[LUAU] Top 10 Best / Worst Cities For Software Developer Pay

[Jim Thompson]

On Mar 25, 2007, at 3:03 PM, Maddog wrote:

> Hawaii's real estate market actually looks a lot better than other  
> areas. Since real estate is a regional business and not a national  
> business I would tend to think you might see a small dip rather  
> than "the sky is falling" . In comparison to the national averages,  
> Hawaii's subprime loans are far below what they are on the mainland.

You do understand that the rapidly expanding default rate of the  
subprime loan market is what will pull the rug out, right?

Do you mean that the number of subprime loans are lower than on the  
mainland, or that the loan-to-value ratios are lower, or... what?   
Just what do you mean?
S&P says subprime originations (nationwide0 last year were $421  
billion. The MBA says all originations were $2.5 trillion. If you  
trust both data sources, that means 16.8 percent of mortgage volume  
(nationally) consisted of subprime loans last year. That's dollar  
volume, not the number of mortgages. I suspect that subprime mortgage  
balances are smaller than average, so the number of borrowers is  
north of 17 percent.

And then there is the issue of the very definition of 'subprime'.  
People have told me it's loans with FICO scores of 620 or less.  
Others have told me it's 660 or less. But I've seen loan matrices  
that count loans as subprime with FICOs above 660 but loan-to-value  
ratios of 95 percent plus, or with low/no documentation, or both.  
People outside the industry might count those as subprime and people  
in the industry are more likely to call them Alt-A.

What is your definition?

What makes matters far worse is that all this wildly reckless  
'subprime' lending has been in the service of a suburban sprawl- 
building juggernaut that will itself represent another layer of  
grotesque liability for Hawaii. The crash of the house-selling  
bubble, based on absurd asset inflation for slapped-together houses  
on the wrong end of H-1, is coinciding precisely with a permanent oil  
crisis that will only exacerbate the locational disadvantages of  
houses built in the newest and furthest suburbs.

The good news is that when gas prices hit $5/gallon (or more), the  
traffic problem on the H1 will solve itself.   The bad news is that  
nearly all of Oahu's electricity is generated by ... oil, and nearly  
everything we consume on this island is brought here by ship or  
plane, both of which consume .. oil during transport.  Its going to  
get a LOT more expensive to live in Hawaii in the next five years.

Saudi Arabia's oil production was down 8% in 2006 (compared to 2005)  
even while the number of rigs in the field skyrocketed.
http://www.theoildrum.com/node/2325

> I don't see a market crash. I see the possibility of a small  
> downward trend as the condo market must absorb what was recently  
> built but single family homes are averaging 62 days on the market  
> which is also far below the national average and our housing  
> inventory is at 6.2 months compared to the national average of  
> above 8 months.

OK, but in May 2005 it was 2.0 months, and in September of last year  
it was 5.4 months.   I smell a trend, do you?

And the paper doesn't seem to agree with you:
http://the.honoluluadvertiser.com/article/2006/Sep/28/bz/ 
FP609280333.html

and this says 70 days: http://the.honoluluadvertiser.com/article/2007/ 
Mar/06/bz/FP703060329.html
quoting: "The median number of days homes spent on the market hasn't  
been as high as 70 since 1999."

> Not only that but new townhomes and tract projectrs are conducting  
> lotteries to enable folks to buy homes. With 30 homes to be built  
> more than 300 people are showing up at these sales. Demand is still  
> pretty strong here.

That must be why the builders are offering freebies.

http://www.honoluluadvertiser.com/apps/pbcs.dll/article?AID=/20061126/ 
BUSINESS04/611260305/1071
quoting:
---
To be sure, many new home projects are not luring buyers with  
freebies, but to see incentives emerging at a few projects  
underscores the shift under way in the local real estate market that  
in the last few years had developers turning away buyers.

The number of new-home sales this year is still up because of several  
high-rise condominiums that are nearing completion.

