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Wednesday, June 07, 2006
More DC Pictures
Three rowhouses for sale along Duncan Place in Washington, DC
All right... how about some photos depicting the alternatives to your photos of houses for sale? Post some photos of rental units. Either that, or you're suggesting people should be homeless...?
You are strongly suggesting that people don't buy homes to live in or as investment properties. That leaves 1) renting or 2) homelessness. Both are relevant to the discussion, actually.
"You are strongly suggesting that people don't buy homes to live in or as investment properties. That leaves 1) renting or 2) homelessness. Both are relevant to the discussion, actually"
If they live in a bubble market or if it does not make financial sense. What is NOT relevant is where I rent.
I lived 46 years inside the beltway, the last 13 in N. Arl. when we sold in 2003 the buyers stretched with a libor note back then and when it resets I don't know how they will be and that was 3 years ago. Prices will drop they did back in the early 90's even in toney N. Arl.
If you rent in an old apartment building for a fair rent, then you are getting what you pay for. A $1600 rent in any of the inner Beltway counties works out to about 1/3 of the median household income. This is the right historical range for a rent, so showing apartments for rent in this price area would hardly be very informative.
The prices for houses imply a monthly payment that is way outside the historical ratio to local median household income. Thus, it is informative to see the type of property you get for such exorbitant prices.
It is also interesting to see how many are for sale.
BTW- if David showed a bunch of apartments with "for rent" signs in front (and there are many in the DC area), I fail to see how this would be good for bubble deniers. It would just further show that there is plenty of housing in the DC area; the disconnect is with the price to own.
"In my case, I currently rent. My payments to housing would double to buy an equivalent condo in a worse location. By renting, me and the wife house ourselves in a good space in an awesome location for 15% of our gross income. "
"David the photos with all those for sale signs are very relevant to your blogsite. The photos of "pretty rowhouses with unique arch" or "Back of Archibald Walk" or "Browns Court" I don't see the point in you showing these photos."
They are not relevant to the housing market discussion. I just like showing interesting places in DC. :-)
I rent a trailer that has been added on to, it is actually large compared to newer condos and etc. I had a hard time with the "image" thing, until I realized that I can take trips, have money to spend and my bills are the same every month as in no increase due to rising valuations. Yes the "image" is wanting but the life is easy going. Go ahead and give me all your poision, rath and talk of dignity.
Keith, were you renting in the 1990s too? Probably because you thought it was financially better than buying than too? Looks like that would have been a mistake. Renting now is just another short term solution to a life long problem of housing.
"David the photos with all those for sale signs are very relevant to your blogsite. The photos of "pretty rowhouses with unique arch" or "Back of Archibald Walk" or "Browns Court" I don't see the point in you showing these photos."
Check out how much that "house" photographed on Archibald walk went for just this year... it's VERY relevant
Perhaps you can post a picture of property for sale and then a picture of a property for rent at an equivalent price. Assume 100% financing at 6.6% interest rates for comparison purposes. Actually, perhaps you should use 80% and 6.0% since so many home buyers are well funded with great credit.
The anti-rent people always seem to forget that very few people actually own a home, they rent from the bank. In addition to renting from the bank they have the priveledge of paying property taxes. Maybe we would be better off if like in many countries, you could not get a long-term loan for a house, you pay cash for it.
It would be wise to rent now as opposed to buy even if rent were higher than buying! It is better than being in the red with regards to equity in a big way. Very bad choices exist at 100k upside down on a house. I own 20 acres and a ranch house free and clear in san diego county so don't tell me I am proudly defending my rights to live in the ghetto. You are proudly defending your rights to have to over pay for place shit and sleep, which are really two of the best purposes any kind of dwelling serves.-
"Check back in December and let me know how it is going; by then you will be screwed to the walls at your home with no chance of leaving or renting for a positive cash flow."
Ok, so the collapse is going to happen by December. Let's check back and see who apologizes if the market is still fine.
Everyone knows that David runs a clean blog here. He deletes name-calling posts and those which contain unfounded accusations.
By asking for David to post photos of apartment buildings, I unleashed a wave of bitter name-calling and unfounded accusations. We just need to wait for David to log back in to delete the posts which violate his rules.... David?.... David?... He will abide by his own rules, I have faith in him. :)
"Ok, so the collapse is going to happen by December. Let's check back and see who apologizes if the market is still fine"
You either live in a non-bubble area, or you are oblivious to what is going on around you. Things are not fine when inventories are up 300-500% in many areas, and the head of the NAR pleads for the FED not to raise rates. This plea even appears more desparate from a man who wrote a book about how prices never go down. Please don't make me connect the dots for you. It is assumed that since you know how to turn on a computer and connect to the net, that you have enough sense to see what is going on around you.
