Nothing Inbetween (Pittsburgh, California, Dallas: mortgage, credit, loans)

[Hopes]

Originally Posted by claremarie

Oh, you want NEW? That's a different story. Older cities like Pittsburgh don't have much new construction, except in the far-out suburbs. You can't compare Pittsburgh to Atlanta, which is a much more recently developed city.

One of the reasons Pittsburgh has so much affordable housing is that most of its housing stock was built long before buyers expected to have 4 bedrooms and 2.5 baths, master suites with walk-in closets, a 2-car garage, and gourmet kitchens with attached great rooms. There are MANY neighborhoods filled with all-brick 3 BR homes, but they don't have all the bells and whistles that many homebuyers have come to see as essential, and they are priced accordingly.

Many people buy those older homes, renovate them, and add huge additions almost the same size as the origional house. Many of those homes are quite nice. Sure, it's hard to find them---but it's worth the effort to search. Another option is chosing to build a new home. Many people buy land and build their own houses. I suspect eventually people will start buying existing houses and tear them down to build new houses too.

[CaptainObvious]

Payments on a 140K 30-year mortgage at 7% would be about $950. $160K bumps it up to $1064. That's less than what many people pay to rent a small apartment.

***That's without taxes and insurance. Those numbers increase significantly when you make those additions.***

[CaptainObvious]

That's actually a nice little find there, Hopes...exactly the type of house I was talking about.

The whole real estate market just bugs me... I just keep thinking about my parents- when they retired they built a brand new home in an exclusive part of town on a half-acre lot. 2 story, 4 bed, 2.5 bath, about 2,500 sq. foot...and they did it all for $130,000. Granted, this was in 1986, but it just is difficult to wrap my head around the fact that that home is now worth $350,000. The only other thing I can think of that has TRIPLED in value in the last 20 years is auto fuel. I wish all of life was this way...buy a 1986 Honda Civic for $8,000 and put 100,000 miles on it to sell it 20 years later for $24,000

[Hopes]

Originally Posted by CaptainObvious

The whole real estate market just bugs me... I just keep thinking about my parents- when they retired they built a brand new home in an exclusive part of town on a half-acre lot. 2 story, 4 bed, 2.5 bath, about 2,500 sq. foot...and they did it all for $130,000. Granted, this was in 1986, but it just is difficult to wrap my head around the fact that that home is now worth $350,000. The only other thing I can think of that has TRIPLED in value in the last 20 years is auto fuel. I wish all of life was this way...buy a 1986 Honda Civic for $8,000 and put 100,000 miles on it to sell it 20 years later for $24,000

To put it into perspective, my parents built a large new house in a nice neighburhood for something rediculous like $30,000 or less in the 1969. It was worth a small fortune when it was sold in 1995. I assure you that whatever you buy today will be worth much more money 25 years from now. Your children will be just as perplexed as you are. And our parents probably struggled to build their 30k and 130k homes back in their day too.

[CaptainObvious]

Originally Posted by Hopes

Let me help you put this into perspective. My girlfriend lives in a very high cost of living area of Maryland---between Baltimore and Washington DC. Her house is worth 400k. They bought it 2 years ago for 300k (pretty similar to today's mortages because their credit wasn't perfect). They had a decent down payment because they made a nice profit on their previous home. So even though they probably mortgaged only 250k, they have since taken out a 2nd and 3rd mortgage and they will need to sell their current home for 350k to break even. That means that they are basically holding a 350k mortgage.

Her husband earns just under six figures. She's a stay-at-home mother. They have three teenagers (two in braces!). They also have two brand new vehicles with car payments, a RV and a built in swimming pool (added after they bought the house). Their kids all participate in expensive sports and play musical instruments. They go out to eat 2 to 4 times a month for dinner as a family. Money is sometimes tight but they always manage to make ends meet. They ALWAYS get a HUGE income tax refund each year because deduct all the mortage interest and property taxes (and trust me, property taxes are just as high were they live as in Pittsburgh).

Oh, did I forget to mention that 400k only buys a modest ranch house where she lives? That's right. Her family of 5 is living in less than 1,350 square feet.

You can definitely get a lot more house for less your money here in Pittsburgh.

