Would you purchase or wait in my position?

[kev374]

Rich, my claim is substantiated by the salaries in my industry and the rents around the South Orange County area. Rents are not that much higher at all. In 2005 I moved to Lake Forest renting a 1bd there for $1,250/mo. The current rent for that exact unit, 10 years later, is $1,345/mo., it has increased 7.6% in a decade which I hardly call substantial!

However, now I live in Costa Mesa and pay $1,220/mo. for a larger apartment with a garage and I am only blocks from Newport Beach.

You can give me your statistical data all day long, which is what Economists do, but it does not match the reality on the ground. I am giving you actual data with my specific case.

I work as a Sr. Software Engineer, been doing it since 1997, pay in my industry has not increased since 2005. I am making $2,000/yr more now compared to my 2005 pay. And I am topped out in my payscale, I see job listings paying even less than what I am making for the same experience level.

You claim pay has increased substantially, let me then send you my Resume and we will see if you can get me a job for substantially more money than my 2005 income 😉

My data is real world, on the ground. Sure, it applies only to the tech industry but let me know in which other industries has pay substantially increased in the last decade?

[Rich Toscano]

That’s an argument I’ve heard from some SD people in the tech industry, but you can’t assume that it applies to the entire economy. It just doesn’t. Per capita income is up over 20% since 2005 in SD (despite similar claims from tech industry people here that their wages have stagnated). I doubt it’s much different in OC. Citing one senior developer’s salary history doesn’t really prove anything about the economy as a whole, which is what matters.

Regarding rent, again, you are using just one property. Who knows what’s going on with that area, that building, etc. What matters for comparison to OC-wide home prices (which is the matter at hand, if you are claiming an OC housing bubble) is OC-wide rents. I don’t have that data for OC but I have it for SD and like incomes they have increased over 20% since the bubble peak.

[CA renter]

[quote=kev374]Rich, my claim is substantiated by the salaries in my industry and the rents around the South Orange County area. Rents are not that much higher at all. In 2005 I moved to Lake Forest renting a 1bd there for $1,250/mo. The current rent for that exact unit, 10 years later, is $1,345/mo., it has increased 7.6% in a decade which I hardly call substantial!

However, now I live in Costa Mesa and pay $1,220/mo. for a larger apartment with a garage and I am only blocks from Newport Beach.

You can give me your statistical data all day long, which is what Economists do, but it does not match the reality on the ground. I am giving you actual data with my specific case.

I work as a Sr. Software Engineer, been doing it since 1997, pay in my industry has not increased since 2005. I am making $2,000/yr more now compared to my 2005 pay. And I am topped out in my payscale, I see job listings paying even less than what I am making for the same experience level.

You claim pay has increased substantially, let me then send you my Resume and we will see if you can get me a job for substantially more money than my 2005 income 😉

My data is real world, on the ground. Sure, it applies only to the tech industry but let me know in which other industries has pay substantially increased in the last decade?[/quote]

It probably depends very much on where one is looking. I do have to agree that pay hasn’t gone up much at all for anybody we know; for many, it is lower today than it was in 2005.

As everybody knows, I pay close attention to what’s going on in the public sector, especially as it regards state and local employers, and they have been seeing pay freezes or cuts since ~2008; only in the past year or so have public employers started to give *very small* raises. Even then, they are often still below overall 2008 compensation levels.

Other people we know who work in tech, biotech, accounting, law, leisure and hospitality, and the building trades, etc. have not seem much of an increase (if any increase at all) since the last bubble peak. Obviously, building is up from the bottom of the recession, but not above the peak in ~2005-2006…they still aren’t anywhere near the levels they were seeing in those days. Of course, this is all anecdotal, but it’s a fairly wide swath of industries.

OTOH, rents in our area are above 2005-2006 levels, but the increases pale in comparison to what we were seeing in ~2004-2007 when rents were skyrocketing in our area.

Agree that low rates are making housing prices look more acceptable because monthly PITI payments are fairly comparable to monthly rents…but even that metric is being stretched right now, at least in our neighborhood. It made absolute sense to buy in late 2011/early 2012, especially when looking at PITI/rent ratios. Not so sure it makes sense today.

[gzz]

Congrats on saving so much, and making good money while you’re young.

I was in your same boat in the mid 2000s. I moved here at 24 and was making 100K within a year, and saving more than half of my take home.

I waited until 2011 to buy a house in OB, and it was the best financial decision of my life. I actually saved money compared to renting, and have about 250k in unrealized cap gains, as well as a low property tax base locked in for life.

