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Old 05-19-2016, 11:03 AM
 
Location: Ventura County, CA
396 posts, read 416,827 times
Reputation: 818

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I can't find a question asking this on this forum but if there is one please point me to it.

We are looking at homes in Southern California right now. Homes in older, kind of sketchy areas are going for 300k and up. We used to live in Connecticut and now we live south of Washington DC so I'm very familiar with HCOL areas and homes prices.

I don't get who is buying these homes now since supposedly wages are so stagnant. I know back in 2005-2008 it was creative financing going on. Banks had their weird 100% financing, bubble loans and we all know how that ended.

But now haven't these loans gone away? So who is buying these homes in middle class HCOL areas? I know who is buying the million dollar homes in wealthy areas. But what baffles me are the 300-400k homes in very middle class areas being sold so quickly. Don't banks only like to lend you what is 3 times your salary? So people in middle class areas are all making 6 figures? Or they all have large downpayments? That flies in the face of every "Woe is America" article that I read about the struggling middle class.

Are there foreign investors coming in and buying? I'm just curious because 2006 is still fresh on my mind. We lost a ton of money buying a house in 2006 and then having to sell in 2009 because we had to relocate for my husband's job. We were sucked into the "Buy now!" froth that was happening back then and I see happening now again. We make pretty good money BUT I really didn't want to buy anything more than 400k. But in many HCOL areas these days, 400k gets you a nice fixer upper.

Are loose lending practices happening again? I was all set to purchase a home when we move but like I said 2006 is still fresh on my mind and this market feels to similar to that.

Last edited by TheLonelyGoatherd; 05-19-2016 at 11:33 AM..
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Old 05-19-2016, 11:20 AM
 
347 posts, read 423,383 times
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You still only need to put 5% down for a conventional or 3.5% for an FHA loan, which is only 10-20K at the price point you are discussing. That is fairly easy to get if you have a 401K you've been contributing to (either through a withdrawal or a 401k loan), and/or it's not so much money that you can't save that sort of deposit within a couple years.

I think lending has tightened up considerably since 2005/2006. Zero down loans are really only available through a VA loan or a USDA loan any more.

Right now I think there is an inventory problem. And to be honest, at least where I live, unless a flood of people start putting their homes on the market, or the building starts increase significantly I don't see it changing a lot. And we do have new houses going up, although at a slower pace than during the boom years, but they are typically homes designed for the mid-level/higher end buyer.
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Old 05-19-2016, 11:27 AM
 
741 posts, read 586,925 times
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I live about 25 miles north of LA, and just bought a house. I'm no expert in trends, but I can tell you some of what we experienced. It seems lending has loosened up a bit if one has good credit. Lenders are allowing 3.5% down on FHA loans and 5% down on conventional loans, but you still have to prove income. People are trading up and rolling their equity into newer or larger houses. 3 and 4 bedrooms are what everyone wants and are being snapped up in a week if priced correctly. But hubby drives 1 hour each way to work in the heart of LA. Commuting an hour to work in order to find affordable housing is a fact of life here.
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Old 05-19-2016, 11:40 AM
 
Location: Ventura County, CA
396 posts, read 416,827 times
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Thank you both. I also just found another thread on here talking about Chinese investors buying up property and then renting it out.
This happened back when we were living in Connecticut with foreigners coming in and buying up housing making it impossible for an average middle class family to ever own a home. I wonder if that is a lot of what is happening again (or still). Because I cannot believe that there are so many people in these very middle income towns qualifying for 400-500k mortgages.

I tell my parents all the time, be happy you are a Boomer. I so wish I could have bought a house back in the 80s but alas I was a teenager. I'm mid 40s now and hate renting but I'm afraid to buy. I can't believe it's happening all over again. We lost so much of our savings selling our home back in 2009 and this was after putting a good 50k into fixing it up.

