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I'd generally agree with HappyInCali. I never made more than $36,000 a year in the Bay Area (thanks Bay Area employers!) and so I'd never ever have been able to buy anything in the Bay Area--I'd have had trouble buying a house somewhere like Florida even, on that salary. Kinda makes home ownership a pointless aspiration. A LOT of people under 40 in the US are in that situation now as of the last 10 years, where housing prices are shooting through the roof in the few places in the country that have halfway decent employment markets, but incomes aren't going up. Even if prices in some places aren't shooting up like in NYC or the Bay Area they're still going up enough to make it harder to buy or at least afford a bigger apartment, and therefore harder to raise a family.
People older than 40 or so are insulated from all this because they were able to buy in back in the day in the 90's or earlier when prices were way cheaper compared to incomes--either that or now that they're in their 40's they're finally making enough to think about buying property, or at least to rent a big apartment or a house. Those older people who bought a long time ago don't even really think about how there's several generations now who have no hope of ever becoming homeowners. Having no hope of attaining something tends to make you not want it anymore--what's the point of hitching yourself to an outdated dream?
Location: Baghdad by the Bay (San Francisco, California)
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Quote:
Originally Posted by mayorhaggar
I'd generally agree with HappyInCali. I never made more than $36,000 a year in the Bay Area (thanks Bay Area employers!) and so I'd never ever have been able to buy anything in the Bay Area--I'd have had trouble buying a house somewhere like Florida even, on that salary. Kinda makes home ownership a pointless aspiration. A LOT of people under 40 in the US are in that situation now as of the last 10 years, where housing prices are shooting through the roof in the few places in the country that have halfway decent employment markets, but incomes aren't going up. Even if prices in some places aren't shooting up like in NYC or the Bay Area they're still going up enough to make it harder to buy or at least afford a bigger apartment, and therefore harder to raise a family.
People older than 40 or so are insulated from all this because they were able to buy in back in the day in the 90's or earlier when prices were way cheaper compared to incomes--either that or now that they're in their 40's they're finally making enough to think about buying property, or at least to rent a big apartment or a house. Those older people who bought a long time ago don't even really think about how there's several generations now who have no hope of ever becoming homeowners. Having no hope of attaining something tends to make you not want it anymore--what's the point of hitching yourself to an outdated dream?
Your point is valid, but when I bought my first house--a 1000 square foot bungalow in the Houston Heights--the $84,000 asking price seemed like all the money in the world. I was 23 and still a full-time student, so my verifiable income was low, but I had managed to save up about $12,000 for a down payment, so I was good to go in those crazy market days.
It's amazing to think about it now. I still remember going home to that house months later, right after I graduated, taking a bottle of Moët et Chandon White Star to my wife to celebrate getting my first internship at an ad agency. The pay for the internship was $5.00 per hour, but the upside potential was huge. I think the bottle of champagne set me back a day's pay.
It was a different time for sure, but less than 20 years ago. Thing is, there were plenty of larger, newer houses in the suburbs for $50,000-$60,000, and I looked at them seriously. I wanted to live in the city, though, and was willing to pay more and sacrifice to do so. It was way out of reach to buy anything then, but I put it on the line and took my chances, with really very little concern about making it work.
Proportionally, the numbers aren't that different today. The credit is harder to get and my down payment isn't as big of a percentage, but the risk is about the same.
If you want to make something work, you find a way. I'm with the OP, though. It's difficult to see the advantages of ownership at these price points.
Well, I was addressing HappyinCali, maybe Happincal should call your wife.
To your point wooliemonster - if you feel that you might be priced out in a couple of you are really saying 1) prices are going up and rates are going to be either flat or lower but making the total monthly cost higher or 2) Rates are going up making the total monthly payment higher. If you really feel that there is going to be enough appreciation to be priced out, how much are you talking about 2% per year 5% per year? Just calculate the cost of PMI into it to see if it make sense. The question is will your qualify?
Let's say that 800k house that you want to buy goes on the market tomorrow at 750k would you buy it? while you think about it, a home similar to it goes on sale for $730k. You'd probably be saying to yourself prices are going down, I don't want to buy in a declining market, because as soon as I buy, my equity goes up in smoke. You can't buy in an appreciating market because you are going to get priced out.
You've bought before , when it the right time to buy? What difference does it make if you have low equity, a higher monthly payment? What does the equity matter to you, if you house appreciate 5% , whether you put 10% down or 20% down it still appreciates 5%. Let's say you put 20% down and your house goes down in value 20%, you are not going to sell it as you displayed with your last property. So little or no equity shouldn't matter to you.
The reality is , it maybe that the 800k house in that neighborhood it just too pricy for you income level.
Have you talked to a california lender lately.
I'd generally agree with HappyInCali. I never made more than $36,000 a year in the Bay Area (thanks Bay Area employers!) and so I'd never ever have been able to buy anything in the Bay Area--I'd have had trouble buying a house somewhere like Florida even, on that salary. Kinda makes home ownership a pointless aspiration. A LOT of people under 40 in the US are in that situation now as of the last 10 years, where housing prices are shooting through the roof in the few places in the country that have halfway decent employment markets, but incomes aren't going up. Even if prices in some places aren't shooting up like in NYC or the Bay Area they're still going up enough to make it harder to buy or at least afford a bigger apartment, and therefore harder to raise a family.
