"Buyers keep asking about the shadow inventory of bank owned homes for sale. Buyers are frustrated by the low inventory. Even $600k buyers may get one new listing to see a week, sometimes less. But it does not appear to get better anytime soon. Rising mortgage delinquencies caused by unemployment, and rising bars on foreclosure charts do not mean that more bank owned homes will hit the market, as long as the owners of those mortgages are preventing them from doing so. I cannot overemphasize this, so I will repeat it a few more times. As long as banks don't want to sell their distressed real estate, it does not matter how many homes enter foreclosure.
We believe that bank owned housing inventory will only increase when banks decide to sell these homes. Since this downturn began, there has been interference in the natural process of delinquencies turning into foreclosures. Still, for those who are curious, we searched for shadow inventory.
We searched property tax records and found about 6000 bank owned homes not yet on the MLS. Before you get excited, note this is the same number we counted at two different times in 2007. While some banks move their homes onto the MLS within one or two weeks of the foreclosure auction, others delay for many months.
Thus, it appears the real shadow inventory is in the delays in each step of the foreclosure process. First, servicers delay in sending out Notices of Defaults (NODs), the first step in the foreclosure process. We estimate, using data from American CoreLogic and ForeclosureRadar.com, that 40,000 - 80,000 San Diegans are at least 90 days delinquent on their mortgage and have not received an NOD.
Next, servicers delay in filing Notices of Trustee Sale (NTS), which assigns an auction date for selling the home on the courthouse steps. They delay scheduled date of the sale by many postponements and cancellations. And finally, they delay in putting the bank owned homes on the MLS for sale.
Mortgages are owned not just by banks, but also by pension funds, endowments, foreign central banks, and fixed income funds. Many readers are likely invested in mortgages in some way in their retirement accounts. The fund managers and ultimate owners of mortgage backed securities, CDOs, and CDO squared are likely delaying the foreclosure process, in hopes that an economic recovery raises the prices of these homes, and prevents the recognition of losses on their financial statements. Add to this foreclosure moratoria, and political pressure to modify rather than foreclose, and it is likely that the bank owned inventory will remain depressed for years to come.
All the rising delinquencies, so dutifully covered by the media, means nothing to the housing supply, if those homes are prevented from ever coming on the market."
So are the banks going to just let people squat for years or are they going to let homes sit empty for years. If they're waiting for the market to recover, that means we will have to see peak prices again.
Let's say we're at bottom. Are we really going to see peak prices again around the corner? With the tight lending and the reduced income and the unemployment? Even if you factor inflation. Fine. Inflation will cause home prices to rise. Without the income to go along w/it, who will be buying?
I can't get my mind around this. Obviously I'm missing something. Someone help me out here.
jpinpb, you're making an big assumption that we'll have inflation w/out wage inflation. I don't think you can have one without the other for very long. Wage inflated ~35% over the last 8 years. Which is right in line with official inflation #. So, adjusted for inflation, wage didn't go anywhere, but in nominal $ term, wage went up 35%. Over the last 8 years, we had the .com crash and the housing crash, yet wage went up 35% over nominal term.
I'm not assuming. I'm asking. Are we going to have wage inflation? We had money in people's pockets from sales of stocks being traded and HELOCs. That accounted for extra "income." Where are people going to get money in the next round? Are actual salaries going to increase along w/inflation?
Edit: I know some of you say the government is throw money at this as long as it takes. Seriously. 5 states out of the union. I think eventually they will just say enough is enough. Sooner or later they will DNR this patient. Getting way too expensive.
I've felt for a while, based on anectdotal stories, that the "shadow inventory" isn't in the bank owned properties.. It's the limbo'd properties that the owners have stopped paying - but the bank had NOT foreclosed. For whatever reason: loan mods, moratoriums, banks not wanting to acknowlege the loss... It seems that the banks are not moving properties that are delinquent into the foreclosure/courthouse sale.
As far as inflation vs wage inflation. I'm old enough to remember a few economic cycles. The 70's come to mind as the most obvious example - a recession with a jobless recovery. Lots of unemployment ever after the recession was nominally over. I can see that happening again.
I also think jp makes a good point. The past decade's economic "growth" was based on over leveraged consumers. Now that credit is less free/easy, there is less money for consumers to spend. That goes for housing, retail, everything.
