San Diego Housing Bubble News and Analysis

The impression of some is that it's never going to end. I was trying to understand the strategy of extending foreclosures and it was explained on SDL "Delay foreclosures so some of those owners can benefit from one or another of the various foreclosure mitigation programs/actions underway or about to begin and keep their homes."

So I guess the government is going to do everything possible to delay, procrastinate, refinance and delay further, write-down loans, artificially continue to prop up real estate prices, print money, steal from taxpayers and did I mention prop up real estate?

Yes. The bubble will not pop and all renters will be priced out forever b/c prices will not come down and there is no such thing as affordability factor and forget loan to income ratio. Nonsense.

Someone told me a median income will never afford you a median home in San Diego. And at this rate, I'm going to agree. /end frustration rant.

That somneone was me

JP,

Have no fear because Economics 101 is here! All these artificial means to keep prices over priced will soon come to an end my friend....it just will take a bit more time....

But in the end, Economics 101 will always prevail...and if it doesn't the Governing People that we vote in to make decisions based upon the best interest of the people will prevail in a second American Revolution to overthrow these criminals....

History always repeats itself.....and just when you think it could never happen...well...it usually does....

In the meantime, I am a PROUD RENTER!

The limit for San Diego is $546,250
Please supply a link to the debt to income ratio of 66%.
Thanks

Here's the chart for geographic limits: http://www.brianskaar.com/xSites/Mortgag...

So let's play this out.

The govt. keeps stalling, trying to keep prices inflated with different tactics.

You guys are looking for your first house, are you just going to bite the bullet and rent for 5 years and wait it out?

Mortgage Man, Here you go:

http://www.ofheo.gov/Regulations.aspx?Na...

Looks like 697,000 for San Diego County now....

Go run a loan through any of your conduits and run a DU for a Fannie product with a 59% LTV, Full Doc loan and you will get an approve eligible up to 66%.

This one I did was through Suntrust....

Yes. I have no shame in renting and feel it is still the best course for me right now. Others may feel different, have at it....

I rent a place for $1750.00 that would cost me a monthly nut of say $3200.00 to buy. Still out of whack....

When I have ANY problems that may hinder my outdoor activities, or simply sitting on the couch with my dog and drinking beer...well...I make one phone call to the Landlord and it gets fixed at his expense....

Plus..I don't have to pay property taxes to the state of CA and watch them piss it all away through programs that are an absolute waste of money....

To each his own....I don't want the monthly alligator payment and I don't want to live in Riverside....

I mine as well move back to Ohio.....

LOL

Now San Diego is a high cost area so we need to raise the conforming loan limits???????

Why is it a high cost area jack asses at the FHFA? Because the prices are overinflated through fraud in CA and FL...ohhh..but that doesn't matter...well it does....

Hey FHFA, what are the conforming loan limits supposed to be based upon? Yea, we get hoodwinked again by our own govie....

Popular fallacy. The argument goes something like this:
Low income people rent <=> The owners are upper 2/3 && median price needs to be affordable by median among owners => median price will never be affordable by median income family.

Here is the problem - in a balanced market the rent must cover the payment on the property. You cannot remove renters since they are 'buying' the property by making their payments.

Since markets across time/space/property tax rate are not balanced you can capture a snapshot that goes either way. But look at Austin, TX - Median Income $53K, Median Price $230K. With 20% down the price is just over 3.5x the income and the trend is down.
Or Rochester, NY back in 2006 (money.cnn.com) - $33K median income, $60K median price.

The premise of median income never being sufficient to buy a median priced property is as valid as the better known version of it - 'the RE prices never go down.'

Keep laughing all the way to the DU of choice my friend.....run that up to 80% and see what they will take...55% DTI ratio's....

So they base a loan mod payment on 31% DTI but you can still get a mortgage up to 55% DTI....

When are we going to wake up and see that are own government is screwing us royally...

i am wondering if the anti-wealth effect of dow 7100 or 6000 or 5000 or some low point is going to dramtically change how the remaning pool of investors think. people at all levels are going to start to feel poorer. the expectation that at some point some hidden legion of investors will come in and scoop up everything may be misplaced. i now see waiting for the bottom as the only way to go here -- wait for things to flatten out -- just like this thing went way higher than most thought possible, im starting to feel this may go way lower than anyone could expect ...and if it takes 5 years to get there, so be it, if you're planning to stay there the remainder of your life, it's not a big deal, and if yoouwer eonly gonna be there for 5-7 years, well, you'd a been chasing it down the whole time you "owned' itanyway. i don't think youc an lose waiting now, i think it's justa moneymaker.

