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(former)FormerSanDiegan
ParticipantRenterclint –
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.
(former)FormerSanDiegan
ParticipantNice work Bugs.
Pretty marginal, even at 350K. Now, if the identical situation were to come up in the Mount streets area of Clairemont, I’d consider it a reasonable deal.(former)FormerSanDiegan
ParticipantBugs, 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).
(former)FormerSanDiegan
ParticipantBugs –
Thanks for the perspective regarding appraisal options. I think my case was a clear example of the appraiser taking the path of least resistance. The value would have been more than enough at that time (from my perspective)to make it subject to repair, but it was easier for them to suggest that they come back in a week to complete the appraisal. But perhaps the broker/lender needed to get it to 70% LTV in order to pocket a larger spread premium or something. Cleaner for all the parties, but a hassle for me worrying whether or not I would lose my lock (didn’t). In addition to the sink, there were a couple of contractors in the house at the time doing some clean-up work and the furniture was not all in place.
The main point on this Jonestown property is that the pool of buyers is further limited by limitations of available funds and extra hoops for a partially completed wreck.
January 25, 2007 at 2:00 PM in reply to: Loan Advertised on KFI – Pay $20 per month per $100k borrowed #44187(former)FormerSanDiegan
Participant“It’s gotta be the biggest no brainer in the history of mankind ”
… Just kidding. Two words: Negative Amortization
(former)FormerSanDiegan
ParticipantProp 13 probably translated into immediate increases that got built-into the prices of houses that were selling at the time — just like tax breaks get priced-into asset prices.
Logical argument. But that’s not what happened.
Years 1982-1984 are the flattest part of the home price curve in the 1975-1990 segment. So, if what you described was the effect in CA it was either overwhelmed or diluted by other effects across the country.(former)FormerSanDiegan
ParticipantBugs – I was simply responding to jg’s argument, which was based on national figures.
You are right, the shorter the period you consider, the more sensitivity you have to interest rate movements.
My general point is that housing prices are not immune from inflation over longer periods, however, I concede that short term price movements are correlated with change in rates.
My argument is simple (and circular): Higher prices (inflation) result in higher prices.
Incidentally, the changes in 1975-1982 time frames were due in part to the changes in the tax code, and in California, due to the effects of Proposition 13. Tying property taxes to purchase prices rather than to market value had a huge effect over the long term to the pricing structure.
I believe that the changes were because higher inflation means higher prices, not due to Prop 13 or other tax code changes. How does the Prop 13 affect prices to the upside? I would argue that Prop 13 suppresses prices by reducing a potential pool of buyers. This pool of buyers are people who are reluctant to move out of their low cost-basis property because they are paying significantly lower property taxes than if they moved. I know several people who would consider moving, but do not want a $500 – $600 per month increase in their property taxes.
What other tax code changes were enacted in 1975-1982 ?
(former)FormerSanDiegan
Participantsdcellar –
That was Jonestown where Jim Jones and his folks drank the kool-aid. Jamestown was the first permanent settlement in the colonies (Virginia).Anyway, even in good times, partially rehabbed houses are difficult to sell. The reason is that banks will not make traditional loans in cases where the home are not occupiable (e.g. if plumbing or heating is not working). Appraisers typically won’t appraise when incomplete, and if they do, they severely mark it down. a few years ago I had an appraiser refuse to complete the appraisal on my newly remodeled house because a single bathroom sink was not installed in the master bath (and it was even the second sink).
Cases like this deserve at least 100K off the going price. But this is a great example of what to expect in the coming year on the REO/foreclosure market from what I remember of the mid-90’s when I was looking. If enough of these come on the market and actually get sold, the published home sales numbers will appear worse than the reality (as opposed to today where they appear better than the reality).
(former)FormerSanDiegan
Participantblackbox – Just having some fun (at your expense), couldn’t resist. I agree that good schools can only support prices relative to other areas, but not at ridiculous levels. The reason is that at some point it becomes cheaper to live in an area with supposedly inferior schools and simply pay $15 grand per year for private schooling.
(former)FormerSanDiegan
Participantjg –
OFHEO prices went up from 1968 to 1975, 1975-1982, 1982-1999 and any other 7-year period I can find. So, it’s no surprise that as a whole US prices went up in 1990-1997 as rates went down.
I agree that rates do impact prices. However, higher inflation (which accompany higher rates) also impacts prices.
Here is a chart showing OFHEO home prices (1975=100) from the mid 1970’s until 2000 (when the current bubble started IMO).
It turns out that the rate of home price increases during the period 1975 through 1990 (a period of generally higher rates, green box) was higher than 1990-1997 (a period of lower rates, gold box).
Rate changes do change the slope of the increases and decreases inversely as you state. However, history seems to show that during prolonged periods of higher rates, home price increases are higher, than during prolonged periods of lower rates.
[img_assist|nid=2487|title=Prices and Rates|desc=|link=node|align=left|width=466|height=349]
Don;t get me wrong. I think that any increase in rates will dampen home prices further. But sustained higher inflation that accompanies those rates would likely result in price increases down the road. Long-term prices track inflation. Rate changes cause deviations from this track.
(former)FormerSanDiegan
Participantjg –
Longer-term changes in rates do not move inversely to prices. Look at Rich’s analysis. Rates dropped precipitously during the early 90’s as housing prices also dropped. Not the opposite.
http://voiceofsandiego.org/articles/2006/11/18/toscano/964return.txtAlso, ask the previous generation what happened to home prices when rates increased from the 6% range in the 60’s to the high teens in the early 80’s.
Any negative correlation of rates and home prices appears to be a short-term phenomenon. This is easy to explain because your payment is higher when rates go up, causing you to be able to spend fewer $ on a house. However, the longer term effect of inflation reducing the purchasing power of a $ appears to overwhelm the short-term effect over longer (5-10 year) time periods. This is a bit harder to grasp but appears to be what has happened historically.
(former)FormerSanDiegan
Participantjg –
Thanks for the update. The December number looks especially bad when compared to the last few years. January usually sees a substantial dip. It certainly will be interesting to see …
(former)FormerSanDiegan
Participantsdr –
Clealy my point has been missed. I have lived in one of the wealthiest suburbs of SD for almost 15 years and most of the businesses I frequent are owned by national entities. Finding a quality locally owned business is a rarity and when I am lucky enough to find one here, I generally become a loyal customer. Where I used to live and visit often, people rarely step into national companies because the locally owned companies are much better.
Maybe the issue is that you live in a suburb. It seems that suburbia is always dominated by chains and franchises.
However, if you lived in Ocean Beach, for example, they protest any franchise that moves in (e.g. Starbucks), and the area is dominated by family owned shops and businesses, not franchises.(former)FormerSanDiegan
ParticipantUpdate …
S&P 500 closed yesterday at ~1423.
How many day’s ’til Spring, PowaySeller ? -
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