How do you people do it?! (San Francisco, Santa Ana: hardwood floors, sales, real estate)

[nchopefull]

I really don't understand how people afford to live here. I want someone to explain it to me. I'm not from here obviously but currently living here due to my husbands job and I don't understand how you do it. For example, the avg. est. houshold income is around 70,000 dollars for OC. The avg. value of a home is about 600,000. With a mortgage of lets say 3,500/month plus the cost of NEW cars, b/c lets admit it the avg. person drives one...how do people afford to pay for their small, yet expensive houses, nice car, nice clothes, etc. and still have money left over?! The only answer I can come up with is DEBT. I just want to let people know there's a whole world out there full of beautiful scenery, nice weather, and affordable living (and it's not here in CA!) Don't worry, we are leaving soon

[dtran103]

..or wealth! Irvine, if you haven't read on this forum, is the wealthiest city in America with populations over 200K.

[Charles]

A lot of those people purchased those homes ten or more years ago when the $600K house was about $250K, maybe the average salary (I'm assuming your numbers are correct) was probably $45K-$50K, so the housing prices increased at a much higher rate than pay. I think you are correct in that a lot of people have a lot of debt (I think we all know that). Another thing, many of the people buying homes today in Socal have either 1) Moved here from another high priced local like New York or Boston (been to an Angels/Red Sox or Angels/Yankee game? Three fourths of the fans are rooting AGAINST the Angels...), or 2) Moved from a foreign country. I used to lap swim at Calabasas Tennis and Swim Center...Calabasas is a $1M average home community. At least half the folks at the pool and playing tennis were rich foreigners from the Middle East, Europe, Asia.

Originally Posted by nchopefull

I just want to let people know there's a whole world out there full of beautiful scenery, nice weather, and affordable living (and it's not here in CA!) Don't worry, we are leaving soon

Wise move. I agree with you 100%. We did what you are planning on doing. Mind boggling how much more livable it is here in Colorado. It's nice to have lots of extra cash for the girls' ballet lessons, gymnastics, swimming, camp, dance, vacations, etc. It's nice not getting strangled in traffic.

It's nice not to sweat.

[Sal Monella]

Many, many people who bought a home in CA within the last 3-4 years did so on 'funny loans'. They either did a stated-income loan and lied like crazy (with the complicity of the broker of course) or did an ARM or an amortized loan. Obviously with minimal or no down payment.

Penniless buyers like these are the a-holes who drove-up home prices to astrospheric levels. In fact Californicans spread out all over the Southwest like a plague, buying-up homes in otherwise unattractive places like Arizona, Colorado, Oregon, Nevada etc as "investment homes". With a seemingly endless supply of spurious funding, they would get into bidding wars amongst themselves trying to snap-up homes quickly in order to flip them for a tidy profit.

NOW the flippers got caught and can't unload. The borrowers are finding what "adjustable rate" means ...the HARD way. Those that went with amortized loans discovered that they actually owe MORE every month because their payment doesn't even cover the monthly principal.

I have homes on my street in Anaheim (which is a crappy CA town) going for $650K that 7 years ago were worth $170K. They're full of Mexicans renting out every room available in order to meet the mortgage. 4 homes have been on sale for close to a year.

And yet they're NOT dropping their prices because they CAN'T. Since they have very little -or no- equity in the house they're 'upside-down' and find they owe more than what the house is currently worth.

I see MASSIVE foreclosures and short-sales looming on the horizon. Wait a year or so more and all the riff-raff will be wiped off the home buying market and prices will settle back into reasonable levels again.

[vfrpilot]

Charles said>

A lot of those people purchased those homes ten or more years ago when the $600K house was about $250K, maybe the average salary (I'm assuming your numbers are correct) was probably $45K-$50K, so the housing prices increased at a much higher rate than pay.

This is the biggest reason why you see the disparency(sp?) is the income vs. median house price. We bought in 1990 for 162k and sold in 2004 for 485k. If you saw my income and the value of our home in 2004 you would've said, "How does that bum do it???" There are a lot of stupid loans that are going to affect the market for a while- good for buyers, bad for sellers. Maybe you need to see the income of 'home buyers' to get a real indicator.
Sal Monella said>

In fact Californicans spread out all over the Southwest like a plague, buying-up homes in otherwise unattractive places like Arizona, Colorado, Oregon, Nevada etc as "investment homes".

