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We can all agree that San Diego will always be expensive. It is a desirable place to live and attracts investors and wealthy owners from all over the world. There is very little housing available which bumps up the costs. You have to be patient and smart about how you enter the housing market, sure. All of that is fine and well trod. But please people, hold off on the smug advice that the rest of us just need to stop drinking Starbucks lattes and keep bootstrapping so that we can finally own that $500k 2bd 1bath damaged dump of a suburban condo that almost doubled in price in only ten years. Please, it is so much more complicated than that.
I think your difficulty is tunnel vision. Are you implying that everyone has a right to own a home in San Diego? There are plenty of places in this vast country that offer a much lower cost of living. Large, diverse metropolises where you can get a really nice updated older "character" home of say 1600 square feet with a small yard in an urban/semi-urban area for $300K or less. Or go to a suburb (think North County) and get 3,000 ft2+, 5 BR, 3+ BR, a half acre yard and top schools in the country for the same.
To put a little more hard-edged point on my previous post: San Diego is one of a relatively small number of areas that has been and remains highly desirably on a global scale. As a result, its prices and price growth are above average. If one wants to stay there in any type of permanent way, one must be and remain above average. This means that at least half the population (and probably more like 75%) cannot reasonably live there long term. I can see how this would be frustrating for someone who hopes to move to San Diego. I can see how it would be even more frustrating for someone who grew up in San Diego but ended up not sufficiently above average to stay there.
I acknowledged in a previous post that in general undergrad and many graduate tuitions have significantly outpaced inflation. There is a bubble building and potential applicants would be wise to give a long, hard look before jumping into debt to go to school. Check out this new ranking which attempts to rank universities on their economic value to graduates.
Did you know that a household income of $35K puts one in the much-maligned "1%"? In this case, I'm talking 1% of the world. Around 80% of the world lives on less than $10/day (Poverty Facts and Stats). So you can't buy a house in San Diego today? Consider a little perspective.
I think your difficulty is tunnel vision. Are you implying that everyone has a right to own a home in San Diego? There are plenty of places in this vast country that offer a much lower cost of living. Large, diverse metropolises where you can get a really nice updated older "character" home of say 1600 square feet with a small yard in an urban/semi-urban area for $300K or less. Or go to a suburb (think North County) and get 3,000 ft2+, 5 BR, 3+ BR, a half acre yard and top schools in the country for the same.
...
Did you know that a household income of $35K puts one in the much-maligned "1%"? In this case, I'm talking 1% of the world... Consider a little perspective.
Sure. I never fee sorry for myself, as though not owning some garish mcmansion is a sign I am a failure. But I would love to finally own a home that won't require extensive repairs or send me into financial precarity.
But, these are misleading questions that frame the issue in an illogical way. No, not everyone "deserves" to own real estate. However, when a significant portion of a city's younger middle class and upper middle class feel they cannot purchase a permanent home, then I think it perfectly reasonable to complain about it without being chastised by the ones who bought decades ago under different circumstances. I also think it is not necessarily city-specific either if national rates of home ownership in the 35 and under crowd are the lowest in 50 years or so. There is a sea change in how Americans school, work, save, and live that makes traditional home ownership very hard. It goes much deeper than desireable cities and millennial pickiness.
The "live somewhere else" argument is also an empty one. Some of us are tied to the area for careers and other obligations. North Dakota is probably very cheap compared to Northern Ca but I cannot silence my Bay Area friends with that argument when all of them work in specific tech industries. Also, trying to dismiss housing woes with the "you'd live like a king in Nicaragua!" is as meaningful as telling a cancer patient that they should be grateful it isn't AIDS. Meaning, not helpful and not addressing the specifics of the problem here.
Again, Caifornia will always be expensive but don't try to pin the problems on the warped expectations of an entire generation of people who operate in a society under different circumstances than their parents.
Um, this isn't a debatable opinion piece but a well discussed, data-backed observation. There are so many articles covering why people under 35 do not own homes anymore. And none of those explanations chalk it up to everyone being a greedy, lazy, entitled brat who demands a fancy house in an established neighborhood on the income of their hip barista job.
We can all agree that San Diego will always be expensive. It is a desirable place to live and attracts investors and wealthy owners from all over the world. There is very little housing available which bumps up the costs. You have to be patient and smart about how you enter the housing market, sure. All of that is fine and well trod. But please people, hold off on the smug advice that the rest of us just need to stop drinking Starbucks lattes and keep bootstrapping so that we can finally own that $500k 2bd 1bath damaged dump of a suburban condo that almost doubled in price in only ten years. Please, it is so much more complicated than that.
So while student debt is not the only factor here, generally each decade has seen young adults starting their lives in deeper debt. That makes it harder to build up a down payment, etc and has been discussed as one reason why millennials also marry and have kids much later now. Plus, homes ARE more expensive now and have outpaced inflation, wages, etc. That is a plain and simple truth.
