Here is an update from the East Bay Economic Q109 Forecast. Some of the information is quite interesting.
The graph of “Affordable and Actual Median Home Prices” illustrates a comparison of estimated affordable home prices and actual median home prices in the East Bay for the years 2002-2008. We used median family income from U.S. Census’ American Community Survey 5, a 30% ratio of mortgage interest and principle payments to income, an 80% loan-to-value ratio (which implies that the family has a 20% down-payment) and a conventional 30 year fixed mortgage rate from Federal Housing Finance Board survey to calculate hypothetical affordable home prices.
On the supply side, the market is in the process of burning off excess inventory. The latest home price estimates using the OFHEO Price Index for the 3rd Quarter show East Bay home prices have continued to fall and are down -26% from the peak of June 2006. Even more telling is the fact that the average increase in home prices in the East Bay over the last five years is only 14% percent. After adjusting for inflation, home values have not increased since the 3rd Quarter of 2003. Therefore, the excess appreciation of homes in the East Bay has for the most part been burned off and home prices are relatively close to their long run trend.
To read the entire report, and i recommend you do, click here: