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wideguy
Aug 12, 2004, 1:40 PM
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In reply to: Personal / cheeky question here: how much could a single person, 1 average income (whatever national average in the US is right now), no major outstanding debts, expect to be able to borrow?
Short answer? Way more than they can usually actually afford.
Banks will generally follow the 25%/33% rule. Your mortgage amount can't exceed 25% of your GROSS monthly or your total debt with mortgage can't exceed 33%. But that's GROSS income, not post tax, post- health insurance. It also only factors mortgage, credit cards, car payments and often student loans.
It doesn't factor expected utilities, food, gas for your car, repairs etc etc. so many young couples get in WAY over their heads.
So if you make 40K a year most banks will lend you up to a $833 . month mortgage, roughly $120K or so but if you factor in that you're probably only bringing home $2200 a month, spending $400 a month on food, another $100 on gass for your car, another $300 for your car, another $200 for heat and electricity, $100 for cable another $200-$300 in student loans you have about $100 / month left for all the stuff I'm forgetting as well as that surprise brake job, new fridge, new boiler or whatever else comes up. So welcome to the American cycle of credit card debt and bankruptcy and forclosure.
I know this is generalizing. Many people are smarter than this, but alot aren't
edit and $120 K buys you squat :roll:
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madriver
Aug 12, 2004, 1:42 PM
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...Dookie is right on with the D.C Metro area.....
...love it!!! I know it must be tough for new families or first time buyers...but...for me it's great. Anything within a mile inside or out of the beltway in Montgomery Co., MD and Fairfax Co., VA is a no-brainer investment. A 960 sq. ft. 3-bedrom Colonial on 7000 sq. ft lot I owned will sell for $550,000. A 3000 sq. ft. 4-5 bedromm Colonial on 15,000 sq. ft. lot $900,000 to who knows what...1.2 to 3.5 mil in Chevy Chase. Mont. Co. real esate is the best investment vehicle I have found.
Bob
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tradman
Aug 12, 2004, 1:49 PM
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In reply to: So if you make 40K a year most banks will lend you up to a $833 . month mortgage, roughly $120K or so
Thanks for the detailed answer, that's quite close to what we get here, perhaps very slightly less.
The general market atmosphere here is one of pure fear - if interest rates go up more than a fraction of a percent, an awful lot of people are going to lose their homes.
I'm happy on the one hand that I have a nice house and it's got good value, but at the same time, I can't help but feel that I'd rather have it be worth less and appreciating slower if it meant the market was more stable and more folks on lower salaries could afford a place to live.
It's good for some individuals, but I think it could be bad for the community as a whole.
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wideguy
Aug 12, 2004, 1:49 PM
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MR that is true but only if you have significant $$ for downpayments and only as long as your market doesn't peak out. Nobody up here is sure where the limit is so investing now if tricky
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unabonger
Aug 12, 2004, 1:53 PM
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Suburban Virginia, near Washington DC. Prices are directly proportional to distance from the city. The metro area is huge, 5 million people. The house you describe might be $700,000 in Arlington, 8 miles from the White House. Go out another 20 miles and you can find $300,000-500,000. Fairly insane.
A single borrower earning $50,000 can qualify for about $220,000 at 6% interest. They can probably afford $175,000. Which is just about what they'd need to buy a non-s##hole single bedroom condominium inside the Beltway.
I bought a 700 square foot single family detached shanty on a 1/4 acre for $95,000 about 40 miles from DC and put $35,000 cash into rebuilding it as well as 40 thrizziillion hours of my labor. The retail price of my repairs done by a contractor might have been $100,000? I'm one month from completion and estimate that it would sell quickly at $250,000. But after all the gd work I did I'm going to keep it for a little while...
UB
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dookie
Aug 12, 2004, 1:59 PM
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OMFG, I live near the infamous Unabonger?!?!?! holy crap!
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madriver
Aug 12, 2004, 2:00 PM
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wideguy wrote:
In reply to: MR that is true but only if you have significant $$ for downpayments and only as long as your market doesn't peak out. Nobody up here is sure where the limit is so investing now if tricky
...word...I look for the marginal neighborhoods in these counties that have not yet "exploded" through the roof. There are still a few "finds" . I look for the most distressed properties in a neighborhood with proximity to Metro (our subway). I have been sucssesful buying low and with a minimum of re-hab and selling at 100-200% of original investment. I agree with the not knowing where the "limit" or ceiling is. I don't think there is one. The market is cyclical, over the last twenty years we have had one correction (downturn in prices) followed by a 30-50% increase in value per year. Over the long haul, it's your best bet. The short haul can be risky but very profitable. I have been waiting for a market correction the last two years. I may be waitng Godot.