" You either live in a non-bubble area, or you are oblivious to what is going on around you. Things are not fine when inventories are up 300-500% in many areas, and the head of the NAR pleads for the FED not to raise rates. This plea even appears more desparate from a man who wrote a book about how prices never go down. Please don't make me connect the dots for you. It is assumed that since you know how to turn on a computer and connect to the net, that you have enough sense to see what is going on around you. "
We'll see. You've been wrong about the "collapse" so far. I expect you'll continue to be wrong. I'll check back in in December.
Am I the only bubblehead unashamed to show my face or reveal my living circumstances?
There is no shame in being a bitter renter. We are what we are. We can either show it, or pretend to ourselves we are hiding it, which just makes us look silly.
Maybe this is off-topic, but I really love the DC area, and I don't even live there.
When I lived in Arlington, there a bit too many lawyers and law students for my taste, but a very enjoyable place nonetheless. Of course, I was young, single, and lived in a widow's basement at the time, but the weather was great, scenery nice, and except for the occasional drive-by murder, a pretty safe place to live.
I really liked the charm of some of the older row houses. I would be happy to buy/rent one of those.
Here is a recent article from the Washington (DC) Business Journal concerning first-time home buyers.
An excerpt: "The program is offered to full and part-time employees who are first-time home buyers making less than $75,000 in annual base pay and have completed at least one year of service to their company."
The full link: http://www.bizjournals.com/washington/stories/2006/06/05/daily33.html?hbx=e_du
In the city of Washington DC (not to be confused with Arlington, VA mentioned in my previous post), public financial assistance for housing is available to families of four with household incomes as low (or high, depending on your perspective) as $53,000.
Reporting facts about public and private assistance for housing in an expensive market doesn't negate the fact that many many people earn in excess of $100,000K in the same market.
Truthiness or Factiness? I pick Factiness, especially given the true definition of "truthiness". :-)
How many people is that 15%? 300,000? 400,000? Between Montgomery County, Arlington County, Alexandria City and County, and Washington DC, it must be at least 300,000 people. (I'm guessing, but my guess is based on a guess of 15%) In general, it is a high concenration of wealth. Fairfax County is one of the wealthiest areas in the entire country. Toss that into the "DC Metro Area" mix, and you've got even more people making six figures. In Fairfax, they probably have a lot of dual-100K income households.
Good point bryce, but your logic still doesnt hold true. Dual-100k families are very well off, even in this area. However, dual-100k would only get you an entry level home in a moderately decent area. So, are you seeing the problem here? The most wealthy families cant afford to be in wealthy areas because of the bubble. Me an my girlfriend, when we marry, will be one of the dual-100k families, with no kids. Yet we could not afford to buy a nice home in a nice area. This is the problem. Things are out of wack in this area. Bob
Your posts and profile are refreshing. Being successful financially is just one small aspect of life. I come up short in many areas and freely admit it.
I am a loser in many respects, but I happen to be well off financially. Big Deal. In the end, it matters not.
"Me an my girlfriend, when we marry, will be one of the dual-100k families, with no kids. Yet we could not afford to buy a nice home in a nice area. "
Yes you can. The only issue is saving up a down payment, which has always been an issue for first-time homebuyers. With 20% down, a mortgage on a $750k house should be no problem. That still buys plenty of house in the dc suburbs.
You folks making $200K combined family income just don't measure up, too poor. There is a reason the prices are so high. One of them being DC is so fabulous it costs to get your foot in the door. The other related issue stems from the need to keep out the undesirables. People making less than $200K/year should live in Baltimore or PG county and commute.
15% of people in DC metro make 100k a year? I doubt it.
I know one of the bubbleheads primary arguments is that housing costs have to go down because there have become too expensive for buyers, and I've noticed that Bubbleheads tend to underestimate the numbers of potential buyers by assuming that most people can't afford housing at present prices. I'll admit that housing is expensive, but there are a lot of weathy people in area who can afford to buy, and more than 15% of people in DC area make 100k. In fact, 15% would only cover the millionaires.
Yesterday Washington Biz Jour. published study that showed that about 15% of the DC metro population had net worth of at least $1 million--excluding value of primary residence.
