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The problem with posts like this is that you're going by the conventional mortgage standard of approval...which says that to be qualified for a certain home at a certain price, you gotta have a certain income and a certain amount of debt to be approved. But that isn't the REAL truth. That's simply the standard that the mortgage industry set as THEIR criteria.
The REAL truth is that a couple with a COMBINED income of $110K can TECHNICALLY afford a $4400 monthly mortgage, assuming that they are frugal in their spending and have almost no debt. People do it everyday, buying $75k vehicles and expensive clothes. There are plenty of people who can MORE THAN afford a nice home, but can't get approved because of credit issues or payment history.
You seem to like to babble about only the most perfect side of the story, in which everyone had great credit, low debt, and a lot of cash...and they were just plain STUPID for not buying before the pandemic.
Those who did not buy before Covid or after are stupid. Because the prices are up now and everyone saw DFW being undervalued from 1000 miles away.
If there is a market crash:
Those who bought after Covid are stupid because everyone saw the crash from 1000 miles away.
Today Stupid is Tomorrow’s genius. And vice versa. All is relative
Those who did not buy before Covid or after are stupid. Because the prices are up now and everyone saw DFW being undervalued from 1000 miles away.
If there is a market crash:
Those who bought after Covid are stupid because everyone saw the crash from 1000 miles away.
Today Stupid is Tomorrow’s genius. And vice versa. All is relative
I suppose I should keep in mind that this seems to be a mostly DFW-only issue. As stated earlier, I purchased a new construction (not inventory) at a steal of a deal, which allowed me to add any upgrades I wanted that, when added all up, STILL fell just under my budget. The interest rate, while not the absolute best, still fell within my expectations. I still just don’t see how I’m “stupid”. Even if somehow the neighborhood loses value (which is extremely unlikely, being that the house is in probably the most desirable neighborhood in the suburb, in a brand spanking new subdivision that doesn’t even have electricity yet) I simply DO NOT PLAN ON LEAVING ANYTIME SOON…so let the market do whatever it will.
I also know many many people that are not financially overextended right now and that are not living paycheck to paycheck. That are also smart enough to have savings for emergencies. That don't blow away their money on unnecessary purchases such as sports/luxury cars, expensive clothing, jewelry or dining out.
While I question the level of detaiI most people give their friends about finances, that's not the point. On a macro level, quite a few indicators point towards significant financial struggle for a lot of folks. That's just the reality. Affordability metrics are very poor right now throughout a lot of the country, DFW and Texas included.
No one ever sees economic crises coming. No one took 2008 seriously until it happened. As a nation, continuing to go down this path will lead to one, and it's just a matter of when it happens.
People are in this thread talking about someone that makes $110K can afford a $4400 a month mortgage payment. That's laughable that thats where we're at. My household makes more than double that and I'd never consider paying that much for housing in Texas. But the silliness trying to convince people that 40+% of their gross payment is affordable is exactly why we will eventually end up right back in a real estate freefall similar to the one that struck us 15 years ago.
While I question the level of detaiI most people give their friends about finances, that's not the point. On a macro level, quite a few indicators point towards significant financial struggle for a lot of folks. That's just the reality. Affordability metrics are very poor right now throughout a lot of the country, DFW and Texas included.
No one ever sees economic crises coming. No one took 2008 seriously until it happened. As a nation, continuing to go down this path will lead to one, and it's just a matter of when it happens.
People are in this thread talking about someone that makes $110K can afford a $4400 a month mortgage payment. That's laughable that thats where we're at. My household makes more than double that and I'd never consider paying that much for housing in Texas. But the silliness trying to convince people that 40+% of their gross payment is affordable is exactly why we will eventually end up right back in a real estate freefall similar to the one that struck us 15 years ago.
Lol…you PURPOSELY missed the point.
I said that TECHNICALLY (First word you neglected to mention) a total household income of $110k can indeed afford a monthly mortgage of $4400…ASSUMING THAT THE HOUSEHOLD IS FRUGAL AND THEY HAVE PRETTY MUCH NO DEBT (awfully convenient that you neglected to mention THAT as well). After all, a 110k salary is about 84k after taxes… which leaves around 32k-34k left afterward…which is often more than a helluva lot of people make in an entire year. My point is that there’s never a one size fits all, and it can indeed be done.
Yes, I’m well aware that $4400 is outrageous for a mortgage payment, but there are certainly plenty of people out there paying just that. It’s that old adage that says “You gotta pay for whatcha want”. And I only mentioned that amount because DFW_FTW concluded that the only people who could afford such a payment are those totaling at least $211k.
And yes, I purposely didn’t factor in other bills and recreation into the affordability of such a mortgage, mostly because (again) I was only using it as a TECHNICAL example…not because I would encourage people to do such a thing.
But you aren't priced out. You just don't think the kind of house you can buy is worth it relative to what you could have bought in 2019. That's not what "priced out" means.
agreed. We can't all live in Southlake. Doesn't mean there aren't a million other suburbs in DFW to explore.
I said that TECHNICALLY (First word you neglected to mention) a total household income of $110k can indeed afford a monthly mortgage of $4400…ASSUMING THAT THE HOUSEHOLD IS FRUGAL AND THEY HAVE PRETTY MUCH NO DEBT (awfully convenient that you neglected to mention THAT as well). After all, a 110k salary is about 84k after taxes… which leaves around 32k-34k left afterward…which is often more than a helluva lot of people make in an entire year. My point is that there’s never a one size fits all, and it can indeed be done.
Yes, I’m well aware that $4400 is outrageous for a mortgage payment, but there are certainly plenty of people out there paying just that. It’s that old adage that says “You gotta pay for whatcha want”. And I only mentioned that amount because DFW_FTW concluded that the only people who could afford such a payment are those totaling at least $211k.
