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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Lizzie Tudor who wrote (6297)	10/27/2002 3:58:54 PM
From: Wyätt Gwyön	Read Replies (1) \| Respond to of 306849

have friends who have lost 40% on their high priced hillsborough homes even though it declines like that don't show up in the statistics. This is in the 1mm range. THey lost 2/3 of their equity just like you did and its fairly devastating for them since their jobs are being moved to india. i think a reasonable target for affordable housing is a place which is no more than 3 times one's annual salary. for somebody living in a house valued at $2 million, that is a salary of 667K. for somebody in a $1 million house, that is a salary of 333K. obviously, there are very few people making those types of salaries (other than the once-in-a-lifetime options thing). but in SV there are many people with those types of home prices. they are able to swing it due to low interest rates and permissive credit standards, not to mention the benefit of artificially inflated salaries during the bubble. what does a run-of-the-mill engineer make in SV who lives in a million-dollar house? 80K? 100K? 120K? 180K? i think 180K is probably not run of the mill, but...imo i would never buy a million-dollar house on such a salary. better yet, what is the median income of people buying the median house in SV? 100K income to buy $1 million house? that is ten times income! sounds crazy to me. what's worse is if 100,000 jobs paying 100-150K in SV can be done by Indians for 30-40K (or could be done by people living in Austin for 80-120K, who can buy a decent house for 250K). perhaps the 150K SV engineer gets downsized to an 80K salary thanks to these trends. unfortunately, his mortgage is not also downsized. if this happens to a lot of people at the same time (and Murphy's law sez that it will), they may not be able to liquidate at the expected price levels. not to mention what happens if lending standards tighten, and interest rates go up.