I see glaring problems:
1. The data in the first table is reported a little different thaan what I’m used to seeing on this site, because they report income as per capita income times the number of people in the household. They do state it’s an unfavorable number. I checked the data from the U.S. Census Bureau, and the CA Association of Realtors. The median home price/ per capita income ratio is usually around 9, but is running close to 15! In this graph, with a figures reported differently, the ratio in SD is over double the national average, but this table fails to show the trend line, and point out that we are almost 2 times the trend line.
2. They cite net migration of -12,000. People are leaving because housing costs too much. So that further proves that desirability of SD is not leading to higher costs. People are leaving, yet costs rise.
3. The do not explain the source of the “strong trends in job gains”. SD had over half its job growth last year in real estate related jobs: realtors, lenders, construction, probably construction stores.
4. They attribute the strong gains in house prices to the “catch-up effect” of low price gains in the ’90s. They forgot to mention that period of lower price increases was a response to the overpriced housing prices of the ’80s, with the pendulum swinging back the other way.
5. While they cite a slightly higher morgage servicing cost, they ignore the fact that today’s option-ARMs and negative-amortization loans cannot be compared to the stable 15 and 30-year fixed rate mortgages to which they are comparing today’s payments. Today’s new mortgagor faces substancial price increases when interest rates adjust and many are actually increasing their loan balance by paying only part of the interest. A more intelligent measure would use NOT today’s artificially low payment, but the final payment these borrowers will pay in 2 years when rates adjust up to 6 or 7 %. Then we would see the true scope of the problem, with mortgages being many times what they used to be.
6. I don’t get the impact of baby boomers buying 2nd homes in SD. A second home is usually a vacation home (at least my parents bought theirs in a ski town and the beach), but why would you buy a 2nd home in San Diego? I think these 2nd homes must be investor purchases.
7. I was surprised that only 3% of loans are over 90% LTV. Why do we have so many 103% financings then? What is the actual figure?
8. They again quote the desirability, due to weather. Did you know that Phoenix and Las Vegas, two of the hottest and by weater standards, least desirable cities, have the highest overvaluations according to the PMI report? So much for rising costs due to nice weather.
9. They say we could see price declines only if interest rates rise of huge job losses occur. Hey, I’m selling my house and watching other sellers, and prices have already declined. I’m not sure we’re at 5% yet, because my area is hard to comp, and my friend finally took her house off the market because she couldn’t get the price they wanted (after lowering it twice).
That’s enough writing – and I’m only halfway through the report.
