patrick.net

Happy Mother's Day All!

*austingal* affirms WWII worst fears as the "rolling bubble" seeks "fresh meat" in an 11th hour attempt to keep it self alive and kicking. Of course it's all the MEDIA's fault that people ran out and got NAAVLP's in an effort to circumvent "traditional financial architecture" and defy the laws God, gravity and in the end, man. We're fresh out of greater fools!

"Peso Palace (TM)* actually started in the Philippines. Gals that married "dashing young sailors" (well, we were young anyway) would muster all their vacation pay and max out their lines of credit to build their parents back home a ridiculous "manse". For the longest time I was O.K with it until the bubble. People started using their HELOC bubble bucks to build even greater P.I Playboy Peso Palaces! Stucco California sub division nightmares square plunk dab in the middle of swaying palm trees and fishing nets drying on bamboo poles. Yes folks, the bubble has reached the furthest reaches of the globe. There was a tribe so remote in the P.I I'd heard they hadn't seen westerners until the 1970's. They now have P.I Peso Palaces. Great........ In Baja, a place with climates so severe that they challenge even NASA they now have a bubble too. I was going to have a star named after my wife for Mother's Day in the Star Registry but there was a bidding war! Peter P, it is the "Star Registry" isn't it? How far does one have to go to find a place so remote as to be "unscathed" by the bubble? I await all of your considered opinions.

Affectionately,

DinOR

Oh, and if you want a real hoot check out www.islandsproperties.com for a goof! My wife showed me a listing in Zamboangita (it's a real place, you couldn't make a name like that up) with a sprawling estate and a f@cking pool no less than 30 yards from the ocean! Yeah a pool! When my wife was in high school they used to swim out to Apo Island from Zamboangita (about 11 land miles) as a dare. These kids are almost born with GILLS! But someone built them a pool! Yet another case of "bubble bucks" gone mad.

Now I could see if you were in Tarlac (outside of the old Clark Air Base) and miles from the ocean but that's an extreme example! Because most of life in the Philippines gravitates toward the shore lines for the fishing it's got to be like 98% of people live within a mile of the beach. Of course excepting the Igorot peoples which still hunt the highlands for wild boar. Please leave these people be.

astrid, could you please check my spelling on Igorot? I've heard even the most casual remark perceived as a "slight" can result result in a life long hex being put upon you. Man, I'd hate for that to happen.

DinOR,

That spelling looks fine to me. Google checked out and didn't recommend an alternative. I doubt the Igorots can track you down in the wilds of Oregon. (hmmm, was that a slight?)

Also, I heard there's some land that just opened up in Greenland. The land used to be under large sheets of glacier. Get in on it before the next ice age.

Just to show you all my "devil may care" attitude I will tempt fate by identifying the "Ifagau Tribe" as the extras used in the final scene of Apocalypse Now as they sacrificed the carabao (water buffalo). If I have spelled either Igorot or Ifagau incorrectly this could have major repercussions on my soul in the "after life". There are no ends that I won't go to prove the existence of the bubble in the furthest reaches of the planet (at great personal risk to myself) for your bubbletainment!

The Ifagau are now contractors.

If kidnapping and healthcare are not issues there, I wouldn't say no to this.

http://www.islandsproperties.com/properties/beachfronts/negor-dau-bf-68/index.htm

I can grow some taro on the front lawn and make my own coconut wine.

ASD,

Thanks for the correction and the curse retraction. I need DinOR around for 2008 cold calls to those Iowans with $1M in savings and $40K annual salary. It would suck if the excellent Igorot people decided to go all Medea on him.

My personal feeling is that Seattle will be one of the better markets for surviving this housing bubble. There's a lot of manufacturing and shipping in the area, so any dollar weakening will help a lot. The prices might now seem high to the locals, but they seem pretty reasonable to anyone in CA, FL, or AZ.

Having said that I still think this is a bad time to buy anywhere in the US (or the world). There's a huge credit bubble that needs deflating, and nobody knows exactly how that'll happen. The uncertainty and the upside already built into the RE prices make buying now extremely risky.

Even if you intend to stay in the home for 10 or more years and weather it out, buying in now can still be a dumb decision. If the housing bubble does indeed burst, there will be tons of inventory for you to pick and choose. Even if you have an ironclad relationship and employment, things can still happen and force you to move at inopportune times, will you be financially ready to deal with that scenario?

