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I don't understand real estate that well.  Housing prices over the years seem to have gone up many times faster than the average income, so how is it that people can even afford houses these days.

For example, if a California house was bought long ago for 5K.  It is now worth almost 600K (albeit, that was in California).  A Professor's salary did not go up that much over that time, and they even have seniority and other perks in pay today.

Then house in a different area of the nation in Rural Utah probably cost around 10K -15K in the 60s, and now could sell for 200K. 

So let's say a professor was making 20K in the late 60s.  They are now making around 100K.  That's a 5x increase.  Not bad...right...

But even with the house comparison, the house has raised at two times the amount that the salary has for the current house, and the original is over 100x it's original cost.  How are people affording houses today and how do the prices keep increasing?

As I said, I'm completely ignorant on how the real estate business works.

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I don't look at a house and think, investment.  Rather, I look at a house and say - this is my family home for the rest of my life, or at least for the rest of my children's childhood.  I don't know how people raise a family in a house they plan on flipping for money every 5 years or so.  Kids getting uprooted every 5 years.  My husband is a military kid who hated leaving friends every couple of years, so we agree on the matter.  So, I don't do the "buy something small then work your way up".  No.  I buy a home I can live in for the long haul.

Therefore, I look at a house and make sure I won't get forced out of my house because I can't pay my mortgage if the breadwinner of the family end up getting hit by a Mac truck.  I look at an area and imagine my family growing up there, playing there, going to school there, working there.  Then I look at what kind of house I can afford there.  My house I live in, for example, is $50K more than the exact same house 20 miles away.  Of course, it was within what we can comfortably afford (which was still a lot less than what the bank says we can comfortably afford - but banks always give you maximums, not Mac truck comfort).  But where we live in is the best place for my family to grow... I've lived in a lot of places and so has my husband, so we have strong opinions on the matter.  So the $50K premium was well worth it.

Anyway, we bought our house, then the market crashed so we lost all our equity and then some.  Didn't matter to us.  Equity only matters when you have to sell a house - or need to mortgage your equity for cash.  We weren't planning on selling anytime soon or maybe even ever.

But, that's just me.

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12 hours ago, JohnsonJones said:

I don't understand real estate that well.  Housing prices over the years seem to have gone up many times faster than the average income, so how is it that people can even afford houses these days

As I said, I'm completely ignorant on how the real estate business works. 

Location is everything.  Even in CA depending on where one lives, there was a huge correction in property values in the last downturn..  In the SF Bay Area, not so much.

Like most economic things it boils down to supply and demand.

My son bought a house in Idaho, held it for ten years, and barely got his money back.  No appreciation at all.  This is fairly typical in much of the US.  He was able to squeeze into a home in the SF Bay Area last year and already has around $60K of appreciation.  It's crazy, I know.

In the SF Bay Area a starter home in most areas is around $1,000,000.  This allows you to own a 3 bedroom/2 bath fixer upper.  It for sure won't be perfect.  And won't be large.  Think around 1,200 sq ft.

How can this last??  It won't.  But for right now, there is so much new money coming into the Silicon Valley that this is the situation.

Think about it..........With 20% down (who has 200K laying around?  answer: guys with stock options) your monthly nut is $3,820 payment, taxes around $1,250 per month and Insurance of $150 per month.  That is a monthy nut of $5,220!  Not a lot of people in the country can crack that payment  month in and month out.  That does not count the maintenance, utilities and other benefits of home ownership!!

What with income taxes, vehicle costs, raising kids etc etc, it's no wonder that a lot of people making $200,000 or more per year consider themselves working poor.

Edited by mrmarklin
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12 hours ago, JohnsonJones said:

I don't understand real estate that well.  Housing prices over the years seem to have gone up many times faster than the average income, so how is it that people can even afford houses these days.

For example, if a California house was bought long ago for 5K.  It is now worth almost 600K (albeit, that was in California).  A Professor's salary did not go up that much over that time, and they even have seniority and other perks in pay today.

Then house in a different area of the nation in Rural Utah probably cost around 10K -15K in the 60s, and now could sell for 200K. 

So let's say a professor was making 20K in the late 60s.  They are now making around 100K.  That's a 5x increase.  Not bad...right...

But even with the house comparison, the house has raised at two times the amount that the salary has for the current house, and the original is over 100x it's original cost.  How are people affording houses today and how do the prices keep increasing?

As I said, I'm completely ignorant on how the real estate business works.

This is simple.  A house in San Franciso bought long ago for 5K by a professor is now worth 600K and owned by some dude working in Silicon Valley who makes a ton of a lot more than a professor.  The professor is now living in a $200K house in Fresno.

The price of a house in any housing market is set by the willingness of people to move to that area and pay that price.

Edited by anatess2
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8 minutes ago, anatess2 said:

This is simple.  A house in San Franciso bought long ago for 5K by a professor is now worth 600K and owned by some dude working in Silicon Valley who makes a ton of a lot more than a professor.  The professor is now living in a $200K house in Fresno.

The price of a house in any housing market is set by the willingness of people to move to that area and pay that price.

