House prices in your area/part of the world?

[Pacion]

How are house prices in your area/part of the world? Have been hearing that prices in the US have been coming down for the last 6 months or so (with higher defaults/reprossession). Yet in the UK, prices have been going up and up with also higher defaults/reprossessions, but it sounds like the proportion of defaults is smaller than in the US.

The old saying was - if the US sneezed, the rest of the world caught a cold. Is this still true or is there any truth still in this?

I know it is a complex matter but generally, how easy is it to get a mortgage in your part of the world ie do the banks/finance houses use a multiplier of your salary/wages? If so, how much? In the UK, some companies are lending as much as 5-7x a single person's salary. Others are doing it on what they work out as "affordability". We can also get 100% mortgages, but I gather this is unusual in Europe, where you generally have to have a deposit of 30%?

[tj]

Well my post is going to be more anecdotal and subjective rather than objective, so here goes...

I just moved from one of the more expensive areas in the US, namely the Northern Virginia/DC area, and for the town I was living in, the average house was in the $800k-1M range, with townhomes being in the $400-500k range.

I know a guy who bought a townhome/condo for $500k about 2-3 years ago, and he said recently, that prices are down about 10% from what he bought it at. That's -$50k, and I don't know about the rest of you, but to me that's quite a chunk of change to be down.

I'm now living in the suburbs of Atlanta (just outside the Perimeter), and I'm seeing the occasional ad for places anywhere in the $150k to $250k range, and while I don't plan on buying a place any time soon, at least I feel like I can afford something here.

What's funny is that a couple of my co-workers talk about how expensive houses are here compared to Texas, and I read a month or two ago in the USA Today that prices in Texas haven't appreciated as quickly as in other parts of the US, making it more affordable there. For example, I have a relative who bought a house in Bellevue, Washington back in 2002 (I think), and it's price is up 50% from what he paid.

So there really seems to be a huge difference depending on what part of the US that you're talking about, and I bet that even within a specific market the prices will fluctuate a lot depending on what sort of dwelling we're talking about, too.

Bottom line for me is that I'm moving around too much to want to buy a place currently, although there's a part of me that would like to have my own place again. Renting sucks when you have noisy neighbors.

[Laura]

So there really seems to be a huge difference depending on what part of the US that you're talking about, and I bet that even within a specific market the prices will fluctuate a lot depending on what sort of dwelling we're talking about, too.
That's for sure. I just bought a loft condo in San Francisco. In fact, the close of escrow is today. Anyway, the San Francisco Bay Area is legendary for its high prices. Outside the area, like near Sacramento, prices have recently been dropping, but inside San Francisco itself the sales prices have been flat for the past year.

[Sagitta]

Also depends on the time of the year. I see a bigger place now asking for less than the place that I bought (which I bought at lower than the asking price).
More land and more sq. footage of the house. With winter here people really want to get places off their hands. And prices have also slightly softened in certain price ranges as well. NOt too much, though because of the area that I am in with tech businesses coming in, couple colleges etc.

[Peaches]

Oh, god. Housing issues.

From what I've seen, second-hand, the market here is softening. Pretty badly, depending on what side of the buyer-seller fence you're on. I know that in our development, they're having a hard time getting the last lots sold. And I believe that's the case in other new subdivisions. Prices have been dropped.

Here you can get a mortgage for just about anything. I know that when we bought our first house they were approving rediculous loan amounts. I think it had to do with an "affordability" calculation of some sort. No idea where they came up with the numbers, since our pre-approval amount was for WAY more than we could ever afford. I'm a number cruncher, so I had a very very good idea of what we could pay/buy, and I was just floored by what they pre-approved us for.

Generally speaking, 20% down is the rule of thumb. But that's very variable. We got into our first house with 2% down, b/c of a special loan program for first-time home buyers. But even without that, they keep coming up with new and interesting ways to monkey around with the lending. I've heard of people putting insanely low amounts down, and taking out 50 year mortgages. It's crazy.

Hopefully some of that will stop.

[Laura]

I've heard of people putting insanely low amounts down, and taking out 50 year mortgages. It's crazy.