I dissent from the words of caution here and say go ahead and buy for sure if your job is safe, and stretch to get a house rather than a condo.

Unless you have student loans at a high rate, in which case pay them back as fast as you can. No safer way of improving your finances.

It was only after buying that how cheap homeownership can be sunk in. My mortgage payment is about $1900. Of that amount, $600 is principle, so increasing my net worth by decreasing my loan balance. The other 1300 is interest and property taxes (except a small amount for insurance). That gets deducted from my taxes. So my true cost of ownership is only around $880 a month for a house in OB. Your loan would have to be about double that, but $1700 as a true cost of ownership sounds like something you can afford.

I was did a refi when rates fell to 3.25%, and used this as a chance to pay in enough to remove mortgage insurance too. Rates are currently almost that low again, and when you own you always have the chance to take advantage of falling rates this way.

I think the market will continue to increase, probably by 15% over the next two years. There are just so many Chinese and Korean people who dream of moving to California, both the lifestyle, cleaner air, and the political stability. SD is not the top of their list, but SF and LA are getting really expensive and we offer more value. And we are getting a real critical mass in zone from Mira Mesa and Claremont to CV and Del Mar, pushing other buyers north to Carlsbad and South to OB and Point Loma.

Rates have also started to fall to near record lows again. Move-up buyers also now have plenty of equity to fund new purchases. And some potential moveup buyers like me will keep their old house, especially if it cashes out as a rental.

As for condo v house, I would have made more so far if I bought a condo. They go up more in good markets and down more in weak markets. However I think in 5-15 years single houses on lots zoned for 2 to 3 houses like mine will end up the best investment. Lately nearly all the construction in OB has been townhouses or townhouse style but detached houses. These keep selling for $650 to $950. Even if I’m wrong, I like having my own land with maximum freedom to do what I want with and no shared walls.

Right now there are about 5 houses on their own lots in OB under 700k. I think you should have a look, run the numbers, and make some offers. North Park and South Park would also be nice. You’re a little young and single for La Mesa and east county. For La Mesa in particular, I’d worry that all the boomers who bought in the 60s and 70s start to die off and their homes hit the market.

Another thing is, when I have free time from work I can improve the value of my house by fixing it up. Spend 20 hours improving the value of your house by $400, and that gain isn’t taxed at all now, and might never be since the first 250K of home capital gains is tax free.

[gzz]

As for waiting for a correction, why would that happen? Prices are still far below their old highs when you adjust for inflation, population is higher, San Diego is even more attractive than before with crime falling and the job market improving. Winter already is the weakest time of the market.

One way rates could get even lower is the new $1.2 trillion ECB bond buying program. Whoever will be selling their bonds to the ECB will need an alternative investment, and GSE bonds (funding US conforming mortgages) are a favorite for the type of people/organizations that buy government bonds.

Assuming you don’t work there, buy QCOM while you wait to buy. Because if QCOM hits 80 or 90, that is going to put some massive pressure on prices here and you’ll need the profits to make up for the higher prices.

[scaredyclassic]

Renters get the std. Deduction so true cost of homeownership must reflect the value of the interest and tax deduction over the std. Deduction. It may be cheaper than renting but the deduction is not all gravy since everyone gets the std deduction anyways.

There’s a lot to be said to waiting till your old and inert and immovable as opposed to merely somewhat stable

[spdrun]

gzz: the maximum time period between recessions since WW II has been something like a decade. By that metric alone, US is likely to go back into recession in the next few years. Southern CA property market is highly volatile. It doesn’t take a change in interest rates, just a loss of confidence (say due to stocks falling 25%) to correct prices.

As to prices being below their peak, so what? That’s like saying Bernie Madoff is mentally healthy as compared to Charles Manson.

[Coronita]

[quote=Rich Toscano]That’s an argument I’ve heard from some SD people in the tech industry, but you can’t assume that it applies to the entire economy. It just doesn’t. Per capita income is up over 20% since 2005 in SD (despite similar claims from tech industry people here that their wages have stagnated). I doubt it’s much different in OC. Citing one senior developer’s salary history doesn’t really prove anything about the economy as a whole, which is what matters.
[/quote]

Rich, you did bring up something that I have a question about. Are people’s income rising because of their “salaries” or is it rising because of their other forms of income such as investments or both?