The only scenario where I can be okay about buying is if money was no object. That is, even if that house's price drops by 70% at some point in the future, I can still be comfortable with that decision and able to bail on the house if I have to. Riding a market up is fun, but very few people find the ride down much fun.

Not investment advice.

Seattle will crash harder than California, because there are NO jobs aside from Microsoft. Previous Microsoft employees benefit from the stock option plan, unfortunately stock option plans are no longer offered at MSFT, plus its stock has been FLAT for the last 6 years!

Boeing is gone, Starbucks and Amazon don't pay much (I have friends in management positions in both companies so I know their payscale), certainly not enough for a Bellevue median house price on a traditional 30-year loan. Weyerheuser? Another low-pay family-owned company. So tell me what other jobs are there in Seattle that can support the current median price? At least the Bay Area can boast about GOOG, who are the recent lottery winners in Seattle after AMZN went public?

Seattle is one of those markets pushed up by CA escapees, so when CA crashes, there won't be any supply of bigger fools from out of state to take over the overvalued properties. I won't touch Seattle until CA is done bursting.

TOlurker,

a typical lot in South Bay, if built before 1970, is about 9000-10890sf (1/4 acre). I have seen lots of homes in older neighborhoods with exactly 10890sf, so I believe this must have been a norm at some point.

The lot of a typical home built in the 1980s here is usually 6500-7000sf. Then, a whole bunch of "SFH"s built from 1990 and onwards have a lot of only 3000-4500sf. I am talking about subdivisions, of course there are lots of custom homes built on larger lots from 1980-now, just not that common.

There is a term called California lot, I believe that it refers to a lot size of around 5000sf. While I personally prefer larger lot, I believe most people can manage a lot of around 7000sf just fine, and if they don't build a monster home, the layout should allow plenty of privacy.

Ryan,

Sorry. IKEA was a jokey reference to the last thread, where it was frowned upon by the sophisticates here. I like IKEA a lot. It's good design at a good price. Having said that, I do see the other side's point. IKEA is primarily designed for smallish European flats and houses. They look really out of place in a stucco McMansion. They also look best in a minimalist concrete and glass setting, which is not to everybody's taste.

TOLurker,

I think a carefully planned small lot can yield beautiful results (thinking of interior courtyards and artfully placed walls). The problem with post 1995 small lot construction is that the houses on them are too big and the builders do not design to fit them into their environments. The result is ugly, energy inefficient, and gives no privacy. Overall, my preference is for good design, and I actually prefer houses with smaller lots, because they are designed with more discipline and better space usage. They are also cheaper to maintain compared to larger properties, which is always nice.

WWII wanted to be more anonymous, to avoid the harrassment of angry specuvestors. Now, we just have to get a search and replace for wordpress and he'll be completely safe.

Owneroccupier,

From wikipedia

Seattle = "The median income for a household in the city is $45,736, and the median income for a family is $62,195."

BA = "the San Francisco Bay Area has the highest median household income in the nation with $62,024."

Firstly, what you say may be true for upper end neighborhood, I'm not familiar with that market. However, BA area homes are much more than 40% premium over Seattle comparables. It also seems to me that Seattle would benefit from a strong loony and strong commodities, since the PNW's economy is more commodities dominated than than CA's.

As for MSFT and Boeing. I'm not knowledgable enough to comment specifically, but it seems to me that if the dollar weakens, their products will be more profitable/competitive worldwide, leading to high profits. I don't see a California equivalent (except maybe Pixar and Hollywood) that have a similar global reach and can benefit from forex arbitrage.

Astrid,

the commodity part of Seattle is 1) lumber and 2) apples (not sure if fruit is counted as a commodity)

Seattle's job market is extremely concentrated on one or two companies, I know that pretty well because I considered moving there before, and after talking to friends and doing job search around that area, I came to a conclusion that Bay Area offers far more career advancement and lottery winning opportunities.

Another problem is the geography. Unlike the Bay Area which is indeed confined by mountains on both sides, providing a natural barrier to certain established neighborhoods, Seattle is like LA in geography, you can go any direction you want. There is much less zoning and restrictions compared to down here. Look at our Santa Cruz Mts, there are lots of natural reserve. The mountains in Seattle are packed solid with new houses, tons of supply.

burbed:
Boeing's HQ is now in Chicago, so the highest paying jobs are not in Seattle any more.

Owneroccupier,

I was thinking of the median wage and not of the high paying wage. I was not considering high end real estate but the average house in Seattle. ASD sounded like a first time buyer, so I assumed he was not loking at the high end.

