How does income level translate to home value?

[waggy]

Originally posted by: Jadow

Originally posted by: skyking
I'm looking at spending about 4x on a new custom home, I'll be the general contractor on it. We'll be going into it with no debt and about 2x in equity on our current home. The mortgage won't be the ugly thing, it is the tax hike. We are building with active solar systems for extreme efficiency, so that will help.

Who cares?

yeap. i have to agree.

 

[BassBomb]

my house is ~600

my dad makes about 150k from what I know

 

[mugs]

Originally posted by: Descartes
I agree with spidey about the 2x. I know people that go well beyond that, but that's to their own peril. Right now, our home is significantly less than 2x our income.

Isn't 28% of gross a sort of standard guideline for mortgage + tax + insurance? That works out to a house that is worth more than 3x annual gross salary. 2x might make sense for people with very high incomes, but it doesn't scale down to the average person very well. By your standard, someone making $150k here in NJ couldn't afford more than a townhouse. Realistically, they could afford a house in the $400k+ range.

/waits for spidey to tell me I feel entitled to a nice house.

 

[Aharami]

Originally posted by: mugs

Originally posted by: Descartes
I agree with spidey about the 2x. I know people that go well beyond that, but that's to their own peril. Right now, our home is significantly less than 2x our income.

Isn't 28% of gross a sort of standard guideline for mortgage + tax + insurance? That works out to a house that is worth more than 3x annual gross salary. 2x might make sense for people with very high incomes, but it doesn't scale down to the average person very well. By your standard, someone making $150k here in NJ couldn't afford more than a townhouse. Realistically, they could afford a house in the $400k+ range.

/waits for spidey to tell me I feel entitled to a nice house.

Mortgage guy at local bank said they recommend 36% here in NJ. That is mortgage, insurance, taxes, monthly bills, etc.

 

[Doodoo]

Those formulas don't work in NY, CA, or any other place where housing is high. Lets say 2x your salary...if you made 80k in NY, 160k isn't enough to get a house. So these people are saying you need to make at least 100k to live in a shack in the ghetto?

 

[Descartes]

Originally posted by: mugs

Originally posted by: Descartes
I agree with spidey about the 2x. I know people that go well beyond that, but that's to their own peril. Right now, our home is significantly less than 2x our income.

Isn't 28% of gross a sort of standard guideline for mortgage + tax + insurance? That works out to a house that is worth more than 3x annual gross salary. 2x might make sense for people with very high incomes, but it doesn't scale down to the average person very well. By your standard, someone making $150k here in NJ couldn't afford more than a townhouse. Realistically, they could afford a house in the $400k+ range.

/waits for spidey to tell me I feel entitled to a nice house.

Well, like all income-related threads on ATOT, it's highly relative. As you said, many people (if not most) have little choice but to put themselves in such a position. I only mean to say that doing so puts you at more risk, but I'm just stating the obvious I guess.

 

[mugs]

Originally posted by: Descartes

Originally posted by: mugs

Originally posted by: Descartes
I agree with spidey about the 2x. I know people that go well beyond that, but that's to their own peril. Right now, our home is significantly less than 2x our income.

Isn't 28% of gross a sort of standard guideline for mortgage + tax + insurance? That works out to a house that is worth more than 3x annual gross salary. 2x might make sense for people with very high incomes, but it doesn't scale down to the average person very well. By your standard, someone making $150k here in NJ couldn't afford more than a townhouse. Realistically, they could afford a house in the $400k+ range.

/waits for spidey to tell me I feel entitled to a nice house.

Well, like all income-related threads on ATOT, it's highly relative. As you said, many people (if not most) have little choice but to put themselves in such a position. I only mean to say that doing so puts you at more risk, but I'm just stating the obvious I guess.

Well yeah, there's going to be more risk. And 2x is more risky than 1.5x, which is more risky than 1x, which is more risky than .5x. But 2x is a rather low threshold for what you consider to be acceptable risk.

 

[Jumpem]

Originally posted by: mugs
Isn't 28% of gross a sort of standard guideline for mortgage + tax + insurance? That works out to a house that is worth more than 3x annual gross salary. 2x might make sense for people with very high incomes, but it doesn't scale down to the average person very well. By your standard, someone making $150k here in NJ couldn't afford more than a townhouse. Realistically, they could afford a house in the $400k+ range.

/waits for spidey to tell me I feel entitled to a nice house.

We make $108k, and our house was $117k. Our mortgage and taxes is 11% of gross.

 

[Gooberlx2]

Originally posted by: Jumpem
The rule of thumb is not to buy a house more than three times your gross income.

We spent one times our income. I couldn't imagine having a mortgage for a house three times it.

