Cuz I really don't understand where all these people are coming from and how they can afford $300,000--700,000 houses....
Aren't you supposed to only buy a house that's equal to or less than three times your income? If you buy a $500,000 house, you (or you and your spouse) have to make 1.5 million/year. Do we really have that many people around here that make that kind of money?
(Fixed post for clarification)
8 comments:
Um... Income 3x what your house costs? If people had that they would buy and fully pay for a couple of new houses every year! and still have a ton of cash left over. Maybe your ratio is inverted?
You are right---I mean:
Aren't housing costs supposed to equal to or less than 3x your income?
"Aren't you supposed to only buy a house that's equal to or less than three times your income?"
I've always been informed that it should be no more than 1 1/2 to 2x your income, and preferably no more than that. Banks will often offer loans for more than that (or at least they did before interest rates started going up), but it's wise not to get yourself involved in a house-poor situation.
In other words, if someone makes $50k a year, then they should preferably be looking in the range of $75-100k home. Some couples are able to jointly go in on a home purchase, so that could change the dynamic.
"If you buy a $500,000 house, you (or you and your spouse) have to make 1.5 million/year."
Not really. Using the 2x your income rule, it would mean that someone would need to make roughly $250k. There's definitely people in the community who make that much.
Ok...apparently I didn't fix my post enough!
I get what you both are saying and I'm sure there are people here in CU who make that much, but it sure seems like the houses built would outnumber people with incomes that can afford these houses.
However, as matthew has pointed out, perhaps people are getting loans for more than the 2x their income in order to buy these houses. Seems dangerous to me. My friend Leeanthro says she has friends who have purchased houses they can barely afford and as a result, they have very little furniture to fill the new house nor can they afford other things, like vacations, etc....
Perhaps my own finances taint my view of the housing market.
Perhaps there's something else at work. Many of these people may be moving here for University jobs, many of them from cities where housing costs much more. Perhaps they made a lot on the sale of their previous home, and their dollar goes a lot farther here. Just a thought.
One of the biggest problems locally is there are A LOT of folks who should be looking in the $75-100K range, but there is an almost complete lack of housing available in that same range. We house hunted last five years ago in that exact range and basically after many months of looking realized that our options were a craptastic house in a shadier part of town for less or to be willing to go a little higher to live where we wanted. We bought just in time too, because while we only had to pay a slight bit more for the house we fell in love with than we originally were considering, the same houses in that area spiked about $20K more immediately after the economy's bottom fell out (9-11 happened exactly a week after we closed). We could never have lived where we are now had we purchased any later.
lbotp: I could see how changing locations in the country might work in your favor. I have a friend in LA who just recently bought a house---I nearly had a heart attack when he told me how much a regular old house goes for in California. Sell your overpriced house in Cali and move here, you'd be able to get a much better house for much less.
mala: I'm in the same boat.... I'm currently contemplating purchasing a money pit because I love it and because I could probably afford it---the house, not the fix-ups....
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