patrick.net

@tarkin

State College PA? Holy cow!
I know the darn place and I can see why you said you're so poor.

But still, you're doing better than others if you earn arround 40K/yr in there. You need to stop comparing yourself with SF city boys, because you're not in SF. At 40K/yr income I assume, you still are doing better than other guys arround you. I think what you need is stop worrying about home right now, and setting a long term plan.

Few thousand bucks doesn't mean much for city dwellers because that's less than what they pay for the rent, but it could do quite much for the person who lives in the place like state college PA. The goal for you is putting additional couple hundred bucks into your saving, so that you can get needed downpayment in let's say, 5 to 6 years before your kid goes to middle school. How's that sound?

Do you think you can cut unnecessary spendings, tightening yourself up little more, getting a part time job or something, and putting couple hundred bucks more into saving account each month? It is possible for you to get your own home in few years if you try harder. So, plan ahead, do it. and good luck.

@tarkin ---> glad to hear a voice like yours on this forum.

Tenants, not just landlords, should be posting their opinions /experiences. My hope for tarkin and family is that home ownership does become an affordable possibility. So many still argue against home ownership. Long term, I think it is always better to be an owner than continuing to maintain a lease.

Tarkin pointedly did not want a pity party but I have to say my heart is hurting a little for someone so intelligent and responsible. I'd like to think things eventually work out for people like you but it doesn't always does it? If a decent percentage the low to low middle homes are swooped up by investors....well, it won't help. Landlords are there to make money from renters.

tatupu70 says

StillLooking says

A house that asked 425 at the height of the bubble would now rent for $16-1800, and there are a slew of these around. At least there was 6 months ago when I was checking it all out. It seems that the rental market has only softened since then.

I was just wondering if you could tell me where they are… The $500K houses that rent for $2100, that is.

Oakland, CA has plenty of 500k and lower houses that rent for at least $2100.

@ Tarkin,

Keep your head up and work hard. You and the wife are doing the responsible, sensible thing. Your position is similar to my wife and I's when we first got married and found out we were having our first child.

We didn't want to pay a daycare $800/mo.... plus raising our child (and not someone else) was enough of a priority for us to opt out of daycare. I wasn't making much right after college - and after all our bills, we were lucky to sock away $300-400/mo into our savings account. We didn't want a mortgage, even though everyone told us we needed to buy a house to have a stable household.

I'm in my late twenties now, and married for three years. My wife still stays at home. We still have no desire to buy, and don't want the debt - but, we can go wherever the heck we want, when we want. We're still renting, and believe it or not, we're still happy.. Funny how it works, because we have better behaved kids than most other families - they get the attention and discipline they need. Our marriage is healthy, while many of our friends have divorced. We NEVER fight about finances, but we live within our means, carry ZERO debt and stick with a budget (this is a foreign word for most people). My wife clips coupons, we drive older cars and shop clearance racks and garage sales when we need things. It's actually fun and turns into a contest the more you do it.

Most of my co-workers are in the 40-60 yr. old bracket and broke. They are living check to check, saddled with debt and always concerned with making the next mortgage payment. Guy next to me drives a $42,000 BMW, lives in a $500k home, but is stressed beyond belief.

Keep marching to your own drumbeat, work hard, and it will pay off. Don't consume yourself with buying a home/car/stuff... just live within your means, without debt, and set attainable goals. Our motto is, if you can't pay cash, you can't afford it.

Lots of people here obviously never lived in the place where there are more deers than people out there. :)

People like tarkin have not much choice but to tightening belt up first. The good news is that he may able to get what he want in few years by doing that and the bad news is there still are more deers than people. Names like Bald eagle, Summit, Breezewood should give you guys some idea about the place. Naturally I won't blame him being not able to understand what City people talk here all the time. Owning a home is simply owning a home, Just simple like that. No landlording or financing opportunity to talk about.

For tarkin, i think he is in better shape than most others in the area. At least he is aware of the situation and is trying to understand what's going on. This small difference could make big impact in the long run. His credit is perfect, no debt and there's endless supply of renters as long as Penn State is there. What he need is a plan.

You need to stop comparing yourself with SF city boys...

...the main difference being the sibilance on the s in boys :)

Plawatty says

their annual expenses almost always are at or exceed 40%-50% of the gross rents

HIstorically, this is not the case. Historically, even investors who did not successfully bottom-fish starting out have been bailed out by immense increases in the local wagebase. With Prop 13 in California as the sugar on top, too. Interest rates declining since 1983 have also helped out LLs by lowering their interest costs.

Plawatty says

We’re in the denouement, to be sure, but still not at the end. When FHA decreases the money pool, a little bit more air is going to come out of it

The System cannot allow that to happen. There will be no draining of the intervention. I believe The System will fund mortgages directly from the Fed's power of money creation before that happens.