Thus, I was only looking at median wages and median home prices. And Seattle didn't look too bad. I didn't consider California's artificial constraints to development. Perhaps those are sufficient to make up the remainder of the difference btwn BA and Seattle RE prices. However, I thought that the most desireable Seattle RE are on the waterfront and already pretty well developed. However, less desireable neighborhoods may not hold their price up very well.

I wouldn't eat a Washington State Red Delicious if someone paid me :) That may make them a commodity, as hard apple cider biodiesel.

However, I assume Boeing still manufacture some planes there. Also, Seattle's overall economy is much smaller than BA's, so I'm not surprised that there are fewer players. The big players like MSFT and Boeing ought to still be big employers whose payroll would dwarf GOOG, Starbucks, and Amazon. And while the former two would benefit greatly from a weaker dollar, the latter three serve primarily American customers. This stuff is speculative anyways. My main point in the original comment was to put off buying. This credit and housing bubble is so big that I don't think there are safe RE bets anymore.

"Seattle will crash harder than California, because there are NO jobs aside from Microsoft"

It's been a while since I lived on the sound, but I recall a few precarious economic moments, including "Will the last person leaving Seattle please switch off the lights". We have a few friends who got "lucky" up there with homes, who coincidentally bought before 2000; the later buyers are struggling--even w/good salaries--with nothing more to show than some dilapidated bungalow in Ravenna.

I've also noted a disconnect among some Seattlelites, who consider RE appreciation in their good fortune (since they got theirs already). Or consider the local media, where the role of speculation is hardly mentioned. When cited as a cause for high prices, Californians are usually to blame. Sigh...it wasn't any different 25 years ago. Lesson to be learned (again): Seattle can do this to itself; it doesn't really need California's help.
In fairness, I think most metro areas have been hurt by rampant speculation.

"I wouldn’t eat a Washington State Red Delicious if someone paid me"

Pick one right off a tree in Chelan (WA); you'll change your mind. Cold storage apples are another matter.

astrid Says:
If kidnapping and healthcare are not issues there, I wouldn’t say no to this.

Here's one of the "Special Features":

* There are 10-15 foreigners living within 2-km. radius.

Kind of funny!

This is OT for this thread, but has anyone noticed that CAR has stopped reporting the statewide affordability index as of last December (when it cratered at a record-breaking 14%)?

According to the L.A. Daily News, there is a perfectly reasonable explanation:

"Cool-down finally arrives as summer nears"
http://www.dailynews.com/business/ci_3820005

One thing that market watchers have not seen yet this year is the housing affordability index from the California Association of Realtors.

This week we will also find out how much tweaking was done with the release.

Golly, I see *no problem* with this business of "tweaking" the affordability index formula or CAR's stated explanation for doing so. Do any of you?

Disclaimer: I still believe in the Easter Bunny, Santa and the Tooth Fairy. I also believe that David Lereah and Leslie Appleton-Young have my best interests at heart.

Ryan says: "Why the angst?"

Using the term angst would imply that there is some tangent of the current housing situation that is salvageable. In the summer of "05" there may have been some angst on my part, but no more. Saying "then buy now" is roughly commensurate to saying "give me one for the road" and we all know where that ends up. One need not be a patrick.net regular to have had ample warnings.

On begrudging.

I don't want to start Monday off on the wrong foot but it really grinds me when someone dredges up a 1950's goldilocks scenario and tries to make applicable to 2006. My folks lived in the same house for the duration of their mortgage (at the time 20 years was the standard). They then stayed on another 10 years in the pusuit of perfection before finally selling at a RESPECTABLE profit. I don't think any rational person would "begrudge" them their rightful place in the sun. Fast forward to the bubble where homes have the potential to double in "value" in a two year period where's the motivation to make any real improvements? Why? Why would you bother? Where would you (as the seller) find the time? How can someone in HELOC heaven on vacation in Cabo be expected to make home improvements? When homes are sold through carefully orchestrated bidding wars it's hard for me to describe this as an innocent act. It's a malicious attempt to defraud another human being into a lifetime of indentured servitude so they can "make your retirement one mortgage payment at a time"*. Not cool.

*I believe it was either astrid or athena that originally coined that phrase.

Extra special thanks to the person that took the time to post that fabulous property right here on patrick.net! My wife grew up about 1/2 an hour from there. It just gives you the sense that all of the locals there that do subsistence farming (after laboring all day on the "sugar isle" in a form of legalized slavery) feel a swelling of pride each time they walk by! I think Imelda would have said that this display of wealth gives the poor something to aspire to!

