how can a young couple afford to buy a home these days....

[Dancing Fire]

with the housing market going up like crazy,even in our area (no. cal) $500k home is so common these days.even IF you have save up $100K 20% down + this and that you still need to carry a $400k jumbo loan mortgage.......glad i bought my in 1986.

 

[IrishEyes]

Good question!! I am wondering that more and more these days. My husband and I are fairly young (both 25) and currently rent an apartment because we are finishing school and don''t plan on staying in our area much longer. We live in Illinois, and up in the Chicago area where we are from, it is getting downright RIDICULOUS! I worry about us, I don''t know how we are going to afford a home in a decent neighborhood. We are both veterans, so at least we have that going for us!

 

[Diamonds4Me]

I have seen that housing trends are going through the roof...no pun intended. It is very hard for a young couple starting their lives together to find a home. And let's face it. Unless you have a wealthy family to back you up or you're well into a high paying career..I just don't know many people that have that kind of money lying around.

Here in NC the average sales price for 2004 was $193,649 with a total dollar amount of homes sold at $18,372,660,767.00
Alright, using a loan calculator, someone wanting a conventional loan for $193,649 @6% interest for 360 months is looking at a Principle/Interest payment of about $1,161.02. That's not taxes and insurance added in. That could bring it to $1,291.02. That's with nothing down so you would have to factor in mortgage insurance of anywhere between $80-$120 a month. Well now we're looking at $1,371.02 - $1,411.02 PITI&MI.

If you take the same sales amount and then have them put down 10%...That brings their PI payment to approx. $1,044.92. That's pretty sad when someone plunks down nearly $20k and it only shaves off $116.10 per month from their PI payment.

Edited: I realize that it's more and less in other states. I'm just using the statistics from the state I live in. But from what I've seen the numbers are relative to the area no matter what state you're in.

 

[Mara]

Also, if you have good credit, little to no debt, and it's your first home, there are alot of programs out there for first time homebuyers that have 0% down or 5% down or similar, so the old 20% down that our parents did is not necessarily required these days. However, you have to be sure you know what you can afford (and not what your realtor says you can afford!) since you go in with little to no equity. But it is a good way to get into a place in some of these more expensive areas where 20% is just not possible sometimes. You'd do something like a 80/20 or 80/15/5 to make the 100%.

Ideally your house would appreciate quickly so you could refinance and then get more equity built into your place and drop your payments, and/or you could start paying down the 2nd 20%(HELOC or loan) and put more into your first which would most likely have a lower IR.

Anyway, there are alot of options out there, so you don't have to have the 20% that was such a popular figure in the past...and I highly recommend that people don't wait until they get 20% if that could take just as long as the house appreciation, because then you just balance it out! Greg wanted to wait until we had more money to put down and I said..well if the house appreciates 50k in a year and we save another 20k in that same year and then buy, we would end up paying 30k more for the same house, just for waiting that year, and it makes the % of debt go up as well.

I'm glad we didn't wait as our house has appreciated about 70k in one year, and we would no way be able to get this same house today. But now that we have it, WE LOVE IT.

 

[Diamonds4Me]

Date: 1/25/2005 3:49:15 PM
Author: Feydakin
All of this may be true, but new home owners do not buy the average home. They buy something considerably less and work their way up.. I am currently on house #4 with 5 in the works in about 5 years.. Each time we moved up the ladder using the equity of theprevious house to help us out.. And yes, I bought in California (North of Sacramento) so I am familiar with the housing markets there as well.. We over bought our house, and grew into it.. It was hard, but it certainly can be done.. Just less nights out and more mac and cheese

I absolutely agree with you that first time buyers don''t always buy the average home. But our little town is so rediculous. They truly believe that our streets are paved with gold. Be it a manufacture home or stick built home you can pretty much rest assured that you''re going to pay more than you should. (Unless you find a foreclosure in decent shape...and lemme tell ya..there''s a whole new topic!) A good portion of the jobs around here are in manufacturing. Well, the manufacturing jobs that haven''t left yet. But I worked in manufacturing for about four years and if I had to buy a house of any kind with that pay I wouldn''t be able to buy a tic-tac.

 

[bar01]

I bought my first home about 6 years ago - North of Chicago. I followed my dad's advice - buy the smallest home in the most expensive/nicest neighborhood you can afford (location, location, location). Basically the land was worth more than the house structure. It was in excellent condition, but small, and no "street attraction". Since then I have added on/renovated/landscaped and with together with soaring property values my home is worth almost double. Frankly if I was trying to buy my first home today - I could not afford the home I have! Moving to a larger home would not make financial sense in my area - rather it is cheaper to add on.

