Let's talk home prices

NEW -> Contingent Buyer Assistance Program
Yes but how does that helps us qualify for that house? 

Well... I mean I  guess in our particular case we have been deliberately keeping our potential housing cost a lot lower than normal (we're looking at like, 18% instead of the 25 or hwatever that is normally consideredt he lower range).    We COULD theoretically qualify for a lot more (well, with a 3.5% downpayment instead of a larger one).  I've been using myself as an example, but like I said (quite a bit earlier) i'm not sure we are a very good 'median' test case.  We don't have expensive hobbies or expensive shopping taste (well I have the TASTE but not the willingness to spend money)  - we don't even pay for cable TV, we have 9/month netflix account and pay 28/month for world of warcraft (no matter what else you can say about it, MMORPGs are the cheapest media entertainment dollar for hour out there) and thats pretty much our day to day fun expense.  Neither of us is a clothes horse or a shopper in general,  we are not partiers or frequent group outing go-ers (happy hours on thursdays 1-2 times a month), we both have decent paying tech jobs wiht lots of salary increases in our future and relatively good benefits, lots of PTO and flexible work environments.    We have inexpensive cars, one of which we own outright, and we don't have kids nor do we have any plans to have them in the future (although I honestly suspect we WILL have at least one in the future but its at least 5 years away).   

Anyway that's just US -- this thread is really about the market as it pertains to our generation.  I would say most people are slightly worse off than us, either they think they need to live in a more expensive place, or they drive more expensive cars, or they go out more, or they buy more STUFF, or make less or whatever.  Not that we are the most frugal or the highest earners, but I've been using our numbers as a general example.   

I'm just trying to figure out how people of my generation, not just me, can afford to eventually move into the types of homes that generally at THIS poijt in time cost around 800k.    for example, lets say "we" have 2 dogs or small children (or both) making our hypothetical house a LOT less desirable for a room rental and making us a LOT pickier about who we rent to.  I dunno.  I'm just trying to create scenarios that don't involve what those of you 10+ years older had, which was the opportunity to start buying properties much earlier than most of us have now (unless we leave the area - we would be freaking rich as hell if we moved to alabama! ...and if we could find jobs that pay around the same... ).   

Actually thanks for reminding me about the room rental.  Now that i'm thinking about it again, I might want to put it back on our map.    I had originally written it off becuase it wouldn't actually help us get anything THAT much better and would be a lot of annoyance and pain for it, but we got a pretty good income boost this year ..... that probably changedthe numbers a bit.  But again, thats just me.  What is the market going to look like in 10-20-30 years?  Can we ever expect the kind of massive property appreciation ESPECIALLY at the lower end we saw this last decade again?  It seems unlikely.  Given that, and add in the fact that people used to graduate college, get a job making 35k and buy a nice little condo for 60k.  Now they graduate college, with a bunch of student loans in many cases, get a nice job making 40k, and can't even THINK about a condo thats cheaper than 200k.  How does that affect the market of 10 years from now? How about 20 years from now?
 
You are doing the right things.  Maybe consider brown bagging the lunch every other day.  You will be surprised how much money you can save.  Best of luck.  You will eventually get there.  Just make sure when you do, you are still just as happy or happier than you are today.  :D
 
I do have to say I feel lucky buying when I did because if I had to do it now... I could totally understand what Talyssa is worried about.

My first home was 5% down, which wasn't too hard considering it was less than $10k. The second home was purchased with proceeds from selling the first but I still had to put in another $20k to make it a 20% down payment. The last home was the hardest and then selling it for less than what we bought it for (esp after putting more money into it to update it) was quite painful.

Looking at what our current home (#2) is going for... I think it would be really tough for non-FCB families to save up enough for a 20% down. And even if you do use the low FHA or zero VA down options, you would have to make really good income to qualify for starter/second homes.

Prices are still too high... probably 30% or more in the premium areas... and it just doesn't seem like they will go down all that much unless something catastrophic happens.
 
