I can appreciate what you guys are saying that "This time may be a little different" and "San Diego is a desirable place to live." That all can be true but the numbers don't lie. The argument here and the argument in all housing (minus the help belligerently large credit availability) is affordability. The numbers… affordable payment of 1000sqft condo is say ~$2500 a month. At a currently conservative rate of $500 per sqft that condo will cost you 500k. Considering good credit and a whoppingly unlikely down payment of 100k your 400k loan 30yr at 7% will cost you $2661 per month not including HOA , Uncle Sam's yearly cut, insurance, etc. Seeing that I'm not expecting average Joe to have 100k for a down payment this whole scenario is highly unlikely in the first place.
Secondly with the credit market going down the toilet at a beyond historical rate, interest rates north of 10% are not at all unexpected in the next couple of years. Let's take a nice doubling (14%) as a round number that is not out of the question. Shooting for the same number as a payment in this environment gets you a 200k loan considering the 100k cash is still in your account for a down payment after dealing with high interest credit card and auto loan payments. That right there is a 40% decline in price due to affordability and ~$300 per sq ft. $2600 plus taxes, HOAs and associated costs is quite steep for 1000sq ft. With my pretty respectable family income and having an actual family to put in there that is an undesirable cost/benefit living scenario anyways and is still likely to be well above the rental costs on the same small condo in that environment. All one has to do is take a look at the ABX to see that higher real rates are coming and they will come with a vengence. That will likely knock Chuckie First-Time Home buyer (and likely family starter) away from paying anywhere near current pricing on a small place like that.
