The whole housing situation makes me depressed. Not so much for downsizing – we at least have a house! ( although in a ‘fly-over’ state, which definitely has not appreciated to keep up with other locations). More depressed, for my youngest, who is NOT a techie in a very tech area. I read recently that the AVERAGE cost of a house there was $960k! (I’m guessing the ‘average’ house in that location is about 1200 -1400 SF).
I was just thinking that while our first mortgage was closer to 14%, (and later refinanced for just under 10%), the cost of our first house was only about 2.5x my annual salary. The cost of a “below average” house for my youngest is about 10-11x the annual salary! I do not see how they can possibly make it work longer term. Move? She loves the area, has family nearby, and has also made numerous professional connections, in a field that could easily be hit with a recession (so a network can be critical). SIGH.
Not to derail this too much (although it is the cafe ; )), my D’s cohorts were actively turning down job offers in HCL areas this hiring cycle. The salary difference were basically nonexistent and quality of life was a big consideration.
Probably is different if that’s where you have grown up, although H and I moved out of the Northeast urban areas as soon as we were able. We were able to buy our first house before we got married. A 4 bed/2 1/2 bath 2,000 sq ft colonial for $140K ; ).
A rule of thumb used to be that you shouldn’t buy a house that costs more than 3x your annual earning (unless you have lots of other liquid assets, of course). Housing bubbles are created when lots of existing homeowners with large amount of equity are able to trade up for bigger and/or better houses. First time home buyers don’t have that option, and that’s what ultimately will cause the bubbles to burst, because somebodies have to be able to buy those entry-level houses for the housing market to remain stable.
Just a caution. Places that used to be lower COL areas….some no longer are. Phoenix is a good example. 10 years ago, houses were able to be purchased for a reasonable price. In looking recently, even smaller houses were north of $500,000. Even many townhouses were higher.
So…the good news for those folks looking in now lower COL areas…is they are now low. So buy now if you can. Family member here wishes they had bought 10 years ago…but absolutely dodnt have the down payment at that time.
Corporations (Mainly Banks) were the leading cause of the Housing Crash in 2008. Then all of a sudden there was too much inventory in houses. It took years to get through that inventory. During that time there wasn’t enough work for the workers in housing construction so those workers left the industry. As housing rebounded builders couldn’t find workers. Put that together with the increased costs from the pandemic shutdowns and Housing has gone through the roof.
But to make matters worse Corporations saw an opportunity to purchase homes and either resell at a later date or rent them out. This has led to housing costs going through the roof. This doesn’t affect most parents in this forum. Most of us bought homes many years ago and have refinanced them at cheap interest rates. Some of us are even done paying a mortgage. This mainly affects the younger people starting their lives on their own. Cost of homes are crazy. Rents are going up big time. But all I hear is well these young people all want things that are too nice. It is so easy to blame the individual instead of the system that benefits most of us.
My brother and SIL relocated last summer from a central California city (they sold their home) to Cour d’Alene, Idaho where their son and his family have lived for 6 plus years. My brother left a high stress job as a plant manager and took a job working in a different kind of plant in Idaho. My brother said that when they first moved last summer the people there were not friendly when they found out they moved from California. This area of Idaho is not happy about the influx of people from California that has driven up their housing prices and brought their politics with them. As an aside my brother and nephew are both pretty conservative.
Too much stimulus? Not for the individual. A family of 4 if there were not making too much money got a total of $11,400 in stimulus checks. And possibly some extra unemployment benefits if they lost their job. Somehow I don’t think that caused homes to increase 50-100%.
But if you would like to talk about stimulus let’s talk about all the PPP loans that have been forgiven now for companies that lost little to no business during the pandemic. Plenty of companies benefited from PPP loans that in the end didn’t need them.
When we purchased our house (1400 sq. ft with a full but unfinished basement), we figured by the time we could afford to upgrade we wouldn’t need to. We’re now empty nesters with our youngest launching in a year or so. It’s proven to be true. Our house will be paid off in a couple years or so an we’re almost done getting it the way we want it. We don’t live in a vacation spot but we live in a good place that we’re comfortable with. It has good medical facilities around when we need them. One problem with moving is that you have to be able to afford it’s replacement. Getting top dollar for your home is great until everyone else wants top dollar for theirs too.
For some kids, not all. I know plenty of kids who make decent income, no or low debt, but still don’t have the money to buy. Most kids I know who own had help from relatives or were lucky enough to get very high paying jobs right out of college…
@sushiritto well I won’t be moving to Boise then. Most Californians I know are very friendly nice people. What really turned me off was how that lady was turned down for volunteering because she was from California (or it seemed like she was). Doesn’t speak well of the non-profit. They should be glad she wants to volunteer to make the community a better place. I kind of get where the natives are coming from, but it doesn’t make them look any better to be so hostile to outsiders…
H had a co-worker who lost his house back in '08, but it was a case of living beyond their means. They bought a house they couldn’t afford. It was a 3,000 square foot home with 5 bedrooms. They only had two kids. We always bought way less then we could afford. I don’t mean to criticize other people and their finances, but this person admitted that they had lived beyond their means…
This article discusses how institutional investors are getting priced out of the market in some areas, including San Diego County - the house prices are so high that they wouldn’t get a return on their investments. It might help explain why there are rising prices and stiff competition in areas that didn’t used to have issues.
I think there are kids like the kids of some of the posters here who could afford a house even in a high COL area. (ShawSon is likely to fall into that category – he and his fiancee were visiting Portland, OR last winter and thought, “This big house is $900K. We should just buy it.” Almost like going to Costco and seeing a great price on something you don’t quite need but can’t pass up because the price is so ridiculous. They didn’t as they had not been together that long, but that would not have been any stretch and seemed so inexpensive to them given Bay Area prices.) For others, not so easy without significant parental help. We are likely to need to help ShawD when she is ready.
If you downsize from a non-California state, you may find people friendly to the idea that “well glad to hear you’re NOT from California”. Heck that was the case for us, when we moved from NY —> CO in 1993. Even back then there was a resentment (maybe justified, maybe not) about CA folks causing increased home prices.
We can’t afford to help our kids, so I’ll guess they’ll have to do it on their own. Oh well, we paid for college for them and that’s more then enough…
Getting back to downsizing…I had a co-worker who just downsized. Her husband passed away suddenly, so she moved to Arizona to a retirement community. She loves it and I think she was ready for a fresh start!
