Tuesday, May 20, 2008

The NAR can't do math


The Press Enterprise is reporting that housing affordability is soaring due to the rapid fall in prices brought on by the foreclosure crisis. Even so the IE still ranks as the 19th least affordable metro area (down from the 14th).

According to the report 57% of Riverside county households can afford the median entry level home of $244k. According to the article you need an income of $46k for qualify to buy that $244k house, assuming a 10% down payment and a 5.65% loan. These numbers come straight from the National Association of realtors by the way.

First of all, how many entry level buyers making $46k per year have $25k in the bank for that down payment? I’m sure a few do but most people I know making $46k per year can’t even afford to buy good beer. Second, where can you get a 5.65% loan? And finally how is buying a home that is 5.3 times your income a good idea. When did the National Association of Realtards start recommending spending 5.3 times your income.

When we bought our first home in 1988 our income was about $45k. The home (we just barely got into) cost $110k. Granted the interest rate was 10.5% for the first few years so the payments were higher than they would be today, but never the less we just made it. And after paying the mortgage and other bills we had very little left at the end of the month. Back then gas was a buck a gallon, a new car was $10k to $15k and you could fill up a shopping cart at Vons for $100. So tell me how is a person making $46k going to live if they buy a $244k home. After taxes they are probably bringing home around $3000 to $3200 per month The monthly payment with tax and insurance would run at least $1500 (assuming you could get a 5.65% loan and a low tax rate). That’s at least $500 a month more than my payment was back in 88. With the added expense of food, gas, clothing, utilities and such today there is NO WAY you can swing that on $46k per year unless you eat to ramen and walk to work. List your expenses and see if you can live on $3k per month

It's amazing that the NAR is still trying to get people to buy more than they can afford. Have they learned NOTHING? That sort of thinking is a large part of the reason we are in this mess. People should buy what they can afford with a safety factor for emergencies. The old 2.5 times your income is still a good number! Using that ratio if you make $46k, you should not spend more than $115k. We obviously still have a way to go.


12 comments:

Alida said...

Are you assuming that most home buyers are singles? I honestly think that if a couple is only making $46K, they shouldn't be buying a house but I am pretty sure that there are plenty of families in the IE where the husband and wife are each making more than $11 an hour.

Other than that, there are alot of places here in the IE that are really overpriced (in the middle of nowhere and no jobs in site) and I expect them to go down at least another year.

ButterMonkey said...

Dude, I hear ya. The math just doesn't work...especially when you're like us and daycare costs $1500/month.

I sure am glad to see prices slipping back into the $200,000's though. That just makes my heart full of glee. I'm hoping that my chosen neighborhood will get the damn message soon and head down into the $300,000's. Stubborn bastards. LOL!

Santa Ana River Rat said...

well people compare the current price to house price couple of years ago and jump at the chance of getting screwed again, this time slightly gentler than the last. NAR can argue inflation and etc etc but income versus expenditure ratio, like X pointed out, is still not in the favor of buyers out there. People need to change their attitude toward long and short term liabilities.

Sellin @ Da Drop said...

If you 'need' 2 incomes to support a mortgage then you should seriously reconsider buying now. They key is to buy when the monthly nut is do-able on 1 income. That would eliminate a hefty child care bill too. If you can't meet this criteria then it's time to evaluate your career decisions.

Bigdog said...

Not to change subjects
But I have been keeping my eye on the Eastvale area of Corona

I have not notice to many prices drops lately. But I spoke with a few realtors and friends that live in the area.

They say the flys in this area are bad in the summer.

Anyone know the scope on the area real well?

Terry said...

I live in Eastvale at the Homecoming Apartments. I moved here last Summer. I noticed these huge black flies and wondered how the hell they got in since there are screens on all the windows. Apparently every time I open the door, a few more would take up residence. I heard on another housing blog from someone who lives here that the flies are so bad in the summer that they can hardly use their pool. But, while using the apartment pool, I never noticed any.

I wouldn't say the flies are horrible, horrible. But, at least in my apartment, they were noticeable members of my household all summer. However, once I went on a major fly-swatting mission I was able to keep them under control until suddenly they just disappeared. I'm expecting their return soon. Hope that helps.

golfer_X said...

The flies in Eastvale, Mira Loma and Norco can be BAD. I used to work over there and some days the flies would be horrible. We also had problems with them finding their way into our shop. We would close up in the evening with no flies in the building and often times there would be twenty plus inside in the morning. I dunno how the suckers got in but we would spend the first 1/2 hour hunting then down. And christ, can they get big over there! Some of them things were as big as a nicklel.

WunderPit said...

I was with a youth group (drum corps, for anyone who knows what that is) that stayed in a Norco/Ontario high school two summers ago. There were so many nasty flys caught in the flypaper near where the food was served. One week later, a bunch of kids were sick from both ends. Coincidence?

Martin Burtin said...

I suppose some people bought homes in Eastvale with the idea that they could get a McMansion for "only" 630K or so. They would try to ignore the smell and the flies for a few years because by the end of the decade the whole valley would be built out and paved over and then they could flip their place for a tidy profit. Ooops...

Now they're 50% upside down, the smell is as ripe as ever, the cows ain't mov'n anytime soon 'cuz the valley ain't sell'n noth'n but milk and tainted beef. The flies flock into the houses and crawl around on the depressed home owners while they sleep, until they snap and beg to have their houses taken back by the banks. Hey Countrywide, come get your Jingle mail, complete with cow pie and flies!

Bigdog said...

So does this mean I should not buy in this area because the flies?

Sellin @ Da Drop said...

Did anyone bother researching the cow and fly situation before purchasing out here? When I bought back in the late 90s that was the first thing I did. Took a drive out in the Corona area (wheb Eastvale was just a baby) and as soon as I took a wiff and saw flies..I said hell no.

bolky said...

@bigdog
I have lived in Eastvale since 2003. Early on the smell was pretty bad and so were the flies. Now there are not that many flies and I cannot smell any cows. There are only 2 dairies left on Archibald and they will be gone next year because a business park/industrial building complex is going in there. Keep in mind many of the dairies that were once in Eastvale were in Orange County/LA County 40 years ago. They moved out here 40 years ago and now they are moving to the central valley. They will not always be here.

You might want to look at www.eastvaleresidents.com. They have forums there that are full of conversations between residents but they can only be accessed if you reside in Eastvale. However, you can read up on some local news and events. There is a video of a recent townhall meeting on that site that you can view where residents voiced their concerns and local updates are presented. This townhall occurs once every quarter and there are roughly 100 residents that show up. That goes to show how invloved Eastvale residents are in their community. This townhall meeting is like a city council meeting and how many city council meetings draw 100 residents? Eastvale is a very active community and many residents take pride in the area.

I challenge you to find a community that is as active as Eastvale anywhere in southern California.

Also, we are in the process of becoming a city. If everything goes as planned we will become a city by next July. You can go to www.eastvaleinc.org to read up on the incorporation process.

So I hope you do research on your own instead of listening to what someone thought of this area back in 1999.