Basic affordability metrics

[SDEngineer]

It’s the demographics of various areas vs. their prices that tell me it’s out of whack – not what I think my personal income should support.

Look at the median income in 4S Ranch or CMR. It’s not upwards of 200K/yr. In 4S, it’s actually below 100K/yr, and in CMR, it’s only a little above (about 120K/yr).

While some certainly probably bought in relatively smartly (funding a large down payment with proceeds from a house sale during the bubble for example), and so will be able to afford it, there will also be plenty that bought more home than they can afford with option ARMs or similar. And in the long run, these “move-up” types of houses will need to drop in price so that post-bubble “mover-uppers” can get into those houses and afford them with the down payments they get from selling their post-bubble first houses.

[Ozzie]

I believe the original post was wondering how come rental prices were so high in desirable areas. Perhaps there is a rental bubble? Or maybe it’s simply supply and demand with a lot of demand coming from renters who have left the buying pool for now (either recently sold or just moved here and putting off their purchase until prices stabilize). That’s my guess because I too see single family rentals rising like crazy in the desirable areas. I’ve seen sellers take their homes off the market and rent them for positive cash flow if they bought in 2003 or in some cases 2004. It makes sense if you’re not desperate to get your equity out right away. Why compete with a desperate seller in a buyer’s market? I’ve seen an investor in South Carlsbad raise his rental rate 50% from where it was in 2003 in what is not a great location IMO. It’s all about supply and demand and in this case the demand is not being driven by speculation or easy money so it seems more sustainable to me.

[Ozzie]

I believe the original post was wondering how come rental prices were so high in desirable areas. Perhaps there is a rental bubble? Or maybe it’s simply supply and demand with a lot of demand coming from renters who have left the buying pool for now (either recently sold or just moved here and putting off their purchase until prices stabilize). That’s my guess because I too see single family rentals rising like crazy in the desirable areas. I’ve seen sellers take their homes off the market and rent them for positive cash flow if they bought in 2003 or in some cases 2004. It makes sense if you’re not desperate to get your equity out right away. Why compete with a desperate seller in a buyer’s market? I’ve seen an investor in South Carlsbad raise his rental rate 50% from where it was in 2003 in what is not a great location IMO. It’s all about supply and demand and in this case the demand is not being driven by speculation or easy money so it seems more sustainable to me.

[Ozzie]

I believe the original post was wondering how come rental prices were so high in desirable areas. Perhaps there is a rental bubble? Or maybe it’s simply supply and demand with a lot of demand coming from renters who have left the buying pool for now (either recently sold or just moved here and putting off their purchase until prices stabilize). That’s my guess because I too see single family rentals rising like crazy in the desirable areas. I’ve seen sellers take their homes off the market and rent them for positive cash flow if they bought in 2003 or in some cases 2004. It makes sense if you’re not desperate to get your equity out right away. Why compete with a desperate seller in a buyer’s market? I’ve seen an investor in South Carlsbad raise his rental rate 50% from where it was in 2003 in what is not a great location IMO. It’s all about supply and demand and in this case the demand is not being driven by speculation or easy money so it seems more sustainable to me.

[Ozzie]

I believe the original post was wondering how come rental prices were so high in desirable areas. Perhaps there is a rental bubble? Or maybe it’s simply supply and demand with a lot of demand coming from renters who have left the buying pool for now (either recently sold or just moved here and putting off their purchase until prices stabilize). That’s my guess because I too see single family rentals rising like crazy in the desirable areas. I’ve seen sellers take their homes off the market and rent them for positive cash flow if they bought in 2003 or in some cases 2004. It makes sense if you’re not desperate to get your equity out right away. Why compete with a desperate seller in a buyer’s market? I’ve seen an investor in South Carlsbad raise his rental rate 50% from where it was in 2003 in what is not a great location IMO. It’s all about supply and demand and in this case the demand is not being driven by speculation or easy money so it seems more sustainable to me.