Looks like 2004 had a record pace of home buying - Click here to see a CNN article on this

 

[snlee]

Good question!!!

My honey and I are looking to buy a condo. We can''t afford a house! =( Even a condo is so damn expensive! At least $400K for a decent one. =/ AHHHH!! We''ll be so broke when we buy a place. But like Mara said - if we wait and save up more money it won''t really help. Prices will most likely go up. It''s better to buy NOW. I can''t wait to find a nice condo to purchase! I can''t wait to move out! I can''t wait to live with my honey!

We''ve done lots of thinking about buying a house. Most of our friends aren''t even close to thinking about purchasing a house. If you wait a couple years, the prices will most likely be so much higher and even if you make tons of money it will be hard to afford. You are basically screwed! We both wish sooo badly that we were making money (our current salaries) a couple years ago so we could have bought a house or condo for a lit less!! But we were still in college back then.... =/

Diamonds4Me- I WISH houses here were at an average price of 200K!!!

The price of homes here are CRAZY!!!!!!!!

 

[codex57]

Yeah, me and my fiancee are in the same situation as snlee. We can''t afford a house so we''re looking at condos. Even those are super expensive. It''s crazy where we''re currently located. We''re in a studio apartment that''s 750 sq feet and already paying $1250/mo. Utitlities are not included.

 

[Mara]

sn..I feel your pain. One of my GF''s bought a condo about 5 years ago for $230k, 2 bedrooms, 2 baths, brand new, yard, full garage, two stories, etc. Within a year it went up to $300 and then now it is stable at about $425k. The funny thing was that I was dating her neighbor then (how we became friends), and had helped him find the place he bought. Later he sold for $400k and moved away (we had long since broken up). How often had I kicked myself--I wanted so badly to be in her position at the time, she had family help and all but she is set now...her payments are much less than if someone bought that place now, and she loves her place.

But..what if what if what if! Life isn''t always ready when you are. I totally urge you guys to get something soon, even a condo. Get into something because you can always upgrade the house later of course...just like diamonds.

Get what you can afford. My parents wanted us to wait and get an actual house instead of a townhouse but we are glad we didn''t wait. They say houses appreciate more than condos/townhouses but it really depends on where you are, and what the market trend is doing. Around where we are, townhouses like ours are rare in a sea of houses, so a starter young family would maybe want our place instead of a $200k more house when we go to sell.

 

[abradabra]

This is a thread after my own heart... I am 24 and my fiance and I are looking to buy our first place. Unfortunately, we live in the DC area where the housing market is out of control. It''s such a good investment because the federal government isn''t going to move like a private company is--so your industry is always there and land is always appreciating. The problem is that we''re young and would like to live close to the city and public transportation but he''s still in grad school and I can''t qualify for a mortgage alone for anything more than a studio (which we would not fit into by any stretch of the imagination)...

In my neighborhood (which, admittedly is one of the more expensive areas in Northern Virginia), they just put up a condo building where 500 square foot studios START in the low $300''s. Can you imagine? (outside of NYC, of course....)

 

[NewShiny]

I have two things to add.

1) Don''t discount the possibility of moving. FI and I met in No. Cal, and after years of agonizing over housing prices, we are set to close escrow on our new 4 bedroom, almost 3,000 sq ft house on Friday. Catch is, we have to move far, far away from sunny California. Soon I''ll be admiring my diamond from my new kitchen in Huntsville, AL. No, its not as "hick" as you might think, and the location makes sense given FI''s career (aerospace industry). Once I got over the shock of moving, I now can''t wait to pack up my stuff and move in. Of couse, there is the possibility that I won''t love the South or I''ll miss my family too much. If it comes to that, we can pack up and move back, brininging along the memories of the great house that we got to live in!

2) Mara is SO right when it comes to having great credit. Though the housing in AL is downright cheap compared to Silicon Valley, a couple still under 30 years old hasn''t had much time for savings. With our credit, we are buying the house with zero money down, and the mortage is still less that what we''re paying in rent here in CA, taxes and insurance included.

Bottom line is, if you want home ownership house bad enough, there are creative ways of going about it. Don''t discount any options, talk to a mortgage broker (you might be surprised at how much you can quailify for), and take every step possible to clean up your credit. Good luck, all!

 

[lindsal]

Ugh. This discussion. I kick myself every month when I pay rent. We pay $2200 for a two bedroom/2 bath/car garage coach house in downtown Chicago. I LOVE everything about our apartment --except that I don''t own it and am just burning money up each month living there. We go through this exercise once or twice a year.. For $2200 in Chicago (with let''s say a $40k down payment in cash.) I could have a 4 bedroom house with a kick ass yard in the FAR burbs (read too much time commuting, but really nice life at home in the country.) Or a nice little old 50''s style house with all the modern kitchen upgrades within about 15 -20 minutes out of the city. Or a condo that is significantly smaller than my current apartment in our current neighboorhood.