Hopefully some of that will stop.
I head on the radio last night that the Fed is considering raising interest rates to tighten the money supply due to inflation, and the reported talked about how that will slow those sorts of things down.

[samina]

I head on the radio last night that the Fed is considering raising interest rates to tighten the money supply due to inflation, and the reported talked about how that will slow those sorts of things down.

hey, btw... good luck on the closing, laura! :)

[Laura]

I'm curious as to why one is wished good luck for this kind of thing. Everything is done, and has been done from my end since Monday when I wired in the down payment. I signed the loan papers two weeks ago. The inspections and appraisals were a week before that. I'm just waiting to get the keys at this point.

[samina]

I'm curious as to why one is wished good luck for this kind of thing. Everything is done, and has been done from my end since Monday when I wired in the down payment. I signed the loan papers two weeks ago. The inspections and appraisals were a week before that. I'm just waiting to get the keys at this point.

that's wonderful if everything has gone so smoothly for you. i rarely hear that... usually there seems to be plenty to be lucky about, but i haven't gone thru it myself.

in any event, enjoy it... and wishing you an early congrats!

[Peaches]

I'm curious as to why one is wished good luck for this kind of thing.

Because all kinds of things can go wrong at closing!

At the closing for our current house so many things went wrong it was unbelievable. They had the price wrong. The address wrong. Our names wrong.

Then they tried to tell us that we couldn't...something...what was it...Oh yeah. They tried to tell us we couldn't title it as full joint ownership (or whatever it's called) b/c our last names aren't the same. They were saying that it was company policy that people had to be married with the last name in order for it to be titled that way. We told them that was BS. Our agent told them it was BS. THEIR LAWYER told them it was BS. Still they argued. We were stuck in the little, windowless, closing room for a couple of hours while their lawyer went and argued with management or something.

We had to start signing paperwork from scratch multiple times, b/c each time they screwed up they'd redo all of the forms. And, of course, they kept screwing it up. Closing took about 4 or 5 hours, IIRC.

THAT's why people wish you luck.

[Laura]

Weird, I had no idea! My future ex-husband and I didn't go to the closing when we bought the house we're currently living in -- we signed all the papers at home over the course of a night or two and sent them over by courier when they were all done. There is no official "closing" for my place, either, that I have to go and sit in a room for because I signed all the papers right before Thanksgiving. I guess things are done differently in San Francisco than elsewhere -- everything both times was incredibly easy and professional. When I went in to sign the loan papers this time, I was in a conference room with floor-to-ceiling windows looking out over downtown San Francisco's Financial District. It took me about an hour and a half, tops.

[dgcasey]

Because all kinds of things can go wrong at closing!

Tell me about it. Speaking as a Realtor in Las Vegas, I've seen transactions fall apart the morning they were sent to the county recorders office to be recorded. I've seen buyers pull up out front of a home they just bought, with the moving van right behind them, only to find the sellers have decided to cancel the deal and stay in the hosue. Can you say, "Judge Judy?" Until it is recorded and the keys are in your hot little hands, things can and do go wrong.

As for the market, the market has no place to go but down at this point. And it has been going down for the better part of a year and a half. It's just that the sellers in this area haven't got the memo on that. Four years ago, just before the market turned super hot, the average home was about $175,000. Now, it's about $370,000 and that is down from a high of just under $400,000. Now, I don't know about you, but the average working person, earning $10-15 an hour can't afford a house at that price, and my pay did not more than double in two years time like the price of homes did. We went from carrying about 6500 homes in the MLS to over 14,000, most of which are overpriced. Basically, the sellers have shot themselves in the foot and now there are no buyers willing to pay the exhorbitant prices. My guess is that we're going to be stuck in this declining market for at least another year before it levels out.

[Laura]

The keys are going to be in my hot little hand in about an hour :)

[samina]

yes, okay -- these nightmare stories are more in line with my impression of what closings can be like. lol -- although nothing to laugh at.

[Pacion]

Congratulations Laura.