I’m curious about this because specifically I can see that salaries in tech are starting to flatten and I think is probably now the norm for more folks that’s been around longer…However, I would also guess that with a general improving housing/stock/etc markets, incomes from other sources also seem to be going up steadily as well, probably more so than one’s salary.
So I was curious if that 20% increase is just “salaries” or includes everything, whether it’s rental income, dividend income,etc,etc,etc. I’m just trying to reconcile the difference.

[Rich Toscano]

Good question flu, and that may be part of the disconnect here. I am using BEA per capita personal income, which includes all sources of income, including investment income. (As it should… after all the point is to measure people’s ability to purchase).

If you want to get into the weeds, here’s the official definition:

Personal income is the income received by all persons from all sources. Personal income is the sum of net earnings by place of residence, property income, and personal current transfer receipts. Property income is rental income of persons, personal dividend income, and personal interest income. Net earnings is earnings by place of work (the sum of wages and salaries, supplements to wages and salaries, and proprietors’ income) less contributions for government social insurance, plus an adjustment to convert earnings by place of work to a place-of-residence basis.

[Coronita]

[quote=Rich Toscano]Good question flu, and that may be part of the disconnect here. I am using BEA per capita personal income, which includes all sources of income, including investment income. (As it should… after all the point is to measure people’s ability to purchase).

If you want to get into the weeds, here’s the official definition:

Personal income is the income received by all persons from all sources. Personal income is the sum of net earnings by place of residence, property income, and personal current transfer receipts. Property income is rental income of persons, personal dividend income, and personal interest income. Net earnings is earnings by place of work (the sum of wages and salaries, supplements to wages and salaries, and proprietors’ income) less contributions for government social insurance, plus an adjustment to convert earnings by place of work to a place-of-residence basis. [/quote]

Thanks for the info. It just seems like seems like the equity markets weren’t that great earlier…Maybe people had less to invest or were sitting on the sidelines more out or more fear.
Now, maybe people are investing more these days. But then, some say that more people have less disposable income to invest. That’s why I was curious. For me, I know back 2003-2005 I was much more heavily dependent on wages for income than right now, but that was because I was fearful that my wages would be stagnant 10 years later, which apparently it is starting to look that way.

Anyway, end thread hijack

[KristopherSD]

[quote=svelte]What you don’t mention is how long you plan on keeping the home and/or staying in San Diego[/quote]

Thank you everyone for the input so far, I appreciate it! To answer your question, I plan on being in San Diego for the rest of my life hopefully or at least until retirement 25 years from now. Ideally I would buy my “forever” home that needs alot of work, and turn it into a nice home over the course of a few years.

I guess what puts me off buying now is what I consider very high prices. I cannot believe that fixer upper homes in Clairemont Mesa are going for $500k+ or $450k+ in La Mesa, not to mention $600+ in Ocean Beach. I wonder who is buying all of these homes, there cannot possibly be THAT many tech jobs around. Maybe I am wrong. I feel that I am in a very advantageous position with decent savings, no debt, and a stable job yet I somehow feel “priced out”. This leaves me wondering if others are stretching the budget to purchase.

[KristopherSD]

[quote=svelte]What you don’t mention is how long you plan on keeping the home and/or staying in San Diego[/quote]

Thank you everyone for the input so far, I appreciate it! To answer your question, I plan on being in San Diego for the rest of my life hopefully or at least until retirement 25 years from now. Ideally I would buy my “forever” home that needs alot of work, and turn it into a nice home over the course of a few years.

I guess what puts me off buying now is what I consider very high prices. I cannot believe that fixer upper homes in Clairemont Mesa are going for $500k+ or $450k+ in La Mesa, not to mention $600+ in Ocean Beach. I wonder who is buying all of these homes, there cannot possibly be THAT many tech jobs around. Maybe I am wrong. I feel that I am in a very advantageous position with decent savings, no debt, and a stable job yet I somehow feel “priced out”. This leaves me wondering if others are stretching the budget to purchase.

[spdrun]

What about sub-$400k fixers?

Something like this:
http://www.sdlookup.com/MLS-140065607-2663_Elyssee_San_Diego_CA_92123

[wallers]

I am wondering who the buyers are as well. If someone here makes an above average living (for here) but still has to stretch to afford an average or less than average small home (with the last few years increase) it makes me wonder what is going on and if a price correction will be coming. Looking at incomes and housing prices it does not pencil out unless it’s all driven by outside investors. Who will come and go but when they go prices go down. From what I see it is cheaper to rent than buy now (much cheaper) so that seems off as well.

[gzz]

A single guy making 100k is likely already paying enough state income taxes to itimize, or pretty close to it.

[Author]

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