Confused about "middle class" home ownership (San Diego, Chula Vista: fit in, sale)

[Rainydaysd]

I have been looking for a sfh in inland North-ish county for a few months now (for the schools), feeling predictably hopeless and confused. We are a single income family of about $130-140k annual with 1 very small child. Given our income, I was hoping for a home for $500-$600k in maybe Rancho Penasquitos (Poway schools but slightly less hot than Poway proper). $600k was our upper limit ($650k is pushing it but probably possible depending on our down payment) but most 3+ bedroom homes are already about $100k above that which is very discouraging.

PQ has great schools but most homes are 50 years old. A new housing development in PQ is setting prices at $800 and up or so. Edit: Just checked Zillow and it is $900k!

At the same time, I've read on this board that PQ is "blue collar" and whatnot.

I have been living long enough in SD to understand it is ridiculously expensive so most home mortgage calculators do not really apply. But can someone give some insight into who is buying what? Is a $130k household (with 2 masters degrees!) considered our of range for home ownership? Or are other young families buying out of budget?

Also, not wanting to start any political discussion here. Just trying to understand where my expectations ought to be.

[someguy10]

San Diego is one of the most desirable--surely in the top 1-3%--places in the world to live. Your current income level puts you in the top 10-12%. To be in the top 3%, you need around $250K/year and to break into the 1% you need around $400K/year.

I think a good way to look at it objectively is by income to mortgage ratio. Lenders may let you get away with a mortgage of 4 or more times your gross income, but IMO that is insane and will make you house poor and probably miserable. I recommend going no more than 2x gross income. So I think your max mortgage amount should be $270K. If you have approx $70K in cash for down payment, you're around $340K max.

Bottom line, at your income I think it's inadvisable to buy anything, let alone a SFM. Also, I wouldn't even think of spending all cash available on buying a house. You should always have 6+ months of expenses in cash that you only touch for emergencies.

[sfosyd]

Originally Posted by someguy10

San Diego is one of the most desirable--surely in the top 1-3%--places in the world to live. Your current income level puts you in the top 10-12%. To be in the top 3%, you need around $250K/year and to break into the 1% you need around $400K/year.

I think a good way to look at it objectively is by income to mortgage ratio. Lenders may let you get away with a mortgage of 4 or more times your gross income, but IMO that is insane and will make you house poor and probably miserable. I recommend going no more than 2x gross income. So I think your max mortgage amount should be $270K. If you have approx $70K in cash for down payment, you're around $340K max.

Bottom line, at your income I think it's inadvisable to buy anything, let alone a SFM. Also, I wouldn't even think of spending all cash available on buying a house. You should always have 6+ months of expenses in cash that you only touch for emergencies.

+1, this is great advice. To be honest, 130k with two masters degrees sounds really, really low to me. 125k each for a total of 250k sounds much more realistic to me, and that is way, way on the low end by NYC or Bay Area standards but about right for SD. That equals 500k plus a 100k down payment equals Mira Mesa which has decent schools, unfortunately that's the reality in San Diego right now. A lot of money from elsewhere is affecting the area.

[Rainydaysd]

Originally Posted by someguy10

San Diego is one of the most desirable--surely in the top 1-3%--places in the world to live. Your current income level puts you in the top 10-12%. To be in the top 3%, you need around $250K/year and to break into the 1% you need around $400K/year.

I think a good way to look at it objectively is by income to mortgage ratio. Lenders may let you get away with a mortgage of 4 or more times your gross income, but IMO that is insane and will make you house poor and probably miserable. I recommend going no more than 2x gross income...

Bottom line, at your income I think it's inadvisable to buy anything, let alone a SFM. Also, I wouldn't even think of spending all cash available on buying a house...

I appreciate your response but would inland North county really be speaking to the 1%ers of the nation? Definitely coastal North County but including, like, Carmel Mountain Ranch? I guess I never considered this region to be upper class (maybe upper middle class). Like I wrote earlier, other city data posters have characterized PQ as "blue collar."

So all of the new home owners are making annual incomes of at least $250k? Hm sobering.

[Rainydaysd]

Originally Posted by sfosyd

+1, this is great advice. To be honest, 130k with two masters degrees sounds really, really low to me. 125k each for a total of 250k sounds much more realistic to me... That equals 500k plus a 100k down payment equals Mira Mesa which has decent schools, unfortunately that's the reality in San Diego right now. A lot of money from elsewhere is affecting the area.

Comp sci + law but it is a government job. I am looking for a job but my field usually amounts to only $50k (so staying home for now).

Hm as a lifelong Californian, I have not really considered recloating before but this reality is terrifying.

[GuyInSD]

Well, I can only speak for myself:

Masters in Systems Engineering (B.S. in Electrical Engineering from UCSD), currently making $118K as a Project Manager.

Bought my first SFH in San Diego in 2008 (located in Carmel Valley), for $700K (it currently would sell for around $900K).

Before that, I bought a townhouse (also in Carmel Valley) in 1991 for $200K (big mistake), and another townhouse near UTC in 2002 for $278K. Both of these townhouses now make good rentals, but Carmel Valley real estate prices appreciate quite a bit more than around the UTC area.

So - yes, it is possible to buy decent real estate in San Diego with less than $120K annual income.
The trick was to start out smaller and work up from there.
Doing that, I've now got a SFH in Carmel Valley (plus two rentals that bring in positive cash flow).
That original $25K down payment from 1991 now translates to about $1M equity today.

[Libertad06]

How in the world do school teachers, nurses, firefighters etc afford to buy a house?

[RosieSD]

Originally Posted by Libertad06

How in the world do school teachers, nurses, firefighters etc afford to buy a house?

They look in other parts of San Diego County that are less expensive than the Poway-Rancho Bernardo-Carmel Valley-PQ loop.

For example: Chula Vista, Spring Valley, La Mesa, Lakeside, El Cajon, Santee, Fallbrook, Vista, Oceanside, Temecula and so on.


It IS still possible to buy in San Diego County on what passes for a "middle class" salary elsewhere in the country. It is, however, not easy; you have to be willing to make compromises, either in terms of location, size of the home or giving up lifestyle stuff (i.e., a stay at home parent, driving newer cars, vacations, etc.)

I also agree that starting small and working up is the way to go. Our first house was in Chula Vista, and was definitely not our dream house or location. But, the profit we made when we sold that house a few years later DID help us to buy a bigger home in a location we preferred, even though neither the home nor location was 100% perfect. However, after a few years of living here, and some sweat equity, this did become our dream home.

Sometimes, "dreams" take a few steps to bring to reality.

[JohnAlt]

Originally Posted by RosieSD

I also agree that starting small and working up is the way to go. Our first house was in Chula Vista, and was definitely not our dream house or location. But, the profit we made when we sold that house a few years later DID help us to buy a bigger home in a location we preferred, even though neither the home nor location was 100% perfect. However, after a few years of living here, and some sweat equity, this did become our dream home.

Was the sale of old home and purchase of new at the same time, or was there timing involved (sell in inflated market, buy in depressed)? Because wouldn't the home you moved into have increased in price as much as or more than the one you sold?

[malcorub16]

^^ Rosie speaks the truth once again, San Diego real estate has a way of humbling a man, even if said man makes 6 US digits which by the world's standards is RICH.

OP, look else where, where you can afford in today's market. Otherwise you will live unhappily ever after in debt trying to avoid "blue collar" PQ and fit in with where you think you belong but you really can't afford.