Can only the top 10% of Americans afford homes now?

I’m sure there are other neighborhoods with less expensive homes.

You probably don’t like those neighborhoods cause they are too working class and too diverse for you.

If middle-UMC stands for middle to upper middle class, then that is still pretty irrelevant without talking about the state or city. Any city on the west coast (unless you are deep inland near Idaho/Nevada borders) is going to be expensive, yes. New York, Boston, Philadelphia, D.C., really any bigger city in the Northeast, is going to be expensive. And then a few random cities here or there, like Denver, Austin, Chicago are expensive (but they are still nowhere near New York or California). But everything else is not so expensive. I'm in the Minneapolis area, 600k in a suburb gets you a fantastic house. $350k will get you a more than enough 3-4 bedroom house with some newer renovations. In Wisconsin/Iowa/South Dakota/Nebraska $350k will get you a very nice house, and you can get a decent enough house for $150k-$220k depending on the part of the state. I've got family in Florida, in Jacksonville and north of Miami. Jacksonville looks like $350k gets you a pretty nice family house, you could get by with more like $250k, but the $350k gets you pretty nice.

I'd say over half the population of the country is in an area that can get a really good family house for $400k or less, and 15% of the country could do that for under $300k.

I was wondering the same thing yesterday. I live in West FL, and a 2350 sq ft house in my neighborhood just sold for $675K cash deal.

The cheapest 1300 sq ft houses are going for ~$450K. Without huge equity from a prior home, I don’t know how the middle class can afford these homes. There are plenty of older blue collar types in my neighborhood, but it seems it’s all northern transplants or young higher dual income families moving in.

You can definitely get in a little cheaper on the other side of the tracks, but it’s out of control down here.

I definitely sense another bubble.

Rainy Day wrote:

I was wondering the same thing yesterday. I live in West FL, and a 2350 sq ft house in my neighborhood just sold for $675K cash deal.

The cheapest 1300 sq ft houses are going for ~$450K. Without huge equity from a prior home, I don’t know how the middle class can afford these homes. There are plenty of older blue collar types in my neighborhood, but it seems it’s all northern transplants or young higher dual income families moving in.

You can definitely get in a little cheaper on the other side of the tracks, but it’s out of control down here.

I definitely sense another bubble.

I also live in a Southern state and it’s not traditionally been known for having high home prices. These neighborhoods I’m talking about are reasonably ethnically diverse. The public schools are very good but not top in the state at all.

I wonder if it’s just all the Covid transplants who headed south that are driving up prices. Will that continue when the North (and CA) reopen? I don’t know.

We are closing on a house next week, the third one I've ever bought (age 47), and when we started looking, I too was astounded at the costs of everything.

But with some perspective, I think you'll find that you are probably looking at what you want, not necessarily what you can afford. If you have peers that have those houses, it is natural to think that you belong there too.

However, maybe they were able to save a big down payment? Maybe the bounced from house to house over the years to get that money? Maybe they had an inheritance? Maybe they had a spouse die and got a big insurance check?

I have friends in each of those situations. Me, on the other hand, just had to save, and it has taken me until age 47 to be able to buy a 500k home, even though our HHI is about 240k.

You are correct. I live in a decent area in the midwest, not a major metro area. New 2500 square foot houses average about $500k but there are many communities popping up of houses that are slightly larger and go for $700k to $1M. My house is worth about $400k but I would probably have a hard time selling it because it is 20 years old and there are thousands of new houses in the area.

midwest homey wrote:

You are correct. I live in a decent area in the midwest, not a major metro area. New 2500 square foot houses average about $500k but there are many communities popping up of houses that are slightly larger and go for $700k to $1M. My house is worth about $400k but I would probably have a hard time selling it because it is 20 years old and there are thousands of new houses in the area.

This is true, and also, interest rates. I am getting 2.74%, which to me is crazy to even think about. It makes a pretty decent difference in the amount per month you can spend. Suburbs are expanding like crazy.

We actually have a down payment and can probably secure the loan. The thing is, who wants a 500k loan on a 160k income? Honestly I would not feel comfortable with a 500k mortgage unless HHI was minimum 200k. I wonder if other people in my shoes just max out the loan, and hope to “grow into” the mortgage income wise, or does everyone buying these homes (multiple bidders every time too) just make more money than us?