Let me know where in SF I can find a house for $600K  I'll buy it today!!!!!!!

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12 hours ago, JohnsonJones said:

I don't understand real estate that well.  Housing prices over the years seem to have gone up many times faster than the average income, so how is it that people can even afford houses these days.

For example, if a California house was bought long ago for 5K.  It is now worth almost 600K (albeit, that was in California).  A Professor's salary did not go up that much over that time, and they even have seniority and other perks in pay today.

It can't go up forever and just like '08 will come crashing down. But some things naturally rise the price of housing. More people in bigger cities = higher prices for homes.  To build more homes you either go up, you go out, or you fill in.  Build high-rises or expand the city footprint or fill in undeveloped areas.  More people in a the same geographic area means higher prices (supply vs. demand).  Some places (like Portland) severely constrain building new subdivisions-this puts more pressure on prices. 

The solution to that is don't live in a high-priced city! In my work career I've gone from high-priced city to medium-price city to low priced city and my income has roughly stayed the same with minor increases while my standard of living has skyrocketed.

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49 minutes ago, anatess2 said:

Get your money ready.  $550K.  125 Britton St.

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You got me.  My wife would not want to live in a house that has less square footage than her kitchen, however.  I'll follow this.  With a 4400 sq foot yard, if buildable, it will likely be bid up over the 600k mark.

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11 hours ago, mrmarklin said:

Let me know where in SF I can find a house for $600K  I'll buy it today!!!!!!!

Depends on what you consider SF and the SF area.  If you are willing to commute about an hour and a half each way...you can get houses down to around 400-500K.  You'll be on the outer reaches of BART perhaps, but it's doable as well.  It just boils down to how far you want to commute.

Also, don't expect a Mansion, just a livable house.

If you want cheaper, Mobile Homes and Trailer Homes are selling for someplace between 150K and 200K.  Condos are up to around 300-400K. 

There were a number of foreclosures still going on where the houses sell for cheaper, if you can get the lucky bid in.

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14 hours ago, mrmarklin said:

You got me.  My wife would not want to live in a house that has less square footage than her kitchen, however.  I'll follow this.  With a 4400 sq foot yard, if buildable, it will likely be bid up over the 600k mark.

There's always the 2nd floor.  :)

 

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7 hours ago, Carborendum said:

You noticed Zillow’s estimate of true value, no?

many homes are listed below market price to begin a bidding war. In addition this home is in a fairly scary area. 

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10 hours ago, mrmarklin said:

You noticed Zillow’s estimate of true value, no?

many homes are listed below market price to begin a bidding war. In addition this home is in a fairly scary area. 

There's somewhere in SF that is not a scary area?  :)

 

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Hey LB,

Not sure if you are worried about the financial part or the part about perhaps not telling your spouse. Maybe both. I think you know how much you make and are willing to spend. Taking into account maybe you'll want to take a vacation, what if things break down?  As far as telling your spouse, be realistic. Would you leave a known thief friend in your house while you run to the store real quick? Would you let a child abuser babysit your kid?  Greedy friend of yours watch your cinnamon roll while you go to the bathroom?  Let your, perhaps not working and horrible with money, wife pick your home and/or know about how much your bank approved you for?????

Bruh, c'mon, you already know the answer. Don't doubt yourself. 

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4 hours ago, Overwatch said:

Hey LB,

Not sure if you are worried about the financial part or the part about perhaps not telling your spouse. Maybe both. I think you know how much you make and are willing to spend. Taking into account maybe you'll want to take a vacation, what if things break down?  As far as telling your spouse, be realistic. Would you leave a known thief friend in your house while you run to the store real quick? Would you let a child abuser babysit your kid?  Greedy friend of yours watch your cinnamon roll while you go to the bathroom?  Let your, perhaps not working and horrible with money, wife pick your home and/or know about how much your bank approved you for?????

Bruh, c'mon, you already know the answer. Don't doubt yourself. 

Well, when we have shopped for houses we both agree on a set budget.  Even if it were me deciding on a budget, I would not select the house on my own unless there was no other choice.  My wife would choose the house, even if she had a budget for it.  She would know the budget, but as she spends more time at home than I do, she would be the one making the ultimate decision on WHAT house to get.  I'm not going to have her spend 90% of her life in a place she hates. 

When we got our current place we narrowed it to two homes.  I preferred one more than the other.  She didn't know which to choose, so she prayed about it and finally chose the one that I did not prefer.  We went with that house that she chose.  If a wife is spending a LOT of time in the home, she should have some say about what the home looks like, where it is, and all other arenas of it's location.  Even if you and her spend about equal time, you and her should come to a JOINT decision.  One's wife should ALWAYS have a choice in such a weighty decision.  I would default that she should be the one to make the final choice even (though within the budget, if it's beyond the budget than it shouldn't even be one of the choices, even if one of you WANT it to be one of the choices, husband or wife), but even if one doesn't go that far in letting the wife decide, it should, at the very least, be a joint decision with both the husband and the wife making the decision.  A husband should never make that type of decision on their own.

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