insert teeth-gnashing here
 

After reviewing my options, my finances and the realities of housing costs in southeastern PA, I have one question remaining:

How the hell can _anyone_ afford to buy a house?

A two-story colonial just popped up in my old neighborhood for $250K -- actually reasonable compared to most housing prices in suburban Philly. I had some interest until I fed the numbers into Freddie Mac's calculator; the end result was a likely mortgage payment + taxes + insurance + PMI combo of $1800 a month. And that's BEFORE figuring in higher utility bills, maintenance costs, school taxes and other facts of life.

That's over DOUBLE what we're paying now as renters. As much as I'd like to stop feeding the rent monster, that's just crazy to consider on a combined $70K income. Then I have to figure in that we're thinking about kids at some point, a whole new bundle of expenses on top of house-ownership costs...

About the only affordable option would be to slice my hopes in half and look into a low-to-mid townhouse... but the problem there is that townhouse life doesn't really present any advantages over apartment life. It has all the problems of apartment living -- limited parking, neighbor problems, noise complaints, privacy issues, increased fire hazards -- but YOU get to pay all the taxes and the maintenance.

I'm struggling with the concept of why I should pay $10K+ up front and a higher monthly bill than I pay now for the _exact same living environment_ we have now, probably worse given what I know of the closest affordable townhouse community, hoping that it'll be worth what we paid for it a few years down the road and that we can pawn it off on some other first-time owner.

Time to start playing Powerball.

Have you considered moving?

Buy a Levittowner in Bensalem and you pay <>$90k...that figures into a mortgage of around $600...plus PMI and whatever else.

Figure $1200 complete with taxes, insurance, sewer and trash collection included.

That's a lot better than $1800.

My house is only worth about $35k. I can buy it and have a mortgage of around $500 over a 15 year period.

But the commute from here would cost too much and kill your car pretty fast.

Brian

Try the real estate foreclosure websites for your area. Try the federal auciton sites. The banks do not like to hold on to property as they produce no income or interest. Pick the worst house in the best area and put a little sweat equity into it. You can find some gems if your willing to do the research. After you fix them up, flip them for a profit and continue the cycle until satisfied.

You are used to having a lot of disposable income. That's why advertisers love your demographic. When you grow up, buy a house, and have kids, the disposable income disappears. It's a fact of life.

Paying $1800 monthly on 70K is not hard. You just need to change your lifestyle a little.

I used to buy my lunch every day, now I bring it in from home. I used to eat out 2-3 times a week. Now I eat out 5-6 times a year. Those are just a couple examples.

You CAN do it.

The buying market here is so over-inflated right now. I see people dropping $200-300K on houses in Fishtown...WTF? I know it's up and coming and all, but it still ain't all that great!

Of course, we have no intention of staying in Philadelphia for good, so no house buying for us for at least 5 years.

I sense that you have no intention of putting 20% down, so you'll definitely have to have PMI...of course, you could get lucky and it could be lender-paid. We give our best lenders special rates, but I would imagine they pocket the money they save with us.

Nope, or at least not far. This area is where I grew up and where I'm comfortable. I actually had to look up to see where Bensalem was.

Of course, that means I have to come to terms with not having a lawn of my own to mow until I'm 40, and that's if we don't have kids over that seven-year span.

You don't get around town much, do you Jeff? :)

Nope. The closest I've come to that part of PA is an every-six-months-or-so trip to Franklin Mills. When I'm travelling, it's usually either to the west or south, or to visit the in-laws in north-central PA.

That's assuming that the 70K remains stable, which is another consideration, as I don't have a lot of faith in the economy (and, correspondingly, the job market) at the moment. How November goes will play a big role in that, of course... but if I lose my job for whatever reason in the near future, I have considerable doubt that I'd be able to find a job and make what I make now, and I can never rule out some corporate beancounter making me irrelevant with the stroke of a pen. Likewise, if we have kids, that's a period of time where my wife's income will be absent and/or diminished, and that has to be figured in as well.

