Is housing really as out of reach as they say?

M

mlm

Contrarian
Everyone has seen this type of report
https://www.sfgate.com/business/net...olds-could-afford-a-13141480.php?t=a2e07d569a
Only 18% of Bay Area households could afford a median-priced home
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My point isn't to argue that housing costs aren't high. Rather I'm suggesting the conventional measures of housing affordability are inaccurate in markets where housing is drastically over or under priced. Statements like this one in the underlying report illustrate what I'm talking about

https://www.car.org/en/aboutus/mediacenter/newsreleases/2018releases/2qtrhousingaffordability
A minimum annual income of $126,490 was needed to make monthly payments of $3,160, including principal, interest, and taxes on a 30-year fixed-rate mortgage at a 4.70 percent interest rate.
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If you examine the numbers you'll see that housing affordability is pegged at 30% of annual income. The fallacy comes out when you start looking at what you do with the remaining 70%. While housing prices are 5x higher than the national average, I can guarantee you that other prices are nowhere near that multiplier. You'll see a similar skewing in things like a retirement calculator

Unfortunately, these measures ARE included in determining financing qualification, but I can't help but wonder how many people's personal decisions are based on these kinds of fixed percentages without accounting for the skew

In any case, it sure adds to the shock factor for headlines :laughing
 
SFSV650

SFSV650

The Slowest Sprotbike™
mlm said:
If you examine the numbers you'll see that housing affordability is pegged at 30% of annual income. The fallacy comes out when you start looking at what you do with the remaining 70%.
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While true, that 70% figure ignores taxes (easily another 30% for a Californian making $100k) and the costs of maintenance and repair, as well as savings and retirement.

Sure, someone can - and will! - spend 60% of their post tax income on their mortgage, but that leaves them very vulnerable to life happening to them.
 
Toast

Toast

Well-known member
If "median priced homes" were the norm here in the Bay Area then we would be having a different conversation. When you have to move out to Fairfield/Vacaville, Oakley/Brentwood/Tracy or Morgan Hill and beyond to find a house that's a half million that's not a great solution. Doing a quick FHA mortgage calculator (the people concerned about buying homes) that's around ~450K to get you to $3100 a month. Not including any HOA fees or extra local taxes. When was the last time you saw a house sell for $450k in the bay area? Especially in a place you would want to live?

Then you either commute 2 hours each way to your job in the BA or you don't make enough locally to afford that house. In the outlying areas the average combined income is 80-90K a year, so less than what you even need to buy out there. Add in family health insurance, costs of a kid and a car payment to get you to your job..
 
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CocoLoco

CocoLoco

FN #5
We are encouraging our recent graduate to stay home for a couple of years, pay off his college loans, and save up money to buy property. He just passed his NCLEX and should be starting at a local hospital in a few weeks. If we have an economic dip that affects housing prices he will be set to take advantage starting in 2020 is my guess.
 
CABilly

CABilly

Splitter
CocoLoco said:
We are encouraging our recent graduate to stay home for a couple of years, pay off his college loans, and save up money to buy property. He just passed his NCLEX and should be starting at a local hospital in a few weeks. If we have an economic dip that affects housing prices he will be set to take advantage starting in 2020 is my guess.
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:thumbup

Good for him for getting a local gig fresh out the gate.
 
Blankpage

Blankpage

alien
If you're single in California making $126K you'll be taking home around $78K after taxes.
A $3160 mortgage payment would be nuts on that income. I wouldn't want to be paying that on top of property taxes, PG&E, car, car insurance, health insurance... You wouldn't save a dime.

I make more than that and have a way lower mortgage payment and I'm not saving a ton of money.
 
Eldritch

Eldritch

is insensitive
Blankpage said:
If you're single in California making $126K you'll be taking home around $78K after taxes.
A $3160 mortgage payment would be nuts on that income. I wouldn't want to be paying that on top of property taxes, PG&E, car, car insurance, health insurance... You wouldn't save a dime.

I make more than that and have a way lower mortgage payment and I'm not saving a ton of money.
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Meh, that is about 50% of income, which is what a significant % of the population pay for rent around here anyway.

The real numbers are that the housing is obtainable, the hullaballo is more about who can obtain it. The Market determines pricing, you just here a lot of squeaking because locals are getting squeezed out by new kids with high wage jobs and foreign investors looking for a solid place to rest their cash. The House prices would not be so high if people were not buying them.
 
