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After graduating college, and looking to get a family started, it is totally beyond me how people manage to actually buy a house.
After calculating things out, it seems a family would have to be making in the neighborhood of $75,000 to afford a barebones house at around $150k. So once you deduct your basic living expenses, you're left with next to nothing to try to buy a house. Just to crunch a few numbers, would this seem like a reasonable (rough) estimate?
Home Ownership expenses
--------------------------
$4000/yr - Property Taxes - Rochester, NY area
$ 800/yr - Homeowners Insurance - NY average
Subtotal = $ 400/mo
Total before mortgage = $2120/mo
$150,000 30yr 6.0% fixed mortgage = $900/mo
So post-income tax, you'd have to be making in the neighborhood of $3000/mo just to EXIST (or around $50,000/yr pre-tax). And that's not even including 'extras' like emergency money (car trouble, appliances breaking, job loss), kids college, clothing, vacations, or whatever other expenses might crop up. Ugh.
When I graduated college I lived super cheap and paid my student loans off in about a year. I was making about 32k and owed 8k.
My wife and I bought our first house for 155k and our combined income was initially probably like 90k and we had no other debt so we did fine. However, once we had kids and combined income dropped to maybe 60k we were struggling financially at that point until my income went up a bit more.
My advice, get your other debt paid down unless you have ridiculously low interest rates. Save up and put down a larger down payment and look to boost your income if possible.
Yeah, I would think you would want to have combined income of at least 70k to get a 150k house. Consider buying a house and having 2 roomates? That might be an option for the next few years.
I've tried to read all of the above posts and have noticed some things that may need some further study.
First off, I think grade schools need to start teaching their students how to balance their check books and how to run a calculator. There's a lot of bad mathematics in these posts. The housing crisis is not due to the rich or big business. It's each and everyone of us willing to pay the market price for things and trying to cut corners by getting subprime loans for homes that we couldn't afford otherwise and lenders willing to give those loans in the first place.
As long as the market will sustain these high prices, they will continue to climb. If we would refuse to pay these high inflated prices for homes, fuel, groceries, utilities, etc then prices would have to drop to levels that we could all afford because there would be a surplus of unsold items on the market. But as mentioned more times than not, people continue to get in over their head and buy homes they can't afford, but are unwilling to take responsibility for their bad judgement and expect someone else to bail them out.
Rowing Munkey states that his insurance costs are around $200 per month and a few posts think that is too high! You people need to pay attention to your check stubs more closely. Two hundred is cheap no matter where you live in this country. I also read several times that some of you people are falsely depending on their 401k for the future. Think again! I have observed more and more people borrowing against their 401k thinking it's free money. Some even have reached retirement and find that their 401k isn't what they thought it would be because they were still trying to pay back that loan at the time of retirement. Then there are those other folks that think their jobs will last long enough for a well financed retirement. Work for a company for 29 years and ten months and watch how fast the company terminates you to avoid paying out the retirement you expected at 30 years service!
Nobody seems to be planning for this type of eventuality and sadly it happens more often than you think. So now you have lived in your overprised dream house for six years and suddenly you have to sell it for less than it's really worth because you can no longer afford the mortgage adjustment that boosted your monthly payment from $700 a month to $1500 a month. You stopped watering your lawn to save on the water bill and now your curb appeal is gone and you wonder why home buyers are ignoring your for sale sign and driving right by your house. Sound familiar?
Finally, a question...If you save for five years in order to have enough money for a 20% down payment, what do you think the market price of that house is now? Is that 20% based on five years ago now a viable amount for today's purchase? Sadly the market doesn't adjust for inflation backwards!
I don't agree with these high prices, corner cutting builders, cheap materials, shady real estate agents, and lending institutions expecting government bailouts because of poor business decisions (tax payer ends up paying actually), but people need to be willing to refuse to pay these high housing costs and live within their means and not expect that their first or maybe even their third home to be a mansion costing more than they can ever afford.
Just an observation people!
Moose, Amen!!! The problem is that if people actually bought where they could afford they'd be living in the ghetto. Now in reality what would happen is that the place would stop being the ghetto by virtue of middle class america lowering their standard of living and moving there, but nobody in this country wants to collectively downgrade their lifestyle, so we overextend our finances and call it a normal day (aka people calling two income households normal, then get defensive when one questions the validity of where that 'norm' came from).