In that case, then yes, that's the only way I can think of that will make home price rise again (income inflation). In some surveys, some companies are starting to unfreeze pay increases.
Submitted by sdcellar on August 19, 2009 - 11:50am.
I've been struggling with historical wage inflation. Exactly where does one find an accurate source for this information? At 35% for the past eight years, that would be 4.5% annual salary that arrive like German trains.
*Very* anecdotal and I also probably just routinely work for cheap bastards, but that hasn't been my experience over the last 8 years.
I just happened to get a nifty Dice survey and it shows the following for the U.S. average increase over the last 4 years: 5.18%, 1.72%, 4.65%. For San Diego Tech, it's 10.05%, -4.31%, 8.3%.
Their numbers are likely skewed by sample size and methodology, but again, I'll ask. Nice annual salary increases for everybody? Everybody from the big places should be able to chime in. Those employers set annual salary parameters, so if any has/knows/recalls those, we can at least make this a little less anecdotal.
Submitted by sdcellar on August 19, 2009 - 11:56am.
AN wrote:
In that case, then yes, that's the only way I can think of that will make home price rise again (income inflation). In some surveys, some companies are starting to unfreeze pay increases.
On the anecdotal front, this is exactly along the lines I'm thinking. Many employers have instituted wage frees at one time or another in the last 9 nine years, and when they un-freeze them, they don't usually make up the difference. Disclaimer: haven't worked for a large employer, so my opinion is way out of its element there.
sdcellar, my data my be skewed, but I got my data from http://profilewarehouse.sandag.org/. I took 92126 as a sample size. Look at the median house hold income in 2000 and in 2008, according to 92126 data, nominal income went from ~$60k/yr to $82k/yr. Adjusted for inflation though, it's ~$61k/yr in 2008. I can easily give anecdotal of my own as well. However, since most of the people I know graduated college after 2000, fresh grad engineers were making around $45k 7 years ago. Now, those same people are averaging around $85k. So, it's well above the 35% I stated. However, I know that as your career mature, the income increase will plateau and it'll be just around inflation or a little bit more if you're good at what you do.
Nurses got a much steeper salary raise compare to engineer over the last few years.
Submitted by sdcellar on August 19, 2009 - 12:39pm.
AN wrote:
sdcellar, my data my be skewed, but I got my data from http://profilewarehouse.sandag.org/. I took 92126 as a sample size. Look at the median house hold income in 2000 and in 2008, according to 92126 data, nominal income went from ~$60k/yr to $82k/yr. Adjusted for inflation though, it's ~$61k/yr in 2008. I can easily give anecdotal of my own as well. However, since most of the people I know graduated college after 2000, fresh grad engineers were making around $45k 7 years ago. Now, those same people are averaging around $85k. So, it's well above the 35% I stated. However, I know that as your career mature, the income increase will plateau and it'll be just around inflation or a little bit more if you're good at what you do.
Nurses got a much steeper salary raise compare to engineer over the last few years.
Yes, we discussed SANDAG the other day and that doesn't help me since they don't even agree with themselves.
...and some other segment has done worse than engineers. It does help me understand why so many nurses were buying investment properties. (as long as we're going to keep rolling with the anecdotes)
Submitted by pabloesqobar on August 19, 2009 - 12:56pm.
I'd be curious to know how many of the 40,000 to 80,000 sandiegans in default are there on purpose in an attempt to get more favorable terms from their lender.
I know of at least one person who intentionally defaulted on his 2nd. He thinks he may be able to pay it off for ten cents on the dollar. It'll be interesting to see if this tactic works.
Submitted by sdcellar on August 19, 2009 - 1:08pm.
AN wrote:
However, since most of the people I know graduated college after 2000, fresh grad engineers were making around $45k 7 years ago. Now, those same people are averaging around $85k.
Also, is this what the class of 2000 is currently making or what 2008 freshouts are pulling down now?
At first, I thought it was the latter, but then started thinking it was the former. It certainly makes a difference.
I can add my anectdotal, personal data.
I work for a large employer as an engineer and have for quite a while. I graduated well before 2000 - so my salary has plateaued. The days of 4.5% increases each year haven't been seen since the early 2000's at my employer. Even with promotions my coworkers and I are falling behind.
