Housing Bubble: Why it may be worse than previously thought

[Account Closed]

A housing bubble is a run-up in housing prices fueled by demand, speculation and exuberance. ... Speculators enter the market, further driving demand. At some point, demand decreases or stagnates at the same time supply increases, resulting in a sharp drop in prices — and the bubble bursts. 

If this is the definition of a housing bubble according to investopedia.... LA may be heading into some serious trouble.

Median LA housing price    = $685,000 (zillow avg. of median home value & median listing price)

Income required to qualify = $125,000 (0% down, 4.5% mortgage)

Income required to qualify = $118,000 (5% down, 4.5% mortgage)

Median LA household income = $54,000 (argue accuracy of data with census bureau)

How much home can a household buy with $54,000 = $260,000 

Primary factor driving LA prices = Speculation (may also argue demand)

[Jay Hinrichs]

Not everyone gets to own a home.. so the median rents.. those that rise above the median buy homes.  and a lot of folks are in the move up mode.. LOTS of cash to put down driving down the need for massive incomes.

I know when I look at my sales of new construction here on the west coast last 5 years and its a small sampling I think we have built and sold about 100 homes.. I would say 10 to 15% were sold for cash..  Oh and price ranges  300 to a million is were we deal.. and I will lump Charleston SC in there since we have been quite active and that is a expensive market relative to local median income..  Any way back to sales data... gone is the day were Everyone put nothing to minimum down.. So don't see the median income affecting the new home prices as much as one might think..

If I think back to my pre 08 days were we were flipping 75 plus homes a year as a retail flipper.. 97% sold for minimum down and I can't really recall a cash sale I am sure we had one but it would be an outlier.. But now its totally flip flopped at least from my little slice of the world. Lots of cash sales.. MOST sales are 10 to 30% down and small sampling is FHA or VA.

WE will bend over backwards for VA ( lot of folks won't deal with it because of time lines and such but we feel its our duty to help our Vets get into our homes)..