No one is expecting young college grads to be able to afford a 600k house. I wasn't trying to argue that point.
What I am trying to say is that there are not many middle-class people in their 30s can afford 600k. The expectation for housing hasn't changed at all, for a family of four, with two working parents with established careers, they should be able to afford something that has 3-4 BRs with a backyard. This was the expectation 20 years ago, and this is the expectation now. The only difference between back then and now is that most middle-class families can't live up to that expectation these days. Despite the recent housing market downturn, housing price outgrew income by a mile for the last 20 years.
Housing affordability is definitely on the downslide in recent years, there is absolutely no question to that.
I own (well, technically like 90% still belongs to the bank...) a $750K apartment, its decent though rather small, but it suits for us for now.
PingSpike
Lifer
- Feb 25, 2004
- 21,765
- 615
- 126
I don't get this "starter home" concept. My parents bought a house of modest size...maybe 1500sqft. When they started making more money the tacked on a small addition. I suppose you could argue this is the same as trading up to a larger house. But around here right now there are decent single family homes for around 250K...one's I can easily raise a family in and retire in. Or...I can buy a 2BR 1bath house in the same area for 200K. (and there are almost none of these, they just don't build them...probably because they don't sell) Or I can buy a condo for 160-180k and with association fees be paying the same as the 2BR house.
Everyone kept telling me to "buy a starter home". I hate moving. And with only a 50K difference between the house that I could probably die in, it didn't really seem to make sense to buy the "starter home". It made more sense to just go straight for the gold and skip the bullshit.
I think that whole starter home business is based on the idea that we'll continue to see endless appreciation. That ship has sailed, I think home prices will probably be fairly stagnant for some time. At this point, it seems like a waste of money paying all the realtor fees and closing costs instead of just moving right to the finish line in the first place.
I agree with your basic premise though that people demand a lot more out of a house now then say my parents generation did. In the 50s, most Joe Schmoe family homes were only like 1200sqft, in the 70s it was like 1500-1700 and now I have a lot of people looking at me funny like my (IMO awesome) 1700sqft house is just plain two small to raise a 2 kid, 2 adult family in.
Man - using how much I can afford calc at mortgage-calc.com - A 350K 30yrs loan (after 20% down) at 5.5% interest with 2K annual taxes & 2k per month expenses - will require a gross income of at least 142k. I think I will keep dream of owning a house in Seattle. 
Depending on interest - but that 50k at 5.5% would mean about $300 per month extra goes toward your mortgage. Can your income handle that?
mugs
Lifer
- Apr 29, 2003
- 48,920
- 46
- 91
Originally posted by: crystal
Man - using how much I can afford calc at mortgage-calc.com - A 350K 30yrs loan (after 20% down) at 5.5% interest with 2K annual taxes & 2k per month expenses - will require a gross income of at least 142k. I think I will keep dream of owning a house in Seattle.
Holy crap, $2k taxes on a $440k home? Taxes on that would be ~$9k here.
whatever makes you happy. no sense in comparing to averages and highs because-there will always be something more expensive. there will always be someone "better"
PingSpike
Lifer
- Feb 25, 2004
- 21,765
- 615
- 126
Maybe, maybe not. Thats not really the question though. You could continue renting and saving for the down payment. If home prices don't go up signifigantly in the next 5 years you save realtor fees (6% when selling that starter home) and closing costs (2%, maybe even 3%) when buying the new by just saving a little longer. Without that starter home appreciating like mad, there isn't going to be a big pile of "equity" to roll into the new house. The first 5-10 years of a mortgage you pay a pretty paltry sum towards the principle. If home prices remain the same or barely rise...isn't that 7-9% hit probably going to leave you further behind?
meltdown75
Lifer
- Nov 17, 2004
- 37,548
- 7
- 81
i know this is in reference to other markets... but
around here that kind of $ can get you a 3000 sq.ft home, brand new and very nicely built with LOADS of extras. crazy
around here that kind of $ can get you a 3000 sq.ft home, brand new and very nicely built with LOADS of extras. crazy
Originally posted by: mugs
Originally posted by: crystal
Man - using how much I can afford calc at mortgage-calc.com - A 350K 30yrs loan (after 20% down) at 5.5% interest with 2K annual taxes & 2k per month expenses - will require a gross income of at least 142k. I think I will keep dream of owning a house in Seattle.
Holy crap, $2k taxes on a $440k home? Taxes on that would be ~$9k here.
Actually, I don't know how much taxes will goes for 450k house here in Seattle. Just throw some number for the calc. If I have to guess, I think it would be around 4k.
In short, they don't. Their only hope is to move to an area where houses are not that expensive which there are plenty but you need to avoid places like California, South Florida, DC, and other really big cities. I understand the whole idea behind "starter homes", but the problem is that in the high priced areas even the "starter homes" are ridiculously expensive. To try and purchase something on the cheap side of starter homes would be moving your family into an area which is not safe and no one in their right mind would dare put their family at risk like that.
I am not sure what you are saying. If a housing market tank and you in your $200k house, $250 house or $1mil house - they all lose values. All I am saying, if you take out a $50k loan, you will take on about $300 per month for the say interest. This is true whether this loan applies to $100k house or $1mil house.
Man am I glad I bought mine when I did...I live in Ohio and only owe 43,000 on my home, (2-3 bed/ one bath/ full basement/ big yard/close to schools/ ranch) we paid 70,000 12 years ago and now it's worth about 125,000-130,000 with all the improvements we have done over the years and will be wrapping up.
