120K/yr and still can't get a nice house in a decent neighborhood (Sacramento: relocating)

[markas214]

I can take a job in Roseville for $110,000/yr plus my wife working part-time we would make $120,000-$130,000. We would qualify for a $400,000 mortgage which doesn't seem to buy much in the area even though we'd be earning twice the median household income. I can see how the brokers were able to suck people into these hybrid ARM loans as it doesn't seem like most families can afford a home without spending half their income on financing. I would like to move but I doubt I'll buy. How do people afford to live anywhere in California these days? The wages aren't spectacular and housing seems out of reach. Are prices still dropping?

[CityGirl72]

back about ten years ago the median household income of 40 or 50 K used to be great considering the houses were about 100k TO 150k

Thos people that already had a house got a ton of equity when the boom happened

So the saying now a days is" If you had a house before you still live in Calif - if you need to buy a house - you leave Calif"

[ndfmnlf]

How about renting for a couple years.... let the real estate bubble burst? Save your money so when the right time comes you can put down a large downpayment or maybe even pay for the house in cash? I am in the process of moving to Sacramento myself, and I am saving my money while watching the bubble deflate. $500K prices on homes when the median incomes are only $50k is clearly unsustainable. Incomes either have to rise or home prices will have to fall.

[EscapeCalifornia]

You just have to spend over 50% of your gross household income on an interest only loan. Then you can afford a house and you'll fit right in. Don't forget to lease the BMW and dine out on credit cards every night too.

[markas214]

Originally Posted by EscapeCalifornia

You just have to spend over 50% of your gross household income on an interest only loan. Then you can afford a house and you'll fit right in. Don't forget to lease the BMW and dine out on credit cards every night too.

Unfortunatly I'm not insane. I currently earn around 110k with my wife's part-time job included and have less than $800 credit card debt (had a little fender bender and paid the guy's repairs rather than seeing my insurance rise) which I'll pay off next month. Also have some equity in my home but that will barely put 20% down on a house in Ca. I was considering renting as I won't be chancing seeing my home value decline. The downside is that I have no mortgage to write off. Would I qualify for a renter's tax credit and if so how much on $1800/mo rent? Any stable areas around Roseville? I'd pay $400,00 but it seems very possible prices are going down another 10% or more. What's a good rule of thumb for property taxes? 1%? Also can anyone give me an idea of insurance rates and utility bills on a 2000 sq ft newer house?

[sc95628]

Originally Posted by CityGirl72

back about ten years ago the median household income of 40 or 50 K used to be great considering the houses were about 100k TO 150k

Thos people that already had a house got a ton of equity when the boom happened

So the saying now a days is" If you had a house before you still live in Calif - if you need to buy a house - you leave Calif"

Couldn't be more true my family is relocating to Montana for this very reason.It's sad to think were I grew up all my life were most Of my Brother, uncles, aunts and cousins live that I leave them behind and remove my children from the ones they love to live a better life.

[EscapeCalifornia]

Originally Posted by markas214

Unfortunatly I'm not insane. I currently earn around 110k with my wife's part-time job included and have less than $800 credit card debt (had a little fender bender and paid the guy's repairs rather than seeing my insurance rise) which I'll pay off next month. Also have some equity in my home but that will barely put 20% down on a house in Ca. I was considering renting as I won't be chancing seeing my home value decline. The downside is that I have no mortgage to write off. Would I qualify for a renter's tax credit and if so how much on $1800/mo rent? Any stable areas around Roseville? I'd pay $400,00 but it seems very possible prices are going down another 10% or more. What's a good rule of thumb for property taxes? 1%? Also can anyone give me an idea of insurance rates and utility bills on a 2000 sq ft newer house?

I'm not insane either which explains my screen name. I've given up on ever being able to afford the life I want in California due to the cost of housing. I think the renter's tax credit was phased out a few years ago. Even then, it was a pretty meaningless credit. Property taxes are 1% plus any extras like repayment on a bond floated to build a new sewer or community college. That adds another 0.06% in my case but it'll vary by location. There's a $7,000 exemption so if you pay $400,000 for a house, you'll only be taxed on $393k. That assessed value can only go up 2% per year so if you manage to live in the same house for a couple of decades, you'll be paying a lot less tax than a neighbor who just purchased. Insurance is about $600/yr down here in SoCal but that doesn't include earthquakes or flood.

