The median home price of a home sold in the U.S. is now down to $165,000 sending us back to nominal levels not seen since 2002. While the stock market is up 70+ percent in one year, housing as the store of most of American’s net worth is still limping along at the bottom. No bounce in this asset class. This of course should not be a surprise given the magnitude of this housing bubble, something not seen since Florida in the 1920s. Only difference this time is that it went national. During the Great Depression roughly 40 percent of Americans were considered home owners. Those that owned actually had to come in with more funds and ironically, they did better that time around with homes maintaining 70 percent of their value while stocks fell 89 percent. California as a state has surpassed that mark with real estate values down nearly 50 percent from their peak values. More Americans this time around are also home owners which spreads the pain around.

Let us look at what is going on at a national level, and then drill down here in Southern California:

Source: Bloomberg

It is interesting to see the bump from HAMP and also the tax credit. That was short lived of course since the employment situation hasn’t really improved much in that time. Most of the jobs added last month were low paying positions. As the chart above clearly shows, we are now back to the low point again. People simply cannot afford to pay higher prices for homes as their wages cut back. Yet the $165,000 median price is starting to make sense in many states across the country. However here in California some areas are blissfully in a state of peyote induced delusion. They are still in bubbles and will soon pop. Culver City is one of those markets. Today we salute you Culver City with our Real Homes of Genius Award.

Culver City – $779,000 or $200,000 across the Street

The above home is in a nice part of Culver City. This isn’t a distressed sale. The price tag will reflect that. This home is a 2 bedrooms and 1 bath home listed at 1,012 square feet. It was built in 1922 during the Roaring Twenties. It has been listed on the MLS for 2 days. The current list price? $779,000. The bubble mentality is back in force.

I tried finding sales history on this home but didn’t see anything listed which seems odd. So I decided to look right across the street:

The home right across has the following details:

2 bedrooms

1 bath

1,078 square feet

Built in 1938

Seems like a reasonable home to use for comparison. Now this home is not for sale in Culver City but it did have some sales history. Fortunately for us the sale took place right at the birth of the California housing bubble:

Sales History

Sold 01/28/2000: $200,000

So my question to you astute reader is this, did the house that is currently selling for $779,000 really appreciate some $579,000 from 2000 to 2010 in what is arguably the worst economy for California in the last century? Or in other words, the home went up in value on average $57,900 per year for ten consecutive years (the median household income for California each year simply for being in Culver City). When you look at things like this, you know full well these cities are still in massive bubbles. Income in the area certainly did not go up to this level and unless we have some gold plated toilets in the home, this current price is in a bubble.

But let us assume you are a working couple with a household income of $120,000. This is higher than the mean household income for the city.

Source: Census

So how many people can afford this home? Let us run the numbers first. Thanks to the geniuses in our government and their corrupt henchmen in Wall Street they have decided that even though the nationwide median price is $165,000 that FHA insured loans should go up to $729,750 in some areas. This nonsense that home buyers are putting down big down payments is baloney. In Southern California last month nearly 40 percent of all homes were bought with FHA insured loans. The CAR had data showing that the vast majority went with the minimum 3.5 percent down payment just like option ARM borrowers make their minimum payment. The all cash buyers were buying properties up in the Inland Empire and other depressed markets.

So let us run the numbers now:

The above is assuming we are putting down $49,250. The required salary to purchase this 2 bedrooms home is over $200,000 and only 6 percent of current Culver City residents even fall within that category. That working couple making $120,000 has no way of buying this place at the current price. This is their monthly take home:

The mortgage payment is nearly $5,200 per month yet they bring in $6,900. In other words, the housing payment eats up 75% of their net pay. This won’t even fly. Yet I somehow find it hard to believe that someone making $200,000 or more wanting to buy this place in Culver City. So what will happen? One option is suddenly wages fly through the roof and everyone is a six figure household. That doesn’t seem likely given our massive state budget fiasco and the fact that new jobs are lower paying with fewer benefits. The other option is prices come down and come down by a lot. For some of these areas that is the next road ahead.

And if you don’t think this is true you are mistaken. The MLS has 113 homes listed for Culver City. But when we pull up the shadow inventory we find 187 homes listed:

Oh and how the problems run deep.

Now how can a supposedly prime area have so many problems? And many are scheduled auctions and the bid is far from the estimated value which is inflated:

In other words, prices will go lower. But you probably already figured that out if you read this far.

Today we salute you Culver City with our Real Homes of Genius Award.

Did You Enjoy The Post? Subscribe to Dr. Housing Bubble’s Blog to get updated housing commentary, analysis, and information.