People older than 40 or so are insulated from all this because they were able to buy in back in the day in the 90's or earlier when prices were way cheaper compared to incomes--either that or now that they're in their 40's they're finally making enough to think about buying property, or at least to rent a big apartment or a house. Those older people who bought a long time ago don't even really think about how there's several generations now who have no hope of ever becoming homeowners. Having no hope of attaining something tends to make you not want it anymore--what's the point of hitching yourself to an outdated dream?
Interest rates were also around 17% and unemployment was the worst since the Great Depression.
Plenty of folks were saying they would never be able to buy a home because that shipped sailed and left without them.
These are same people, for the most part that make up many of today's homeowners...
Each generation has it's own set of obstacles to overcome.
I've posted before about young high school sweethearts that married and had no problem buying a home... she graduated as and RN and he is a Police Officer for a Bay Area city... the first in both families to have college degrees and right out of school they both have jobs with great benefits and good wages.
More people owned homes a few years ago than at just about anytime...
Most that got into trouble also had refinanced at least once and others simply decided their home was a bad investment and walked... both wealthy and those of modest income.
Interest rates were also around 17% and unemployment was the worst since the Great Depression.
I wish the days of high return , insured deposit would come back.
If that happens again and I could earn 17% at the bank, it would be so easy to have your cash in the bank service your mortgage. I don't see high bank rates coming back in the near future. I think the day of 5% CD returns are gone, I think that banks will not have to compete to get cash deposits from people to lend out money because they already found another channel to get money it is is a whole lot easier. A bank's business use to be taking deposits from people and lending that money out. The whole lot of things has changed, basic they don't need your money anymore to lend out money and they are also real estate investors and speculators and don't need to dump their foreclosed properties like in the past. They are your competition when you sell, they are your partner when you buy.
Interest rates may increase (they're unlikely to go down, at least) but will this put any pressure on sale prices? I see a lot of cash sales on the MLS. Are prices likely to increase another 20-30% in the next few years? Even 5% per annum on 800k is 40k. Who knows. Anxiety source #1.
Anxiety source #2 is finding a lender. We're moving next month, so it's premature at this point, but on the immediate radar. Will we qualify? If so, for how much? I don't know, 2008 was a lifetime ago. I can trade job satisfaction for additional income if necessary, which may ultimately be required. I can wear many kinds of hats. It also depends on where my wife finds a job. Current budgets are just projections.
Anxiety source #3 is of course the difficulty renting with my cats, especially if I try to find a place inexpensive enough to ramp up my savings.
(of course, this might all be a moot point -- if the federal government goes into a deep shutdown, I might not have a job in the Bay Area when I arrive!)
Really depends on a LOT of different variables. For starters, using a million dollar home as an example is rather extreme. A million dollars? cmon'. So... yeah, I would agree if the average house was a million dollars. But it isn't. We rented for 12 years, saved up money, and last year interest rates were down to almost 3.50%. We bought at that percentage, bought a house for $530,000, and as a result our mortgage payment, including taxes, is less than the average rent for the same size house. Trust me- I did the math. I'm not saying that its always better to buy, but in our case and many others, sometimes it is.
The places where a starter homes are a million dollars are still rare here. If you go to the east bay plenty of homes can still be had for less than 500k . But a lot of people missed the opportunity to buy from 2008 to 2012 the planets aligned just right then but people day on the fence. My wife ad a house that was 150k underwater and as bank that didn't want to help so we walked in 2011 and I bought a house in my name for half of what she owed. Our payment is less than half what her payment was. I even refinanced last year and our payment is 190 less than before. Rents for the same homes I the area are 500 more. She had to pay handsomely come tax time but it is all gravy now. Best decision we could have made. And she is already on her way to repairing her credit having been approved for new credit cards.
I'd generally agree with HappyInCali. I never made more than $36,000 a year in the Bay Area (thanks Bay Area employers!) and so I'd never ever have been able to buy anything in the Bay Area--I'd have had trouble buying a house somewhere like Florida even, on that salary. Kinda makes home ownership a pointless aspiration. A LOT of people under 40 in the US are in that situation now as of the last 10 years, where housing prices are shooting through the roof in the few places in the country that have halfway decent employment markets, but incomes aren't going up. Even if prices in some places aren't shooting up like in NYC or the Bay Area they're still going up enough to make it harder to buy or at least afford a bigger apartment, and therefore harder to raise a family.
People older than 40 or so are insulated from all this because they were able to buy in back in the day in the 90's or earlier when prices were way cheaper compared to incomes--either that or now that they're in their 40's they're finally making enough to think about buying property, or at least to rent a big apartment or a house. Those older people who bought a long time ago don't even really think about how there's several generations now who have no hope of ever becoming homeowners. Having no hope of attaining something tends to make you not want it anymore--what's the point of hitching yourself to an outdated dream?
Other than in South Podunk the break point is more like age 50.
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