$450K house is low income?

[paulxcook]

450K in my city would get you a huge, nice house in a great neighborhood.

 

[Special K]

Originally posted by: Capt Caveman

Originally posted by: PingSpike
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?

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.

Increase in credit rating? What if you already qualified for the best rate to begin with? Don't you only need a 750 FICO to get the best rates?

PingSpike - I kind of agree with you. Rents may always increase like clockwork, but I can't imagine they would ever exceed the cost of a mortgage + property taxes + maintenance + homeowner's insurance for even a cheap starter home.

 

[Fingolfin269]

Originally posted by: legoman666
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.

Yup, Tennessee is a good sweet spot as far as what you pay for what you get in terms of real estate. A lot of the areas are really not as bad as what people think about Tennessee as well. One thing I've noticed is that we still do experience a good amount of appreciation basically because we haven't priced the majority out of the market like what has happened in other places. If I had to pay $500k for a 600 square foot home to live in CA I don't know how I would react.

 

[HannibalX]

My folks bought a home in Orlando, Florida in mid 1995. It was a nice home, 2,500 s/f not including the garage or patio sitting on a double lot (on a corner 25,000 s/f). The home had 4 beds, 2 baths, separate living room and family room, separate dining room, breakfast dining room, large kitchen, 1000 s/f patio with a 40 foot long, 25 foot wide screened pool in the back yard with a custom "lagoon" style waterfall. The entire yard was professionally landscaped with a professionally installed sprinkler system. There was a 2 1/2 car attached garage, outside kitchen area with a professional grill and refrigerator. This was a nice, middle class home for the time in a nice, clean, new neighborhood. They paid, $99,000. Now, anyone guess what that home sold for in 2005, just ten years later? $425,000.

When my parents bought the home, my dad was making about 45k and my mother was making about 30k or roughly $75k combined. Both were college educated and for that time their salaries were considered respectable for their titles. I wanted to buy the house from my parents in 2005 when they sold it, but I just didn't have the money. In 2005 when the home sold for $425,000 I was making $42k and my wife was making 35k - roughly the exact same amount as my parents ten years ago. There was just no way we could afford the house, and my parents did what was best for them financially (I would have too) and sold it for as much as they could. Selling it to me for a discount would have been foolish. The house sold for roughly 4.2 times it's original price - but I was making no where close to 4.2x75k/year.

I ended up moving out of Florida this past September after living there for 14 years. The housing market there just got to be out of control. My wife and I, both worked professional jobs, couldn't buy anything. Even the nasty areas had moved beyond our reach. 200k for a house in the ghetto where people are raped, mugged and murdered almost daily? No way I am moving my family into something like that. We had the option of moving north of Orlando away from the metro area to the Deltona area where prices were more reasonable, but the commute for me would have been 3 hours total per day in the car.

So, like I said we moved away. And like others have posted on here already, the housing market is growing faster than our incomes. We are operating at a deficit just by working at all. Each year I get a raise, but actually make LESS that the previous year because the housing market is out of control and the cost of goods and services has risen as well. For example. I rented a condo in 2004 that was 1,500 s/f, 2-2 for $890/month - that same condo now is renting for $1,600/month. It practically doubled in four years. In the meantime my income hasn't come CLOSE to doubling in four years.