Buying a Home.....

[Red96TA]

I live in Central California where the median family income is something like $45k, however, alot of developers in our area are ONLY building homes that cost $300k+ and I know that there's just no way for the average family to own one of these homes....but I see folks moving into these places each and every day.

I do know a bit about real estate, but even if a family has been living in a 3/2 for five years and has built let's say $60k in equity, that would only allow them to do a horizontal shift (since every other 3/2 would be similarly priced and would eat up the 'equity'). Additionally, even if the family gets into a starter home at say 35 years of age and keeps this home for five years and does a vertical shift toward a more expensive house, they would have to pay toward that home until they were past retirement.

I just don't get it....there should be no way that a couple making $45k TOGETHER should be able to buy a $300k house in the lifetimes. You think these guys are just falling into the ARM's and sub-prime garbage that has the market bogged down at the moment?

[Conquest10]

I just don't get it....there should be no way that a couple making $45k TOGETHER should be able to buy a $300k house in the lifetimes.

Of course not. But that just goes to show how messed up the system is in this country. Housing isn't getting any cheaper. Unless you want to live out in the streets or are rich, you are going to be paying for your home your entire life.

[Epicurus8a]

No doubt you've heard about the debit crisis many Americans are facing.

http://www.youtube.com/watch?v=MxFx0NzSjWw

Without getting into a rant about ARMs (a freakin' scam, IMO.), most people shouldn't pay more than 1/4 of their monthly income on their monthly mortgage payments. In other words: if you earn $1,000 per week, then the maximum mortgage payment you can afford is $1,000 per month (generally speaking).

Furthermore: whenever you take out a home loan - go for the 30 year loan (not 15 year loans). As time goes buy inflation kicks in and you're paying of the home loan with cheaper dollars. (i.e. 2007 dollars are worth far less than 1997 dollars). Therefore: 30 year loans allow most people maximize their tax write-offs.

NOTE: Be sure to check with your own advisor before following a strangers advice.

[Heywould3]

i ask that question a lot too. one reason i found is that some people wil lget an intrest only making their payment half of what it would be.. but those are ARMs and as a result we have the highest forclosure rate ever now in the US. i make well above the mean income or average income even the one the OP posted and im single. so only one income... i wont look for a house that cost more than 250k i would more likely pay under 200k

On that note .. i reciently moved from Michigan to TN and work in an area that has a low income rating. but very high employment rating. basicly they pay less here in this area then they do in other areas for the same work.

anyway im leasing currntly since i dont know where i want to move yet.. but i got real lucky. IMO anyway. there is a very upper class comunity here called "the bay" its got water on 3 sides golf, clubhouses you name it. obviously its a gated comunity. the average house price in this comunity is 500k thats nutz lol.. anyway im in a 1800sq condo on the 18th green with the lake behind me. i could go on and on.. but this is the type of place the OP was talking about and i am only paying 1000 a month. people with money by these places and lease them but not to make money just to help pay them off. they buy as an investment.

[Xylob the Destroyer]

We bought our first house just over a year ago.
When we got approved for the loan, the lender told us that according to their figures (all base on the reems of paperwork we did, the background check, credit check, and rectal exam with a telescope) we could easily afford to buy a house in the $475,000.00 range and that was the most they could approve us for.
That's half a fuckin million dollars!!!
There is no way in hell we could EVER afford that kind of a loan.
When they make their "computations", all they look at is the value of what you own + the GROSS income.

When we sat down prior to getting the ball rolling, we closely examined our finances and after about a week of ******* with the numbers we decided that the MAX we could afford would be $220,000.00 -- and that would be a real pain in the ass = no more eating out, movies, toys, shoes, clothes shopping, fun in general.

Lenders don't take into consideration things like food, gasoline, insurance etc.

That's why every month for the last year has set new records for foreclosures.
Lenders tell people they are approved for outrageously HUGE loans and the morons take 'em up on it....

People say that Americans have no culture, but that's not true at all.
This has become a culture of debt. A culture with absolutely no understanding of the concept of "personal responsibility". A culture of 4 year olds.

[zzyzzx]

The other problem I see is that unless you can convince a custom builder to build you a normal sized house, or want something at elast 30 years old, you have only two choices, McMansions, or luxury condos.

[Supreme2k]

I'm in the process (escrow) of selling my house. I'm by no means a millionaire (more like a dollar menuaire), but we're having no problem selling our home for $680K in a "mid" area - not worst, but not prime. We bought it about ten years ago for $200K. Our next home, in San Diego, is much bigger, but nearly $200K less.

What we originally did was an 80/20. You'd be surprised at the tax break you get these days. Most $3.5K/month payments can turn to $2-2.5K/month at the end of the year. With rent at $2k-$3K anyway, it's well worth it to own (if you can get the financing).

[Xylob the Destroyer]

We did an 80/20 as well. It's OK for now, but we definitely gotta refinance/consolidate before that ARM on the 20 kicks in.

as for zzyzzx's comments -- we looked at new construction first and found that for what we could afford, we wouldn't get much.
Then we started looking at older stuff. Comparing a 15-20 year old house to new, you can literally get twice as much for your dollar.


We wound up with a 40-year old "flip".
The dude bought it for $76K from a crazy old cat lady. The neighbors have all told us that she had at least 20 cats running around here.
Emphasis on the "crazy" part too. She was on fixed income and didn't spend any $$ on shit like trash removal etc. She threw all her garbage in the basement until it got full. Then she moved her car outside and threw all her garbage in the garage until it got full.
Then she just started filling the rooms upstairs......
Dude had his work cut out for him when he bought the place.
He wound up having to remove all of the flooring and subflooring, all of the dry wall, a fair amount of the interior wall studs just to get rid of the smell.
We now have a 40-year old house with a 2-year old interior.
We got a sweet deal on it too because he got an offer the first day it was on the market, but the buyer's financing fell through so after having to spend a whole hell of a lot longer flipping it than he had anticipated (thereby having to make several more mortgage payments than he had planned on), he wound up having to make 3 more mortgage payments while dicking around with the first buyers....
He jumped on our first offer which was $5K below his asking price and $12K below the offer from the first buyers!

[lordsmurf]

Avoid the ARM unless you want to live in a cardboard box in 5 years.
Fixed only, or you can't buy.