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Logan Mohtashami says

However, the one item I have seen now in that they are paying more than what they originally wanted to pay for a home in terms of total PITI payment.

Whenever you see that in a market place on the move up buyer side of the equation that shows that the buyer capacity is hitting their limits points.

This doesn't surprise me. Back in the bubble days, I had co-workers telling me "you should go talk to my [brother/cousin/friend] who's a mortgage broker. You'd be surprised what you'd qualify for on our salary." I'm starting to hear things like that again. The other day someone was telling me that someone who earns X could afford a $1.5M house easily. And I was thinking, "yes, they could *qualify* to get a loan to buy a $1.5M house easily," but whether that's "affordable" is another question entirely because it would strain the budget and make other things like savings, vacation, and other life goals rather difficult to achieve.

corntrollio says

whether that's "affordable" is another question entirely because it would strain the budget and make other things like savings, vacation, and other life goals rather difficult to achieve.

But then you will miss out the equity gains that future generations will hand out to you. Don't you?

Let me give you a good example of what I am seeing

If a buyer has a comfort total mortgage payment of $4000

PITI total payment, principal, interest , taxes and insurance. That is the level that has always been key to me because they know better than a bank.

Now they may qualify for a total payment of $6,500 hitting that 43% DTI which is still good to go. However, comfort payment levels are a better gauge of after tax/expense incomes

They are going above their comfort mortgage payment level, still can qualify but at 4.25%-4.625% range that is very telling

Logan Mohtashami says

If a buyer has a comfort total mortgage payment of $4000

PITI total payment, principal, interest , taxes and insurance. That is the level that has always been key to me because they know better than a bank.

Now they may qualify for a total payment of $6,500 hitting that 43% DTI which is still good to go. However, comfort payment levels are a better gauge of after tax/expense incomes

$6500 at 43% DTI means just over $180K annual income. That is a significant percentage of post-tax income and seems to be stretching quite a bit.

corntrollio says

$180K annual income

$6,500 doesn't correlate to $180,000K a year buyer, that 180K income is 3 times more than the median CA income.

That income bracket is doing well, the problem is we can't produce enough of that type buyer income, hence why sales have fallen here in So Cal

"California home sales and price gains temper in May as buyers confront housing affordability constraints and low inventory"

http://www.car.org/newsstand/newsreleases/2014releases/may2014sales

Negative YoY sales, with higher inventory and rates below 4.5% #DTI #LTI

Heraclitusstudent says

The problem is not low wages.

The problem is ultra high prices.

beg to differ, IMHO its a problem of too high "public" expectations, job skill "mismatch" in the general public, too much credit creation chasing "global" returns