One thing I forgot to mention - the house buying process here takes three stages

- verbal offer and acceptance
- contracts are "exchange" where the buyer pays a deposit then various checks/searches are made resulting in
- "completion" where final monies and keys are handed over

and can take weeks, sometimes months (!) with lots of "forward and backwards" and "side to side" between lawyers, buyer, seller, surveyers etc etc.

It was in the UK papers recently that a banker (I think he was Swiss?) paid £10 million MORE than the asking price and everything was completed in 5 days! One person commented on the newspaper website how come it took 5 days and his buying process takes weeks. Someone quick witted responded -try offering £10 million more!!!

(original price for the house was £25 million I seem to recall)

Yes, sadly we do have some very ***silly*** prices going on here in London :?

[tj]

Yes, sadly we do have some very ***silly*** prices going on here in London :?

So when you sell your flat for 25 million, are you going to throw a big DF party for the rest of us?

[Pacion]

:lol: 25 million grains of sand!!!! :lol:

[caityrosey]

Condos in this area (decent two-bedroom ones) start around $160K.

Houses--hard to find something nice for less than $250K.

[DancingJools]

I plan on moving to NYC within the next couple of months. Though that has been in the works for a couple of years at least, and I know the New York City area, I still can't deal with the sticker shock of housing prices there. A house comparable to where I live now would cost over one million dollars in the NYC area, way more than I can afford, or am willing to pay. A house within a decent commuting distance (under one hour) will be even more. Much more.
I keep looking at online real estate ads, and see those itsy bitsy houses, on postage stamp lots, with absolutely no beauty and curb appeal, for outrageous prices.
I know prices in NYC (and in my area now, which is southern New Hampshire, or the greater Boston area) have been going down.
A friend of mine, who lives in Westchester County (that's the northern suburb of NYC), wants me to move close to her. A house on her block is on the market, and its price has gone down over the past few months. From what I hear, prices in the New York area have gone down 10-20% over the past year, but that is down from the unrealistically high prices of the past few years.
It's an OK house, for half a million dollars, and the commute to work would be about one and a half hours each way. That's too much time out of my life wasted in a train car.

[pygmalion]

Especially if you're gonna pay a half a million bucks for the privilege. :?

Did anybody besides me see the Learning Channel (I think?) show where the hosts traveled all over the US, showing what kind of house a million dollars would buy? Everything from a teeny, tiny flat to a bonafide mansion, depending on location.

Dallas, where I live, is somewhere in the middle. Eh. I guess I can't complain.

[Pacion]

...the commute to work would be about one and a half hours each way. That's too much time out of my life wasted in a train car.

I agree! For me too! In fact, anything over half an hour, I find painful and that includes from the time I step out of my front door to when I enter the building rather than just the actually travel time and delays! :lol:

Incidentally, something that has been evolving here in the UK, in addition to parents/siblings helping out those struggling to buy a property for the first time, is a group of friends or even strangers getting together to buy. There are a couple of websites I have heard off that "matchmake" prospective buyers and lenders are allowing upto 4 (or is it 5?) names on a mortgage, which they didn't do previously.

I would love for the UK government to do more but they just seem to be totally interested and unconcerned and merely bleeting (like sheep) about the high prices and the spiralling debt people are finding themselves in. Mortgages were generally for 25 years, a lender recently started offering 40 year ones!

[DancingJools]

I should mention that real estate taxes are a considerable factor when assessing total housing costs, and they vary greatly from one area to another. One reason I am reluctant to go for that house in Westchester County is that the real estate taxes are about one thousand dollars a month. That's almost equal to an extra 170 thousand dollars added to the price, if you consider the total monthly payments.
Taxes in other areas for a similar house can be as low as 400 a month. But the price of the house would be higher. It all adds up in the end.
My current real estate taxes are under 300 a month.

[pygmalion]

Yup. It pays to consider the taxes. (Wish I'd known that before I moved here two years ago.) For example, one of the itemized line items on my tax bill is school taxes, which you pay, regardless of whether or not you have kids in public school. $500 a month, just for that. Regardless. It kinda stinks. What!?! Not kinda. It stinks, IMO. :? (And, btw, that doesn't account for all the other line items on the tax bill. )

Of course, I live in a very nice, wannabe-upscale suburb. But still. $500 a month just for the privilege of sending somebody else's kids to school? Sheesh! I love my house, but I shoulda done my homework. :?

