The kind folks at the Orange County chapter of the Building Industry Association were nice enough to invite me to join a recent panel on local housing market conditions.
I decided an early-morning seminar required a quick start, so I offered the audience of industry insiders and local elected officials a “pop quiz” on some housing supply and affordability trends.
The theme to my questions was that decades of rising housing costs aren’t as out of line with monetary sanity as one might think. That reality check doesn’t make it any financially less challenging to live here, but I think it does give policymakers some leeway when seeking cures to local housing hurdles.
So here are my 10 questions that say a lot of about limited affordable housing options.
#1: Relative value?
Q: In past 30 years, Orange County home prices have increased five-fold while inflation has just doubled. Not a shabby return for owners. But, how did the Dow Jones industrial average do, better or worse?
A: Stocks easily outperformed housing in the period, with the Dow rising 11-fold — from 2,000 to 22,000 since 1987. It’s an example of the broad economic fundamentals that provide support for higher home prices.
#2: Bubble or not?
Q: Orange County home prices are way up, with CoreLogic’s median selling price over the last five years growing at a rate equal to 10-percent-a-year average gains. How do the large profits of the crazy mid-2000s bubble compare with today?
A: Please do not forget how insane last decade’s real estate insanity was. One hint is that in the five years ending in 2005, local home appreciation was averaging 18 percent a year! That’s almost twice today’s upswing. So the current run-up looks pretty meek, comparatively.
#3: Afford much?
Q: According to National Association of Home Builder data, the typical Orange County home sold in 2017 is affordable to 14 percent of residents making median incomes. But back in the 2007 bubble, was “affordability” better or worse?
A: Statistically, it was worse a decade ago with 4 percent affordability … but (a big but) … that era’s lax lending practices meant far too many people were qualified as borrower’s who could afford overly generous loan-qualification standards. Half-jokingly, affordability was actually 100 percent in those days, if that phrase simply meant “can you buy?”
Q: If you take CoreLogic’s estimated monthly house payment for an Orange County homebuyer from 1989 and…