Does anyone else *not* live in a 200K+ house?

[DisFlan]

Well, if I was looking to buy right about now....I'd sit tight. All indicators are pointing to a housing cooldown....not a sharp drop mind you. But the days of double digit gains a *quarter* are over for some time.

I'm really glad to hear that, especially about Orlando. Our son and DIL are planning on moving to Orlando next year. They're planning on an apartment initially, but we've been worried how they'd ever be able to afford a house in the Orlando area market.

I remember the days when housing was super cheap - but interest was double digit (like 16 or 18%). When loans were cheap, housing shot up. I'm hoping we find a happier middle ground this time.

About the economy, it's just my opinion, but I thinks it's more fragile than we're being led to believe. Too much personal and public debt, big layoffs starting again, "job creation" has been stretched thin, and the huge cost of expensive wars and crushing natural catastrophies has yet to be fully felt. I'm really hoping we aren't facing a replay of circa 1980 - or worse.

DisFlan

 

[Chicago526]

Well, if I was looking to buy right about now....I'd sit tight. All indicators are pointing to a housing cooldown....not a sharp drop mind you. But the days of double digit gains a *quarter* are over for some time.

We are already seeing it here. In April of this year there were 2,700 homes on the market in the greater metro Orlando area. Now...a short 8 months later....7,700 homes. Realtors keep saying that it's still a great time to sell! And yes, it may be better than in previous decades, but we're flipping over to a buyer's market, and not so quietly either.

USA Today just wrote a story on this today. While a professor at UCLA says that the cooldown shouldn't trigger an economic resession, a slowdown is coming for sure.

Other disturbing facts in that article, 300,000 jobs in the housing sector will be lost in years to come. 500,000 job in financial services. And a fair number of manufacturing jobs as well.

Since 9/11 it has been housing that has held this country up. It has created thousands of jobs, but also lots and lots of equity. Unfortunately, a lot of people are going overboard and used their homes as an ATM machine. This year 72% of all refiances will be "cash-out" refis, and over 200 BILLION dollars in equity will be pulled out of peoples' homes. Next year's forecast...116 billion, that's going to be quite a hit to consumer spending.

The days of buying and quickly flipping properties are over. Now, buy a home and plan to live in it for a pretty long time. And there are other ramifications that will hit folks too. So many people have bought recently using very risky mortgage products like the "interest only" mortgage. Well, those folks are in for a tough time because rates are on the rise, and many people may end up locking in to find out that they owe more than their homes are worth.

Here's the full USA Today article for anyone who is interested.

http://www.usatoday.com/money/economy/housing/2005-12-07-ucla_x.htm

I read the same things today over at abcnews.com . I'm so glad DH and I bought with 20% down in August. I hated to buy at the peak of the market, but for various reasons we needed to go ahead with the move. I think the market around here (Chicago area) will cool off and not actually go down, though, as we don't seem to be as over priced as CA or New England. We have a very diverse job base, so even if a mild recession hits, we should be okay. Even if the absolute worst happens and our house value goes DOWN, with our 20%, we'll still be okay. We have a low interest rate and a 30 year fixed, with our total monthly house payment (loan, interest, and taxes) at 25% of our net take home pay. DH's job is secure (he would only be fired if hit hauled off and sluged his boss, yes it really is THAT secure, trust me). Mine is less secure, but we can live off just his income (not well, we'd be eating a lot of mac 'n' cheese, but we could do it). I know of A LOT of people who can't say the same! They've pulled equity out of their homes and still have consumer debt, and heaven only knows what kind of mortgage they have (3 year arm, interest only etc.). I don't know what they'll do if they housing market takes a major down turn.

The other good news for DH that he'd love to get one or two investment properties. If home values start to go down, we'll get more for our money. DH thinks of it as a long term investment, not fliping. If we did it, we'd keep homes (rented out of course) for decades, not years. I'm not so enthusiastic about the idea, but if we are going to do it, paying less for a investment property is a good thing!

 

[Aimeedyan]

Yes, it is cheaper living in an apartment in the short run, but you aren't building any equity and you are at the mercy of the landlord. I see that you are moving to the Orlando area. Here in Orange County (not sure where you are moving), there is a major apartment shortage which is forecast to get worse as many apartment complexes are being converted to Condos and sold. That means that rental rates will go up because many, many people here are service industry workers and can no longer afford to buy a home.

The other problem with moderately priced apartment complexes in Orange and Osceola is that there is a disturbing amount of violent crime. Having moved here from NJ (and purchasing a home) about 18 months ago, I will admit that the high crime factor is something that we're not exactly thrilled with (who would be right?). If I had to rent in this area, I would probably look to rent a home (maybe this is what you are doing?), in a safe area.

