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(former)FormerSanDiegan
ParticipantMedian income earners and homebuyers …
Since San Diego County home ownership rate is historically in the 50-60 % range, why should we consider the median wage earner, relative to median prices ?
Shouldn’t we consider the upper 50 % of wage earners when considering affordability ratios ?
When has the ratio of median wage to median home price ever been in the 3-3.5 range in San Diego ?
ParticipantIO role in planning …
Seems to me that mephisto has been using an IO to free up cash flow for investment purposes and to provide a large cushion for a future slow down/rainy day/bubble pop/recession.
Seems like an appropriate strategy for high-income folks who purchased prior to 2002 for riding out the bubble. It depends on their other assets and what portion of their net worth the property encompasses.
Participantanx – Agree that there is some “finding” required in So Cal, but is that all bad ?
I would be willing to bet that the gossip factor is much worse in the areas of the country that people point out as having friendly neighborhoods.
Lemma: The amount of interest your neighbors immediately take in a newcomer (gift baskets, welcome wagon) is proportional to their interest in being the first to spread gossip about that newcomer.
ParticipantAs a current LA resident and a former San Diego resident, I find it funny that people blame the city for how un-friendly neighbors and neighborhoods are. Does your neighbor consider YOU friendly ?
Isn’t it the people that make the difference. For a decade we lived in older established neighborhoods in San Diego and always found neighbors that were friendly, that I would trust leaving my kids with and that I would invite in to my home. I didn’t find it that much different than the areas in the midwest I grew up in, with one exception … no way we would let our kids roam the streets and explore into the canyons like we roamed and explored the woods where I grew up.
We currently live in West LA/Westwood in a very dense urban area, with more Bentleys and platic surgeons per capita than anywhere on earth, but even in this plastic-barbie-Luxury-car-driving-vain-look-at-me Los Angeles area we have found neighbors and families that are friendly, inviting and other children that our kids can play with. As in San Diego, most of these people came from somewhere else … many from the midwest
There are plenty of nice folks/neighbors in So Cal.
The grass may appear greener in Mayberry, USA, but is it really ?
ParticipantAmarillo
EL Paso
Lubbock
Wichita
… nah … It’s So Cal for me.
ParticipantIndividual job gains
NSR is correct, the 25-50% gains in 5 years are for particular people moving up the salary scale. While overall wages would roughly increase by inflation, e.g. 15-20% over 5 years.
But for the person whose ARM re-sets in 3-5 years, she/he only cares about the individual job gains, not what someone in their former position is making.
I’d still like to see detailed demographics on ARMS, option ARMS, I/O’s and 100% financing, so that one could gauge the impact effectively. What are the odds that lenders or Fannie Mae release that info ???
ParticipantAs a former federal employee as an engineer my income increased from 50K as a new hire in 1996 to 72K in 2000, when I left to work for a company. 44% salary increase over 5 years.
Fed gov’t workers at my former employer increase at COLA (cost-of-living adjustment) e.g. 3% per year, plus locality adjustment of ~1% per year (SD has risen higher than other areas), plus merit pay increases of 1-2% per year. This averaged out to about 5-6 % per year for most people. Over 5 years this puts those in the 25% range.
City/County employees might be another story.
ParticipantSAIC
SAIC Corporate Headquarters:
10260 Campus Point Drive
San Diego, CA 92121Founded by Dr. J. Robert Beyster and a small group of scientists in 1969, Science Applications International Corporation (SAIC), a Fortune 500® company, now ranks as the largest employee-owned research and engineering firm in the United States. SAIC and its subsidiaries have more than 43,000 employees with offices in over 150 cities worldwide.
Participantwife ratio …
I would hold off until the wife purchase-to-rental reaches 16. That’s a 50% drop compared to the peak (1962, when Father Knows Best went off the air). But don’t forget to account for the hidden costs(expensive dinners, flowers, jewelry, etc).
Participant8 * Annual Rent ???
“…housing has to revert to the basic value where HOUSE PRICE = 8 * ANNUAL RENT.”
In San Diego, I believe that this ratio was actually more like 10x or 12 x annual rent. Where does 8x come from ? National figures ?
I purchased a house in Clairemont in 1996 for $163k. This was within 1% or so of the bottom of the market, at the point which housing prices were too LOW and needed to increase to revert to the mean (mean reversion works both ways). Using your valuation (8x annual rent) gives me a rental rate of $1698 monthly.
I know for a fact that rental rates at this time were far less. I rented out this same house in 2000 for about 1300 per month.
ParticipantIsn’t the following also a blanket statement :
“What DOES bug me is your constant use of blanket statements to make your point.”
July 28, 2006 at 6:09 PM in reply to: Leading Economists have NEVER predicted any of the last recessions #29985ParticipantYes “8 out of 6 times”.
Yield curve inversion is necessary, but not sufficient going into a recession. And that is for cases where the yield curve remains inverted over extended periods of time.
The verbage was intened to point out that these indicators are not perfect.
See the link
http://www.safehaven.com/article-4321.htmJuly 28, 2006 at 5:49 PM in reply to: Leading Economists have NEVER predicted any of the last recessions #29979ParticipantAn inverted yield curve has predicted 8 out of the last of the last 6 recessions. In other words it is necessary, but not sufficient prior to a recession. The yield curve has inverted several times in the last two years as the Fed has increased short-term rates. Eventually it remain inverted for a sustained period (like right now) and it will be right.
ParticipantMore gray area to contemplate …
PS wrote “In a market of rising interest rates, anyone who is not converting to a loan that is FIXED and PAYING PRINCIPAL, is in over their heads.”
IMO this should read “In a market of rising interest rates, anyone who CANNOT convert …”
My previous example in this post outlined a person who could convert, but would likely be better off not converting. That “hypothetical” person is real (but the loan numbers were numbers were scaled to be approx the same as PS’s example).
The 20%+ down IO people should be OK.
The 0% down, Neg Am, IO, with 1-year teaser rates are already in troubleOther factors: Debtor’s net worth, income, etc.
Until we have data on I/O arms and associated data on the distribution of the net worth and incomes (or debt ratios) of those taking out these loans, it is difficult to predict whether MOST, SOME or ALL of these people will default, sell, get divorced, etc.
Who has these data ?
Maybe the lenders do !
What are they doing ? -
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