The original statement to which I responded: “I don’t believe the average Joe Blow lives in Encinitas.”
In order to qualify for an interest-only mortgage for a house on Brae Mar Court in 2003, you had to make around 90k. Less if you had a down payment (say, this was your second house) or if you opted for a neg-am loan. A household with two schoolteachers, or one police officer and one clerk, could make that much. Income numbers for 92024 agree with that. Encinitas is above average, but it’s populated by considerable numbers of Joe Blows. It has to compete with other upper-middle-class suburbs and it is not as insulated from overall SoCal RE market as, say, Rancho Santa Fe. And Joe Blow’s purchasing power has been suffering lately (6.5% jumbo IO loans instead of 4.5%, problems with 100% CLTV loans, etc.)
Rising ARM interest rates and disappearance of creative financing have successfully priced out $90k/year households from the area. You seem to be implying that poorer households will be squeezed out of the city and well to do people will take over their properties, turning Encinitas into next Rancho Santa Fe. I disagree. The number of well to do people and the number of attractive properties are fairly constant. Encinitas is not the most attractive place in San Diego County. Instead the market will keep sinking as a whole, until two schoolteachers can afford a 4br in Encinitas again. (Even if they have to get an IO loan and spend 50% of their income on housing)
I expect the return to 2003 affordability levels in most areas. Even at 680k, 645 Brae Mar Ct would be far less affordable to residents of Encinitas today than it was in 2003. Incomes are up 10% (maybe), jumbo fixed interest rates are up 20-25%, and jumbo ARM interest rates are up 50%. The fact that there are 5 knife catchers bidding on this property? For me, not an argument to buy.
