Would you purchase or wait in my position?

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Submitted by KristopherSD on January 18, 2015 - 9:41pm

Hello all, first time poster here at Piggington with a question that's been racking my brain for several years now. As an intro I am 26 years old with a very secure $100k year job, pension, maxing out 401k, zero debt, excellent credit, and $110k in savings. I've been very fortunate to find a great job and kept a low overhead which has allowed me to save quite a bit over the last 4 years. Unfortunately I missed the boat timing wise for purchasing at discounted prices as the bulk of my saving has been done in the last 2 years.

I've watched single family home prices climb and climb over the last few years as i've been saving and am starting to get worried that they will never come back down to what I consider "affordable" levels. I would love even a 10% correction in SD housing, and would ideally purchase a $425k-ish complete fixer upper with 20% down and fix it up from there. The worst house in the nicest neighborhood I can find (La Mesa, Allied Gardens, South or North Park, Ocean Beach)!

Currently I rent a small but nice 1 bedroom apartment 2 blocks from the ocean with my significant other with a total cost of $900 to me after rent and all utilities. I love the area we live in and although the apartment is very small I can see myself doing this for a few more years and continuing to save at a slower rate. My only concern is that prices will continue their upward march and all my efforts will be wasted in the long run.

Prices seem crazy to me and flipping activity is rampant in the areas I look at. My initial inclination is to keep saving and keep a low overheard and wait for a potential correction. It's always nice to get an outside perspective though. If you were me, would you bite the bullet and buy now, or hope and pray for a correction while continuing to save? I appreciate the input.

Thanks,
Kristopher

Submitted by spdrun on January 18, 2015 - 9:50pm.

I'd buy a 2/2 condo for low $200k's with $50k down in your position.

(a) You'll still have $50-60k cash in the bank for other investments, repairs or fun.
(b) HOA is only $200-300/mo (equivalent to $40-50k of loan) and covers a lot of things that you'd have to pay for yourself in a house. Pool maintenance, exterior maintenance/roof, water bill, etc.
(c) You can use the leftover cash to buy another rental to help pay the bills. Not necessarily in San Diego. But if prices do drop (people here will tell you they won't), you'll be ready to jump on something in San Diego.
(d) Condos are nice -- the HOA takes care it to some extent if you (say) decide to travel for a month or two. No hiring landscapers, etc.

Submitted by CA renter on January 19, 2015 - 2:10am.

Full disclosure: I'm a long-time deflationist who sold to rent (bubble sit) in 2004, buying again in 2011.

IMHO, and this is only an opinion, I think that prices and speculative activity are far too high to call this a "normal" market.

That being said, Rich Toscano, the brilliant and very well-respected owner of this blog, has some information that can be found on the home page of this site indicating that housing prices are not in bubble territory at this time. There is no doubt that prices are high, though, and Rich's graphs and data will show you how today's market compares to markets in the past.

I would highly suggest that you read all of Rich's articles as a starting point. It might help you decide whether or not this is a good time to buy, and what you might gain or lose depending on your choices.

It sounds like you've been very responsible with your money. That makes it more difficult to think about losing significant sums.

Best of luck!

Submitted by svelte on January 19, 2015 - 7:59am.

What you don't mention is how long you plan on keeping the home and/or staying in San Diego.

I think you have to go into a home purchase with the mindset that you'll keep it at least 5 years, and hopefully 10. Property values will be higher in 5 years in most cases, and will surely be higher in 10 years.

If you're planning on selling in 2, 3, or 4 years - well then it all depends on how much risk you are comfortable with. There certainly could be a temporary price dip in that time period.

Another reason to buy: sounds like mortgages will be easier to get in 2015, which means more folks will buy, which means more demand on the housing market.

http://www.10news.com/financial-fitness/...

Submitted by spdrun on January 19, 2015 - 11:40am.

A more balanced take from WaPo, basically saying more of the same this year:

http://www.washingtonpost.com/realestate...

Even if you're planning on holding, make sure to get a good price. There are still people who bought in 2006 who are underwater.

Submitted by sdsurfer on January 20, 2015 - 2:59pm.

You mention you'd appreciate a 10% correction. How about you just tell whoever you are working with that your offers will be 10% below the market value and that you are only looking for fixers. The most well known realtor in town might be too busy for that kind of arrangement, but there are tons of Realtors that are competent and would not mind one bit as long as you are qualified to follow through and have the intent to do so if/when you get one. Let them know you only want to see properties that have been on the market for 30 days that have the equity to come down a bit or something along those lines to increase your chances.

I also agree with the others that asked if you are looking to hold the property and for how long because there is a tendency to have less risk if your intentions are long term.

Submitted by deadzone on January 20, 2015 - 4:14pm.

Your post is a perfect example that demonstrates that we are once again in a housing bubble. Your comments are verbatim what we heard throughout the 2001-2007 period.