[Pacion]

Yup. It pays to consider the taxes. (Wish I'd known that before I moved here two years ago.) For example, one of the itemized line items on my tax bill is school taxes, which you pay, regardless of whether or not you have kids in public school. $500 a month, just for that. Regardless. It kinda stinks. What!?! Not kinda. It stinks, IMO. :? (And, btw, that doesn't account for all the other line items on the tax bill. )

Of course, I live in a very nice, wannabe-upscale suburb. But still. $500 a month just for the privilege of sending somebody else's kids to school? Sheesh! I love my house, but I shoulda done my homework. :?

Ooooh don't get me started on a single person having to pay higher taxes and basically paying for other people's kids! I love children and am all in favour of people having children. What I don't care for is the way single people have to pay more taxes and or, looking at it another way, get no tax deductions because they do not have children.

Who gets the real estate taxes? We have a tax on properties here (called Council Tax) that goes to the local government. Depending on where you live, you can pay a lot more than other areas, for a property that costs less. The "excuse"? One area has more "social services" requirements (health care, social housing, unemployment, policing etc) than another/different local government party. This tax is based on what the local council values your property at, in a benchmark year. I think that year is 1989/90 (?) before property values shot up. There have been discussions about changing the benchmark year but not sure whether that will happen anytime soon. Yes, some people have made "money" on their purchases, particularly in London, but it does not necessarily mean that they have that money in liquid cash to pay for a much higher tax, which goes up every year in any event.

[Alskling]

Just for a different take: we're in the process of buying a property in Italy. Very different from what we're used to in the U.S. Basic process:

Verbal offer and agreement: nice, but has no force in law, so is essentially meaningless if the seller decides to sell to someone else, which happened to us with the first property we offered on.

Binding preliminary sales contract and 20-30% deposit: this is the one that really counts, and since you have to put down a significant amount of money, which is forfeited if you back out, you better have done your homework, inspections, financing, etc., before you sign that piece of paper. The good thing is, if the seller backs out after countersigning, they have to refund double thedeposit. Understandably, if you make it to this point, it's basically a done deal (or so we hope, since this is where we are at the moment), since it causes considerable pain to both sides to break the contract.

Closing: cast of thousands gathers in a room to sign papers, hand over checks, keys, etc. In theory, you'd have buyer, seller, real estate agent, notary, and representatives of both banks if the seller is paying off a mortgage and the buyer is acquiring one. For the first place we were looking at, I think we figured out it would require 9 people to get the closing done.

The mortgage situation is different, too. Instead of banks throwing money at you as they do here in the US (or that's been my experience; I'm sort of horrified by how much most banks seem to think I can afford), the banks we were talking to would only consider salary, not other assets in the bank, and were extremely strict about loan-to-debt ratios. We were explicitly told, actually, not to mention other assets besides salary, because the bank might view it negatively: if you have the money in the bank, why would you ask for a loan?

Interesting.

[samina]

i live in verrrrrrry expensive locale, considering its in the middle of nowhere and one hour west of nyc. it's wealthy rural, year after year anywhere from 2nd-4th in the country for wealthiest counties (by avg income).

i just checked the latest stats: the average listing price is between $700K-800K for a 4 BR. there's also very little in the way of rental property -- almost no apartments, very few houses for rent.

having a high mortgage does not appeal to me on any level, so i rent, and have been very fortunate that i've found workable situations. but they have not been cheap.

have lived here as a single mother for a dozen years. not too many other single moms around -- i think they probly sell the house & move away. very nuclear-family-oriented here. and quite stepfordy, to boot... lol

[yippee1999]

I hope to buy my own place someday in NYC. On my own, I could probably afford something for say $400k or so. Since outdoor space is "essential" for me, in Manhattan, $400k would get me a small studio apartment with a patio (although it would take me some time to find the right place, as apartments with patios are much less common). I am also considering looking outside of Manhattan, in a borough called Queens, where there are areas with small detached houses, one next to the other, with small front/back yards.

