Is everyone in SD rich? (San Diego, Fresno: low income, section 8, apartment)

[esmith143]

"And basically if you want the median house in SD and you have a "decent job" then you really don't GET to save dough. Your monthly income goes to the mortgage (and taxes) and after the other regular expenses, you don't have much left."

In your mind, what's a decent job ($$$-wise) and what does the median house look like / cost / rent for?

[esmith143]

A little more on the subject of bifurcating population, the decline of Imperial Beach, and the rise of Encinitas.

I went and found some statistics on education levels across San Diego in 1990. In 1990, 12% of adult residents of Imperial Beach and 39% of adult residents of Encinitas had bachelors' degrees. At the time, Encinitas was 18th best of 82 major zip codes, IB was 13th worst. By 2007, Encinitas rose to 53% and Imperial Beach rose to 18%.

So, if there ever was a time when Encinitas and Imperial Beach were substantially similar middle-class communities, it was definitely no longer the case by 1990.

By 1990, the percentage of educated people in Scripps Ranch was more than twice the percentage of educated people in Clairemont, and bachelors degrees in Clairemont were two times more common than in Lemon Grove. These ratios were almost exactly the same in 2000.

[killer2021]

If you can pay 1,500+ per month for a 1 bedroom, you are rich. Or really fricken stupid to be living paycheck to paycheck.

[staceysd72]

I think "rich" is a matter of opinion. I think most people that are driving BMWs or whatever fancy cars are most likely paying $600/mo car payments and live in crappy apartments. Personally, I think San Diego is affordable. I moved her from the Bay Area and found it much more affordable than Northern California. It all depends on your perspective and where you're coming from. No, you're probably not going to have a beach house, that's out of most peoples means, but if you have any decent savings (which you should have if you're making close to $100K) you can buy a modest house or condo and drive a nice but not super expensive car and also put a little away in savings. Yes, property taxes are expensive, income tax, sales tax (sunshine tax) etc but the rest of us seem to manage just fine paying all of this. It may be different from Houston, but it is what it is and everyone that lives here seems to be doing it. I'm sure some people on here would disagree with me, but I am living in San Diego and managing my finances very well. I make a decent/good living but nothing off the charts. I have a modest house in a nice but older neighborhood (not at the beach, but not out in no where either) and a new car (but not a BMW) and I have a pretty decent sized savings account. It's possible if you are smart with your money and don't waste it all at the bars or on flashy crap to impress everyone around you. If you want to live in San Diego, move here but don't expect to live at the beach (unless as someone suggested, you have roommates or live in a dumpy apartment in PB). You could probably get a nice little condo downtown or in Little Italy (which are pretty affordable right now) and be near lots of great party spots perfect for a single guy in his late 20's. I say go for it...if you really want to live here! Good Luck!

[MantaRay]

Originally Posted by esmith143

"And basically if you want the median house in SD and you have a "decent job" then you really don't GET to save dough. Your monthly income goes to the mortgage (and taxes) and after the other regular expenses, you don't have much left."

In your mind, what's a decent job ($$$-wise) and what does the median house look like / cost / rent for?

According to this city-data website, the median home price in 2007 was $558k, and the median income was $68k. Median rent was $1.2k per month.

So if we assume a person is a young professional who has saved $30k for a down payment on a home, then if they want to purchase a median priced home in SD in 2007 (and granted the housing crisis has decreased values over 2007 levels), they would have to take out a $528k mortgate ($558k - $30k). That much mortgage amortized at 6% APR for 30 years gives a monthly payment of $ 3,165.63 a month. Of course that's just principal and interest. You've got to add escrow to that for homeowner's insurance and taxes and you've got to add PMI as well since you don't have a 20% down payment. A $68k job nets you about $4400 or thereabouts per month if you DON'T contribute to a 401(k). You can obviously see the financial problem that results from someone with a median salaried job trying to buy that median priced home. Housing Tracker says the median listing price as of 4/13 was $385k. Obviously that's a whole lot better than $558k. Still, that's a $355k mortage for that young professional, which is $ 2,128.40 a month. After escrow and PMI, that could easily be $2,500. That would leave the guy $1900 per month for everything else- groceries, auto and auto insurance and auto maintenance, phone, utilities, cable, internet, furniture and decorations, fun, and misc. And whatever meager amount is left from that, he or she could use for a 401(k) or personal savings. Still pretty tough to get a median home AND save enough for retirement even AFTER the correction.

But the person who moves to SD with $300k in hand and a median salaried job of $68k has A LOT of financial power. They can put it all down and get an $85k mortgage which is easy to pay on while saving, or they can get a $185k mortgage and keep $100k out for whatever they might want to keep $100k out for- investing, a boat, whatever. Or they could even upgrade from "median" and go for something like 4S Ranch and still be able to save. And the original question wasn't just how to move to SD, but how to move to SD and get a place of your own AND STILL be able to save.