Scaredycat,

It will, and already has...trust me. I have friends with big money that have tightened their belts to the extreme.

We are now reaching the place where people actually are awakening to the fact the our own government lies to us repeatedly and blatantly, that our regulatory agencies that we pay don't protect us AT ALL (Enron, Worldcomm, Madoff, Stanford and a bunch more to come), that the media and stats are distorted and controlled by certain people with agendas, and that GAAP are an absolute joke....

People are more afraid of losing more money than losing out an an opportunity...

Fun times......

Why ya think treasuries are so popular right now? Because of the ROI? Yes, Return Of Investment.

Making money in a down trending market is very possible, but it's a game for the very nimble.

That's not how the argument goes. The argument is, "median household income does not have to afford a median house". The reason: there are more households than houses. Many households can't afford or don't need houses.

Median household income should afford a median housING UNIT, which could be an apartment, a condo, or a detached house.

And "afford" is a vague word, generally speaking, even 50% of gross income could be "affordable".

Ultimately, the ratio of median housing cost to median household income should give you the desirability of the place. It stands to reason that Rochester NY, with its climate and white flight problems, would be less desirable than San Diego.

I will accept that median income should afford a median housing unit. Generally speaking, 50% of gross can be affordable on far upper end and/or if you ignore various costs associated with owning a place (which applies to numbers you provided in the past).

Rochester, NY might be less desirable and that is reflected in the income and the prices.
On the other hand, Austin, TX is not Rochester, NY. Feel free not to ignore it.

I have heard the 697K thing was coming back for SD county but no one could confirm it. That links seems to.

If we get decent conforming/super conforming rates up 697K, the market which was previously pretty healthy up to only 700K could easily bump up 900K. That would keep some more air in the bubble for a while longer. This would not be a postive for those expecting or hoping for a faster crash up above.

Macromaniac
What general area do your rent in for 1750 and what does that get you? Its helpful for us to be able to put your broad generalizations into context.

sdr

BTW, I'm not surprised to learn you are from Ohio.

Austin, TX - median household income $53K (census.gov says 48K), median price $230K.
San Diego, CA - median household income $60K (census.gov) / 67K (SANDAG), median price - I guess 300-350K by now?

Austin, TX - property tax rate 2.5% or so
San Diego, CA - property tax rate typically begins at 1.1% and goes down over time, thanks to prop 13

Austin, TX - average August high 96 F, average January low 40 F, hot and humid summers, 150 miles to the nearest beach
San Diego, CA - average August high 78 F, average January low 50 F, dry summers, 0-5 miles to the beach

What's your point again?

It's affordable if your median household is physically capable of surviving after making monthly housing payments. In practice, people won't stretch their finances to the limit. How far are they are willing to go before packing up and moving to Austin, TX? Depends on how desirable the place is. San Diego is not the most desirable place in the United States, but it's near the top. It's behind Puerto Rico, Hawaii, Bay Area, and central California coast (Santa Barbara, Monterey & such).

I was just in Puerto Rico last September, (the place was mostly deserted I guess it was the wrong season to go there).

It was nice if you like a cross between Mexico and the U.S. (kind of but almost not quite third world “Mexico only a lot safer”).

The homes for sale there were very reasonable, the one complaint I would have is they don’t seem to have a handle on their mosquitos, They (mosquito’s) are a real problem there.

And they have fantastic snorkeling right off the beach in some spots.

SdRealtor,

Please clarify the comment concerning you not being surprised that I am from Ohio as I am not sure where you are going with that....

I rent in the original La Jolla Woodlands off Via Alicante, $1750.00 for a 2 bed 2.5 bath with 1 car garage and 2 patios.

The bump up on the conforming of 70 some thousand is not going to be a major factor to hold up prices at this point. You still have to qualify with full doc and there are substantial rate hits for what is called Jumbo Conforming....

Most anyone that is going to purchase a home at this point and range needs their head examined.....my opinion....

Whether they need their head examined or not they are out there with money, motivation and desire. When that meets financing at better terms that means more sales. The bump up on the conforming to 697K would not be 70K more it would be over $150K. Many of these potential buyers will have cash to put 20% down or more so an increase in the loan limits of $150K raises the bar for them by almost $200K. How many and how quickly they would act is anyone's guess. Dont think they arent out there. I meet people like that all the time and know I cant be seeing all of them. It would make a difference in the 700 to 900K price range and a significant one at that.

