San Diego Housing Market News and Analysis
Submitted by Rich Toscano on July 3, 2006 - 1:13pm
I'm breaking radio silence, finally, after having sequestered myself for a week and a half to cram for a securities licensing exam. (The exam manual suggested studying for 4-6 weeks vs. my 1.5 weeks, hence the cramming). Anyway, said exam was successfully passed yesterday, so I can close the door on that particularly onerous 10-day period of my life and get back to writing occasional content for this site.
I did check the forums from time to time during my absence, and now that I have a minute I wanted to revisit a really interesting article someone posted. The USA Today article, entitled "Buyers in more markets find housing out of reach," chronicles the plight of a San Diego postdoc who bought a home with 100% financing, whose PITI eats up 70% of her take home pay, and who has among other things taken to selling her fertile eggs in order to make the mortgage payments.
It's another article on Ye Olde "Housing Affordability Crisis," with requisite fretting about the question of "What Should The Government Do?" This is of course an entirely flawed framework with which to address the situation, as A) the "crisis" is only a crisis to the extent that you pretend the gigantic gap between wages and home prices is sustainable and B) government attempts to legislate away the laws of economics are what got us here in the first place.
But the article is very interesting to me for a different and entirely unintended reason. Our egg-seller's tale makes it crystal clear that people are still panic-buying.
After all, how else can you explain the actions of an otherwise mentally sound individual who could easily afford to rent a place, but instead chooses to get so deeply into debt that the monthly carrying costs eat up 70% of her income? There is only one explanation: this woman is terrified of not owning a house.
A few people here and there have become wise to what's really going on in housing, but the irrational, "get me in at any price" mentality is still out there in spades. Imagine what it will be like when these last optimistic stalwarts finally cease to believe that home prices will rise forever. Now, imagine what it will be like when they apply their same infinite-trend-extrapolating mindsets to falling home prices. That's the kind of enormous sentiment shift we will likely see in Southern California in the future. But as this story shows, and despite victorious declarations of a soft landing, we are nowhere near that point.
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