San Diego's Growing Affordability Crisis

By
Real Estate Agent with Retired CA BRE# 01048160

San Diego's Growing Housing Affordability Crisis

The cost of housing in San Diego is growing and more and more working families are facing difficult times in both acquiring a home or meeting the challenge of the costs of renting. The national average home price is in the $190,000's. In San Diego that average is more than two and half times that amount at $535,000. San Diego's average rent for a 2 Bedroom is now at $1700 per month. And for those with a bigger family, the average 3 Bedroom rental is over $2100. 

Think back to when your parents bought their first home and try to imagine them paying over a half million dollars for their first little piece of the American Dream. Chances are that their incomes have not risen 10 to 12 times what they were earning then over the same course of years.

We are seeing in so many parts of San Diego that the cost of housing is now exceeding 50% of income. The only saving grace is that the rising tide of housing prices is floating all boats (equity that is creating wealth). 

So in effect, while the housing affordability crisis is real for so many, for those fortunate to already be in the home ownership minority and as long as the economy stays stable and jobs are still being created, they are likely creating some good equity. God forbid that a crsis or serious recession be on the horizon as some have predicted.

In 2007, we saw what would happen when prices escalate to rapidly, masses of homeowners lost all their equity and were then upside down. We are 9 years into correcting the massive losses. There are still some areas where the homeowners are still underwater.

I think the worst part of this scenario is that there are no real clear answers moving forward. The costs of new homes are increasing steadily for the land, fees and the costs associated to bureaucratic regulations. Builders are caught between a rock and hard spot and the new home or apartment costs are skyrocketing.

The answer for some are that they are exiting the "California Dreaming" experience just out of trying to financially survive. Others are moving in, in hopes of turning their small investment in the housing market into a much bigger one ( creating wealth ) in the years ahead. 

 

 

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Rainmaker
532,794
Robert May
Robert W May - Lethbridge Real Estate - Lethbridge, AB
Real estate consulting

thats unfortunate that so many great cities are getting up in price.

May 21, 2016 05:24 PM #1
Rainmaker
1,827,545
Lise Howe
Keller Williams Capital Properties - Washington, DC
Assoc. Broker in DC, MD, VA and attorney in DC

This is a real issue - and it is sad that it is being created by  the steady increase in property values that is driving people out of the market - the effect can be the same disaster that we saw in 2007 but it will be a different way of getting there 

May 21, 2016 07:53 PM #2
Rainmaker
1,592,030
Sandy Padula and Norm Padula, JD, GRI
HomeSmart Realty West & Lend Smart Mortgage, Llc. - Carlsbad, CA
Presence, Persistence & Perseverance

We agree 100% with you, William Johnson. When one considers how much the monthly 'nut' is for a $400,000 mortgage then realize a conventional CLTV ratio will require, it is not difficult to understand why so many cannot afford housing. Raising the minimum wage does not cut it either!

May 21, 2016 08:52 PM #3
Rainmaker
443,820
Dianne Goode
Raleigh Cary Realty - Raleigh, NC
Realtor/Broker

Affordability is a real issue.  In theory, when no one can afford to buy the prices will come hown.  However, in certain markets like New York City and maybe San Diego as well, foreign capital is preventing that dynamic from operating.  Non-residents keep the prices high and local people are left out in the cold.  Or, in your case, in the nice weather  : )

May 21, 2016 08:53 PM #4
Rainer
212,763
Dennis Swartz
Full Circle Property Management - Columbus, OH
MBA, GRI...experience counts!

Without housing, people move. Without employees, jobs move...Its a cycle.

May 21, 2016 09:11 PM #5
Rainmaker
3,834,669
Sheila Anderson
Referral Group Incorporated - East Brunswick, NJ
The Real Estate Whisperer Who Listens 732-715-1133

good morning William. I read this with interest and am not surprised. Your city is noted for many wonderful things but affordability isn't on that list.

May 21, 2016 09:35 PM #6
Rainmaker
1,157,183
Sharon Lee
Sharon Lee's Virtual Assistance - Jonesborough, TN
Retired and loving life

William-The American dream of being a homeowner is more elusive than ever and probably even more so in California and NYC as well,

May 21, 2016 11:08 PM #7
Rainmaker
4,920,039
Ron and Alexandra Seigel
Napa Consultants - Carpinteria, CA
Luxury Real Estate Branding, Marketing & Strategy

William,

Oh so true, I don't think there are homes in even your affordable range in the most desirable parts of Santa Barbara...A

May 22, 2016 01:13 AM #8
Ambassador
2,804,201
Dick Greenberg
New Paradigm Partners LLC - Fort Collins, CO
Northern Colorado Residential Real Estate

Hi William - Great post, and something many of us are dealing with. It's a shame to see so many just frozen out of the dream of home ownership, and even renting is becoming problematic as rents rise as well. Here in northern Colorado, we're making a fast transition from what was closer to the national average, to something approaching California pricing. We're not there yet, but I don't see the increase in inventory we need to slow it down.

May 22, 2016 03:24 AM #9
Rainmaker
3,401,228
Endre Barath, Jr.
Berkshire Hathaway HomeServices - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

William well said sadly it is even worse here in the Greater Los Angeles area, I am seeing that the middle class is being forced out of Los Angeles due to the prices.... hence the commute is going to get worse for them for the sake of home ownership, Endre

May 26, 2016 11:33 AM #10
Rainmaker
2,776,175
Myrl Jeffcoat
GreatWest Realty - Sacramento, CA
Greater Sacramento Real Estate Agent

As long as folks strive to be where that wonderful San Diego climate is, I doubt home values will go down.  The situation will certainly limit the number of those who will be able to afford living there. 

My mother and father purchased the home which I grew up in 1944.  It was actually a 1905 Victorian era home that had a flat upstairs, with two apartments downstairs.  The cost was $5,200.  That was for a nice neighborhood here in Sacramento.  The two apartments downstairs just about covered the payments.

May 27, 2016 01:44 PM #11
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William Johnson

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