2009 increase 0% (corporation wide frozen salary)
2008 increase 2%
2007 increase 3%
2006 increase 2%
2005 increase 0% (changed a policy that slammed the California based workers)
2005 increase 2%
2003 increase 4.5%
2002 increase 4.6%
2001 increase 3.5%
I get very good performance reviews, before someone snarks that I must be a slacker.
If you factor in how much our bonuses have been hit - it's even worse. We (my coworkers and I) are falling behind.
Then factor in the fact that they cut our 401k match to zero earlier this year... That's a 3% paycut this year.
Wage deflation is real. But it could be worse. My husband is an architect and he's only working part time due to lack of work. That's REAL wage deflation. (He's part of that mythical U6 number- underemployed.)
sdcellar, yes, some segment will do worse while others will do better. That's why I took a specific area to see what's the median house hold income is. Although their two sites disagree with each other on the exact number for 2008, they're the same for 2000. Adjusting for inflation, it's only off by ~$1k/~1.5%. Not a big deal in my book. Still get my point across that median house hold income in an area is relatively stable adjusted for inflation. In more newer developed areas like CV, it actually went up.
Regarding the class of 2000 comment, yes, it's the former. Class of 2002 made about $45-50k fresh out of school. Now, those same people are making around $80-100k. The fresh grads now are making between $55k-65k, based on salary.com. So, if you're comparing fresh grad vs fresh grad, the salary went up between 22%-30%.
I can add my anectdotal, personal data.
I work for a large employer as an engineer and have for quite a while. I graduated well before 2000 - so my salary has plateaued. The days of 4.5% increases each year haven't been seen since the early 2000's at my employer. Even with promotions my coworkers and I are falling behind.
2009 increase 0% (corporation wide frozen salary)
2008 increase 2%
2007 increase 3%
2006 increase 2%
2005 increase 0% (changed a policy that slammed the California based workers)
2005 increase 2%
2003 increase 4.5%
2002 increase 4.6%
2001 increase 3.5%
I get very good performance reviews, before someone snarks that I must be a slacker.
If you factor in how much our bonuses have been hit - it's even worse. We (my coworkers and I) are falling behind.
Then factor in the fact that they cut our 401k match to zero earlier this year... That's a 3% paycut this year.
Wage deflation is real. But it could be worse. My husband is an architect and he's only working part time due to lack of work. That's REAL wage deflation. (He's part of that mythical U6 number- underemployed.)
I think many of us who graduated in the last 10 years will have drastically different experience than you. We both seems to agree that salary tend to plateau after a certain point. I think that's around 10 years experience or so. So, to the older people, wage deflation is real. But to a lot of us who just entered the work force in the last 10 years, drastic wage inflation is also real. It is also very relative to the industry you're in.
I think many of us who graduated in the last 10 years will have drastically different experience than you. We both seems to agree that salary tend to plateau after a certain point. I think that's around 10 years experience or so. So, to the older people, wage deflation is real. But to a lot of us who just entered the work force in the last 10 years, drastic wage inflation is also real. It is also very relative to the industry you're in.
I don't disagree with that. I had my biggest wage increases early in my career.
That said, my coworkers with less experience were also hit with frozen salaries (even if you get a promotion!), eliminated 401k match, bonuses at half of previous years. So the folks in the first 10 years of their career also saw a hit this year.
That said, my coworkers with less experience were also hit with frozen salaries (even if you get a promotion!), eliminated 401k match, bonuses at half of previous years. So the folks in the first 10 years of their career also saw a hit this year.
I don't disagree that even people in the first 10 years of their career got their salaries freezes. But this is one of the worse recession in a long while, so, that should be expected. However, everything seems to get cheaper too, so inflation didn't really hit over the last year. There is a CNN article recently that state employers are starting to hire back people they lay off.
Submitted by sdcellar on August 19, 2009 - 3:28pm.
AN wrote:
sdcellar, yes, some segment will do worse while others will do better.
Yes, my point exactly.
AN wrote:
That's why I took a specific area to see what's the median house hold income is. Although their two sites disagree with each other on the exact number for 2008, they're the same for 2000. Adjusting for inflation, it's only off by ~$1k/~1.5%. Not a big deal in my book.
