My thanks to the readers who noted that I accidentally used adjusted income in my calculations of the ratio of the median house price to the median wage. Below are the updated figures:
Below, on the Y-axis, is the ratio of the median house price (not adjusted for inflation; from here) to the median income (not adjusted for inflation; from here). So a value of 1.0 means that the median house costs as much as the median income, a value of 2.0 means that the median house costs twice as much as the median income:
Here are the underlying numbers; obviously, median housing price is the higher line, and median income is the lower line:
(for reference, the first point on the income line is $8,389)
From Bloomberg today:
California home prices dropped 41 percent last month from a year earlier, more than double the U.S. decline, as surging foreclosures drove down values, the state Association of Realtors said today.
The median price for an existing, single-family detached home in California sank to $247,590 in February from $418,260 a year earlier, the Los Angeles-based group said in a statement. The U.S. median price fell 16 percent during the same period, the second-biggest drop on record, according to the National Association of Realtors.
The median price in the U.S. is about right if you have a ratio of 4.0 (i.e., 1999). I certainly don’t see it rising. If you want the 3.0 observed in 1969, prices need to drop about 20% more. Without funny money floating around, I’m guessing prices will drop. They certainly won’t increase.
(and never blog when you’re coming down with a cold)