SD county does not warrant OC or LA county prices

[Monster]

I’m really surprised no one mentions how the SD economy is not as strong/robust/diverse/larger than our neighbors up north. I willing to bet there are more millionaires in LA/OC than SD.

How can SD sellers keep all these prices over 1mm on these CV homes? Sorry, but SD does not have the economic engine to support these prices. Forget interest rates, look at your neighbors. The spec investor is long gone. Sea World, SD Zoo, service oriented employees cannot buy these 1.2mil Irvine looking homes.

Any new large corporations moving in soon? High paying executives? Not 20 people, SD county needs 1,000 of them. Better hope alot of trust fund babies or inheritance players come to the rescue.

For comparison, LaJolla does not sell at the same price as Solana Beach or Cardiff. More money in LJ than those 2 towns. Now just blow up the geography for my cost example.

I’d be concerned if I was looking to sell a home at 1.2mil in SD versus 1.2 in OC.

FYI..I’m renting and not a buyer. $1,000 per square foot for a 1972 condo is not wise investing at this time. Don’t forget the $450 HOA fees per month for the sleeping security guard.

Reality check time if your a seller.

[Anonymous]

I bet very few people who have homes in San Diego valued at over a million dollars actually paid anywhere near that. The vast majority were purchased long before the run-up and the homeonwers just benefitted from the speculative activity going on around them. Many others who did purchase recently probably were able to afford it due to equity they made from their previous more modest homes. In either case, the prices were enabled by the housing price run-up, not due to high paying jobs.

I don’t think it is much different in LA or Orange County frankly. I do agree there is more industry and overall maybe more high paying jobs. However, regardless of how much industry is in an area very few jobs pay enough salary to afford a miliion dollar house straight up. For example, if you started from scratch with little build up home equity, you would need probably 250K salary to consider purchasing a million dollar home. Only a very select few executives for any company make that kind of salary.

[Monster]

So, who are the new buyers? Heck, at least Miami with all those unsold condos have the south and central American buyers and European buyers. Maybe they can sell them eventually. SD is alot different. Where are the economic power players coming to buy all these 1mm houses? Retirees? Don’t think so. Relocation buyers from the east that sold their homes at top of the market 6 months ago?

Can the new Miramar airport workers support these homes in CV? Don’t think so? Will more corporations move to SD with better air transportation?

Here is a better thought, have that huge seaport built( not sure if you heard about this idea) on the east coast of Baja and have a rail line come into SD and then corporations will build distribution plants here. Being a surfer, this project will not be good for the surfing in particular parts of Baja, but we cannot control Mexico politics. Surfrider is great, but……

Maybe I need to find what new jobs have been created in SD county this year and average salaries that are paid.

[VCJIM]

I agree Deadzone, LA’s salaries do not justify the prices. The same dynamics that have affected SD have also affected LA, Riverside, Sacramento, SF to greater or lesser degree. One could argue back and forth as to which area will be affected the most in a housing downturn, ultimately time will tell. I could make strong arguments why LA will far harder/more/worse than SD, but what would be the point?

[bob007]

I would rank in descending order the risk of downturn
San Francsico-San Jose
Orange County
Los Angeles
San Diego
Inland Empire
Sacramento
Central Valley

[Monster]

bob007, interesting ranking. I still put SD up front, the military and govt. are the biggest employers in SD county. Are these employees the new buyers in SD? Mover uppers? Don’t think so.

Econ 101..demand and supply and disposable income wins here. SD has supply, demand? Big incomes?

I love this area, but this is only for conversation. I’m not a basher, just thinking out loud.

[Anonymous]

I would put Riverside County in first. Most of their growth is lower income people who commute to LA or San Diego. That place is going to be a trainwreck.

[Monster]

Deadzone, take your logic and think eastern SD county. East of the 15 freeway, east of the 805?

Homes near the center of economic activity will stay stronger, not including condos. If you have to commute 25 miles west to your job, then those houses will tumble. Commuting costs going forward will make suburbs obsolete.

If you live in the hinterlands, take up farming to feed your neighbors that will not be able to cover the cost of commuting. By the way, I think oil could go to $125 a barrel. Suburbism without mass transit is the first to fall.

[ocrenter]

being from OC, SD does not have OC level prices.

let’s take RB, I think a comparison to mission viejo or aliso veijo would be justified. yet a 1500 sqft home can now be had for the low $500,000 in RB, but you’re still looking at mid $600,000 for the similar home in MV or aliso. So a good $150,000 still separate comparible cities in the two counties.

let’s take it a step further. those Eureka Springs new homes in Escondido is currently $550,000 for a 2700 sqft home. Armstrong Ranch in Santa Ana is still over $1 million!

[powayseller]

Monster, you got that right! Our wages do not support the current prices, and the only reason they got this high is reckless financing. Stupid investors who bought MBS, backed by a home financed on 0% down, on stated income, with a negative amortization interest only loan. What kind of stupid investor bought this MBS? Anyway, that’s what caused it. And reckless FDIC which allowed the lending guidelines to be thrown out the window. Crooked executives at Fannie Mae, whose earnings have to be restated many years back, and nobody really knows what their earnings really are.

That’s why the Bubble Primer shows the median price/per capita income is at the highest ever since data going back to the 1970s: ratio is 14. If people could really afford these homes, the ratio would have remained at 7.

[Monster]

Powayseller, thanks for the support. Truth hurts and I could be wrong, but if we all had houses here and sold them 1 yr. ago and had bundles of cash and moved to Hilton Head, I would think the real estate market would jump there. We could afford 1mm homes there. Is SD going to see a same type of influx from the same scenario from outside of CA? Where do all the new buyers come from?

[powayseller]

We can’t get new buyers as a nation. Historically, housing ownership is around 64%, and in the last few years, by reducing lending standards, we increased this to 69%. This extra increase of 5 points is going to be, in hindsight, an error. These people who were brought in, did not qualify before because they have low credit score, low income, unstable histories, bankrupcies, no down payment; in other wors, they are subprime borrowers who should never have qualified for any loans of any type. Let’s face it: not every American is stable enough to own a mortgage.

So anyone who could fog a mirror and wanted to buy a house, has done so.

Now, where will the new buyers come from? Who are today’s buyers anyway? Moveup buyers? Some first time buyers? The latter group is shrinking as they are most interest rate sensitive.

The buyer pool is shrinking, because we are at a record homeownership rate now, interest rates are too high for current prices, prices are too high, and people are afraid of falling prices.

A problem for sellers is that there isn’t any group left to sell homes to. People moving from other states have less money from their homes, so they don’t have enough money to put down to get a CA home.

[Author]

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