*cries* less than 10k.... I could have bought 6 months out of college.    I was still living at home so I saved a lot more then (but there's only so long most people can stand to live at home).    Of course at that point the smallest crappiest condo was 300k (yay 2006!).    And I guess I technically could have bought one, since someone out there would have given me a loan (that I subsequently wouldn't have been able to pay off ....).  i know two homeowners my age right now. One got a job straight out of college with his electrical engineering degree at the company he'd been interning at during college for 2 years (and where they paid their interns 18/hours)  so he got a 2-years-of-experience salary instead of a starting one.  ALso, *electrical engineer* and his college was fully funded by parents.  The other has very very VERY wealthy parents who basically bought him a condo flat out. Its in his name though.

I've never seen any generation but my own become adults before.  Maybe over the next 5 years it all turns around, everyone starts making lots of money, etc etc.  But I don't see how that could happen.

(by the way I also suspect that rent now is much higher relative to income than it was 10 years ago, mostly because housing overall is just higher.  Which hurts people's ability to save as well although its likely that most of us just stay in roomate situations a lot longer than people used to.  I for one have never had my own apartment and neither has my boyfriend.)

Also...did y'all start putting into a 401k or other type of retirement savings right away?  I think now most people do  --- or...maybe not... i'll poll some friends -- but that does eat into savings for a house a little (and heck I don't even put that much in there)
 
Could've, would've, should've...who thinks about buying a place right after graduating from college?  It all about partying and having fun.  ;)

You should try to max out your 401k each year, no doubt about it. 
 
Talyssa,

Go on NetWorthIQ.com.  You will get some insight as to people with your salary, you age, and your demographics are doing. 

Sonoma
 
yes, I agree, definately max out the 401K up to the employers match.  if you think about it. the employer's match benefit is basically free money
 
Talyssa said:
*cries* less than 10k.... I could have bought 6 months out of college.    I was still living at home so I saved a lot more then (but there's only so long most people can stand to live at home).    Of course at that point the smallest crappiest condo was 300k (yay 2006!).    And I guess I technically could have bought one, since someone out there would have given me a loan (that I subsequently wouldn't have been able to pay off ....).  i know two homeowners my age right now. One got a job straight out of college with his electrical engineering degree at the company he'd been interning at during college for 2 years (and where they paid their interns 18/hours)  so he got a 2-years-of-experience salary instead of a starting one.  ALso, *electrical engineer* and his college was fully funded by parents.  The other has very very VERY wealthy parents who basically bought him a condo flat out. Its in his name though.

I've never seen any generation but my own become adults before.  Maybe over the next 5 years it all turns around, everyone starts making lots of money, etc etc.  But I don't see how that could happen.

(by the way I also suspect that rent now is much higher relative to income than it was 10 years ago, mostly because housing overall is just higher.  Which hurts people's ability to save as well although its likely that most of us just stay in roomate situations a lot longer than people used to.  I for one have never had my own apartment and neither has my boyfriend.)

Also...did y'all start putting into a 401k or other type of retirement savings right away?  I think now most people do  --- or...maybe not... i'll poll some friends -- but that does eat into savings for a house a little (and heck I don't even put that much in there)
Click to expand...
See, you were unfortunate for being born too late (kinda how I was born a little too late to take advantage of the tech bubble run-up).  Unlike you, I graduated college in the late 90s and after living at home for 18 months I had enough for a 20% down payment on a 3bedroom HB townhome that cost all of $115k back in early 1999 so I was lucky in that sense.  At the peak of the bubble that townhome was worth around $450k-$500k (back down to around $350k today). 
 
