I found this chart that was just put out: http://www.rentseeker.ca/blog/wp-co...he-Salary-and-Income-Needed-by-RentSeeker.jpg It shows the average cost of a house in the major North American cities, and the corresponding income you would need to afford a specific amount. Some interesting take-aways: - Americans can't bitch about home prices. Holy shit, the cheapest city in Canada has house prices that double some US cities. - The overall insane pricing of housing in general in Canada. - I'm unclear how they calculated required income, because it seems low. According to this chart I can afford a half-million dollar house, which would be lunacy. The mortgage on that thing would be like $3k a month. It also ties in with an article on renting/finding rental places, which is equally as difficult. Personally the last two cities I've lived in I had to purchase a house simply because the mortgage was significantly cheaper than rent. Focus: Discuss the article, and maybe the housing markets you've experienced. Alt Focus: House shopping, apartment shopping, renting/buying horror stories.
I'm calling bullshit on this chart immediately. You're telling me that there happens to be a city named Boston, located exactly where St Louis is, that has the exact same average housing cost as Boston, Massachusetts? And that there's a Saratoga in Southern California where the median home price is nearly $2.5 Million (are you sure you don't mean the Saratoga, CA that is a suburb of San Jose with under 30K people)?
Yeah, I don't see it. I bought a $200K house which the chart says you can do on $35K a year? Uh....I guess it's possible...if you don't have water, electricity, cable, a car, or eat. I was on a 20 year contract and the payments were $1800 a month (PITI). When your take home is about $2K a month that's pretty hard to swing.
I'm going to call bullshit too. How much does 'average' cost of a house even tell you? For Jacksonville it says $210k. Some of the richest people in the world live in the Ponte Vedra area, and by the city Yacht Club. You can get some rinky dink shit box for $50k if you just want a house. Take the Yacht Club area. A house there that costs $4 million will cost around $500k less than two miles away. Chicago is another area that is relatively 'cheap'. I'm sure a house in the ghetto isn't a bank buster, but you might want to live somewhere you don't risk getting shot at on a regular basis. It's not as brutal as some of those places in California, but that's not a low cost city.
What I don't understand is how ANYONE affords a house anymore. My bread and butter for my adult life has been residential housing. In Calgary, during the summer of 2007, the market spiked. We were seeing new homes go up in price an average of $30,000 per month for almost seven months. The same thing happened when I moved to Winnipeg in the summer of 2010. It's very difficult to find a house for under $300k anywhere. You probably can't do it in Calgary, even if you're willing to live in a collapsing shithole. So that means a new couple just starting out in life has to come up with a minimum of $15,000 for a down payment, although ideally you want at least $60,000 because then you avoid the massive insurance policy you have to take out on the mortgage. Who the hell can buy that? Because let me tell you...they are. The tract home builders couldn't build them fast enough. One interesting thing I saw was the demographics. The tract home guys who sold entry level two stories in the new subdivisions? The ones essentially made out of toothpicks and drywall, where you can hear the buzzer on your neighbour's dryer go off from the basement of your house? Not a single buyer had a typical English surname. All the homes were being sold to Asian or Indian families. It was such a trend that several of the big home builders started designing their kitchens with a "spice kitchen," which is a second kitchen that has hardcore ventilation that's directly behind the actual kitchen. Why? Because the smell of cooking curries was hurting the properties during resale, so families started looking for alternatives that let them cook their ethnic food without devaluing their property. Now, the 4,000 square foot mansions that sold on the 1.5 acre lots just outside of town? The ones that went for +1million? Those guys went exclusively to Canadian families. Or at least families with stereotypical names of settlers in the area. It wasn't too often a Wong or a Singh purchased one of the custom houses, although it did happen from time to time. It's interesting to me what the demographics these house prices are at will cause in the future.
Yeah...I don't understand where they got this data. The average house in my city is LOW. I suspect that's the same case across the board. Maybe if they're looking at an older home in a nicer suburb...or a brand new house an hour out from town...that's accurate. Where I live you really can't find anything less than $350,000. And that's getting you a 3 bed/2 bath that's < 2,000 square ft. And most likely needs some work.
The part I find most interesting about the chart is the income to home price calculation. I mean, I guess that yes you could technically afford it at those incomes but would you want to? Maybe this chart forgets to include taxes, insurance, car payments, electricity, cable, water/sewer, cell phone, groceries, annual maintenance. It's no surprise that this is from a real estate publication. I really wish they understood how toxic these articles are to their marketplace. Pushing people into financial transactions they cannot afford to bump up sales prices never works out well, we learned that in 2008. ALT FOCUS: I find realtors to be in a bit of a paradoxical position. The only thing keeping them from being fully automated are the MLS system controlled by realtors and the fact that home owners can't be bothered to show their own house. I am of the opinion that realtors are WAY overpaid. I think there commissions should be cut in half for the limited amount of work they do. In my case, I did the home searching, called her and told her to set up a showing for the exact address and we would look. When we got to the house she didn't show it, she just stood to the side and let us look. There was no selling involved and no calculation of comps or discussion of offer prices....I did all of that. When my wife and I went to make a written offer, the co-owner of the realty office said the offer was too low and I was wasting my time. I remember telling him I disagreed and that the house was only worth what someone was willing to pay. He countered that house prices were going up a thousand dollars a day in this neighborhood and I better get in now. I asked him if he realized that that would mean that home prices in the neighborhood would double in a single year if that were true. He said yes, that was really happening. I told him that I had a really hard time taking financial advice seriously from anyone who would wear a bright red shirt with a suit and we left the conversation at that. All the same, I thanked him for his advice and got up to leave, he still had the audacity to ask if I was going to make a higher offer or an offer at all. I told him I wouldn't be overpaying for anything that day and I also wouldn't waste any more of his valuable time or my own. My realtor was pissed, the listing realtor was pissed and I told them both that they should limit their dealings with the owner of that realty shop because he was a moron who had no concept of money, finance or economics. They asked me if I would consider making the offer I wanted, I agreed and it was accepted immediately by the owner. I likely could have low balled them even further but I figured at the time that more than 20% below asking would be taken as an insult, I didn't realize that the guy worked for Lockheed Martin and they were paying moving expenses to include any loss on real estate. The closing turned into it's own fiasco which is a whole separate story and I never ended up closing on that particular house.
One of the things that annoys me about the US market is the shake down you get from the government because of the endless loopholes and low income tax rates. Instead they just come up with ways to make taxes less visible because at the current rates some of the communities can't afford jack. A guy I worked with in Milwaukee was building a home and had to pay $15k for a home inspector to make sure it was up to code. That was one of many fees. $15k to go in and look it over. That's not an equitable fee, that's a shake down. I can't remember which one it was, but in one of the freakonomics books they analyzed the value real estate agents add to a home seller's transaction and determined it was basically zero. You're better off selling yourself unless you just don't want to deal with the hassle.
That's the thing...unless you specifically have a buying agent, the selling/listing agent is an agent for the seller and looks out for the seller's interest, not yours. It's kind of shady when they're representing both the buyer and seller because you really can't fairly do both.