Real Estate Orple of the Week

"Prices are poised for a continual drop for the next 5 years, or until they come back down to historical affordability ranges" - Chicken Little 1.0

"When will the average list prices get in-line with average incomes?For example, you wrote the average price of those duplexes was $381,133. Assuming 20% down, that leaves a loan of $304K. Using 4x gross income as the affordability factor means you need an income of $76K. Does the average person is Sacramento earn $76K? I thought the median income in Sacramento was $42K" - Chicken Little 1.0

Okay, Chicken Little 1.0, let's go over this s-l-o-w-l-y, shall we? Median income has nothing to do with median home prices. Or how do you explain San Diego where the median price of a home is $566,700 and the median income is $55,637?

Ouch. That hurts your argument, doesn't it? Well, maybe we could look elsewhere. How about New York? City Data reports median income in New York as $43,434 and the median price of homes as $449,000. Hmmm... maybe they should hear your theory and lower their house prices.

Okay, so maybe we should consider Los Angeles. Surely, they understand your measure and what you mean. Okay, Los Angeles, then. A median priced home in Los Angeles sells for $513,800. Median income? $42,667.

Hmmm. (Cough, cough) Ahem!

The problem, Chicken Little 1.0 is that you cannot put a nice little bow on everything that happens. There are no neat little mathematical calculations you can apply to everything. I wish life were that simple.

Median house prices are oranges; median incomes are apples. Compare the two and you get an orple. A nut.