Yeah, since it's all doom and gloom for anyone who graduated in the 2000s, just spend your money and keep stimulating the economy.  You were born at the wrong time.  J/k of course.
 
sonoma said:
Yeah, since it's all doom and gloom for anyone who graduated in the 2000s, just spend your money and keep stimulating the economy.  You were born at the wrong time.  J/k of course.
Click to expand...
Haha  No one said anything about them spending all of their money.  Think about how much longer it will take someone coming out of school to save enough money to put 20% down on a home in Orange County compared to 10 years ago.  Honestly, a lot has changed for the worst since the late 90s...especially the job market for new grads that aren't in the right fields (mostly healthcare).  Then you add to it that salaries have not even remotely kept pace with the rising in the cost of living of housing in Southern California.  The one positive is that interest rates are much lower today than they were 10 years ago, but you better have all your ducks lined up to qualify for a loan today. 
 
Japanese college grads are in similiar shape.  Low salaries, very few opportunities, shrinking presense in the global economy and high taxes with perhaps even higher taxes on the way to support the elderly population.  In the urban centers (where of course all the jobs are) these new grads might be lucky enough in a few years to buy a small home an hour's commute (by high-speed train) from the office.

A condo close to the office is unlikely as even the smallest 1K (maybe 250 sq feet) in  these urban centers is still close to 200K

I recall having similiar difficulties in my 20s (lived in Hawaii at the end of the Japanese buying spree induced real estate bubble) so perhaps the theme is that its difficult starting out in your 20s in any generation, but, home / land inflation with comparable wage deflation  has made it that more improbable that a young 20-ish professional can start on the path to home ownership without sacrificing their time with longer commutes.

Prices really do need to fall back down to acceptable levels
Doesn't seem right at the moment.
 
Talyssa said:
we COULD save more but we both are not the type to brown bag and we both work in office environments where going to lunch is part of the culture.    And we like having a washer dryer and air conditioning in our apartment - we could save about 150-200 a month by doing without that I think but we choose not to.    I understand your point that anyone COULD save a ton more, but its not in the cards for us and I don't think its in the cards for most people.  I think we are relatively frugal (no fancy cars or place to live other htan our minor amenties) but we also value our time a LOT.  We value our short commutes (10-15 minutes) over saving 100-200/month by living way up north or way down south where rents are cheaper.    Basically, we value time over money.  So we make certain financial choices where we probably consider each hour of our time to be worth a lot more money than you consider each hour of your time to be worth - and thus it makes 'financial sense'.

Yeah we're working on the budget.  The last credit card payment went out on Friday and thats what we were waiting for - I wasn't interested in combining our finances until he was out of debt.


So what really interests me in your story is the part you glossed over -- if you are comfortable telling us general numbers, how much was the 20% down on your house and how much was your income?  I bet the house price was astronomically lower than what people in the same situation today  are looking at, and the income was NOT much lower.... but you tell me.  Today someone fresh out of college without a 'rockstar' degree (like a technical degree) is looking at 35k/year.  A small livable condo with decent parking and amenities in an ok location (a 2br with parking for 2 cars in garden grove) is about 260k. 
Click to expand...
Do you eat lunch with your superiors?  If not, then your lunch culture may be more of a social expectation than a professional one.  Do people who brown-bag it really get held back career-wise? Somewhat the opposite at my workplace.  My wife and I also value our time--another reason why we pack lunches.  It takes maybe 20 minutes to pack both lunches and saves us each an hour a day (we don't get paid lunch breaks)...8 hours saved per week net, in addition to the difference (cost and quality) in food.  And we too have never lived more than 15 minutes from work. 

20% down on our 1st place was about $60k.  We could have (and should have, in hindsight) bought in our dream area, still with 20% down, but we were and still are fairly conservative.  Our salaries at the time were less than what yours are now.  Of course house prices were lower then, but that's beside the point.  If your choices work for you, then you're doing the right thing.  But if you're wondering who among your peers will be able to afford $800k-1M homes in 10 years (or less), one answer is people much like you, but with more savings.  If you want to save $40k a year, then figure out what people taking home $40k less than you are doing to get by.  You say it's not in the cards for most people, but I contend there are a LOT of families making that much or less.  And again, I'm not debating the direction or fundamentals of housing prices, just tossing around ideas related to personal finance.  I have yet to see a well-correlated model between income/age demographics and future house prices. 