Some people say gross income and others say net income. Which is it? There's quite the difference between the two.

 

[BrownTown]

Just curious here, but how would one think that should work for apartments? You don't have any of the risk in that if you lose your job your not stuck with hundreds of thousands of debt, but at the same time you don't have any equity saved up? I was just thinking that given the job I will have upon graduation and what I expect to pay for an apartment that I will be not even close to 25% of my income.

 

[Baked]

It doesn't. That's why we're in recession now. Retards who buy houses beyond their means, and bigger retards who give them the loan in the 1st place.

Around here, multiple members of the family contribute to the mortgage payment, not just the parents. In a lot of instances, multiple families live in the same house. They don't make 6 figures income, they don't even make high 5 figures income.

Somebody in my lab bought a house a few years back at around 800K (north side of Golden Gate Park), before the housing market went to shit. The couple makes just a little over 100K a year. But their down payment was huge, they got help from their parents. I think their property tax is 10K a year or something like that.

Originally posted by: waggy
depends on who and where i would guess.

my grandmother (well step-mothers mom). baught a house in the 60's for like 80k (in california). when she died a few years ago the estate sold the house for 1.5 million.

my grandmother never made very much money. weird part is her tax's were extremly low.

That's 'cause retarded politicians came out w/ some property tax law to save big business money and in turn fucked all the new property owners. Property tax is based on original purchase value of the house. So if you've been living here for the past 20+ years and bought your house way back, your property tax is gonna be low. If you bought your house during the "fuck you dot com let's jack up all the home values" era, then you're pretty much getting bitch slap bi-annually w/ a large property tax bill. Seeing how your grandma bought her house back in the 60s, the property tax would be extremely low.

 

[Special K]

Originally posted by: Baked


That's 'cause retarded politicians came out w/ some property tax law to save big business money and in turn fucked all the new property owners. Property tax is based on original purchase value of the house. So if you've been living here for the past 20+ years and bought your house way back, your property tax is gonna be low. If you bought your house during the "fuck you dot com let's jack up all the home values" era, then you're pretty much getting bitch slap bi-annually w/ a large property tax bill. Seeing how your grandma bought her house back in the 60s, the property tax would be extremely low.

Aren't all properties periodically reappraised by the county?

 

[RichieZ]

Originally posted by: Special K

Originally posted by: Baked


That's 'cause retarded politicians came out w/ some property tax law to save big business money and in turn fucked all the new property owners. Property tax is based on original purchase value of the house. So if you've been living here for the past 20+ years and bought your house way back, your property tax is gonna be low. If you bought your house during the "fuck you dot com let's jack up all the home values" era, then you're pretty much getting bitch slap bi-annually w/ a large property tax bill. Seeing how your grandma bought her house back in the 60s, the property tax would be extremely low.

Aren't all properties periodically reappraised by the county?

In CA the appraised value for tax purposes of a house can only increase by a certain % each year. My parents house is worth over 4X what they bought it for (in the early 90's) but is appraised for tax purposes about 1.5X the original purchase price.

at least thats what my laymans view is, i think this is the prop that covers it:
http://en.wikipedia.org/wiki/C..._Proposition_13_(1978)

 

[Dirigible]

Originally posted by: Special K

Originally posted by: Baked


That's 'cause retarded politicians came out w/ some property tax law to save big business money and in turn fucked all the new property owners. Property tax is based on original purchase value of the house. So if you've been living here for the past 20+ years and bought your house way back, your property tax is gonna be low. If you bought your house during the "fuck you dot com let's jack up all the home values" era, then you're pretty much getting bitch slap bi-annually w/ a large property tax bill. Seeing how your grandma bought her house back in the 60s, the property tax would be extremely low.

Aren't all properties periodically reappraised by the county?

Not really. Prop 13 limits the prop tax increases to something like 2% a year, no matter how much property values go up.

Edit: RichieZ beat me! [Shakes fist at RichieZ.]

 

[Jumpem]

Originally posted by: Gooberlx2
Some people say gross income and others say net income. Which is it? There's quite the difference between the two.

Either one, just different percentages for each.

 

[Jumpem]

Originally posted by: Dirigible
Not really. Prop 13 limits the prop tax increases to something like 2% a year, no matter how much property values go up.

Edit: RichieZ beat me! [Shakes fist at RichieZ.]

Not here in upstate NY. Some municipalities have been handing out 50% increases.

 

[Capt Caveman]

Originally posted by: spidey07
If you're smart 25% of your net goes to your house.

Making 250K gross a year means you should buy a 500K house, MAX.

Wrong.

