So what you have is many people living in homes spending a large amount of money on their mortgage y

The Orange Housing business travel la jolla agency Bubble – Orange business travel la jolla agency County still largely in a housing bubble. 5 charts looking at income, employment, and housing costs. A $100,000 county wide price drop and prices are still inflated. Dr. Housing business travel la jolla agency Bubble Blog
The Orange Housing Bubble – Orange County still largely in a housing bubble. 5 charts looking at income, employment, and housing costs. A $100,000 county wide price drop and prices are still inflated.
Orange County still carries the most expensive price tag in Southern California housing .  Yet simply having a high price tag doesn't mean prices are justified.  Recent data shows that home sales in Orange County are now down over 10 percent on a year over year basis and the median price has collapsed from its peak.  I wanted business travel la jolla agency to dig deep into the county data to see whether a housing bubble is still present in Orange County.  Using a variety of metrics including income, employment, and housing costs Orange County is still one of the most inflated areas in the country.  We have shown million dollar homes taking million dollar price cuts.  The correction no doubt is in full swing.  Yet Orange County is a large area and we can only understand it better by looking at each data point and compiling it all together into a holistic overview.  Let us examine 5 charts showing that Orange County overall has one of the most inflated real estate markets in the United States.
41 percent of OC homeowners spend 35 percent or more of their household income on housing.  Keep in mind that 35 percent of income is the upper-range if we are looking at entering a home in a more fiscally disciplined environment.  The Census only goes up to 35 percent but it is likely you have many families spending 40, 50, or even 60 percent of their household income business travel la jolla agency on making that mortgage payment.  Especially with the current economy, you might have a dual income business travel la jolla agency household that is now down to one earner or with one earner with a depressed salary.  What this chart above shows is that even if a county business travel la jolla agency can have a relatively high income distribution it does not justify high priced housing across the board.
The vast majority of households in Orange County make between $50,000 and $149,999.  This is a very wide distribution.  The actual median household income for Orange County is $71,000.  The $100,000 to $149,999 range doesn't reflect the distribution all that well because you have the bulk of families hugging the $100,000 range (i.e., two income households).  For Southern California Orange County is a wealthy county overall.  Yet an interesting point to note is the massive number of two income households. business travel la jolla agency For example OC has 975,000 households yet 1,445,000 people are actually fully employed:
A large number of people are employed in education, health care, and manufacturing.  These are good paying professional jobs but certainly not enough to put you in the $200,000 range which is what is necessary for buying many homes in Orange County (the above income chart reflects business travel la jolla agency this).  8 percent of households in Orange County actually business travel la jolla agency make $200,000 or more a year.  Yet when we look at the cost of a median priced home we see why so many problems exist and will persist in the market:
Keep in mind the above is for 2009 and is averaged out for the year by the Census.  According to the latest figures from Data Quick the median Orange County home price is $435,000 (for the last month of home sales).  This is nearly business travel la jolla agency $100,000 lower than the Census figure for 2009.  The bulk of housing in 2009 in the OC was valued business travel la jolla agency between $500,000 to $999,000 yet the median household income was only $71,000!  This is part of the SoCal housing bubble that is now bursting in a second round lower.
If we look at the actual household income one would need a household income of $150,000 or higher just to be in contention here.  Only 15 percent of households have this in Orange County it is likely many already own given the homeownership rate for OC is 60 percent.  53 percent of all owner occupied housing was valued at $500,000 or higher yet only 15 percent of actual households can actually afford this payment.  This disequilibrium is why with recent data we now see a county wide price decline of $100,000 in one year.
