Dr Housing Bubble 12/10/08

[Crewleader]

The Rise and Fall of the Southern California Housing Empire:
Foreclosures, Bad Investments, and Psychological Deception.

Mighty kings rise and fall like the sun. Southern California decided to take an ancient recipe from the books of history and followed in this time honored path. Except our king came riding in on a pair of 24 inch spinning rims in a Cadillac Escalade. The only problem is all of it was mortgaged on a kingdom of sand that is now quickly eroding. For anyone in Southern California the minor consolation we can take is that this will go down in the history books of financial exuberance like those who lived through the Dutch tulip mania in 1637. Tulip contracts were selling at 20 times the annual income of a skilled craftsman. Remember the story about a farm worker who made $14,000 a year and was able to buy a $720,000 home back in May of 2007? Why stop at a 20 ratio when we can go over 50 times?

Now this is the story of glamour and glitz. The rise and fall of a housing market in a few short years. In today’s article I am going to use graphs and data to try to examine the Southern California housing market. I have been covering the housing market since 2006 in the heat of the insanity and the psychology now is incredibly different. Prices declining by 40 percent in one year will do that to you.

Southern California according to DataQuick reached a peak median price of $505,000 in July of 2007. Since that time, the median price has fallen to $300,000. Keep in mind the median household income for Southern California is under $50,000. So at the peak, it would take the median household income 10 times their annual earnings to purchase a home in the region. 20 times for a tulip contract, 10 times for a glorious shack. We will now have our place in the history of magnificent bubbles right their next to the tulip bulb mania from 371 years ago.

http://www.doctorhousingbubble.com/the-rise-and-fall-of-the-southern-california-housing-empire-foreclosures-bad-investments-and-psychological-deception/