There are obviously things that we can cut out without going on the total ketchup-soup-for-dinner plan. There are second-job possibilities. There are other ways of raising income and lowering expenses. But the pessimist in me is already recoiling at the notion of a thirty-year-commitment risk to begin with; I can't reasonably go that high on the monthly commitment and gamble that nothing bad will interfere with that over that period.

LOL

A crappy 2 bedroom house which needs repairs out here is $450k

An average home is $500k

Renting a house like you describe would be well over $3,000 per month.

~25 years ago, I bought my first house for 27k. Long commute and a real fixer-upper.

I gutted the place, put in insulation, shimmed the walls (really old house - nothing was square), and put up drywall. Cost me about $1000 in materials. I sold the house for 34.5k. It took all my spare time for a year, but it got my foot in the housing market.

The profit from the first place was my down-payment on a newer home in a better (and closer) suburb.

Local cost-of-living is a huge issue on the housing question... one of the (very) few nice things about Utah is the housing market. For instance, my first house was a 2400 sq. ft. place on a 1/4 acre plot. Six bedrooms, two-car garage, brick, central air, nice part of town... all for $143k. I spiffied it all up with new paint/carpet/linoleum, and sold it... and those guys got a NICE house for only $155,000.

I feel some mortgage pain now though... I bought another house, a bit of a fixer-upper, on an acre plot so my wife could keep her animals when we got married (horses, etc)... the mortgage on $200k is sometimes tricky to make on a $61k salary, especially with the added expenses of feeding animals, and making home improvements. But we just budget a little more... we don't go out to eat so often, etc... and it we manage OK most of the time. I've been doing a little contract work on the side to get a few extra bucks, so it should help relieve a little more pressure. Of course when we decide to start having kids, we'll have to do something to cover those large expenses.

In some areas, when the average salary is compared to the cost of the average house, it is obvious that buying a home is out of the question for the average person. I suspect PA is one such place.

This economy looks like it's heading for inflation. The best defense against inflation is owning a house. The price of everything else goes up, along with your pay, but your mortgage stays the same.

If you look at all that's written about how much of a pecentage of your income your housing cost should be, you will see that $1800/month is well within reason for a 70K income.

Many people today are spending as much as 50% of their income on housing. That's crazy. You would be spending 30%. That's right on target.

Now, I don't know what your wife's portion of that is, and how long she will be out of the workforce raising kids. But you are in much better shape than most people.

Remember that financial advice from strangers on the internet is the best advice you can get.

Southeastern PA more so than the rest of the state, as a general rule. If I went up to Williamsport and looked for a house there, for instance, I could get a nice house on a couple of acres for less than most townhouses cost around here.

Of course, finding a comparable job up there would be just a TAD difficult.

After taxes, there's probably only about $50k take-home from his $70k salary... so the $1800/month isn't far from 50% of the income.

:D

Well, I'll look at it from a few perspectives...

According to the typical 28/36 rule:

~68K * .28 / 12 = $1536 per month front-end (% of gross).
~68K * .36 / 12 = $2040 - $225 (car payment) = $1815 per month back-end (debt-to-income).

We have no credit card debt or outstanding loans at all; at present, apart from typical utilities and insurance, our only month-to-month bill is my car payment, $225 a month. However, that's right now, and I have to anticipate other debts down the road that'll affect this. My wife's car is paid for, for instance, but if it wears out in a couple of years we'll have to add a second car payment in, and (again) there's the what-if-we-have-kids factor.

According to the "2.5x" income rule, I should be aiming at something around 170K. Rolling that through Freddie Mac's calculator comes out with ($959 principal/interest) + ($217 taxes/insurance) + ($89 PMI) = $1265 per month, which would be within my anticipated target range. The trick is finding a single-family home at 170K that isn't in a bullets-flying-overhead neighborhood.

Oh, I agree that things could be a lot worse... but I also have to account for the fact that they could get worse than they are now. My income is about double what my wife makes, maybe more like 2.2:1, so any change of employment for me would be more critical than for her... but kids mean that debt goes up dramatically and her working hours drop off at least temporarily. I'd just as soon not lose the house via reproduction. Likewise, if I change jobs (voluntarily or not), I expect to take a hit.