But in the part of Manhattan where I live right now, and where I'd prefer to stay/buy a place, the brownstones are selling for $1.5M and up, so there's no way I could buy one of those on my own. For the time being, I am trying to save for a down payment, and since I was lucky enough to find a pretty cheap apartment to live in for now, I am able to put money aside every month.

As someone else here mentioned, I too have heard about casual acquaintances getting together to buy a place, as it has just become so impossible now, for so many people, to buy. So the only alternative for many folks is to pool their resources.

[samina]

Closing: cast of thousands gathers in a room to sign papers, hand over checks, keys, etc.

you mean, so it's not as easy as depicted in the movie "under the tuscan sun"????

there goes my run-away-to-tuscany-next-year fantasy

LOL

[Floyd]

I find the real estate market where I live confusing. A house in a bad neighborhood can sell for $400,000. By bad neighborhood, I mean the houses are poorly maintained and have peeling paint and unkempt yards.

With a 20% down payment, a 36% debt to income ratio, and a 6%, 30-year loan, a $400,000 house requires an annual income of about $100,000. It's hard for me to understand that somebody who makes that kind of money would want to live in a bad neighborhood or would buy that house and then not mow the lawn.

[Alskling]

you mean, so it's not as easy as depicted in the movie "under the tuscan sun"????

there goes my run-away-to-tuscany-next-year fantasy

LOL

Alas, no. :) But we're hoping it will all be worth it in the end, especially as we live out the second part, which is to rebuild the scenic ruin we're blowing our life savings to buy.

[Zhena]

Ooooh don't get me started on a single person having to pay higher taxes and basically paying for other people's kids! I love children and am all in favour of people having children. What I don't care for is the way single people have to pay more taxes and or, looking at it another way, get no tax deductions because they do not have children.


Don't think of them as "other people's kids" -- think of them as the people who are going to be sharing your world very soon. Unless you plan to die within 15 years, the kids who are in school now are going to be the doctors, bus drivers, salespeople, etc. you will have to deal with. If they don't get a decent education, you will deal with the consequences in one way or another. Education is not the responsibility of the parents, it is the responsibility of the community. Childless people have plenty of other monetary advantages compared to parents, and paying taxes for the future of your community is a small price to pay.

Just my two cents...

[Pacion]

Zhena, I hear your two cents and do value them. However, I disagree on two counts:

If they don't get a decent education, you will deal with the consequences in one way or another. Education is not the responsibility of the parents, it is the responsibility of the community.

Childless people have plenty of other monetary advantages compared to parents

This particular issue is up there with religion, politcs and another well known subject, therefore, I am going to bite my tongue and not say anything further ;)

[yippee1999]

I can see both sides of this .... I can understand why people with children don't feel they should pay taxes for the education of other people's children. But I also understand Zhena's point, which perhaps I would put this way:

I don't know that it's a community's "responsibility" to see that everybody's children (including those that are not their own) are well educated, but I do think we'd all agree that it's in "everybody's interest" that the future generations in their community are well educated. When children are poorly educated, at the worst end of the spectrum it can result in a lack of job opportunities, low incomes, poverty, abuse, crime, etc. And I totally agree that I think we need to think about who will be our future politicians, educators, businessmen, etc. Without good education, our communities will eventually decay.

[pygmalion]

i have lived here as a single mother for a dozen years. not too many other single moms around -- i think they probly sell the house & move away. very nuclear-family-oriented here. and quite stepfordy, to boot... lol


I'm feeling you, sis. Since I moved here, I could swear I'd died and gone to Stepford. :lol:

[pygmalion]

Zhena, I hear your two cents and do value them. However, I disagree on two counts:


This particular issue is up there with religion, politcs and another well known subject, therefore, I am going to bite my tongue and not say anything further ;)

It's not a simple issue, and I do see both sides. And yes, I do agree that a good educational system benefits the community. However ...

No. Maybe you're right, Pacion. I'd better leave it. :lol:

Oh. What the heck. It's a very contentious issue here, and one that has very little to do with parents versus non-parents. The incendiary issue, here, is homeowners versus renters. Which is why I raised it in this thread. (Not to start a debate on the relative benefits of parenthood versus a child-free life. Just for the record, I think that each has its benefits and its detriments, and that each state is one that people choose. So ...)

