patrick.net

My Mortgage target was no more than what I had been paying in rent for the last 11 years before I bought.

That chart said $200 a month for health insurance, where in the hell does this guy live, and what about the rest of the Family? $45 electric in a 350K house? With a family of 3 or 4?

That article reminds me of Zillow or Trulia when they list the monthly payment for a house.

$900-Mortgage
$125- Insurance
$112 - Tax

Meanwhile in South Florida, you can't pay either your monthly tax bill or your home owners insurance on those two figures combined.

His health insurance number would be low for my family, too.

He doesn't really talk about rent parity.

I agree his number on utilities is probably low in most parts of the county. I am in the bay area where 1.) a 350K house is really small and 2.) You don't pay much in utilities since the weather is so moderate.

You make up the difference and then some by appreciation in your home value though. And interest rates are so low now! You'd be crazy not to buy now!!! ...in bizzaro world.

Anyway I liked how he ran all the numbers, but I agree with above that the utilities all seem low.

Is there a reason for posting up a 4 year old article with quoted 6.5% interest rates?

@Bigssby: Sorry Bigsby, What stuck me about the article is how few homes on the peninsula are actually as low as 350. I thought it was an interesting read. I agree that it would be nice to see it written for more current interest rates.

@ War: I do think prices in the bay area are inflated and falling. I think it is interesting that the average income person can't buy a median prices home. I wasn't actually commenting on my personal household income if that is what you are getting at.

Fair Oaks (RWC), Huntington Ave. (SB), EPA. Short or probate/contractor's special, especially.
You still can for less than 350K but would u want to?

CaptainShuddup says

That chart said $200 a month for health insurance, where in the hell does this guy live, and what about the rest of the Family?

The example says "married couple" and doesn't mention children. Splurging on that luxury is a horrible budget move for most people. There are also ethical implications bringing new lives into a world with a progressing collision between developed countries with costs of living artificially increased for corporatist interests and emerging countries with correspondingly low costs where the places we live have decreasing real wages and employment although I digress.

Normal employer provided health insurance, two wage earners, and a 25% employee share get you to $200/month most places. My current group plan is ~$400 for one not-old person in their child-bearing years of which 25% is $100.

Individual (I don't know about group plans on the private market) catastrophic coverage for a couple would be in that ballpark - I pay $110/month to Blue Cross/Blue Shield for my adult son in Colorado.

I don't care about spending a few hundred dollars on doctors appointments which is a few thousand less than the upcharge for a "nice" insurance plan which would cover them. $5000 out of pocket wouldn't be pleasant but isn't going to change the year I retire or make a real difference in how long I can survive without a job.

I'm insuring to get into sports-medicine doctors who aim to have you running/jumping/etc. rather than walking with a limp like the budget people where the preferred guys refuse to see you without insurance. I'm insuring for $100K in medical bills which would be a big deal (having broken my leg with some complications that's from experience). I'd like the insurance companies negotiated discounts which meant that I paid $12 for blood work with a $300 MSRP.

I don't care much about a few hundred dollars for doctors appointments which would require a few thousand dollar annual upcharge to be covered under insurance.

Accident coverage is also available for tens of dollars a month to cover $5-$10K of deductible and co-insurance for the most likely causes of moderate to high medical bills for otherwise healthy young people. In a world where ER visits can run $7K with insurance discounts (it was a warranty return after I started making puddles of blood following surgery and they initially billed me and my insurer) with limited savings that would be prudent.

$45 electric in a 350K house? With a family of 3 or 4?

Sure - my electric bill is usually less for my 1200 square feet 3/2 bedroom place and stayed that way when our daughter made an extended visit. You just need gas appliances and to live someplace with a nice climate that doesn't require air conditioning too often. Such places (probably in California) also tend towards high property values where "condo", "cottage", or "shack" is a more appropriate description for a $350K home than "house" with the reduced square footage and perhaps common walls (which would imply HOA fees that are not listed) being good for things like lower lighting/cooling costs and modernization for energy efficiency. You could live someplace sub-optimal like Missouri with higher energy costs although a reasonable sized house would come with a $90K price tag leaving a lot more budgetary room for things like air conditioning.

The example also has a $300 car payment listed which is an unnecessary luxury. Where you're on a budget there are plenty of $1.5K Toyotas, Hondas, and Suburus that will net another 100K of your own miles and don't require full-coverage insurance. As a more affluent "car" guy who would like to retire before I'm ancient I ascribe to the "rarely drive a nice used German sports sedan until it dies" philosophy which also nets a zero car-payment bill. Maintenance averages about $40 a month that way but it it's 1/8 the payment on a cheap newish car and makes for a more pleasant driving experience.

