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anonymous
2015 Aug 30, 10:35am
that same graph can justify why people are renting, though - because the equivalent graph of mortgage payments to income is quite larger. well, san diego is about 8-10% higher but SFBA is a whopping 20% higher.
it's all risky though because as you say the "normal" historically should be 30-35% ratio, renting or owning.
the thing about "urban" development that confuses me is the lack of family formation amenities and thus a really small pool of folks that want to live or stay there for very long. americans prefer the suburbs for longer term housing - it's just the way we want to live after age 30.
after reviewing recent news about the stock market turmoil caused by people/government in china looking for alternatives to their ghost cities and the domestic equities market, have to wonder where/when the next hot money panic is going to happen (and what will the effect be in my neck of the woods in San Diego)
started thinking about this because got a call a few days ago from a broker to see if I was interested in a rental property just listed in a an urban neighborhood where I have holdings
basically told him I think the local (and for that matter the global markets for RE is priced pretty high WRT to historical norms of the past 30 years)
then the conversation turned toward the big new apt tower just built in town
http://www.sandiegouniontribune.com/news/2015/aug/25/pinnacle-apartments-east-villages/
the development seems to be a reflection of what is happening in urban cores around the world (made possible with hot money)
my own thoughts on the luxury tower apt-condo issue are:
1) Developers have no incentive to build quality products that last because of the short term max profit motive (economic strategy used to achieve this goal is to put make-up on a pig!!!)
2) Owners who buy condos from developers are mindful to max out property re-sale value, so curb appeal is given a priority over infrastructure (owners follow developer concept of "make-up on a pig")
3) Condo owners lose re-sale value if there are known construction defects, therefore condo owners have an economic incentive to say there are no isses with building infrastructure (and/or financials of the condo association)
4) A condo board "corporation" is headed by individual volunteers (who too often have little or no technical knowledge about construction) so over time there is a high probability for a downward management spiral (issue 2 leads to issue 3 REPEAT)
seems in a global economy, urban luxury apt-condos are functioning like a commodity investment purchased by people who (too often) do not have ties to the neighborhood and I'm guessing prices w/in this sector are likely to fall dramatically sometime the next few years because its an unsustainable situation
checkout the graph/article showing upward trends of house hold income needed to pay rent
http://www.multifamilyexecutive.com/business-finance/luxury-apartments-galore-at-what-cost_o
#housing