My worry - Page 2 - cougarguard.com — unofficial BYU Cougars / LDS sports, football, basketball forum and message board

SteelBlue · 10-10-2008, 07:18 PM

Quote:

Originally Posted by smokymountainrain

Houses in my area that were just over $200k 8 years ago are now selling (in a supposed bad sellers market) for $375-400k. I guess it is a bad sellers market if you consider that values haven't risen in about 1.5 years, but that doesn't change the fact that after 8 years, prices have nearly doubled.

And trust me, these houses are not worth $400k.

Are they selling for $375k or are they listed at $375k? Our city, like the rest of CA is loaded with homes "slashed" to still ridiculous prices. Very few are moving. Sellers are learning the hard way that there will be much more slashing to come.

TripletDaddy · 10-10-2008, 07:43 PM

Quote:

Originally Posted by SteelBlue

Are they selling for $375k or are they listed at $375k? Our city, like the rest of CA is loaded with homes "slashed" to still ridiculous prices. Very few are moving. Sellers are learning the hard way that there will be much more slashing to come.

I look at the average income, then multiply by about 4 or so. That would be about right for housing prices, no?

ERCougar · 10-10-2008, 07:50 PM

Quote:

Originally Posted by TripletDaddy

I look at the average income, then multiply by about 4 or so. That would be about right for housing prices, no?

We're house-shopping in the next year and we sure as heck are not going to purchase a house for 4 times my income. Our limit is more like 1.5x. In residency, we had a house that was about 3 times my income and I felt really stretched. I can't imagine what you'd have to do to get to 4 times. Even without tithing.

TripletDaddy · 10-10-2008, 07:55 PM

Quote:

Originally Posted by ERCougar

We're house-shopping in the next year and we sure as heck are not going to purchase a house for 4 times my income. Our limit is more like 1.5x. In residency, we had a house that was about 3 times my income and I felt really stretched. I can't imagine what you'd have to do to get to 4 times. Even without tithing.

That is what you are comfortable purchasing. I am talking about a reasonable range for housing prices in a given area. I would think 3-4x the average annual income is pretty normal. But I am probably wrong. Maybe a stat guy like Indy would be able to better lay it out.

smokymountainrain · 10-10-2008, 07:59 PM

Quote:

Originally Posted by SteelBlue

Are they selling for $375k or are they listed at $375k? Our city, like the rest of CA is loaded with homes "slashed" to still ridiculous prices. Very few are moving. Sellers are learning the hard way that there will be much more slashing to come.

At $375k, they are selling - that is the low end. Up in the $400k range they'll sit for a while.

ERCougar · 10-10-2008, 09:18 PM

Quote:

Originally Posted by TripletDaddy

That is what you are comfortable purchasing. I am talking about a reasonable range for housing prices in a given area. I would think 3-4x the average annual income is pretty normal. But I am probably wrong. Maybe a stat guy like Indy would be able to better lay it out.

I'll agree with you on my current limit--I can easily get a comfortable house for that and my tax burdern is higher, so it doesn't make sense to go much higher; for lower income brackets, it would make sense. However, 3-4x your income goes beyond what most advisors recommend spending. Banks will give you enough rope to hang yourself with, and hence our current meltdown.

TripletDaddy · 10-10-2008, 09:41 PM

Quote:

Originally Posted by ERCougar

I'll agree with you on my current limit--I can easily get a comfortable house for that and my tax burdern is higher, so it doesn't make sense to go much higher; for lower income brackets, it would make sense. However, 3-4x your income goes beyond what most advisors recommend spending. Banks will give you enough rope to hang yourself with, and hence our current meltdown.

Currently, home prices were being listed at 8-10x average annual local income. 4x seems like a bargain to me. I guess it is all relative. I honestly have no idea what a reasonable home price would be.

ERCougar · 10-10-2008, 10:22 PM

Quote:

Originally Posted by TripletDaddy

Currently, home prices were being listed at 8-10x average annual local income. 4x seems like a bargain to me. I guess it is all relative. I honestly have no idea what a reasonable home price would be.

One thing I didn't think about is equity. I guess you could purchase in the 8-10x range if you had a significant amount of equity in your current home, probably not that uncommon a year ago. I'm also coming from much cheaper markets than you so the average home was much cheaper than 8-10X income.

Travis Henry · 10-10-2008, 10:22 PM

Quote:

Originally Posted by ERCougar

I'll agree with you on my current limit--I can easily get a comfortable house for that and my tax burdern is higher, so it doesn't make sense to go much higher; for lower income brackets, it would make sense. However, 3-4x your income goes beyond what most advisors recommend spending. Banks will give you enough rope to hang yourself with, and hence our current meltdown.

I can't imagine 3-4x income being that big of a deal. I'm moving into a house in a week that I had built. It's about 3.2 times my income. It's our first house and after taxes we're only paying about $500 more per month for about twice as much space than we were paying in rent. The monthly payment is about 25% of our gross monthly income.

I think what often gets lost with using simple income ratios is the fact that certain expenses don't have much variation with income levels. For instance, I largely pay the same amount for food, gas and health insurance that someone pays who makes less or more than me who has the same family size and is the same age. Of course, people can choose to eat out more the more money they make, but the same baseline can be achieved.

ERCougar · 10-10-2008, 10:27 PM

Quote:

Originally Posted by Travis Henry

I can't imagine 3-4x income being that big of a deal. I'm moving into a house in a week that I had built. It's about 3.2 times my income. It's our first house and after taxes we're only paying about $500 more per month for about twice as much space than we were paying in rent. The monthly payment is about 25% of our gross monthly income.

I think what often gets lost with using simple income ratios is the fact that certain expenses don't have much variation with income levels. For instance, I largely pay the same amount for food, gas and health insurance that someone pays who makes less or more than me who has the same family size and is the same age. Of course, people can choose to eat out more the more money they make, but the same baseline can be achieved.

You can swing 3X your income. I just felt stretched (when my income was around 40K, house 140K). And I paid tithing, which most people don't do. But I wasn't saving a comfortable amount and I was living somewhat paycheck-to-paycheck. Didn't like it.

I've read several places that say you shouldn't spend more than 25-30% of gross monthly on housing, so you're about at the recommended limit, without tithing. You may be able to economize more than most, but I'm just stating recommendations.