Posted on 05/31/2005 10:33:33 AM PDT by TXBSAFH
Hot California market daunts first-time buyers Median home price passes $500,000; many young workers shut out
Paul Sakuma / AP file A home for sale in Los Altos, Calif. The pace of existing-home sales rose 3 percent last month from the year-earlier level. By Martin Wolk Chief economics correspondent MSNBC Updated: 12:51 a.m. ET May 28, 2005Pity the poor first-time home buyer in California. With the median price of a home in the Golden State crossing $500,000 for the first time, getting into that “starter” home requires perseverance, luck and a willingness to think small.
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Maya Vestal, 25, who works for a biotech company, took the plunge this month with her boyfriend, plunking down $585,000 for a 1,200-square-foot home near San Jose in a neighborhood she describes as “not great.”
Frankly, the three-bedroom, one-bath house doesn’t sound all that great either. Built in 1940, it needs about $50,000 worth of work including new plumbing, new wiring and a new kitchen, she figures. “The only thing we’re keeping are the floors, which are beautiful, original hardwood.”
Together, Vestal and her boyfriend, a 25-year-old city worker, earn more than $100,000 a year, but the new $3,800 monthly mortgage payments will eat up nearly 70 percent of the couple’s take-home pay.
“It’s a lot of money, and it’s really scary,” she said. “We really like to travel, and we probably won’t be able to do that so much.”
But with prices going up so rapidly and long-term interest rates lingering at their lowest levels in four decades, Vestal and her boyfriend didn’t want to risk waiting.
“We felt if prices or interest rates go up, we’ll be priced out of the market,” she said. “Even if rates went up half a percent we wouldn’t be able to afford a house.”
(Excerpt) Read more at msnbc.msn.com ...
Where I lived in Brooklyn, houses were around that price as of last year. Nevertheless 1. illegal aliens were stuffing eachother into the rentals and 2. Legal immigrants were stuffing two families into single family homes, kicking in $250,000 a piece to share a VERY SMALL row house.
"Not if the house appreciates 4k/month."
That is an unrealized gain. Means nothing until they sell. If they can't hold out until they sell, they are out of luck and a house. Try to hold it for a year then move out of state.
Prop 13 will not last forever. The socialist kooks and southern invaders of California would love a way to crash the housing market so the current residents leave and the new arrivals find cheap housing.
Re: The SUV bubble. Check out the prices for used Ford Expeditions on E-Bay. You can get a good used lo-milage Expedition for less than the cost of a Honda Civic in similar condition.
"Past Performance Does Not Guarantee Future Results"
--If the appreciation stops or slows down --If one of them loses their job --If their relationship hits the skids
All of which are all too probable, which is why I wouldn't do it.
LQ
Must be nice.
What they need is a better loan. $3,800/mo is $468,000 @ 8%. What did they do? Buy the house on a credit card?
Even first time buyers are able to get an adjustable at 4.125%. I just refinanced with a fixed payment for five years at 1.5%. Granted, that's a negative am. adjustable but since it keeps my cash flow way down and my house is appreciating at roughly $15,000 per month, I can well afford it.
I'm on the ground here in the bubble housing market.
A couple of things to note. To buy an average house where I live (south Orange County), costs about $690,000 for a 3br 1400 sq ft home, give or take. The type of people that are buying them now, are taking out interest only, negative amoritazaion loans. Basically, they are renting it from the bank.
There's a house for rent right now, for $2100 a month. There's also a house for sale across the street, for $669,000. They're exactly the same. Anyone that tells me that it's better to buy that house (which sold in 1998 for $236,000), than rent is crazy. Assuming 20% down, and 5.8% fixed, you're looking at double the cost to own. And that's after you plunk down $130,000. That's why most of the sheeple are getting interest only loans that eat up 60% or more of their take home pay.
Also, the reason, and only reason that home prices are as high as they are, are the incredibly lax lending standards, and ease in which those who need maximum credit, can obtain it.
The piper will have to be paid sometime. It is only a question of when, not if.
That helps when you go to sell the place down the road, but isn't much help in the meantime!
They could have rented a very nice apartment in the area for $1,800/month and put $2,000/month in savings. In five years they might actually be married and ready to sign up for a mortgage, and would have $120,000 + interest in savings to use as a down payment on the same house (which I predict will then be selling for about $360,000.) Over the life of the loan, they will pay 350K to 400K to the lender instead of the 1.2M they are going to get stuck paying under their current arrangement.
Incurring a huge debt just to get a phony tax break is not smart.
Right. At some point people are going to decide a place with fantastic economic opportunity, great weather 300+ days a year, the ability to get to the beach, mountains and/or desert within an hour, etc. are undesirable? I don't think so. We'll see!
My anemic IRA is just sad compared to my home which has tripled to around 450K in 4 years. If you know of any equities that I can turn a 5K down payment and 1300 a month (maybe 60K total) into nearly a half a million dollars in four years, while living in them let me know.
It must be a piti payment - principle, itnerest, taxes & insurance.
We just sold a house here in Orange County. During the process, we had an offer from a couple. The next day they withdrew the offer after the wife had a panic attack when she realized her mortgage/tax/insurance payment would be $4,500 per month.
That a good point except...if the folks who bought their CA homes for $200,000 ten years ago, who are selling them for $800,000 now, had thought that way a lot of them would not be retiring early!
Moved in April into a new home:
2700 sq.ft
4 bdrm + study
3 car attached garage
All Brick
140 x 70 lot
Nice features inside (silestone, whirlpool, gas fireplace, crown molding throughout, etc.)
25 minutes from work
less than an hour to wade fishing the surf
$201K.
I love Houston
Well at least she realized it before they moved in.
It is, but the loan is still at 8% which is way out of line.
Yep. Right after The Big One, or Vincente Fox makes "Los Angeles, Mexico" a reality.
My wife and I are willing to do just that! We just bought a shorefront place on Puget Sound and are bailing out of LA alltogether. Sold our investment property last week and our own house goes on the market this week. We just can't resist the idea of having our own beachfront place with zero mortgage payments... thanks to the gains from our stuff here in LA.
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