But in the very same thread, I showed that the discrepency in another ZIP was $5K and almost 5%. That is significant. As far as the census years are concerned (1990, 2000), they do match, but that appears to be their methodology (census data supplemented with survey and interagency data compilations for the next 10). It'll be interesting to see what SANDAG will have for 2010 (it should at least be consistent again). Seeems to me that the IRS could nail these numbers.
AN wrote:
Still get my point across that median house hold income in an area is relatively stable adjusted for inflation. In more newer developed areas like CV, it actually went up.
Actually, as I just mentioned, the data I brought for CV specifically shows in one data series that wages are up 5.4% and in another merely 0.8% (both adjusted for inflation). So, how do can you state that it went up in a meaningful sense? I suppose it did, but maybe barely (and less than in 92126).
AN wrote:
Regarding the class of 2000 comment, yes, it's the former. Class of 2002 made about $45-50k fresh out of school. Now, those same people are making around $80-100k. The fresh grads now are making between $55k-65k, based on salary.com. So, if you're comparing fresh grad vs fresh grad, the salary went up between 22%-30%.
Submitted by sdcellar on August 19, 2009 - 3:36pm.
AN wrote:
UCGal wrote:
That said, my coworkers with less experience were also hit with frozen salaries (even if you get a promotion!), eliminated 401k match, bonuses at half of previous years. So the folks in the first 10 years of their career also saw a hit this year.
I don't disagree that even people in the first 10 years of their career got their salaries freezes. But this is one of the worse recession in a long while, so, that should be expected. However, everything seems to get cheaper too, so inflation didn't really hit over the last year. There is a CNN article recently that state employers are starting to hire back people they lay off.
I certainly think houses are going to get cheaper. We're finally starting to see eye-to-eye! ;)
Regarding the class of 2000 comment, yes, it's the former. Class of 2002 made about $45-50k fresh out of school. Now, those same people are making around $80-100k. The fresh grads now are making between $55k-65k, based on salary.com. So, if you're comparing fresh grad vs fresh grad, the salary went up between 22%-30%.
Yes, so decidely less than 35%.
Even taking 20% income inflation, median home price in SD in 2000 was $269,410 and in 2008, it was $305,000. So, median home price went up 13% between 2000-2008 while entry level engineer salary went up between 22%-30%. Well above 13%.
If you think 2000-2008 # might be skewed, I know someone who graduated in 1988 as an engineer. He told me fresh grad back then made around 25-30k/yr. Median home price in 1988 was $153,410. So median home price went up 99% over 21 years. Salary for a fresh grad engineer went up between 115%-120%. So, over 21 years, median house price traced fresh grad engineer salary pretty well. I don't know about other profession, so this might not apply so well.
I certainly think houses are going to get cheaper. We're finally starting to see eye-to-eye! ;)
One big caveat is, I only believe this is true for some areas. Places that have been hit 50-60% off peak, I think would be hard press to drop much more if at all. This has always been my view btw. We always saw eye to eye, but I'm glad you finally think so.
Submitted by sdcellar on August 19, 2009 - 4:00pm.
AN wrote:
sdcellar wrote:
AN wrote:
Regarding the class of 2000 comment, yes, it's the former. Class of 2002 made about $45-50k fresh out of school. Now, those same people are making around $80-100k. The fresh grads now are making between $55k-65k, based on salary.com. So, if you're comparing fresh grad vs fresh grad, the salary went up between 22%-30%.
Yes, so decidely less than 35%.
Even taking 20% income inflation, median home price in SD in 2000 was $269,410 and in 2008, it was $305,000. So, median home price went up 13% between 2000-2008 while entry level engineer salary went up between 22%-30%. Well above 13%.
If you think 2000-2008 # might be skewed, I know someone who graduated in 1988 as an engineer. He told me fresh grad back then made around 25-30k/yr. Median home price in 1988 was $153,410. So median home price went up 99% over 21 years. Salary for a fresh grad engineer went up between 115%-120%. So, over 21 years, median house price traced fresh grad engineer salary pretty well. I don't know about other profession, so this might not apply so well.
Wow, for the most part, I'm just responding to your numbers, but you just keep coming back with something else. I can't really track down your buddy, so I give up. I will say that I think we can both agree (?) about flaws in the median at various points in time (including now), so that makes it very hard for me to concede that it consistently tracks _engineering_ salaries. Bubbles would indicate otherwise, but sure, in the *long* run there is a causal relationship between wages and house prices (duh). I think it was Shiller who said, "people need to be able to pay for the f'in places."