[jguillot]

Originally Posted by sc95628

Couldn't be more true my family is relocating to Montana for this very reason.It's sad to think were I grew up all my life were most Of my Brother, uncles, aunts and cousins live that I leave them behind and remove my children from the ones they love to live a better life.

Many people have no choice but to leave California. Young people will never be able to buy homes as long as things remain the same, unless they have huge incomes or a hugh down payment. More and more people are leaving the state as they are finding that they will never have a home unless then move to a state where housing is less costly. The overall cost of living in California is very high. The cost of living in Citrus Heights, where I live, is 29% higher than the national average, according to Sperlings Best Places. I'll be leaving the state as soon as I can retire.

[UseJeff]

It really depends on how much house you want, and if you have to live in Roseville/Rocklin area. It also depends on your time frame. First, the market around here has plenty of foreclosures and bank sales. If you have the time you can find the house you want.

If you don't mind a commute, look into Foresthill... it's about a 20 minute drive, all highway. You'll find less expensive houses there.

Now looking at what you can afford... You'll gross 10K a month, so figure a low estimate of 7K a month net.

If you put 10% down on a 500K house (this will get you a 4 bedroom 2-3 bath around 2400 sq ft or so - guestimate here), so your loan would be $450K

Assuming your credit is good enough, you'll want to work out a deal with the seller to pay your closing costs. Brokerages around here are hurting(trust me I know), so you can get a good loan for much less in fees than before. However, outside of brokerage/escrow fees, you may want to consider paying the lender to truly buy down your rate. You can easily still get a 30 year fixed 10 year interest only at 6% by buying down the rate some.

This 6% 10 year I/O will give you a payment of $2250. You will need mortgage insurance due to the 10% down, which will be around $200 a month. Your taxes are 1.25% of the purchase price so they will be $520. Tack on $75 for home owners ins. and you're looking at a payment of $3045. This is 44% of your net income, which is really very good. Considering you're going to have nearly $4k in disposable income for other bills, and food.

Find a good real estate agent, and have them look for nice looking houses that have been on the market awhile, preferably emtpy and ready to move in. These people are making payments on empty houses, and are very motivated to sell. In addition, your agent should be able to get access to foreclosures and notice of defaults. If they have a good title company they can get this info once a week on any county you want.

I'd also be sure to see how low you can really buy your rate down. Most A paper lendes will let you buy it very low, but there's an invisible floor for their rates that they implement by cost. Basically it could cost you .375% of a point for every .125% lower on rate, then at a certain point there's a HUGE jump in cost. Like going from 5.875% to 5.75% might cost a full point. This of course you don't pay, but you can see what would make sense.

This is all about getting a low payment initially... but from an investment standpoint you want to consider your break even for costs. (A seller credit towards costs could just as easlily come off of price, so it's basically the same thing, but named differently). So if you're open to longer term interest only loans, then you can just look at the difference in cost vs. the interest savings by lowering your rate.

Here's an example for a $100,000 loan amount, also pretending your paying all costs out of pocket to keep the math logical.

6.75% is no points, and 6.5% is .75% of a point. The difference in cost between the two rates is $750. The difference in monthly interest is $20.83. With that in mind, you would need to be in the loan for 36 months to recoup your investment of buying the rate down.

I always look at my clients ability to buy down the rate, and consider how long they will be in the house, and how long until they think the earliest they would refinance would be. Getting a lower rate saves money in the long run typically... the main key is what people do with that money... do they blow it on beer, pizza, and shoes to make up for spending too much on beer and pizza? Or do they take that extra money and invest it?

Hope this helps some as far as options you may have available to you.

Good luck on the house... and be sure to check out Carver's, La provance, and Slocum house for restaraunts. Oh, and of course PF Changs...

[markas214]

Originally Posted by UseJeff

It really depends on how much house you want, and if you have to live in Roseville/Rocklin area. It also depends on your time frame. ...

Very informative. I could also avoid the PMI by doing a 10% second mortgage.