"The greater Washington area, including the District of Columbia, and neighboring areas of Maryland and Virginia, had the highest U.S. median household income, at nearly $72,800, ahead of the San Francisco area at $71,201 and Boston at $63,958, according to the report from the Greater Washington Initiative, which cites data from the U.S. Census Bureau, the Bureau of Labor Statistics, market data firm Claritas Inc and other sources."
David says "District of Columbia, and neighboring areas of Maryland and Virginia, had the highest U.S. median household income, at nearly $72,800"
A person or couple makes 72.8K, what could he afford in the DC metro area? Maybe a condo? Less the 50% of the population can afford a decent place. Pretty sad:-(
So the median household income in the DC Metro area is almost $73,000. Which means half of the households make more than that amount. Which means David's assertion that only 15% of DC area residents make more than 100k seems to have been shot down.
And yes it does suck that not everyone can buy the house of their dreams as their first home. It's always been that way. And it makes people bitter and resentful at those who are able to afford such homes. And that explains a great deal of the postings on here.
How is making almost 3 times the average household income considered starting out? That is just a bizzare statement.
All of the stats quoting median incomes, etc, are for household not people. So if you look at the median household income for montgomery county, its around 75k, not sure of the exact digits. That is not per person, that is per household. This means there are not as many rich people as you think. My household income would be 200k well above the 75k yet I can afford to purchase most of the homes in this area, why, because they are inflated by poor lending practices and overstretched buyers. bob
You make alot of assumptions that I don't think are valid. Most of the people making that median income are probably already homeowners - assuming 70% homeownership rates.
They already own their home and are set or they have equity to assist with a trade-up.
The only difficulty, as I see it, is for those who never entered the market for whatever reason.
Even then, it would appear that 72K translates into about a 275K mortgage. Lots of "starter" homes in the suburbs (townhouses etc.) would be affordable. Sorry, no marble, hardwood, granite, subzero ...but you have to start somewhere.
I have a relative who makes in the 30's and she OWNS her townhouse.
These are household incomes not individual incomes.
Historically, lending practices were from 2.5 to 3 times annual income for homeloan approval. This would put the median loan at $182,000 to $218,400 based on these income figures. Granting a 20% down payment that would translate to median home values of $227,500 to $273,000.
Recent quarterly numbers from NAR for the Greater Washington metropolitan region put average sales prices (median information is not readily available to me) at $422,500. This is 5.8 times salary or 55% higher than the price historical lending norms would support.
How sensitive is the x-times earnings multiplier rule of thumb for lending to the actual interest rate?
"So the median household income in the DC Metro area is almost $73,000. Which means half of the households make more than that amount. Which means David's assertion that only 15% of DC area residents make more than 100k seems to have been shot down."
You should not confuse median household income with median worker income.
va_investor "You make alot of assumptions that I don't think are valid. Most of the people making that median income are probably already homeowners - assuming 70% homeownership rates."
I am well aware of all the facts that you have presented. It looks like you were making the assumptions that I was not aware of this. Anyway my statement "Less the 50% of the population can afford a decent place." still stands true. You mentions and income of 72K can get you a 275K townhouse. I have found a few 275K townhouses in the Metro area, although I am not too excited about them. My income is close to the median and if I were to buy a 275K townhouse I would be house poor. Knowing what my mortgage payments would be, if I were to have a major car repair bill, I would be in a world of hurt or accumulate that and other neccessities on to my credit card debt. I would not be able to save much on the company 401K plan. Imagine if I were a household at this income with 2 kids. Our family would be toast! An interesting statistic would be how many people could afford to buy the house they live in now at today's price.
WVU 84, What would the downpayment be in your hypothetical house? Are you talking about a 275K mortgage (which could be a 350k house with a downpayment) or a 275k house (which could be a 225k mortgage).
I think people with median incomes should be able to cover a 225k mortgage. That's about the same as rent on a 1 bd apt. in DC.
The downpayments make a big, big difference. I think any hypotheticals should assume a 20% downpayment. This is something that homeowners should manage to make (by saving in advance) or they aren't ready or qualified to be owners.
"An interesting statistic would be how many people could afford to buy the house they line in now..."
My point exactly. The relative cost of housing declines over time as a percent of income due to inflation. One locks-in housing in today's dollars as income increases down the road.
How many of our parents could now afford the house bought 30 or so years ago. This is precisely the point of buying when you are young!
d in dc Personally I don't see plunking several thousand dollars into a house as a good investment unless I knew I was going to be in this area for a long time. And a 225K mortage would be tight!
va_invester "This is precisely the point of buying when you are young!" I did buy a townhouse in 2000 for this very reason. A job loss caused me to sell the house in 2003. Fortunatley I made a nice profit, which I invested in mutual funds. However due to circumstances beyond my control I got thrown off the home ownership boat. I could find a boat to jump back on in Raleigh NC.
