Comments on: Using The ‘Rule Of 15’ To Identify Local Housing Bubbles http://www.boom2bust.com/2008/07/17/using-the-%e2%80%98rule-of-15%e2%80%99-to-identify-local-housing-bubbles/ "The Most Hated Blog On Wall Street" Fri, 05 Dec 2008 01:05:06 +0000 http://wordpress.org/?v=2.6.2 By: Editor http://www.boom2bust.com/2008/07/17/using-the-%e2%80%98rule-of-15%e2%80%99-to-identify-local-housing-bubbles/#comment-2433 Editor Tue, 05 Aug 2008 03:09:45 +0000 http://www.boom2bust.com/?p=939#comment-2433 Thanks for the info Gary. Thanks for the info Gary.

]]> By: Gary Anderson http://www.boom2bust.com/2008/07/17/using-the-%e2%80%98rule-of-15%e2%80%99-to-identify-local-housing-bubbles/#comment-2429 Gary Anderson Mon, 04 Aug 2008 17:33:17 +0000 http://www.boom2bust.com/?p=939#comment-2429 Historically prices should reflect three times household income. So this 15 rule is twice that in LA. The average income there is 50k per year times three equals 150k price. Compare that to your calculation of 360k value and you are too high. Timberrrrrrr. Historically prices should reflect three times household income. So this 15 rule is twice that in LA. The average income there is 50k per year times three equals 150k price. Compare that to your calculation of 360k value and you are too high. Timberrrrrrr.

]]> By: Editor http://www.boom2bust.com/2008/07/17/using-the-%e2%80%98rule-of-15%e2%80%99-to-identify-local-housing-bubbles/#comment-2317 Editor Fri, 18 Jul 2008 17:25:00 +0000 http://www.boom2bust.com/?p=939#comment-2317 Thanks for the comment and input Steve. I'l have to check into that. It'll be interesting to see if Ms. Wong Ulrich replies to my e-mail in the meantime. Thanks for the comment and input Steve. I’l have to check into that. It’ll be interesting to see if Ms. Wong Ulrich replies to my e-mail in the meantime.

]]> By: Steve Gelmis http://www.boom2bust.com/2008/07/17/using-the-%e2%80%98rule-of-15%e2%80%99-to-identify-local-housing-bubbles/#comment-2304 Steve Gelmis Fri, 18 Jul 2008 01:10:32 +0000 http://www.boom2bust.com/?p=939#comment-2304 That's a pretty rough (in my view high) ballpark ratio considering the amount of variability a range of interest rates, closing costs and property taxes in various locales could have on the overall carrying monthly costs. Not to mention insurance, repairs, etc., some of which is offset by the mortgage interest and property tax deduction from income tax. Still, as a rough target it serves a useful purpose. By the logic of the above it should probably be a bit lower though, like 13. Especially if interest rates rise. As to "why 15?" It's probably because when you add the interest of a 30 year loan to the sale price of a house, the price approximately doubles, so 15 bought + 15 interest = ~ the monthly mortgage payment. That’s a pretty rough (in my view high) ballpark ratio considering the amount of variability a range of interest rates, closing costs and property taxes in various locales could have on the overall carrying monthly costs. Not to mention insurance, repairs, etc., some of which is offset by the mortgage interest and property tax deduction from income tax.

Still, as a rough target it serves a useful purpose. By the logic of the above it should probably be a bit lower though, like 13. Especially if interest rates rise.

As to “why 15?” It’s probably because when you add the interest of a 30 year loan to the sale price of a house, the price approximately doubles, so 15 bought + 15 interest = ~ the monthly mortgage payment.

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