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Old 01-10-2014, 08:22 PM
 
25,959 posts, read 28,379,164 times
Reputation: 24623

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Quote:
Originally Posted by ohio_peasant View Post
People complain, with admittedly good reason, that the ratio of house price to median annual earnings is unpleasantly high in some areas. The flip side, in my view, is that this "unreasonableness" can actually be a benefit when viewed as long-term investment value.
But this isn't always that simple, either. If you are house poor in a high cost area and lose your job, you may be totally screwed. It usually takes not one, but TWO professional incomes to afford a modest SFH in places like Los Angeles, & the SF Bay Area. That puts a lot of stress on people. And even with 2 good incomes, the house payment gobbles up a lot of your income....taking away from stuff like retirement savings, which may actually appreciate faster than your house. And if you don't plan on selling and moving to a cheaper area when you retire, then home price appreciation doesn't really mean a lot, anyway.

Bottom line for me: Total housing costs, whether you buy or rent, need to be a low percentage of your income...25% of gross or, ideally, less. Those low percentages are often hard to achieve in high cost areas, especially for people with kids.
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Old 03-04-2014, 07:08 AM
 
Location: USA
7,479 posts, read 5,770,599 times
Reputation: 12319
Quote:
Originally Posted by tickyul View Post
Good luck, you will buy a junky house and/or have to live in a nightmarish area.

Thank Big Brother for continually attempting to artificially hyper-inflate the cost of housing......thank many citizens because they think housing price inflation is a great thing.
Bingo.

I live in central Maryland. Housing here is basically unaffordable unless both husband and wife work at good paying jobs with job security... yeah, what a novel concept. Around here, $250,000 might get you a townhouse, or maybe an old, Post-War home in questionable condition. This is already pushing it since it assumes a household income of about $100,000 - this can be done, but both spouses need to be professionals vs. working at the ever increasing number of part-time, poverty wage jobs that are available.

The situation only gets worse the closer you get to cities. A decent home in the area around DC will set you back at least $500,000, which is simply absurd.

Unfortunately, people have been taught that high housing prices are "good" for the economy, and everyone is itching to sell their home at a huge profit thanks to inflated housing prices... nevermind the fact that they'll then need to buy a replacement home in which to live, which will also be inflated in price, thus cancelling out the gains they made selling the overpriced home. High prices are never good for the economy - imagine if gas prices were cheered on the same way housing prices are... "Yeah, look at how much gas has gone up lately! It's good for the economy!" The problem is that there are a lot of people higher up who need asset inflation to maintain their absurd levels of wealth and control, hence the inflationary policies that are being practiced.
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Old 03-04-2014, 07:27 AM
 
2,429 posts, read 3,211,732 times
Reputation: 3330
Quote:
A decent home in the area around DC will set you back at least $500,000, which is simply absurd.
I work in DC and live in the suburbs ....that 500K is a total exaggeration. There are very nice houses in very good areas for half that.

Making a blanker statement that puts a dollar amount on subjective criteria for a purchase doesn't really work.

I'm not saying housing may not be a big expense, but to say you have to spend 500K for a decent house in a safe area with amenities, is just not true.
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Old 03-04-2014, 02:37 PM
 
7,846 posts, read 5,270,218 times
Reputation: 4025
Quote:
Originally Posted by pete6032 View Post
I hear this rule of thumb all over. Use 2.5x your HH salary as a rule of thumb. If you are a single person in this economy, making $50,000 per year, then the maximum house you could afford is $125,000. That doesn't buy much. How do couples do it when one parent stays home? I really don't understand how we can have so many houses priced $250,000+ in the US? That would be an income of $100,000. That's doable for a couple in their mid to late 30's, but anything younger than that you're probably not going to break $100,000 take home pay as a couple unless you're either a lawyer, doctor, or engineer.
Then don't buy a house.