@ebguy

Prop 13 should cause an increase in property taxes, to make up the difference on properties which have ultra low taxes. While home owners long past get great deals, new home owners shoulder most of the burden, this means he should be way under shooting property taxes.

pkennedy says

Prop 13 should cause an increase in property taxes, to make up the difference on properties which have ultra low taxes

Property taxes are limited by appraised value and cannot be raised to "make up the difference"

I'm actually referring to Serrano v. Priest, which begat Prop 13. In California, property taxes flow to the state, which then disperses them to local districts (to prevent wealthy districts from having an 'unequal' educational system -- but special parcel taxes are a way to get around this) . People in millage states are usually referring to locally collected property taxes, which are locally dispersed to the local school district.

@Troy

Ah yes, my bad on that one, totally slipped on my math there! For some reason I was thinking the tax rate changed over time, not the appraisal value which was locked in at 2%.

I find it hard to believe that property taxes are 2.5% anywhere.
Bet you will be able to spot the "good" school district in this list. Hint -- search for 3%.

@EBGuy
3% of no homes, or 3% of homes worth nothing, yields nothing.

Right at the top of the page, they have an example:
Example: Annual Taxes on a home in: Bay Village $100,000 x 2.40% = $2,400.0

1.25% of 800K is a lot more than 2.4% of 100K. I'm not sure how much "better" those school districts would necessarily be.

I’m not sure how much “better” those school districts would necessarily be.
To be clear, I mean better compared to other schools within Ohio -- not trying to compare to CA schools. Although, I'm pretty sure, a district like Shaker Heights (No levy left behind) would compare favorably to most CA districts.
I think you may have missed my larger point though (and you should understand it before having kids in California).
1.25% of 800K is a lot more than 2.4% of 100K.
In California, ALL this property tax revenue is funneled to the state for distribution -- which disperses it to districts based on per pupil funding formulas. Marin property taxes fund Stockton schools. Rich districts, though, still can maintain a comparative advantage by levying parcel taxes -- which are based square footage (not property value).

What a lugubrious pit to throw your money into...

Sure you'll make it to 70?

Monthly MIP is going up as stated, but the additional cost is substantially mitigated by a 1.25% reduction in upfront MIP. The effect is to provide borrowers with additional leverage and reduce overall cost to borrow. You have misread the situation once again.

I assume the sheep depicted on the front page of your site represent the fools who send you donations each week. Where exactly do you put that money?

EBGuy says

I find it hard to believe that property taxes are 2.5% anywhere.

Bet you will be able to spot the “good” school district in this list. Hint — search for 3%.

Shaker Heights, OH has a 3.05% tax rate in your list and has pretty pathetic scores for such high tax rates. What a bunch of underachievers! I would excuse a bunch of 6 or 7 rating schools: http://bit.ly/underachievers for a district with a 1% tax rate, but not 3.05%

For a paltry 1.28% tax rate, the residents of La Canada, CA get 100% of their schools rated a 10: http://bit.ly/achievers . That's why I'm willing to pay a premium for a house there vs surrounding cities, since the school district will save me hundreds of thousands vs. having to enroll my 2 children in private schools.

Lem'me say first of all I'm wayyyy into being a senior (I'm old) and also, second, that I hang out at the dog park alot (four dogs). There's a certain group of seniors (males) that if they're there, I listen listen in on their discussions. And, what they're discussing is owning rental property and becoming landlords. This is the new nirvana, the new way to get into the housing market and make a buck. I started asking questions. =Not one of them= understood the business of owning a rental (forget things as subtle as an MIP increase). However, they all had the power tools. They all believed they had the ability to buy a fixer-upper and rent it out. I believe they (most of them) could fix up a fixer-upper. What I do not believe is that even one of them could rent it out profitably. What really got to me is that these guys are talking about pulling money saved for retirement purposes from banks to fund a rental purchase. IMHO this business of becoming a landlord qualifies for bubble status.

This is the best news I've heard all day!!!!

I'm happy to see our government helping us buyers along with their artificial deflation of house prices as it has been well overdue. Hopefully, the government will continue to meddle in this market and knock it down an additional 30-40% more than the current price. It would be nice if the government saved me some money for once in my life.

As for the sellers who purchased at the peak and didn't do their homework; I'm sorry this is happening but unfortunately, you'll have to stick with your investment and if anything, live in or rent the property you overpaid for or try to find a sucker out there who's willing to overpay and drink the Kool-Aid, there are plenty of those guys left on the sidelines waiting for you to fleece them...........

