Last week, we looked at the relationship between past and current housing prices. We saw that there are some regions where housing prices have fallen more than what might be expected based on national trends, while prices have declined considerably less than expected in others.
Today, we shift gears looking at the relationship between housing
price and incomes. The graph below compares median housing prices in
2009 to income per capita levels in 2007 (the most recent figures
Housing prices and incomes are closely associated with one another: The correlation coefficient is 0.68 and the R2, 0.46. Metros above the fitted line have housing prices that are higher than their incomes relative to the national trend, while those below the line have housing values that are less than what their incomes would predict relative to the national trend.*
In Honolulu, for example, the differential was a whopping $371,777. Almost half of the top 10 regions are in California. In San Jose the differential is $120,134, San Diego ($106,625), Los Angeles ($103,278), and San Francisco ($59,633). The differential was also significant in the Pacific Northwest - Portland ($74,490) and Seattle ($60,848), as well as Salt Lake City ($77,526), and New York ($93,900).