So, would you call this AFFORDING a home? Seems not. How much are they putting toward retirement? Their kids' college education? Remind me not to buy a $400,000 house and live paycheck to paycheck. People amaze me...I swear some people could make $1,000,000/year and still be waiting for that next $38,000 bi-weekly paycheck to come in to pay the mortgage.

Agreed, Pittsburgh is more affordable than say the Silver Spirngs, MD area you speak of above. Still, housing prices in general are absolutely insane....we're all upside down here. If the average US household income is somewhere around $45,000 and the average US home price is somewhere around $240,000, this means there are a lot of people living for their homes. That means home prices are 6 times annual income. In the 60's the average income was $20,000 but the average home price was $50,000...only 2.5 times annual income. This is pricing young folks that make good wages right out of the market. It is a shame.

[claremarie]

I just keep thinking about my parents- when they retired they built a brand new home in an exclusive part of town on a half-acre lot. 2 story, 4 bed, 2.5 bath, about 2,500 sq. foot...and they did it all for $130,000.

Well, try wrapping your head around the sort of house or apartment your parents lived in when they got married. If they were like my parents or inlaws, they started out in a small one BR apartment. No central air. No dishwasher. Probably no washer/dryer. One car, or maybe no car. One small black and white TV with rabbit ears that got three channels.

[claremarie]

That's without taxes and insurance. Those numbers increase significantly when you make those additions

Yes, but then you factor in the mortgage interest deduction, and the payments on a $140,000 mortgage are still well within range for most middle-class families.
We bought our first house 20 years ago for $175,000 on an income under $100,000. We also had car payments and student loan payments, and could afford only a 5% down payment. We still had money left over for food and 401(k) contributions.
Seriously, if you think that Pittsburgh's housing market is unaffordable, I can't imagine what "affordable" means.

[Tallysmom]

Originally Posted by CaptainObvious

So, would you call this AFFORDING a home? Seems not. How much are they putting toward retirement? Their kids' college education? Remind me not to buy a $400,000 house and live paycheck to paycheck. People amaze me...I swear some people could make $1,000,000/year and still be waiting for that next $38,000 bi-weekly paycheck to come in to pay the mortgage.

Agreed, Pittsburgh is more affordable than say the Silver Spirngs, MD area you speak of above. Still, housing prices in general are absolutely insane....we're all upside down here. If the average US household income is somewhere around $45,000 and the average US home price is somewhere around $240,000, this means there are a lot of people living for their homes. That means home prices are 6 times annual income. In the 60's the average income was $20,000 but the average home price was $50,000...only 2.5 times annual income. This is pricing young folks that make good wages right out of the market. It is a shame.

Oh, Cap'n... come out to California, where a 1000 square foot 80 some year old home barely updated in a neighborhood a little better than the Hill District costs you 450,000..... just yesterday I watched a young man smoke something in a glass pipe, tucked away in this little enclosed corner on my neighbors fenced in yard on the sidewalk... and then watched him turn around... smoke some more and do something rude to himself. If I hadn't hurt myself at work (injured my knee, which made my back hurt -- and then I did something to my pinkie...) I would have gone after the little **** with a broom.

Anyhow -- using your logic of 2.5 times earnings at 90K you could buy a 225,000. home -- I know you can find them there...

[Hopes]

Originally Posted by CaptainObvious

So, would you call this AFFORDING a home? Seems not.

You're making assumptions.

Originally Posted by CaptainObvious

How much are they putting toward retirement?

You're forgetting that your home is part of your retirement investment.

Originally Posted by CaptainObvious

Their kids' college education?

They saved for that during the children's younger years. Their educations are already secure.

Each time you trade up to a new home, you generally make money off of the sale of the previous home. They lived in the NYC area previously. When they sold their home there, they made a profit of over 400k. They only took a portion of that to put down on the mortage of their new home and invested the rest. And this isn't the first home they have owned and made a profit at resale. I believe this is their 6th home. They move around the country a lot.

I assure you that the retirement and other investments are intact. When I say that sometimes they have a difficult time making ends meet, it's because they live within the salary means and very rarely dip into their savings and investments.

You've got to spend money to make money, CaptainObvious.

[likepgh]

Um, It's "Silver Spring" not "Silver Springs." I hate to be pedantic but speaking as a former Montgomery County, MD resident, I can tell you that folks down there get as touchy about that one as Pittsburghers do when out-of-towners leave off the final "h."