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.