Monday, February 27, 2006

BubbleSphere Roundup

Seattle Bubble has a post titled 'Mobile Homes Disappearing In Seattle's Bubble.'

At Crash 2006 there is a interesting piece about the Boston Condo market. "The condo market in Boston is ready for a crash. Currently, condo listings are the highest for six years. Nervous developers are offering a range of incentives" Check it out.

Its tax season, and Bankrate has a article about Tax consequences for flipping real estate.

The New York Housing Blog has not been updated since November 22, 2005. I will be removing the link soon. Ah maybe it was another case of blogger fatigue.

In the past few weeks the bubble sphere has grown with more regional sites popping up. Excuse lousy pun. They include the Sonoma Bubble and the South Florida Bubble. If you know any more please email me and let me know. I want to add them to links section. It would be great if there were more regional housing bubble blogs from Phoenix, Las Vegas, and other bubblicious cities.

Finally, Out at the Peak talks about how "I can no longer keep up with all the bubble news and comments" because "there is just too much information going on in thriving blogs and their comments." However, the blogger states its a "great thing." Well said. :-)

1 comment:

  1. David, I wanted to thank you for the work you put into running your Blog. I have been reading housing blogs for the last few months and I like yours the best. I am anticipating a move to the DC area in several months. While I would love to be able to buy for non-financial reasons, I don't want to be financially ruined by the process.

    I recently tried to do some quick calculations of home prices in the region, and I was shocked by the results. I have seen many estimates over the past year or so of the magnitude of overvaluation in various markets and had generally seen 30% as a middle-of-the-road estimate for DC. Now that prices seem to have declined ~10% from summer, I was wondering how far they may continue to fall.

    Two indators that I have seen used to compare historical pricing trends are Price/rental earnings and Price/Median income. I looked at estimates of both for Montgomery County using some rough estimates that I thought were fairly conservative, if anything, underestimating current pricing disparity. Median prices were taken from MRIS. I normalized to 2000 since in other analyses it seems that housing was close to historical norms at that point. Median family income on 2000 census was 84035 for Mo Co.. Though I cannot find more recent stats, I estimated a fairly generous 3% average increase since then (national numbers were lower over that period). This yielded a 2006 median family income in Mo.Co. of 100,342 which sounded reasonable. Price/Income over the period starts at 2.26, peaks in July05 at 4.72 and Jan 06 sits at 4.23.

    For rental P/E, I took the mean rent for currently listed Craigslist SFH ($2200, which seemed about right). I didn't have historic average rents but back- calculated allowing for a generous 5% annual rent increase yeilding an avg rent in 2000 of $1617. P/E over the period started at 9.79, peaked at 17.4 and Jan 06 sat at 16.09.

    If each of these were to revert to 2000 levels (and historic norms) a 700k house that I was looking at would be valued between 373K- 451K. Yike! If prices stay flat and incomes continue to rise at 3% (soft-landing scenario with optimistic wage growth) it would take until 2025 for P/Income to be at 2000 levels. Even assuming indefinite 5% rent increases (far outpacing inflation), it would take until 2013 to reach 2000 levels.

    If you or any of your readers has any insight into sources of error in my calculations, or better sources of primary data, I would love the feedback. Perhaps year 2000 wasn't so normal? Am I off on income levels, rent prices? Is median to median comparison not valid?