Submitted by sdcellar on August 19, 2009 - 4:08pm.
AN wrote:
One big caveat is, I only believe this is true for some areas. Places that have been hit 50-60% off peak, I think would be hard press to drop much more if at all.
Absolutely, some are at either bottom or a virtual bottom. Others, like that 2/2 in north park, they've got a ways to go.
If you think 2000-2008 # might be skewed, I know someone who graduated in 1988 as an engineer. He told me fresh grad back then made around 25-30k/yr. Median home price in 1988 was $153,410. So median home price went up 99% over 21 years. Salary for a fresh grad engineer went up between 115%-120%. So, over 21 years, median house price traced fresh grad engineer salary pretty well. I don't know about other profession, so this might not apply so well.
I would assume some of the salary gain was due to promotions and generally having more experience over time. Typically new grads make less than folks with experience. Yet the typical median house probably remains about the same house...
One big caveat is, I only believe this is true for some areas. Places that have been hit 50-60% off peak, I think would be hard press to drop much more if at all.
Absolutely, some are at either bottom or a virtual bottom. Others, like that 2/2 in north park, they've got a ways to go.
See, "bottom" isn't such a dirty word, now is it? :-).
sdcellar wrote:
Bubbles would indicate otherwise, but sure, in the *long* run there is a causal relationship between wages and house prices (duh). I think it was Shiller who said, "people need to be able to pay for the f'in places."
This is my whole point. Just different way of stating it. Not all area are out of reach. If people are able to pay for the f'in place, they'll buy it.
If you think 2000-2008 # might be skewed, I know someone who graduated in 1988 as an engineer. He told me fresh grad back then made around 25-30k/yr. Median home price in 1988 was $153,410. So median home price went up 99% over 21 years. Salary for a fresh grad engineer went up between 115%-120%. So, over 21 years, median house price traced fresh grad engineer salary pretty well. I don't know about other profession, so this might not apply so well.
I would assume some of the salary gain was due to promotions and generally having more experience over time. Typically new grads make less than folks with experience. Yet the typical median house probably remains about the same house...
I'm comparing fresh grad salary from 1988 to 2002 to 2009.
If you think 2000-2008 # might be skewed, I know someone who graduated in 1988 as an engineer. He told me fresh grad back then made around 25-30k/yr. Median home price in 1988 was $153,410. So median home price went up 99% over 21 years. Salary for a fresh grad engineer went up between 115%-120%. So, over 21 years, median house price traced fresh grad engineer salary pretty well. I don't know about other profession, so this might not apply so well.
I would assume some of the salary gain was due to promotions and generally having more experience over time. Typically new grads make less than folks with experience. Yet the typical median house probably remains about the same house...
I'm comparing fresh grad salary from 1988 to 2002 to 2009.
Submitted by qwerty007 on August 20, 2009 - 11:36am.
The big question is then, is this delay (or delays) doing any good to anyone either now, or in the long term? I don't believe that the delays are entirely based upon the premise that house prices will improve. There's got to be a work over-load element, and chaos to this story. If the market ever gets back to normal (however you wish to define that), and there is still a huge inventory or back log of unprocessed REOs, what happens then?
"Buyers keep asking about the shadow inventory of bank owned homes for sale. Buyers are frustrated by the low inventory. Even $600k buyers may get one new listing to see a week, sometimes less. But it does not appear to get better anytime soon. Rising mortgage delinquencies caused by unemployment, and rising bars on foreclosure charts do not mean that more bank owned homes will hit the market, as long as the owners of those mortgages are preventing them from doing so. I cannot overemphasize this, so I will repeat it a few more times. As long as banks don't want to sell their distressed real estate, it does not matter how many homes enter foreclosure.
We believe that bank owned housing inventory will only increase when banks decide to sell these homes. Since this downturn began, there has been interference in the natural process of delinquencies turning into foreclosures. Still, for those who are curious, we searched for shadow inventory.
We searched property tax records and found about 6000 bank owned homes not yet on the MLS. Before you get excited, note this is the same number we counted at two different times in 2007. While some banks move their homes onto the MLS within one or two weeks of the foreclosure auction, others delay for many months.
