San Diego Housing Bubble News and Analysis

Kev,

I think there are still opportunities for people to buy. This isn't to say they should buy.
Teachers, Fireman, Police not only have stable income but simultaneously are rewarded with speacial finance programs. In fact they need to buy early in their carreers if they before their income exceeds the threshhold of the programs

There are also programs available for first time homeowners through the state of california.

Homeownership Programs

FIRST MORTGAGE LOAN PROGRAMS

CalHFA Conventional Loans

interest only PLUSSM
This conventional mortgage loan offers up to 95% financing and allows borrowers to pay only the interest for the first five years of a 35-year term. After that, borrowers pay principal and interest at the same low, fixed interest rate for the remaining 30 years.
40-Year Fixed Mortgage
This conventional mortgage loan offers up to 95% financing with a 40-year term and a low, fixed interest rate.
30-Year Fixed Mortgage
This conventional mortgage loan offers up to 95% financing with a 30-year term and a low, fixed interest rate.
Government Insured/Guaranteed Loans

30-Year Fixed Government Insured/Guaranteed Mortgage
This program is for mortgage loans that are insured or guaranteed by FHA, VA or USDA and features a 30-year term with a low, fixed interest rate.

DOWN PAYMENT ASSISTANCE LOAN PROGRAMS

Affordable Housing Partnership Program (AHPP)
A joint effort by CalHFA and cities, counties, redevelopment agencies and housing authorities whereby a deferred payment subordinate loan from a locality is utilized by the first-time homebuyer to assist them with down payment and/or closing costs.
CalHFA Housing Assistance Program (CHAP)
Offers a deferred-payment second loan of an amount up to the lesser of two percent (2%) of the purchase price or appraised value.
California Homebuyer's Downpayment Assistance Program (CHDAP)
Offers a deferred-payment junior loan of an amount up to the lesser of three percent (3%) of the purchase price or appraised value.
Extra Credit Teacher Home Purchase Program (ECTP)
A low interest rate CalHFA first loan, together with a forgivable interest CalHFA junior loan to assist eligible teachers, administrators, staff members and classified employees to purchase their first home.
High Cost Area Home Purchase Assistance Program (HiCAP)
Designed to assist first-time homebuyers in the highest housing cost areas of the state.
School Facility Fee Down Payment Assistance Program (SFF)
A conditional grant program that provides assistance to buyers of newly constructed homes throughout California.

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At my oofice, the would-be first time owners (in their late 20s) have the incomes and good FICO scores, but no down payments.

I believe the first-time homebuyer's programs have an income limit of something around $90K, if I remember correctly. I don't see how someone making just $90K could afford anything but a condo or a 1500 SFR (in limited locations).

They can't afford to buy at this time. A small percentage with above average incomes may be able to afford a starter home, or they got money from mommy and daddy, etc. But for the most part prices still exceed incomes.

Those who partook in the loose lending couldn't afford it either. In actuality the houses own them (the ones not forclosed on yet).

If you have to ask "how can they afford it", they can't. Which means that prices have to drop more. Simple.

Exactly my point. The first time homebuyer's program is a joke right now.

In general I will agree with that point, that it is close to impossible or next to impossible for first time homebuyers. However, I will say that of the first time homebuyers I have been working with who do have alot fo money saved up, demographically they tend to be either Asian or Indian, and are mostly dual income earning couples who have been diligent and patient and have made a concerted effort to save substantial monies for downpayments. In a few cases also there are some white females who have also done a good job at substantially saving money for dps.

No this is not an endorsement to buy, just a snapshot of the demographics of people I know who are first time buyers and have saved alot of money up over the past few years.

If you are thinking La Jolla, 1st time homeowner might not work. But there are more than enough areas where this limit is more than enough.