A house isn't a right. If the home is greater than 2.5 times your annual income, you can't afford it. It really is simple.
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Old 03-04-2014, 03:03 PM
 
Location: Prepperland
13,705 posts, read 9,803,871 times
Reputation: 9731
Ironically, most American code-compliant housing is pure crap, deliberately shoddy, and ephemeral.
But it "looks good."
And is overpriced.
....
Ah, the joys of government controlled everything.
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Old 03-04-2014, 03:08 PM
 
Location: Cincinnati near
2,539 posts, read 3,511,302 times
Reputation: 5714
Rules of thumb are great if you want to be lazy, but it is not that difficult to make an actual budget, project income and expenses, and choose a path that has tolerable risk. Saying X.X times your annual gross is only a decent guide for someone who is incapable of coming up with a financial plan of their own. The opportunity costs, risks, and lifestyle consequences are so different for people of different marital status, socioeconomic class, and regions of the country that a one size fits all type of guideline will be bad for a lot of people.
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Old 03-05-2014, 06:49 AM
 
Location: USA
7,479 posts, read 5,770,599 times
Reputation: 12319
Quote:
Originally Posted by rdflk View Post
I work in DC and live in the suburbs ....that 500K is a total exaggeration. There are very nice houses in very good areas for half that.

Making a blanker statement that puts a dollar amount on subjective criteria for a purchase doesn't really work.

I'm not saying housing may not be a big expense, but to say you have to spend 500K for a decent house in a safe area with amenities, is just not true.
It's not an exaggeration. I have family in the Fairfax area. To get a good house with room for a family outside the Beltway (where the schools are better) will set you back the amounted I listed since the family in question recently bought a place in that area (to keep their commute sane.)

Maybe there are cheaper places, but I'm sure there's a reason they are cheaper... houses that are small, old, in poor repair, poor neighborhoods, or with long commutes, etc. If those are not a problem for you, fine, but even those homes are still going to cost a laughable amount of money in the DC area, even if they are well under $500,000.
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Old 03-05-2014, 07:00 AM
 
38 posts, read 34,090 times
Reputation: 69
Default House for 2.5x Your Salary

Quote:
Originally Posted by pete6032 View Post
I hear this rule of thumb all over. Use 2.5x your HH salary as a rule of thumb. If you are a single person in this economy, making $50,000 per year, then the maximum house you could afford is $125,000. That doesn't buy much. How do couples do it when one parent stays home? I really don't understand how we can have so many houses priced $250,000+ in the US? That would be an income of $100,000. That's doable for a couple in their mid to late 30's, but anything younger than that you're probably not going to break $100,000 take home pay as a couple unless you're either a lawyer, doctor, or engineer.
The way people buy houses for $250,000+ is by starting small, paying off as much as they can every month on the house payment (extra on the equity). Make your payments as early in the payment period as you can to build equity. Then, when you have a substantial amount of equity built up, invest the equity in that house into a more expensive house. Keep trading up like that every 5 years or so. You will soon have a beautiful house with low house payments. Talk to a financial planner about the way it works. Good luck.
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Old 03-06-2014, 08:44 PM
 
Location: Chapel Hill, NC, formerly DC and Phila
8,555 posts, read 12,630,938 times
Reputation: 8315
Quote:
Originally Posted by rdflk View Post
I work in DC and live in the suburbs ....that 500K is a total exaggeration. There are very nice houses in very good areas for half that.

Making a blanker statement that puts a dollar amount on subjective criteria for a purchase doesn't really work.

I'm not saying housing may not be a big expense, but to say you have to spend 500K for a decent house in a safe area with amenities, is just not true.
Please show me where can you find a very nice house in a very good area near DC for $250K?
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Old 03-07-2014, 08:03 AM
 
9,818 posts, read 10,057,290 times
Reputation: 5256
Quote:
Originally Posted by pete6032 View Post
I hear this rule of thumb all over. Use 2.5x your HH salary as a rule of thumb.
That rule of thumb is about 50 years old. Most people go way over that amount today.
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