It kills me. A) Love where I am, b) don''t want to leave for the burb''s JUST yet but C) want a yard so I can let dog out the back and not have to walk him as much and as a place to garden.

We keep saying "after the wedding" we''ll do the house hunting. UGH. I am SOOOOO not looking forward to it, but I know it has to be done.

 

[snlee]

Mara, we are looking and will buy as soon as we find a nice place we like! Not much out there right now... =/

Feydakin, you are right. There ARE houses in our price range just not where we WANT to live. We will end up having to commute as well.

NewShiny, I could never move from no cal to AL like you. I want to stay close to my family.

 

[Bagpuss]

The situation is just as bad in the UK. House increases are just bottoming out now, but prices are still sky high.

The government is having to step in to help first time buyers - building houses that will be offered at cut rates to FTB''s, offering low cost housing to key, but low paid, workers, schemes to buy half of your house (the other half would be owned by the housing association that built it). Many families are turning to buying one dwelling as extended families - grandparents, married children, kids.

It''s getting scary.

My advice is to buy as soon as possible and get on the housing ladder.

 

[fire&ice]

Yes, good credit - little debt is the key. Unfortunately, many kids have student loans. Mara is correct - plenty of creative financing available today.

Some suggestions - Buy on the fringe. These neighborhoods regentrifiy. Buy off the market. If you see a cute house for rent, ask to buy it. Go to estate sales and ask if the home is for sale.

I really feel for those in areas of staggering prices.

 

[MichelleCarmen]

Date: 1/25/2005 2:50

3 PM
Author:Dancing Fire
with the housing market going up like crazy,even in our area (no. cal) $500k home is so common these days.even IF you have save up $100K 20% down + this and that you still need to carry a $400k jumbo loan mortgage.......glad i brought my in 1986.

Okay, my husband and I bought our first piece of property (raw land) for 69K when we were in our early 20s before marriage and then sold it and made a small bit of money. . .then we tried to buy another house a few years later and the deal fell through so we rented for a number of years. THEN, we hit it big. We became friends with my inlaws' (who develp land) loan officer

He gets us killer rates and 0 down on the houses we buy. With the 0 down, you have to get a second mortgage, BUT, this is better than not having a house at all

We're now on our second home and own land too which we'll be building on soon.

Edited to add. . .another big trick to getting a great loan rate is to spread out your debt. Your credit report looks better if you have 10 credit cards each with less than 1/3 maxed out (or whatever) than if you have two credit cards which have the same balance as the hypothetical 10 cards and are completely maxed out. This DOES raise your score.

 

[cflutist]

MC, good for you, you should be proud of yourselves.

When we get around to building on websailor''s property, I''ll check with you for advice.

 

[MichelleCarmen]

Date: 1/25/2005 6:26:58 PM
Author: cflutist
MC, good for you, you should be proud of yourselves.

When we get around to building on websailor''s property, I''ll check with you for advice.

Thanks. Please do ask questions. My husband knows everything as he''s built a number of spec houses. . .lol All I know how to do is paint and hallucinate from the fumes. lol

 

[perry]

A couple of comments here:

Buying a house may not be a good investment. In some areas it is, but in others the value of housing can go down (especially if a major Mfr lays off people).

The real financial winners from housing is the Banks and Finance companies: A typical person pays 3 to 4 times the name value of the house by the time a 30 year mortage is paid off. See Robert'' Kiosaki''s books (Rich Dad - Poor Dad, Cash Flow Quardrant, etc) for more information on the realities of home financing and how it affects many people.

It may actually make more financial sense to rent and build your savings for a while.

That being said: For some it does make sense. Most people get into entry level housing - or the best deals are actually, if you can find them, where you can take over an existing mortage from someone (certain federal financing programs have that option), or arrange a transfer from a finaincial institution before they forclose (credit unions are more likely to do this than national banks). It takes looking and patience to find these deals, but it does provide a more reasonable option where people would otherwise loose their house with nothing to show except a defaluted loan on their record (and even be sued for a loss by the bank). I suggest that you arrange to give the people something beyond just taking over their mortage (and then you can probably refinance at a lower payment because the house is 20-50% paid for when you assume the mortage).

Only time will tell if buying was right for me, but I may be forced into a job move to a "central office location" and loose $10 - $20,000 in the relocation; if I wish to retain my current job with my current employer (and they pay a lot more than other jobs in the area).