""District of Columbia, and neighboring areas of Maryland and Virginia, had the highest U.S. median household income, at nearly $72,800"
A person or couple makes 72.8K, what could he afford in the DC metro area? Maybe a condo? Less the 50% of the population can afford a decent place. Pretty sad:-( "
There are are a lot of very poor people living in very , shall we say ungentrified, neighborhoods, dragging that number down.
Losing your job and having no $ in reserve for this possibility IS your fault. I'd rather put no money down and have 6 mos. living expenses available than put 20% down to avoid PMI.
You'd buy if your job was guaranteed? Good luck with that. There are NO guarantee's in life. Prudence is your safety net.
Things would be "tight" if I bought. Well, you make your own priorities. Things are supposed to be "tight" when you are starting out.
But, you are not "starting out". You had it and lost it. And now you don't want things to be too "tight". Too bad, so sad.
va investor There you go again with the false assumptions. When I lost the job I had 1 year living expenses reserved.
"You had it and lost it" This is of no fault of my own.
Looking at your comments for several months I noticed sometimes you brag about your financial success or you are putting down other people who are not as fortunate as you. If you a going to another false conclusion that I might be jealous of you...NO WAY!
I'm am outraged that me and other hard working professionals are not able to afford decent housing. If you find any of this amusing than you have got issues and I see no point in corresponding with you.
wvu_84: "I'm am outraged that me and other hard working professionals are not able to afford decent housing."
There's "decent" housing out there that you can afford. The first thing you have to put out of your mind is that you can't afford it, because that is what is holding you back. You may not be able to buy in the same kind of neighborhood your folks bought in, but chances are (1) they didn't start off in that nice a neighborhood or (2) that that neighborhood wasn't all that nice when they did. Like anything in life, buying a place to live involves baby steps. Start off with a tiny efficiency in a nice neighborhood, or a delapidated row house in a not-so-nice neighborhood. Experience what is feels like to actually own where you live and the peace of knowing that no one can put you out from it ever. Learn what it feels like to want to fix up your digs. Become a homeowner. With time, and work, you'll eventually be where you want to be ... It'll come faster than you ever imagined and you'll appreciate it all the more because of your having at one time incorrectly thought you could never have it. Baby steps ... and determination, that's all it takes. ... And getting over the incorrect thought that you can't afford "decent" housing. You'll make it decent housing when you own it. It's not like renting where what you move into is what you move out of. Good luck!
Lance - Lifestyle coach! Wow, your knowledgable, gentle touch just wants me to fork out $300K for a house in the Anacostia slum - the American dream!
Thank you, Lance. I can listen to you and ignore all those Wall Street and housing RE executives who warn against buying in the current housing market. You're a sweetheart!
Two rowhouses next to each for sale.
Three signs needed to sell one rowhouse
Pretty rowhouses with unique arch
Back of Archibald Walk in Washington, DC
how about some photos of your apartment building?
ReplyDeletebryce
it is not relevant.
ReplyDeleteNo? Not even if renting an apartment is the sound logical alternative to buying a home? That is your premise.
ReplyDeleteSince that is the case, lets get a look at the logical alternative that you are advocating.
bryce
What is not relevant is the building I live in.
ReplyDeleteRenting in an alternative to buying.
BERNANKE TO DC HOUSING MARKET: "DROP DEAD"
ReplyDelete"Renting in an alternative to buying."
ReplyDeleteAll right... how about some photos depicting the alternatives to your photos of houses for sale? Post some photos of rental units. Either that, or you're suggesting people should be homeless...?
You are strongly suggesting that people don't buy homes to live in or as investment properties. That leaves 1) renting or 2) homelessness. Both are relevant to the discussion, actually.
bryce
"You are strongly suggesting that people don't buy homes to live in or as investment properties. That leaves 1) renting or 2) homelessness. Both are relevant to the discussion, actually"
ReplyDeleteIf they live in a bubble market or if it does not make financial sense. What is NOT relevant is where I rent.
I lived 46 years inside the beltway, the last 13 in N. Arl. when we sold in 2003 the buyers stretched with a libor note back then and when it resets I don't know how they will be and that was 3 years ago. Prices will drop they did back in the early 90's even in toney N. Arl.