Home prices need to fall MUCH further. Vehicle prices need to drop much, much further. Anyone who counts their home as part of their net worth is making a mistake. No matter how old you are, you will still need a place to live unless you can move in with your kids. If you want to cash in on your home, sell when you are aged, put the money in the bank and rent. Until then, your home is dead money. We need to get back to the days when moms could stay home and take care of the kids. America has lost the "family" because everyone is forced to chase the dollar in order to provide housing and transportation. The government needs to stop propping up the auto and housing industries. Let the market determine their values. There is too much noise about closing FANNIE and FREDDIE. They will eventually be shuttered and much heftier down payments will be the rule of the day. All those bargains investors bought 2 years ago? They will be back on the market as foreclosures. There are many middle-class people in the early stages of screw it because they are so far upside down. This thing is going to take years to unwind. All the while, prices will continue to decline. Most wealthy people accumulated their money from saving and investing, and not in real estate. Do you know any multi-millionaires who achieved their riches in residential real estate? And I'm talking about the ones who have liquidated and have the CASH in the bank.

MIP = Mortgage Insurance Premium
(Please People: When authoring an article, please do not assume everyone knows real estate lingo (i.e. what "MIP" stands for). It's always better to define your term when you first use it. Just in case. Thanks!)

APOCALYPSEFUCK says

Your grandchildren will know how to hunt with their bare hands, however.

see there ... found somethning positive in the grim outlook ahead. Addaboy. I agree with your vision, incase you wondered.

I just had to register to hop in on this discussion. Long time lurker though...

I'm hailing from the DC / MD / VA area, and we have our own housing issue. Well this area has LOTS of issues, but we can start with housing. Houses are ... similar to anything else that's bought and sold. Pricing is determined by supply, demand, and emotions. This area is odd... you have a steady job market, an influx of college educated youngsters, and a relatively stable core of "older people". The problem though... the younger college-educated folk don't make enough to support a house. Even if you stack 3-4 of them together and they all go in together on one ( a HORRIBLE idea unless you're married, by the way), it's still a tough battle. Opposed to this population are the "lived here for years" folks who have seen their housing values increase 5-6 times over the years. They don't see any issues with the housing situation and hold steady to their bubble prices.

And so this area sees a good bit of deadlock. Both sides are rather stubborn and up against fairly solid walls. More and more college grads stack into the area, landing 55-60k per year jobs, but what's that do against a 450k rowhouse in DC or a 300k "starter" house in PG county?

As for me, I sit on the sidelines counting my hours til I can leave this hellhole we call DC. In the 6 years I've been here, I've managed to save upwards of 650k by renting the entire time with one of my good friends. I guess a 195k / year salary doesn't hurt either huh? We all make concessions and trade-offs, I'm trading a few years of my youth and enjoyment for financial security later on.

For housing prices, my views are so skewed now it's not even funny. My economic training screams that prices simply have to fall here, since the median AND mean house is 4-5x the median and mean household income. However, prices have come down an impressive 9% since peak and are headed back up.

As a side note, what do you guys see happening. I know for a fact that the gov't spending can't continue as it has been with no respective increase in tax receipts. I say this fully knowing that a cut in spending would impact my job in a hurry. Will our great leaders inflate us out of this mess through increasing the money supply (seems to be the trend in this country), or will our great leaders impose austerity requirements on us (the "Greek" method)? What do you kind folks see?

whats the "TI" stand for in a FHA loan?

You are missing something. You are not comparing apples to apples as the up-front premium is going down substantially (from 2.25% to 1%). The up-front premium is typically added to the loan amount so the loan would no longer be $200,000, it would be $197,455. At 4.5% annual interest this lowers the payment to $996.74, just over $16/mo less than in your example. So instead of a 9% increase there will be an 8% one.

Also, if you put 5% or more down then the monthly premium is .85% and it is .9% for 3-5% down. It is 0.5% now.

I'm not saying your point is incorrect, just that your numbers are off.

Austinhousingbubble says

What a lugubrious pit to throw your money into…
Sure you’ll make it to 70?

Luckily for me it's the renters money. I haven't thrown any of my money in for a long time and have taken it back out anway. The renters don't seem all that lugubrious either come to think of it. They need to live somewhere so they are actually pretty happy to have well maintained houses in good area's.

I'm 54 with no health problems, take no medications and have no bad family history. I spend 1-2 hours every day windsurfing, surfing, or playing squash. Barring a black swan event the odds are pretty good to make 70. Thanks for your concern.

StillLooking says

There are no listings in the Chicago area where the asking price would leave anyone a profit if they tried to rent out the place. Your claim that housing is not overpriced clearly implies a major disconnect between asking and buying prices

You said that in another thread, but after I repeatedly asked you for any examples you dodged me every time. I'm not in the landlord business, but I did a quick search and it looked to me like there were several properties that would rent out OK in the suburbs.

tatupu70 says

StillLooking says

There are no listings in the Chicago area where the asking price would leave anyone a profit if they tried to rent out the place. Your claim that housing is not overpriced clearly implies a major disconnect between asking and buying prices

You said that in another thread, but after I repeatedly asked you for any examples you dodged me every time. I’m not in the landlord business, but I did a quick search and it looked to me like there were several properties that would rent out OK in the suburbs.

