Another perspective on the housing/home ownership issue

Toll_Collector · 2024-08-25T14:03:09.111Z

That’s a 3000 dollar mortgage. Am I the only one that thinks that’s nuts at that income level?

Oops. I think it’s 2500. Still bad

Eagle-Keeper · 2024-08-25T14:17:24.575Z

Toll_Collector:

Eagle-Keeper:

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.

That may include property taxes and insurance.

Eagle-Keeper · 2024-08-25T14:19:01.642Z

Guvnah:

Eagle-Keeper:

you need $80,000 down and have a salary around $120,000/year.

Or a two income household of $60K each.

And likely no kids.

Gaius · 2024-08-25T14:30:25.588Z

Eagle-Keeper:

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.

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

image944×195 27.4 KB

.

Toll_Collector · 2024-08-25T14:33:13.415Z

Eagle-Keeper:

Guvnah:

Eagle-Keeper:

you need $80,000 down and have a salary around $120,000/year.

Or a two income household of $60K each.

And likely no kids.

Yeah, 25% doesn’t sound like a lot in a vacuum. But when it’s one expense among many, it’s a big deal.

Gaius · 2024-08-25T14:39:16.368Z

Toll_Collector:

Dedicating 25% of your income to a mortgage is rough.

Most young folks not living in Mom’s basement pay more than that for rent.

~33% rent or mortgage per household is pretty much the norm

bigtwnvin · 2024-08-25T14:53:30.446Z

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.

Gaius · 2024-08-25T15:45:18.385Z

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.

Toll_Collector · 2024-08-25T15:52:27.874Z

Gaius:

Toll_Collector:

Dedicating 25% of your income to a mortgage is rough.

Most young folks not living in Mom’s basement pay more than that for rent.

~33% rent or mortgage per household is pretty much the norm

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.

Gaius · 2024-08-25T16:14:43.385Z

Since ~33% is what most households are willing to pay rents and mortgages typically adjust to that level.

If you never paid more than 25%
then you were probably like my parents, always the best-employed family in the neighborhood.

They were teachers, and we always always always lived in neighborhoods most teachers would look down upon.

(They also afforded a home plus an income property before age 30.)

Toll_Collector · 2024-08-25T17:20:37.980Z

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.

Eagle-Keeper · 2024-08-25T18:33:47.983Z

Toll_Collector:

Gaius:

Most young folks not living in Mom’s basement pay more than that for rent.

~33% rent or mortgage per household is pretty much the norm

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.

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.

Liberty323 · 2024-08-25T21:41:23.067Z

Toll_Collector:

Eagle-Keeper:

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.

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.

Gaius · 2024-08-26T03:23:09.988Z

Not sure here to put this chart.

Caption reads it is from Bloomberg but I can’t find the original article.

image900×653 74.6 KB

t

biggestal99 · 2024-08-26T09:12:20.175Z

Guvnah:

Or a two income household of $60K each.

thats easily doable in Jersey.

120 however isnt even close to middle class. which prolly starts at 150 in jersey.

Allan

Gaius · 2024-08-26T14:17:27.964Z

biggestal99:

Guvnah:

Or a two income household of $60K each.

thats easily doable in Jersey.

120 however isnt even close to middle class. which prolly starts at 150 in jersey.

Allan

Definitely doable in S Jersey.

Qualifying income $64,618 . . .
Two Walmart cashiers can afford this crampy 3BR house on 1.26 acres . . . if they can save the 20% down payment and 10% closing costs.

Fireplace
3 car detached garage/workshop
4 miles to the beach
4 miles to Acme
20 miles (30 mins) to the nearest employment center

Toll_Collector · 2024-08-26T14:42:34.333Z

Liberty323:

Toll_Collector:

Eagle-Keeper:

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.

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.

I’ve always found this fascinating. This isn’t a smart/dumb thing either. All types willingly make this decision. I always thought the choices people make take into consideration the affect it has on their life. But I think a lot of people make choices and then compromise their life as a result of their choices.

Make no mistake. This is a choice if you’re not lazy. I will never buy a house, work a shift, take a job, where I’ll be subjected to traffic and tolls on a regular basis. I will not buy a home that makes me house poor. Maybe that means you don’t have a great house. But your life is a lot better. This is why I never work overtime. And this is just my opinion. My free time is worth more than what they’re willing to pay me to take it away. I have no problem with people that think differently.

I got a mortgage in 2000. Refinanced to a 15 year mortgage in 2003. Paid that thing off by 2015. It was around 12% our income at its highest. Went down every year since 2003.

Eagle-Keeper · 2024-08-26T14:56:12.939Z

biggestal99:

Guvnah:

Or a two income household of $60K each.

thats easily doable in Jersey.

120 however isnt even close to middle class. which prolly starts at 150 in jersey.

There’s other factors affecting a lot of people who would like to buy a house in that range: multiple kids, poor credit, lack of down payment, etc.

bigtwnvin · 2024-08-26T15:30:21.372Z

Not sure of your demographic but that’s a financial and personal health practical approach to living aka common sense.
For some reason the yutes have this preconceived notion that upon graduation from college and perhaps in some kind of relationship, they should be moving into a $400k or more McMansion?
Then of course there is that faction that moves into Mommy’s basement to mooch for the next 20 years.
I have no problems with 20 somethings living well or lavishly so long as they can afford it. OR are well heeled and come from wealth. I’m not and had to work my arse off to get where we are. And thank God I was able to take this journey with my soon to be bride of 40 years!

Guvnah · 2024-08-26T17:25:24.948Z

bigtwnvin:

For some reason the yutes have this preconceived notion that upon graduation from college and perhaps in some kind of relationship, they should be moving into a $400k or more McMansion?

My first house (1981) was an 800 sq. ft. 2BR, 1BA starter home. We got it 6 months after we got married, and our first baby was on the way. We stayed there through baby #2. That was all we could afford, so that was all we bought.

Then we moved up to a 2-family home. Our half was 3 BR, 1 BA. Second apartment was 2BR 1 BA. The rent allowed us to have bigger piece of real estate, and thereby benefit from bigger appreciation. It was a huge lesson for me, seeing how well that worked. The rental income was added to the mortgage qualification. (80% of that income, to be precise.) We essentially doubled our appreciation trajectory. The cost to us was essentially a second part-time job as landlords. Want more income? Work a second job! We expanded to 4 kids in that 3BR apartment.

In 1989 we sold it and moved into a 3000 sq. ft. single-family house using the equity we amassed with the 2-family property.

When my daughter and son-in-law were bouncing from apartment to apartment, my counsel was for them to buy a multi-family property and live in one apartment. They went with a 4-unit property. With sweat equity they fixed up the property, improved the quality of tenants, and ended up covering the whole mortgage with the 3 rental incomes. They therefore lived completely “rent-free” in the 4th. After 8 years they sold and put the equity into their own single family home. The realtor at the time was surprised that they didn’t want to keep the 4 unit and rent all 4 to have a huge positive cash flow, but by that point they reached their limit with landlording. They sold it and never looked back. I’m happy for them for how it all worked out.

It’s not an approach that many of today’s younger generation wants to consider. Too much work, I guess. It’s not ideal. It’s not easy enough. Lots of excuses. But it works, and works well, if you want to put your effort into it.