The ratios everyone is using for income has to do with the appropriate mortgage one should finance. No one is including the downpayment into the equation.

My house is over $500k and I make less than $250k yet I can comfortably cover my mortgage payments.

 

[Special K]

Originally posted by: Capt Caveman

Originally posted by: spidey07
If you're smart 25% of your net goes to your house.

Making 250K gross a year means you should buy a 500K house, MAX.

Wrong.

The ratios everyone is using for income has to do with the appropriate mortgage one should finance. No one is including the downpayment into the equation.

My house is over $500k and I make less than $250k yet I can comfortably cover my mortgage payments.

Shouldn't they also include property taxes, insurance, and maintenance costs?

 

[mugs]

Originally posted by: Jumpem

Originally posted by: mugs
Isn't 28% of gross a sort of standard guideline for mortgage + tax + insurance? That works out to a house that is worth more than 3x annual gross salary. 2x might make sense for people with very high incomes, but it doesn't scale down to the average person very well. By your standard, someone making $150k here in NJ couldn't afford more than a townhouse. Realistically, they could afford a house in the $400k+ range.

/waits for spidey to tell me I feel entitled to a nice house.

We make $108k, and our house was $117k. Our mortgage and taxes is 11% of gross.

I don't know why you're telling me this.

Originally posted by: Capt CavemanNo one is including the downpayment into the equation.

I was assuming a 20% downpayment in my calculations.

Originally posted by: Dirigible
Not really. Prop 13 limits the prop tax increases to something like 2% a year, no matter how much property values go up.

Edit: RichieZ beat me! [Shakes fist at RichieZ.]

2% increase per year hardly seems sustainable, so it sounds like the new homeowners will get screwed. Smart.

 

[StageLeft]

Originally posted by: spidey07
If you're smart 25% of your net goes to your house.

Making 250K gross a year means you should buy a 500K house, MAX.

Oops, guess I'm not smart, but I'm from Canada so I have an excuse!

 

[Dirigible]

Originally posted by: mugs

Originally posted by: Dirigible
Not really. Prop 13 limits the prop tax increases to something like 2% a year, no matter how much property values go up.

Edit: RichieZ beat me! [Shakes fist at RichieZ.]

2% increase per year hardly seems sustainable, so it sounds like the new homeowners will get screwed. Smart.

Like a lot of things, Prop 13 created winners and losers.

New homeowners do get screwed. You can have a new homeowner in a house worth $500k living next to an old homeowner with a house worth $1M, and the new homeowner paying more in property taxes. Makes it unlikely someone'll get taxed out of their house though.

 

[Imdmn04]

The price of the house should not be used as a variable in comparison to income. Rather, it should be the amount to be financed

Let's say, a couple has a house that was bought 15 years ago, and now it's paid off and worth 400k. They want to upgrade to a 500k house and they only make a combined 100k.

By the rules posted above (2 or 3 times yearly income), they can't even afford a house that they currently live in. But in actuality, they can put down 400k sold from the old house, and take out a 100k mortgage, which every lender in the country will gladly approve on a 100k/yr annual income.

 

[xeemzor]

Originally posted by: Imdmn04
The price of the house should not be used as a variable in comparison to income. Rather, it should be the amount to be financed

Let's say, a couple has a house that was bought 15 years ago, and now it's paid off and worth 400k. They want to upgrade to a 500k house and they only make a combined 100k.

By the rules posted above (2 or 3 times yearly income), they can't even afford a house that they currently live in. But in actuality, they can put down 400k sold from the old house, and take out a 100k mortgage, which every lender in the country will gladly approve on a 100k/yr annual income.

I believe the rule makes an assumption that you are paying a mortgage equal to the value of the house.

 

[theeedude]

Wow, 2x or 3x annual income doesn't buy much in CA, even if I am making low 6 figs
Oh well, will just wait for bubble to finish bursting, or marry a sugar momma

 

[Imdmn04]

Originally posted by: xeemzor

Originally posted by: Imdmn04
The price of the house should not be used as a variable in comparison to income. Rather, it should be the amount to be financed

Let's say, a couple has a house that was bought 15 years ago, and now it's paid off and worth 400k. They want to upgrade to a 500k house and they only make a combined 100k.

By the rules posted above (2 or 3 times yearly income), they can't even afford a house that they currently live in. But in actuality, they can put down 400k sold from the old house, and take out a 100k mortgage, which every lender in the country will gladly approve on a 100k/yr annual income.

I believe the rule makes an assumption that you are paying a mortgage equal to the value of the house.

That is what's wrong with the real estate industry theses days, letting people buy houses with no down payment.

In my opinion, if you don't have at least 20% down, you can't afford it.