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The California housing trend: Taking a close look at 30 years of housing data. Building a market on low inventory. One thing to understand about California housing is that boom and busts are central to the market.
It is fascinating from a psychological standpoint that today, many think that California housing is a simple and safe bet.
Casually, they forget the massive destruction that occurred only a few years ago and the echoes of the impact are still around: Gear up for a sizable down payment and maximum leverage on a low interest rate. Even with the trend to higher prices, people have the choice to buy or rent.
Unlike stocks, most households have to make the analysis of buying or renting. In spite of rising prices and the meme that home values will only go up, the homeownership rate in California has plummeted. The state is seeing a wave of households opting to rent.
This trend started inwhile home prices held a plateau up until In housing, trends reverse slowly. But investors those with big wallets have pulled out dramatically early in Yet momentum is shifting but the question is, what will come about this change?
People also forget that the stock market is on a six-year tear and California, especially the Bay Area has a deep connection between the two. Stocks are up and real estate follows. It is interesting to see that the stock market this year is also unsure of what it wants to do.
It might be helpful to look at the Case-Shiller Index for the L. The index also pulls in OC data so it is a nice overview of a very big market. Here is data going back 30 years: The blue line is the Case-Shiller Index with no adjustments. You can see the recent big bounce up.
The red line shows momentum changes in the form of year-over-year changes. You can see that the trend is definitely heading lower.
Of course, these changes happen over years. A small 10 percent correction see chart above would wipe out a nice chunk of change. Those going in with low down payments might be in a position where equity is at par or below given selling costs.
More to the point, price-to-income ratios are incredibly out of whack. It is interesting to see the justifications today for why prices are high. Because relative to the other areas, incomes here are simply not that high.
This is also a reason why we see more booms and busts here. Take New York City: That is a massively important point to note.Mr. Michael Pento serves as the President and founder of Pento Portfolio Strategies.
He is a well-established specialist in the Austrian School of economics and a regular guest on CNBC, Bloomberg, FOX Business News and other national media outlets.
One thing to understand about California housing is that boom and busts are central to the market. It is fascinating from a psychological standpoint that today, many think that California housing is . People have a hard time predicting the future especially when it comes to economic behavior. Many people saw the housing boom and bust but few had the wherewithal to take action at optimal points.
Some years ago, Joseph and Mary headed from Nazareth to Bethlehem to sign a census. Census night was a big deal in Roman Judea because the Romans were meticulous about economic and demographic affairs, particularly because they were exacting tax-collectors.
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