“43% Overpriced”

[Anonymous]

FWIW: here are the 2007 census numbers (in percentages) for ownership nationwide. Reading from left to right across the row, we have the total, then the five quintiles based on HH income from lowest to highest. There’s a big skew to the high side, for sure, but also a surprisingly high proportion of owners on the lower end too. My sense (though I don’t have data) is that SD would skew even more to the high side given the comparatively high prices and low wages here. Still, its hard to see how the 75th pcntl is any more than a theoretical upper bound, since it assumes 100% ownership for those above the median and 0% ownership for those below. Of course the 50th pcntl is wrong too. The numbers below suggest the ownership percentile is about the 68th (plus the SD skew, minus the equity).

Owner occupied: 68.3, 45.6, 59.2, 68.2, 79.7, 88.9
Renter occupied: 30.3, 51.4, 39.0, 30.6, 19.6, 10.8

[TheBreeze]

Supply also needs to be taken into account. If there are 1000 homes on the market and only 800 families who qualify to buy/rent them, something bad is going to happen to prices regardless of median income.

It would be interesting to know how overbuilt San Diego is right now. I seem to recall an article that discussed how the home ownership rate had gone up by a couple of percentage points in recent years, but the percentage of houses sold had gone up by something like 15%. This means that several buyers were buying multiple properties. No doubt a lot of these folks were qualifying with liar loans. When these homes come back on the market, who is going to buy them?

I think move-up equity is what allows higher-end homes to better hold their values. People moving in to higher-end homes are generally moving up and can bring some move-up equity to the table. Folks buying starter homes generally don’t have much to put down, so the prices of these homes more quickly adjust based on how easy it is to get a mortgage.

I don’t see how the median income doesn’t go down in San Diego over the next few years. Even if the rest of the nation doesn’t go into recession (unlikely), the downturn in RE-related income will decrease significantly thus driving down the median income.

[TheBreeze]

Supply also needs to be taken into account. If there are 1000 homes on the market and only 800 families who qualify to buy/rent them, something bad is going to happen to prices regardless of median income.

It would be interesting to know how overbuilt San Diego is right now. I seem to recall an article that discussed how the home ownership rate had gone up by a couple of percentage points in recent years, but the percentage of houses sold had gone up by something like 15%. This means that several buyers were buying multiple properties. No doubt a lot of these folks were qualifying with liar loans. When these homes come back on the market, who is going to buy them?

I think move-up equity is what allows higher-end homes to better hold their values. People moving in to higher-end homes are generally moving up and can bring some move-up equity to the table. Folks buying starter homes generally don’t have much to put down, so the prices of these homes more quickly adjust based on how easy it is to get a mortgage.

I don’t see how the median income doesn’t go down in San Diego over the next few years. Even if the rest of the nation doesn’t go into recession (unlikely), the downturn in RE-related income will decrease significantly thus driving down the median income.

[TheBreeze]

Supply also needs to be taken into account. If there are 1000 homes on the market and only 800 families who qualify to buy/rent them, something bad is going to happen to prices regardless of median income.

It would be interesting to know how overbuilt San Diego is right now. I seem to recall an article that discussed how the home ownership rate had gone up by a couple of percentage points in recent years, but the percentage of houses sold had gone up by something like 15%. This means that several buyers were buying multiple properties. No doubt a lot of these folks were qualifying with liar loans. When these homes come back on the market, who is going to buy them?

I think move-up equity is what allows higher-end homes to better hold their values. People moving in to higher-end homes are generally moving up and can bring some move-up equity to the table. Folks buying starter homes generally don’t have much to put down, so the prices of these homes more quickly adjust based on how easy it is to get a mortgage.

I don’t see how the median income doesn’t go down in San Diego over the next few years. Even if the rest of the nation doesn’t go into recession (unlikely), the downturn in RE-related income will decrease significantly thus driving down the median income.

[TheBreeze]

Supply also needs to be taken into account. If there are 1000 homes on the market and only 800 families who qualify to buy/rent them, something bad is going to happen to prices regardless of median income.

It would be interesting to know how overbuilt San Diego is right now. I seem to recall an article that discussed how the home ownership rate had gone up by a couple of percentage points in recent years, but the percentage of houses sold had gone up by something like 15%. This means that several buyers were buying multiple properties. No doubt a lot of these folks were qualifying with liar loans. When these homes come back on the market, who is going to buy them?

I think move-up equity is what allows higher-end homes to better hold their values. People moving in to higher-end homes are generally moving up and can bring some move-up equity to the table. Folks buying starter homes generally don’t have much to put down, so the prices of these homes more quickly adjust based on how easy it is to get a mortgage.