2008 HOMEOWNERSHIP PROGRAM INCOME LIMITS ATTACHMENT A

SAN DIEGO
EXISTING RESALE NEW CONSTRUCTION
1or2 Person 3+ 1or2 Persons 3+
Moderate Income$ 94,800 $ 110,600 $ 94,800 $110,600
Low Income $ 56,880 $ 65,412 $ 66,360 $ 76,314

Sd Realtor, funny you mentioned the demographics thatyou see. In my hood, the tracts built in the last 2 or 3 years are heavily dominated with asian and indian buyers, but interestingly enough, they dominate the foreclosures. All the while they are not a large chunk of the city demographics. On foreclosure.com if you run 92592 and look at pre-foreclosures and sheriff sales, it lists the names, maybe half are inidan or asian names, while they are less than 10% of the demographics. I know every street and it's tract, the numbers are even more suprising when looking at bubble built tracts, maybe 80% indian or asian. I think that their diligence may have been their undoing, allowing them to buy during the bubble and the supposed bottom of 2007. They caught a lot of knives, perhaps because they were the only ones with the ability to do so. We can learn a lot from their cultures and their diligence, in this case it seemes to be just bad timing.

Future fist time buyers will re-enter the market in S.D. after the prices shake out. When 100k income gets you a decent starter home, they will come back. Until they come, the recovery wont.

Not having down payments is the real issue, IMHO. A couple that makes 100k pre-tax can comfortably afford making payments on a median house, even now. But very few of them have enough cash for 20% down.
I wouldn't rule out a J-shaped recovery when housing market stabilizes and banks bring back their zero down and 2nd mortgage programs.

Sorry ..didn't find a single Indian name.

I don't think the majority of 20 somethings, even early 30-somethings have immediate plans to buy.

This demographic grew up with MTV, and will spend money on cars, clothes, and cell phones before saving for a down payment. Certainly not all, and probably none of us on these forums but I only know a small handful of people saving for a house.

It's not necessarily that they don't have the income, though many don't, it's more the mindset.

The idea of owning a home by the age of 30 in CA is fading IMO. People are pushing back marriage, kids, and home buying in favor of a comfortable lifestyle. They know homes are too expensive, so why try. Then there's the issue of financial responsiblity. Those in this grouup that went to school are most likely in debt, and most if not all owe big time on credit cards.

All the more reason I think despite the quick correction we're seeing, it will still drag on for a while.

I think there aren't as many sideline sitters as the RE industry thinks. The few there are more than likely got out early-bubble to wait. First time buyers are few, and probably mid-30 dual income couples. You simply can't afford an average CA home on an average mid-30's single income.

As a representative of the discussed demographics (GenY, dual income, would-be first-time buyers)I can assure you that me and my renting friends are getting increasingly comfortable on the sidelines. "Pride of ownership", "ability to paint my bedroom purple" - those concepts are lost on me and most of my peers, and things like landscaping and remodeling are viewed as chores and mandatory expenses. What we really worried about is being priced out of the market forever... Well, that's not an issue anymore, so nothing forces us to make the move until we find our PERFECT house for a comfortable price or until buying becomes cheaper than renting.

Many of the 20 somethings are also still living at home, in some cases despite earning a decent paycheck. They will save money by accident unless they are totally frivilous.

As an aside, these "Millennials" by and large have to be the most coddled generation in history. The stuff I've read about and seen in person makes me wonder if they will ever grow up.

they behave like the japanese generation

the young japanese can't buy condo's or houses, so they
buy expensive consumer goods, don't marry, don't have kids.

the current number of kids per japanese femals is now down to 1.22

I checked that list too and other than a couple of vietnamese and maybe a korean, I do not find any other asian or indian names. At the same time, I realized it is useless to draw demographic conclusions simply based on names. Insufficient information. Maybe the poster's definition of asian names is more inclusive than mine!!!

However, what I do know is that this disaster is affecting all ethnicities.

