Insane Cost Of Living (Richfield: 2009, renting, mortgage)

[countrymanl67]

Minnesota used to be a place of reasonable cost of living. My parents used to live in Richfield and bought their house for $22K back in 1972. They sold it in 1991 for $80K. Looking at zillow that house just sold in 2006 for $259K!! This is just a starter type home mind you. My question is, how is a first time buyer even going to be able to buy? Think about it. A 200K house has around a $1400 a month mortgage payment. Banks require the payment not exceed 30% of your monthly income. Which in this case would have to be at least $4700 a month. A starter home in the Twin Cities is around $240K. Just to afford a starter home you would need to be making $65,000 a year! Very few jobs pay over $40K, even those that require many years of college. If you spent many years in college you likely have debt up to your ears and they wouldn't let you get a house anyways because of that debt.

So whats the secret? There must be one, or else people wouldn't be able to afford a house until they are 40.

[Slig]

rent, don't buy until 2009 when the market starts to turn around again.

[sugarbeet]

While I will not deny the OP's statement that the Twin Cities are expensive for many people, some facts are not correct.

For some people it might feel like "very few jobs pay over $40k," but that is simply not the case for a large portion of the population. The median household income in Hennepin County is $58k. That means half the households make more and half make less. Since Hennepin is the most populous and urban county, you have many households making $0 or close to it. And quite a few making in excess of $1 million.

It's quite common for a new college grad coming out of the U of M this year to be offered $45k to work for Target, Best Buy, etc. in entry level corporate jobs. Add a couple of annual pay increases, get married and suddenly a household is making $100k. While not everyone follows this path, the Twin Cities are by and large a "white collar" area where a 25 year old married couple making six figures is not out of the ordinary.

Also, banks do not "require the payment not exceed 30% of your monthly income." They may have done so at some point years ago, but that is no longer the case. Part of the reason so many people got in over their heads is because they could pretty much qualify for any mortgage they wanted. Even today, those with good credit can quite easily qualify for a mortgage that brings their total monthly debt to 50% of gross income.

All those facts being said...people here generally buy what they can afford. Prices have come down in many areas, making it easier for first time buyers to find those homes in closer-in, more desirable areas. But for quite some time, those who wanted a single family home were going farther and farther into the outer ring suburbs.

Of course there are those who still rent. And there is nothing wrong with that, particularly given the risks of the housing market in the past year or so. I'm sure there are quite a few people who over bought or bought wrong and now wish they rented instead.

[moving123456]

"Insane cost of living" all depends what you are comparing it to. Compared to rural Oklahoma, it might be considered "insane". Compared to much of the east and west coasts, I would call it quite reasonable.

Housing prices are still up in most major cities from the biggest increase in U.S. history. They are slowly coming back down again.


This shows how ridiculous the last increase was.....

[golfgal]

Back in 1972 your parents were probably making a cool $9000 a year and doing very well on that income too. The average house price in our area is in the $250,000 neighborhood and the average family income is in the $70,000 or so range. With an income level of that a family can easily afford a house in that price range.

[Kingsnkali]

That chart about says it all....

What a mess we are in.

Thank you banks and hedge funds. Great lending practices!

[x0me880x]

minnesota is ALOT cheaper then most states. Espically if you get out of the minneapolis area.

[kuan]

Or you can do it like my wife and I did. I worked while she got her Doctorate, we had two jobs for three years, rented an affordable place, had one car, and saved until we could afford our 20% down, had baby after we were financially able.

[nick is rulz]

A part of the problem with your dollar to dollar comparison is that the income level of what constitutes a "living wage" in the 70s is very different from that of 2008.

historically, the cost of living was cheaper if you owned versus renting. Renting was just an option for younger people or those who didnt want to accept the long term responsibility of home ownership.

I read a statistic recently and I think it said that home prices would have to drop approx 5% in value for the next 10 years in order for them to be in sync with the cost of renting. Basically, the whole "housing boom" screwed up prices so much that as of right now, buying would be a pretty stupid decision.

Furthermore, the next time someone tells you that renting is just "throwing your money away", be sure to punch them in the face. Its the most smug, ridiculous excuse for home ownership. Those people also "throw their money away" by driving rather than biking, or eating out rather than cooking at home.

I had recently toyed with the idea because I got a pretty substansial pay raise at work but I dont think that prices have dropped substansially enough. I would probably consider a nice block in Camden provided I could find something under $120k, but even that is a crapshoot.

[rcsteiner]

Originally Posted by countrymanl67

Minnesota used to be a place of reasonable cost of living.

Still is according to Forbes. :-)

So whats the secret? There must be one, or else people wouldn't be able to afford a house until they are 40.

I didn't buy a house until 2000. At that point, I was 38. :-)