They suck it up early on.

Just looking at the purchase price is silly. Purchase prices have gone up because interest rates have gone down.

Meaning you can afford more house on the same mortgage payment. In addition, lower rates means you start eating away at the principal much sooner.

Yes, I think people are looking purely at the payment and taking out 30 year loans. I did 3 of them, and finally have a 15 year mortgage since I didn’t want to keep paying into my late 60s assuming this is my final house.

It’s great for people that are selling at all time highs, but I can’t think of how a 30 year old teacher could be a first time homeowner in many areas.

64.0% of housing units are owner occupied. So your guess is off by a factor of 6. Only 61% of homeowners carry a mortgage. The states with the highest rates of paid off homes are :

WV, MS, LA, NM, ND, OK, AR, SD, AL, and FL. In general those states have lower housing prices, fewer restrictions on building, and other than New Mexico, are all Republican strongholds (ie. Republican policies result in more affordable housing). The states with the lowest rates of paid off homes are: CT, WA, VA, NV, RI, MA, CA, UT, CO, and MD. The only one of those states that voted for Trump in the last election was Utah. Democrats like to talk about affordable housing, but their policies (energy codes, labor laws, restrictions on development, etc.) provide the opposite.

Free_the_thigh wrote:

Just looking at the purchase price is silly. Purchase prices have gone up because interest rates have gone down.

Meaning you can afford more house on the same mortgage payment. In addition, lower rates means you start eating away at the principal much sooner.

This is true. This is also what can make the real estate market quite fragile. People making $125K with equity from a prior home taking out a $400-500K mortgage.

When rates go up and housing falls by 20-30%, suddenly their equity is gone. Now, it’s very tough for people to get out, and short sales and foreclosures pick up again. It’s not certain to happen but it is a risk for people buying at these frothy prices.

The thing is, who wants a 500k loan on a 160k income?

With current interest rates, that's a totally reasonable loan with that HHI, depending on some other factors. In many areas, it would be a lot less expensive than renting an equivalent home right now.

I own a $900k home and I'm not sure I could afford to rent it, but the mortgage is totally reasonable.

Most big cities have sprawled out as far as they can an a big premium is being placed on schools and commute times. New housing starts have been way behind demand since the Great Recession in 2008. And boomers are not downsizing in a way (or at all) when they retire that would free up supply. Throw in low interest rates and you have a near permanent seller's market.

People have been willing to take on huge amounts of debt compared to income because there has been continuous appreciation in housing that makes everyone who has owned for more than a few years feel like they are saving lots of money. I paid $275k for a little bungalow 11 years ago. It is now worth at least $550k and most of the homes in my neighborhood are either new construction or renovations with additions that are going for $1 mil+. So, I feel like I made out like a bandit when I am actually at a very normal income to debt ration and everyone else is pushing the envelope.

600k not what it used to be wrote:

I’m serious. I do not live in California or NYC, just a fairly typical middle-UMC suburb, and basic 4 bedroom family homes are selling for 600k right now. These are not new or necessarily with updated kitchens...etc.

How on earth do young families buy a home? Our HHI is 160k, but my wife (earning 50k of that) may be dropping to PT work to be home more with the kids. So even if we can get a loan now, it would be so tight. Do most people just suck it up and borrow hard? We both have college degrees and feel like it should not be this expensive to own a 2000 sq foot home!

What major city do you live near? Here in Dallas 500k will get you a hell of a nice house.

I am single, make 42K a year and just closed on a 200K new build house. 1600 sqft.

I saved up 60K for down payment. Took about seven years.

It really wasnt that difficult.

Real Estate Gurus.

What's the most reasonable ratio or rule of thumb with a conservative house-price-to-income ?

Let's say you make $140k. What's a reasonable range of purchasing power?

Swaglord_the_real_one_1_one_1 wrote:

Real Estate Gurus.

What's the most reasonable ratio or rule of thumb with a conservative house-price-to-income ?

Let's say you make $140k. What's a reasonable range of purchasing power?

The old rule was 3 times the yearly household income is the maximum amount you should get a loan for. So with $140k, that would be $420k max.