The Residential Real Estate Crash Index Message Board

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Strategies & Market Trends : The Residential Real Estate Crash Index

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To: GraceZ who wrote (3261)	7/8/2002 5:22:06 PM
From: MulhollandDrive	Read Replies (3) of 306849

>>Its the distribution of income levels to home levels that matters. In other words, how much supply is available for the demand at a particular price level combined with the interest rate. You can have a low median income in an area where people with higher incomes are migrating. This is very much the case where I live in Maryland. The older existing housing is small and funky, but the McMansions are going up daily with higher income buyers looking for bargains in the next area to go up.<< Absolutely. However, there are STILL sale price to income formulas that are necessary. And the overarching point here is that incomes are not keeping up with price inflation. At what point does the pool of qualified buyers dry up? Or are lending standards simply "customized" to fit the new buyer. I have filled out MANY a financial disclosure form and it didn't matter that I had enough "cash on hand" to write personal checks for certain real estate that I have purchased. The lenders were VERY interested in my INCOME...not necessarily my savings....knowing full well that the savings could disappear in an instant if I chose to spend it( or lose it in an investment gone sour) . Lenders want to see income tax filings with a particular eye to your W-2's. If you don't have sufficient monthly income to cover the mortgage payment, you simply shouldn't qualify....doesn't matter how much you have in "savings". So when you say "distribution levels to home levels" that matter...yes I agree with that...which is also why lenders should pay strict attention to the debt level....credit card, revolving credit, etc... Ultimately it is the annual income (with due consideration to debt and savings) that is the best indicator of a person's ability to service debt. Your $60K couple is the admirable exception. The $200K couple is also the "exception"... To say that tracking median income is almost worthless...I'm still not quite sure of your point. Are there variances? Yes... Is loan policy made on those variances? The discussion we were having about median prices and median income had to do with available pools of buyers in a specific area...(Culver City).

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