[Ozzie]

I believe the original post was wondering how come rental prices were so high in desirable areas. Perhaps there is a rental bubble? Or maybe it’s simply supply and demand with a lot of demand coming from renters who have left the buying pool for now (either recently sold or just moved here and putting off their purchase until prices stabilize). That’s my guess because I too see single family rentals rising like crazy in the desirable areas. I’ve seen sellers take their homes off the market and rent them for positive cash flow if they bought in 2003 or in some cases 2004. It makes sense if you’re not desperate to get your equity out right away. Why compete with a desperate seller in a buyer’s market? I’ve seen an investor in South Carlsbad raise his rental rate 50% from where it was in 2003 in what is not a great location IMO. It’s all about supply and demand and in this case the demand is not being driven by speculation or easy money so it seems more sustainable to me.

[Fearful]

Well, I don’t exactly wonder why the rental prices are so high, at least in light of the purchase prices, but still I wonder who all these people are that afford these houses. Carmel Valley ain’t a small area.

Anyway, my original calculations were a bit off – sorry to get folks’ feathers ruffled – they were including savings in the form of 401k and stock purchase plan (10% of gross); with those backed out, my take home pay was about $7K a month. Still, I can’t imagine spending 4/7 of my take home pay on housing!

And lest we forget – that $1M house renting for $4K a month – the owner is losing money at a pretty rapid rate. Overall gross cash outflow on such a house would be more than $6K a month, no? One good reason to look into the owner’s financing situation before renting!

[Fearful]

Well, I don’t exactly wonder why the rental prices are so high, at least in light of the purchase prices, but still I wonder who all these people are that afford these houses. Carmel Valley ain’t a small area.

Anyway, my original calculations were a bit off – sorry to get folks’ feathers ruffled – they were including savings in the form of 401k and stock purchase plan (10% of gross); with those backed out, my take home pay was about $7K a month. Still, I can’t imagine spending 4/7 of my take home pay on housing!

And lest we forget – that $1M house renting for $4K a month – the owner is losing money at a pretty rapid rate. Overall gross cash outflow on such a house would be more than $6K a month, no? One good reason to look into the owner’s financing situation before renting!

[Fearful]

Well, I don’t exactly wonder why the rental prices are so high, at least in light of the purchase prices, but still I wonder who all these people are that afford these houses. Carmel Valley ain’t a small area.

Anyway, my original calculations were a bit off – sorry to get folks’ feathers ruffled – they were including savings in the form of 401k and stock purchase plan (10% of gross); with those backed out, my take home pay was about $7K a month. Still, I can’t imagine spending 4/7 of my take home pay on housing!

And lest we forget – that $1M house renting for $4K a month – the owner is losing money at a pretty rapid rate. Overall gross cash outflow on such a house would be more than $6K a month, no? One good reason to look into the owner’s financing situation before renting!

[Fearful]

Well, I don’t exactly wonder why the rental prices are so high, at least in light of the purchase prices, but still I wonder who all these people are that afford these houses. Carmel Valley ain’t a small area.

Anyway, my original calculations were a bit off – sorry to get folks’ feathers ruffled – they were including savings in the form of 401k and stock purchase plan (10% of gross); with those backed out, my take home pay was about $7K a month. Still, I can’t imagine spending 4/7 of my take home pay on housing!

And lest we forget – that $1M house renting for $4K a month – the owner is losing money at a pretty rapid rate. Overall gross cash outflow on such a house would be more than $6K a month, no? One good reason to look into the owner’s financing situation before renting!

[Fearful]

Well, I don’t exactly wonder why the rental prices are so high, at least in light of the purchase prices, but still I wonder who all these people are that afford these houses. Carmel Valley ain’t a small area.

Anyway, my original calculations were a bit off – sorry to get folks’ feathers ruffled – they were including savings in the form of 401k and stock purchase plan (10% of gross); with those backed out, my take home pay was about $7K a month. Still, I can’t imagine spending 4/7 of my take home pay on housing!

And lest we forget – that $1M house renting for $4K a month – the owner is losing money at a pretty rapid rate. Overall gross cash outflow on such a house would be more than $6K a month, no? One good reason to look into the owner’s financing situation before renting!