ReplyDeleteIf you rent in an old apartment building for a fair rent, then you are getting what you pay for. A $1600 rent in any of the inner Beltway counties works out to about 1/3 of the median household income. This is the right historical range for a rent, so showing apartments for rent in this price area would hardly be very informative.
ReplyDeleteThe prices for houses imply a monthly payment that is way outside the historical ratio to local median household income. Thus, it is informative to see the type of property you get for such exorbitant prices.
It is also interesting to see how many are for sale.
BTW- if David showed a bunch of apartments with "for rent" signs in front (and there are many in the DC area), I fail to see how this would be good for bubble deniers. It would just further show that there is plenty of housing in the DC area; the disconnect is with the price to own.
A Redskins fan
"In my case, I currently rent. My payments to housing would double to buy an equivalent condo in a worse location. By renting, me and the wife house ourselves in a good space in an awesome location for 15% of our gross income. "
ReplyDeleteAnd 10% of your dignity.
"David the photos with all those for sale signs are very relevant to your blogsite. The photos of "pretty rowhouses with unique arch" or "Back of Archibald Walk" or "Browns Court" I don't see the point in you showing these photos."
ReplyDeleteThey are not relevant to the housing market discussion. I just like showing interesting places in DC. :-)
I rent a trailer that has been added on to, it is actually large compared to newer condos and etc. I had a hard time with the "image" thing, until I realized that I can take trips, have money to spend and my bills are the same every month as in no increase due to rising valuations. Yes the "image" is wanting but the life is easy going. Go ahead and give me all your poision, rath and talk of dignity.
ReplyDeleteKeith, were you renting in the 1990s too? Probably because you thought it was financially better than buying than too? Looks like that would have been a mistake. Renting now is just another short term solution to a life long problem of housing.
ReplyDeleteHa ha. What a great meltdown.
ReplyDeleteJerkstore
"David the photos with all those for sale signs are very relevant to your blogsite. The photos of "pretty rowhouses with unique arch" or "Back of Archibald Walk" or "Browns Court" I don't see the point in you showing these photos."
ReplyDeleteCheck out how much that "house" photographed on Archibald walk went for just this year... it's VERY relevant
David,
ReplyDeletePerhaps you can post a picture of property for sale and then a picture of a property for rent at an equivalent price. Assume 100% financing at 6.6% interest rates for comparison purposes. Actually, perhaps you should use 80% and 6.0% since so many home buyers are well funded with great credit.
My $0.02.
"If they live in a bubble market or if it does not make financial sense. What is NOT relevant is where I rent."
ReplyDeleteNow I'm not talking about where you rent, I'm talking about rentals in general. Post some logical alternatives to buying homes in a bubble market.
bryce
The anti-rent people always seem to forget that very few people actually own a home, they rent from the bank. In addition to renting from the bank they have the priveledge of paying property taxes. Maybe we would be better off if like in many countries, you could not get a long-term loan for a house, you pay cash for it.
ReplyDeleteIt would be wise to rent now as opposed to buy even if rent were higher than buying! It is better than being in the red with regards to equity in a big way. Very bad choices exist at 100k upside down on a house. I own 20 acres and a ranch house free and clear in san diego county so don't tell me I am proudly defending my rights to live in the ghetto. You are proudly defending your rights to have to over pay for place shit and sleep, which are really two of the best purposes any kind of dwelling serves.-
ReplyDelete"Check back in December and let me know how it is going; by then you will be screwed to the walls at your home with no chance of leaving or renting for a positive cash flow."
ReplyDeleteOk, so the collapse is going to happen by December. Let's check back and see who apologizes if the market is still fine.
Everyone knows that David runs a clean blog here. He deletes name-calling posts and those which contain unfounded accusations.
ReplyDeleteBy asking for David to post photos of apartment buildings, I unleashed a wave of bitter name-calling and unfounded accusations. We just need to wait for David to log back in to delete the posts which violate his rules.... David?.... David?... He will abide by his own rules, I have faith in him. :)
bryce
"Ok, so the collapse is going to happen by December. Let's check back and see who apologizes if the market is still fine"
ReplyDeleteYou either live in a non-bubble area, or you are oblivious to what is going on around you. Things are not fine when inventories are up 300-500% in many areas, and the head of the NAR pleads for the FED not to raise rates. This plea even appears more desparate from a man who wrote a book about how prices never go down. Please don't make me connect the dots for you. It is assumed that since you know how to turn on a computer and connect to the net, that you have enough sense to see what is going on around you.
I deleted MANY comments.
ReplyDeletePlease follow Blog rules:
http://bubblemeter.blogspot.com/2006/05/blog-rules.html
Thanks.
