It is beginning to feel like 1996 – Piggington's Econo-Almanac

This topic has 220 replies, 27 voices, and was last updated 16 years, 3 months ago by Sandi Egan.

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August 9, 2008 at 12:53 AM #13565

lajolla-pig
Participant

I loaded up on SD RE too soon between 94-98 and unloaded too soon between 2002-2004.
I have been negative on real estate for several years now (since late 2002) but this is starting to feel like La Jolla 1996 to me.
-Prices have dropped a lot (25% off peak in late 2005).
-There are few indications that a turnaround is imminent but well priced places keep selling.
-La jolla is still much nicer than CV or DM (sorry DM, but it is true) but prices are similar for lot sq ft (OK you get a bigger box on the CV lot if that is what you want).
-Foreclosures are high but not exceeeding 0.1% in the really nice zip codes (I don’t include 92130 in the ‘really nice’…it may get hit since so many big boxes sold to wannabes)
-Inflation adjusted prices are about where they were 12 years ago. You could buy a 4br new home in ridgegate for $475k with typical appointments in 1996. After 12 years of real inflation (the way the Europeans calc it, not our artificially supressed CPI-U figure) the prices are basically the same. A year from now if nominal house prices are static they will be distinctly below 1996 on inflation adjusted basis, assuming 7-9% real inflation.
-I can easily buy propeties where rents will cover 5% of the purchase price (not great in some areas but great in primo ‘name’ resort areas).

August 9, 2008 at 1:13 AM #255006

Eugene
Participant

-Prices have dropped a lot (25% off peak in late 2005)

Not in La Jolla.

assuming 7-9% real inflation

Did you really see 12 years of 7-9% wage inflation?

August 9, 2008 at 1:13 AM #255178

Eugene
Participant

-Prices have dropped a lot (25% off peak in late 2005)

Not in La Jolla.

assuming 7-9% real inflation

Did you really see 12 years of 7-9% wage inflation?

August 9, 2008 at 1:13 AM #255182

Eugene
Participant

-Prices have dropped a lot (25% off peak in late 2005)

Not in La Jolla.

assuming 7-9% real inflation

Did you really see 12 years of 7-9% wage inflation?

August 9, 2008 at 1:13 AM #255241

Eugene
Participant

-Prices have dropped a lot (25% off peak in late 2005)

Not in La Jolla.

assuming 7-9% real inflation

Did you really see 12 years of 7-9% wage inflation?

August 9, 2008 at 1:13 AM #255290

Eugene
Participant

-Prices have dropped a lot (25% off peak in late 2005)

Not in La Jolla.

assuming 7-9% real inflation

Did you really see 12 years of 7-9% wage inflation?

August 9, 2008 at 1:41 AM #255026

lajolla-pig
Participant

[quote=esmith]-Prices have dropped a lot (25% off peak in late 2005)

Not in La Jolla.

assuming 7-9% real inflation

Did you really see 12 years of 7-9% wage inflation?

[/quote]

in 2005 an entry house in La Jolla was 1.6, now it is 1.2 (close to many bland boxes in CV).

And yes, the population looking for homes in La Jolla today easily has an income 200-300% the level of those looking back in 1996. Engineers in 1996 made what….maybe 70K. Today 150K is typical. I’m not saying those people working at walmart have had great wage increases but the educated class that has not yet been outsourced has done just fine. Walmart workers aren’t shopping for homes in LJ so wage pressures at the low end and ‘average wage growth’ does not matter.

Also, today it is almost universal that the educated buyer is married to a another high-earner (150+150=300 ==> 1M mortgage + 20% down ==> rational sustainable entry-level price of 1.2). That was not as much the case in 1996.
Of course if the man earns 400K+ he can still easily afford a stay-at-home trophy wife and the LJ house. That part was true even in 1996.

August 9, 2008 at 1:41 AM #255197

lajolla-pig
Participant

[quote=esmith]-Prices have dropped a lot (25% off peak in late 2005)

Not in La Jolla.

assuming 7-9% real inflation

Did you really see 12 years of 7-9% wage inflation?

[/quote]

in 2005 an entry house in La Jolla was 1.6, now it is 1.2 (close to many bland boxes in CV).

And yes, the population looking for homes in La Jolla today easily has an income 200-300% the level of those looking back in 1996. Engineers in 1996 made what….maybe 70K. Today 150K is typical. I’m not saying those people working at walmart have had great wage increases but the educated class that has not yet been outsourced has done just fine. Walmart workers aren’t shopping for homes in LJ so wage pressures at the low end and ‘average wage growth’ does not matter.

