The U.S. real estate bubble continues to swell like a lava dome, supporting full-blown manias on both coasts and in quite a few cities, suburbs and towns in between. You'd have to live in a place like Muncie, Indiana, or Vernon, Texas, to be unaffected by it all. In Vernon, a town of about 12,000 in the lower panhandle, a mere $50,000 still buys all the house a growing family could need. To put that in perspective, a beach dweller in the Hamptons could trade his or her property for 200 homes in Vernon, with enough left over to buy a few Wichita Falls mansions. Not that anyone from the Hamptons is yearning to relocate to the Texas scrublands. Vernon is a quiet place, one where even big deals are still done on a handshake. But you'd be wrong to infer that it is a relative dearth of wheeler-dealers that has kept prices there from taking off. In fact, the town is where Charles Keating seeded his schemes. Yes, that Vernon Savings & Loan -- where my wife's grandmother kept her savings. SoCal Mania But I digress. For it is not Vernon's affordable housing that we wish to discuss, but rather the vast number of barely affordable homes on inventory just about everywhere else. In Southern California, to take a particularly notorious example, the concept of 'barely affordable' has been stretched to the threshold of the metaphysical. Los Angeles County's frothy market offers dwellings that only 17 percent of buyers can afford at the median price. And it's even worse in Orange County, where the figure is 11 percent. But how, you ask, can real-estate mania be going full-bore in a region where home prices are so very high? Some would answer that it's simply a matter of all-but-insatiable demand meeting temporarily insufficient supply.
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