My suggestion, wait it out. You are in no hurry, no kids on the way, live by the beach. Sounds like a good life. Keep saving your money and be happy you can spend your weekends on the beach instead of doing home repairs and remodeling like all of the homeowners.

Keep in mind that the primary (only?) reason home prices are still high is the near zero interest rates. Well mathematically they can't get much lower so there is limited upside to buying right now in terms of price appreciation.

On the other hand, when the next housing crash occurs, it will coincide with higher interest rates but by that time you could have a few hundred Gs saved away. Guess what, not many other people have or will have that kind of liquid cash laying around to make a big down payment so you will be in the drivers seat.

Never been a more obvious time to be patient.

Submitted by scaredyclassic on January 21, 2015 - 2:56am.

shacking up by the beach sounds good to me.

youd be nuts to give that up!

dont get married or buy a house till youa re really really ready to stay.

Submitted by Escoguy on January 21, 2015 - 11:42pm.

If the median home is about 500K now and you can save 30K/year, on balance you won't be too far behind even if the market goes up 2-3%/year for next five years. Worst case over 5 years, you lose 50K in appreciation but save about 150K plus earnings (from work) on the investment (say 20K more). Then you would have 270K to work with even if prices are at 550K, they will still be fairly affordable to you. And when you buy, you can buy what you really want and not worry about trading up. One negative is, the property taxes will be higher by 1% of that amount (difference) for all years going forward.

I think the mistake many make is thinking the patterns of the past will repeat.
It is much harder to get loans now and investors who get used to monthly steady rent payments probably don't want to sell out and put their money in CDs or govt bonds which pay less. Stocks are close to an all time high, so that's not so appealing too from a value standpoint. While there are some negatives out there like low wage growth, on balance low energy prices, low inflation, low interest rates and other commodity prices should allow for reasonable growth in the US in the next few years.

A good realtor should be able to find you a short sale, there are still some out there or a pre foreclosure. It may take some work, but if you want your 10%, that's how to do it.

Submitted by UCGal on January 22, 2015 - 1:23pm.

svelte wrote:
What you don't mention is how long you plan on keeping the home and/or staying in San Diego.

I think you have to go into a home purchase with the mindset that you'll keep it at least 5 years, and hopefully 10. Property values will be higher in 5 years in most cases, and will surely be higher in 10 years.

If you're planning on selling in 2, 3, or 4 years - well then it all depends on how much risk you are comfortable with. There certainly could be a temporary price dip in that time period.

Another reason to buy: sounds like mortgages will be easier to get in 2015, which means more folks will buy, which means more demand on the housing market.

http://www.10news.com/financial-fitness/4-reasons-buying-a-home-in-2015-will-be-easier

I agree the timeframe you plan to hold the home is key. If it's a home you plan to stay with for 7 years or longer - that helps amortize the transaction costs associated with buying/selling. If you plan to "move up" in a few years... keep renting.

Is your job likely to stay here in San Diego - or could you be transferred?

There are opportunities out there- especially if you're ok with something that needs some work. My block had two houses sell for a $200k difference within 2 months of each other. One was fixed up and fancy, one was dated. Buyer of the cheaper one is in process of spending about $50k for new kitchen/bathrooms/flooring. But most buyers don't want to bother.

Submitted by kev374 on January 23, 2015 - 12:10pm.

That being said, Rich Toscano, the brilliant and very well-respected owner of this blog, has some information that can be found on the home page of this site indicating that housing prices are not in bubble territory at this time. There is no doubt that prices are high, though, and Rich's graphs and data will show you how today's market compares to markets in the past.

I hope Rich is only referring to SD real estate. Here in Orange County things are in a full fledged bubble. Even Trulia rates OC as 20% overvalued and they are usually conservative.

And finally for concrete proof..my friend bought his condo in Ladera at the very peak of the last bubble for $600k and sold it last month for $585k.

So, Rich is saying that we are not in a bubble this time but somehow prices are back to where they were at the peak of the largest asset bubble in the history of the United States? Respectfully, His argument does not make much sense to me.

I hope Rich can substantiate his claims. I bet he will say something to the effect of inflation and rents but that is nonsense. My rent is lower now than I was paying in 2005 and in a nicer area.

Submitted by deadzone on January 23, 2015 - 2:32pm.

San Diego is also in a real estate bubble right now, not just OC. If the near peak prices aren't enough to convince you, the fact that we are even having this "buy now or be priced out forever" conversation again seals it.

Submitted by Rich Toscano on January 23, 2015 - 2:35pm.

CA renter, you are far too nice to me! :-)

To the OP: if you haven't seen it yet there's some hopefully helpful info here:

http://piggington.com/shambling_towards_...

Yes, houses are pretty expensive, but nothing like during the bubble.