Thus, it appears the real shadow inventory is in the delays in each step of the foreclosure process. First, servicers delay in sending out Notices of Defaults (NODs), the first step in the foreclosure process. We estimate, using data from American CoreLogic and ForeclosureRadar.com, that 40,000 - 80,000 San Diegans are at least 90 days delinquent on their mortgage and have not received an NOD.
Next, servicers delay in filing Notices of Trustee Sale (NTS), which assigns an auction date for selling the home on the courthouse steps. They delay scheduled date of the sale by many postponements and cancellations. And finally, they delay in putting the bank owned homes on the MLS for sale.
Mortgages are owned not just by banks, but also by pension funds, endowments, foreign central banks, and fixed income funds. Many readers are likely invested in mortgages in some way in their retirement accounts. The fund managers and ultimate owners of mortgage backed securities, CDOs, and CDO squared are likely delaying the foreclosure process, in hopes that an economic recovery raises the prices of these homes, and prevents the recognition of losses on their financial statements. Add to this foreclosure moratoria, and political pressure to modify rather than foreclose, and it is likely that the bank owned inventory will remain depressed for years to come.
All the rising delinquencies, so dutifully covered by the media, means nothing to the housing supply, if those homes are prevented from ever coming on the market."
So are the banks going to just let people squat for years or are they going to let homes sit empty for years. If they're waiting for the market to recover, that means we will have to see peak prices again.
Let's say we're at bottom. Are we really going to see peak prices again around the corner? With the tight lending and the reduced income and the unemployment? Even if you factor inflation. Fine. Inflation will cause home prices to rise. Without the income to go along w/it, who will be buying?
I can't get my mind around this. Obviously I'm missing something. Someone help me out here.
jpinpb, you're making an big assumption that we'll have inflation w/out wage inflation. I don't think you can have one without the other for very long. Wage inflated ~35% over the last 8 years. Which is right in line with official inflation #. So, adjusted for inflation, wage didn't go anywhere, but in nominal $ term, wage went up 35%. Over the last 8 years, we had the .com crash and the housing crash, yet wage went up 35% over nominal term.
I'm not assuming. I'm asking. Are we going to have wage inflation? We had money in people's pockets from sales of stocks being traded and HELOCs. That accounted for extra "income." Where are people going to get money in the next round? Are actual salaries going to increase along w/inflation?
Edit: I know some of you say the government is throw money at this as long as it takes. Seriously. 5 states out of the union. I think eventually they will just say enough is enough. Sooner or later they will DNR this patient. Getting way too expensive.
I've felt for a while, based on anectdotal stories, that the "shadow inventory" isn't in the bank owned properties.. It's the limbo'd properties that the owners have stopped paying - but the bank had NOT foreclosed. For whatever reason: loan mods, moratoriums, banks not wanting to acknowlege the loss... It seems that the banks are not moving properties that are delinquent into the foreclosure/courthouse sale.
As far as inflation vs wage inflation. I'm old enough to remember a few economic cycles. The 70's come to mind as the most obvious example - a recession with a jobless recovery. Lots of unemployment ever after the recession was nominally over. I can see that happening again.
I also think jp makes a good point. The past decade's economic "growth" was based on over leveraged consumers. Now that credit is less free/easy, there is less money for consumers to spend. That goes for housing, retail, everything.
In that case, then yes, that's the only way I can think of that will make home price rise again (income inflation). In some surveys, some companies are starting to unfreeze pay increases.
I've been struggling with historical wage inflation. Exactly where does one find an accurate source for this information? At 35% for the past eight years, that would be 4.5% annual salary that arrive like German trains.
*Very* anecdotal and I also probably just routinely work for cheap bastards, but that hasn't been my experience over the last 8 years.
I just happened to get a nifty Dice survey and it shows the following for the U.S. average increase over the last 4 years: 5.18%, 1.72%, 4.65%. For San Diego Tech, it's 10.05%, -4.31%, 8.3%.
Their numbers are likely skewed by sample size and methodology, but again, I'll ask. Nice annual salary increases for everybody? Everybody from the big places should be able to chime in. Those employers set annual salary parameters, so if any has/knows/recalls those, we can at least make this a little less anecdotal.
sdcellar, my data my be skewed, but I got my data from http://profilewarehouse.sandag.org/. I took 92126 as a sample size. Look at the median house hold income in 2000 and in 2008, according to 92126 data, nominal income went from ~$60k/yr to $82k/yr. Adjusted for inflation though, it's ~$61k/yr in 2008. I can easily give anecdotal of my own as well. However, since most of the people I know graduated college after 2000, fresh grad engineers were making around $45k 7 years ago. Now, those same people are averaging around $85k. So, it's well above the 35% I stated. However, I know that as your career mature, the income increase will plateau and it'll be just around inflation or a little bit more if you're good at what you do.
