Home prices we haven't seen since spring of 2004
June 24, 2008
| posted by:
Andrew C Maleski
The median price for a Los Angeles County homes stood at $ 232,000 in May of 2001. In May of 2007 it reached all time high of $ 585,000. This was a 152% increase. The median price dropped to $435,000 in May of 2008. The price was down 26 percent from a year ago.
Even with the housing downturn, the drop in prices still just isn't enough for many workers in traditional occupations to afford Los Angeles houses. In 2001 the median income in the Los Angeles County was $43,908. The median income today is just $74,000. That is just a 69 % increase from 2001. The housing price increases outpaced rise in median income in California for many years.
The prices would need to drop roughly another 20% to bring us back to affordability level from 2001. This simple calculation does not even count recent spikes in cost of food and energy. People are spending much more these days on basic necessities that leave them with less to pay for their mortgage.
Recent housing boom created the illusion that homes are affordable and within reach of anyone, regardless of income. Just because a family purchases a house doesn't mean they can afford it. Especially now with rising costs of living, many renters may have to improve their personal finances before they can buy a home.
The truth is that average family in Los Angeles County still can't afford a home. Personal incomes have to grow faster, and or home prices will still need to come down before the housing market can recover.
Copyright Andrew C Maleski 2008. All rights reserved.