Why home prices aren't in bubble territory.

[collected]

I've seen articles showing how home prices are now approaching 2006 levels and some have even gone past but that doesn't mean home prices are overvalued. 

This article from Corelogic seems to put it to rest.

http://www.corelogic.com/blog/authors/andrew-lepage/2016/01/typical-mortgage-payment-a-historical-comparison-of-the-monthly-payment-to-buy-a-home.aspx

Since rates are much lower than they were in 2006 the mortgage payment is much less so people can afford to buy much larger homes but not pay as much for them.  Looking at the inflation-adjusted mortgage payment chart it would appear that we aren't even close to 2006 levels in Orange County.  Rates also won't rise unless there's actual inflation which would increase home prices more.  Even SF has lower payments than in 2006 which is surprising.

Also since more people are renting than before a smaller subset of the population is buying homes which means that there's an even higher median income for those buying homes than the general population.  Given all of this info I would say that homes aren't overpriced at all and I wouldn't want to be without a home once all of the empty land in OC is developed which will happen in five years. 

 

[lnc]

Because at least for Irvine, the existing home for sale's inventory is still very low. 

We've discuses the inventory level in another thread and looks like current inventory level is only about 2.5 month.  We really need to see over 6 month of housing supply inorder to see an impact on housing prices and 10 month of inventory to see some sort of significant price reduction.

We've also discussed many factor that might impact housing such as slow down in Chinese buyers, rsise interest rate and slow down in the ecomy etc. but base on the existing inventory, which is one of best indicator of housing price trend, there's no evidence of slow down yet.  (We do see a slow down in higher end but anything under $1.1 million are still selling like hot cake)

 

[jmoney74]

You only get bubbles where the things get over leveraged. A slow down is healthy to keep the market at a moderate growth rate it can sustain.