For many people, it’s a big part of the American dream, owning a home. For more and more San Diegans, though, that dream is evaporating,
It’s no secret that home prices are skyrocketing in San Diego County. News came just this week that the median home price soared $25,000 in just the last month, up to an eye-popping $825,120 in April, mirroring a spike across California that brought the state’s median price above the $800,000 benchmark for the first time, according to the California Association of Realtors (CAR), which posted the numbers this week.
Just a year ago, San Diego County’s median home price was $671,000. And in July 2019, according to the U.S. Census Bureau, $563,700 was the median value of owner-occupied housing units.
According to CAR, the percentage of home buyers who could afford to purchase a median-priced, existing single-family home in California in the first quarter of 2021 narrowed to a slim 27%, down from 35% in the first quarter of 2020, the organization said.
So what does that 27% of the county look like?
“What we do is we take the median price home in San Diego and look at where current interest rates are and assume that people are putting 20% down and that their home payment would be 30% of their household income,” CAR’s chief economist, Jordan Levine, told NBC 7. “From there you figure out what the income would be and figure out how many households in Sn Diego are at that income level or above.”
Can that really be 27% of the county’s households when, according to the Census Bureau in 2019, the median household income in the county was $78,980, and per capita income sat well below that, at $38,073? Well, maybe not.
“Included in that figure are folks who already own a home, correct,” Levine said. “A lot of folks who own homes wouldn’t be able to afford them at current prices.”
So to buy a home from the starting line, as it were, anybody putting 20% down for that $825,000 home has to have $165,000 lying around to drop for a down payment.
Then, they need to be able to pony up a sizable monthly nut — about $4,200 — with total annual payments somewhere in the neighborhood of $50,000, if they plan on a 20-year mortgage. These numbers are based off of 3.8% loans …
Now, to pay for that mortgage — and all their other bills — a prospective homeowner would need to make at least $139,200 per year, Levine said, adding that there are 294,839 households in San Diego who could make the payments. There were 1,125,286 households in the county as of 2019, per the Census Bureau.
One of those households, paying the average rent for a two-bedroom in San Diego of $1,940, would need to save for over 20 years (when there was no pandemic going on) to accumulate that $165,000 down payment, according to Levine, who qualified how he determined that figure.
“What do their other bills look like?” Levine said. “What is their savings rate? What is the rate of return on their savings, etc.? Savings rates have spiked concurrent with the distribution of stimulus, so if I apply the average savings rate, that comes out to 8.8 years in Q1, because savings rates spiked to more than 18%. Pre-crisis, the number of years it would take the typical household in San Diego County saving the average amount (5-7% savings rates) at typical 10-year Treasury rates, would have taken 20.2 years to save a 20% down payment.”
Even if you are one of the lucky few who patiently scrape together and save that down payment, you might have a tough time getting that home regardless. According to Zillow, close to half the homes that go on the market in the region sell within a week.