San Diego housing headed in 2017
Do you know that feeling when you think “hey, this all seems eerily familiar” You chalk it up to being De Ja Vu and then you sit in wonderment for a few minutes before you get moving on with your day.
No realtor or person who has anything to gain in real estate is ever going to be the first one to tell the general public that it’s about to turn down. If you ask any of them it’s always the best it’s ever been and it’s always a great time to buy and sell. Well, as a full time practicing realtor…probably the only one that I know of that is honest to a fault is about to tell you the facts in San Diego real estate as of fall 2016.
Affordability Matters
It all boils down to affordability and availability. If you were a giant peering in you would see that our San Diego local economy is finally picking up steam, unemployment is finally in single digits throughout the county and things seem to be humming along. But if you looked at our demographics, the average income, the average house price, the average debt load, etc you would see that the majority of our population cannot afford to buy a home in San Diego.
One might argue that affordability doesn’t matter because as long as people own homes they now have equity and can move up using their newly formed equity position as leverage to do so. I agree, but who is going to buy thier house? Who is San Diego first time home buyer? They make about $58k a year and can TRULY afford something in the $100k’s.
How can someone who only makes enough to buy a $100k house actually purchase a $400-500k house? It’s called creativity. The loans that were made in the early 2000’s are back. They are buying homes using no down payment, an introductory interest rate that will increase in about 5 years and continue to increase as long as the government increases interest rates. The government has also increased the minimum they will guarantee (aka FHA insurance). These people are being told that interest rates will stay low forever and they’ll get into the market and increase their wealth because they are now home owners. What they aren’t hearing is that interest rates will increase as soon as we have an inkling of inflation. Has that buyer looked at what they’ll be making when that happens? Have they looked into whether or not they can afford their newly purchased home if the interest rates go up to a normal interest rate of 5 or 6%?
San Diego is number at the top of the list
San Diego has notoriously had the worst salaries compared to what it actually costs to live here. We are number 1 when it comes to not being able to qualify for the average priced home where we live. Put another way, out of all 50 states in the U.S. our residents can afford our houses the least this year.
To ‘help’ San Diegans qualify for a home loan the lenders are once again offering interest only loans, no down payment loans, no tax return loans, etc. This began in early 2015…I saw it, everyone should have seen it. Home sales were balanced in 2014 some were selling, others were sitting. Some buyers were getting good deals, some sellers were getting out from under their mortgages it was going along fine….then the government increased the loan for FHA from $417500 to $580750 and BAM up shot the prices, all of a sudden there were bidding wars on houses in the $600k’s and it has only blown up from there into what we are experiencing today.
More to come….
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