Where the market is - Buyer Offers
- Thread starter usctrojancpa
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Ok fair enough, more than 50% of my Irvine buyers have household incomes from $250k to $350k (the majority of these are dual-income households). Assuming that buyers don't have any significant outstanding recurring debt obligations (car loans/leases, student loans, etc), they can easily qualify for a loan of 5-6x their annual pre-tax income assuming they have the required downpayment and reserves with today's interest rate environment. I've noticed that some higher earning first-time buyers tend to have somewhat limited down payment funds from savings which reduces their ultimate maximum purchase price.
They can qualify for that, but I think you've said in the past that most buyers spend conservatively, right? Even 5x seems like it's pushing it to me. For a couple grossing $300k and buying a $1.9M home ($1.5M loan)...That's ~$6300/month just for P&I (@ 3%). Add in Taxes, HOA, insurance, mello-roos... ~$10k/month? Give or take.
$25k gross -30% equivalent taxes all in, -10% retirement savings... $15k take home
$15k - $10K = $5k left to pay for everything else. Not starving by any means, unless they have young kids in daycare @ $1500 each. Then it gets pretty tight. Car payments, insurance, food, utilities...nothing left for the annual vacay to Disneyworld. Unless we're not saving for retirement.
I think USC mentioned most buyers are conservative in this area, so I wouldn't think they would go for what they max qualify for so 1-1.5mm depending on down with a 600-800k loan is would be a lot more realistic and manageable. That's assuming they can find a 1mm home these days. :-\
Needing 2 earners to achieve $250-350K/yr and trying to buy a 1.5M house is just insane unless the down is >$500K. It also leaves no room for one of them to stay home with kids.
2 earners in my neighborhood in SV (not the fanciest by any means but somewhat Irvine-like in demographics) is typically $350-500K+, with median home sales price $1.5M.
The way you did math is pretty accurate and you are right, it is very tight. I think that if you are buying 1.9M home, one of these two conditions has to be met to make the numbers work for borrower and for the lender.
1. If 300k income, better have lower LTV more like 60% or less. Then you get a nice cut in interest rate, payments are a bit lower etc..
2. If 80% LTV, better have income north of 450k. Higher the better.
I agree, just because they would be approved for a $1.5m loan amount doesn't mean that they go that high. A typical buyer with that type of income would tend to get a loan of $900k to $1.1m hence why I state that pretty much all of my Irvine buyers are underbuying.
100% agree with you. 300K income with a 1.9M home is insane in my opinion. This is the classic example of being house poor imo.
Unless the buyer is putting a larger downpayment. Some people need a larger home because they have 3-4 kids and/or have parents living with them. Each situation is different.
No dice for my buyers who put an initial offer of $1.251m on the home. Got this reply from the listing agent...
"The seller finally made a decision in another direction. The prevailing party has a family in the area and terms that the seller couldn't refuse.
I know so many buyers are disappointed these days and I appreciate your work on this."
So sounds like seller got an offer that they couldn't refuse and didn't want to send out counters.
No luck on Robins Tree, they got 15 offers and my client's offer of $1,037,500 was the 5th highest of the bunch. My guess is that the home will close somewhere between $1.05m to $1.075m but I guess we'll see.
We are waiting on a reply and/or counter for Navigator....
usctrojancpa
Well-known member
kpatnps said:
Ok fair enough, more than 50% of my Irvine buyers have household incomes from $250k to $350k (the majority of these are dual-income households). Assuming that buyers don't have any significant outstanding recurring debt obligations (car loans/leases, student loans, etc), they can easily qualify for a loan of 5-6x their annual pre-tax income assuming they have the required downpayment and reserves with today's interest rate environment. I've noticed that some higher earning first-time buyers tend to have somewhat limited down payment funds from savings which reduces their ultimate maximum purchase price.
USCTrojanCPA said:
They can qualify for that, but I think you've said in the past that most buyers spend conservatively, right? Even 5x seems like it's pushing it to me. For a couple grossing $300k and buying a $1.9M home ($1.5M loan)...That's ~$6300/month just for P&I (@ 3%). Add in Taxes, HOA, insurance, mello-roos... ~$10k/month? Give or take.
$25k gross -30% equivalent taxes all in, -10% retirement savings... $15k take home
$15k - $10K = $5k left to pay for everything else. Not starving by any means, unless they have young kids in daycare @ $1500 each. Then it gets pretty tight. Car payments, insurance, food, utilities...nothing left for the annual vacay to Disneyworld. Unless we're not saving for retirement.
daedalus said:USCTrojanCPA said:
They can qualify for that, but I think you've said in the past that most buyers spend conservatively, right? Even 5x seems like it's pushing it to me. For a couple grossing $300k and buying a $1.9M home ($1.5M loan)...That's ~$6300/month just for P&I (@ 3%). Add in Taxes, HOA, insurance, mello-roos... ~$10k/month? Give or take.
$25k gross -30% equivalent taxes all in, -10% retirement savings... $15k take home
$15k - $10K = $5k left to pay for everything else. Not starving by any means, unless they have young kids in daycare @ $1500 each. Then it gets pretty tight. Car payments, insurance, food, utilities...nothing left for the annual vacay to Disneyworld. Unless we're not saving for retirement.
I think USC mentioned most buyers are conservative in this area, so I wouldn't think they would go for what they max qualify for so 1-1.5mm depending on down with a 600-800k loan is would be a lot more realistic and manageable. That's assuming they can find a 1mm home these days. :-\
USCTrojanCPA said:
Needing 2 earners to achieve $250-350K/yr and trying to buy a 1.5M house is just insane unless the down is >$500K. It also leaves no room for one of them to stay home with kids.