This message applies to BOTH housingheads, bubbleheads and others.
ReplyDelete"
ReplyDeleteYou either live in a non-bubble area, or you are oblivious to what is going on around you. Things are not fine when inventories are up 300-500% in many areas, and the head of the NAR pleads for the FED not to raise rates. This plea even appears more desparate from a man who wrote a book about how prices never go down. Please don't make me connect the dots for you. It is assumed that since you know how to turn on a computer and connect to the net, that you have enough sense to see what is going on around you. "
We'll see. You've been wrong about the "collapse" so far. I expect you'll continue to be wrong. I'll check back in in December.
Am I the only bubblehead unashamed to show my face or reveal my living circumstances?
ReplyDeleteThere is no shame in being a bitter renter. We are what we are. We can either show it, or pretend to ourselves we are hiding it, which just makes us look silly.
Maybe this is off-topic, but I really love the DC area, and I don't even live there.
ReplyDeleteWhen I lived in Arlington, there a bit too many lawyers and law students for my taste, but a very enjoyable place nonetheless. Of course, I was young, single, and lived in a widow's basement at the time, but the weather was great, scenery nice, and except for the occasional drive-by murder, a pretty safe place to live.
I really liked the charm of some of the older row houses. I would be happy to buy/rent one of those.
Here is a recent article from the Washington (DC) Business Journal concerning first-time home buyers.
ReplyDeleteAn excerpt: "The program is offered to full and part-time employees who are first-time home buyers making less than $75,000 in annual base pay and have completed at least one year of service to their company."
The full link:
http://www.bizjournals.com/washington/stories/2006/06/05/daily33.html?hbx=e_du
bryce
In the city of Washington DC (not to be confused with Arlington, VA mentioned in my previous post), public financial assistance for housing is available to families of four with household incomes as low (or high, depending on your perspective) as $53,000.
ReplyDeletebryce
Wait, weren't we praising all those GS-15's and career SES's who make $140,000 just a few short weeks ago? Wha'appen?
ReplyDeleteJerkstore
Reporting facts about public and private assistance for housing in an expensive market doesn't negate the fact that many many people earn in excess of $100,000K in the same market.
ReplyDeleteTruthiness or Factiness? I pick Factiness, especially given the true definition of "truthiness". :-)
bryce
"n an expensive market doesn't negate the fact that many many people earn in excess of $100,000K"
ReplyDeleteWhat percentage of people earn 100K?
15% at most
How many people is that 15%? 300,000? 400,000? Between Montgomery County, Arlington County, Alexandria City and County, and Washington DC, it must be at least 300,000 people. (I'm guessing, but my guess is based on a guess of 15%) In general, it is a high concenration of wealth. Fairfax County is one of the wealthiest areas in the entire country. Toss that into the "DC Metro Area" mix, and you've got even more people making six figures. In Fairfax, they probably have a lot of dual-100K income households.
ReplyDeletebryce
Good point bryce, but your logic still doesnt hold true. Dual-100k families are very well off, even in this area. However, dual-100k would only get you an entry level home in a moderately decent area. So, are you seeing the problem here? The most wealthy families cant afford to be in wealthy areas because of the bubble. Me an my girlfriend, when we marry, will be one of the dual-100k families, with no kids. Yet we could not afford to buy a nice home in a nice area. This is the problem. Things are out of wack in this area.
ReplyDeleteBob
surfer-x,
ReplyDeleteYour posts and profile are refreshing. Being successful financially is just one small aspect of life. I come up short in many areas and freely admit it.
I am a loser in many respects, but I happen to be well off financially. Big Deal. In the end, it matters not.
Today in the WaPo, there is an article about condo projects being cancelled. A couple of burb buildings will be built, but will be rentals.
ReplyDelete"Me an my girlfriend, when we marry, will be one of the dual-100k families, with no kids. Yet we could not afford to buy a nice home in a nice area. "
ReplyDeleteYes you can. The only issue is saving up a down payment, which has always been an issue for first-time homebuyers. With 20% down, a mortgage on a $750k house should be no problem. That still buys plenty of house in the dc suburbs.
anonymous 5:40 AM,
ReplyDeleteObviously, you have missed my point.
Bob
"nice home in nice area"
ReplyDeleteWhat about the concept of starting-out?
You folks making $200K combined family income just don't measure up, too poor. There is a reason the prices are so high. One of them being DC is so fabulous it costs to get your foot in the door. The other related issue stems from the need to keep out the undesirables. People making less than $200K/year should live in Baltimore or PG county and commute.