I guess you didn't do the math that I said to. But let me do it quickly for you. That's the problem with the younger ones, they don't think for themselves, just cite research when real estate is very specific and life is really specific.
Take that $300,000 house in 1992, with 20% down at a 9.5% interest rate and 1.2% property taxes. The annual total is $27,816. Three years out, in my field people were making about $40,000. That mortgage payment with property taxes is about 70% of annual income. It is not possible to buy that house, so what do you do, wait until you can afford it or buy a cheaper house. I needed to wait until 1997.
Ok, now, that $300k house is worth $800k. With 20% down at a 3.625% interest rate and property taxes the annual mortgage paid with property taxes is $35,016. Three years out of college now, people in my field are making in excess of $80k, but let's just use $80k. This mortgage paid with property taxes translates into 56% of total income. That person is in a far better position now even with these high prices. So what do you do? Either buy a cheaper house or wait until you earn more income.
This seems simple to me. Sure the downpayment is quite a bit more, but people earn quite a bit more right out college now than they did in 1990. You seem to want to blame high tuition and housing costs on your predicament. By the way interest rates on student loans back in the 80s/early 90s topped 10% in many cases.
You're assuming a higher interest rate translate into a lower price for the house.
Is that necessarily true?
There are only a few things that can happen if rates go up
1. People will keep buying until the price goes out of reach and they can no longer stretch. That will have the effect of less and less buyers in the pool. This may force sellers to lower price to attract more buyers. Depending on how much the rate goes up and the price drops depends on how willing the buyer us to take X payment for X years.
2. Prices stay high rates go high. Nobody can buy and you get a stagnant market
3. Investors have to step in to gee porches high. That won't happen because investors don't buy at high prices.
Eventually there is a meeting point between prices and affordability. That's the affordability ceiling. EVERYONE reaches that ceiling at some point. Considering most people have to borrow it all comes down to affordability for the buyer. A borrower can only borrow so much or be willing to borrow so much
Sure. I never fee sorry for myself, as though not owning some garish mcmansion is a sign I am a failure. But I would love to finally own a home that won't require extensive repairs or send me into financial precarity.
But, these are misleading questions that frame the issue in an illogical way. No, not everyone "deserves" to own real estate. However, when a significant portion of a city's younger middle class and upper middle class feel they cannot purchase a permanent home, then I think it perfectly reasonable to complain about it without being chastised by the ones who bought decades ago under different circumstances. I also think it is not necessarily city-specific either if national rates of home ownership in the 35 and under crowd are the lowest in 50 years or so. There is a sea change in how Americans school, work, save, and live that makes traditional home ownership very hard. It goes much deeper than desireable cities and millennial pickiness.
The "live somewhere else" argument is also an empty one. Some of us are tied to the area for careers and other obligations. North Dakota is probably very cheap compared to Northern Ca but I cannot silence my Bay Area friends with that argument when all of them work in specific tech industries. Also, trying to dismiss housing woes with the "you'd live like a king in Nicaragua!" is as meaningful as telling a cancer patient that they should be grateful it isn't AIDS. Meaning, not helpful and not addressing the specifics of the problem here.
Again, Caifornia will always be expensive but don't try to pin the problems on the warped expectations of an entire generation of people who operate in a society under different circumstances than their parents.
Middle and definitely upper middle class can buy a home in a lot of very decent places. Most places, even. San Diego is an exceptional city in a number of ways and this may be one of those exceptions.
The odds of your being truly tied (nearly forced) to living in SD are slim. You may choose to stay in SD because the networking and job hunting required to live somewhere else is more than you are willing to do. You may choose to stay in SD because you are giving care to a friend or parent. You may choose to stay in SD for a myriad of other reasons. But those are choices and ones you're absolutely free to make. But you can't complain about the consequences of those choices, especially since in this case they are so easily foreseen.
With globalization and the rise of the internet, individuals are more geographically mobile and flexible than ever before. Being geographically flexible is an advantage in the marketplace. I think that is the main reason why home ownership tends to be lower among younger generations.
Sorry if I missed it, but what field are you in and what is the impetus for wanting to own a home in San Diego?
My brother bought a fixer in Normal Heights for 190k in the 90's, there is no way they could have afforded to buy that house today even with their current incomes. I don't think it's apples to apples anymore either, I agree with someguy in that regard.
That said we bought our first home when I was 28 and we saved a lot of cash to do it. We bought way under our means and it made it easy to weather the biggest economic crisis of our generation. My wife was able to stay home with our kids for 6 years.
