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There are MANY success stories in this country. That was the American dream.. to own a house. The problem is the above examples are from differrent time. A lot changed from 1990 to now. A LOT. They got homes in 70's and 80's.. They were real homes back then. Buy a $400K homes today.. It's mostly garbage. Don't believe me? Wait 20-25 years later. By 10 years. lots of things need replacing already.
Heck.. I grew up on welfare in the early 80's and now I own a home.. If my kids started out like me today in the USA.. I wish them luck..
Why can't someone buy a home built in the 70s and 80s today? In fact, in San Francisco, most homes are built in the early 1900s. The houses that are bought in the 70s, 80s, 90s, 00s, and 10s are the same houses - early 1900s Victorian/Edwardian/Arts and Craft.
Real estate has always been a desirable commodity, a few things have changed since the 70s but the underlying fundamentals haven't changed at all. In fact, it has remained the same since the 1800s - save money, buy a house, live in it for a long time, don't worry about the appreciation, reap the profit when it's time to sell; and of course "location, location, location." The examples given were possible mostly because the people bought at the right location (San Francisco). If they had bought in say, Detroit, then the endings would have been different.
Applying the same strategy today, someone may have to venture further out to find similarly cheap (relatively speaking) house in less desirable area compare to someone in the 70s or 80s, but there are always such areas. Of course, the market is really crazy right now so it's a bad example to use but if someone had bought between say, 2009 to early 2012, the housing would have appreciated a lot by now.
You could have a house in Visitation Valley for $400k (laughably cheap by SF standard). The tough part is saving enough downpayment, but someone making say, $50k a year, buys a $400k house in SF, rent out the in-law unit for$1,000 a month; mortgage + property tax + insurance - $1,000 = roughly $1,000 a month payment. Can a family making $50k affords $1,000 a month towards payment? I think so. 15-20 years from now, that $400k house could be worth around $1 million because of it's location. It takes patience, tight budgeting, and most importantly, knowing where to buy; but it's very doable.
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A house built today is built to meet today's code, even though though it uses cheap materials. Your example is about someone buying a home in the 70's and 80's how it had appreciated. Those house are probably more desirable (if it was built by craftsman).
Like I posted earlier.. Today's dollar don't get you much in terms of real estate. Owning real estate today cost a lot more.
Buying a house is a less desirable area to hope that it appreciate over time isn't ideal for someone looking to buy a primary home. Investment wise, yes..
A house built today is built to meet today's code, even though though it uses cheap materials. Your example is about someone buying a home in the 70's and 80's how it had appreciated. Those house are probably more desirable (if it was built by craftsman).
Like I posted earlier.. Today's dollar don't get you much in terms of real estate. Owning real estate today cost a lot more.
Buying a house is a less desirable area to hope that it appreciate over time isn't ideal for someone looking to buy a primary home. Investment wise, yes..
It's also riskier now because those areas tend to be where most of the distressed mortgages are. Those areas where large #'s of people can barely afford (or not afford) the homes they're in are going to deteriorate more than average.
Husband was a janitor, wife was a dish washer, two kids. They bought a small starter home in a far away (ie cheap) district in San Francisco in the 70s for 6X their income. They lived modestly and most of their money went to paying off the mortgage. They build a basement in-law unit and rented it out to supplement their income (very common in SF).
Mortgage paid off in 20 years (back then loan duration was 20 yrs, not 30 yrs) and they bought a second modest house in the same district, moved into the second house and rented out the first house.
Today, their second home is about to be paid off too and they're retired. The two houses combined are worth around $1.5 millions. Furthermore, CA's Prop 13 law means that they are paying way under market property tax.
They have moved to a lower cost area and bought a third house for $400k - have enough savings to put down 25% and their rental income from the SF houses total around $7,000 a month so they have plenty to cover the mortgage + tax + insurance + expenses (kids all grown up and have jobs now).
True Story #2:
Wife does not work, husband is a day laborer/handyman earning $10 an hour (been making $10 an hour since the 1980s, his income hasn't gone up in almost 30 years), two kids.
He bought a fixer-upper house in a sketchy neighborhood in San Francisco in the 80s. Like the couple in the first story, he built an in-law basement unit and rented it out to supplement income. Took him years to finally fix up all the things in his fixer-upper, doing it mostly on weekends.
Sold house in the 90s for triple what he paid for and bought a duplex (also a fixer) in a nicer neighborhood; living in one unit and renting out the other. Today, his duplex is worth over $1 million and it's almost paid off. In a few years he will retire, sell the property, and move to a lower cost area and targeting a house around, you guess it, $400k.
He will of course retire a millionaire just like the couple above.
If they can do it, there really is no excuses.
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That is a matter of timing and benefiting from the boom of real estate.
Why can't someone buy a home built in the 70s and 80s today? In fact, in San Francisco, most homes are built in the early 1900s. The houses that are bought in the 70s, 80s, 90s, 00s, and 10s are the same houses - early 1900s Victorian/Edwardian/Arts and Craft.
Real estate has always been a desirable commodity, a few things have changed since the 70s but the underlying fundamentals haven't changed at all. In fact, it has remained the same since the 1800s - save money, buy a house, live in it for a long time, don't worry about the appreciation, reap the profit when it's time to sell; and of course "location, location, location." The examples given were possible mostly because the people bought at the right location (San Francisco). If they had bought in say, Detroit, then the endings would have been different.
