In 2000, 60 percent of the homes sold on Long Island could be classified as “affordable” for families earning up to $100,000 a year, under the old rule of thumb that buyers should spend no more than 2.5 times their income on places to live.
Last year, according to a new report, just 2 percent of the houses sold on Long Island were in that range for families with such earnings, which make up more than 60 percent of Long Island households.
Here's how you interpret the above graph.
Each vertical pair of graphs should have been equal.
This isn't rocket science, and you don't need to be a Warren Buffett to understand this. All you need to realize is that you can't spend more than you earn (at least not for any extended periods of time.)
The above graph is showing what happens when you spend more than you earn on housing. Prices goes through the roof, and affordability plummets.
However, remember the above fact that you can't do it for any extended period of time.
The markets must revert, and sooner rather than later, the number of people earning X, and the price being roughly 2.5-3.5X are going to become identical.
There are two ways for that to happen. Either people make a lot more money, or prices collapse.
With China and India online, there is no way in hell the first option is going to happen!
Long Island is going to be a world of hurt!
1 comment:
For those not in the "know", L.I.E. is a pun on the Long Island Expressway.
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