ReplyDelete15% of people in DC metro make 100k a year? I doubt it.
ReplyDeleteI know one of the bubbleheads primary arguments is that housing costs have to go down because there have become too expensive for buyers, and I've noticed that Bubbleheads tend to underestimate the numbers of potential buyers by assuming that most people can't afford housing at present prices. I'll admit that housing is expensive, but there are a lot of weathy people in area who can afford to buy, and more than 15% of people in DC area make 100k. In fact, 15% would only cover the millionaires.
Yesterday Washington Biz Jour. published study that showed that about 15% of the DC metro population had net worth of at least $1 million--excluding value of primary residence.
http://washington.bizjournals.com/washington/stories/2006/06/05/daily27.html
Just today Wash Post reported that median income in DC area is in excess of 70k.
http://www.washingtonpost.com/wp-dyn/content/article/2006/06/08/AR2006060800133.html
"The greater Washington area, including the District of Columbia, and neighboring areas of Maryland and Virginia, had the highest U.S. median household income, at nearly $72,800, ahead of the San Francisco area at $71,201 and Boston at $63,958, according to the report from the Greater Washington Initiative, which cites data from the U.S.
ReplyDeleteCensus Bureau, the Bureau of Labor Statistics, market data firm Claritas Inc and other sources."
Source: http://news.yahoo.com/s/nm/20060608/ts_nm/economy_washington_dc
David says
ReplyDelete"District of Columbia, and neighboring areas of Maryland and Virginia, had the highest U.S. median household income, at nearly $72,800"
A person or couple makes 72.8K, what could he afford in the DC metro area? Maybe a condo? Less the 50% of the population can afford a decent place. Pretty sad:-(
So the median household income in the DC Metro area is almost $73,000. Which means half of the households make more than that amount. Which means David's assertion that only 15% of DC area residents make more than 100k seems to have been shot down.
ReplyDeleteAnd yes it does suck that not everyone can buy the house of their dreams as their first home. It's always been that way. And it makes people bitter and resentful at those who are able to afford such homes. And that explains a great deal of the postings on here.
va_investor said... "starting out"
ReplyDeleteHow is making almost 3 times the average household income considered starting out? That is just a bizzare statement.
All of the stats quoting median incomes, etc, are for household not people. So if you look at the median household income for montgomery county, its around 75k, not sure of the exact digits. That is not per person, that is per household. This means there are not as many rich people as you think. My household income would be 200k well above the 75k yet I can afford to purchase most of the homes in this area, why, because they are inflated by poor lending practices and overstretched buyers.
bob
wvu_84,
ReplyDeleteYou make alot of assumptions that I don't think are valid. Most of the people making that median income are probably already homeowners - assuming 70% homeownership rates.
They already own their home and are set or they have equity to assist with a trade-up.
The only difficulty, as I see it, is for those who never entered the market for whatever reason.
Even then, it would appear that 72K translates into about a 275K mortgage. Lots of "starter" homes in the suburbs (townhouses etc.) would be affordable. Sorry, no marble, hardwood, granite, subzero ...but you have to start somewhere.
I have a relative who makes in the 30's and she OWNS her townhouse.
A couple of observations.
ReplyDeleteThese are household incomes not individual incomes.
Historically, lending practices were from 2.5 to 3 times annual income for homeloan approval. This would put the median loan at $182,000 to $218,400 based on these income figures. Granting a 20% down payment that would translate to median home values of $227,500 to $273,000.
Recent quarterly numbers from NAR for the Greater Washington metropolitan region put average sales prices (median information is not readily available to me) at $422,500. This is 5.8 times salary or 55% higher than the price historical lending norms would support.
How sensitive is the x-times earnings multiplier rule of thumb for lending to the actual interest rate?
My $0.02.
fritz,
ReplyDelete"So the median household income in the DC Metro area is almost $73,000. Which means half of the households make more than that amount. Which means David's assertion that only 15% of DC area residents make more than 100k seems to have been shot down."
You should not confuse median household income with median worker income.
va_investor
ReplyDelete"You make alot of assumptions that I don't think are valid. Most of the people making that median income are probably already homeowners - assuming 70% homeownership rates."
