can't afford a house (square foot, 3%, agents, mortgage)

[gunther]

I am an average guy make around 50000 a year and could afford a payment of 750 a month for a house. That would buy a 100000 dollar house. I believe the average yearly pay is 42000 a year. So if that is all true how can the average price of a house be 200000? Am I wrong? because the math doesn't add up, how does a person buy a home by themselfs? Or does a person need to find an other person to pay for half of the house. I have rented a great place for 6 years (550 a month), since I was divorced and not cared to buy another until recently, now the prices are over twice what they where when I bought my last house 11 years ago. Has the country gone insane and paying these prices. I told my 13 year old she better get a good job making over 100000 a year just to get a nice house. Nobody in her age group will be able to be a house at these prices. So have home prices gone so sky high that they need to drop 50% so the next generation can afford them? I guess I will have to stay where I am until I will the lottery, prices get back to reality or somebody can tell this country guy how to work this new system.

[Frudy McRomson]

Originally Posted by gunther

I am an average guy make around 50000 a year and could afford a payment of 750 a month for a house. That would buy a 100000 dollar house. I believe the average yearly pay is 42000 a year. So if that is all true how can the average price of a house be 200000? Am I wrong? because the math doesn't add up, how does a person buy a home by themselfs? Or does a person need to find an other person to pay for half of the house. I have rented a great place for 6 years (550 a month), since I was divorced and not cared to buy another until recently, now the prices are over twice what they where when I bought my last house 11 years ago. Has the country gone insane and paying these prices. I told my 13 year old she better get a good job making over 100000 a year just to get a nice house. Nobody in her age group will be able to be a house at these prices. So have home prices gone so sky high that they need to drop 50% so the next generation can afford them? I guess I will have to stay where I am until I will the lottery, prices get back to reality or somebody can tell this country guy how to work this new system.

Hang on the fence for a while, rent a nice house, and watch the show unfold. Think the situation is a buyer's market now? You ain't seen nothin' yet.

you'll be pleasantly surprised after one or two lease renewals.

[garth]

That's the exact story that's being discussed in many circles. The run-up in home prices was fueled by investors and easy liar credit for all, yet it wasn't supported by the average income. Some say that prices need to fall quite a bit to bring things back into equilibrium with the income. I don't know if prices will fall as far as some think or wish, but they will fall some.

In the meantime, buying a decent home has been increasingly requiring a DINK status over the past decades, or at the "DI" portion. DINK means "Dual Income No Kids." Its been driven to that form for a long time.

I also doubt that this situation will change, either. For example, would the younger generation be willing to live in a 900 square foot, two story, 2 bed 1 bath house? Since their parents didn't want to them, and bought larger and larger over the years, I doubt that the children were taught differently. Even though they were good enough for the parent's parents, they're not good enough for the subsequent generations so that one parent could stay home and still afford a house.

So, if the generations want to afford bigger, more elaborate, fancy, muti-bed and bath McMansion homes for two or three people, then they have to pay the piper in some form. If they want to live smaller, more efficient, like their grandparents lived, then perhaps they can afford something if the homes would be built.

Disclaimer: Yes, I know these statements are genealizations, but generalizations have their place. Some people might have 19th Century railroad barons as their grandaparents so they won't apply. However, they're easily applicable for the early 20th century homeowners and their subsequent generations.

So, that's my take . . .

[Frudy McRomson]

Originally Posted by garth

That's the exact story that's being discussed in many circles. The run-up in home prices was fueled by investors and easy liar credit for all, yet it wasn't supported by the average income. Some say that prices need to fall quite a bit to bring things back into equilibrium with the income. I don't know if prices will fall as far as some think or wish, but they will fall some.

In the meantime, buying a decent home has been increasingly requiring a DINK status over the past decades, or at the "DI" portion. DINK means "Dual Income No Kids." Its been driven to that form for a long time.

I also doubt that this situation will change, either. For example, will the younger generation be willing to live in a 900 square foot, two story, 2 bed 1 bath house? Since their parents didn't want to them, and bought larger and larger over the years, I doubt that the children were taught differently. Even though they were good enough for the parent's parents, they're no longer good enough for the nsubsequent generations so that one parent could stay home and still afford a house.

So, if the generations want to afford bigger, more elaborate, fancy, muti-bed and bath McMansion homes for two or three people, then they have to pay the piper in some form. If they want to live smaller, more efficient, like their grandparents lived, then perhaps they can afford something if the homes would be built.