The difference I see with the educated, upper middle class 20 and 30-somethings I work with, is they all drive luxury cars (Audi, BMW, etc), they all live in high-end housing (usually expensive 2-3k/mo rentals), they eat fine dining a lot (2-3x a month) and they take luxury-style vacations, i.e. Tahiti, Hawaii, Vegas, Cabo, Palm Desert, Costa Rica, etc. They furnish their rented home with nice stuff, they have pets, no kids, etc. All of it adds up to tens or even hudreds of thousands. And many of them only make 75k or so.
We never did any of that we just worked and visited family and friends domestically, drove basic cars, we stayed in on weekends and had nice dinners and a movie once in a while etc. Now we do have more of these upper middle class things, but even still it's moderate and occasional, we never go all-out, certainly not compared to my professional peers, who drive insanely expensive cars and waste money like crazy on watches and shirts and shoes and crap.
I don't think it's lattes I think it's people buying upper-middle class stuff when they still don't own and that means later in life when they really want the nice house they don't want to make the sacrifices they would have when they were younger, to buy the starter home and move up, or you end up with a 6k/mo mortgage.
My brother bought a fixer in Normal Heights for 190k in the 90's, there is no way they could have afforded to buy that house today even with their current incomes. I don't think it's apples to apples anymore either, I agree with someguy in that regard.
That said we bought our first home when I was 28 and we saved a lot of cash to do it. We bought way under our means and it made it easy to weather the biggest economic crisis of our generation. My wife was able to stay home with our kids for 6 years.
The difference I see with the educated, upper middle class 20 and 30-somethings I work with, is they all drive luxury cars (Audi, BMW, etc), they all live in high-end housing (usually expensive 2-3k/mo rentals), they eat fine dining a lot (2-3x a month) and they take luxury-style vacations, i.e. Tahiti, Hawaii, Vegas, Cabo, Palm Desert, Costa Rica, etc. They furnish their rented home with nice stuff, they have pets, no kids, etc. All of it adds up to tens or even hudreds of thousands. And many of them only make 75k or so.
We never did any of that we just worked and visited family and friends domestically, drove basic cars, we stayed in on weekends and had nice dinners and a movie once in a while etc. Now we do have more of these upper middle class things, but even still it's moderate and occasional, we never go all-out, certainly not compared to my professional peers, who drive insanely expensive cars and waste money like crazy on watches and shirts and shoes and crap.
I don't think it's lattes I think it's people buying upper-middle class stuff when they still don't own and that means later in life when they really want the nice house they don't want to make the sacrifices they would have when they were younger, to buy the starter home and move up, or you end up with a 6k/mo mortgage.
^^This.
I also agree that housing prices have outpaced incomes. That has to do with interest rates and other external factors. Coastal California is desirable. San Diego is desirable and people will pay more to live there.
The latte reference is not the item we need to talk about. It is just one thing to spend money on. The fancy cars (with probably higher interest rates and high maintenance costs), dinners, high priced rentals, and luxury vacations, always having the latest smartphone, etc. are all things that one must forego if ever to save substantial amounts of money, especially if that person is only making 75k. It is by no means just Starbucks!
I simply cannot understand the Millennial mindset as it relates to money. One example is a young person who works for my employer/office/firm. My employer/office has generous benefits, including matching 401k funds up to a point. The young person told me that money is so tight, there is no way to save anything in the 401k (thus no employer match). The person never brings lunch and buys coffee all the time.
One example is a young person who works for my employer/office/firm. My employer/office has generous benefits, including matching 401k funds up to a point. The young person told me that money is so tight, there is no way to save anything in the 401k (thus no employer match). The person never brings lunch and buys coffee all the time.
A 25%, 50%, 75% or 100% return (depending on the match policy) guaranteed and with zero risk? It is the deal of the century. I'd love to have longitudinal access to employee 401(k) contribution data at a couple big employers that have always had a 401(k) match. I think it is possible that a given age cohort has had relatively stable participation ratios over time but it's hard to tell that sometimes since as individual observers we are constantly aging . As one gets older, saving for retirement and other goals becomes more important. And of course, hopefully, one has a higher level of disposable income.
A 25%, 50%, 75% or 100% return (depending on the match policy) guaranteed and with zero risk? It is the deal of the century. I'd love to have longitudinal access to employee 401(k) contribution data at a couple big employers that have always had a 401(k) match. I think it is possible that a given age cohort has had relatively stable participation ratios over time but it's hard to tell that sometimes since as individual observers we are constantly aging . As one gets older, saving for retirement and other goals becomes more important. And of course, hopefully, one has a higher level of disposable income.
I think the percentage return, and risk, are pretty irrelevant when one is not taking the 'free' money and thus has zero return...and a zero balance.
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. As one gets older, saving for retirement and other goals becomes more important. And of course, hopefully, one has a higher level of disposable income.