I don’t see how the median income doesn’t go down in San Diego over the next few years. Even if the rest of the nation doesn’t go into recession (unlikely), the downturn in RE-related income will decrease significantly thus driving down the median income.

[TheBreeze]

Supply also needs to be taken into account. If there are 1000 homes on the market and only 800 families who qualify to buy/rent them, something bad is going to happen to prices regardless of median income.

It would be interesting to know how overbuilt San Diego is right now. I seem to recall an article that discussed how the home ownership rate had gone up by a couple of percentage points in recent years, but the percentage of houses sold had gone up by something like 15%. This means that several buyers were buying multiple properties. No doubt a lot of these folks were qualifying with liar loans. When these homes come back on the market, who is going to buy them?

I think move-up equity is what allows higher-end homes to better hold their values. People moving in to higher-end homes are generally moving up and can bring some move-up equity to the table. Folks buying starter homes generally don’t have much to put down, so the prices of these homes more quickly adjust based on how easy it is to get a mortgage.

I don’t see how the median income doesn’t go down in San Diego over the next few years. Even if the rest of the nation doesn’t go into recession (unlikely), the downturn in RE-related income will decrease significantly thus driving down the median income.

[NotCranky]

“but the percentage of houses sold had gone up by something like 15%.”
This could be do to the fact that houses were “chrurning” for lack of a better word.

“Folks buying starter homes generally don’t have much to put down, so the prices of these homes more quickly adjust based on how easy it is to get a mortgage.”

Good point, this is why I say there will be good deals early on but it won’t be stuff that most people want and therefore can quickly be driven down by investors to “pencil out”. Also first time buyers who can live in “marginal” neighborhoods might score. In the early 90’s a lot of single guys I know scooped up properties in Normal Heights at lows that were never touched again. That was 6 years before the bottom.

[NotCranky]

“but the percentage of houses sold had gone up by something like 15%.”
This could be do to the fact that houses were “chrurning” for lack of a better word.

“Folks buying starter homes generally don’t have much to put down, so the prices of these homes more quickly adjust based on how easy it is to get a mortgage.”

Good point, this is why I say there will be good deals early on but it won’t be stuff that most people want and therefore can quickly be driven down by investors to “pencil out”. Also first time buyers who can live in “marginal” neighborhoods might score. In the early 90’s a lot of single guys I know scooped up properties in Normal Heights at lows that were never touched again. That was 6 years before the bottom.

[NotCranky]

“but the percentage of houses sold had gone up by something like 15%.”
This could be do to the fact that houses were “chrurning” for lack of a better word.

“Folks buying starter homes generally don’t have much to put down, so the prices of these homes more quickly adjust based on how easy it is to get a mortgage.”

Good point, this is why I say there will be good deals early on but it won’t be stuff that most people want and therefore can quickly be driven down by investors to “pencil out”. Also first time buyers who can live in “marginal” neighborhoods might score. In the early 90’s a lot of single guys I know scooped up properties in Normal Heights at lows that were never touched again. That was 6 years before the bottom.

[NotCranky]

“but the percentage of houses sold had gone up by something like 15%.”
This could be do to the fact that houses were “chrurning” for lack of a better word.

“Folks buying starter homes generally don’t have much to put down, so the prices of these homes more quickly adjust based on how easy it is to get a mortgage.”

Good point, this is why I say there will be good deals early on but it won’t be stuff that most people want and therefore can quickly be driven down by investors to “pencil out”. Also first time buyers who can live in “marginal” neighborhoods might score. In the early 90’s a lot of single guys I know scooped up properties in Normal Heights at lows that were never touched again. That was 6 years before the bottom.

[NotCranky]

“but the percentage of houses sold had gone up by something like 15%.”
This could be do to the fact that houses were “chrurning” for lack of a better word.

“Folks buying starter homes generally don’t have much to put down, so the prices of these homes more quickly adjust based on how easy it is to get a mortgage.”

Good point, this is why I say there will be good deals early on but it won’t be stuff that most people want and therefore can quickly be driven down by investors to “pencil out”. Also first time buyers who can live in “marginal” neighborhoods might score. In the early 90’s a lot of single guys I know scooped up properties in Normal Heights at lows that were never touched again. That was 6 years before the bottom.

[(former)FormerSanDiegan]

Let’s consider median household income versus median price at the the last bottom. First of all, by 2000, we already had a significant bounce in prices from the bottom. I sold a house in Clairemont in early 2001 that I purchased in 1996. The price change in those 5 years was 65% (we made no improvements to the house).

