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Posted by on Dec 19, 2013 in Jim's Take on the Market, Mortgage Qualifying, North County Coastal | 12 comments | Print Print

NSDCC Affordability

While we are kicking around that affordability thing, let’s note that by the traditional measuring of the Housing Affordability Index that we are still better than the last peak.

The San Diego index got down to 8 in 2005, and today we are at 27:

But that is using today’s San Diego County’s median sales price of $485,040, for which it takes an income of $99,670 to qualify for an 80% LTV mortgage.

Have you seen many houses around NSDCC selling for $485,000?  Me neither.  In the last 60 days there have been 403 NSDCC detached-home sales closed, and only three of those were under $485,000!

The NSDCC median sales price for the last 60 days? $1,010,000.

In the same stretch last year we sold 500 houses, median SP = $837,243 with mortgage rates in the low 3s.

Income needed to qualify for 80% LTV mortgage:

2012: $126,500

2013: $175,000

Logically, this affordability issue should start to matter at some point.  Could we run out of buyers?  There have been 1,425 houses sold this year over $1,000,000 between La Jolla and Carlsbad!


  1. Affordability issues in the NSDCC? There hardly seems to be a shortage of high income households. Check out median income for specific neighborhoods:


  2. Coastal SD is a fairly small market (mostly high end areas) IMO.
    I think we will see median cost homes pushed to the east (not coastal.

    Median cost homes are 15-20 miles from the coast in L.A.


  3. WHAT?!? Everyone didn’t get a $50K raise this year???

    Makes no difference for $1M+ buyers, but IMHO it’ll definitely impact everything below that.


  4. Makes no difference for $1M+ buyers, but IMHO it’ll definitely impact everything below that.

    Agreed – the upper crust should be fine. But the rest….

    A majority—83 percent—of buyers believe a “normal” interest rate for a fixed-rate, 30-year mortgage loan is less than 5 percent.

    Furthermore, a significant portion of homebuyers—42 percent—say they “would be unable or unwilling to buy a home if rates rose further.”


  5. Please define “impact” as that could mean anything from significant price declines to an insignificant slowdown in price increases.


  6. tj will be more bearish than me, but the ‘impact’ wouldn’t be that noticeable until April/May or maybe June.

    There won’t be any sellers listing their homes for less than 2013 prices – and it is irresistible to tack on the extra 5% or so. If buyers are “unable or unwilling” to pay more, then the Big Stall will begin.

    But no seller who lists in March will start dumping in April – it will take a few months of a glut forming to convince sellers and their listing agents that the market ain’t what it was in 2013.

    For my zero-appreciation prediction to come true, we will have to see buyers hesitating immediately. If we get off to a fast start where every decent deal is getting snapped up at the 5% or higher prices, then we’ll be off to the races again.


  7. Chief economist for NAR, Lawrence Yun, says he expects avg 30 yr fixed mortgage rate to be 5.5% at this time next year.

    The Freddie Mac monthly rate hasn’t been in the mid-fives since 2008.


  8. “Impact” was left undefined for a reason. We know it’ll have an effect, but what effect is dependent upon too many other factors.


  9. “A majority—83 percent—of buyers believe a “normal” interest rate for a fixed-rate, 30-year mortgage loan is less than 5 percent.”

    Wow I’m surprised by the above information. Who are these buyers? They seem out of touch with reality? Thinking 5% is normal on a 30 year fixed rate mortgage loan. I would say a normal 30 year fixed rate mortgage loan is around 6.5 – 7% range. 5% is a bargain not normal in my opinion.

    This leads me to believe we might be in trouble when rates reach 7% if these so called buyers think 5% is normal.

    What are they drinking?


  10. Normal? We didn’t get consistently below 7% until 2002 when the Fed started aggressively forcing rates down.

    Check this out:

    Anyone thinking 5% is normal is suffering extreme recency bias, just as those thinking 2006 home prices are normal are suffering extreme anchoring bias.


  11. It’s likely that with an improving economy the banks will be able to relax lending standards.

    A banker once told me as the market improves, it becomes easier for them to lend, as borrowing becomes easier prices improve, and on it goes.

    More will be able to buy next year. I think it will be a strong year.



    The Fed bet big on job creation, a robust housing market and continued economic growth when it announced the “Tepid Taper” on Wednesday.

    And as welcome as any movement to towards curbing ad infinitum quantitative easing is, there is some legitimate concern that they’ll have to hedge that bet in 2014 because there’s a lot of evidence that there’s still rough times ahead and that we’re not so much seeing “recovery” as we are seeing “wreck hovering.”

    Put simply – economic conditions are not much better off now than we were in January 2013.



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