Do you know anyone who could afford their house?

[edhopper]

Let me elaborate. I live in the New York City area. I ask this question of all my friends who own a home. There are one or two who have bought in the last few years, so the price of their home would be about the same and they could afford it today.
But everyone else, who bought their home before 2000 or so could not afford to buy that home now. Think about that, most people I know could not afford to buy their own home. Yet many don't think that prices are out of whack. Who do they think can buy now?
$500k SFHs in middle class communities just don't make sense. People only have so much money a month to pay for a mortgage. We have a long way down before we reach bottom.

[MercutioATC]

1. Ohio, but I could.

It's not a high-priced market and I have a stable job that pays decently, though.

[patrice]

2. I've been puzzled by houses for a while too: What IS a house worth if you always have to have

a place to live? Below some level, it's never really a profit, because whatever you make on it has to go back into another house.

P.S. Kansas, and I could, but then we purposefully bought in the low end of a new neighborhood. Were trying to avoid being "house poor".

[Sherman A1]

3. Bought my first place in 1977

working part time and got one of the last 5% down loans in St. Louis. Sweated it out for a couple of years until I got a full time position, married then sold it in 1987 for double the price. Got a good deal on the place I have now and could probably swing it today but it would be tough to do even with 2 incomes. Much of the current problem from my personal point of view is the vast uptick in real estate taxes and insurance as the payment is fixed. It isn't something I would want to have to even really think about doing without a hefty down payment.

[Art_from_Ark]

10. In 1977, a friend from high school was able to use his inheritence

of $7500 to buy, free and clear, a dumpy little house in a medium-sized town in Arkansas. Even though the neighborhood wasn't spectacular, it was close to schools and shopping.

[LiberalEsto]

4. I sure couldn't afford mine today nt

[MADem]

5. I live in a house that is valued at twenty times the price paid for it.

And it has LOST a good deal of value in the last year.

The taxes alone, over the course of five years, equal the cost of the house. This shit is crazy.

[NMDemDist2]

6. I sold at the height of the market and no, I couldn't have afforded what I sold it for

but moved to a much cheaper area and paid cash for my land here from the profits

and they'll carry me out of here feet first

:rofl:

[Warpy]

7. I could, but that's because I inherited enough to do it.

and besides, it's not much of a house. It's a 2/1 post world war II house in a so-so neighborhood in NM. It's been appraised at twice what I paid for it 12 years ago and houses in this area are selling briskly because they appeal to downsizers and people who want to be close to work.

Anyone who is considering buying a house needs to look at not only how inflated the prices in the area are, but also at what rents have done over the last two years or so. If rents are rising rapidly, you can still do well even if you lose your down payment to deflation in property values.

I know people in Santa Fe who bought at the same time I did and who couldn't possibly afford their houses were they to try to buy them now. Renting is much cheaper there as it is in much of California, so until there is more parity between monthly PITI and rent, there's not much of a point to buying in that city.

[girl gone mad]

12. I wish you could talk my..

brother in law out of buying in Santa Fe. He's a young newlywed, convinced the path to financial freedom begins with homeownership. Last time I Was in Santa Fe, we toured a few homes and I almost passed out when I saw the prices. He won't listen to me when I tell him to wait and rent for a while, even though the place he is renting is closer to town and has a much better view than anything he could possibly afford on his salary.

[Robb]

8. Everyone I know is in the same boat

Median home prices here have gone up about 11% in the past five years, and median incomes rose about 2%. The math speaks for itself.

Got my house painted on a home equity loan a few years back... pulled out some cash so the guy could pay his crew cash, did the rest on the HELOC check. Contractor said of all the jobe he'd done around town, he hadn't seen a regular check from a local bank since 1999.

"No one out here has any money, they just have equity," he joked. A little less funny now that they don't have that either.

[fasttense]

9. I just got reassessed by the tax appraiser

They say my home is worth 24% more than it was last year. I know for a fact there is no way I could sell this house for how much it was appraised for.

I have replacement value home insurance. For the first time in six years my insurance costs went down. Yet the appraiser is telling me my house is worth 24% more. It is interesting that our local property tax appraiser also is business partners with the real estate agent who owns the empty lots in our development.

I'm appealing the appraisal. Corruption is at every level of this country.

[Uben]

14. Believe it or not...........

.....I was actually able to get my tax appraiser to lower the appraisal on my home by $42K! I was shocked. I usually have to beg just to get it lowered a couple of thousand.

[girl gone mad]

11. Well, I live in Dallas..

our housing never really went up much, except for in a few wealthy enclaves. Even so, a number of people did take out interest only and arm loans for McMansions which they couldn't actually afford. Builders weren't building reasonably sized family homes in the low-income range, so now we have a glut of the supersized stuff.