Show me one.

I'm still waiting for the slew of properties you know about...

http://www.zillow.com/homedetails/2681-Sheridan-Rd-Evanston-IL-60201/3377662_zpid/

Really?--this looks pretty comparable

http://chicago.craigslist.org/nch/reb/1955221659.html

robertoaribas says

Realtycheck:
The upfront MIP can be added to the loan balance, and hence has almost NO effect on the monthly payment, which the increase in monthly MIP is directly added to the payment. Do your own math, if someone is approved for a monthly payment of $1200 a month based on their DTI ratios, you can clearly see that the price home they can buy will come down, something above 4%.
Now, take the entire world of FHA buyers, which in many price points is almost all of them, and reduce their top price by even 4%, and it very will may have an effect. Especially in a market that is already reeling.

Hey man, I get that there are some places that are way expensive to live, but Tempe, AZ ain't one of them. Why don't you move out of the Apartment already. Hell, house in Tempe are practically given away as Cracker Jack prizes.

tatupu70 says

Really?–this looks pretty comparable
http://chicago.craigslist.org/nch/reb/1955221659.html

This is a different neighborhood where asking prices are much more optimistic. And I don't believe this one would fetch that. THere are too many three bedrooms looking for rent under $2000.00

http://www.zillow.com/homedetails/9715-Woods-Dr-UNIT-605-Skokie-IL-60077/87702496_zpid/

These are renting for $1700/month

The asking price is in the 350 grand area.

I don plan on selling, until the next bubbl

You better live a long time.

Whoah, no doom intended. Quite the contrary; I merely find the idea of another real estate bubble in our lifetimes highly unlikely. I see that as a good thing, as I find bubble economies to be ultimately counterproductive.

Austinhousingbubble says

I don plan on selling, until the next bubbl

You better live a long time.

Patrick, dude, this exchange MUST have a spot on the T-shirt.

I went to school grades 4-12 in La Canada and as you stated, the schools are fantastic. Although the school district is top notch, you are going to be paying at least a 200-300k premium over Glendale, Burbank or any of the other surrounding bedroom communities. Unless you have a bunch of kids going to private school, or are going to send them K-12, I don't know if your math applies, Mark_LA.

Don't get me wrong: I would love to give my kids the education that I was provided by my folks... I just don't think I can pull in $400k a year like they did for the privilege of living in LC.

All,

Any insight on the Denver, Colorado area market situation? Specifically interested in Highlands Ranch in Douglas County?

Any data on rents vs. price (per this thread) would also be really useful.

Thanks in advance!

E-man says

bob2356 says

Taxes are not that high. Don’t have any problems with insurance despite being 20 miles from the Gulf.

Congrats. I guess that would be somewhere close to Pasadena or Houston. May I ask what % is your property tax? And how much does it cost to insure these rentals in term of percentage? 0.2 or 0.4% of the cost of the home? Thanks.
I was looking at Dallas/Forthworth areas, and property tax was around 3%. I believe there are certain exempt areas where the property tax is really low.
Edit: I would probably fared okay if I bought back then, but I’d rather invest where I live. It’s just more comforting since I’m a pretty conservative investor. Based on history, CA has outperformed many other markets in appreciation over the long-term. With that said, getting 7% to 8% cash on cash return with the probability of appreciation over the long-term is much more appealing to me. I have a friend (http://tomwilsonproperties.com/) that has been investing in DFW areas and have done exceptional well. He’s been trying to sell me some of his properties just for diversification purposes. Well, different strokes for different folks. How’s New Zealand? Are you planning on retire there or coming back to the U.S.? :o)

Actually my properties are in the Rio Grande valley. Last insurance I paid was 938 on the place in Harlingen, but I have wind. Without wind it would be 385. Taxes 1800. My guestimate on value on that property (I'm currently looking at similar properties in the area to buy) 175-200k.

New Zealand is terrific. Greatest place on earth to raise kids. Very high cost of living vs wages, so we live a pretty simple lifestyle. Picnic and hike instead of eating lunch out, that kind of thing. If I get my Italian citizenship (actually if my wife gets hers then I get mine) we're retiring to either Lake Garda Italy or Biarritz France. I would live in the states again, but there's so much out there to explore and life is so short. I'm really considering Dubai/Oman for a while when the kids hit high school (partially because of the huge teenage binge drinking problem in NZ, definitely NOT a problem in Oman). There are great water sports, it's a one hour flight from terrific dirt cheap skiing in Iran (that would be on my kiwi passport not my american one), and a couple hours flying to southern Europe. Learning Arabic would be challenging, although probably no worse than learning to speak kiwi. I've really had a lot of fun living around the world so far.