…Leslie Appleton-Young, the association’s vice president and chief economist, said earlier that they were going to tweak the model to more reflect current market conditions.

And yet there are those who wonder why we dare to consider the "professionals" in this industry anything but. How about this for a parallel:

Daily closing figures for the NASDAQ don't reflect the current reality so the NASDAQ's chief economist has decided to implement a more accurate measure of index prices.

It's well past time that the real-estate industry is put on regulatory and certification terms at least comparable to the finance industry.

Randy H,

Exactamundo! At a time where the whole world is demanding "real time" data CAR has elected to take the low road by blissfully ignoring the trend and doing as they damn well please. It seems the "Santa Barbara Incident" set the precedent for not disclosing unflattering data.

Trading Skanky tastes for the Hills in Tennnesee? It's already underway. I had a conversation with my mom. She and my dad live in Knoxville. There was nothing special about it a few years ago. Just a smaller sized older city with the Smokey mountains 45 minutes to the east. Anyhow, there's nothing short of a rennaisance going on there as we speak. For example, they are getting two new libraries, one that's 3 stories tall, with a large fireplace, coffee shop and cafe out front. The old Tennesee theater was restored. Buildings on Gay street that sat dormant for 30 years are suddenly getting turned into nick-knack shops.There is a new urban development in the works for a chink of the town where residents can walk to work with old-fashioned houses with porches. Property is being developed on the lakes. New condos and high rises are being planned. The city now has a ballet, symphony, art museum, and several heritage centers for appalachian culture.The same can be said for most of the towns in Tennesee. She's concerned because as she relates it- people are just pouring in there.
At the same time, my wife is from Pennsylvania. A lot of the smaller former steel mill towns are getting redeveloped into qaint little villages for retirees, NYC mega-commuters, and young families. It's the same kind of rennaisance. Formerly dead areas being repurposed and propped up o their historical charm.
I see a pattern here. Ironically,I think that most of the young people I know, myself included, are tired of the stucco subdivisions. While I didn't grow up in one, most of my friends did. There is a desire to return to the small town that has character. Places like Alameda, Greenich, and Cambridge provide that kind of feel, but of course it's way, way too overpriced for 98% of anyone under the age of 45. So the next logical decision are these new alternatives.
Population shifts have been a normal occurance in this century, for diffrent reasons. I predict a shift of the older, retirement age population taking over the traditional metros, while the younger populations shift to places like Austin. This is good and bad. This likely means bubbles in these areas, but at the same time, there's a ton of business moving to these new areas. The unemployment in Knoxville and Nashville is 2%. That's lower than SF. It could be that while prices might go up in these regions, the real non RE related business could actually support it. It could also go seriously wrong. That's why I'm biting my fingernails. I would hate to see this thing take over another area. I don't see how though. Simply put- people in these areas make less, so there physically isn't the amount of money to throw at housing. Plus- places like Austin are having a firestorm of foreclosures just outside of the city limits. Over 400 and rising on Craigslist.
Most of these cities are populated heavily in the city proper, then peter out rapidly outside the borders. There is not the same population density. Thus if California RE investors are going there for a quick buck and expect rapid appreciation, then they'll lose their shirts, which might be the final nail in the coffin for the RE bubble... hopefully.

Sorry, off topic, but my gold bug friends, check the latest disintegration and sell now before you waste your downpayment and/or the college trust fund.

It is not a "buying opportunity"...

Surprise Surprise! I kind of figured the gold mania was a last-ditch effort for folks who don't know a damned thing about the stock market( if any of them do.)
I think the problem with stocks today are underlined by stories like these. Put simply, everyone from hairdressers to bankers "know" about stocks- enough to gain them access to a stockbroker. So what do you get with more dummies to stir the pot? faster and faster booms and busts.Let us hope this also translates into what might happen to the housing market.

Conor,
All I've seen in economic circles seems to be metals and oil futures. Not near as much petaining to real marketable companies, which is a concern. Buying metal seems like a ass-saving measure that people buy when there are threatened; suspect projected problems, like currency devaluation or for lack of a better word- a real economy to back up the standard. So the fact that gold made it to over $700 shows just how many people are worried about the economy, some for good reason, but in the end, just as speculative as buyinh RE in Idaho.

Gold and the other commodities, namely zinc and copper, are increasingly coming under micro economic pressures which have little or nothing to do with all the macro stuff people attribute to their rise (especially gold).

