Ethics of Real Estate Investment, NIMYism and the Housing Crisis

Toyman! said:

In reply to classicJackets (FS) :

My daughter saved for 4 years and bought her first house on a single income. It's not harder, it's just hard and takes discipline. Discipline that people don't want to do. 

She makes the median income and bought a house that was well under the median house price because that's what she could afford. 

What industry? 

Any student loan debt? 

What region? 

I don't doubt that some areas are easier than others, but in some areas certain industries and jobs just don't exist. Folks who work in the medical industry, for example, have the ability to live in much smaller, older, cheaper areas than if you're a mechanical engineer specializing in electric vehicle systems (limited to Detroit, Phoenix, California). 

My wife and I got lucky in that we both went to states schools and unlike many of our peers, we didn't get obsessed with taking on my student loan debt to chase after advanced degrees. She paid off most of her loans with AmeriCorp, and I paid off mine by being broke. We simply worked, and got real lucky finding median-wage paying jobs, saved for a few years, didn't go to the bar much, and didn't buy expensive new cars (although she did buy a new Honda Fit in 2012). Honestly, had she not bought that car and continued driving the old T-Bird she had (or anything not $18k), we could've probably bought much earlier and cheaper than what we did. 

In reply to yupididit :

The median house price for the Charleston area is $550k. Her house was almost half that.

No kids, no husband. If she was married with 2 incomes it would have been even easier, even with a kid or two. Her commute is currently 0 miles but if they go back to the office it will be about 25 miles which is not outrageous. 

She made a choice to get out of her apartment and passed up on a lot of fun things to pile up the necessary cash. IIRC she put about 10% down. Most first-time buyers don't have to put down the full 20%. You do have to live below your means to make that happen and most people today aren't willing to do that. The latest shiny thing always seems to snatch the extra out of their pockets. 

It's certainly hard but I'm not buying harder. All it takes is the drive to get it done and the willingness to forgo the immediate pleasures for long-term goals. She has always had that ability. 

In reply to pheller :

She works in a call center for software support for Blackbaud here in Charleston SC. Currently their primary trainer for new hires at this point.

She has a fairly inexpensive business degree that she was able to pay for with some help from an aunt and my parents, so no school debit. 

She is still driving the same sub $4k car she bought when she got out of college. She has never had any debt. She doesn't make extravagant purchases. Her hobbies are very modest. She has done a great job of living well below her means and it has allowed her to do what she wanted. She wanted a small house with a big yard. Now she has a 1000 sqft house on a 1/2 acre lot. 

Nice. That's how you do it. 

Although, I would be interested to know if she makes Median Income for her region, or Median Income for the country as a whole? 

In a place like Charleston, the Median Income is $44k. Buying outside of the Charleston market, and having inventory outside that market is probably what saved her so much. 

In my area around Flagstaff AZ, our market area is growing - it used to be that you could live 15 minutes from Flagstaff City proper and save $100k on your home, or have an acre of land.  Kachina, Mountainaire, Munds Park, Parks, Bellemont, Baderville all offered considerably lower housing costs with a short commute into town. Today, those places are as expensive as living in town, you just get a little more land to work with. Nobody is building apartments in those area, so rent is $1500 whether your downtown or $1300 if you're on the outskirts. 

In San Diego, the Median Income is $38k, the average home is $900k, and there is no way to escape that housing market unless you're an hour away. Some of that has to do with geography, because an hour away from San Diego is on the edge of the mountains/desert. 

Her being remote also helps her flexibility. Most of the labor market is not granted that. If she was forced back into the office I'll bet she'll wish she had been closer to work, but at least she might be able to sell and use the equity to do that later on. 

In Flagstaff, we've had a rash of new building happening, big apartments and some absolutely massive developments going up in town. Hopefully the increase in supply and a reduction in demand due to less profitable rentals gives our local wages some time to catch up, but alas, this will always be an expensive place to live. 

I still think we need LVT. 

frenchyd said:

In reply to ProDarwin :

Where homes are cheap,  wages also tend to be cheap.  

Right, you need to take that into account for sure.  Moving won't solve the problem for everyone.  Also there are circumstances that make it harder for some than others.

For me, opportunities weren't great where I was.  I searched and was able to move somewhere far less expensive, where the wage:home cost ratio was much more favorable.

pheller said:

In San Diego, the Median Income is $38k, the average home is $900k, and there is no way to escape that housing market unless you're an hour away. Some of that has to do with geography, because an hour away from San Diego is on the edge of the mountains/desert. 

There is absolutely a way to escape that market.  Don't live in San Diego.