The "catch" is that interest rates are super low. So if you are planning on financing most of your purchase, and you are able to keep the house indefinitely (because the low financing costs are only beneficial over the long haul), then buying could make sense, depending on your situation/goals/etc. Effectively, the abnormally low financing cost is offsetting a high price in this scenario.

That said it's also reasonable to not buy. Given where prices are, I don't see enough price pressure to invoke the dreaded "priced out forever" scenario. So waiting could make sense. You could miss out on the super low rates, if/when they rise, but that could be offset by prices becoming more reasonable.

FWIW I don't anticipate another home price "crash" as we saw last decade, because the valuation situation is just night and day. The current level of over-valuation could pretty easily be normalized by several years of flat or slightly down prices while incomes and rents continue to grow. Not predicting that scenario, just saying that it's not like the bubble when a crash was basically the only way out.

Anyway, the bad news is there is no clear cut answer, but the good news is that it's reasonable to go either way. I don't feel like you should feel pressured to buy right now "or be priced out forever," but at the same time, if you found a place you loved and wanted to buy (especially if you are financing), I think it would be perfectly reasonable to do so.

Hope this helps a bit.

Submitted by Rich Toscano on January 23, 2015 - 2:47pm.

kev374 wrote:

I hope Rich is only referring to SD real estate. Here in Orange County things are in a full fledged bubble. Even Trulia rates OC as 20% overvalued and they are usually conservative.

Yes I am referring to SD but everything I've seen indicates that the situation is very similar in OC. As it happens, I also show SD as being 20% overvalued. Expensive, for sure, but there is a difference between expensive and a "bubble." By comparison, SD housing became 80% overvalued during the bubble.

kev374 wrote:

And finally for concrete proof..my friend bought his condo in Ladera at the very peak of the last bubble for $600k and sold it last month for $585k.

This proves absolutely nothing. At this point, the bubble peak was almost a decade ago! Rents and incomes, which are what support home prices, are much higher now than they were at the peak.

kev374 wrote:

I hope Rich can substantiate his claims. I bet he will say something to the effect of inflation and rents but that is nonsense. My rent is lower now than I was paying in 2005 and in a nicer area.

Ah, so here is the heart of the disagreement. You feel that rents are lower now than at the peak. If this were true, you would have a point -- but it's not. There is no chance that OC-wide rents are lower now than they were in 2006 or wherever you want to mark the bubble peak.

As for substantiating my claims, I have done so via graphs like the one below that are based on sourced, publicly available data... how about substantiating yours?

San Diego housing valuations

Submitted by Zzz888 on January 23, 2015 - 3:21pm.

If I were you, I'd buy a 2 bdrm condo in an up and coming area that is attractive to young people and renters. For instance Barrio Logan, still some opps in North Park & Golden Hill, College, Sherman Hts etc. In this scenario you can pay yourself or view your condo as both a savings account & tax saving (in lieu of renting) and you can also hold this property indefinitely by turning it into a rental when or if you want to buy something bigger or SF that will either yield a positive cash flow or break even and will leave you with a leg up on retirement.

I wish the timing would have been right for me to have started investing in potential rental properties at that age. Many professionals I know have done that and now own 5-10 properties that just bring in income in their 40s. They plan to retire by 50 and just live off retirement savings & rental income property that is paid off.

Submitted by kev374 on January 23, 2015 - 5:19pm.

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?

Submitted by Rich Toscano on January 23, 2015 - 5:25pm.

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.

Submitted by CA renter on January 24, 2015 - 1:49am.

kev374 wrote:
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?

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.

Submitted by gzz on January 24, 2015 - 9:08am.

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.

Submitted by gzz on January 24, 2015 - 9:27am.

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.

Submitted by scaredyclassic on January 24, 2015 - 9:30am.

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

Submitted by spdrun on January 24, 2015 - 11:01am.

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.

Submitted by Coronita on January 24, 2015 - 11:15am.

Rich Toscano wrote:
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.

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.

Submitted by Rich Toscano on January 24, 2015 - 11:25am.

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.

Submitted by Coronita on January 24, 2015 - 1:18pm.

Rich Toscano wrote:
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.

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

Submitted by KristopherSD on January 24, 2015 - 4:32pm.

svelte wrote:
What you don't mention is how long you plan on keeping the home and/or staying in San Diego

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.

Submitted by KristopherSD on January 24, 2015 - 4:32pm.

svelte wrote:
What you don't mention is how long you plan on keeping the home and/or staying in San Diego

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.

Submitted by spdrun on January 24, 2015 - 4:40pm.

What about sub-$400k fixers?

Something like this:
http://www.sdlookup.com/MLS-140065607-26...

Submitted by wallers on January 24, 2015 - 6:19pm.

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.

Submitted by gzz on January 24, 2015 - 6:45pm.

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

Submitted by CA renter on January 24, 2015 - 7:02pm.

Rich Toscano wrote:
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.

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.

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