I’m fascinated by the current news happening in the financial markets right now. For some reason it’s all very interesting to me.
One of the most telling article’s I’ve read in recent days is this article from the Wall Street Journal that shows the ratio of median home prices to median incomes. From 1981-2000, the ratio held fairly constant around 2.66. So, a family with an income of 37,600 would have owned a $100,000 house.
Starting in 2001 that ratio started to skyrocket until it peaked at around 4.10 in October 2005. That same family making 37,600 would have owned a $154,000 home. Quite a jump in only six years.
After the peak, home prices started falling, and we’re now around a 3.30 ratio. At current rates, home prices won’t get back to normal until around January 2010, and aren’t likely to hit bottom until April 2010.
For fun, I calculated my ratio of house price to income: 2.79. Looks like I wasn’t a dufus.
What would be interesting is to see a ratio of mortgage value to income, since people were not only buying houses at a higher price, but they were going from putting 20% down on a house to 0-down 100% financed loans. Taking that into account, my ratio falls to 2.21.
Or maybe another fun statistic would be monthly mortgage payment to monthly income ratio.
If you don’t like numbers, sorry for boring you.