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The Post Subprime Crisis Home Buying Thread - Page 4

post #46 of 68
Quote:
Originally Posted by odoreater View Post
A median income of $80,000 is enough to support a mortgage on a $500,000 house.

I don't see how one could possibly afford a $500k house on an $80k annual salary.
post #47 of 68
Quote:
Originally Posted by spertia View Post
I don't see how one could possibly afford a $500k house on an $80k annual salary.

Well I can see family getting by barely on 80k with 500k house, but they can have one car only and NO kids.
Seriously I think the only way the family of three can afford that house is by going interest only.

The ugliness of US RE market is not in :"People are willing to pay half-mil for apartment in Jersey", but " Crooked banks are willing to lend half-mil for apartment in Jersey".
post #48 of 68
Thread Starter 
Quote:
Originally Posted by spertia View Post
I don't see how one could possibly afford a $500k house on an $80k annual salary.

yeah, you'd definitely need to have the 20% down. assuming 20% down, that's a 400K loan. at 6% with a few points, you'd be looking at a $2300-$2400 monthly note. 36% of 80K / 12 = $2400.

-Jeff
post #49 of 68
I have plenty of friends who have bought homes in the past few years, ranging from 200k to 500k--I don't think ANY of them put 20% down. Maybe more banks will insist on that with all the BS lately. (I'm 27, and all these people were buying first homes, FWIW.)
post #50 of 68
Quote:
Originally Posted by dkzzzz View Post
Well I can see family getting by barely on 80k with 500k house, but they can have one car only and NO kids.
Seriously I think the only way the family of three can afford that house is by going interest only.

The ugliness of US RE market is not in :"People are willing to pay half-mil for apartment in Jersey", but " Crooked banks are willing to lend half-mil for apartment in Jersey".
The needs to be assessed with reference to reality. Assuming that the average home sold is 500k, the average income is 80k, and 60% of families own homes, that is not really a high multiple. In real life the average earner does not buy the average home, rather the average earner in the top 60% of earners does.
post #51 of 68
Quote:
Originally Posted by spertia View Post
I don't see how one could possibly afford a $500k house on an $80k annual salary.

Agree.

Together, my girlfriend and I clear over 200k, and we are about to put 20% down on a 575k condo, and that is the absolute peak of our budget. I have no idea how someone who makes 80k can handle 500k, even with 20% down. There's no room for retirement or general savings and definitely no room for lifestyle, fun or vacation.
post #52 of 68
My fiancee and I have started seriously looking for a home in the past few weeks, since I got an offer for a new position, and I've never been so glad to live in West Virginia.

Some of the houses we're considering include a few 1500 sq. ft. homes in the very upper-class part of town (hillside, great views, low traffic, close to parks and a museum) and a 2400 sq. ft. 4 bed, 3 bath 1919 brick home with a Spanish tile roof in a nice middle-class part of downtown (walking distance to churches, synagogue, shopping, etc).

With a 35% downpayment, we should be able to easily make mortgage payments on either of those for less than 600 monthly. We may not be in the center of culture and excitement, but when you're just starting out as a young couple, it's nice to be in an area where housing is this affordable. Even some of the architect-designed dream homes in the ritziest suburbs are going for less than 300K right now. A more reasonable (though still large and well-located) home would be anywhere from 85-200K.
post #53 of 68
Quote:
Originally Posted by oDD_LotS View Post
some of the architect-designed dream homes in the ritziest suburbs are going for less than 300K right now.

What city/suburb? Can you link to such a home on realtor.com? Just curious, but I do like West Virginia.

Want to see some overpriced real estate? Make sure you're seated:

http://www.realtor.com/realestate/pa...01-1096141616/
http://www.realtor.com/search/listin...lid=1098116091

Those look like median homes to me but they're not median priced. I went to the bank a few blocks away to withdraw almost the same amount of money from savings that would go into a monthly mortgage payment on either of those and the bank told me they couldn't give me the full cash amount until tomorrow.
post #54 of 68
Quote:
Originally Posted by spertia View Post
I don't see how one could possibly afford a $500k house on an $80k annual salary.

Quote:
Originally Posted by dkzzzz View Post
Well I can see family getting by barely on 80k with 500k house, but they can have one car only and NO kids.
Seriously I think the only way the family of three can afford that house is by going interest only.