It's important to keep in mind that, as prices rise, the potential return on investment for producers to extract and refine rises. This often means that reserves which were not economically viable at lower prices become profitable to extract. There is a huge game that goes on in this regard because, as more production comes on line, supply increases and prices can quickly fall back below the profitable point for those "deeper" reserves. So producers are very slow and conservative about making the huge capital investments into mining and refining capacity operations every time prices jitter up.

However, this time around Hedge Funds are really skewing the price movements and volatility. Essentially, if you were a "genius" macro hedge fund, you could pile onto a commodity that's already rising for fundamental reasons (increased demand) like copper, further driving the price up, in an attempt to force the producers to increase capacity. That is exactly what is happening now, even in gold. However, as a macro HF, you're also betting on the draught to come after the industry gets caught with overcapacity; and you'll make even more $ on the way down because your HF activities have dramatically increased volatility and perhaps even added fuel to minor/major speculative bubbles.

The same is true in oil. If oil stays at too high of a level for too long then it will encourage massive investment in known alternative fossil technologies, like oil shale, tar sands, and coal liquification -- all of which are in use in parts of the world today (but either unprofitably or barely profitably). However, doing so will again overload supply, causing the very economic force that encouraged more investment to lower prices below profitability.

IMHO, this is why the commodities games is extremely hazardous. With stocks you can study fundamentals and technicals. With bonds you can study inflation/Fed signals and macro stuff. With gold you have to do all that plus study all the players in production, the major industrial consumers, and macro & arb HFs active in that sector. Oh yea, and you have to at least pay homage to the technical trading and huge derivatives markets which reflect back upon spot pricing, especially since the HFs are using the derivatives to do all their black magick.

Conor,

There have been bubbles in collectibles; quite a few of them.

I don't know if gold is or will become a bona fide bubble, but I do know that the history of gold is one which ebbs and flows without direct correlation to the macro factors you are describing.

There have been bubbles in collectibles; quite a few of them.

Does anyone remember Thomas Kinkade paintings a few years back?
I knew several people who, despite my warnings, spent $$ on these prints convinced they were investing in art. Just like realtors of late, gallery owners were actually telling buyers they couldn't go wrong with Kinkade.

Perhaps some N.Bay people also caught the article last Weds.(5/10) from our friends at the IJ under the header "Expert says most couldn't afford home here today"; excerpt below in italics.

I'm glad we can trust the IJ to keep us informed, but what caught my eye were comments made about Zillow.com:

(During a realtor meeting in San Rafael) Appleton-Young told Realtors their clients are using the Internet more, including looking at Web sites such as Zillow.com, where they can find the value and other information for millions of homes across the country.
"Zillow comes out and what did I hear from everybody, including myself? Not accurate," Appleton-Young said. "How many people are getting their 'zestimate' and saying, 'That is not what I thought?' They want to talk to a live body that knows the market."

"Buyers and sellers still need a Realtor who knows the area and can personally work with that client regarding market conditions, comporable home sales, contract negotions and so many other aspects of buying and selling a home," Schlegel said.

I cannot vouch for Zillow.com's accuracy, but I find their response interesting.
I'll take a guess that somebody was disappointed with their "zestimate"--buyer or seller?
If Zillow.com lowballs the price, why should the seller/realtor care--if they can get list price anyway?
Are buyers using Zillow.com to negotiate down on homes?
Once again, I see a vague accusation lacking informative details for the reader to make up their own mind.
But isn't that how Realtors and the IJ like to work? (smirk)

Maybe a good thread would be, “We’re all bearish on real estate. Where is everyone parking their money right now?”

@Conor,

We've actually had quite a number of recent-ish threads on this topic. The most recent one was Inflation and Interest Rates (and the dollar)

I caught that IJ article too. I think they can smell that change that's coming to their industry, and they're doing whatever they can to keep the music playing.

As for Zillow, I don't think it low-balls all the time at all. I've found about even examples of over/under estimates, and by pretty large margins. If you're familiar with Strawberry, Zillow a bunch of those homes and compare them to similar, say, Corte Madera or Mill Valley neighborhoods.

I think the Zestimate algorithm is using some proximity weighted averaging, probably segmented by valued attributes such as number of BRs. This could easily cause some areas to skew up/down depending upon the mix of old/new construction and the random geographic distribution of recent sales. I think in the real world, when there are not enough close comparables, the buyer/agent will increase their area of consideration and perhaps more heavily weight more macro factors.