Bob
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nearly_there
Aug 12, 2004, 4:08 PM
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you guys got it soooooo easy man-
two bedroom flat with small balcony in the house next to mine got sold for about £235,000 (yes pounds sterling) last month.
a semi detached house with 3 bedrooms in my area will set you back around £350,000-450,000 and a detached prob circa £500,000-£700,000, they easily go for more and houses in my local are getting sold for well into the millions (£)
think i will be renting till i die
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macherry
Aug 12, 2004, 4:18 PM
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i live in a small ski town, we bought our 3bedroom, 2 1/2 bath, split level 10 yrs. ago for 129,000. At the time we nearly crapped ourselves, because we moved from a small prairie city and had a 3 bedroom craftsman 1920's style home for 64,000.
Our house is now nearly worth 200,000 because some american investors bought the local ski hill, driving real estate through the roof!
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superdiamonddave
Aug 12, 2004, 4:47 PM
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Oklahoma City equals cheap houses! Right now you can get a 3 bedroom brick home for $80k. The prices have soared since the interest rates are so low. A few years ago you could get the same $80k house for $45k - $50k. Still a heck of a good deal around here.
Check out WWW.REALTOR.COM
This site is where I found my house and I just closed on it last Friday!!
Woo Hoo!! I'm finally a home owner! No more renting apartments! :D :D :D
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winter
Aug 12, 2004, 4:48 PM
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I live downtown in a pretty major city. My neighborhood has tons of trees and is very residential.
My house was the deal of the century. It is a 1912 shack on a tiny lot and was gutted before I bought it so the whole inside is new. I have 2 bedrooms and around a thousand sq ft. I also have a small backyard and 2 car garage. I paid $182,000 cdn. almost four years ago. You can't buy a shack in my neighborhood right now for $220,000. My house is worth $240-260k now.
I dont' make very much, and my mortgage is over half my monthly income, but I love my place and I walk to work every day. My parents had to cosign.
To buy a suburbia home here with a half hour commute....3 bedroom brand new house around $180,000. 3 bedroom in a slightly nicer neighborhood, slightly closer to the centre...200-250. One near the centre in swanky neighborhood...1-2million.
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nearly_there
Aug 12, 2004, 4:52 PM
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hey tradman!
i unfortunately live in and extremely pricey part of south east london
later dave
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sickbird
Aug 12, 2004, 5:08 PM
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Prices where I live are outrageous. A one bedroom, one bath shack down the street from where I live just went on the market for for $346,000. And that pretty much is just the value of the property-the house is worthless. It even says "a contractor's dream." In some of the gated parts of town houses go for just around a mil. Cali's great, aint it?
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abouttopeel
Aug 12, 2004, 5:44 PM
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$250,000 to 350,000 minimum.
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curt
Aug 12, 2004, 6:03 PM
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In reply to: In reply to: So if you make 40K a year most banks will lend you up to a $833 . month mortgage, roughly $120K or so Thanks for the detailed answer, that's quite close to what we get here, perhaps very slightly less. The general market atmosphere here is one of pure fear - if interest rates go up more than a fraction of a percent, an awful lot of people are going to lose their homes.
Hey tradman, why is that so? Are all the mortgages over there variable interest rate? In the US, we have the option of going either fixed or variable. Obviously, with a fixed rate mortgage, inflation will work for you.
Curt
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sbwyliedog
Aug 12, 2004, 11:13 PM
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Here in Santa Barbara, CA the median price of sold homes is just over $1,000,000. I think you'd be lucky to find a 3 bedroom house for under $900K that wan't a fixer, it's crazy. I don't know how anyone can move here and hope to stay long term with the high cost of housing.
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tradman
Aug 13, 2004, 9:26 AM
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In reply to: Hey tradman, why is that so? Are all the mortgages over there variable interest rate? In the US, we have the option of going either fixed or variable. Obviously, with a fixed rate mortgage, inflation will work for you.
Not all, but some. Banks here are extraordinarily crooked, and are very fond of selling people innapropriate mortgage packages that result in the bank winning every time and the home-owner getting screwed.
A classic example of this is the endowment mortgages that they made popular in the eighteis and nineties: they sold millions of home buyers a mortgage whereby they only paid the interest on the loan, and put a corresponding amount of money into an endowment policy which was invested by the bank in stocks etc. The idea was that at the end of the loan term, the money in the endowment would clear the remaining capital on the mortgage, settling it, and the homeowner would get what was left.
Brilliant, huh?