One place where I'll gladly admit that I'm an amateur is the repercussions on my 1040 form. It's one thing to speculate on how much interest (or other things) would be deductable, but it's another to sit down and actually work out what the increase in my refund might be.

I don't have much to do with the US property market but from what I hear it's fairly inflated but as badly as the UK market (which is giving a fair few fund managers a nervous twitch at the moment). Remember that overinflated property can go DOWN in value, people always assume property appreciates and in the right timeframe that is usually true but in the wrong one you can end up down, property is not the perfect safe investment some people still think it is.

Also best, as a rule of thumb to keep those kind of payments below the 50% mark at all times.

The federal income tax ramifications are huge.

When my wife and I were living in an apartment, we were dual income - no kids. Taxed out the wazoo.

Now we have two kids, and my wife stays at home raising them. On top of that, I am deducting almost the entire amount of my monthly payments on the house, because it's all still interest now. (You pay most of the interest off before you you pay down the equity on the house.) What it all boils down to is that I am almost embarrassed how little I pay in federal taxes. I think my tax rate works out to maybe 5-10%. I don't know because I don't have my tax forms in front of me. But it's nothing.

I don't know how PA rates compared to other states as far as taxes go. I live in Virginia, and pay FAR more in state taxes than I do federal. And Virginia is pretty good about taxes.

One excellent thing is that you make much more than your wife. You won't miss her salary nearly as much when she stays home to raise the kids.

I bought my house 7 years ago. It seemed expensive then, but the monthly payment now is less than a two bedroom apartment is. It's cheaper for me now than if I had stayed in our old apartment.

That's why I'm still in the city...
 

but once a city rat-always a city rat!

For those of you who never lived in the city and grew up in the burbs, it would be culture shock, as if you moved to a foreign country.
:eek:

I guess the same would be said for me if I moved to the burbs then.....My Older brother moved to Havertown about 6 years ago....EVERY time I go out there and it starts to get late, DAMN it's just to quite for me.....I need the rumble of traffic, the screaming of neighbors...etc...

Oh well......Later!

:rattat:

Thank God for that.;)

You can't get a house within two hours of Los Angeles for less than 400k. You can't get one you'd want to live in for less than 500k.

It's brutal. My wife and I flipped in an out of a house within a year because of the heat of the market. I think it's ready to crash, so we took our profit on a house we never even moved into, and are renting until the correction.

At which point I'm guessing my money will buy twice the house.
-sm

I'd be surprised if the correction was that large, of course specific areas might cop it fairly damn hard.

vsp, take a look into coatesville.



as far as housing inflation goes, that is usually tied to interest rates. people are payment buyers. if your mortgage of 150000 yeilds a 997.95 payment for 30 yrs at 7% and 186,000 at 5% is 998.49/mo, you can get a better house for the same money.

watch the 10 yr note as that directly impacts mortgage rates.

it is starting to rise, so housing prices should begin to correct soon. if you plan to be in your house long term, it is somewhat irrelevant, but you could be upside down if you try to move early and rates have, in fact, gone back up.

If you do so, please first contact me regarding various home defense options.

not central coatesville. stay above 10th ave, and you're fine.....actually, there are many new developments poping up in the burbs there for decent prices. 150's and up for new construction on 1/4 acres lots...not bad

The problem with these new developments where people have things like money, jobs, tv's, dvd players and jewelry, is that they are within easy robbing distance of the 'expected to be bad' parts of town.

The problem with Coatesville is that I'd never get any sleep. I'd lie awake at night, fearful that someone would break in during the night, throw a burlap sack over my head, drag me away and build a golf course where my house used to be.

You realize they closed the Oak Street public housing close to a decade ago right? Moved all those folks to West chester... it's just not scary on the East end. We lived there for years, often forgetting to lock the doors at night, jim working late hours etc. Never had any problems, never had anything stolen. It was a good investment for us.


Nice twin


New construction

House prices where I live (Bournemouth, England) are ridiculous. Avg cost of a 3-bed semi is around £400K ($700K). And salaries are far from in line with this. Think I'll just rent forever, or go and live in a beach hut (although one such 3-foot wood hut went recently for £120K, about $170K)

One bedroom condos similar to mine have been selling for $275K to $315K recently. I paid $110K 5 years ago. It is, for lack of a better word, insane.