War says

Isn't it interesting that your yearly income is 50% higher than the national median household income yet you cannot afford the median price house.

And you think prices aren't inflated and falling?

WHAT PART OF THIS LUNACY DONT THEY GET?

For Christ's sake isn't that enough proof why it is utterly insane that so many 500K plus listings abound? Who is going to buy them NOW? WHO?

Here is my take if you have above average income, and take in 75K or 100K a year (whereas most average CA income is WAY below that figure yet ...) and are absolutely stupid enough to live out in the middle of nowhere or in a literal shack for $350K!!! When you factor in food, insurance, utilities, etc technically you CANNOT EVEN AFFORD A CAR! Does any of that make any sense to anyone with their head on straight? At $75K a year or even $100K a year? COME ON.

I realise now the entire sham of real estate is way worse than I ever imagined. The situation is such a disaster it has to implode (and I don't mean the declines I mean FUCKING IMPLODE) to normalise itself.

The author's numbers are too generous. Most people with $75k incomes aren't going to have 1 car payment on a "35 MPG manual." They'll have two SUVs. And I don't know anyone on a family plan that pays just $40 a month.

In essence? He's even more correct!

What's worse: My friend's Realtor mom heard I graduated college 2 years ago, and was pushing me to buy her $250,000 listing in Palmdale -- even though none of my jobs are within 100 miles of there.

What about us college grads who don't start with $4870 a month in net take home pay, like the article mentions? Let's try that math again, with MY budget:

NET PAY: $1350 (yes, college was soooooo worth it)
............ x 1/3 (amount safely spent on housing)
...........__________
........... = $450 a month

Fun. Oddly enough, that's exactly what I pay for housing. Thank heavens I'm still single and can split with roommates. I'd hate to see what $900 a month would buy me, once I'm married. And, down the road, if said wife were to get pregnant and quit her job, I'm guessing I'd have to move into a van.

America's economy just doesn't add up for my generation (age 25-30). Our wages need to skyrocket. Otherwise, prices are going to have to implode.

What people don't realize is how many people have dual incomes @ 100K a person in the bay area, or single incomes at 150K or more in the bay area. These incomes are the ones paying 500K for these homes. And there are plenty of those people queued up waiting to buy those homes, so it's a supply and demand thing.

If you make 75K in the bay area, you can't buy a house. You could afford a small 1 bedroom apartment probably, but that is it. 75K is a low salary in the bay area, where there is a huge population making masses of money. 75K in many places would be an awesome salary.

Also, unemployment for those making over 100K in the bay area is running around 2% now. Lots of demand out there for these employees.

pkennedy says

And there are plenty of those people queued up waiting to buy those homes,

In my view, it's SCREWED UP.

And I hate to burst your bubble there are PLENTY of people in the bay area NOT making 150K a year.

http://www.simplyhired.com/a/salary/search/q-San+Francisco+Bay+Area

Reader says

And I hate to burst your bubble there are PLENTY of people in the bay area NOT making 150K a year.

http://www.simplyhired.com/a/salary/search/q-San+Francisco+Bay+Area

A couple of years ago someone posted something about the number of households making over 150K in the Bay Area and the number of vacant homes on the peninsula. That is really what we are talking about. I think there weren't enough millionaires or people making more than 150K in the area to sustain the prices. It isn't if there are some, but if there are enough. My understanding was the answer is "NO!". The sad thing is that there are families who are not being realistic and who are over extending themselves to buy houses that they cannot afford.

I don't think there is an underestimated number of "foreign cash buyers", millionaires or high earning individuals to sustain these prices. The bench just isn't deep enough to keep this ponzi rolling. You can only sustain it with new money to keep it propped up. I just don't see where the new suckers are being minted.

bg says

I just don't see where the new suckers are being minted.

PRECISELY.

Buy buy buy or be priced out forever. It's a manipulated market and those baby boomer retirements aren't going to fund themselves.

anon12366 says

Buy buy buy or be priced out forever. It's a manipulated market and those baby boomer retirements aren't going to fund themselves.

My worry is that I lose either way. I lose if I buy and I lose if I save. Neither one looks great. Saving clearly suits me better than buying, but with interest rates this low, saving doesn't look like it did when I was a kid.

$350,000 is a bit stretching it, but it can be done. With 20% down assuming 3.75% mortage and $250 for HOA with a 33/38 debt to income ratio, the price of $350,000 falls within the upper bound of that range. That is assuming that a potential purchaser has no other debt and is disciplined enough to make payments. Also, they better be secure in their job prospects or have at least 1 year of expenses in liquid cash reserves.