Fairminded, we'll be in the same boat as you with commuting though at least my husband can have some work from home days. Me not so much. But I need California. I'm so done with the east coast humidity, winters, days and days of rain. I'm done. I need nice weather for the second half of my life.
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Old 05-19-2016, 02:54 PM
 
1,054 posts, read 1,416,728 times
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In HCOL areas people can often qualify for a house that's 4x or more of their household income. So in the neighborhoods you're looking in, that would only take a household income starting at $75k. It's not very hard for a couple with some type of skills/education to each find a job in a large city paying at least $35k-$40k a year and with the two jobs added together, with good credit, a down-payment, and little other debt, a couple in this situation would not have much trouble buying a home starting at $300k.
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Old 05-19-2016, 11:17 PM
 
741 posts, read 586,925 times
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Quote:
Originally Posted by TheLonelyGoatherd View Post
Thank you both. I also just found another thread on here talking about Chinese investors buying up property and then renting it out.
This happened back when we were living in Connecticut with foreigners coming in and buying up housing making it impossible for an average middle class family to ever own a home. I wonder if that is a lot of what is happening again (or still). Because I cannot believe that there are so many people in these very middle income towns qualifying for 400-500k mortgages.

I tell my parents all the time, be happy you are a Boomer. I so wish I could have bought a house back in the 80s but alas I was a teenager. I'm mid 40s now and hate renting but I'm afraid to buy. I can't believe it's happening all over again. We lost so much of our savings selling our home back in 2009 and this was after putting a good 50k into fixing it up.

Fairminded, we'll be in the same boat as you with commuting though at least my husband can have some work from home days. Me not so much. But I need California. I'm so done with the east coast humidity, winters, days and days of rain. I'm done. I need nice weather for the second half of my life.
I'm not sure what your budget is, but its possible to find decent homes in good areas north of LA starting around $485K. Look at the cities in the San Fernando Valley and Santa Clarita. Good luck!
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Old 05-20-2016, 08:13 PM
 
Location: Ventura County, CA
396 posts, read 416,827 times
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patches thanks that makes sense. Not good sense, but sense, lol. To me that is stretching way too tight to get a house 4x ones salary unless of course a person has a good savings, no debt. But really how many people fit that? I can see why so many are saying another bubble is coming. And that sucks. I want to buy. I hate renting! I just also would hate to buy a house and 6 months later it's worth 50k less than we paid. That's exactly what happened to us 10 years ago.

Fairminded thank you also! We have those places on our list as well. I cannot wait to go checking out places this summer. I want to kiss the east coast goodbye!
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Old 05-21-2016, 03:40 PM
 
4,284 posts, read 10,723,475 times
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You also need to consider people that have equity going in. Buy a condo in mid 20s, get married/have a kid early 30s. 2-3 years saving while living together in the condo one person could afford on their own allows money to be saved up quickly. Throw in the equity from the condo sale and the wedding gifts and you got a pretty nice amount of money.

Not to mention older people upgrading from a starter house to a bigger house that also have significant equity
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Old 05-21-2016, 10:13 PM
 
1,855 posts, read 2,900,431 times
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Quote:
Originally Posted by GiantRutgersfan View Post
You also need to consider people that have equity going in. Buy a condo in mid 20s, get married/have a kid early 30s. 2-3 years saving while living together in the condo one person could afford on their own allows money to be saved up quickly. Throw in the equity from the condo sale and the wedding gifts and you got a pretty nice amount of money.

Not to mention older people upgrading from a starter house to a bigger house that also have significant equity
Almost no native Californians can afford even a condo in their mid 20s. Sorry, it's not 1995 anymore.
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Old 05-23-2016, 07:00 PM
 
8 posts, read 11,533 times
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We are in the process of purchasing in SoCal - Orange County to be more specific. My husband and I have good credit, decent savings (although we are borrowing a little from a 401k to supplement), and no debt. We are early-mid thirties and sacrificed (ie lived with parents - although we did pay rent and bills) for a while to be able to do so. We were renting in Irvine for $2500/mo and eventually decided to save to buy.

Our wages are $150k together. We had been home shopping since June 2015 (when we were first pre-approved, although we started scouting the market much earlier than that) but everything in our price range ($500-$600k) in a decent neighborhood with good schools was being snapped up faster than we could even blink. Of course, as our first purchase and with market volatility, we were very cautious and picky about what we wanted to buy. Finally found one that just felt "right" and jumped on it right away.

LOTS of properties in the below $500k are being snapped up by flippers. Lots more by investors that want to rent the home out. And both those typically have more cash to throw around to start.

If I were you, I'd find a great agent that can give you the scoop on properties before they hit the market. Once they're on the MLS they're gone! Best of luck!
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