Why SD real estate is so expensive (San Diego, San Carlos: transplants, apartment complexes)

[mixxalot]

San Diego real estate was not always super expensive. It is a bubble and low inventory and FED causing low near zero interest rates driving the high prices. Bay area has even worse problem with tons of foreign buyers.

[mauialoha]

San Diego real estate was not always super expensive

it's been bubbling at least since 1978

[Compuhi]

It is definitely a combination of all of the above:

- Low interest rates
- Low inventory
- Foreign money

I bet the interest rates are what is causing most of these prices. When the fed finally begins to raise it, perhaps it'll deflate the bubble a bit.

[sdlife619]

Desirability is the main culprit, but what has always been surprising about SD's real estate is how so very expensive homes have become here that isn't justifiable with many of the jobs in the area being low to middle paying which literally eliminates most residents that makes under $90,000 a year almost impossible to buy a home in a decent area in SD without some sort of huge down payment.

So that strictly only allows the upper middle class to buy homes these days. The American dream in SD is so far reaching that you need a very high paying job or own your business that pays well just to even consider a house here.

When a person buys a home, people assume it's just the mortgage that you have to worry about, but it's a massive expense if you add up the taxes, utilities, the upkeep and maintenance of the house including the plumbing, landscaping, future repairs, all can easily add an extra $500 a month just on a couple of those things.

Sometimes the maintenance and plumbing alone especially in an old house, can suck you dry.

No matter how many more thousands of homes are built in SD, it won't put the slightest dent in lowering the home prices here.

It's really an L.A., SD, and S.F. problem. All 3 are highly desirable cities that people want to live in. It's the West Coast, with the best weather in world, with lot's of different cultures, and things to do, with the added flair of that CA lifestyle that has influenced so much of what is cool and hip in this country.

This is why it seems like the entire Mid-West and the South has transplanted to SD. Never seen so many Texas, and other Mid-Western plates in my life when driving in SD. You don't see as much of this in say L.A. or even the O.C., but SD is a Mid-West haven and obviously the military is the main reason for it.

[Wartrace]

Originally Posted by Compuhi

It is definitely a combination of all of the above:

- Low interest rates
- Low inventory
- Foreign money

I bet the interest rates are what is causing most of these prices. When the fed finally begins to raise it, perhaps it'll deflate the bubble a bit.

That is a real risk for people buying at inflated prices due to historically low rates. A 500k mortgage in a 4% environment (2387 if 4%) becomes a 2684 payment @5%, 2997@6%,3326@7% and 3669@8%.

People buy the payment. What will happen to your resale value if rates return to their historical norm (8%) and wages continue to stagnate? It doesn't matter what you paid for your house; if you have to sell it in the future will people be able to afford it? Typically people are limited to 30% of their income for mortgage loans. Right now a 94,000 dollar income would qualify a family to purchase a home with a 500k mortgage. In an 8% environment they will have to be making 145k.

[mysticaltyger]

Originally Posted by mixxalot

San Diego real estate was not always super expensive. It is a bubble and low inventory and FED causing low near zero interest rates driving the high prices. Bay area has even worse problem with tons of foreign buyers.

The main reason is very simple. THEY DO NOT BUILD ENOUGH HOUSING. These 2 articles explain it all:

Why Middle-Class Americans Can't Afford to Live in Liberal Cities - The Atlantic

http://www.newgeography.com/content/...-class-warfare

[ucctgg]

Originally Posted by mauialoha

it's been bubbling at least since 1978

I thought a bubble was a peak, after which prices go down.

What does "bubbling" mean ?

[mauialoha]

I thought a bubble was a peak, after which prices go down.

are you seriously asking this? A peak, a bursting of the bubble, followed by another buildup, etc.

[ucctgg]

Originally Posted by mauialoha

are you seriously asking this? A peak, a bursting of the bubble, followed by another buildup, etc.

Yes I was serious ---- no need to be rude.

I looked at this graph of median home prices since 1982 and I only see one period that
would be considered a real bubble.

San Diego, California - JP's Real Estate Charts

[mauialoha]

Sorry I didn't mean to be rude, was just surprised. And depends on your point of view I suppose, but that chart looks like a series of bubbles to me. Yes there is one much larger than the rest the one we know was associated with the crash of the banks and the recession.

But there is no period of stable prices that I see