Regarding Ohio thats just a running joke with me. I'm a friendly guy and talk to everyone. Last time I drove cross country (1997) people were nice everywhere with one exception. That exception was Ohio where no one we met was nice or friendly. I laugh because my sample size was limited to front desk clerks, waitresses, gas station attendants, toll takers and random people on the street. Far from scientific. Nonetheless, I still carry with myself a feeling that people from Ohio are very unhappy internally and not nice however unscientific it may be. Of course my rear neighbor over the last 10 years is from Ohio and is just about the friendliest most outgoing guy around but I still laugh about my traipse through Ohio 12 years ago.

As I mentioned elsewhere, I rent a 2/2 w/a 2 car garage and a distant panoramic ocean view for 1800/mo.

There is a townhouse for sale in my complex for 395k. Doing quick math, if I just put minimum down, like FHA, so as to no tie up my money, figuring out P&I, taxes, insurance and HOAs of 350/mo, I would be paying considerably higher than my rent, even w/a tax write-off. Makes no sense.

Before the bubble, the 2000/2001 price in this complex was 200k/250k.

There's already been a short sale down the street and an attempt short sale w/postponed foreclosure on another place in this complex.

Shoud I buy the one for 395k?

Thats up to you but if you could get it at 350K w/ 20% down your loan is 280K. At todays rates thats about $1400 per month add your 350/month and you are at rental value without factoring in tax benefit.

If you were truly interested in buying it as a long term home that is how you would purchase it not as an FHA buyer as you have the means to (at least I think you do). In that case, it could make sense at 350K or higher when you consider tax benefits. Plus the gubment gonna give you $8K this year which would cover all your closing costs.

Of course, if it is more of an investment decision the cash flow would be more than offset by the expectation of lower prices to come.

Keep waiting or get on with living. Thats your choice. I'm stuck thinking about all this nonsense all day. Someday I hope you dont have to anymore.

Is that insinuating that all of us waiting for this mess to finish unraveling are not living just b/c we rent? {hands on hips - fire from eyes}

Do I really want to tie up 20% (70k), when in a years time there is real potential for it to be reduced 20%?

Though I would not buy for investment (buy to live there for a while), financially, it still doesn't sound like a good investment of my money.

8k is not an incentive when there's a good chance the place could drop in value 50-100k in a year.

JP,

Remember SD is posting with self interest. This is how he earns his living and little pokes like this are used to try to create second guessing yourself so he can go show you a house to buy that will be 30% lower next year.....

You will know when we have hit a bottom as it will level out for a few years just like the mid 90's. Don't let people pull psychological sales moves on you......buy when it is cheaper....hold tight......

Its not because you are renting. If you were happy renting you would not be here and we wouldnt be having this conversation. Its because you are frustrated renting and spend all day on housing blogs trying to address that frustration. That is the keep waiting or get on with living point. I bought a place in 1997 at the bottom and I will say it seemed expensive and was uncomfortable then. Very much so and I lost lots of sleep over it. I dont beleive you will ever find the slam dunk this seems cheap and easy situation you may be seeking in SD.

Clearly you do not want to tie up that 20%. I dont beleive there is a real potential for it to drop 20% so we can agree to disagree on that. Even if it did, would there be one you wanted on the market for that price?. Would you be competing with others for it? These questions are all part of the equation.

The example I gave above is how the other nit wits and shady RE agents on the street think and worse. That is your enemy not me.

MM-Yep defintely from Ohio

We're only one year into the biggest credit implosion in history. Derivatives are built on complete fiction and amount to over $100T. This bomb has yet to hit. Unemployment is about to really take off.
Waiting right now is probably the best financial option for anyone holding cash. If ,"...get on with living." , means keeping one's money and watching the market tank while renting, then bring on the life!!!

If the peak was 2006, we are starting the third year.

Just b/c I'm on this blog does not mean I'm not living. Do I monitor excessively? Yes. I'm funny that way w/my hard-earned money and I would do research w/any investment, stocks or real estate.

life is what happens while you're making other plans?

as jackie mason once joked, "every jew knows a building in nyc he coulda bought for 50 dollars."

no wait, here's the quote:

Every Jew knows a building he could've bought thirty years ago for nine dollars. They'll all tell you, "Do you know what that building is worth today? One hundred and eighty-seven million! They talked me out of it, those . . ."

if it's a gamble on the way up, it's a gamble on the way down. i like the odds. screw it. Let's double down and wait 2 more years.

i plan to continue to live int he interim.