You can go to a LOT of other cities and make $38k where the cost of living is wayyyyyyy less.

Easier said than done. Requires saving up a considerable amount, moving or leaving behind all your stuff, and signing a one year lease in a new town where you don't have income. 

Honestly, AirBNB has made relocating a little bit easier, but it's still not easy. 

Migrant workers are experts at this, but the rest of the labor force is sorta trapped in their home region. 

Apparently this is the primary reason for homelessness outside of substance addiction and mental health across the USA (otherwise known as working homeless). People leaving their resources in hopes of finding something better, only to be left trapped on the greener side. It usually because they don't have anyone to bail them out. 

ProDarwin said:

pheller said:

In San Diego, the Median Income is $38k, the average home is $900k, and there is no way to escape that housing market unless you're an hour away. Some of that has to do with geography, because an hour away from San Diego is on the edge of the mountains/desert. 

There is absolutely a way to escape that market.  Don't live in San Diego.

You can go to a LOT of other cities and make $38k where the cost of living is wayyyyyyy less.

A big part of why the average income in San Diego is so low is the Navy and Coast Guard is there bringing income way down.  That plus Tijuana is just down the freeway, driving labor jobs down too.  
  However, normal jobs such as pilots, doctors,  Computer programmers,  management and executives earn income more in line with LA. 
   Many of those San Diego home prices are driven up  by successful retirees wanting to enjoy the 300+ days of sunshine and pleasant temps San Diego offers.  There is a very finite amount of land that offers that and other blessings  available in SanDiego. 

Investigate.  Don't assume.  I keep hearing 20% down.  But FHA  allows 3% down in some cases. And  there are still some assumable loans out there.    The City of Minneapolis had a program for first time home buyers,  other cities  probably have something similar.  Police, firefighters,  and  other such people tend to get available money first but frequently  there is left over money.  So check on that.  
     Then there is family. Even if there is no "money". There can be credit.   Parents with great credit might go together to allow it to happen.  Secure the loan for their children  and let the parents act as the bank.   
  I guy I served with in the Navy just got a VA loan  for his granddaughter.  0 down.  Technically it's his house and he's living there. Although he remains in his old home in actuality. So if a loved, trusted family member has paid off the VA loan  that person may be able to get a new 0 down loan.

 Make friends with bar tenders, and hair dressers, and barbers.  People tend to tell them their problems like a divorce or tight financial situations. 
  It's far better for them to "sell" to someone then let it be turned into  a foreclosure.    Occasionally with sufficient credit the banker will even allow the buyers to assume the loan. Especially if the house is upside down in equity.  Banks love to get a loan current, rather than lose the money a foreclosure costs.    
  Even if loan assumption isn't possible,  making 3 months payments to bring the loan current.  Will typically  allow enough time for closing to happen far enough away  that a loan can be acquired.   And $2000 x3 months  is typically a lot less than 20% down. 

It's hard to pay rent for the years it takes while saving 20% down.  (  Median home at $440,000?   X.20 = $88,000 + closing costs) That money is always there. When the car breaks down  or the job goes away.  Just meeting those obligations can quickly put you back towards zero.  

Ok, I'll throw some numbers out because I haven't posted in this thread in a while.

Last year, combined, we made $34k. 

Mortgage $12k (22) [130k @3.125]

Electric $2400 (19.6)

Heat $1000 (18.6)

Car insurance $1000 (17.6)

Phone Bills $1500 (16.1)

Internet bill $1500 (14.6)

Streaming services $1500 (13.1)

Food $9000 (4.1)

That leaves $4100 available, throughout the year, for everything else. Clothes, school E36 M3, repairs, emergency fund, car problems, birthdays, holidays, all that E36 M3. Sounds like a lot until you divide 4100 by 12 months.

Even going just with today's interest rates, buying a small house is damn near unaffordable. The only reason we were able to do it is because of my father in law gifting us a 10% down payment and cosigning the loan. We couldn't buy this house today at current interest rates, period. 

Had we been stuck in the rental trap, it could never have happened. Hell, you can't even rent a two bedroom apartment around here for our mortgage payment, unless you're good with black mold, asbestos, or living next to junkies. 

I know, especially here on this forum, we're financial outliers, but I don't think a lot of you really understand how little money so very many people actually make and how far it really goes, or doesn't. 

Just throwing out some perspective. 

In reply to Toyman! :

Save your typing.  You have given a real world example of how it can, and has been done. The same people here have started the excuses on why it can't be, even though she did it.

They believe the excuses, she didn't.  Good for her. You should be proud.