But, back to the topic, being a homeowener, particularly of a relatively nice home in this part of Texas, carries along with it what I consider to be a disproprortionately high tax burden -- because school tax is assessed based on so many dollars per thousand dollars of property value.

[Pacion]

It's not a simple issue, and I do see both sides. And yes, I do agree that a good educational system benefits the community. However ...

Yes, a good educational system benefits communities. However, if a child is not given values, ethics and discipline from HOME then in today's communities people not related to that child cannot say boo! We have had incidents of policemen/women and school teachers being reprimand and even losing their jobs (!!!) when they have called up children/teenagers for creating griffiti or harrassing elderly people. Many of these teenagers laugh at the law (UK law), and just basic *community* considerations of decency. As such, it is a topic that makes my blood boil, and why I would rather not get be drawn on it. I aim to set a good example in what ever I do including regarding litter (I will walk a mile with my Starbucks coffee cup, rather than just leave it on the pavement :lol:). However, don't tell me I have pay higher taxes for "community education" and then in the next breathe tell me that I can't gave your son/daughter a good hiding for harrassing an elder of that very same community - and if it isn't you (you figurately used) telling me to mind my own business, then it is your child in the form of a weapon... (vent over for now!)

so, where were we, house prices... :D

[mamboqueen]

The county I live in was dubbed the most "overpriced" housing market in the country by Forbes. Lovely. It's behind SF and metro-NYC in prices, but probably not by much. We were fortunate and bought our house about 14 years ago, so we actually have a good deal of equity. People selling their houses in my neighborhood are not doing well *at all* these days...in fact there's a glut of houses on the market and people are having to drop their prices. It's probably a good time to buy, but not if you have to sell first.

Real estate taxes here are moderate, especially compared to NY/NJ. I have a friend who is looking to move to Westchester and she's completely floored at the prices and the taxes.

I want to move south. We could sell our house, buy a slightly bigger house and have enough left over for a nice college fund for the kids. And we could sell all three of our snowblowers!

Edit: I'd say the average 4BR house in my area is going for $650-700K, on average. And that's not a house with a cherry kitchen and granite countertops.

[Pacion]

Sigh. In today's UK papers

Half of all would-be first-time buyers are being priced out of their dream of home ownership because of the continuing housing boom, new research has revealed.

Experts have identified 78 'crisis' areas where young professionals cannot afford even the most modest starter home.

The districts - where people need at least five times the average salary to buy - stretch from Cornwall to Yorkshire, showing that the problem is not only confined to London.

Many of the worst affected areas are in rural or seaside locations, where the trend for wealthy families to purchase second homes has driven up prices and made property unaffordable for local people.

In eight of the worst affected areas more than 50 per cent of young workers, aged 20 to 39, no longer earn enough money to buy their own home.

The insurmountable gap between their income and house prices means as many as 250,000 young people are being frozen out of the market each year.

Lenders have responded by offering mortages up to seven times a buyer's salary and are loaning up to 125 per cent of the value of the house.

Not sure if it is still the case, but one of the Channel Islands off of England, Guernsey - from recollection - a local had priority in terms of buying a property. Guernsey, being a tax haven and very popular with "the wealth"/people who have made a lot of money and then wanted to retire was at risk of the newcomers buying up the property. They put in place a policy whereby if say I was a local and wanted to sell my house, it would:

a) have to have been on the market for at least a year before a non-local could buy it
b) the overseas buyer would have to pay a premium of 2x (or 3x) the price
c) if an overseas buyer ended up buying my house, I did not get the difference between the selling price and the premium - the Guernsey authorities got it

[All of this is from recollection of about 10/15 years old so don't quote me! :D]

I read about a year ago, one of the seaside areas of England was trialling something like Guernsey's system because their young people were being priced out. I have often wondered why the UK government did not look at doing something like that as a whole.