Seems like we’re at the point now where the bears are convinced that the party is over, and are just waiting to see how bad things will get. Feels like everyone is just waiting, waiting, waiting for either prices or inventories to drop. Could be awhile.

It ain't over until sellers accept lower prices (in numbers large enough to move the averages). People hate my sticky theories, but I fully think we're well into the sticky phase now:

Seller: wait and see if prices come back
Buyer: wait and see if prices come down more

So now it's a game of what starts pushing either side out of inertia. Foreclosures and ARM resets? Or, wage and rent inflation along with headline inflation and low rates?

Just remember that things rarely play out like theory or models suggest or predict. I'm prepared for something messily in the middle of both of those scenarios, and a lot more price stickiness.

I'd have to say that at this moment the pendulum has swung, although I'm reluctant to say "it's a buyer's market". Far from it. Clearly though seller's are going to continue to be the ones under pressure. All a buyer has to do is sit on his/her hands and the snake fascination that drove the bubble will shift from getting a house, ANY house at ANY price to...... "this week my $'s can buy house X, if I wait another week will I be able to get a house just like house X but this time with a pool?" Start liking it!

@Kurt,

I tried Googling your headline, but didn't get any hits. Do you have a URL for the "IJ" article?

It feels like the calm before a storm.

CNN money has the "median home prices down 3.3%" story, and a smaller one on "chipping away at the 6% commission". Finally, there's an article mentioning the problem of inflation and a slowing economy.

I generally assume Bad Things wait for late Summer or Fall, but it's a bit odd seeing one of my accounts drop by 500 for each of the past 3 days. Sometime between now and then I'll probably dump SPY back into cash reserves.

DinOR,

I think you're right, but I think the decision will be toughest on the Bubblesitters or otherwise patient folks who are sitting on multiple HaHas to put down. I'd much rather be a first-time buyer because I tend to think that it will be the "starter-homes" that correct more quickly and cleanly. I've talked about our first start-home in Redwood City that cost around $300K back in 96 and now Zillows at over $1M. Those will come tumbling back to earth, in my opinion.

But as for the home with a view and a pool, I'm not so confident that they'll correct so cleanly. If for no other reason than the HaHa flushed buyers who could have easily bought all along, but refused to play the game. Since raw affordability isn't the sole important factor in this case, it's harder to predict where prices meet resistance on the way down.

I'm more in line with Peter P's thinking here: beware of flat-nominal prices and slowly deteriorating real prices, while other factors close the affordability gap ... at least for the above-starter-home tier of houses.

SP,

So basically all a seller needs is that one "special" potential FB?

@SP,

I agree with you to some extent. Actually, several of us old-timers have debated this point at some legnth. I think you're right that CA is not likely to ever approach the "affordability" numbers of most other states, largely due to its own NIMBY anti-development laws and high overall population density (as opposed to those fungible "intangibles" that bulls love to trot out). I also tend to believe that rent-vs.-PITI/carrying costs is a better yardstick to determine whether or not prices are in bubble territory.

Even so, I still believe that incomes are one of those "fundamental" supporting metrics that provide long-term support for housing prices. CA's long-term historical ratio is probably closer to 5-6X median incomes, vs. 3-4X elsewhere. And yes, there are going to be many more "non-participants" in such a region. Even so think whenever prices become so disconnected with supporting incomes and basically requires "exotic" financing for the vast majority of buyers, this is a huge RED FLAG that something's fundamentally out of whack.

SP,

Thinking about your post, I'm trying to get away from a "but it does measure affordability" response, since your last paragraph mentions that.

I think what bugs me is that as price P changes, the qualified participants N will also change. So, when you have 2xN buyers, the price would get bid up, at which point you are left with only N1 buyers again. Also, as P drops, more non-participants become participants.

Mmm... I think the greatest problem with using medians is that they can be skewed (e.g. only richer people buying pushing the median price higher.) More accurate might be calculations for separate income scales. That is, all home sales where the buyer's income is within X amount of the median/mean, or within a defined income range.

(Just rambling here)

Randy H,

O.K, I can go with that. What we're seeing to a large degree in OR is that while overly inflated "starter" homes 3/2 (remarkably unremarkable) tend to move more quickly. Particularly those at or below median price. It's getting to be a tough road for those looking to bail out from their older homes. It's hard for many of these folks that have older places that were built 25 or 50+ years ago. They can't compete with their 1 car detached garage, awkward laundry rooms, crowded floor plan and less prestigious settings. I fear for them, the window to "cash out" just closed.