Median income numbers can be very misleading when used in the context of home ownership. Median income is the point at which half of those included are above and half are below. But many of those included are not in the market for a home. They have no intention of buying a home, and do not yet have the skills to land a job sufficient to purchase a home. The reported median income includes all workers age 15 and up. The average age of a first time home buyer is in the early 30's. Last year was a peak anomaly due to the market at 36, it is usually around 33. In the early 80's, it was 29, and slowly crept up over the next 40 years. So that median includes a large group well outside the home buying age, including many who are still in school. On the other end, older people are included that are past the home buying phase of their lives. They hopefully already bought their home, are retired, and are earning part time supplemental income, driving down the median for the area.
 

San Diego's median of $38k sounds crazy low for anyone expecting to buy a home, because it is. So let's look at the numbers of those actually in the game. 
 

San Diego Median Income by Age

25-44 $98k.

Unfortunately, I couldn't find any data for specific ages. Very few have people their stuff together at 25 to buy a home, so I'd say this number is still low for the group that actually buys first homes. I'm curious what 30-44, would look like. San Diego is still tough, but using overall median income is misleading by a factor of around 3. 

In reply to frenchyd :

You can get a 0% down loan without any of the things you mentioned. How do I know?  It's how I purchased my current home. I didn't have 20% down and 3-5% didn't make a material difference in payment or remove PMI, so I figured it would be better to just keep the cash on hand. You just pay a higher interest rate. 

In reply to Steve_Jones :

I agree completely with you on that. There are plenty of ways around the down payment problem as I listed above.  And regularly I hear different ones.  
  Those that are successful don't wait for it to happen,  they actively go out and find a way. 
    I'm proof of that. 

z31maniac said:

In reply to frenchyd :

You can get a 0% down loan without any of the things you mentioned. How do I know?  It's how I purchased my current home. I didn't have 20% down and 3-5% didn't make a material difference in payment or remove PMI, so I figured it would be better to just keep the cash on hand. You just pay a higher interest rate. 

Absolutely ,  then when you get in a better position, refinance at a lower rate.  

Boost_Crazy said:

Median income numbers can be very misleading when used in the context of home ownership. Median income is the point at which half of those included are above and half are below. But many of those included are not in the market for a home. They have no intention of buying a home, and do not yet have the skills to land a job sufficient to purchase a home. The reported median income includes all workers age 15 and up. The average age of a first time home buyer is in the early 30's. Last year was a peak anomaly due to the market at 36, it is usually around 33. In the early 80's, it was 29, and slowly crept up over the next 40 years. So that median includes a large group well outside the home buying age, including many who are still in school. On the other end, older people are included that are past the home buying phase of their lives. They hopefully already bought their home, are retired, and are earning part time supplemental income, driving down the median for the area.
 

San Diego's median of $38k sounds crazy low for anyone expecting to buy a home, because it is. So let's look at the numbers of those actually in the game. 
 

San Diego Median Income by Age

25-44 $98k.

Unfortunately, I couldn't find any data for specific ages. Very few have people their stuff together at 25 to buy a home, so I'd say this number is still low for the group that actually buys first homes. I'm curious what 30-44, would look like. San Diego is still tough, but using overall median income is misleading by a factor of around 3. 

 

Plus many of those owners bought years ago when prices were a whole lot less. 
    The first house I ever tried to buy was in El Cajon.  Up by the water tower?  Fantastic view of the Harbor. Nice 3 bedroom 2 car  garage.  Olympic size swimming pool.   My offer of $28,000 was accepted by the owner. ( he'd been asking $45,000 for it but was in  jail in Chicago and needed bail money). ;-) 

Boost_Crazy said:

Median income numbers can be very misleading when used in the context of home ownership. Median income is the point at which half of those included are above and half are below. But many of those included are not in the market for a home. They have no intention of buying a home, and do not yet have the skills to land a job sufficient to purchase a home. The reported median income includes all workers age 15 and up. The average age of a first time home buyer is in the early 30's. Last year was a peak anomaly due to the market at 36, it is usually around 33. In the early 80's, it was 29, and slowly crept up over the next 40 years. So that median includes a large group well outside the home buying age, including many who are still in school. On the other end, older people are included that are past the home buying phase of their lives. They hopefully already bought their home, are retired, and are earning part time supplemental income, driving down the median for the area.
 

San Diego's median of $38k sounds crazy low for anyone expecting to buy a home, because it is. So let's look at the numbers of those actually in the game. 
 

San Diego Median Income by Age

25-44 $98k.

