As someone with experience in this space - through self, family and friend - I wanted to put this in a different perspective. The first thing, from what I can tell is that these investors - whom I have been approached by - seem to be largely in the price range on single family properties around $300,000 - $400,000 (at least for NJ). I don’t get the impression they are buying properties in the >=$700,000 range. Also, from my experience with them is they are coming in at under Market value. I don’t get the impression that they want to have bidding wars with people who want the home for personal use.
So what’s happening here is that these investors are not looking at the upper end Market as the supply of upper end would be homeowners and the demand for that housing is likely pretty stable. On the other hand the supply of would be homeowners in the mid range housing Market is weaker. My friend has two properties in which both tenants would love to buy the properties. One is working on getting their credit up in order to buy the home, while the other recently got approved for a loan but only around $250,000.
What I think this highlights is one of the structural issues that we have in the economy. I would be curious as to what percentage of the labor force is in the >=$300,000 salary range; $100,000-$299,000 range; $70,000-$99,000 range; etc.
I think that largely depends on whether or not you already own a house. My cousin, around 30, just got married last year. They struggled to find a house just over 300k. They did not own a house. They had to go deep into south Jersey. They also got a large gift from their parents to help out.
If one is going to follow the 20% down rule and 25% of salary for mortgage rule then on a $400,000 home you need $80,000 down and have a salary around $120,000/year.
Dedicating 25% of your income to a mortgage is rough. I wouldn’t do it. In 2003 we were about half that percentage including taxes, and the mortgage still annoyed me. I can’t imagine it being double that.
Income varies a LOT
(many people who are technically rich are living in NY area, or Cali where prices are so high they can afford only an average or below-average standard of living.)
NYC cop Salary after 5 ½ years: $121,589
Entry-level teacher NYC: $75,269
Each of them alone earn enough to be in the top 50% of US households.
Thus an NY cop married to an NY area teacher is eat-the-rich super wealthy . . . on paper. (Possibly so rich their kids don’t qualify for college student aid.)
That said here are the 2021 household income thresholds by quintile
I wouldn’t want to be a 30 ish couple just getting their careers off the ground and trying to buy a home today. Let alone start a family? Our youngest daughter now living in MI is having a hell of a time finding something affordable. The disparity in the housing markets in different parts of the country is amazing to begin with. I actually feel sorry for the young 'uns. The wife and I got into our first house in 1983 for $59k. We remodeled, added sq. footage, decks, pool etc etc. In 2021 we sold for $280k.
In 2010 we settled on our retirement home in Palm Beach FL. The original owner paid $437k. The market was ■■■■■ his wife passed and he wanted out. He accepted our contract at $225k. The house up north was paid for for years and when we sold we paid off the FL home, banked and invested the remaining cash. The last county assessment on the property was $380k and the local real estate hunters have made offers just under $500k. The FL housing situation is like teenagers drinking liquor, it’s crazy. WE could sell and make money but where would we go? Except for the growing traffic madness especially when the snowbirds are around, we like it here.
Butyes,
in a broader answer to your question home ownership and all the benefits that growth it is going away (diminishing) in America and there’s notelling where the end will be.
Currently 65% of American households own homes
42% w/ a mortgage
23% without.
That means
65%
locked-in (most of) their monthly payment for life
got a big tax deduction on their monthly housing payment
put 20% down but got 100% of the appreciation
got to retire without needing to make a major housing payment.
That was good and it is slowly going away.
Like three wolves and sheep voting on what’s for dinner People who got a rapid 20-50% increase in home values have enough political power to decide they must keep that 20-50% gov’t handout
no matter what government program must be enacted and
no matter what it does to the country’s future.
I’m not questioning the norm. I’m questioning whether or not it’s a smart decision. I’m allergic to debt. I try to keep it as low as possible. I’ve rented twice and bought two homes. Paying 25% for rent or a mortgage is not something I’ve ever done. It’s not something I’ll ever do. I’m a high school grad, I’m not rich, I’ve never been rich. But I make decisions based on comfort level, not the norm.
We were entry level position at Verizon, then NJ Bell. Making roughly 40k a year each in 1995. We bought in south Jersey because it was cheaper, but not a bad neighborhood.
In 2003 we bought in Howell NJ. We made roughly 120k combined at the time. In 2003 my house was only 187k. It’s now selling for over 500k. It’s insane. I don’t have a fancy house.
When we bought, we always chose out of the way over a bad area. At one point we made over 180k a year combined. We never relocated. We didn’t need to. Now my wife retired at 46, and I make around 65k. We don’t need more.
Many young adults today are not raised to think that way. Many in the 20-35 range and who are working just live for the day. They don’t save, spend beyond their means buying either expensive things or stuff they don’t need, and/or rack up credit card debt.
After my last bump in pay to keep up with inflation, my mortgage payment is down to about 7.5% of my income. I thought about paying extra just to get it paid off early, but I know they will keep making the money printer go “brrrrrrr” so I’ll probably just let inflation take care of it. I can’t imagine 25% or more.
