How do people afford to buy a house here? (Los Angeles: rental market, loans)

[harhar]

Originally Posted by adr3naline

Then you're doing something wrong. Very wrong.

A $350k salary @ 30% debt ratio with $1000 in monthly misc debts, you're still able to finance a $1.2MM home with a 10% downpayment.

...so what's up there?

A family making 350k a year could afford even more than that. Depending on down payment, level of debt, you could afford 2 million +. And there are plenty of nice homes in nice areas from 700k-2m.

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On the topic of fixers, I've stated and seen from experience that a majority of affordable (key word) "fixers" are snatched up through all cash auctions.

Those flipped homes are now selling for 100k more than what they "should" be. Granted there are also "pros" to some flips, however low priced fixers just haven't existed in the past few years.

During this time as I've stated in other threads, people are selling homes that would have been considered fixers as regular sales at inflated prices.

This behavior is on the decline as there is a bit more inventory, things are slowing down and interest rates will be going up in the near future.

A lot of homes are still overvalued (depending on the area) around 20-50k+.

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This is where the system is screwed up. Investors have really done a number on the state of housing in CA. Flipping isn't inherently bad, but people jumping on the investing bandwagon, in an already crowded market is.

I'd propose eliminating investors by making them live in the home for x amount of years. Second eliminate the all cash requirement of Auctions and allow only those with preapproved mortgages access to these houses. Then streamline the mortgage process and require that the buyer upgrade the home with an included 203k type loan.

You would have the best of all worlds; by eliminating the flipper, you can have a house bought for way under market value, it would be rehabbed to the buyer's specs AND it would be worth more after that, WITHOUT the price being inflated. Hence bringing a truer market value to the table.

The goal would be to allow the middle class to purchase homes more quickly, while at the same time give the buyer exactly what they want, which would hopefully lead to less flight and more community involvement.

But first we'd have to change our thinking and empower buyers with the right tools to show them: "oh hey, there are things like 203k loans that could be used to fix up a house." But right now a lot of people who may be on the cusp never get those chances because the better deals are scooped up quick.

[tekboi]

I declined a job offer in the LA area because of the cost of living. As much as I would love to live there, i'm fresh out of college and it doesn't make since to move there and work my ass off just to live like a savage because of the inflated costs.

[adr3naline]

Originally Posted by harhar

A family making 350k a year could afford even more than that. Depending on down payment, level of debt, you could afford 2 million +. And there are plenty of nice homes in nice areas from 700k-2m.

Agreed. Many homeowners here are financing their home at a 40-50% debt-vs-income ratio. Which I'm surprised banks allow but given the ludicrous housing costs...it makes sense. At that ratio, he/she is in the low $2MM's. Maybe they accidentally added an extra zero to their income

[BRinSM]

Originally Posted by tekboi

I declined a job offer in the LA area because of the cost of living. As much as I would love to live there, i'm fresh out of college and it doesn't make since to move there and work my ass off just to live like a savage because of the inflated costs.

depending on the prospects in the area you're from, this may have been a bad idea. sure LA is expensive, but renting is not usually so bad, it's ownership that is generally the issue. if the job paid well and would have boosted your resume, it may have been worth it to 'live like a savage' for a time before parlaying that experience into a job in an area you consider more desirable.

[SageCats]

Originally Posted by adr3naline

Then you're doing something wrong. Very wrong.

A $350k salary @ 30% debt ratio with $1000 in monthly misc debts, you're still able to finance a $1.2MM home with a 10% downpayment.

...so what's up there?

Many people with that salary don't want to put down only 10%. Besides, coming up with $100K+ is difficult. Also, with a 1.2M home with a 10% down payment, you are financing 1.1M, which will cost roughly $5k / month. That's a lot to pay for a mortgage.
Also, a 1.2M house will net you a 4 bedroom, 2 bathroom home in the east bay. Forget about Mountain View, Palo Alto, etc.

[cAlifornia213]

Originally Posted by Mr. Zero

What do you consider to be affordable on $350k+ a year?

I'm a physician who just finished fellowship. Within last two months. My income dramatically jumped from residency/fellowship levels of $60k to $350k. This is expected to increase by another 100k at least in 2 years. I have student loans >200k. I must live within 30 min radius of my hospital.

Until I've saved up $200k or so for downpayment, a reasonable house won't be feasible in this area. By the time I have saved that much, its likely that 1 mil won't buy a decent house.

[cAlifornia213]

Originally Posted by adr3naline

Then you're doing something wrong. Very wrong.

A $350k salary @ 30% debt ratio with $1000 in monthly misc debts, you're still able to finance a $1.2MM home with a 10% downpayment.

...so what's up there?

10% down will require pmi. Plus I'm debt averse, so iI'd rather not have a 30 year loan.

[thelopez2]

Originally Posted by adr3naline

Agreed. Many homeowners here are financing their home at a 40-50% debt-vs-income ratio. Which I'm surprised banks allow but given the ludicrous housing costs...it makes sense. At that ratio, he/she is in the low $2MM's. Maybe they accidentally added an extra zero to their income

Read his other post, he is shopping for a 800k-1.2M home in Washington, he just came here to troll or hes saying that a 1.2M home in LA still sucks.

[thelopez2]

Originally Posted by cAlifornia213

10% down will require pmi.

PMI isn't always required.

[cAlifornia213]

Originally Posted by thelopez2

Read his other post, he is shopping for a 800k-1.2M home in Washington, he just came here to troll or hes saying that a 1.2M home in LA still sucks.

I was looking at homes in the east side of Seattle. In desirable areas like Bellevue, 1.2 mil will buy you a fixer upper. It's the same problem as LA. However LA is a much better place (IMHO) than Bellevue/Seattle. If I have to spend >1mil for a decent house, id rather buy it in LA.

So yes, I was looking at houses in Seattle/Bellevue several months ago. I'm not anymore.