I'm trying to frighten you, but depending on where you will be living in this area, you need to be a little more mindful of this kind of thing. I live in SouthWest Orange county in a really nice neighborhood, but I won't venture into local 7-11s after 9pm.

My mom is in Orlando and has run into that. Rented from a beautiful new apt complex in Orlando and with the demand of apts now that they are all going condo and forcing tenants out if they don't want to buy, her complex realized they could get away with raising rent and BOY did they raise it! Since she works as a CM and gets paid a ridiculous rate considering cost of living in the area, she was forced to move way out to another rental and just hope and pray that they don't throw her out. =) She is quickly approaching "retirement" age and hopes to get into one of those communities in a few years. Buying a house there is completely out of the question for her at this point.

I think the travel industries are going to struggle to find people to work hard for that rate of pay soon - many of them are having to move back home or work 2-3 jobs to live there. Hot market!

 

[pooh4evr]

We live in a 15 yr old 4 bed room 2 story with 2 1/2 bathrooms, an unfinished basement on about 1/2 acre in a suburb of St Louis about 2500 Sq ft- 18 months ago we paid 199K since then we have replaced all the flooring, put in a new furnace and dishwasher, and have stripped all the wallpaper and painted almost every room.

 

[dvcgirl]

I read the same things today over at abcnews.com . I'm so glad DH and I bought with 20% down in August. I hated to buy at the peak of the market, but for various reasons we needed to go ahead with the move. I think the market around here (Chicago area) will cool off and not actually go down, though, as we don't seem to be as over priced as CA or New England. We have a very diverse job base, so even if a mild recession hits, we should be okay. Even if the absolute worst happens and our house value goes DOWN, with our 20%, we'll still be okay. We have a low interest rate and a 30 year fixed, with our total monthly house payment (loan, interest, and taxes) at 25% of our net take home pay. DH's job is secure (he would only be fired if hit hauled off and sluged his boss, yes it really is THAT secure, trust me). Mine is less secure, but we can live off just his income (not well, we'd be eating a lot of mac 'n' cheese, but we could do it). I know of A LOT of people who can't say the same! They've pulled equity out of their homes and still have consumer debt, and heaven only knows what kind of mortgage they have (3 year arm, interest only etc.). I don't know what they'll do if they housing market takes a major down turn.

The other good news for DH that he'd love to get one or two investment properties. If home values start to go down, we'll get more for our money. DH thinks of it as a long term investment, not fliping. If we did it, we'd keep homes (rented out of course) for decades, not years. I'm not so enthusiastic about the idea, but if we are going to do it, paying less for a investment property is a good thing![/QUOTE

You'll be fine Chicago...just live in your house and don't expect to build big equity in the next several years. And also, from reading your previous posts, you sound like you are in an area that hasn't had the insane gains that some of us have seen. You'll be safer because of that. You may stay flat, but probably won't lose much. From what I've read, there shouldn't be a *huge* drop anywhere, but it's all relative of course. I've seen my home appreciate over 50% in the 18 months I've lived here in Orlando. Housing shortage my rear, this thing has been driven by an insanity unseen since the tech run-up of the late 90s. There are going to be a whole lotta "condo investors" left holding the bag on this one. In my zip code 32835, there are pages and pages of condos for sale right now....all thanks to apartment to condo conversions. And we're nothing compared to Miami....gonna be a whole lot of losers in the condo game down there.

For me, it's not a huge issue. And so if the market drops 10%, what do I care right? Still a nice gain. But if I bought the house around the corner last week for 650K and in six months it's worth 600K...I'll be a little more upset.

I think I mentioned this on the budget board once, but housing values have certainly gone down in the past, and they will surely be open to that option in the future. I did a tax search on my Orlando home, which was built in 1990. Original price was 265K. Sold in 1992 for 260K. And then it sold again in 1998 for 265K. 8 years, and no appreciation. We bought it in 2004 for 370K and so the market had started taking off here. Now we're up over 550K conservatively. And so, we're expecting to stay at this level for some time, perhaps even heading down in the high 400s.

As for investment properties, the one place I'd feel comfortable investing and becoming a landlord would be the midwest. There are few places left where the rental income will cover your expenses....and the days of quick appreciation are done. Just do all of your homework! And remember, being a landlord is a heck of a lot of work. They don't call it sweat equity for nothing .

 

[JenDaveBrendan]

I didn't read any other responses besides the OP's, but what it is like here in Massachusetts is crazy. In the paper the other day, they were saying how the average price of a home in Essex county (where I am) is $420,000. In our town the average home price is around $550,000. Needless to say, we are still renting, and we make roughly a six-figure income. This is the reason we are thinking of moving out of New England, we feel we can not get ahead, even making a good income. We don't want to move, but we feel like we will never be able to own a home here without literally living to pay the mortgage.
The newspaper article I read the other day in our local paper said it best: "For those who don't already own a home in -my town's name- , you probably can't afford to". We live in a "decent" town, there are many more towns that are more affluent than where we are. And for the towns that are "cheaper" - I could not even imagine raising a child there.