I think its way to hard to speak about such a broad group of people. I can't speak to SD at large, but from my personal experiences, if you are talking about young white collar professionals, who want to live in places in central SD or North County coastal, I think there are number of people who will be competing for that "deal". Those are desirable neighborhoods where first time buyers, move up buyers (condo to a house), and investors may want to compete for that gem in Mission Hills or Encinitas. For people in their late 20s or early 30s, 7-12 years of work experience post college is not a "few" years of work experiences in fields such as tech, biotech, sales.

There are quite a few people who fit that demographic who have moved here from other locales with lower cost of living but command equal or higher salaries. They've been saving for 10 years. I have friends who bought and sold their first house in other cities in their 20s and have that nest egg and are just waiting for the right house to come along along with the right price.

I agree there are also plenty of 20s and 30s who spend spend spend. But there are plenty who do have the downpayment in cash. There are also many people willing to borrow against their 401k for the downpayment. I think people underestimate how many people who's families will help them out with the downpayment.

Most of my friends who have never bought a home are no longer looking at buying condos but rather homes because homes have come down to a level where it doesn't make sense to risk the condo glut market and deal with the possible HOA assessments or hike in fees.

As an aside, these "Millennials" by and large have to be the most coddled generation in history. The stuff I've read about and seen in person makes me wonder if they will ever grow up.

I really get tired of the baby boomers criticizing any generation. You are likely the most selfish generation in America, and yet we're the problem? This despite my generation doing more charity work than yours at the same age. Not to mention less drugs and partying as well. I'm going to be inheriting the debt, SS and medicare bills that your generation caused.

I don't know about savings, but all the parents I know from the boomer generation have lived paycheck to paycheck their whole lives. My parents only recently started to save, my wife's only parents recently started to save I have two aunts and uncles that are pushing 60 and have zero saved. I know lots of boomers who took out massive HELOCs to fund their fancy toys today and were depending on my generation buying their overpriced homes to fund their retirement.

On buying a house, I graduated from college in 2004 which was close to the bubble. I had given up on ever buying a house in San Diego at that time, because I knew I'd never afford a home at those prices. I was thinking I'd need to make 4 times my income to even get into a condo, so I put it out of my mind. Now that housing prices are dropping and are looking to become affordable when this all shakes out, my wife and I started saving up at the beginning of this year.

I concur with JordanT on most accounts.

patb- you should read the article in the nytimes magazine recently about babies and why certain cultures are not producing babies. Don't think its quite so simple as being materialistic.

I am 29, and finishing my PhD in Biochemistry. My friends are primarily in their mid-to-late 20s, with a sprinkling of 30s with college degrees, so overall we fit the profile you're asking about. Although most of us are single and w/o kids, and tend to have fairly urban sensibilities.

"What kind of houses they are buying and what kind of down-payment they have?"

People that are buying are looking at condos and cottages. Down payments are primarily coming from parents/grandparents, and are modest at best. In fact, a lack of a downpayment is a huge barrier.

"Are Singles buying homes at all?"

Not from my point of view. It seems like the biggest incentive for people to buy is having a kid. Marriage can be an impetus, if only because it often means kids are planned.

A lot of my friends and co-workers also have seriously considered moving out of SoCal in the past year, although not necessarily to somewhere cheaper. The Bay Area is a popular destination. If moving is a serious possibility, it gives another reason not to buy.

I don't know if this is typical but I have friends, in their mid-30's, 3 kids, who've been sitting by the sidelines during the extreme prices and are now in escrow on a forclosed house.

They lived in a smaller house than they wanted in order to max out their savings. They're going in with a $50k downpayment.

I know a couple of other friends in similar positions but not yet in escrow... been renting and living in much smaller spaces than they'd prefer, in an effort to save down payments... now hoping to pick up a better deal with their down payments, but waiting for the right home. All of them are married with kids.

My post was a knock on the baby boomer parents of the Millennials. Nothing against the kids at all. The helicopter parenting, coddling, and reluctance to letting their kids grow up and take responsibility are what I was referring to. But YMMV.

Am I a baby boomer? Technically I may just squeeze in there but I've never related to those who grew up mainly in the 1960's. I grew up in the 1960's and 1970's.