But weaker demand is evident in O'ahu's resale market, where sales of  
previously owned homes fell 17 percent in the first 10 months of the  
year compared with the same period last year.
---

> So to answer your question about prices here stabilizing and  
> rising, no I don't think 2020 is a good prediction. There were a  
> lot of factors that contributed to the stagnation here amoung them  
> the crash of the Japanese economy. With that a lot of money was  
> pulled out of Hawaii and the sound of air escaping Hawaii's economy  
> could be heard for years. The economy here has been fairly strong  
> and looks to slowing some now but not stopping nor going backwards.  
> I think real estate will remain strong here.

http://starbulletin.com/2006/12/01/business/story01.html

Meanwhile, Honolulu county's median household income is $60,739 (2005  
dollars), this is 19.1 percent higher than the median in the US,  
which is $49,133.
The median owner-occupied home value in Honolulu County for the year  
2005 was $457,700.  This versus a median home value of $167,500 for  
the rest of
the nation in that year.

If, by some miracle (in a land of negative savings) someone with an  
income of $60,000 had managed to save enough to make a 20 percent  
down payment ($91,400) on the aforesaid median-priced house and got a  
30-year mortgage for the remainder ($365,600)) at 7 percent interest,  
his monthly payment would be $2432. Add to that $250 a month in local  
property and school taxes and insurance and that brings it up to $2682

That adds up to $32,184 a year in house payments. Let's say the poor  
bastard pays $11,000 a year in combined income tax and FICA  
witholding. That leaves him with a grand total of $16,816 for  
everything else. Then there's the yearly cost of owning a car,  
including installment payments, insurance, gasoline, and maintenance:  
around $8,000 a year. Oh yeah, if he's a prudent fellow, he's got  
health insurance, let's say a practically useless high-deductible  
policy costing $3,000 a year. That leaves approximately $112 a week  
for groceries, laundry, the collection plate at church, and  
everything else. (Too bad he can't afford cable TV and the Internet.).

Of course, the scenario above was based on the most conservative type  
of mortgage. If Mr. Median Income had gotten a creative (sub-prime)  
mortgage, let's say a no money down, interest only, payment option,  
adjustable rate mortgage, he would have been a little more solvent  
until the interest rate ratchets re-set. Then after enjoying the  
place for a year or two, he'd either have to sell it pronto, or  
default on his payments. And because all his payment option  
shortfalls would have been back-loaded onto the principal, the  
mortgage obligation could be over $400,000 now.

This is a bummer, selling into a down market, especially after paying  
the Realtors their 6%.

Of course, sooner or later under conditions of perpetually rising  
house prices, houses would have to be priced out of everybody's range  
except for Donald Trump, Paris Hilton, Oprah and a handful of other  
lucky, beautiful people who dwell in the perfumed ethers above the  
pathetic lumpenprole median zone.

Getting back to the subject...

The "software publishers" industry lost the largest amount of  
employment in terms of percentage, during the last five years, losing  
65.8 percent of the jobs from 2001 to 2006. This job classification  
declined faster than the industry sector across the State of Hawaii,  
where the loss was 63.7 percent. The losses in the "software  
publishers" industry in Honolulu County vastly outpaced the US in  
terms of percent of decline of industry employment, since the US (as  
a whole) lost 12 percent in this sector during the same period.

By any measure, thats "failure".

Top 5 Industries in terms of job loss (percentage) Honolulu County  
(2001 - 2006):
1. Software publishers (65.8 percent decline)
2. ISPs and web search portals (61.1 percent decline)
3. Glass and glass product manufacturing (53.4 percent decline)
4. Emergency and other relief services (52.2 percent decline)
5. Waste collection (49.8 percent decline)

Total county-wide industry employment has increased by 9.7 percent  
from 2001 (2nd Quarter). The figures for Honolulu County are less  
than the job growth in the State of Hawaii as a whole, which saw a  
gain of 11.0 percent from the 2nd Quarter of 2001. The gains the area  
experienced were greater than than the gain experienced overall in  
the US of 2.6 percent.