 

[dvcgirl]

My mom is in Orlando and has run into that. Rented from a beautiful new apt complex in Orlando and with the demand of apts now that they are all going condo and forcing tenants out if they don't want to buy, her complex realized they could get away with raising rent and BOY did they raise it! Since she works as a CM and gets paid a ridiculous rate considering cost of living in the area, she was forced to move way out to another rental and just hope and pray that they don't throw her out. =) She is quickly approaching "retirement" age and hopes to get into one of those communities in a few years. Buying a house there is completely out of the question for her at this point.

I think the travel industries are going to struggle to find people to work hard for that rate of pay soon - many of them are having to move back home or work 2-3 jobs to live there. Hot market!

Yes, this is *the* topic right now in Orlando. I live in MetroWest, and just about every single apartment complex in my zip code has already converted. The apartment shortage is growing rapidly and so rental rates are rising fairly rapidly and there are waiting lists at the nicer (and safer) complexes. Complex managers are getting their pick of the litter so to speak....they're using credit scores and income levels to determine who gets the apartment. We moved here only 18 short months ago and nearly every complex in the area had "Move In Specials!!" with anywhere from one to two months free, or free utilities for six months. No more.

As for the service/travel industry and where they are going to live....good question. Prices have positively sky-rocketed here and those with low paying jobs simply can't afford to buy here.

 

[Crankyshank]

There was an article in a local paper a few weeks ago that said that in order to live in most communities here in Rhode Island and own a home you need to earn a minimum of $74,000 to afford your mortgage, to heat your house, and to live. This isn't a 2500 sq ft house either - just your basic starter home in a decent neighborhood

 

[palmtreegirl]

Complex managers are getting their pick of the litter so to speak....they're using credit scores and income levels to determine who gets the apartment.

For our new apartment they required both a credit run and income verification. The rent isn't bad though, but that's probably because I'm originally from up north where the rent is through the roof.

 

[dvcgirl]

I didn't read any other responses besides the OP's, but what it is like here in Massachusetts is crazy. In the paper the other day, they were saying how the average price of a home in Essex county (where I am) is $420,000. In our town the average home price is around $550,000. Needless to say, we are still renting, and we make roughly a six-figure income. This is the reason we are thinking of moving out of New England, we feel we can not get ahead, even making a good income. We don't want to move, but we feel like we will never be able to own a home here without literally living to pay the mortgage.
The newspaper article I read the other day in our local paper said it best: "For those who don't already own a home in -my town's name- , you probably can't afford to". We live in a "decent" town, there are many more towns that are more affluent than where we are. And for the towns that are "cheaper" - I could not even imagine raising a child there.

JenDaveBrendan, you are not alone. Have you seen this article on cnn/money.com? The title is Take this House and Shove it!

http://money.cnn.com/2005/12/05/real_estate/buying_selling/forget_this_housing_market/index.htm

Essentially the article is about folks just like you who can't afford to buy in their own areas, or people like me who sold the expensive house, took the equity and moved to a cheaper area. It's an interesting article if you get an opportunity to read it.

 

[dvcgirl]

For our new apartment they required both a credit run and income verification. The rent isn't bad though, but that's probably because I'm originally from up north where the rent is through the roof.

I think that's fairly common for any complex. My point was more that say a year ago, you needed just a so-so credit score and an okay income because there were always vacancies in these complexes. Now that so many complexes have flipped to condos, apartments are few and far between allowing apartment complex owners to be more selective in who they accept.

I'm glad you found a place here. We do really enjoy living here. We love the weather and the surroundings, but we are a little more vigilant with respect to where we go at night...those types of things. One good thing....it's *always* safe to go to Disney

 

[Tinkerbelle739]

I dont think we even have houses here under $300,000

 

[Chicago526]

And remember, being a landlord is a heck of a lot of work. They don't call it sweat equity for nothing .

And THAT'S why I'm not so hot on the idea. DH's grandma owns 5 or 6 houses, though, and gets a good deal of her retirement income from those houses, and he thinks we can do the same. I'd rather we didn't go that route, myself, I'm a big believer in long term investment in the stock market and would rather our money go into 401k's and IRA's. But since we'd need a downpayment to buy a place, and we don't have it (all our money went toward the downpayment of the house we live in!) I'm safe for now!

 

[palmtreegirl]

I think that's fairly common for any complex. My point was more that say a year ago, you needed just a so-so credit score and an okay income because there were always vacancies in these complexes. Now that so many complexes have flipped to condos, apartments are few and far between allowing apartment complex owners to be more selective in who they accept.