And yes, I purposely didn’t factor in other bills and recreation into the affordability of such a mortgage, mostly because (again) I was only using it as a TECHNICAL example…not because I would encourage people to do such a thing.
Yes, I understand what you're saying. What *I'm* saying is the fact that this is even a conversation is ridiculous on its face, whether the example was meant to be "technical" or not. The fact that there are plenty of people paying that is true, and it's not sustainable. One job loss or financial emergency and you can't afford that house. I think both you and I know that, so to bring it up in a hypothetical just shows the lunacy of this market and why it will never last. The fundamental forces don't support the prices and the household debt and credit card data supports that. People overextending themselves for long periods of time never turns out well.
It's really a question of how long people can hold on for. If the economy slows down and we start seeing significant job losses, it will get ugly really quickly across the country.
One job loss or financial emergency and you can't afford that house. I think both you and I know that, so to bring it up in a hypothetical just shows the lunacy of this market and why it will never last. The fundamental forces don't support the prices and the household debt and credit card data supports that. People overextending themselves for long periods of time never turns out well.
I think the fundamental problem that so many can't deal with is that there is a real bifurcation of people who can and cannot afford current prices. Prices would have to fall dramatically for those in the 'can't afford' category, and they assume everyone is in the same boat as them - stretching. But there's very little evidence that is true. I mean, if you are pointing to the 2007 financial crisis as some kind of bellweather event, well it happened and prices are even higher now. Whatever policies that were supposed to improve things that came out that didn't work. And generally, lower paid people are mostly laid off in recessions, and they wouldn't be buying houses anyways.
Yes, I understand what you're saying. What *I'm* saying is the fact that this is even a conversation is ridiculous on its face, whether the example was meant to be "technical" or not. The fact that there are plenty of people paying that is true, and it's not sustainable. One job loss or financial emergency and you can't afford that house. I think both you and I know that, so to bring it up in a hypothetical just shows the lunacy of this market and why it will never last. The fundamental forces don't support the prices and the household debt and credit card data supports that. People overextending themselves for long periods of time never turns out well.
It's really a question of how long people can hold on for. If the economy slows down and we start seeing significant job losses, it will get ugly really quickly across the country.
If you're gonna say that, then that applies to ANYONE who pays a mortgage, assuming that they're not millionaires...not just those who pay HIGH mortgages. If one were to suddenly develop a debilitating illness to where he/she can't work anymore, that'll probably get them foreclosed on whether they pay $4400 OR $1500 a month. While one is significantly smaller than the other, none of that matters if they have no major savings or anyone to lean on to help them financially.
The same would go for a person who rents...if said person were paralyzed in a car accident today, and the disability checks aren't enough to cover rent...well, what is that person to do?
I'm curious and have questions of my own regarding this thread.
1. What market are you all referring to that will imminently come to a crash? This is important because all markets behave differently. I only care about Plano, Allen, and Frisco.
2. Even if prices do decline, how much are you expecting to save as opposed to buying this year?
3. Do a large majority of residents in Plano, Allen and Frisco not have savings for emergencies, such as, job loss, medical, etc.? Personally, I have enough savings to live off of for five years or more. And that is not including my wife's savings and assets.
4. For prices to crater back down to pre 2019 levels will require fire sales, short sales, foreclosures, etc. Being that these cities that I mentioned are in such high demand by not only Texas locals, but also out of state folks, wealthy foreigners, private equity companies, and institutional investors. Do you think the high demand will allow prices to come down crashing before it gets swooped up by those individuals, entities, and investors? And wouldn't that cause more bidding wars that could potentially stabilize prices and keep it from cratering?
5. Many of you are assuming a $4,400 monthly mortgage payment is unsustainable. However, where I come from, that is perfectly normal. With that said, isn't it a common theme in this forum to blame wealthy foreigners, Californians, New Yorkers and other folks from coastal states for the ramp up in real estate prices? So what makes you think a $4,400+ monthly payment is unsustainable for them? And that is assuming a large majority of them put down less than 20% for their overpriced homes. Lets assume a decent sample size of coastal buyers sold their homes during the ramp up and bought in Plano, Allen and Frisco, wouldn't they have enough money to either purchase with all cash, put down more than 20% or have a huge cash surplus to be used in case of an emergency?
6. The claim that people are overextended with credit card debt. What people are you referring to? Which market/city? What is their ethnicity and social economic background? Personally, everyone that I associate with, be that my neighbors, friends, colleagues, their circle of friends and family, and especially my clients and people that cashed out from coastal states are nowhere near being overextended. Nor are they worried about a recession because they have savings and assets to dispose in case of an emergency. And they all bought either in Plano, Allen or Frisco. So when you say "people" are overextended, are you referring to lower income folks that live in lower income areas? People that don't have a college education? Saying "people" is a big generalization.
6. The claim that people are overextended with credit card debt. What people are you referring to? Which market/city? What is their ethnicity and social economic background? Personally, everyone that I associate with, be that my neighbors, friends, colleagues, their circle of friends and family, and especially my clients and people that cashed out from coastal states are nowhere near being overextended. Nor are they worried about a recession because they have savings and assets to dispose in case of an emergency. And they all bought either in Plano, Allen or Frisco. So when you say "people" are overextended, are you referring to lower income folks that live in lower income areas? People that don't have a college education? Saying "people" is a big generalization.
People are overextended on personal credit, this is not an opinion, it's a fact. Balances are up. Delinquency rates are high and increasing, especially among low credit quality consumers. What you see in your social circle doesn't mean anything because firstly, people lie to create the appearance of affluence and secondly, because your social circle is not a population-level observation.
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