Perry

 

[Dancing Fire]

Date: 1/25/2005 3:59:17 PM
Author: Mara
Also, if you have good credit, little to no debt, and it's your first home, there are alot of programs out there for first time homebuyers that have 0% down or 5% down or similar, so the old 20% down that our parents did is not necessarily required these days. However, you have to be sure you know what you can afford (and not what your realtor says you can afford!) since you go in with little to no equity. But it is a good way to get into a place in some of these more expensive areas where 20% is just not possible sometimes. You'd do something like a 80/20 or 80/15/5 to make the 100%.

Ideally your house would appreciate quickly so you could refinance and then get more equity built into your place and drop your payments, and/or you could start paying down the 2nd 20%(HELOC or loan) and put more into your first which would most likely have a lower IR.

Anyway, there are alot of options out there, so you don't have to have the 20% that was such a popular figure in the past...and I highly recommend that people don't wait until they get 20% if that could take just as long as the house appreciation, because then you just balance it out! Greg wanted to wait until we had more money to put down and I said..well if the house appreciates 50k in a year and we save another 20k in that same year and then buy, we would end up paying 30k more for the same house, just for waiting that year, and it makes the % of debt go up as well.

I'm glad we didn't wait as our house has appreciated about 70k in one year, and we would no way be able to get this same house today. But now that we have it, WE LOVE IT.

Mara
the problem is people expecting their home to appreciate 10-15% every yr so they move in with 0-5% down and then the housing bubble burst ,it will happen sooner rather than later,then they will owe the bank more than what the house its worth or NEGATIVE equity.


this housing market reminds me of the stock market in early 2000,when everybody think they can't lose,until the bubble burst.

 

[twinkletoes]

I recently purchased my first home (a condo) and let me tell you, it was such an eye opening experience!

The first weekend I went house hunting I went around west Los Angeles. I went to school at UCLA and knew the area pretty well. Anyways, everything within my price range was in the ghetto! They were old, small and in neighborhoods I wouldn''t have felt safe living in alone.

The next weekend I met with a realtor in Huntinton Beach. It was far from where I originally wanted to live, but I figured I''d go for the hell of it just to check things out. Well, I fell in love with a place and put in an offer the same week. $500K for a 2/2 condo in Orange County. My HOA fee''s aren''t too bad and it''s a newer complex, a corner unit and spacious (about 1700 sqft). All the others I saw were around 1000-1200 sq feet. It helped that my credit was clean and that I had no contingencies as a first time buyer and had a good portion to put down (thanks to bank of mom & dad).

I can''t believe it was so expensive for a condo and I''m wondering if the value will appreciate anymore. I can''t help but think...how can it go up when it''s already so much?! We''ll see what happens, but I absolutely love my place!

 

[strmrdr]

In my area you can get a decent house in a decent area in the 80k to 120k range and a lot of people still cant afford them.
I dont want to be tied down to this area anyway so wouldnt if I could.

Its kinda sad they are building $500000+ houses all around the area outside of town but the people that actually work in the area cant afford the basic houses.
All the good paying manufacturing jobs are moving overseas.
Then you have the Chicago area working commuters driving up housing costs.

 

[strmrdr]

Date: 1/25/2005 5:59:10 PM
Author: lindsal
Ugh. This discussion. I kick myself every month when I pay rent. We pay $2200 for a two bedroom/2 bath/car garage coach house in downtown Chicago. I LOVE everything about our apartment --except that I don''t own it and am just burning money up each month living there. We go through this exercise once or twice a year.. For $2200 in Chicago (with let''s say a $40k down payment in cash.) I could have a 4 bedroom house with a kick ass yard in the FAR burbs (read too much time commuting, but really nice life at home in the country.) Or a nice little old 50''s style house with all the modern kitchen upgrades within about 15 -20 minutes out of the city. Or a condo that is significantly smaller than my current apartment in our current neighboorhood.


It kills me. A) Love where I am, b) don''t want to leave for the burb''s JUST yet but C) want a yard so I can let dog out the back and not have to walk him as much and as a place to garden.


We keep saying ''after the wedding'' we''ll do the house hunting. UGH. I am SOOOOO not looking forward to it, but I know it has to be done.

Im paying $575 a month for a similar apartment here.
Thats what is driving up housing costs in my area you can get a huge house for $2200 a month but you have a hour and a half commute but a lot of people are doing it.
Most of them are moving from the Chicago area.

 

[strmrdr]

http://www.starckhomes.com

30 year morgage on it:
Your monthly payment: $1,186.69
Interest you will have paid after 5 years: $54,330.40
Principal balance remaining after 5 years: $198,029.25
Total interest you will have paid by end of term: $212,306.87
Principal and interest you will have paid by end of term: $427,206.87

Tax and insurance would be another few hundred a month.