I don't know why you would say this. I've lived in AZ, along the 'River' and now live in CO. I've visited Oregon and Nevada. I can guarantee you that there are many, many areas of those states that are more attractive than Anaheim(YUCK!), especially from your own discription>

I have homes on my street in Anaheim (which is a crappy CA town) going for $650K that 7 years ago were worth $170K. They're full of Mexicans renting out every room available in order to meet the mortgage. 4 homes have been on sale for close to a year.

[Axiom]

While I'm not sure I agree with Sal's description of my state... he's definitely right about the CA investors.

There's a house just down the street owned by a really nice Asian couple from CA. They have never lived in it, just bought it and started coming over on the weekends upgrading like crazy: new carpet, hardwood floors, travertine, granite, stainless appliances, shutters, boat dock, etc, etc.

I guess they thought real estate here would continue to spiral out of control until we were on par with some of the ridiculous CA housing prices. I'm sure they figured they would recoup all the money they sunk into the place and then some. Problem for them is... their timing stinks! They bought right near the top of the bubble and now prices are dropping and sales are stagnant. They're desperate to get rid of the place, but I'm guessing it's going to be ugly for them and/or their mortgage holder.

I'm not usually all doom and gloom, but I agree that prices have got to come down. It's scary here and we don't have nearly as far to fall as some places in CA.

[JakeDog]

How do people do it in Manhatten? San Francisco? Boston? They are usually professionals and/or successful businessmen. Why is this so shocking to people? The nice parts of Orang County are arguably the nicest suburban parts of the entire country. Considering how desirable the area is, the prices really are not that high. Go to most major cities with strong economies and look at the MOST desirable close in areas and I think you will find the prices are pretty similar.

[sliverbox]

I think almost all the points were made already. But the phenomenon of high prices on the coasts can be summed up in a few points:

- tech boom ends, people looking for 'safe' investments. wallah! housing.

-Fed lowers interest rates, spurs more home buying. Prices rise as the pace intensifies.

- 2003: sales start to slow. Banks and lending agencies drag out IO and ARM loans to prop up sales.

-2003-2005: Prices more than double on the coasts. ARM, IO, loose lending make it easy for people who are panicky about the high prices and "have to get in" The media is back to "dot-com" type hyping. Popular shows like " Flip This House" are one of just many shows. Investors flood the market. Oversupply starts to appear.

-2005-early 2006: Early onset of a slowdown in the priciest areas, "bubble" is acknowledged by the media and Greenspan, who admits that certain areas have some froth.

-2006-2007: Slowdown very pronounced in bubblezones. Depreciation and sales declines start to become regular news stories.

So as we sit now, the bubble is over in places like CA, NY, and so on. The problem now is the aftermath. The middle class are screwed. NY, CA, FL, and MA are losing more people that coming in. States like NC, TX, and GA are getting throngs of people from the affected states, driving up their prices at the same time. A second bubble in a new area? Meanwhile, states like CA and NY have a questionable economic future as housing costs and the cost of doing business has created a tedious situation for both business and individuals. The prices that were too high 3 years ago are still too high. "funny" loans are a thing of the past. hence the only way for prices is down. But how long this will take is anyone's guess.

[EscapeCalifornia]

Originally Posted by JakeDog

How do people do it in Manhatten? San Francisco? Boston? They are usually professionals and/or successful businessmen. Why is this so shocking to people? The nice parts of Orang County are arguably the nicest suburban parts of the entire country. Considering how desirable the area is, the prices really are not that high. Go to most major cities with strong economies and look at the MOST desirable close in areas and I think you will find the prices are pretty similar.

Except it never used to be that way. Sure, there's always been Newport Beach for the wealthy to live on an island. But when crappy little 45 year old houses in Garbage Grove are half a million bucks, something's wrong. The middle class is having to choose between living like the lower class (crowding multiple families into one house), buying a tiny condo, renting forever, or leaving the state.

[GumbyGirl]

My husband and I live in an apartment. Last year our incomes were over 100K but we couldn't afford a home. Now that I'm a stay at home mom, there was no way we could afford a place here... even in Santa Ana (UGH) which is why we're moving to another state. A co-worker of mine spent $550,000 on a TWO BEDROOM house... it's SO small. They were happy because they thought they got a great deal. OC has a lot of good things going for it, but most of it is negated by the high costs of everything... houses, gas, food.. and having to pay for parking everywhere!

I'm always amazed at how many people are moving to this state. Ten years ago I could understand it, but with real estate costing as much as it does, nowadays only high paid executives can afford to move here. The original poster was right... there are plenty other nice parts of this country to live in, that are more affordable.