$315K is absolutely insane for a one bedroom condo. Are the faucets made of gold? The bathroom tiled in silver?

SELL! SELL! SELL!!

Triple your money in 5 years? Oh, Hell yes!

Quickly, some thoughts -

Your downpayment is too small - you really need to make at least a 10% dnpmt and couple that with an 80% first and a 10% 2nd. Never get a first of more than 80% since that automatically triggers PMI. Never, ever pay PMI (private mortgage insurance - it is a shameful racket). If you can't put up 10%, shop for something less expensive - commute and price are usually inversely proportional.

Wait till you don't have a car payment if you must.

Buy a house that you can rent out the basement AFTER you fix it up. Usually, the basement can pay 1/3 of the mortgage,

So, move further out, rent out the basement and lastly, increase your deduductions from your withholding to increase your takehome pay AFTER discussing with an acct how not to overdo it. Renter pays a third, gumit pays a third, and you pay a third.

Homebuying is not as hard as it seems. Find a good realtor - honestly, the older ones are more patient and more helpful usually - and will help you though the confusion. Buy a house if at all possible. We may never see interest rates this low again. Its worth making some other sacrifices.

Fuck you...it pays my bills. :)

Seriously, it helps put more people in a home of their own sooner. As I see it, it's no different than requiring people to pay for full coverage auto insurance while making payments on a car.

Unfortunately, I don't want to leave the area, I don't think my parents want me back, and all of the houses in the area are in a similar state.

I do wish I'd bought two at the time, though. I probably could have swung it (not easily, but still).

You are a patient Monkey. In your shoes....I assume you are single.....I think I would sell now, and rent a place for a year or so, then when prices drop back down, buy the same kind of house but without the mortgage....

I fear change. :worried:

Agreed on 10% being desirable, but that pretty much eliminates me from any single-family housing for the next few years, barring Powerball or my showing up in some long-lost Uncle Fred's will. About 15% is more like it, as I'd need money for closing costs and related expenses.

For instance, on that 250K house I first mentioned, that's at least 30K in cash up front; that's just not happening. On a 120K townhouse, I could handle the 12K down payment (I have about 10K in the bank, with ~7.5K in mature bonds I could cash in; I'd take a tax hit later, but the money would be there now), but an extra 3-4K in closing costs would hurt badly. Anything cheaper than that would either be made out of cardboard, have crack vials in the front lawn or be located in South Dakota.

The catch with that is that mine won't be paid off until three years from now, and my wife's (currently at 68K miles and counting) may well be worse for wear by that point. I have to expect at least one car payment in the mix for the longterm future. (On the plus side, there will be no credit-card debt or other easily-avoidable financial perils, either.)

On a 120K townhouse, I could handle the 12K down payment (I have about 10K in the bank, with ~7.5K in mature bonds I could cash in; I'd take a tax hit later, but the money would be there now), but an extra 3-4K in closing costs would hurt badly.

It's very plausible to negotiate into the price of the house that the seller pays all closing costs. That's what we did.

What makes you think they will go down, Jim?:confused:

the rates, they rise......


"Treasuries and Mortgage Rates
Yields on 10-year and 30-year Treasury securities are typically used to set long-term mortgage rates. Loans with short initial terms (1-, 3-, and 5- year ARMs, e.g.) are pegged to shorter-term securities. So when bond yields drop, typically, conventional mortgage rates fall as well. Conversely, when yields rise, so do mortgage rates.
Why? If a lender chooses to sell your mortgage loan to an investor, the lender will likely use Treasury yields as a benchmark for value."

http://www.mortgage-x.com/images/graph/t-3m.gif

Oh, my bad. I thought you meant the prices of the properties would go down.:blush:

I did, but jinx says I'm nuts. She points out that while rising rates may slow the dramatic rise in prices, there is a lot of room between the rapid increase they have been riding, and staying the same.....before they ever start to lose ground. I have to concede the point. The future is unwritten.