At $525 a month for a house payment you could not get a decent apartment around here now OR 12 years ago....I hate my neighbors to one side of me (there is another thread around here ) but we'll be adding a deck this year to enjoy the nice days and summer evenings, and finishing the basement.
It's ain't much, but it's mine and we are not so far in debt that we can't afford it.
The only thing I wish I did over those few years was make 1 extra payment a month.
At $525 a month for a house payment you could not get a decent apartment around here now OR 12 years ago....I hate my neighbors to one side of me (there is another thread around here ) but we'll be adding a deck this year to enjoy the nice days and summer evenings, and finishing the basement.
It's ain't much, but it's mine and we are not so far in debt that we can't afford it.
The only thing I wish I did over those few years was make 1 extra payment a month.
mugs
Lifer
- Apr 29, 2003
- 48,920
- 46
- 91
Originally posted by: crystal
Originally posted by: mugs
Originally posted by: crystal
Man - using how much I can afford calc at mortgage-calc.com - A 350K 30yrs loan (after 20% down) at 5.5% interest with 2K annual taxes & 2k per month expenses - will require a gross income of at least 142k. I think I will keep dream of owning a house in Seattle.
Holy crap, $2k taxes on a $440k home? Taxes on that would be ~$9k here.
Actually, I don't know how much taxes will goes for 450k house here in Seattle. Just throw some number for the calc. If I have to guess, I think it would be around 4k.
That's probably more reasonable. I'm not sure what to expect out there. Here in NJ our property taxes are relatively high I think. We pay a lot in state and local taxes, because the federal government makes us its bitch to subsidize crappy states.
I also question the idea of buying a so-called starter home. I have driven through some new housing developments around here and many of these cheap houses look like they would offer me no more privacy than I get by living in the apartment complex I am in now, which is to say next to none. I guess you could buy the starter home and hope it appreciates enough to sell it for a profit later, which could be used as the down payment for a better home, but what if the home doesn't appreciate? It seems like I would be better off just staying in the apartment and saving the difference. Heck, with a long enough time horizon, maybe I should look at it as "investing" for a house. The S&P500 has never posted negative returns over any 10 year period
My family owns two houses. 1 in the Cincinnati area. It was built in 1990 for ~120k. 5 acres of land, 2800sq ft, 4BR, 3bath, 3 car garage. Later they built another 3 car garage seperate from the house.
2 or 3 years ago, they bought a lot on the coast of Lake Norris in Tennessee for 90k and built a 300k home there. 1 acre, 5BR, 4 Bath, 2 boats, 2 jet skis, hot tub, covered 400sq ft dock. I remember my dad telling me it was so "cheap" simply because of where it was built. Cheap labor, lowish property values etc. Reading this thread now, I had no idea how "cheap" it really was.
We own both houses and sometimes rent the Tennessee house to family/friends, but mostly we go down there maybe twice a month and chill out.
2 or 3 years ago, they bought a lot on the coast of Lake Norris in Tennessee for 90k and built a 300k home there. 1 acre, 5BR, 4 Bath, 2 boats, 2 jet skis, hot tub, covered 400sq ft dock. I remember my dad telling me it was so "cheap" simply because of where it was built. Cheap labor, lowish property values etc. Reading this thread now, I had no idea how "cheap" it really was.
We own both houses and sometimes rent the Tennessee house to family/friends, but mostly we go down there maybe twice a month and chill out.
PingSpike
Lifer
- Feb 25, 2004
- 21,765
- 615
- 126
Originally posted by: Special K
I also question the idea of buying a so-called starter home. I have driven through some new housing developments around here and many of these cheap houses look like they would offer me no more privacy than I get by living in the apartment complex I am in now, which is to say next to none. I guess you could buy the starter home and hope it appreciates enough to sell it for a profit later, which could be used as the down payment for a better home, but what if the home doesn't appreciate? It seems like I would be better off just staying in the apartment and saving the difference. Heck, with a long enough time horizon, maybe I should look at it as "investing" for a house. The S&P500 has never posted negative returns over any 10 year period
The trouble is, even if it appreciates a lot...then in all likelyhood so will the "real" houses that you ultimately wanted to get into. And if it doesn't appreciate (nevermind losing value, obviously that isn't good if you plan to sell in a short time) then you will still take the hit on closing costs and realtor fees when you sell.
This is more for crystal, and let me be clear I might be missing something, but my logic seems sound here?
My ultimate goal is to buy house B.
Plan 1:
Buy starter home A for 200K 30yr @ 5.5%
5 years later, I sell
I owe 188K, so I have a net equity of 12K
-6% realtor fees $0 of equity after 5 years
Buy new 250K house B, pay 2% closing costs
-$5000 after 5 years
Plan 2:
Save for 5 years to get a 20% down payment...or hell, even 10%.
Buy house B for 250K - down payment.
It doesn't seem like buying the starter house helped at all. You just dicked around paying property taxes and likely doing repairs in a house you never really wanted to live in long term anyway. And for your troubles you end up 5K in the hole, more if you count the repair costs.
It might be different in an appreciating market I would think, but in a stagnant market it doesn't seem that great. Am I missing something?
Capt Caveman
Lifer
- Jan 30, 2005
- 34,543
- 651
- 126
Might not make a huge difference but you also need to add in increase to credit rating and the tax benefits of being a home owner.
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