Toast

Toast

Well-known member
Bowling4Bikes said:
also, don't forget about the 20% down payment! you got an extra 200k laying around?
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Seriously. Even with an FHA loan you still have to pay the mortgage even if the down payment is only a few percent...

My parents nearly spit out their coffee when they heard how much my cousins and my gf and I pay in rent. I guarantee you that if you took most of the middle class families in the BA and told them to look for a place right now they could afford to buy or even rent, they couldn't do it.

I can't stand hearing older folks complaining about "complainers". Yes please tell me about how paying a mortgage on a home you bought for $100,000 in 1990 is the same as looking for a place now.
 
N

NCGiant

.
Try owning even the shittiest 1 bedroom condo in San Jose when you pay 30% taxes, and another 15% in child support. Basically 18 years of never being able to get ahead. Even the $1500 mortgage plus $350 HOA (which is cheap compared to the market) is back breaking on a $80k salary.
 
Bowling4Bikes

Bowling4Bikes

Steee-riiike!
CocoLoco said:
We are encouraging our recent graduate to stay home for a couple of years, pay off his college loans, and save up money to buy property. He just passed his NCLEX and should be starting at a local hospital in a few weeks. If we have an economic dip that affects housing prices he will be set to take advantage starting in 2020 is my guess.
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:thumbup

also, incidentally this is a big reason why we want to stay in the bay area. thread crossover!
 
jt2

jt2

Eschew Obfuscation
CocoLoco said:
We are encouraging our recent graduate to stay home for a couple of years, pay off his college loans, and save up money to buy property. He just passed his NCLEX and should be starting at a local hospital in a few weeks. If we have an economic dip that affects housing prices he will be set to take advantage starting in 2020 is my guess.
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Great plan. I too think there will be a reset in housing prices within the next 2-3 years.
 
M

mlm

Contrarian
Blankpage said:
If you're single in California making $126K you'll be taking home around $78K after taxes.
A $3160 mortgage payment would be nuts on that income. I wouldn't want to be paying that on top of property taxes, PG&E, car, car insurance, health insurance... You wouldn't save a dime.

I make more than that and have a way lower mortgage payment and I'm not saving a ton of money.
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To start with you are double counting expenses. The 78K figure is a 38% haircut so I'd assume that already includes deductions for health insurance, and the 3160 payment is for "housing" which includes property tax, insurance, homeowners, etc. If you put 8% in your 401K (which I suspect is already taken out) you'll still end up with over $2600/month for non-housing related expenses.

Doesn't seem unreasonable that someone could live off 2K/month and put the rest towards an "unaffordable" mortgage.
 
M

mlm

Contrarian
Eldritch said:
Meh, that is about 50% of income, which is what a significant % of the population pay for rent around here anyway.

The real numbers are that the housing is obtainable, the hullaballo is more about who can obtain it. The Market determines pricing, you just here a lot of squeaking because locals are getting squeezed out by new kids with high wage jobs and foreign investors looking for a solid place to rest their cash. The House prices would not be so high if people were not buying them.
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50% net or 30% gross are just two different types of magic numbers. Agree it has more to do with salary...50% of net income is scraping by on a low salary while with high income (or dual income) it is more than comfortable (and you could safely pay an even higher percentage
 
M

mlm

Contrarian
jt2 said:
Great plan. I too think there will be a reset in housing prices within the next 2-3 years.
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Agreed, if not sooner. Especially since the new tax laws and rising interest rates should have depressed prices.
 
Blankpage

Blankpage

alien
mlm said:
To start with you are double counting expenses. The 78K figure is a 38% haircut so I'd assume that already includes deductions for health insurance, and the 3160 payment is for "housing" which includes property tax, insurance, homeowners, etc. If you put 8% in your 401K (which I suspect is already taken out) you'll still end up with over $2600/month for non-housing related expenses.

Doesn't seem unreasonable that someone could live off 2K/month and put the rest towards an "unaffordable" mortgage.
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That take home pay does not include health insurance and from what I read on barf some members are paying as much as $1K per month just for that.
You also still need to have a car, insurance, gas, maintenance, food, clothing...


https://www.paycheckcity.com/calculator/salary/result

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Bowling4Bikes

Bowling4Bikes

Steee-riiike!
mlm said:
"Affordable" -vs "comfortable"
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hey man, I'm all about being house poor lol.

Please consider that planning to spend close to all of your monthly income just on paper doesn't leave much for extra unforseen costs.

other than that...go for it!
 
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