At the last bottom, by 1995-1996t, after a 6-7 year decline, recession, structural changes in the local economy (loss of defense jobs) and unemployment in 8-9% range the San Diego the median household income in San Dieog for 1995 was:

per Census Bureau (1995): 37,000+-700
per Labor Dept. (1996) 34,000
per Franchise Tax board (1995): 40,706

Let’s use 37K as an average.

The median priced single family home in 1995 was ~ 171 K (per the CAR).

That’s 4.6x the median household income.

At the prevailing 8% interest rates at that time we’re talking about 45% of the median household income required to service PITI in the 1995-96 time frame.

Also, from personal experience a median priced home back then would buy you a 3 BR/ 1 Bath house in Clairemont with up to 1200 sq ft. You needed to make about 60K to qualify for a typical loan. Well above the median household income.

The concept of median house prices relating to qualification ratios at median household incomes is fantasy.

[(former)FormerSanDiegan]

Let’s consider median household income versus median price at the the last bottom. First of all, by 2000, we already had a significant bounce in prices from the bottom. I sold a house in Clairemont in early 2001 that I purchased in 1996. The price change in those 5 years was 65% (we made no improvements to the house).

At the last bottom, by 1995-1996t, after a 6-7 year decline, recession, structural changes in the local economy (loss of defense jobs) and unemployment in 8-9% range the San Diego the median household income in San Dieog for 1995 was:

per Census Bureau (1995): 37,000+-700
per Labor Dept. (1996) 34,000
per Franchise Tax board (1995): 40,706

Let’s use 37K as an average.

The median priced single family home in 1995 was ~ 171 K (per the CAR).

That’s 4.6x the median household income.

At the prevailing 8% interest rates at that time we’re talking about 45% of the median household income required to service PITI in the 1995-96 time frame.

Also, from personal experience a median priced home back then would buy you a 3 BR/ 1 Bath house in Clairemont with up to 1200 sq ft. You needed to make about 60K to qualify for a typical loan. Well above the median household income.

The concept of median house prices relating to qualification ratios at median household incomes is fantasy.

[(former)FormerSanDiegan]

Let’s consider median household income versus median price at the the last bottom. First of all, by 2000, we already had a significant bounce in prices from the bottom. I sold a house in Clairemont in early 2001 that I purchased in 1996. The price change in those 5 years was 65% (we made no improvements to the house).

At the last bottom, by 1995-1996t, after a 6-7 year decline, recession, structural changes in the local economy (loss of defense jobs) and unemployment in 8-9% range the San Diego the median household income in San Dieog for 1995 was:

per Census Bureau (1995): 37,000+-700
per Labor Dept. (1996) 34,000
per Franchise Tax board (1995): 40,706

Let’s use 37K as an average.

The median priced single family home in 1995 was ~ 171 K (per the CAR).

That’s 4.6x the median household income.

At the prevailing 8% interest rates at that time we’re talking about 45% of the median household income required to service PITI in the 1995-96 time frame.

Also, from personal experience a median priced home back then would buy you a 3 BR/ 1 Bath house in Clairemont with up to 1200 sq ft. You needed to make about 60K to qualify for a typical loan. Well above the median household income.

The concept of median house prices relating to qualification ratios at median household incomes is fantasy.

[(former)FormerSanDiegan]

Let’s consider median household income versus median price at the the last bottom. First of all, by 2000, we already had a significant bounce in prices from the bottom. I sold a house in Clairemont in early 2001 that I purchased in 1996. The price change in those 5 years was 65% (we made no improvements to the house).

At the last bottom, by 1995-1996t, after a 6-7 year decline, recession, structural changes in the local economy (loss of defense jobs) and unemployment in 8-9% range the San Diego the median household income in San Dieog for 1995 was:

per Census Bureau (1995): 37,000+-700
per Labor Dept. (1996) 34,000
per Franchise Tax board (1995): 40,706

Let’s use 37K as an average.

The median priced single family home in 1995 was ~ 171 K (per the CAR).

That’s 4.6x the median household income.

At the prevailing 8% interest rates at that time we’re talking about 45% of the median household income required to service PITI in the 1995-96 time frame.

Also, from personal experience a median priced home back then would buy you a 3 BR/ 1 Bath house in Clairemont with up to 1200 sq ft. You needed to make about 60K to qualify for a typical loan. Well above the median household income.

The concept of median house prices relating to qualification ratios at median household incomes is fantasy.

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