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CosmicWizard · 07-21-2009, 10:33 AM

Randomdude wrote:

I wonder how ticked people who bought their houses in the past few years would be if Hampton Roads houses actually fell to levels where they were considered affordable to the average family (about 130-170k, which the higher levels being in Virginia Beach) or average person (70k-120k, with the higher levels being in Virginia Beach).

After selling my home in Great Neck Estates for triple the purchase price, I bought my most recent home in 9/2006, about a year prior to the local peak in Grand Junction-CO. On paper, the value has dropped almost 10% below the price I paid. As long as I have no need or desire to sell my home, the paper loss is a non-issue for me.

Randomdude · 07-21-2009, 10:43 AM

Quote:

Originally Posted by CosmicWizard

After selling my home in Great Neck Estates for triple the purchase price, I bought my most recent home in 9/2006, about a year prior to the local peak in Grand Junction-CO. On paper, the value has dropped almost 10% below the price I paid. As long as I have no need or desire to sell my home, the paper loss is a non-issue for me.

I wish more people thought like that, however, too many people use their house as a source of wealth, rather then a shelter.

CosmicWizard · 07-21-2009, 10:46 AM

rtandc wrote:

What really is affordable?

The lenders have their magical debt to income ratios and other metrics to qualify the lender, but that is far from being a science. Personally, my comfort level for debt is waaaaay below what the lenders tell me I can afford. My conservative approach has saved my butt on several occassions.

rtandc · 07-21-2009, 11:06 AM

Quote:

Originally Posted by CosmicWizard

rtandc wrote:

What really is affordable?

The lenders have their magical debt to income ratios and other metrics to qualify the lender, but that is far from being a science. Personally, my comfort level for debt is waaaaay below what the lenders tell me I can afford. My conservative approach has saved my butt on several occassions.

Right, great answer, others on this board think that a home prices should be at a certain price based just on what the average salary for this area may or may not be...what they have to take into account also is what type of finances people have...Some people may have tons of bills and cant qualify anywhere close to the same level of someone making the same salary but has no other debt....other people may have a large down payment due to the sale of a home or just did a good job at saving money .....you stated you made triple off of your last home, well that would lead me to believe that you had a large down payment for your next home so if you wanted to you could of went well above your income ratio on your next home just based on a larger down payment to bring the ratio back in line where you felt comfortable paying.......We do this everyday no matter what we buy, but for some reason when it comes to home prices then it seems unfair to some people...

CosmicWizard · 07-21-2009, 11:25 AM

rtandc wrote:

others on this board think that a home prices should be at a certain price based just on what the average salary for this area may or may not be...

Unfortunately this ridiculous sentiment is not limited to Hampton Roads. So many people all across the usa have been utterly brainwashed by one financial guru or the other to see any abberartion from the traditional ratios as an end to the world as we know it. The sky is falling.

Randomdude · 07-21-2009, 12:11 PM

Quote:

Originally Posted by rtandc

Right, great answer, others on this board think that a home prices should be at a certain price based just on what the average salary for this area may or may not be...

Affordable housing is generally considered a housing payment below 30% of your gross income, or a purchase price 3 times more then your salary or less. These are not just random figures, they are generally accepted in the industry to define affordable housing. If you take the median home price in Hampton Roads, and match it against the median income, you will see there is a serious disconnect. The housing prices need to shrink any where from 30-100% depending on where the house is for it to be "affordable".

Quote:

Originally Posted by rtandc

what they have to take into account also is what type of finances people have...Some people may have tons of bills and cant qualify anywhere close to the same level of someone making the same salary but has no other debt....

This has no bearing as to what defines "affordable" as "affordable" is not defined by anyones personal situation.

Randomdude · 07-21-2009, 12:18 PM

Quote:

Originally Posted by CosmicWizard

rtandc wrote:

others on this board think that a home prices should be at a certain price based just on what the average salary for this area may or may not be...

Unfortunately this ridiculous sentiment is not limited to Hampton Roads. So many people all across the usa have been utterly brainwashed by one financial guru or the other to see any abberartion from the traditional ratios as an end to the world as we know it. The sky is falling.

What is a rediculous sentiment is thinking that its ok for one to pay 50-70% of their gross income for median housing. Its the ignorance of the "traditional ratios" that has gotten us in to this housing mess in the first place.

telemonster · 07-21-2009, 01:44 PM

People are willing to spend 50% of their gross income thinking they will cash out rich in two years. The problem is 20% YoY appreciation doesn't work unless you wanna roll like Zimbabwe :-) Also it seems quite a few used 100% CLTV (or more) loans, so they didn't have anything in the game anyways. If it goes up, then they win. If it goes down, they walk.

All the gains of the past few years have to be given back. Some people cashed out, a few did. But most didn't. People took on a record amount of debt, Debt is not wealth. The debt will not be paid back.

It's kind of like how the purchase price for a place should be equal to 100 or 120 months rent :-)
But you see retards paying way above that.

I like my relatives that moved here, "If prices don't correct soon we'll ask for papers and transfer out of here. It's nice, but there is nothing worth these prices." (Up near Yorktown). They were hip to the housing bubble, I didn't have to explain it.

The real interesting thing about Hampton Roads is that there isn't much here. This region was late to the run-up in home prices, so it's late to the decline.

rtandc · 07-21-2009, 02:14 PM

True you do have figures like 28%-36% that many lending companies use to base your total allowable income towards a home loan based on credit scores and other outstanding debts...But at the same time this ratio is based off of the type of loan you are looking at, so if its a simple FHA loan that value is based off of 3.5% down......So that dollar value would quickly change if you have a larger down payment, no PMI or the rate changes.......

But these figures do not have anything to do with affordable housing, these rates are based off of what is affordable as far as a loan....These same type figures are based on anything you buy....be it you want to qualify for a new vehicle or looking to buy a new TV.....loan companies could care less what type of home you are buying just like they could care less what type of car or what brand of TV it is all they are concerned with is can you pay off the loan......

So if you qualify for a 400K loan it makes no difference if it is a 5 Bedroom 4 bath 3000 Sq Foot home on 3 acres or a 3 bedroom 2 bath 1800Sq Foot home on a postage size lot...as long as the home appraises for that amount you can buy it.......What you think the home should be worth in a certain city or state has nothing to do with the purchase.....The loan company could care less if the home is sitting in Va Bch Va or 3000 miles away

So for someone that qualifies for a 400K loan, making that loan amount should be no problem, now take another person that also qualifies for a 400K loan based off his salary but this person has 250K he made off the sale of his last home well this person can now buy a 600K home for about the same monthly payment....so both the 400K and 600K home is considered affordable based on the person living in those homes even though they both make the same salary

So what is affordable is defined by each personal situation, so the average housing in Va Bch may be higher then the average salary but that does not mean the average person in Va Bch can not afford to pay these higher prices....if it did the housing market would of taken a bigger fall then it has.....

CosmicWizard · 07-21-2009, 02:23 PM

rtandc wrote:

So what is affordable is defined by each personal situation, so the average housing in Va Bch may be higher then the average salary but that does not mean the average person in Va Bch can not afford to pay these higher prices....if it did the housing market would of taken a bigger fall then it has.....

I can't think of a way to say it any more clearly than this. You hit the nail right on the head.