I'm glad you found a place here. We do really enjoy living here. We love the weather and the surroundings, but we are a little more vigilant with respect to where we go at night...those types of things. One good thing....it's *always* safe to go to Disney

We found a great apartment that came highly recommended by some fellow Disers. We're new to the whole renting thing since we've previously only owned homes. When we bought our first house in NJ in 1995 we only paid 143,000, sold it for 243,000 in 2003. We moved to the Poconos to build our dream home but the trade off wasn't worth it. We moved here to Ocala in June and while it's nice and all, it's still too rural. I tried the country life but it turns out I'm more of a city girl at heart.

We can afford to buy a house but we just choose not too, maybe in about a year. I'm not ruling it out but for now we're enjoying the nice break from owning a home.

 

[disneysteve]

And THAT'S why I'm not so hot on the idea. DH's grandma owns 5 or 6 houses, though, and gets a good deal of her retirement income from those houses, and he thinks we can do the same. I'd rather we didn't go that route, myself, I'm a big believer in long term investment in the stock market and would rather our money go into 401k's and IRA's. But since we'd need a downpayment to buy a place, and we don't have it (all our money went toward the downpayment of the house we live in!) I'm safe for now!

For a good point of view on this issue, I'd recommend reading "Start Late, Finish Rich" by David Bach, author of "The Automatic Millionaire." He makes a pretty good case for why everyone should include real estate besides their own home as part of their portfolio. And he does discuss REITs as one way to do this but also talks in some detail about buying actual properties to rent out.

 

[Rafiki Rafiki Rafiki]

I think everything is all relative in rural America.

We're getting ready to list our house for just under 300K in a small city in Mississippi. But we have 3500 sq. ft. on 1.7 acres.

I don't consider our home to be a starter home by any means--but I don't know that we'll ever afford anything larger.

BTW, how in the heck does one afford a $500,000 property on anything less than $100K income a year?

 

[Stacey2grls]

We purchased our house in July of 98 for $138,000. We had our house appraised this past summer, the value is now around $460,000! We did put on a new roof, vinyl fence, and 2 new baths, but what a diffence 7 years make. I do feel bad though for first time buyers though.

 

[hentob]

And for the towns that are "cheaper" - I could not even imagine raising a child there.

Why?

I am so proud to be raising my children in a "cheaper" town. It has nothing to do with the town, it has to do with how you raise a child. Like I said, we take our children EVERYWHERE. The beach, museums, the zoo, the aquarium, etc. We have three major amusement parks within a one hour radius, etc.

And because we live in one of those dreaded "cheaper" towns, we have money left over to fly to places that aren't within driving distance..like WDW

Am I reading you wrong? Are you dissin' me Girlfriend

 

[disneysteve]

Why?

I am so proud to be raising my children in a "cheaper" town. It has nothing to do with the town, it has to do with how you raise a child.

I think the general answer is the quality of the school system. Most families that can afford to, buy based on that factor more than anything else. There are plenty of nice communities in my area where houses are less costly than the town we live in, but the schools aren't as good. So people with school-age children tend to gravitate here even though houses are more costly than a few miles down the road.

 

[JenDaveBrendan]

Why?

I am so proud to be raising my children in a "cheaper" town. It has nothing to do with the town, it has to do with how you raise a child. Like I said, we take our children EVERYWHERE. The beach, museums, the zoo, the aquarium, etc. We have three major amusement parks within a one hour radius, etc.

And because we live in one of those dreaded "cheaper" towns, we have money left over to fly to places that aren't within driving distance..like WDW

Am I reading you wrong? Are you dissin' me Girlfriend

I apologize, that comment may have been taken wrong. Now I am wondering how I can explain myself..... What I mean by a "cheaper" town is this: Example:A friend of mine is a teacher in Lawrence,MA and the schools are beyond horrible, most of her first graders are in foster homes or from homes where the parents are really messed up - tons of major behavioral problems (and again,this is 1st graders), lots of crime in the town, and about 90% of her students have to translate english for their parents/caretakers. I guess what I meant was I could not see raising a child in a town like that particular one - these types of cities are the only ones in MA that have even close to reasonable home prices. No thanks IMO.
There are less expensive towns around us (than our town) that I would be happy to live in, but unfortunatly even real estate in those towns are getting to be outrageous.
I truly meant no offense towards anyone, I guess I was more thinking of Lawrence (which is near me and for obvious reasons the real estate is much lower). I did not mean that there are no "cheaper" towns that are good to live in. Honestly, I would rather live in a safe, "cheaper" town, with decent schools, than an affluent town anyday. I am so NOT a snob in that respect.
Again, if anyone lives in Lawrence, I apologize for my comments, but it is just the impression I get from what I hear and see.

Also ---- dvcgirl, I read the article you posted..... very interesting and so true - I forwarded it to DH. thanks-