Also, today it is almost universal that the educated buyer is married to a another high-earner (150+150=300 ==> 1M mortgage + 20% down ==> rational sustainable entry-level price of 1.2). That was not as much the case in 1996.
Of course if the man earns 400K+ he can still easily afford a stay-at-home trophy wife and the LJ house. That part was true even in 1996.

August 9, 2008 at 1:41 AM #255203

lajolla-pig
Participant

[quote=esmith]-Prices have dropped a lot (25% off peak in late 2005)

Not in La Jolla.

assuming 7-9% real inflation

Did you really see 12 years of 7-9% wage inflation?

[/quote]

in 2005 an entry house in La Jolla was 1.6, now it is 1.2 (close to many bland boxes in CV).

And yes, the population looking for homes in La Jolla today easily has an income 200-300% the level of those looking back in 1996. Engineers in 1996 made what….maybe 70K. Today 150K is typical. I’m not saying those people working at walmart have had great wage increases but the educated class that has not yet been outsourced has done just fine. Walmart workers aren’t shopping for homes in LJ so wage pressures at the low end and ‘average wage growth’ does not matter.

Also, today it is almost universal that the educated buyer is married to a another high-earner (150+150=300 ==> 1M mortgage + 20% down ==> rational sustainable entry-level price of 1.2). That was not as much the case in 1996.
Of course if the man earns 400K+ he can still easily afford a stay-at-home trophy wife and the LJ house. That part was true even in 1996.

August 9, 2008 at 1:41 AM #255260

lajolla-pig
Participant

[quote=esmith]-Prices have dropped a lot (25% off peak in late 2005)

Not in La Jolla.

assuming 7-9% real inflation

Did you really see 12 years of 7-9% wage inflation?

[/quote]

in 2005 an entry house in La Jolla was 1.6, now it is 1.2 (close to many bland boxes in CV).

And yes, the population looking for homes in La Jolla today easily has an income 200-300% the level of those looking back in 1996. Engineers in 1996 made what….maybe 70K. Today 150K is typical. I’m not saying those people working at walmart have had great wage increases but the educated class that has not yet been outsourced has done just fine. Walmart workers aren’t shopping for homes in LJ so wage pressures at the low end and ‘average wage growth’ does not matter.

Also, today it is almost universal that the educated buyer is married to a another high-earner (150+150=300 ==> 1M mortgage + 20% down ==> rational sustainable entry-level price of 1.2). That was not as much the case in 1996.
Of course if the man earns 400K+ he can still easily afford a stay-at-home trophy wife and the LJ house. That part was true even in 1996.

August 9, 2008 at 1:41 AM #255309

lajolla-pig
Participant

[quote=esmith]-Prices have dropped a lot (25% off peak in late 2005)

Not in La Jolla.

assuming 7-9% real inflation

Did you really see 12 years of 7-9% wage inflation?

[/quote]

in 2005 an entry house in La Jolla was 1.6, now it is 1.2 (close to many bland boxes in CV).

And yes, the population looking for homes in La Jolla today easily has an income 200-300% the level of those looking back in 1996. Engineers in 1996 made what….maybe 70K. Today 150K is typical. I’m not saying those people working at walmart have had great wage increases but the educated class that has not yet been outsourced has done just fine. Walmart workers aren’t shopping for homes in LJ so wage pressures at the low end and ‘average wage growth’ does not matter.

Also, today it is almost universal that the educated buyer is married to a another high-earner (150+150=300 ==> 1M mortgage + 20% down ==> rational sustainable entry-level price of 1.2). That was not as much the case in 1996.
Of course if the man earns 400K+ he can still easily afford a stay-at-home trophy wife and the LJ house. That part was true even in 1996.

August 9, 2008 at 1:46 AM #255030

Eugene
Participant

Today 150K is typical

Oh really.

I guess I should ask for a big raise, then. And I should tell most of my colleagues that we’re seriously underpaid. I work in a software company and I don’t think anybody in our engineering department (with the exception of VP) makes 150K.

August 9, 2008 at 1:46 AM #255202

Eugene
Participant

Today 150K is typical

Oh really.

I guess I should ask for a big raise, then. And I should tell most of my colleagues that we’re seriously underpaid. I work in a software company and I don’t think anybody in our engineering department (with the exception of VP) makes 150K.

August 9, 2008 at 1:46 AM #255208

Eugene
Participant

Today 150K is typical

Oh really.

I guess I should ask for a big raise, then. And I should tell most of my colleagues that we’re seriously underpaid. I work in a software company and I don’t think anybody in our engineering department (with the exception of VP) makes 150K.

August 9, 2008 at 1:46 AM #255266

Eugene
Participant

Today 150K is typical

Oh really.

I guess I should ask for a big raise, then. And I should tell most of my colleagues that we’re seriously underpaid. I work in a software company and I don’t think anybody in our engineering department (with the exception of VP) makes 150K.
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