With the real estate comments here, just curious...how do "average" Joes afford CA

Dueller · 09-21-2007, 07:35 AM

Perhaps I'm spoiled living in the deep south where reasonably priced housing (owning or renting) is abundant. But looking at what some of you guys are paying for housing in Cali and other left coast locales that are pricey...just how do you afford to live there?

I recognize that wages are higher in metropolitan areas, but are you making THAT much more? I make a decent living as a country lawyer and my wife works as well but I cannot imagine trying to purchase a home in SoCal.

So what gives? Are there reasonably priced homes but stuck in the boonies with multi-hour commutes? Did everybody profit by trading up in the boom? Did you all hit the lottery? Are you all TFB's?

By contrast, we're about to close on this house in a nice neighborhood....3400 sq ft, 4 BR, 3 1/2 baths, nicely landscaped for around $200K. We'll spend another $20K updating to our tatste. I know...location, location, location. But still....

motion · 07:42 AM

Nice house

I think most buyers in SoCal are move-up buyers. They've made $$$ on their previous home, throw in a few more $$$ and move into something larger. Start off with a 1 BD condo, as I did 20 years ago and eventually parlay that into a nice home in a family neighborhood. Except for the funny-money borrowers, not many people are coming into the area with $250K down payments (unless they're coming from other parts of the world).

Dueller · 07:59 AM

I can understand that to a certain extent. In my case, after a divorce I lived frugally for a few years and paid $82K cash for a 2BR/2bath garden home that needed updating. Just sold it for 130K and using that plus cash to pay cash for this house. Realtors freak when you say you're paying cash and want to show you $600K homes if you've got $200K to buy a house outright. I haven't had a house payment in several years and really enjoy knowing I can pay my monthly nut by working at Walmart....

But for a first time buyer...how do they do it in Cali? DINK's (Dual income No Kids)? Mom and dad fronting a large downpayment? Just seems so outta whack nothwithstanding the current real estate mess.

BTW...I liked your first comment before you edited.

Dan in Pasadena · Dan in Pasadena's Garage

I think we make a bit more than other areas of the country but mostly we just know we have to alot a much greater percerntage of our net income to housing costs.
In 1978, I was 23 and with my then-wife we bought our first house for $63,000(had been a rental, needed a lot of work). It was a 3/2 single story stucco on a typical 60x100 suburban lot. Owned it 15 months and sold it making $15,000! Bought another 3/2 house, better area for $88K. Sold that about 6 years later for I think $125K. I think I was paying 12% interest which wasn't all that high then.

The last home my wife and I bought, still a 3/2 but up in the hills in the nicest part of the town I grew up in cost $165,000 in 1986. Sold it upon divorce for $255,000 in 2000. Bought the house I am in now (yup, 3/2, 50x100 lot) TOO damned near the freeway, needed a lot of work (sound familiar?) no where near as nice/exclusive as my former house for $304,500. It was the first house in the neighborhood to go for more than 300K. It now appraises for $800,00. Crazy? Of course but THAT is California real estate. I am now trying to pay this house off before I retire - a bit of a long shot. My mortgage payment is just under $4,000/mo including property tax, which is high here.

Dueller · 08:12 AM

Ok...but prices are still relatively high today. Is SoCal real estate still so high that for a young married couple that starter homes are unobtainable? Are most average ypung workers destined to be tenants?

I did get a good deal on the above house due to an abundance of houses on the market...it appraised for $289K 2 years ago, but it belongs to a doctor who just wants to unload it fast as he moved out of state a few months ago and he doesn't have the time or inclination to up date it.

scottmandue · 09-21-2007, 08:13 AM

It really isn't that bad... you do what you have to... a little pimping... pushing crack on the corner... meth lab in the garage... selling porn on the Internet.

You know, the usual stuff.

What Dan said, my first house was $70K (but in the hood), sold that for $120K, added a hefty inheritance, now live in a house that appraises for... well I'm afraid to think about it but well over $500K with a $160K mortgage

Hugh R · 09-21-2007, 08:19 AM

More condos are being built here now. Also, lots of people buy further out of Los Angeles, like Palmdale and Lancaster; substituting equity for drive time. Its not uncommon for people to drive 1-1/2 hours each way to work. Lots of people with the "stated income" subprime loans, 40 and 50 year loans, interest only, etc. Socal has the highest foreclosure rate in the country, I believe. I bought my current house ten years ago for $360K and it got up in comparables, to about $900k and with recent price drops is still worth $800K easily. I had a 30 year fixed jumbo until six years ago, and bought down the jumbo and went to a 15 year. But I'm probably unusual in SoCal.

Dueller · 09-21-2007, 08:34 AM

So Hugh/Dan/Scott...what are your property taxes like? The house I'm buying runs about $1600/year based on an assessed value of $280K. The missus and I passed on a killer deal because the property taxes were over $6K per year ($400K house for $289K...foreclosure after first payment default

The guy put $10K down and lived in it for 14 months before he was kicked out...pretty cheap rent, I suppose). we're seeing some weird chit here as well.

Porsche-O-Phile · Porsche-O-Phile's Garage

Rent. Makes life simpler/easier.