Disclaimer: Yes, I know these statements are genealizations, but generalizations have their place. Some people might have 19th Century railroad barons as their grandaparents so they won't apply. However, they're easily applicable for the early 20th century homeowners and their subsequent generations.

So, that's my take . . .

Where are they going to get the money as traditional mortgage standards (20% down minimum and 3x income maximum) come back into play?

[christina0001]

I'm guessing that most homes are being bought by married people who have 2 incomes.

[Brandon Hoffman]

RE is local. I don't know what prices are in your area so I would advise you to take your situation to a local Realtor and see what your options are. You said average prices, don't know if that was local or national but if average is 200k then it would indicate there are homes priced below 200k you could possibly purchase.

As far as some of the advice here take it with a grain of salt, it's all opinion and not necessarily gospel. Rent in my area is higher than a mortgage for a similar home and will probably get even more out of line if mortgages tighten to where Frudy suggested (which by the way probably won't happen in our lifetime if ever again).

[DMenscha]

Originally Posted by Frudy McRomson

Where are they going to get the money as traditional mortgage standards (20% down minimum and 3x income maximum) come back into play?

Traditional as in FHA loans? My father bought the home I was raised in with an FHA loan 3% down. VA loans were 0% down and there wasn't a crisis in credit over those.

The only reason to put 20% down (as I did when I bought my last home) is to avoid Private Mortgage Insurance.

Your one trick pony is not that much fun to watch anymore.

[Frudy McRomson]

Originally Posted by DMenscha

Traditional as in FHA loans? My father bought the home I was raised in with an FHA loan 3% down. VA loans were 0% down and there wasn't a crisis in credit over those.

The only reason to put 20% down (as I did when I bought my last home) is to avoid Private Mortgage Insurance.

Your one trick pony is not that much fun to watch anymore.

My "one trick pony" is not fun to watch because people are subscribing to it (and not from my doing, from their own accord). The one trick pony I've seen from many is the black helicopter tin foil hat theory that the media is out to get 'em.

FHA loans will vanish as Freddie and Fannie go belly up. A gubmint bailout will not be able to keep it solvent. Our generation of fantasy wealth from virtual dollar home equity will be a catalyst to this event. If these programs do return, they'll have to be so massively subsidized it'll be like we're living in the USSR with public housing for almost everyone.

We'll be back to the neighborhood bank loaning money rather than the Chinese or Japanese investors ultimately doing so.

We'll just have to see what happens now, won't we?

[garth]

Originally Posted by Brandon Hoffman

As far as some of the advice here take it with a grain of salt, it's all opinion and not necessarily gospel.

Yup . . . even from some real estate agents. Consider the source to check someone's motivations. It all needs to be taken with a grain of salt, doesn't it?

Short of anyone posting defined data from authoritative sources, any post is opinon. I have yet to consider anyone on this board as an "authortative" source. Instead, I consider them experienced people, to one degree or another with varying abilities to communicate effectively, who provide valuable insight that's worth considering but not necessarily adopting as gospel. In the final analysis, even when considering authoritive sources, it still remains opinion since authoritative sources will come to different conclusions based on the same data.

Rent in my area is higher than a mortgage for a similar home and will probably get even more out of line if mortgages tighten to where Frudy suggested (which by the way probably won't happen in our lifetime if ever again).

Oh heavens I wish those days were back . . . the ability to buy a house and have a positive cash flow right from the gate. I haven't seen that in any area I'm familiar with for many many years.

I acutally don't view that situation as being "out of line." I view it as good for investors and good for people who want to make the move from renting to owning. It gives them a tangible reason to economically invest in the community. All they have to do is redirect their priorities, tighten their belts, bust their backs, and invest in their futures.

[Sandy Nelson]

Gunther,
I'm going to operate on some broad assumptions, since I don't know any details, but if you earn $50,0000 a year, owning a home should be doable. Of course I don't know what other debts or bills you have, but most lenders budget your mortgage payments up to one third of your monthly income. If you net $4,000 a month, you should be able to handle a mortgage payment of $1,300. If this is to include property taxes and insurance, that should buy you a house at around $180,000. I don't know what house prices are like where you live, but in our neck of the woods (Olympia, WA area) you can get a modest home (not a manufactured home) in that price range.
If home ownership is what you want, perhaps you should schedule some time with a good mortgage broker to work on a strategy.
Best of luck.

Sandy