[1AngryTaxPayer]

Originally Posted by Sassberto

No, everyone in SD is not rich, although many do try their hardest to look that way. It's easy to think that as a visitor, since San Diego's beautiful neighborhoods, waterfront and beaches are prominently on display.

While there is a ton of wealth in San Diego, the reality is that most of San Diego is working-to-middle class, and a large portion of that population is really just barely hanging on. You need to look to find a middle-class area in San Diego... a place like Clairemont or Imperial Beach or Escondido or Paradise Hills or La Mesa. What you will see, among the neatly kept homes and landscaped lawns and proud longtime homeowners, are rental-scarred homes with dead lawns, gangs, and failing schools, amongst a crumbling 1950's city infrastructure.

The reality is that San Diego is increasingly becoming bifurcated among rich and poor, which is already the case in other CA cities. San Diego traditionally had a larger and more stable middle class than it does now due to the military population, but that middle class is fleeing to lower-cost areas. Many formerly middle-class areas like Encinitas are now becoming enclaves for the wealthy.

My advice to you as a software developer with 10+ years experience, a high income and a young family.... stay where you are or look somewhere else. You will never make enough money to live in a nice neighborhood here. It's a lot more fun to be here when you are 23 and making 40k than it is to be 33 and making 100k with very little to show for it. The exception would be if you have a large amount of money, or the skills and time to rehab a foreclosed home, or are able to have 2 high-income earners in your family.

Very good advice! I bought a beater 10 years ago and just now got it completely looking like new in Bay Park. My wife works too and I don't feel we are wealthy at all and we did it the very hard way.

Unless you are a trust fund baby it is hard to get ahead here.

[Sassberto]

Originally Posted by esmith143

So, if there ever was a time when Encinitas and Imperial Beach were substantially similar middle-class communities, it was definitely no longer the case by 1990.

Good post.

If you use education level and bachelors degree attainment as your metric for determining what is "middle class", than I'd agree, but I would say that education is not necessarily as clear an indicator as it might seem. But I do agree that this dynamic has been in play for some time, although it seems to have accellerated greatly in the past 10 years.

I grew up in a rock-solid middle class Long Island neighborhood. Excellent schools and safety. Maybe half of the neighborhood has a degree and I would guess almost no one is employed at a job making more than 75k or so. It is a mix of tradesman, business owners, professionals (teachers & nurses), and retirees. The common thread is that everyone is essentially "in the middle" of the income band. Meaning there are no rich people, and no poor people in the area. But there are no gangs either, and most of the modest, small ranch homes are well-kept. It is basically the same today as it was the day I left, save a few newer big houses and a lot of older faces.

There are few places like this left in San Diego or even many CA cities. Most of the people in the middle are just barely hanging on to Clairemont or Rolando or Paradise Hills. They don't really have anywhere else to go. The price premium attached to stable areas has become so high that no one in the "middle" of anything will ever get into those communities again.

Encinitas is the perfect example. It was not built for the rich, like La Jolla or Del Mar. Like most of San Diego it was a sleepy little middle-class beach town for a long time. Even places like Coronado were not always the enclaves for the wealthy that they are now. Encinitas went from middle class to upper-middle-class but has far surpassed that now. People are not paying 6,7,800k+ for 1500sf ranch homes in Encinitas because it is an upscale area... they are paying that because it is a stable area. The next logical step is scraping and upscaling... it is all but inevitable.

The decline of Clairemont and Paradise Hills is to me less about education levels and more about the eroding middle class in CA, i.e. people "in the middle" are leaving faster than they can be replaced and they are by and large not moving up, they are moving out. That results in a narrow middle class that is squeezed by the social problems of the poor and the unaffordability of the rich.

I was in NY on New Years Eve and struck up a conversation with a cabbie (Jamaican guy) on the way back to my house. He had grown up on LI but moved to LA and owned a home there for almost 20 years. Finally he had moved back to LI. I asked him why, and he said this: "the mailman on my block has been the same guy for 20 years." He went on to describe his LA neighborhood as a "revolving door".

That sentiment seems to sum up a lot of what I have noticed about the changes we are all seeing. The price premiums in CA are not for luxury anymore - they are for the basic middle-class experience that was once taken for granted in almost every neighborhood save a few longtime bad areas. Even with the tanked housing market, 600k+ home prices places the middle-class lifestyle out-of-reach from all but the wealthiest few.

[esmith143]

There seems to be an inherent paradox in your statement. You're saying that neighborhoods like Encinitas, where house prices start at 600K, are unaffordable to the middle class. Okay. But then mid-range neighborhoods like Clairemont are not good enough for the middle class because of poor people and gangs? How do poor people and gangs get into Clairemont, in your opinion? Houses in Clairemont start at 350K, you need a solid middle-class income to buy a house there.

