[quote=sdrealtor]Permabear,
Time to clear up a simple misonception again which is based on statisitics. You said “If you’re making 200k, you’re in the top 5% of earners for any of those areas. That means you should be able to afford the top 5% of homes.”
That simply doesnt compute. Home ownership rates are roughly 50% and the renters skew to lower incomes. So under normal conditions a buyer with a top 5% income should be able to buy what a top 5% income homewoner (not resident) can. That pull it down close to a top 7 or 8% home. The we hit Prop 13 and the so called “perfect” weather. Homeowners stay in place because of the substantial tax benefit to doing so. Which means a buyer with a top 5% income isnt even competeing with the top 5% of homeowners they are competing with the Top 5% of homebuyers. The you toss in all the buyers out there who have significant cash to put down from prior homes they sold. At the end of the day after you factor in all those things in a so called “glamour city” like SD, someone with a $200K income without a big cash position should be buying around the 20 to 25% of homes.
It is what it is…[/quote]
While I understand the point behind this argument, it assumes that landlords on the lower end should be running monthly losses on their “investments.” The renters’ wages/income have to cover the costs of the landlords’ purchases, or else there wouldn’t be any rentals. Yes, many of these rentals were purchased years ago when the market was “normal,” but you can’t really argue that renters don’t play a part in the market.
The wealth and/or incomes of all the people who rent in an area do indeed determine market rents, which are a large part of what determines market price in that segment.