Ditto about the savings rate. A lot of people are of the mindset that you need to overextend yourself because the nominal household just doesn't have the ability to beat the combined effect of inflation and house appreciation via regular savings. In other words, it will take you 5 years to save 20% on a selected home, but 5 years later the asking price requires a higher downpayment. It's a moving target. Of course the part about savings rate is right, but the assumption of why it's a good idea to overextend yourself in the first place is wrong in today's economy, it's inflation and speculation that's driving the price up. Yeah, the scheme might have worked for the baby boomers which in general had the advantage of holding the home ponzi scheme as relatively true (about home appreciation). But Late Gen X's and beyond have inherited a royal pile of dung for an economy and RE; it's a brave new world baby and we are the ones with the painful reality of accepting a lowered standard of living than that of our parents, a first in contemporary america. Cheers. But people are refusing to do that, which is why we're keeping the bank bailouts and mortgage gimmicks on life support, instead of letting all that paper mirage crash to the floor and actually allow some of us financial conservatives the ability to dwell in a non-bloated utility of a house like it should be.
My air conditioner is messing up again for the second time this year and the landlord has been notified. I'm saving so much money renting this joint right now it's not even funny. I love waking up in the morning and not worrying about my stretched budget, or the broken air conditioner, or the leaky faucet. To each their own of course.
we are the ones with the painful reality of accepting a lowered standard of living than that of our parents
Livining in a 4000 sf McMansion with 3 SUVs in the driveway only LOOKS like a high standard of living. In reality it is just a facade! Most folks living ( if you want to call it living ) such a lifestyle, seem to have little joy and tons of pressure in their lives. They often waste more than a hour a day commuting to and from jobs they hate. They are required to wear depressing business suits, and spend 8 hrs or more in a building with windows that don't even open to the outside world. Weekends are usually spent doing yard work or other fun projects around the mansion. They are strapped financially and really struggling to get by on their combined $100K incomes. Paying the mortgage, and the SUV payments along with regular living expenses leaves litte or no discretionary income. Their showy vacations are just one more thing that goes into the creation of massive credit card debt. They are dutiful church goers, becasue this affords them the only time when they have a chance to pray to God that neither one of them looses the very job they hate.
hindsight....thank your lucky stars that your standard of living is being lowered. I can't imagine anyone who would actually WANT to live the lifestyle I just described. In reality, you're better off living in a mobile home and driving a 10 year old car, if that is all you can afford. Believe it or not that lower standard of living will provide a much greater sense of freedom and joy than most boomers ever had. A material facade of SUCCESS is often an elaborate coverup for utter desperation.
Last edited by CosmicWizard; 09-11-2008 at 05:57 PM..
Are property taxes really $4k/year on a $150k home in Crapchester?? (Jim Rome's term - not mine, but liked it!) That's insanely high, a $150k home in Columbia has taxes of around $1k/yr.
I have a $400K house in a very well-to-do suburb Birmingham, and my property taxes are $3K a year. How do you people stand it up there? Why haven't you guys stormed city hall with pitchforks?
It depends where you live. My property taxes are about $3k a year on a $130,000 house in Texas. People see what size house you can get for the money and think they have hit the jackpot. That changes once the find out the property taxes are between 2.5-3%.
i cant afford my mortgage payments, i scapre up enough money just to make ends meet and am aquirirng too much credit card debt too. I dont know why i just dont sell and move into a small house in the city, but i like the school that my kids go to.
After graduating college, and looking to get a family started, it is totally beyond me how people manage to actually buy a house.
After calculating things out, it seems a family would have to be making in the neighborhood of $75,000 to afford a barebones house at around $150k. So once you deduct your basic living expenses, you're left with next to nothing to try to buy a house. Just to crunch a few numbers, would this seem like a reasonable (rough) estimate?
Home Ownership expenses
--------------------------
$4000/yr - Property Taxes - Rochester, NY area
$ 800/yr - Homeowners Insurance - NY average
Subtotal = $ 400/mo
Total before mortgage = $2120/mo
$150,000 30yr 6.0% fixed mortgage = $900/mo
So post-income tax, you'd have to be making in the neighborhood of $3000/mo just to EXIST (or around $50,000/yr pre-tax). And that's not even including 'extras' like emergency money (car trouble, appliances breaking, job loss), kids college, clothing, vacations, or whatever other expenses might crop up. Ugh.
Some of those numbers are insane. Probably accurate for your area, but I couldn't imagine. I pay $750/month for a 3 bed/2 bath/ 2 car garage, I bought it before the market peak, so its only a $100,000 mortgage. My annual home insurance is like $180. My annual taxes are around $950. That is not a typo. So that's a difference of more than $550 / month right there.
I do spend more than that for food, about $400 / month, for 2 people, but I buy lots of prepackaged stuff I shouldn't. I could probably get by on $300 without too much trouble.
However, I do not think that it is a given right to own a place as soon as you graduate from college. Rent for a few years, pay off some student debt/cars/ etc, get a few years of good credit under your belt - then start to look at buying something.
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So once you deduct your basic living expenses, you're left with next to nothing to try to buy a house. Just to crunch a few numbers, would this seem like a reasonable (rough) estimate?
