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15 days ago
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San Diego Home Prices are Not Sustainable at Current Level : San Diego's price-to-income ratio: 7.9, according to https://www.citylab.com/equity/2018/05/where-the-house-price-to-income-ratio-is-most-out-of-whack/561404/ BTW: this is similar to the ratio's value at the peak of the prior housing bubble. ​ The rule of thumb long used by real estate agents and homebuyers is that you can afford a house if its price is equivalent to roughly 2.6 years of your household income. That ratio is based on historical nationwide averages under healthy economic conditions. But today, in many places around the country—particularly in coastal cities in California and along the New York–Boston–Washington corridor—housing has become staggeringly more expensive than that. ​ This is not sustainable. An example family earns $120K per year, or $10K per month. That family buys a home costing 8 times their annual income, or $960K. They somehow cough up 20% down, or $192K, and borrow $768K at 5%, 30-year, fixed. Their mortgage payment: $4,123 per month, or 41% of their pay. On top of that, add property taxes, insurance, maintenance... about another $2K per month. Just paying for their home, this family would be shelling out over $6K per month, leaving very little of their take-home pay for things like food, medical, dental, transportation, clothing, utilities. It doesn't matter whether you "think" or "feel" that today's prices are sustainable. The numbers say otherwise. ​ ​ - Full Article

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