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wow - the irony here is almost beyond my comprehension!
This is exactly what pilgrim and I were saying with regards to values and what people should be buying vs. income...
I'm going to paint a circle on the wall and bash my forehead into it.
If you must... then you can borrow my helmet when I'm done.
It's the way the math worked out... but it's the payment that drove us there, not the home price.
Another 4% interest and I wouldn't have spent more than 1X our income (and been out of luck)_
If rates dipped to 3 - I might have gone 3X our income...
Point is, we based it on a mortgage payment of less than 20% of our gross income... I gave the other number because the OP asked for it.
Look, maybe the 2X rule is a good one... an being fair to you, I did follow it because we were really concerned with overextending ourselves... but the real driving force, if I'm honest with myself, was payment. If the payment was low enough, and the terms were sane (30 yer fixed) that mattered to me more than selling price.
Last edited by superfly10; 08-25-2010 at 02:58 PM..
If you must... then you can borrow my helmet when I'm done.
It's the way the math worked out... but it's the payment that drove us there, not the home price.
Another 4% interest and I wouldn't have spent more than 1X our income (and been out of luck)_
If rates dipped to 3 - I might have gone 3X our income...
Point is, we based it on a mortgage payment of less than 20% of our gross income... I gave the other number because the OP asked for it.
Look, maybe the 2X rule is a good one... an being fair to you, I did follow it because we were really concerned with overextending ourselves... but the real driving force, if I'm honest with myself, was payment. If the payment was low enough, and the terms were sane (30 yer fixed) that mattered to me more than selling price.
nono, I'm sorry it wasn't you specifically I was being sarcastic about... It was the comments earlier. You seem very together and get it.
I'm fine with 3x for most people, the problem is that average in most areas are 4, 5, 6x the median salary of those living there... and if you read responses here, this is justified somehow because it's, you know, THE Long Island. It's always been that, though - proximity to THE city of the world. Yet, something broke in the math when values got so out of synch with incomes. If it was so great, the salaries would have kept up... well, they didn't and what's worse is the buying power you may have gained via interest rate is offset by the taxes.
So yeah I get the payment thing and always considered it in relation to the taxes for the most part. But when it comes down to it - a financially responsible person is not going to be over extending themselves under normal circumstances - we complain about how easy it was in the past putting people in homes that really couldn't afford it. Well, now it's "downsizers" (like yourself) and FHA loans driving the market. That's a continuing problem - not a sign of stability or holding values.
maybe they were underpriced back then and we're just now catching up...lol.
Also have to factor in things like interest rates at the time (probably in the mid teens if I'm not mistaken).
Anyway, I'm with you on this for the most part, however it seems like the ratio you describe might be a LONG way off.
Underpriced when they were in relation to the average income and within normal 2-3x standards? How is that?
Fact is that the home prices are were 270% higher then they were 10 years ago, but most people are only making 23% more. Everywhere else the prices "plummeted", by plummet I mean that they went back to a normal income-to-price ratio. Long Island isn't near that, we're still living at 150% COl but only 110% income. That 40% disparity is THE hurdle to overcome to retain growth on LI and retain some of our white-collar middle income young people.
Quote:
Originally Posted by superfly10
Fair enough... but do you buy that MOST people do shop that way... and it drives the market?
I hope this link works... but it's a market affordability survey from 1995-2005
You're right... houses in NE (as in Long Island) were MORE affordable related to income in 1995... but still WAAAY off the national average. Couple that with the diff in interest rate (4.5 to 8% is an easy 100K difference in buying power - then consider rising median income and things balance out more.) Not saying they ARE balanced... but things were off then too... if you look at payment. Sure, the sticker shock isn't the same... but the payments are about as "affordable" to many. People freak over a 40K sticker price on a car... but 0% financing still sends them home driving one.
You might not buy the whole "payment shopping thing," but I don't think people lose their houses because the house cost too much... the lose it because they can't make the payment.
See above, 270% higher vs. 23% increased income. Payments are, whether "affordable" or not, still negatively effecting the COL on LI. You may take a 30yr loan instead of the 20yr loan to make your payments higher, but now you look at total cost of your home and you increased it by $100,000, even with the interest rates being lower. Also, prices vs. interest does nothing for me. All things equal I'd rather sit on an 18% interest rate buying a 100K home vs. a 4% with a 450K home. That extra money I throw into the principal with every payment goes to a significantly better percentage of the total principle owed.
People definitely are closing their eyes to the lack of affordability because of the lower interest rates... just like the banks and the .gov want them to.
People definitely are closing their eyes to the lack of affordability because of the lower interest rates... just like the banks and the .gov want them to.
Worst news in housing data released over the past 2 days like - ever... Yet, the market finishes 19pts UP. It's really like we fell down the rabbit hole.
Worst news in housing data released over the past 2 days like - ever... Yet, the market finishes 19pts UP. It's really like we fell down the rabbit hole.
Well they did drop the previous 2 days iirc. Fools bump. It'll probably drop into the 9xxx's again.
The high-end market, in particular, is under tremendous pressure. In fact, it is becoming non-existent. Guess how many homes prices above $750k managed to sell in July. Answer — zero, nada, rien; and for the second month in a row. Only 1,000 units priced above 500,000 moved last month. That’s it! Over 80% of the homes that the builders managed to sell were priced for under $300,000. Just another sign of how this remains a full-fledged buyers’ market — at least for the ones that can either afford to put down a downpayment or are creditworthy enough to secure a mortgage loan (keeping in mind that 25% of the household sector does have a sub-600 FICO score).
I still see quite a few luxury buildings going up in Manhattan. You'd think they would have at least sold one in July.
They're saying it was the same in June... What seems unclear are some comments replying to the story indicating that it might be a "statistical" zero since the overall data is in 000s (thousands) - meaning <500 total sold in the month for the whole country would equate to zero.
Beyond the headline, the chart data is very interesting.
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