[quote=livinincali][quote=bearishgurl]
So for those who live in areas with many paid-off homes, it should be some consolation to know that your neighbor who paid off their $45K to $150K mortgage years ago likely did so after a lot of blood, sweat and tears. It was no easier for a homeowner to attempt to pay off $97K at 9-14% than it is to attempt to pay off $417K at 3-4% today, especially when factoring in the lower salaries of previous decades.[/quote]
That would be false. From 1980 to about 1995-2000 there was significant salary growth for you average working person. For example median household income went from 17K in 1980 to 33K in 1990 in san diego. So take a 70K mortgage at 10% in 1980 and the payments is 614/mo or about 40% of your income. That’s a lot initially but 10 years later that 600/mon payments was about 22% of you take home salary. Today there isn’t much expectation for real salary growth and if there were to be the case it’s unlikely rates would remain low.
San Diego may continue to become more unaffordable for the working citizens of the city but only if there’s significant migration of wealthier people into the city.[/quote]
Your calculations are way off and not based upon reality, livinincali. SD County homebuyers putting 10% down and taking out a $70K mortgage in 1980 (for a $77K purchase) faced buying in zip codes that *you* likely would not, sorry to say. I purchased a 2/1/1 (each side) duplex in that same era for just over $73K and it was off 47th Street in SE SD (total <1900 sf). By 1981/82, sub-1000 sf dry-rotted crapshacks in OB were listed from $88K to $97K, while the prevailing fixed mortgage interest rate soared to over 15%!
In 1980, the prevailing fixed mortgage interest rate was 11.78 to 13.15%, NOT 10%, as you posted. 10% fixed-rate mortgages did not prevail until mid-1986. here are the rate changes of that area coinciding with their respective Fed announcements:
(scroll down for historical conventional fixed rates)
The devil is in the details …
It doesn’t matter about perceived “wage growth” when determining a (mortgaged) SD homeowner’s accepted present lifestyle. It only matters what their income was at the time they signed up to pay the mortgage note they agreed to take on. I feel that many homeowners today (esp first-timers) take on way too much mortgage debt than is wise for their families because they can’t possibly fathom themselves living in what they perceive as a “starter home” or in a “working-class area” or both, G@d forbid! Yes, these new millennial homeowners may have banked upon (perceived) “wage growth” in SD County at the time of taking out their huge mortgages, which, historically speaking, has not EVER kept up with the rest of the nation’s coastal markets and never will, IMO.
Such was not the case when SD boomers, for example, were buying homes to raise their families in. Part of the reason for this is that boomers did not ever have very much new construction to choose from which wasn’t too far away from SD’s major workcenters of the era and SD County’s freeways were not as wide or numerous as they are today.
Livinincali, what the median household income in SD County today?