Now you know why so many people are doing it.

 

[Momoftwo]

There are lots of first time buyers programs that did not exist 24 years ago when my DH and I got married. Most everyone we knew rented for a few years, saved, and then bought what they could afford. At that time, couples did not expect to buy a home immediately after the wedding. They saw it as a goal to work together towards. My parents bought their first home in their mid 30''s when I was in 7th grade. We didn''t feel like we were "missing" something by living in rentals while they saved the downpayment. It actually made us all appreciate it even more. For some reason, everyone now seems to think it''s part of the package. Why? Ask around, most people over 40 will tell you they never expected to buy a home right out of college or right after they got married.

BTW, people have always asked that question, the current times always seem to be so expensive to those living then.

Yes, homes are expensive, but as a percentage of income, not really any more than they were 10 years ago. We started with a 2 bedroom townhouse in 1982 (15 1/2% interest rate) and leveraged up to our current large home (our fourth purchase).

 

[strmrdr]

This one is typical of whats available in the older houses.

http://www.starckhomes.com/

Your monthly payment: $563.25
Interest you will have paid after 5 years: $25,787.35
Principal balance remaining after 5 years: $93,992.48
Total interest you will have paid by end of term: $100,769.20
Principal and interest you will have paid by end of term: $202,769.20

With taxes and what not around 700 a month

 

[strmrdr]

Personaly I think a house is one of the worst investments anyone can make.
They may rise for a while but they will crash eventualy and the interest kills ya.

 

[Mara]

we really weren't expecting our house to appreciate as much as it has...even if it was the same price in 5 years when we sold it, then we basically could just have taken advantage of a huge tax break and have paid rent to ourselves/the bank for 5 years to live in a beautiful new townhouse.

the housing bubble will burst at some point here in CA but it won't be a huge downslide most likely, most predictions are for it to fall 5-10%...and if it does that then we are still up above where we bought. even if it goes down under what we paid, then that would be a great time for us to purchase a 2nd property at the low prices, and hold this one until things come back. and in CA..they *always* do--it's very cyclic if you look at the previous history.

all our household related expenses, including mortgage, taxes, HOA, bills etc are about the same as what Greg was paying in RENT for a 1 bedroom 'luxury' apartment when he first moved to CA. due to the extremely low IR's, if you are able to get in with the low rates (good credit, low debt), it does offset some of the higher rates for having a 0% or 5% down type scenario. also the tax breaks are astronomical, the money you save is amazing...definitely not worth it to continue to rent when you factor in everything. IR's are very key...now they are so low.

my mom bought her first place when she was 25 and only had one income and a small baby to raise (me), so she has been harraunging me for years to buy something!

 

[Dancing Fire]

Date: 1/25/2005 6:59

3 PM
Author: perry
A couple of comments here:

Buying a house may not be a good investment. In some areas it is, but in others the value of housing can go down (especially if a major Mfr lays off people).

The real financial winners from housing is the Banks and Finance companies: A typical person pays 3 to 4 times the name value of the house by the time a 30 year mortage is paid off. See Robert'' Kiosaki''s books (Rich Dad - Poor Dad, Cash Flow Quardrant, etc) for more information on the realities of home financing and how it affects many people.

It may actually make more financial sense to rent and build your savings for a while.

That being said: For some it does make sense. Most people get into entry level housing - or the best deals are actually, if you can find them, where you can take over an existing mortage from someone (certain federal financing programs have that option), or arrange a transfer from a finaincial institution before they forclose (credit unions are more likely to do this than national banks). It takes looking and patience to find these deals, but it does provide a more reasonable option where people would otherwise loose their house with nothing to show except a defaluted loan on their record (and even be sued for a loss by the bank). I suggest that you arrange to give the people something beyond just taking over their mortage (and then you can probably refinance at a lower payment because the house is 20-50% paid for when you assume the mortage).

Only time will tell if buying was right for me, but I may be forced into a job move to a ''central office location'' and loose $10 - $20,000 in the relocation; if I wish to retain my current job with my current employer (and they pay a lot more than other jobs in the area).

Perry

Perry
i got to disagree with you saying,that the real winners from housing are banks and finance co....look what happen to japan in the 80''s when real estate took a dive , people just defaluted on their loans and the banks still haven''t recover as we speak.this could happen here in the U.S.

 

[Dancing Fire]

i got to take my hat off to the young couples

who just got marry, paid for a wedding,paying off a student loan and still have money to buy a house...i wish i knew their secret