Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stocks Bull Market Smoking Gun - 25th May 24
Congress Moves against Totalitarian Central Bank Digital Currency Schemes - 25th May 24
Government Tinkering With Prices Is Like Hiding All of the Street Signs - 25th May 24
Gold Mid Tier Mining Stocks Fundamentals - 25th May 24
Why US Interest Rates are a Nothing Burger - 24th May 24
Big Banks Are Pressuring The Fed To Losen Protection For Depositors - 24th May 24
Another Bank Failure: How to Tell if Your Bank is At Risk - 24th May 24
AI Stocks Portfolio and Tesla - 23rd May 24
All That Glitters Isn't Gold: Silver Has Outperformed Gold During This Gold Bull Run - 23rd May 24
Gold and Silver Expose Stock Market’s Phony Gains - 23rd May 24
S&P 500 Cyclical Relative Performance: Stocks Nearing Fully Valued - 23rd May 24
Nvidia NVDA Stock Earnings Rumble After Hours - 22nd May 24
Stock Market Trend Forecasts for 2024 and 2025 - 21st May 24
Silver Price Forecast: Trumpeting the Jubilee | Sovereign Debt Defaults - 21st May 24
Bitcoin Bull Market Bubble MANIA Rug Pulls 2024! - 19th May 24
Important Economic And Geopolitical Questions And Their Answers! - 19th May 24
Pakistan UN Ambassador Grows Some Balls Accuses Israel of Being Like Nazi Germany - 19th May 24
Could We See $27,000 Gold? - 19th May 24
Gold Mining Stocks Fundamentals - 19th May 24
The Gold and Silver Ship Will Set Sail! - 19th May 24
Micro Strategy Bubble Mania - 10th May 24
Biden's Bureau of Labor Statistics is Cooking Jobs Reports - 10th May 24
Bitcoin Price Swings Analysis - 9th May 24
Could Chinese Gold Be the Straw That Breaks the Dollar's Back? - 9th May 24
The Federal Reserve Is Broke! - 9th May 24
The Elliott Wave Crash Course - 9th May 24
Psychologically Prepared for Bitcoin Bull Market Bubble MANIA Rug Pull Corrections 2024 - 8th May 24
Why You Should Pay Attention to This Time-Tested Stock Market Indicator Now - 8th May 24
Copper: The India Factor - 8th May 24
Gold 2008 and 2022 All Over Again? Stocks, USDX - 8th May 24
Holocaust Survivor States Israel is Like Nazi Germany, The Fourth Reich - 8th May 24
Fourth Reich Invades Rafah Concentration Camp To Kill Palestinian Children - 8th May 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Are Changing Prices to San Francisco Starter Homes Enough?

Housing-Market / US Housing Jan 09, 2019 - 06:03 AM GMT

By: Harry_Dent

Housing-Market Bubbles ultimately die of their own extremes, although it always helps to have a trigger like the subprime crisis in 2006.

But the San Francisco area takes the cake when it come to the U.S. real-estate bubbles! (That Canadian honor goes to Vancouver and in Australia it’s Sydney and Melbourne.)

And prices have started to fall, albeit slowly, despite no slowdown in the economy and only modestly rising interest rates thus far.

Why?

Because of the insanity of home prices there! They’re massively overpriced, especially in the large and critical starter-home market.


They have become, literally, unaffordable!

The biggest investment most people make is that first home, which they buy between the ages of 27 and 33 (with the average buying age at 31). The second one, if they get another, is an upgrade that they can usually afford with higher income sometime between the ages of 37 and 41. And for the upscale, into age 65 buyers invest in a vacation home that they rarely use.

So, forget that the median home price in San Francisco is a whopping $1.3 million, pushing on 13 times median income.

The real kick in the head is for starter homes…

The median starter home is $895,000. The median income for such families is only $35,425.

That’s 25 times income!

That’s insane!

How could a bank possibly lend against that when the traditional norm is three to four times income?

It takes 41% of their income to pay for that home. 30% is considered high and creates “mortgage stress.” To afford that starter home, you can just forget dining out at all those great restaurants in San Francisco.

The six most overvalued areas for starter home affordability are in California. Even Fresno, for crying out loud! That’s in the middle of nowhere in the desert. Last time I was there it was 120 degrees in the summer and felt like an oven.

San Jose isn’t quite as bad as San Fran, but only because they have higher starter family incomes thanks to the tech jobs. The median starter home there is $759,250 against incomes of $38,645… a mere 20 times income!

Oakland is 15 times and L.A. is 18 times.

Then there’s my past stomping grounds: Miami.

I was there for the last bubble, when high-end condos on South beach were pushing $1,000 a sq. ft. Now they’re $2,000 a sq. ft., with the very top-end, like Setai, Apogee, and Faena House at $4,000-plus a sq. ft. Double the bubble!

That’s the biggest reason I ended up in Puerto Rico (not the tax advantages, as one journalist would have you believe).

My condo is 25% of the cost, and I deal with far less traffic, enjoy more good restaurants nearby, and suffer far fewer prima donnas per capita. Heck, in Puerto Rico I probably qualify for that label myself.

The everyday person in Miami has those low-end service jobs that David Stockman always harps on about growing the fastest. The town’s starter home household only has a median income of $17,952 (that’s $1,496 a month or $9 an hour). They need 10 times that income to afford a lower median price of $185,000 for starter homes.

Then there’s Las Vegas, which didn’t bubble as much this time around as it did into 2006. It’s coming late to the party, with the highest price rise for a major city in 2018 over 2017. It now weighs in at near 8 times income, as does Newark, New Jersey.

Now this bubble is slowing down in many leading cities here and around the world, most so in San Francisco and Manhattan. Mostly because property is too expensive, especially for the biggest and most price-sensitive buyers, the new families.

Now what…?

When the bubble goes belly up, it’ll be worse than the last property crash because the most-bubbly areas are stretched beyond any reason!

And this bubble is leading the stock bubble in bursting, just like it did last time, by about two years.

We may have one more year in the stock bubble at best, but the real estate bubble is already saying “Game Over,” as it did from early 2006 forward and as we warned in late 2005.

Harry

http://economyandmarkets.com

Follow me on Twitter @HarryDentjr

P.S. Another way to stay ahead is by reading the 27 simple stock secrets that our Seven-Figure Trader says are worth $588,221. You’ll find the details here.

Harry studied economics in college in the ’70s, but found it vague and inconclusive. He became so disillusioned by the state of the profession that he turned his back on it. Instead, he threw himself into the burgeoning New Science of Finance, which married economic research and market research and encompassed identifying and studying demographic trends, business cycles, consumers’ purchasing power and many, many other trends that empowered him to forecast economic and market changes.

Copyright © 2019 Harry Dent- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Harry Dent Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in