Unfortunately, I couldn't find any data for specific ages. Very few have people their stuff together at 25 to buy a home, so I'd say this number is still low for the group that actually buys first homes. I'm curious what 30-44, would look like. San Diego is still tough, but using overall median income is misleading by a factor of around 3. 

 

I suspect you are right.  Pay in SanDiego for anything other than military and labor  is about the same as the rest of the country. 

In reply to frenchyd :

$28,000 in what year money? Makes a difference. $28k in 1960 is the same as $288k Today

RevRico said:

Ok, I'll throw some numbers out because I haven't posted in this thread in a while.

Last year, combined, we made $34k. 

Mortgage $12k (22) [130k @3.125]

Electric $2400 (19.6)

Heat $1000 (18.6)

Car insurance $1000 (17.6)

Phone Bills $1500 (16.1)

Internet bill $1500 (14.6)

Streaming services $1500 (13.1)

Food $9000 (4.1)

That leaves $4100 available, throughout the year, for everything else. Clothes, school E36 M3, repairs, emergency fund, car problems, birthdays, holidays, all that E36 M3. Sounds like a lot until you divide 4100 by 12 months.

Even going just with today's interest rates, buying a small house is damn near unaffordable. The only reason we were able to do it is because of my father in law gifting us a 10% down payment and cosigning the loan. We couldn't buy this house today at current interest rates, period. 

Had we been stuck in the rental trap, it could never have happened. Hell, you can't even rent a two bedroom apartment around here for our mortgage payment, unless you're good with black mold, asbestos, or living next to junkies. 

 

I know, especially here on this forum, we're financial outliers, but I don't think a lot of you really understand how little money so very many people actually make and how far it really goes, or doesn't. 

Just throwing out some perspective. 

That is very location specific. I make that much as a school bus driver working part time.  Other school companies are offering a lot more for next school year.   20% more. So I fully expect my company to match or exceed that. 
     They are advertising for CDL Class B drivers  starting out at $45,000 a year plus benefits and thousands of dollars sign on bonus.   
 Don't have s Class B CDL?  Those bus companies will train you and pay you while training.  They will pay for your medical and background test.  Provide you with equipment to take the test. If you fail ( don't hop a curb)  they will get you scheduled again, keep paying you  and then once you start driving for them,  give you a $4000 signing bonus.    
  A couple years of that under your belt  and  you can go to work as a local delivery driver @ $45,000 a year plus signing bonus. 
  Or  a whole lot more with the right company  as an over the road semi driver. 

Steve_Jones said:

In reply to frenchyd :

$28,000 in what year money? Makes a difference. $28k in 1960 is the same as $288k Today

Yes!! That was  1972. Last I looked that place up on Zillow it was    $2,390, 000 I   can't imagine it's gotten cheaper. 
I n 1985 Joe,  ( best friend) moved back to San Diego  from Chicago and basically traded a  older modest 3 bedroom in Chicago for a big!!! brand new 4 bedroom.  Last year sold it for $990,000.   He bought a new house about the same size  in Troy Missouri  for $365,000.  The rest and social security, is his retirement.  That's what almost 40 years of inflation in the right location is worth. 

classicJackets (FS) said:

Peabody said:

Steve_Jones said:

it's kind of funny seeing people complain about $350k houses being crazy expensive.

Even funnier seeing people freak out over the crazy high interest rates like it's the end of the world, when we would have been thrilled to buy at those rates

The problem (and I didn't read far enough back to see if you've already addressed it), is prices aren't coming down, and in fact still seem to be going up. To say; when rates were low, really high prices could still be handled. With rates high and prices high - it's so much harder.

You're right.

What I should have said is they're acting like it's never happened before, yet it was entirely predictable

In reply to Boost_Crazy :

Yea I'm not sure where the $38k I quoted was coming from but it can't be right. 

In reply to pheller :

$38k is right if you want the median including everyone from 15 to 100 years old who worked at all, according to the census. But that is misleading if you really want to know the average wage of a worker  in the home buying age range. 

Medians and averages are created with half of the population making LESS than that. I don't understand discussing median prices at the same time as discussing entry level incomes and prices, and the difficulties for first time homeowners. 
 

My son bought his first house 2 years ago at the age of 20.  He bought in Atlanta, where the median home price is $439,000.  But HE'S NOT MEDIAN.  At the time he was making $18 per hour (not full time).  He purchased a house for $120,000 with $0 down as a first time homebuyer.

Anyone who complains about not being able to buy a median priced house when they are an entry level home buyer needs to get their head examined.  It's a completely disingenuous debate. They're not doing it right. 

In reply to ProDarwin :

Is there something wrong with mobile homes?

Its a starter.