The way financing is now, nobody's making any $$$ on RE anyway, so it's no loss.

As Wayne has pointed out many times, it's actually more financially beneficial to rent right now.

I found that once I gave up caring about "owning" a home, it was actually quite liberating and I'm a lot happier now and at peace with that reality. If the opportunity comes along some day, fine. If not, I'm okay with that too.

motion · 09-21-2007, 08:40 AM

I guarantee you that prices today will seem like "free" 10 years from now. Its always been that way. If you rent, you're going to be in the same position 10 years from now as you are now: missing out. There are plenty of condos out there for $250K. They may not be in Newport Beach, but they're out there. Jump in or get left behind. Its that simple.

widebody911 · widebody911's Garage

You and yer sister got yerselves a nice house there, boy...

Quote:

Originally Posted by Dueller

Perhaps I'm spoiled living in the deep south where reasonably priced housing (owning or renting) is abundant.

Rot 911 · 09-21-2007, 08:42 AM

Unfortunately I think most first time home buyers in the desirable areas of CA have been priced out of the market. I've been to CA a number of times and really could get into living close (within 5 miles) of the ocean. But I think those days are long gone for the 1st time buyer. There is no way I would drive 1 1/2 hours to work just to say I live in CA! And a number of those communities are out in the desert!

Dueller · 09:00 AM

Quote:

Originally Posted by Porsche-O-Phile

Rent. Makes life simpler/easier.

The way financing is now, nobody's making any $$$ on RE anyway, so it's no loss.

As Wayne has pointed out many times, it's actually more financially beneficial to rent right now.

I found that once I gave up caring about "owning" a home, it was actually quite liberating and I'm a lot happier now and at peace with that reality. If the opportunity comes along some day, fine. If not, I'm okay with that too.

I understand completely...especially when I have to replace a furnace or water heater unexpectedly. I really don't view my home as an "investment" in the traditional sense. Within reason, I don't care whether it goes up or down in value because I have no intention of borrowing money against it. Its shelter, period.

I've seen a lot of people get into houses with nothing down/teaser rate ARMS/etc and then feel flush when the prices were going up just because some appraiser said so. And then they began using their front door as an ATM with additional home equity credit lines. All of the sudden they're upside down on their home fer christsakes...insane and these are the people losing their homes to foreclosure.

I do like the security of ownig my home outright because if I check out the missus doesn't have a mortgage. And when you don't have a mortgage or monthly rent payment, it frees up substantial discretionary income.

Dueller · 09-21-2007, 08:51 AM

Quote:

Originally Posted by widebody911

You and yer sister got yerselves a nice house there, boy...

Yup...and Uncle Ned shore has a purty mouf.

GDSOB · GDSOB's Garage

Quote:

Originally Posted by Dueller

So Hugh/Dan/Scott...what are your property taxes like? The house I'm buying runs about $1600/year based on an assessed value of $280K. The missus and I passed on a killer deal because the property taxes were over $6K per year ($400K house for $289K...foreclosure after first payment default

The guy put $10K down and lived in it for 14 months before he was kicked out...pretty cheap rent, I suppose). we're seeing some weird chit here as well.

Nice taxes. I'm paying over $5K in friggin Ohio.

'89cab · '89cab's Garage

you buy a fixer-upper in 1974 when first year teachers could afford to buy a house.

scottmandue · 09-21-2007, 09:03 AM

Quote:

Originally Posted by Dueller

So Hugh/Dan/Scott...what are your property taxes like?

I think my property taxes are calculated on the mortgage so I am paying around $1600... well that is what I pay, I have no idea how they come up with it.

I also have two houses on my lot and rent one out so that really does help, I think buying duplexes or other multiple dwellings is a possable way to get around housing costs here.

I have a fixed rate 20 year mortgage.

Dueller · 09-21-2007, 09:03 AM

Neat house, cab. Did you do all the pergolas youirself?

So...what will your students be able to buy?

JavaBrewer · JavaBrewer's Garage

As been stated many times in other RE threads...first time home buyers start modest and work up from there. As Motion says there's many ways to get started in SoCal for 1st time buyers as long as they realize they won't be in La Jolla 2 blocks from the Pacific... A 2BR/2BA condo/townhome, in need of some lovin (floors, counters, paint, cabinets, windows, etc...), with a somewhat handy, or willing to learn, owner is the ideal place to start.

I'm positive I have way less discretionary income than you Dueller. My wife is a stay home Mom so we take it in the shorts financially even more than most. No fancy cars, our yearly family vacation is a 5 day road trip, we don't eat out much, struggling to put money away. Yet, living where we do, we feel very very fortunate. YMMV.

Dueller · 09-21-2007, 09:10 AM

Quote:

Originally Posted by scottmandue

I think my property taxes are calculated on the mortgage so I am paying around $1600... well that is what I pay, I have no idea how they come up with it.

Never heard of that. Do you mean your taxes are added to your mortgage payment and held in escrow?

Here property taxes are calculated based on the assessed value of the house (usually a little lower than actual FMV). Depending on the neighborhood, town, county they run anywhere from .75 to 1.5 % of the value of your house. Thus taxes on a $1M home would be around $15,000/year.