Perhaps those poor people are there because Clairemont is an old 60's neighborhood. Back in the 60's when it was settled, the neighborhood was uniformly nice. Over time, some people get ahead, some stay behind. Successful second-generation Clairemontians move to Encinitas and Rancho Bernardo, because they get nicer and bigger houses there. Not-so-successful folks stay put. Over time the neighborhood starts looking spotty because all that's left is old-timers, white trash, and occasional Mexican immigrants. (In case of Clairemont, it's not quite as bad because of proximity to employment centers. It's worse in Paradise Hills.)

I don't see how this pattern is unique to California. The same could be happening almost anywhere. The only thing specific to CA is that, thanks to prop 13 and our housing bubble, losers have a lot of staying power. You could inherit a paid-off house in Clairemont from your parents in 1999, live in it rent-free, refinance a few times to pull out the equity, and walk away in 2009 without working a day in the preceding 10 years. I am not kidding. These situations do happen.

Notice that almost all neighborhoods built in San Diego since 1980 are firmly middle-class or upper-middle class (Penasquitos, Rancho Bernardo, Sabre Springs, much of Carlsbad, Carmel Valley, ...) Almost all neighborhoods built before 1970 are spotty, unless they have strong redeeming qualities such as being west of 5. The city is evolving.

There are middle-class neighborhoods in San Diego, even today - affordable to households with 75K incomes and without crime and problems inherent to older neighborhoods - but they are all located on the outskirts. Eastlake and San Marcos come to mind.

[esmith143]

According to this city-data website, the median home price in 2007 was $558k, and the median income was $68k. Median rent was $1.2k per month.

Those numbers are highly inaccurate, especially the median home price, which is quite likely below 350K now. And comparing median household income with the price of a median house is inaccurate, too, because not all households live in houses. For example, every full-time UCSD student is a household of its own, unless he lives with his/her parents. Between UCSD and SDSU, there are more than 60K students in San Diego.

After escrow and PMI, that could easily be $2,500. That would leave the guy $1900 per month for everything else- groceries, auto and auto insurance and auto maintenance, phone, utilities, cable, internet, furniture and decorations, fun, and misc

but that raises the question, why would your single guy with 68K income want to buy a median 3+ bedroom house?

And if you use a married couple with 68K and 30K incomes even, that gets their net after-tax income well over 6K.

[Sassberto]

Originally Posted by esmith143

Perhaps those poor people are there because Clairemont is an old 60's neighborhood. Back in the 60's when it was settled, the neighborhood was uniformly nice. Over time, some people get ahead, some stay behind. Successful second-generation Clairemontians move to Encinitas and Rancho Bernardo, because they get nicer and bigger houses there.

The problem with this is that it works when there is a large supply of available land for cheap new housing. That ship appears to have sailed for good. In my NY example there is no RB to move to - the area is essentially completely built-out. People move to North Carolina because there is nowhere else to go. I believe San Diego is reaching a similar point where moving up will simply mean moving out, because there is nowhere to move up to, i.e. Las Vegas, Pheonix, etc... The communities on the outskirts of SD have a pretty significant commuter penalty that seems to be getting worse.

Originally Posted by esmith143

How do poor people and gangs get into Clairemont, in your opinion?...
Not-so-successful folks stay put. Over time the neighborhood starts looking spotty because all that's left is old-timers, white trash, and occasional Mexican immigrants. (In case of Clairemont, it's not quite as bad because of proximity to employment centers. It's worse in Paradise Hills.)

I would say that the deterioration of those neighborhoods is primarily due to owner-occupied homes becoming rental properties. And that occurs because the costs of housing are so high today that it becomes more financially advantageous to turn a single family home into a rental property since they were so cheap when they were first purchased. Those homes have become too valuable to live in.

With the equity effect essentially destroyed, moving up today means sacrificing such a huge chunk of income, making one arguably less successful than they were before, although their surroundings are nicer.

Originally Posted by esmith143

I don't see how this pattern is unique to California. The same could be happening almost anywhere. The only thing specific to CA is that, thanks to prop 13 and our housing bubble, losers have a lot of staying power.

Not unique to CA but much more visible. NY in particular has seen this for years but to me LA is the textbook example, people just flee in a way they don't in NY.

There appears to be an inherent instability to non-exclusive neighborhoods here. People move out the minute things start to change. They don't fight for their neighborhoods. That stability is what makes a middle class area what it is, not the income level or education level of it's residence. Who is to say the same thing won't happen to Eastlake or San Marcos? Look at what has happened to suburban Sacramento... brand-new subdivisions are becoming slums. I think many communities along the 78 corridor and Chula Vista are particularly vulnerable to this, Oceanside and Vista come to mind immediately.

Think of it this way: does Clairemont seem "middle class" to you? To me it doesn't. It was once, but isn't so much anymore. But in San Diego, that is what the middle class is, or has, become. RB, Poway, Encinitas... have graduated beyond middle class even though most of the people living there are in fact middle income.