Reply to There is no housing bubble in the DC area so get over it

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[quote=Anonymous][quote=Anonymous]I think that we have a good indicator in the link below. It hasn't been updated in nearly a year.  I think that the bubble deflated, if not burst and we aren't in one now.

http://novabubblefallout.blogspot.com/[/quote]

The fallacy of this meter is that it measures housing prices against the 2006 inflation-adjusted peak. There has never been another proper analysis conducted on a post-bubble asset class that measured valuation to peak. You look against market low prior to the bubble, along with long-term averages. In the long-term (since 1970), homeowners in the DMV paid aprox. 2.7x home price to median income. During the bubble that got as high as 6-7x, we're currently looking at 3.5x.

Average inflation-adjusted median income in the DC market has remained at ~$100k since 2000, at that point, inflation-adjusted housing prices were close to $270,000 (in today's dollars). This coincidentally ties to the average, healthy market ratio of 2.7x median income for a house price.
Current average house prices in DC are around $350,000, wages have remained flat (adjusting for inflation). 
Unless we're assuming some massive improvements in the local economy that have, as of yet, to be advertised...healthy average home price for this market is $270k.

Here's where you can very easily chart the change in both nominal as well as real home prices in the DC market since 1987:

http://www.jparsons.net/housingbubble/washington.html

A proper analysis would compare today's housing market against how it stood prior to the bubble (which started in 2001).

The [u]wrong[/u] question is this:

Have we returned to 2006 market-high valuation?

The [u]right[/u] question is this:

Have we returned to 2001 market-low valuation?

Sorry guys, we're never going to see 2006 home price valuations again, that was a fluke. It's a pipe-dream to stack up a recovery against that number. Feel free to wait it out if you'd like, but that's a foolish game, IMO.

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