Would you purchase or wait in my position?

[CA renter]

[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 posting this, Rich. Makes much more sense now. Also, I’m assuming this would include any new residents from other countries who might have substantial income from other countries? It seems as though there is so much foreign money sloshing around here.

[CA renter]

[quote=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.[/quote]

+1

[moneymaker]

As Suzy Orman would say DENIED! No sorry, BUY BUY BUY! You’ve got the down payment and rates are at historical lows, so if you can get the house you want where you want, then you have my blessing.P.S.-Suzy would probably want you to have 6-8 months of cash in reserve, so if you are planning on not paying PMI that would mean you can afford a 250k house, which we all know doesn’t get you much today in San Diego. Actually I don’t really know if she means 6-8 months of income or living expenses, could be a big difference.

[scaredyclassic]

there is something to be said for going with your gut.

[CA renter]

[quote=moneymaker]As Suzy Orman would say DENIED! No sorry, BUY BUY BUY! You’ve got the down payment and rates are at historical lows, so if you can get the house you want where you want, then you have my blessing.P.S.-Suzy would probably want you to have 6-8 months of cash in reserve, so if you are planning on not paying PMI that would mean you can afford a 250k house, which we all know doesn’t get you much today in San Diego. Actually I don’t really know if she means 6-8 months of income or living expenses, could be a big difference.[/quote]

Should be 6-8 months of living expenses, IIRC.

[masayako]

Here’s what I see: SD housing market is not in a bubble phase right now. Last buyer’s market was in 2010/2011 timframe. With my ballpark guessimate, the cycle goes between 8-10 years, so it will make sense to start looking around or so. We are in 2015 now, and from what I see, there’s not much good deal out there, I’d recommend to “monitor” and search for good deal, if you find someone reasonably price and fall in love with, make an offer. Don’t overbid. In the meantime, keep monitoring for good deals and keep saving in low risk investment vehicles. Stock market (despite many optimistic folks out there) is quite a bumpy ride ight now and housing market is always a lagging indicator of that. Good luck. Just my .2 cents.

[an]

[quote=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.[/quote]I think it’s more important to compare mortgage vs rent instead of mortgage vs income. Rent tells you how much people in a particular area are will to pay for shelter. So, if you want to live in that particular area, you have to compete with other people in your area. There are a myriad of reasons why people are will to spend different amount for shelter and people in different areas spend differently.

The reason I like using rent as a barometer is because people don’t put an ownership premium on rent. So, you tend to get a more pure view on how much people in the area are will to spend for shelter. If your mortgage is less than rent, then I would say, go ahead and buy, especially if you’re intending this to be your forever home. Worse comes to worse and you have to move, you can always rent it out for more than your mortgage.

[Anonymous]

What areas in San Diego is mortgage with minimal down payment less than rent? Probably only undesirable areas.

[Coronita]

[quote=deadzone]What areas in San Diego is mortgage with minimal down payment less than rent? Probably only undesirable areas.[/quote]

Mira mesa was….

[utcsox]

I will recommend buy vs. rent calculator from NY Times. This is an excellent tool for you run different scenarios.

http://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html

[an]

[quote=deadzone]What areas in San Diego is mortgage with minimal down payment less than rent? Probably only undesirable areas.[/quote]Mira Mesa. This house: http://www.sdlookup.com/MLS-140064625-10221_Trails_End_Cir_San_Diego_CA_92126 @ $450k with $90k down, P+I = $1600. PITI would be around $2100. Rent for that house is currently going for ~$2100. So, yeah, it’s still out there.

Unless you mean minimal down as in <20% down. In that case, I would suggest not to buy if you can't afford to save enough to have 20% down. It doesn't matter if it's cheaper than rent. It's better to save enough for 20% down and still have some set aside for a rainy day before considering making such a big purchase.

[Anonymous]

If you have to put 20% down then it is not an apples to apples comparison (rent vs. mortgage) in terms of affordability. I would say Mira Mesa is borderline undesirable.

[an]

[quote=deadzone]If you have to put 20% down then it is not an apples to apples comparison (rent vs. mortgage) in terms of affordability. I would say Mira Mesa is borderline undesirable.[/quote]I don’t see why it’s not apple to apple comparison? PITI – tax deduction would be less than rent. You’re also paying ~$600/month toward principle, while rent, it’s all gone. I guess if you want to have a pure rent vs mortgage, then compare ITI – tax deduction vs rent. This particular house, ITI with 20% down is ~$1500/month. ITI with 10% down is ~$1600/month. That’s $500-600< than comparable rent. Depending on your tax bracket, you can add ~$200 to that number as well on the buying side for tax deduction. As for Mira Mesa being borderline undesirable, then I guess >50% of San Diego is undesirable. If you’re the type of think Mira Mesa is undesirable and can’t come up with a big down payment, something is wrong with your perception and your finances.

[livinincali]

[quote=AN]I don’t see why it’s not apple to apple comparison? PITI – tax deduction would be less than rent. You’re also paying ~$600/month toward principle, while rent, it’s all gone. I guess if you want to have a pure rent vs mortgage, then compare ITI – tax deduction vs rent. This particular house, ITI with 20% down is ~$1500/month. ITI with 10% down is ~$1600/month. That’s $500-600< than comparable rent. Depending on your tax bracket, you can add ~$200 to that number as well on the buying side for tax deduction. [/quote] Probably need to include transaction costs and maintenance if you're going to give yourself the benefit of realizing the principal part of the payment.

[an]

[quote=livinincali][quote=AN]I don’t see why it’s not apple to apple comparison? PITI – tax deduction would be less than rent. You’re also paying ~$600/month toward principle, while rent, it’s all gone. I guess if you want to have a pure rent vs mortgage, then compare ITI – tax deduction vs rent. This particular house, ITI with 20% down is ~$1500/month. ITI with 10% down is ~$1600/month. That’s $500-600< than comparable rent. Depending on your tax bracket, you can add ~$200 to that number as well on the buying side for tax deduction. [/quote] Probably need to include transaction costs and maintenance if you're going to give yourself the benefit of realizing the principal part of the payment.[/quote] Transaction cost only apply if you sell. You're, right, there is maintenance cost. If you add that, you should also add appreciation as well.

[Author]

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