I am well aware of all the facts that you have presented. It looks like you were making the assumptions that I was not aware of this. Anyway my statement
"Less the 50% of the population can afford a decent place." still stands true. You mentions and income of 72K can get you a 275K townhouse. I have found a few 275K townhouses in the Metro area, although I am not too excited about them. My income is close to the median and if I were to buy a 275K townhouse I would be house poor. Knowing what my mortgage payments would be, if I were to have a major car repair bill, I would be in a world of hurt or accumulate that and other neccessities on to my credit card debt. I would not be able to save much on the company 401K plan. Imagine if I were a household at this income with 2 kids. Our family would be toast! An interesting statistic would be how many people could afford to buy the house they live in now at today's price.
WVU 84,
ReplyDeleteWhat would the downpayment be in your hypothetical house? Are you talking about a 275K mortgage (which could be a 350k house with a downpayment) or a 275k house (which could be a 225k mortgage).
I think people with median incomes should be able to cover a 225k mortgage. That's about the same as rent on a 1 bd apt. in DC.
The downpayments make a big, big difference. I think any hypotheticals should assume a 20% downpayment. This is something that homeowners should manage to make (by saving in advance) or they aren't ready or qualified to be owners.
"An interesting statistic would be how many people could afford to buy the house they line in now..."
ReplyDeleteMy point exactly. The relative cost of housing declines over time as a percent of income due to inflation. One locks-in housing in today's dollars as income increases down the road.
How many of our parents could now afford the house bought 30 or so years ago. This is precisely the point of buying when you are young!
d in dc
ReplyDeletePersonally I don't see plunking several thousand dollars into a house as a good investment unless I knew I was going to be in this area for a long time. And a 225K mortage would be tight!
va_invester
"This is precisely the point of buying when you are young!"
I did buy a townhouse in 2000 for this very reason. A job loss caused me to sell the house in 2003. Fortunatley I made a nice profit, which I invested in mutual funds. However due to circumstances beyond my control I got thrown off the home ownership boat. I could find a boat to jump back on in Raleigh NC.
""District of Columbia, and neighboring areas of Maryland and Virginia, had the highest U.S. median household income, at nearly $72,800"
ReplyDeleteA person or couple makes 72.8K, what could he afford in the DC metro area? Maybe a condo? Less the 50% of the population can afford a decent place. Pretty sad:-( "
There are are a lot of very poor people living in very , shall we say ungentrified, neighborhoods, dragging that number down.
wvu_84,
ReplyDeleteLosing your job and having no $ in reserve for this possibility IS your fault. I'd rather put no money down and have 6 mos. living expenses available than put 20% down to avoid PMI.
You'd buy if your job was guaranteed? Good luck with that. There are NO guarantee's in life. Prudence is your safety net.
Things would be "tight" if I bought. Well, you make your own priorities. Things are supposed to be "tight" when you are starting out.
But, you are not "starting out". You had it and lost it. And now you don't want things to be too "tight". Too bad, so sad.
va investor
ReplyDeleteThere you go again with the false assumptions. When I lost the job I had 1 year living expenses reserved.
"You had it and lost it"
This is of no fault of my own.
Looking at your comments for several months I noticed sometimes you brag about your financial success or you are putting down other people who are not as fortunate as you. If you a going to another false conclusion that I might be jealous of you...NO WAY!
I'm am outraged that me and other hard working professionals are not able to afford decent housing. If you find any of this amusing than you have got issues and I see no point in corresponding with you.
wvu_84: "I'm am outraged that me and other hard working professionals are not able to afford decent housing."
ReplyDeleteThere's "decent" housing out there that you can afford. The first thing you have to put out of your mind is that you can't afford it, because that is what is holding you back. You may not be able to buy in the same kind of neighborhood your folks bought in, but chances are (1) they didn't start off in that nice a neighborhood or (2) that that neighborhood wasn't all that nice when they did. Like anything in life, buying a place to live involves baby steps. Start off with a tiny efficiency in a nice neighborhood, or a delapidated row house in a not-so-nice neighborhood. Experience what is feels like to actually own where you live and the peace of knowing that no one can put you out from it ever. Learn what it feels like to want to fix up your digs. Become a homeowner. With time, and work, you'll eventually be where you want to be ... It'll come faster than you ever imagined and you'll appreciate it all the more because of your having at one time incorrectly thought you could never have it. Baby steps ... and determination, that's all it takes. ... And getting over the incorrect thought that you can't afford "decent" housing. You'll make it decent housing when you own it. It's not like renting where what you move into is what you move out of. Good luck!
Lance - Lifestyle coach! Wow, your knowledgable, gentle touch just wants me to fork out $300K for a house in the Anacostia slum - the American dream!
ReplyDeleteThank you, Lance. I can listen to you and ignore all those Wall Street and housing RE executives who warn against buying in the current housing market. You're a sweetheart!