In response to your last question, my wife and I have each put at least 8% into our 401ks each year, maybe 12% on average.  I skipped the IRA contribution for several years, but the wife has maxed her Roth out every year.

Do your budget and update it regularly.  Without a solid baseline you can't find the low-hanging fruit, set goals, or measure improvement.
 
 
We just started using mint.com and that helped a bunch for us to figure out exactly what cash was going where (eating out expense....yikes!)
 
Ever since my bank stopped lending and after I sold my condo back in 2008, I have been living below my means for the most part.  I've been fortunate enough to have some good consulting clients as well as great buyers who have enabled me to squirrel a good bit away the past 18 months.  I clip coupons, moving into a smaller/cheaper rental, and even shop at the 99 cent store.  As my mom's bf stated to me, saving money does become addicting. 
 
Sigh, this topic has gotten so derailed.  Let me rephrase.  For those of you who know people in their 20s, what percentage would you say are able to have 180k (160 for the down and 20 for closing costs?) in cash for a home in the next 5 years?    And of those, what percentage do you think will CHOOSE to.  And based on that percentage, are there enough potential buyers for homes in the upper middle range right now?  If not, then what happens? Do prices come down or do people just have longer times on the market -- i mean the high end of housing sits on the market longer and thats just an accepted thing, no one goes "oh no its been 3 months and it hasn't sold, quick drop the price".    does this end up redefining the high end or do prices drop?   

This is not about me.  I am not worried that I won't be able to buy a 3000 sq ft 3cwg home one day.  I'm wondering about the upper middle class suburban housing  market in 5 -10 -15.    Go ahead and be purely speculative, I certainly am being so.  I'm just trying to get a bigger picture and I don't have a well correlated model for income/age to future home prices either.  Actually i think that is what I am asking for here -- not the well correlated model but thats what I want to know.  You'd think someone would have put something like that together - the data must be out there.  Like in year 1980, here are the incomes at age 25, here is the property they owned at age 25 and at age 33.  In year 1981...etc.  That would be cool. 
It would be interesting to see what kind of fluctuations there were too during the last housing crash - did ownership at 25 shoot down, etc.    maybe dr housing bubble will do it.
 
A lot of your answers have to do with Fear versus Greed.  Right now there are a higher percentage of people who are fearful than greedy.  I'm sure in five years it will be flipped.  In terms of people in their 20s, there are lots of opportunities out there to buy houses out there, just not in CA.  People who will have homes in CA will value home ownership more than eating out everyday, watching movies at a movie theater, or having an expensive car.  Just look at the Bay Area, people drive junkers and wash their own cars. 
 
3 years ago (2007) I posted a number of these pictures on the IHB forum on what a difference a decade makes.  1997 was the bottom of market back and 2007 was sort of the peak of market.  Here's one of Cristal in Northwood Pointe.  A nice large Cristal home recently sold for 1.2M, which needed some work, had some water damage in on the rooms, but very repairable.  In 1997 these homes sold for low 400's.. Scroll to the right ----->

821077659_SbMiA-X3.jpg


821089718_o4xgs-X3.jpg


821095215_TsvtL-X3.jpg


I was in my mid 20's went I went looking for these homes, just a few years out of college and was eager to own a home.  Of course back then interest rates were at 8+% and 20% down was the norm.

 
I was just inside that very same El Dorado home that's pictured yesterday.  It's currently for sale in the upper-$900K range (and will likely go around $925K). Amazing.
 
I think one day we will look back to today and think how cheap housing prices were.  That's when CA minimum wage is $40/hour because of inflation.  If you don't believe inflation will happen, why is everyone buying gold?
 
sonoma said:
I think one day we will look back to today and think how cheap housing prices were.  That's when CA minimum wage is $40/hour because of inflation.  If you don't believe inflation will happen, why is everyone buying gold?
Click to expand...

The days of the home as an ATM are over. We will probably see price declines over the next couple years followed by 1-2% annual appreciation. The credit market market and American psyche regarding RE are forever changed.
 
You must log in or register to reply here.
Back
Top