Following Message Is From Irene Kiang
Now this is a fascinating chart because it shows how big the bubble got during the boom. The fact of the matter is, the median family income in California still can’t afford the median priced home. However, much of the data is distorted because the mix of sales. That is, many of the homes that sold over the last year happened at the lower end of the market thus misrepresenting the median price. So although the median price is down, it is a reflection of the massive amount of foreclosure resales. In the mid to upper tier of the market prices remain stubborn on the downside.
That will change as more and more shadow inventory makes its way to market in 2010. There is simply no other way around it. Many of the Alt-A loans, those made to “better income” borrowers occurred in more expensive areas. When these hit recast dates, a new inventory surge will hit the market and a simple rule of economics will play out. That is, more supply equals lower prices. There is no way around this fact.
Now this is a fascinating chart because it shows how big the bubble got during the boom. The fact of the matter is, the median family income in California still can’t afford the median priced home. However, much of the data is distorted because the mix of sales. That is, many of the homes that sold over the last year happened at the lower end of the market thus misrepresenting the median price. So although the median price is down, it is a reflection of the massive amount of foreclosure resales. In the mid to upper tier of the market prices remain stubborn on the downside.
That will change as more and more shadow inventory makes its way to market in 2010. There is simply no other way around it. Many of the Alt-A loans, those made to “better income” borrowers occurred in more expensive areas. When these hit recast dates, a new inventory surge will hit the market and a simple rule of economics will play out. That is, more supply equals lower prices. There is no way around this fact.
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