2 earners in my neighborhood in SV (not the fanciest by any means but somewhat Irvine-like in demographics) is typically $350-500K+, with median home sales price $1.5M.
Cornflakes
Active member
daedalus said:USCTrojanCPA said:
They can qualify for that, but I think you've said in the past that most buyers spend conservatively, right? Even 5x seems like it's pushing it to me. For a couple grossing $300k and buying a $1.9M home ($1.5M loan)...That's ~$6300/month just for P&I (@ 3%). Add in Taxes, HOA, insurance, mello-roos... ~$10k/month? Give or take.
$25k gross -30% equivalent taxes all in, -10% retirement savings... $15k take home
$15k - $10K = $5k left to pay for everything else. Not starving by any means, unless they have young kids in daycare @ $1500 each. Then it gets pretty tight. Car payments, insurance, food, utilities...nothing left for the annual vacay to Disneyworld. Unless we're not saving for retirement.
The way you did math is pretty accurate and you are right, it is very tight. I think that if you are buying 1.9M home, one of these two conditions has to be met to make the numbers work for borrower and for the lender.
1. If 300k income, better have lower LTV more like 60% or less. Then you get a nice cut in interest rate, payments are a bit lower etc..
2. If 80% LTV, better have income north of 450k. Higher the better.
usctrojancpa
Well-known member
daedalus said:USCTrojanCPA said:
They can qualify for that, but I think you've said in the past that most buyers spend conservatively, right? Even 5x seems like it's pushing it to me. For a couple grossing $300k and buying a $1.9M home ($1.5M loan)...That's ~$6300/month just for P&I (@ 3%). Add in Taxes, HOA, insurance, mello-roos... ~$10k/month? Give or take.
$25k gross -30% equivalent taxes all in, -10% retirement savings... $15k take home
$15k - $10K = $5k left to pay for everything else. Not starving by any means, unless they have young kids in daycare @ $1500 each. Then it gets pretty tight. Car payments, insurance, food, utilities...nothing left for the annual vacay to Disneyworld. Unless we're not saving for retirement.
I agree, just because they would be approved for a $1.5m loan amount doesn't mean that they go that high. A typical buyer with that type of income would tend to get a loan of $900k to $1.1m hence why I state that pretty much all of my Irvine buyers are underbuying.
daedalus said:USCTrojanCPA said:
They can qualify for that, but I think you've said in the past that most buyers spend conservatively, right? Even 5x seems like it's pushing it to me. For a couple grossing $300k and buying a $1.9M home ($1.5M loan)...That's ~$6300/month just for P&I (@ 3%). Add in Taxes, HOA, insurance, mello-roos... ~$10k/month? Give or take.
$25k gross -30% equivalent taxes all in, -10% retirement savings... $15k take home
$15k - $10K = $5k left to pay for everything else. Not starving by any means, unless they have young kids in daycare @ $1500 each. Then it gets pretty tight. Car payments, insurance, food, utilities...nothing left for the annual vacay to Disneyworld. Unless we're not saving for retirement.
100% agree with you. 300K income with a 1.9M home is insane in my opinion. This is the classic example of being house poor imo.
usctrojancpa
Well-known member
kpatnps said:daedalus said:USCTrojanCPA said:
They can qualify for that, but I think you've said in the past that most buyers spend conservatively, right? Even 5x seems like it's pushing it to me. For a couple grossing $300k and buying a $1.9M home ($1.5M loan)...That's ~$6300/month just for P&I (@ 3%). Add in Taxes, HOA, insurance, mello-roos... ~$10k/month? Give or take.
$25k gross -30% equivalent taxes all in, -10% retirement savings... $15k take home
$15k - $10K = $5k left to pay for everything else. Not starving by any means, unless they have young kids in daycare @ $1500 each. Then it gets pretty tight. Car payments, insurance, food, utilities...nothing left for the annual vacay to Disneyworld. Unless we're not saving for retirement.
100% agree with you. 300K income with a 1.9M home is insane in my opinion. This is the classic example of being house poor imo.
Unless the buyer is putting a larger downpayment. Some people need a larger home because they have 3-4 kids and/or have parents living with them. Each situation is different.
Dr. CA Real Estate
New member
People not taking into account after a certain price point just about all buyers do 40%+ down payments.
usctrojancpa
Well-known member
USCTrojanCPA said:
No dice for my buyers who put an initial offer of $1.251m on the home. Got this reply from the listing agent...
"The seller finally made a decision in another direction. The prevailing party has a family in the area and terms that the seller couldn't refuse.
I know so many buyers are disappointed these days and I appreciate your work on this."
So sounds like seller got an offer that they couldn't refuse and didn't want to send out counters.
usctrojancpa
Well-known member
USCTrojanCPA said:
No luck on Robins Tree, they got 15 offers and my client's offer of $1,037,500 was the 5th highest of the bunch. My guess is that the home will close somewhere between $1.05m to $1.075m but I guess we'll see.
We are waiting on a reply and/or counter for Navigator....
marmott
Active member
I would hate to be looking right now...
Just for a good laugh, it could be worst ;D:https://www.kron4.com/news/californ...s-122-offers-in-one-weekend-sells-in-3-hours/
Just for a good laugh, it could be worst ;D:https://www.kron4.com/news/californ...s-122-offers-in-one-weekend-sells-in-3-hours/
usctrojancpa
Well-known member
Navigator got 11 offers but the seller only decided to counter the top 5 buyers with a best & final counter (including my buyer) which is due by 7pm today.