Nurses got a much steeper salary raise compare to engineer over the last few years.
Nurses got a much steeper salary raise compare to engineer over the last few years.
...and some other segment has done worse than engineers. It does help me understand why so many nurses were buying investment properties. (as long as we're going to keep rolling with the anecdotes)
I'd be curious to know how many of the 40,000 to 80,000 sandiegans in default are there on purpose in an attempt to get more favorable terms from their lender.
I know of at least one person who intentionally defaulted on his 2nd. He thinks he may be able to pay it off for ten cents on the dollar. It'll be interesting to see if this tactic works.
At first, I thought it was the latter, but then started thinking it was the former. It certainly makes a difference.
I can add my anectdotal, personal data.
I work for a large employer as an engineer and have for quite a while. I graduated well before 2000 - so my salary has plateaued. The days of 4.5% increases each year haven't been seen since the early 2000's at my employer. Even with promotions my coworkers and I are falling behind.
2009 increase 0% (corporation wide frozen salary)
2008 increase 2%
2007 increase 3%
2006 increase 2%
2005 increase 0% (changed a policy that slammed the California based workers)
2005 increase 2%
2003 increase 4.5%
2002 increase 4.6%
2001 increase 3.5%
I get very good performance reviews, before someone snarks that I must be a slacker.
If you factor in how much our bonuses have been hit - it's even worse. We (my coworkers and I) are falling behind.
Then factor in the fact that they cut our 401k match to zero earlier this year... That's a 3% paycut this year.
Wage deflation is real. But it could be worse. My husband is an architect and he's only working part time due to lack of work. That's REAL wage deflation. (He's part of that mythical U6 number- underemployed.)
sdcellar, yes, some segment will do worse while others will do better. That's why I took a specific area to see what's the median house hold income is. Although their two sites disagree with each other on the exact number for 2008, they're the same for 2000. Adjusting for inflation, it's only off by ~$1k/~1.5%. Not a big deal in my book. Still get my point across that median house hold income in an area is relatively stable adjusted for inflation. In more newer developed areas like CV, it actually went up.
Regarding the class of 2000 comment, yes, it's the former. Class of 2002 made about $45-50k fresh out of school. Now, those same people are making around $80-100k. The fresh grads now are making between $55k-65k, based on salary.com. So, if you're comparing fresh grad vs fresh grad, the salary went up between 22%-30%.
I work for a large employer as an engineer and have for quite a while. I graduated well before 2000 - so my salary has plateaued. The days of 4.5% increases each year haven't been seen since the early 2000's at my employer. Even with promotions my coworkers and I are falling behind.
2009 increase 0% (corporation wide frozen salary)
2008 increase 2%
2007 increase 3%
2006 increase 2%
2005 increase 0% (changed a policy that slammed the California based workers)
2005 increase 2%
2003 increase 4.5%
2002 increase 4.6%
2001 increase 3.5%
I get very good performance reviews, before someone snarks that I must be a slacker.
If you factor in how much our bonuses have been hit - it's even worse. We (my coworkers and I) are falling behind.
Then factor in the fact that they cut our 401k match to zero earlier this year... That's a 3% paycut this year.
Wage deflation is real. But it could be worse. My husband is an architect and he's only working part time due to lack of work. That's REAL wage deflation. (He's part of that mythical U6 number- underemployed.)
I think many of us who graduated in the last 10 years will have drastically different experience than you. We both seems to agree that salary tend to plateau after a certain point. I think that's around 10 years experience or so. So, to the older people, wage deflation is real. But to a lot of us who just entered the work force in the last 10 years, drastic wage inflation is also real. It is also very relative to the industry you're in.
I think many of us who graduated in the last 10 years will have drastically different experience than you. We both seems to agree that salary tend to plateau after a certain point. I think that's around 10 years experience or so. So, to the older people, wage deflation is real. But to a lot of us who just entered the work force in the last 10 years, drastic wage inflation is also real. It is also very relative to the industry you're in.
