Don't buy all the fear. . . just consider the facts

Don't buy all the fear. . . just consider the facts

On top of that more encouraging numbers have just come out. Demand for mortgages was up 16.6% in September...the highest since 2004. Existing homes sales were also up in September to the highest they've been since August of 2007...or a 5.18 million unit annual pace.

So is all this fear justified?

Let's look at an example of fear being stirred up with pure media spin.

You'll often hear real estate pundits on TV and in the newspapers comparing the U.S. "housing bubble" with Japan's real estate crisis in 1990. They say, "Japan is off 50% from their highs of 20 years ago. So we've got a long, long way to go."

Well...let's look a little closer at some facts.

If you wanted to buy property in Japan 20 years ago, you needed a 100-year mortgage.

That's right...a 100-year mortgage!

Can you believe that?

If you wanted to buy real estate in Japan, the lifetime earnings of the average office worker weren't enough to buy a tiny apartment in central Tokyo. Real estate got so crazy there that the grounds of the Imperial Palace were valued higher than all the real estate in the entire state of California.

The news media claim we have a housing bubble in the US. When you objectively drill down to the real figures, overall we had a modest bubble at one point, but not anymore...

Take for example, Jacksonville, Florida. According to the latest data, the median home price is $189,774, with a median household income of $57,072. Right now, the median income to median home price in Jacksonville is a little over three years!

Or how about Charlotte, North Carolina? The median home price is $221,678, with a median household income of $63,774. Income to home price is three and a half years.

Then there's Kansas City, Missouri. Median household income to median home price is two years and ten months!

In fact, the 50 largest metro areas in
the United States average only. . .

The 50 top metro areas in the United States combined, average only 4 years and nine months of median household income to median home value. That's from best to worst. In fact, there are only five areas of the country where you might consider that ratio high.

On top of that, even in those areas the numbers are somewhat skewed by pockets of extremely high-end real estate. For the most part, even properties in those five metro areas are affordable for the average household.

Is this anything like Japan in 1990, where your lifetime earnings wouldn't buy you a room big enough to keep you from smelling your own armpits?

The real fact is U.S. home prices, according to the Case-Shiller Index, have fallen 20% from their peak two summers ago. So now the bubble has washed out. Homes here are affordable. In fact, the Midwest and the much of the South are downright cheap.

Even the much publicized "bubble" markets – like Phoenix and Las Vegas, which were very hard hit – aren't that expensive anymore. Both markets have a similar median household income of about $60,000 and median home prices of $215,955 in Phoenix and $216,918 in Vegas. It's nothing at all like Japan.

Don't buy all the fear. . .
just consider the facts.

Buying a Home

The obvious conclusion is: U.S. real estate is no longer a bubble. Real estate is once again affordable. The median family can afford the median home in most of America.

The underlying fundamentals of the market and what's coming in 2009 are very strong. Housing prices are affordable, demand has been pent-up and is growing, mortgage rates are low, and courtesy of our tax-payer funded 700 billion dollar bail-out the flow of funds to get homes sold is just around the corner.

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If you are interested in relocating to Las Vegas or would like information on Las Vegas real estate, please email me, Bob Ratliff with RE/MAX CENTRAL LAS VEGAS, at rratliff@remax.net, or call me at 702-807-5528. I look forward to hearing from you!