Applying the same strategy today, someone may have to venture further out to find similarly cheap (relatively speaking) house in less desirable area compare to someone in the 70s or 80s, but there are always such areas. Of course, the market is really crazy right now so it's a bad example to use but if someone had bought between say, 2009 to early 2012, the housing would have appreciated a lot by now.
You could have a house in Visitation Valley for $400k (laughably cheap by SF standard). The tough part is saving enough downpayment, but someone making say, $50k a year, buys a $400k house in SF, rent out the in-law unit for$1,000 a month; mortgage + property tax + insurance - $1,000 = roughly $1,000 a month payment. Can a family making $50k affords $1,000 a month towards payment? I think so. 15-20 years from now, that $400k house could be worth around $1 million because of it's location. It takes patience, tight budgeting, and most importantly, knowing where to buy; but it's very doable.
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No one is qualifying today or a 400k mortgage on 50k income. On average housing hasn't done much since 2009 in terms of appreciation. Basically your examples from decades ago was like hitting the lottery.
A house built today is built to meet today's code, even though though it uses cheap materials. Your example is about someone buying a home in the 70's and 80's how it had appreciated. Those house are probably more desirable (if it was built by craftsman).
Like I posted earlier.. Today's dollar don't get you much in terms of real estate. Owning real estate today cost a lot more.
Buying a house is a less desirable area to hope that it appreciate over time isn't ideal for someone looking to buy a primary home. Investment wise, yes..
Those houses used in my examples were built in the early 1900s. If someone were to buy a house in San Francisco today, they'd still likely buy a house built in the early 1900s. That's because land is scarce here and it's very rare (and difficult due to tight regulations) to build new buildings. Those houses bought in the 70s are are the same houses being bought today and will be the same houses being bought 50 years from now. They are the same inventory, due to lack of new buildings in the last 50 or so years, that's what I'm trying to tell you. Probably less than 1% of the total houses in San Francisco are built after 2000s. You get my point?
Said house would look something like this but bigger:
I remember twenty years ago, lot of people said real estate was too costly and they don't get as much bang for the buck as in the past. What happened since then? Housing went from expensive to unaffordable to very unaffordable. I'm sure when the people in my examples bought their houses, there were other people who'd tell them that real estate was too costly and they could get twice the house at half the price if they moved to (insert name of city).
Bottom line is that real estate has always been costly and usually more costly than the generation prior. I'm not saying that real estate is for everyone but if you think it is costly now, look ahead twenty years and it'll be even more costly then. Now, with that said, one needs to be smart and not jump in when there is a bubble.
Currently 400k can buy a decent house in the So Cal suburbs.
That's ~$2000 for just the mortgage, then tax, PMI, and insurance puts you at about $3000+ a month.
That is approximately double our rent.
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I would buy a house for 250-350 but they are either in perpetually bad areas, or snatched up by all cash investors, driving the price up past 400k.
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But my wife and I don't and aren't anywhere near close to having anything resembling a down payment.
We will though, and we will be home owners with in the next 5-6 years. And will buy in the $400-450 range. We (knock on wood) at that point could qualify for the max of $450k. Currently we're paying off debt, and except for our cars we will have all of our other debt paid off by next year.
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To answer the question, I think that there are a lot of people like me, but who have a down payment. Those who aren't investors are just regular joes trying to buy a house, or people as evidenced in this thread, who were previous home buyers but want to make a move.
No one is qualifying today or a 400k mortgage on 50k income. On average housing hasn't done much since 2009 in terms of appreciation. Basically your examples from decades ago was like hitting the lottery.
A $400k home. NOT a $400k mortgage.
With 25% down, the mortgage would be $300k = $1,500 mortgage. Someone making $50k + part of the potential rental income; can qualify for a mortgage. I've done it.
It's not like hitting a lottery at all. It's tight budgetting and planning ahead.
Quote:
Originally Posted by Gatornation
On average housing hasn't done much since 2009 in terms of appreciation.
That is a matter of timing and benefiting from the boom of real estate.
No, the most important aspect are savings and location.
Timing is important too but timing is easy. Half the country knew there was a bubble and half the country knew that housing bit bottom between 2009 to early 2012. Timing is easy, finding the right location is harder but having enough down payment is the toughest part. It doesn't happen by accident, a lot of budgetting went into it.
Honestly, 'buying' a $400K house is not what it was 15-years ago (or in the 2003-2007 run-up when everyone was 'buying' houses that were way beyond their means to 'pay for them.' Even then, a lot of people got out before the 'bubble' burst ... making enough money to buy what was an $800K house then, for $400K today!
$400K houses are pretty commonplace in many areas of Florida; - In fact, in many areas of Destin, $400K is at the low-end of the spectrum. However, in most parts of the country, $400K can still buy a LOT of house.
How do people 'Pay' for their $400K home is a 'horse of a different color.' But, people have not traditionally 'bought' homes to live-in for the 30-year term of their mortgage. Many, instead, stretch to buy a more expensive home, so that when the RE Market goes up, they make more money. (It's a matter of priorities and leverage).
(Example: One buyer stretches for a downpayment to buy a $400K home, in the same market that a contemporary buys a $200K home. Over the next 5-7 years, the local RE market goes UP by 25% and both buyer's sell. The first buyer has grown his 'housing equity/savings' by $100K (or $50K more than the second buyer in his $200K house). --- Repeat the process and in 10-12 years, buyer one then has $200K in equity/savings ... or enough to pay cash for half of a $400K home, ... while buyer two is still working on $100K in a $200K house.) ... Meanwhile, salaries are going up and the amount of 'stretch' is less.
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