I don't disagree with that. I had my biggest wage increases early in my career.
That said, my coworkers with less experience were also hit with frozen salaries (even if you get a promotion!), eliminated 401k match, bonuses at half of previous years. So the folks in the first 10 years of their career also saw a hit this year.
That said, my coworkers with less experience were also hit with frozen salaries (even if you get a promotion!), eliminated 401k match, bonuses at half of previous years. So the folks in the first 10 years of their career also saw a hit this year.
I don't disagree that even people in the first 10 years of their career got their salaries freezes. But this is one of the worse recession in a long while, so, that should be expected. However, everything seems to get cheaper too, so inflation didn't really hit over the last year. There is a CNN article recently that state employers are starting to hire back people they lay off.
That said, my coworkers with less experience were also hit with frozen salaries (even if you get a promotion!), eliminated 401k match, bonuses at half of previous years. So the folks in the first 10 years of their career also saw a hit this year.
I don't disagree that even people in the first 10 years of their career got their salaries freezes. But this is one of the worse recession in a long while, so, that should be expected. However, everything seems to get cheaper too, so inflation didn't really hit over the last year. There is a CNN article recently that state employers are starting to hire back people they lay off.
Even taking 20% income inflation, median home price in SD in 2000 was $269,410 and in 2008, it was $305,000. So, median home price went up 13% between 2000-2008 while entry level engineer salary went up between 22%-30%. Well above 13%.
If you think 2000-2008 # might be skewed, I know someone who graduated in 1988 as an engineer. He told me fresh grad back then made around 25-30k/yr. Median home price in 1988 was $153,410. So median home price went up 99% over 21 years. Salary for a fresh grad engineer went up between 115%-120%. So, over 21 years, median house price traced fresh grad engineer salary pretty well. I don't know about other profession, so this might not apply so well.
One big caveat is, I only believe this is true for some areas. Places that have been hit 50-60% off peak, I think would be hard press to drop much more if at all. This has always been my view btw. We always saw eye to eye, but I'm glad you finally think so.
Even taking 20% income inflation, median home price in SD in 2000 was $269,410 and in 2008, it was $305,000. So, median home price went up 13% between 2000-2008 while entry level engineer salary went up between 22%-30%. Well above 13%.
If you think 2000-2008 # might be skewed, I know someone who graduated in 1988 as an engineer. He told me fresh grad back then made around 25-30k/yr. Median home price in 1988 was $153,410. So median home price went up 99% over 21 years. Salary for a fresh grad engineer went up between 115%-120%. So, over 21 years, median house price traced fresh grad engineer salary pretty well. I don't know about other profession, so this might not apply so well.
Wow, for the most part, I'm just responding to your numbers, but you just keep coming back with something else. I can't really track down your buddy, so I give up. I will say that I think we can both agree (?) about flaws in the median at various points in time (including now), so that makes it very hard for me to concede that it consistently tracks _engineering_ salaries. Bubbles would indicate otherwise, but sure, in the *long* run there is a causal relationship between wages and house prices (duh). I think it was Shiller who said, "people need to be able to pay for the f'in places."
I would assume some of the salary gain was due to promotions and generally having more experience over time. Typically new grads make less than folks with experience. Yet the typical median house probably remains about the same house...
See, "bottom" isn't such a dirty word, now is it? :-).
This is my whole point. Just different way of stating it. Not all area are out of reach. If people are able to pay for the f'in place, they'll buy it.
I would assume some of the salary gain was due to promotions and generally having more experience over time. Typically new grads make less than folks with experience. Yet the typical median house probably remains about the same house...
I'm comparing fresh grad salary from 1988 to 2002 to 2009.
I would assume some of the salary gain was due to promotions and generally having more experience over time. Typically new grads make less than folks with experience. Yet the typical median house probably remains about the same house...
I'm comparing fresh grad salary from 1988 to 2002 to 2009.
Gotcha. Sorry.
The big question is then, is this delay (or delays) doing any good to anyone either now, or in the long term? I don't believe that the delays are entirely based upon the premise that house prices will improve. There's got to be a work over-load element, and chaos to this story. If the market ever gets back to normal (however you wish to define that), and there is still a huge inventory or back log of unprocessed REOs, what happens then?