So what you have is many people living in homes spending a large amount of money on their mortgage yet were only able to buy in the go-go years of the housing bubble .  What the data reflects is that many of the current owners would not be able to afford their home in today's market where incomes now need to be documented more fully and standards have become more normal.  I don't like using the word stringent because standards are still flimsy with FHA insured loans and only needing 3.5 percent as a down payment.  Are things tougher than a few years ago when anyone could get an option ARM and jump into a $700,000 business travel la jolla agency McMansion without documenting income?  Of course but that doesn't make the current environment stringent.  If anything, on a longer business travel la jolla agency historical perspective it is a relatively easy market for money.  Mortgage rates are still near their historical lows and down payment requirements are a joke with FHA insured loans .  The problem of course is one of income and the Federal Reserve gimmicks are merely trying to wash over things with cheap debt and not addressing the weaker situation for middle class families.
business travel la jolla agency It is abundantly clear why Orange County prices are falling and sales have collapsed.  The county like many in Southern California is still largely in a giant bubble.  If rates even go up by say 2 or 3 percent (still below historical norms) the market will take it directly on the chin.  Why?  Because people are already stretched thin at the moment even in a county with "high incomes."  I know some will say "well this area has great schools …" and I get these comments even for areas in Los Angeles.  The schools were good in 2000 as well.  It wasn't like they just realized schools were good there.  And we have hundreds of counties around the country with good schools that have moderate priced housing.  So this is just more emotional reasons to justify current prices.  Emotions do play a big role in buying a house, that is a fact.  Yet what we have now is an actual buffer (aka examining incomes) and this is showing that people just don't have the money to support current prices.  I'm sure everyone would like a $1 million home but that isn't how the world works. business travel la jolla agency Is there a premium for good schools and a good neighborhood?  Of course!  But this is like saying "since business travel la jolla agency this is a BMW it needs to cost $70,000 more than a Chevy."  Well okay, but do you have the income to back it up and not "own" it by merely going into massive debt?
This is just one way to measure cost relative to income and even after the $100,000 price drop and many more tens of thousands from the peak home values are still in a bubble business travel la jolla agency in Orange business travel la jolla agency County.  In other words, prices will drop or incomes need to go up.
The Orange Housing Bubble – Orange County still largely in a housing bubble. 5 charts looking at income, employment, and housing costs. A $100,000 county wide price drop and prices are still inflated.
Testify! I have been waiting here in Foothill Ranch for 5 years! Finally, we are seeing business travel la jolla agency homes in the 450K range. Still about 35% too high, UNLESS you have 2 incomes and both people make 150-200K/year, which based on this study shows me that is very unlikely. You may have 1 income in that range, but 2 is very, very rare for a family. Even then, what is the true cost to the family? I can guarantee that the rare family with 2 incomes earning 400-500K does not have both parents at home 24/7. You may have one that stays home and earns that kind of money, but the other is going to be traveling, at the office 16 hours a day, working weekends, etc. I know a couple of these types, who are lawyers. Let me say, working weekends, esp. Sunday for twice what I make is not worth my life or time or freedom.
I realize this is all about choices, but the point I am making is that Docs numbers bear out what I am seeing. I also notice that there are quite a few people living in these homes, usually mom/dad/grandparents. How much are the grandparents kickin in for the mortgage?
In the end, this bubble must burst too. When you compound everything I have mentioned with maxed out CC s, student loans, car loans, HELOCs, etc. you have a recipe for financial armageddon. I know, I know, not everyone has all the debt. The reality is many do and this bubble will only end in pain!!!
This blog is always so spot-on, and one of the ONLY sources of sane assessments of the OC housing market, which is yes! *still* business travel la jolla agency in a huge bubble. Thank you for confirming that I m not totally out of my mind when I go to view some stucco tract house that looks exactly like every other stucco box on the street, and I choke on the close-to-$300/sq.ft. price. I have about 30 properties on a watch list in specific neighborhoods that I like, and just in the past two weeks, I ve seen so many price decreases of $50k, $75k, $100k. I told my husband, I think the upper end is *finally* starting to come down.
I hate it with every bone in my body, because I really miss being a homeowner, but after reading this, we ve decided that we re just going to find a nice rental home and lock in a 2-year lease and keep our money in the bank.
Trapped homeowners can come up with a million reasons why this time the market is different.. but in the end when bubbles pop they always overshoots to the downside, then eventually reverts to fair market value (about business travel la jolla agency 1999 prices when adjusted for inflation, or 3 3.5 times household income).
Along the way there are usually bull traps that occur which give false hope that the market is returning, or at least basing for a while, but these are just temporary pauses in the larger downward leg back to pre-bubble prices.
Homeowners don t want to hear such things, just like they wanted to believe their Nasdaq weighted portfolio from