Seems like things have been slow

[(former)FormerSanDiegan]

Bugs, I made a point regarding interest rates and prices using a CA example. Someone countered with a national example, so I responded with a national example. Now we bring it back to California with the effects of prop 13.

Now I forgot what my original point was 🙂

I agree with qcomer regarding the phasing of rates and inflation. This drives much of the short term rapid increases and declines over short periods. Anyway, I firmly believe that based on history, sustained periods of inflation (decade scale) favors leveraged investment in tangible assets (e.g. property).

[renterclint]

FutureSDguy,

Is 6% truly a “normal appreciation” rate? Aren’t most of these guys on this thread going into detail about how housing tracks long-term to inflation? Come on!

Bottom line, when you have a community with a median household income of $62k and the median house is selling for $500k+, something is seriously wrong. These median wage earners are still buying homes! They are focusing on monthly payment (an artificial introductory one at that…) which is why 1 out of every 3 homes is purchased with a Neg-am loans during the last year. I do not recall what the remaining 2/3 of buyers are using in SD, but I would bet that a majority of those loans are ARMs w/ below market intro rates.

The local SD bank I recently worked for had 80% of their portfolio in gimmick loans (Neg-am, teaser Arms, I/O). Why? Because they can! The regulators are a joke. The cheap $$ has allowed many, many of these around-the-median earners to get into houses they can not afford.

If the lending regs were tighter, these people could not get loans for $500k+. If these people could only get loans for what they could truly afford, they would not be able to buy an average tract home for half a freaking million dollars! If most people could not buy the median home at $500k, the price would never have gotten to that level in the first place.

Yes. It is not entirely the banks fault, but without the cheap money, I can almost guarantee this ridiculous bubble would not have gotten so large.

[surveyor]

inflation

A 10% national housing appreciation rate has been bandied about (non-inflation adjusted) in some publications, so a 6% appreciation can be considered normal. Some other post quoted a 9.3% rate for San Diego pre-bubble.

But that’s the whole point for this thread – with the easy money running around, the feds printing money, there could a stealth inflation that might actually hold up housing prices (and other asset/commodity prices) and cause a price drop to be at least negligible.

[(former)FormerSanDiegan]

Renterclint –

Bottom line, when you have a community with a median household income of $62k and the median house is selling for $500k+, something is seriously wrong. These median wage earners are still buying homes!

I agree that something is wrong.

However, don’t assume that median wage earner would ever would qualify for a median-priced home. This has never happened in San Diego, even at the low points.

The home “ownership” rate in SD is historically around 45-55%. Therefore, folks making the median family income are not buying the median priced house. If you assume a 1:1 translation of income to home price, it would be the ~ 75th percentile of household income that is buying the median priced home.

[sdrealtor]

Great point FSD! Not exactly perfect but it does point out the problem of trying to compare a median income to median home prices. It’s probably even more lopsided than that as many long time homewoners are moe likely to be among the lower wage service sector earners while more recent arrivals are more likely to be employed in the high paying sectors.

[renterclint]

Yep. I agree.

One can get in to trouble comparing those two medians in that way. I believe the bubble has indeed been greatly exacerbated by easy lending, but that wasn’t the best angle to make my point. Anecdotally, I know several middle-earners who have bought in that last couple years (not all median homes mind you), but clearly MOST people in the middle range are not out buying $500k homes.

[sdrealtor]

To cover both sides, its only fair to point out that there have been below median income wage earners buying above median priced homes using liar loans. This is probably more the exception though.

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