Twin Cities Affordable Housing

[Cruz Azul Guy]

Originally Posted by ArcLyte

... And then your example wouldn't make any sense. If your hypothetical family could save $38,000 for a downpayment, why would they move into an undesirable area, with a substandard house? Do you believe that people who can afford a 20% downpayment for a property in the Twin Cities are even interested in affordable housing?

Yes I do. Because that was me 10 years ago. I started out with a small starter home in a low income area of South Minneapolis that I bought for 140k with 20% down. I have since upgraded to a nicer home in a better neighborhood.

[pvoyd]

Originally Posted by tlarnla

... According to Mortgage Calculator , you'd be paying over $170k just in interest. So that $190k house would actually cost over $570k.

Can I ask how one gets $570k by adding $170k in principal repayment and $190k in interest? Taxes and insurance not included in the monthly payment?

[Mason3000]

Originally Posted by Cruz Azul Guy

This is a topic that interests me. I've been hearing alot recently about the city of Minneapolis and the Twin Cities metro area having a shortage of affordable housing. The Star Tribune has even taken it a step further by calling it a 'crisis.'

Minneapolis leaders look to tackle affordable housing 'crisis' | Star Tribune

I can't speak for renting but for those trying to buy an affordable house there still appear to be plenty of options on the market that would lead me to opine that this metropolitan area is nowhere near any kind of crisis.

To prove my point, let's look at a simple example. Let's say that a family of 4 has an annual household income of $45,000 (this is about 50% of the median income for the Twin Cities). The family has no debt, but also cannot afford any down payment on a home. Using a home affordability calculator this means that the family could afford to buy a house for a little over 190k.

I ran a search of 3 bedroom houses/condos and came up with well over 100 results. Yes, many of these results were in areas that some would consider less desirable - North Minneapolis, Eastside, North End, Frogtown St. Paul, Brooklyn Center, Crystal, etc. You gotta start somewhere though. People with lower incomes shouldn't expect to land a place in SW Mpls or Edina. They should be finding an affordable home in a low price area, build up some equity, hopefully gain job skills and experience, climb the career ladder and eventually upgrade to a nicer home in a nicer area in the future.

I'd welcome a counter-argument but for me there is no affordable housing crisis here and there won't be as long as there are move-in ready homes available on the market for under 200k.

I think you're right. They are affordable areas, but they're starter areas & diamonds in the rough. We're also in a bubble right now so even the affordable homes I see today I balk at compared to the same homes in 2011.

If a 190k house is available, the couple with two kids & 45k in income should be able to get an FHA loan with 3% down. That's $5,700 + some fees. With the Earned Income Credit (EIC), that family should get about $10k back from their tax returns. That's plenty for the 3% down payment & moving expenses.

If that family has debt, pay it off with those tax returns and set the goal of using the tax return money for the down payment for the following year.