[cr]

Top Ten Big Cities in the U.S.: SD is #9, behind LA, 3 cities in TX, Chicago, NY, Philly, and Phoenix. It’s a great city, but there are better places to live.

http://money.cnn.com/magazines/moneymag/bplive/2007/poll/index.html

As far as incomes, there’s a big difference between spending money and actually having it. Everything I found for SD average income put average HOUSEHOLD income at >$50,000:

http://www.whitepages.com/white-pages/San_Diego-CA/
http://en.wikipedia.org/wiki/San_Diego,_California#Economy
http://www.sandag.org/uploads/publicationid/publicationid_1100_3411.pdf

Even if at best it’s $60,000 people could double up in houses and still not be able to afford $4000/month, rent or mortgage.

I don’t know how they do it, but I think in the next 10-20 years when people who never retired pass on debt instead of money we’ll start to see how.

We’re a nation of debtors, that’s about all I know, and here are some startling numbers:

http://creditcounselingbiz.com/credit_counseling_statistics.htm
http://www.creditcards.com/statistics/credit-card-industry-facts-and-personal-debt-statistics.php

[cr]

Top Ten Big Cities in the U.S.: SD is #9, behind LA, 3 cities in TX, Chicago, NY, Philly, and Phoenix. It’s a great city, but there are better places to live.

http://money.cnn.com/magazines/moneymag/bplive/2007/poll/index.html

As far as incomes, there’s a big difference between spending money and actually having it. Everything I found for SD average income put average HOUSEHOLD income at >$50,000:

http://www.whitepages.com/white-pages/San_Diego-CA/
http://en.wikipedia.org/wiki/San_Diego,_California#Economy
http://www.sandag.org/uploads/publicationid/publicationid_1100_3411.pdf

Even if at best it’s $60,000 people could double up in houses and still not be able to afford $4000/month, rent or mortgage.

I don’t know how they do it, but I think in the next 10-20 years when people who never retired pass on debt instead of money we’ll start to see how.

We’re a nation of debtors, that’s about all I know, and here are some startling numbers:

http://creditcounselingbiz.com/credit_counseling_statistics.htm
http://www.creditcards.com/statistics/credit-card-industry-facts-and-personal-debt-statistics.php

[cr]

Top Ten Big Cities in the U.S.: SD is #9, behind LA, 3 cities in TX, Chicago, NY, Philly, and Phoenix. It’s a great city, but there are better places to live.

http://money.cnn.com/magazines/moneymag/bplive/2007/poll/index.html

As far as incomes, there’s a big difference between spending money and actually having it. Everything I found for SD average income put average HOUSEHOLD income at >$50,000:

http://www.whitepages.com/white-pages/San_Diego-CA/
http://en.wikipedia.org/wiki/San_Diego,_California#Economy
http://www.sandag.org/uploads/publicationid/publicationid_1100_3411.pdf

Even if at best it’s $60,000 people could double up in houses and still not be able to afford $4000/month, rent or mortgage.

I don’t know how they do it, but I think in the next 10-20 years when people who never retired pass on debt instead of money we’ll start to see how.

We’re a nation of debtors, that’s about all I know, and here are some startling numbers:

http://creditcounselingbiz.com/credit_counseling_statistics.htm
http://www.creditcards.com/statistics/credit-card-industry-facts-and-personal-debt-statistics.php

[cr]

Top Ten Big Cities in the U.S.: SD is #9, behind LA, 3 cities in TX, Chicago, NY, Philly, and Phoenix. It’s a great city, but there are better places to live.

http://money.cnn.com/magazines/moneymag/bplive/2007/poll/index.html

As far as incomes, there’s a big difference between spending money and actually having it. Everything I found for SD average income put average HOUSEHOLD income at >$50,000:

http://www.whitepages.com/white-pages/San_Diego-CA/
http://en.wikipedia.org/wiki/San_Diego,_California#Economy
http://www.sandag.org/uploads/publicationid/publicationid_1100_3411.pdf

Even if at best it’s $60,000 people could double up in houses and still not be able to afford $4000/month, rent or mortgage.

I don’t know how they do it, but I think in the next 10-20 years when people who never retired pass on debt instead of money we’ll start to see how.

We’re a nation of debtors, that’s about all I know, and here are some startling numbers:

http://creditcounselingbiz.com/credit_counseling_statistics.htm
http://www.creditcards.com/statistics/credit-card-industry-facts-and-personal-debt-statistics.php

[Author]

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