Well, not really. The banks made a complete arse of the investments they made with the endowment money, and "the funds underperformed". So lots of people came to the end of their loan term, and were told by the bank that there wasn't enough money in their endowment to settle the mortgage and (here's the really great bit) that the homeowner would have to pay the difference!
Now that is brilliant.
The banks took these people's money, squandered it, and are now demanding that the homeowners pay for their mistakes! It's genius! And it's even legal!
As a footnote, and all joking aside, a LOT of people got seriously f*cked in this scam. The problem is not just that the endowments didn't appreciate as much as the banks said they would, the problem is that the banks spent the money so badly that there's not even as much money in the endowment as the homeowners paid into them.
My girlfriend's folks have paid money into an endowment for the last 15 years. The bank has just told them that it now contains £60,000 LESS than they paid into it, because the bank spent all the interest plus £60,000. And of course, they're demanding that the folks pay the bank that 60 grand to settle the mortgage.
Does that sound fair to anyone here?
:evil:
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unabonger
Aug 13, 2004, 3:05 PM
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In reply to: Does that sound fair to anyone here?
Caveat Emptor. They signed it, presumably they even read the contract. Too bad, though. I have no idea why anyone would trust a bank to manage their investments when the bank has NO incentive to care. If the profit goes to the homeowner, and the loss comes from the homeowner, I can guess how much time the manager spent researching his investemnts: zero.
UB
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tradman
Aug 13, 2004, 3:24 PM
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In reply to: Caveat Emptor. They signed it, presumably they even read the contract.
Very true. However, it's worth remembering that the banks had a number of helpful pamphlets to assist home buyers in making their decision, wit titles such as:
"No we don't do any kind of mortgage other than endowment linked"
"Yes you can say no, but we'll trash your credit rating if you do, then you'll never get a mortgage"
"No, the funds never underperform. You'll walk away with a fortune. I'm not lying"
"Here's the small print - now that you've already paid your arrangement fee, survey fees and conveyancing and are two grand out of pocket. Oh and there's a severance fee if you walk away"
It's caused a major scandal here. The banks are being sued left right and center for mis-selling mortgages, and so they should be.
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winter
Aug 13, 2004, 4:09 PM
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Wow, how strange just last night my friend from the UK and I were discussing the complete sham of the endowment mortgage.
Another iteresting UK thing is that property tax is per habitation not ownership. So...you can buy a derelict property in London and as long as no one lives in it, there are no taxes paid on it. So if you need a place to sink some money that's it. Problem is of course, with the housing shortage in London, there is no incentive to do anything with the direlect properties and every incentive to have them remain so, thereby increasing prices of exhisting properties. If this tax law were to change then the housing market there would decrease signifigantly.
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pbjosh
Aug 13, 2004, 4:24 PM
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In reply to: Having just bought a new house here in Scotland, and with property prices being big news here, I thought I'd take a quick straw poll, just out of interest. How much would a three bedroom semi-detached villa in a desirable middle-class suburb cost where you live? Nothing huge or fancy, just bedrooms, a bathroom, lounge, dining room, kitchen, garden and garage. I know a few folks here have moved recently so come on, post up! Dollars, pounds, shells or whatever your local currency is!
In San Diego, it could vary but for a "desirable middle class suburb" you'd probably pay around $500-600k now on average. You could give yourself a slightly worse neighborhood and a worse commute for probably $450k, or the same thing in my neighborhood would probably be over $700k by now, but I'm in a beach community...
San Diego is very expensive, but the flip side is housing is still a good investment here. It's pretty high on the list of most desirable places to live in the US.
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chanceboarder
Aug 13, 2004, 4:37 PM
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i live in Marina del Rey in Los Angeles, CA which was ranked by some magazine (i can't remember which) to be like #75 on the list of most expensive places to by a home or something like that in the US. my house personally isn't worth that much maybe $150,000 but there's a new house down the street that was just built going for around $1,250,000.
there's a lot of condos around my place that go for anywhere from $500,000 for a small 2 bedroom place over looking a Ralphs parking lot to over a million for a 2 bedroom condos overlooking the marina. and trust me these places are small. its all about location. :roll:
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padge
Aug 13, 2004, 4:41 PM
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We bought a house in Sonoma County, CA four years ago for $180,000 it's now worth about $450,000. We've been renting it out for a few years and now were going to sell it and we won't have to pay capitol gains tax (Whoo Hoo!). We bought a house a couple of years ago for $275,000 and now it's worth about $550,000. As you can see the "Wine" country has experienced significant appreciation. I seriously do not see how a young person could buy anything in California today with out a very good job. Also there is alot of 'creative' financing going on right now, so I have a feeling there is going to be alot of forclosures in the near future.
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