The ugliness of US RE market is not in :"People are willing to pay half-mil for apartment in Jersey", but " Crooked banks are willing to lend half-mil for apartment in Jersey".

Well, I wonder how many people on the lower spectrum of the income range bought their houses 30 years ago when they were less than $100k. I wonder how many people have upgraded over the years from other houses where they built up solid equity and then sold the house giving them a solid down payment for a new house. It's not as if everyone moved into the neighborhood yesterday and just plopped down $500k for a house. And even then, I still think people can afford a $500k house even on $80,000 income. But my point was more that there are places in NJ where median incomes are a lot higher than the national average, and that's why home prices are much higher than the national average too.

I think sometimes you guys think a little too theoretically without really thinking about reality. The world is not as simple as a three sentence post on styleforum.
post #55 of 68
There are always different stories. One set of grandparents wound up living in a waterfront villa in West Vancouver-- after careers in teaching and the clergy. I gather my grandfather was moved around from parish to parish, and their habit was to pay cash for the worst house in the neighborhood and fix it up. So that's 40 years of sweat equity.

But I think we're going to be hearing a lot more about people who stretched to buy on teaser-rate loans, and now may not even have the income they used to have while the rate pops. Nasty stuff brewing.
post #56 of 68
Quote:
Originally Posted by odoreater View Post
I wonder how many people have upgraded over the years from other houses where they built up solid equity and then sold the house giving them a solid down payment for a new house. .

I don't understand this point. Could you explain this to me? So when I live in a house for 30 years the houses around me are getting cheaper while my house is getting more expensive/appreciates and I built SOLID EQUITY with which I go and buy better house in my neighborhood?


Quote:
Originally Posted by odoreater View Post
But my point was more that there are places in NJ where median incomes are a lot higher than the national average, and that's why home prices are much higher than the national average too..

That is certainly a factor affecting home prices albeit not to the ridiculous points that we observe. I don't see any explanation for the prices of 500K and more in most NJ areas other than criminal lending practices. If banks tomorrow start to operate like real banks and demand 20% collateral on overvalued properties in the overheated markets the fake RE market would grind to a complete halt.
The scam is : Appraiser puts BS value on a home - Bank lends money to people who cannot afford it - then pushes all that junk obligations to the financial market where it USED TO BE bought by a bunch of morons.
Let's see which new fabulous scam US government would cook now. After all the show must go on.
post #57 of 68
how does $80K support a $500K house. I make more than twice that (stating, not bragging by any stretch) and we're struggling with a $420K mortgage, taking into account one income, children, etc.
post #58 of 68
Thread Starter 
Quote:
Originally Posted by raphael View Post
What city/suburb? Can you link to such a home on realtor.com? Just curious, but I do like West Virginia.

Want to see some overpriced real estate? Make sure you're seated:

http://www.realtor.com/realestate/pa...01-1096141616/
http://www.realtor.com/search/listin...lid=1098116091

Those look like median homes to me but they're not median priced. I went to the bank a few blocks away to withdraw almost the same amount of money from savings that would go into a monthly mortgage payment on either of those and the bank told me they couldn't give me the full cash amount until tomorrow.

holy crap. ok, that was impressive. that amount of money in So Cal could get you a 2000-3000 sq ft pre WWI Craftsman on a 10-15K sq ft lot in a good neighborhood (basically my dream home).

-Jeff
post #59 of 68
Quote:
Originally Posted by thekunk07 View Post
how does $80K support a $500K house. I make more than twice that (stating, not bragging by any stretch) and we're struggling with a $420K mortgage, taking into account one income, children, etc.

Well I guess it depends on # of children, etc... but that doesn't sound too crazy to me. The annual after-tax cost of a $400k mortgage is somewhere in the $15k area (obviously depending on a lot of assumptions). This sounds consistent with a $80k income, assume of course that such income woulg increase over the life of the loan. This is totally consistent with a national average around 20% of gross income. Areas like NY and NJ generally have averages higher than that (in the 25% area)
post #60 of 68
If you're struggling to pay a $420k mortgage making $160k per year, you're doing something wrong. 'nuf said.
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