[Uben]

13. I own 158 apts in Dallas

...and we are full! They are in the Spring Valley/Coit area. We suffered for a few years while they were digging the tunnel under central expressway and the telecom industry was busting, but it's back now! Our rents are in the median range for Dallas, so people are flocking in, trying to save money where they can. I don't live in Dallas, I live about 60 miles north at Lake Kiowa. Many people from the metroplex have moved here (its a gated lake/golf community)and commute because they can buy a bigger home and still live much cheaper.

[distantearlywarning]

15. We live in Pittsburgh, PA

We can easily afford our house, as our mortgage is a mere 1.25X our annual income. We could probably even swing the mortgage if one of us lost their job (although it would be a little tight).

Pittsburgh is an extremely stable housing market and never participated in the bubble that hit other parts of the nation.

[mainegreen]

16. My area: average wage ~30k, average home price ~250k.

Out of whack?
You bet!

[World Traveller]

17. Houston - Yes - No bubble - Had MAJOR Housing Bust in '80's,

I've told my husband we know how a major housing bust and economic slowdown will play out in the U.S., because we already lived through that in Houston, during the 1980's oil bust.

One thing that is not getting enough coverage in mainstream media right now - it takes a LONG time to recover from a serious housing bust that is entwined with an serious economic slowdown.

An article in Houston Chronicle in early 2001 documented that in 2000, Houston housing prices, on an inflation-adjusted basis, were finally back to where they had been in 1981. 19 years!

We were young and newly wed in 1982, when we bought our first house. Paid $70k. In 1988, it would have fetched about $47k. We finally sold it on an assumption (had VA mortgage) for $63k in 1993.

The one thing that may be different this time, it appears financial authorities in Washington are attempting to engineer inflation in order to to maintain "asset values" (asset-backed securities, bonds, stocks, houses, etc.) as much as possible so Wall Street doesn't melt down.

Re: housing, unles they also allow some wage inflation, success will be limited in maintaining today's housing values. If average Joe can't afford the house, prices will continue to go down.

[edhopper]

18. I don't know how the Average Joe can afford today's prices

In NYC (not Manhattan) prices are still over 10x income. The math just doesn't work. Monthly wages can't possible pay that kind of mortgage.

[dixiegrrrrl]

19. We had to move to afford a house

from West Coast back to rural South.
Even so, house prices had gone up by 1/3 in the south, overall, from 1994.
Good thing we could afford to retire, but still have to live very frugally, given the increase in living costs.

[shireen]

20. even the MD association of realtors can't spin the grim numbers

They issue the Maryland affordability index every quarter, at http://www.mdrealtor.org/HousingResearchStatistics/HomebuyerAffordabilityIndex/tabid/160/Default.aspx

The Index is the percentage of income the typical first time homebuyer has to buy a typical starter home with a 5% down payment.

For instance, clicking on the index table at
http://www.mdrealtor.org/LinkClick.aspx?fileticket=PBVGr8cTbI0%3d&tabid=160&mid=585
(detailed definitions at the website)

In 2004,
Starter home = $188,420
mortgage & PMI rate = 6.23%
Monthly P&I payment = $1,099.80
Median household income, 1st time homebuyer = $32,732
Annual payment as % of income = 40.3% (1099.8*12/32732 * 100)
Annual income needed to qualify for starter home = $52,790
1st time homebuyer Housing Affordability Index for 2004 = 62% (Median household income / annual qualifying income * 100)

In 2007, 3rd quarter,
Starter home = $264,863
mortgage & PMI rate = 7.23% (btw, interest rates haven't dropped significantly despite fed rate cuts)
Monthly P&I payment = $1,713.64
Median household income, 1st time homebuyer = $38,558
Annual payment as % of income = 53.30% (1713.64*12/38558 * 100)
Annual income needed to qualify for starter home = $82,255
1st time homebuyer Housing Affordability Index for 2007, 3rd Q = 46.9% (Median household income / annual qualifying income * 100)


More awful numbers at http://money.cnn.com/2007/11/06/real_estate/home_prices.fortune/index.htm
Check the table at
See price trends in 54 major metropolitan areas
(detailed definitions at the website)
In Baltimore, we're looking for a -27.8% home price drop in the next 5 years, while rent will increase 11.3%. Other cities are also listed. The biggest change will be Orlando, -34.2% home price drop, 3.0% rent increase over 5 years. Next is Miami at Miami-32.2% / 8.9%.

Chilling. Depressing.