A recent study by LendingTree says about 40 percent of San Diego homeowners spending one-third or more of their income on mortgages and other associated costs.
Speaker 1: 00:00 A recent study from lending tree says San Diego has some of the most cost-burdened homeowners in the country with about 40% of homeowners spending more than a third of their income on mortgages and other associated costs. So how will rising home costs impact that? Joining me is Phillip Molnar, real estate and business reporter for the San Diego union Tribune. He’s been covering this issue and the reason study Phillip welcome. Thank you so much for having me. So homeowners in San Diego are among the most cost burdened in the nation. Where do we rank?
Speaker 2: 00:33 So we’re third highest in the nation behind Los Angeles and Miami. And this lending tree study was sort of interesting because it uses the most recently available data, but it was for 2019 is the most recently available. So this basically tells us going into the pandemic. Things were already pretty rough if you own a home in San Diego. So we’re going to have to wait and see what happened after prices exploded in the last year and a half. Exactly. As you
Speaker 1: 01:02 Just mentioned, a large number of San Diego, we’re already spending more than a third of their income on mortgages before the pandemic housing prices shot up in 2020, and they are still soaring to all time highs, but the income to housing debt ratio isn’t expected to change much. Why is that?
Speaker 2: 01:20 Well, income did go up for a lot of people that were able to work, stay at home jobs during the pandemic. However, we also know unemployment reached a record high in San Diego of around 15% at one point during the pandemic. So if you look at income to, you know, spending on mortgages and all that stuff, it might be better for some people coming out of this pandemic, but it’s also going to be bad for some people. So we’re still waiting to see how it’s all going to shake out what I’ve heard from some housing analysts. And it sounds super cold, but the people that couldn’t afford a house before the pandemic sure as heck can’t afford one now. So we might just be, when we look at these numbers, we might just be looking at a dwindling homeownership, but maybe the people that actually got homes might be doing better than they were before on their cross payments. We just kind of have to wait and see. Hm.
Speaker 1: 02:13 And let’s talk about that a bit more, uh, about lower income homeowners and those who may have lost income due to business closures. How are they impacted by this?
Speaker 2: 02:23 A lot of low-income people were hurt the very worst during COVID. We have a study from the San Diego association of governments, and they found that nearly 40% of jobs that paid below 27,000 a year, that’s a around $15 an hour. Those were lost by April. But if you look at jobs that were, you know, paid 27,000 up to 60,000, only 6% of those jobs were lost. And any jobs that paid more than 60,000 a year, only 3% were lost. So we can see from these numbers that during the pandemic, low income people were hurt the hardest by this stuff. So they probably are so far outside their chance to buy a home at this point that, you know, we don’t even know if this study will change that much, because if they couldn’t get a house before, it’s going to be way harder now with prices that have gone up more than 20% in San Diego county in the last 12 months,
Speaker 1: 03:19 You know, this really is exposing disparities between the wealthy and those who bring in a lower income and that some who are wealthy are coming out of this pandemic, actually spending less on housing than they were before. Can you talk about that
Speaker 2: 03:34 Before the pandemic started, about 31% of homeowners were spending 20% or less of their monthly income on housing costs. And if we think about that, you know, there’s a comparative study. I’m looking at at the moment with renters, but a lot of people in San Diego are spending way more than 20% of their income on housing. So we can see that homeowners were doing much better than the general population, even before the pandemic. So there’s a very strong possibility with mortgage rates being so low that some of those homeowners were able to refinance and get their monthly costs even lower than they already were. So, yeah, we’re going to see a huge disparity coming out of the pandemic for people
Speaker 1: 04:17 Who recently bought a home. Is there a point where the high cost of housing cancels out the benefit of those low mortgage rates?
Speaker 2: 04:25 Yeah, definitely because, you know, we hear a lot from real estate agents and of course it’s always buy now buy now, but you know, mortgage rates are so crazy low right now that one of the thoughts is I need to get into a house to take advantage of these. But if you look at the median price home in San Diego county, one of the things is like, yeah, interest rates are low, but if you break it all down, you’re still paying like 130,000 more for a down payment on a medium price home. It’s just it’s bonkers. Because even though that monthly payment might be a little more manageable, not look as bad coming up with that down payment is extreme. So I’ve been talking to real estate agents throughout the pandemic, you know, and one of my biggest questions is who’s affording these houses. And a lot of times it is those younger millennial couples, but they’re getting help from their parents. So that down payment is sort of artificial in some ways, because, you know, it’s, it’s more of an anecdotal story, but that’s just what I keep hearing over and over. So it’s, it’s not like that person that just bought that house for a really high amount actually had that down payment money sitting there. I mean, there’s only so many tech billionaires and millionaires around to buy houses. So that might be interesting to see how that plays out in the longterm.
Speaker 1: 05:42 Are renters feeling the same cost burden
Speaker 2: 05:44 For housing? No, not really. As far as renters go rent prices in San Diego, roughly they’ve, they’re up about 5% a year. That’s still rough if you’re a renter, you know, but in the past seen rent prices go up more than 7% up to 8% in a year. So at least in that regard, you know, we’re seeing that 5%. And of course, especially downtown, if you’re looking to rent in east village, especially, or even some of the new complexes in OTI ranch that I’ve seen in some, in mission valley, a lot of them are just trying to get people to sign new leases. So they’re offering up to four to six weeks free and rent. And a lot of times they’re actually lowering that security deposit. You know, a lot of times if you move into like kind of a junky apartment in golden hill or something, they’re like, okay, we’re going to need a month and a half of rent. So you’re, you’re shelling out like $2,000 just to get into a place. But a lot of those places are lowering the security deposit. I’ve heard security deposits as low as $500 in mission valley. So for once we can kind of say, it might not be so bad for renters right now. If you’re looking at all things considered, I’ve
Speaker 1: 06:52 Been speaking with Phillip Molnar who covers real estate and business for the San Diego union Tribune. Philip, thank you so much for joining us. Thank you so much for having me okay.