[mamboqueen]

I honestly don't know how young people starting out today can afford homes, at least in the part of the country I'm in. On the other hand, many people don't bat an eye at dropping $30,000 on a wedding...which IMO, would be better spent on a down payment on a home.

The only somewhat good thing is that the job situation here is pretty good. I remember when I first came to Massachusetts and worked as a real estate paralegal...my first two years I was working on closings, and the next two on foreclosures. Very high unemployment rate.

[yippee1999]

Good point mamboqueen (on the amounts some people spend on weddings). Maybe in SOME instances, the issue is people thinking they should have everything in life... they don't want to have to make sacrifices. Maybe if SOME people didn't have that Escalade, and maybe if they didn't spend "3 months salary on a ring", or $xxxx on a fancy reception, or that fancy new widescreen TV, etc., maybe then some folks would be in a slightly better position to buy a place. I'm not saying this is the case in all instances. Housing prices have clearly gone through the roof. But I think some people perhaps need to cut down in other areas of their life, if they truly want to buy a home.

[mamboqueen]

Good point mamboqueen (on the amounts some people spend on weddings). Maybe in SOME instances, the issue is people thinking they should have everything in life... they don't want to have to make sacrifices. Maybe if SOME people didn't have that Escalade, and maybe if they didn't spend "3 months salary on a ring", or $xxxx on a fancy reception, or that fancy new widescreen TV, etc., maybe then some folks would be in a slightly better position to buy a place. I'm not saying this is the case in all instances. Housing prices have clearly gone through the roof. But I think some people perhaps need to cut down in other areas of their life, if they truly want to buy a home.

Well, it's just completely insane to me to spend thousands upon thousands on one day. My wedding was great, but it was like an out-of-body experience for us...and over in a snap. The planning of it alone was stressful and exhausting. If I had to do it over again, I'm sure we'd both have been happy to go off to an island and get married and sock the money away. But, everyone's different.....

[Pacion]

Housing prices have clearly gone through the roof. But I think some people perhaps need to cut down in other areas of their life, if they truly want to buy a home.

Or, they decide that buying a home is out of their reach, so splurge on everything else? ;)

[Laura]

Well, it's just completely insane to me to spend thousands upon thousands on one day.
I agree...when I got married there were magazine articles trumpeting that the "average" wedding in the US cost about $30k. Well, we spent about 1/5 of that on our wedding, including the honeymoon. And now that he is divorcing me, I'm doubly glad we didn't overspend on the wedding!

[mamboqueen]

There is such a cottage industry in both wedding and babies. It's absurd. I know a lot of people like to have that special day, but it really doesn't have to be grossly expensive for it to be special. It doesn't have to be expensive at all.

I just want to vomit when I hear about these showbiz folks who pay $2 mil for their wedding only to be divorced 2 years later....that money could have done a lot of good elsewhere.

[Peaches]

I honestly don't know how young people starting out today can afford homes, at least in the part of the country I'm in. On the other hand, many people don't bat an eye at dropping $30,000 on a wedding...which IMO, would be better spent on a down payment on a home.

The only somewhat good thing is that the job situation here is pretty good. I remember when I first came to Massachusetts and worked as a real estate paralegal...my first two years I was working on closings, and the next two on foreclosures. Very high unemployment rate.

I don't know how young people can buy a house now. DH and I have often discussed how thankful we are that we got into the housing market when we did, b/c otherwise there'd be no way. I've got friends in this situation now. College grads, reasonably good jobs, dual income a lot of the time, and they can't afford a house.

It's a heckuva catch-22. If they go with the small down payment, they can't afford the mortgage payments, but there's usually no way they can save enough for a substantial down payment. Meanwhile, rent for a 2-bedroom apartment is about as much as my mortgage. It's insane. And I'm not even talking about great real-estate locations.

My brother's solution is to take a contract in Iraq for a year...

[mamboqueen]

My brother's solution is to take a contract in Iraq for a year...

Ick. My brother did it the first time around...for a few years...also to Saudi. We didn't rest real easy, but he's around to talk about it. And back then, no e-mail...took weeks and months to hear anything. I'll keep him in my thoughts, Peaches.

[Pacion]

Wow Peaches. Best wishes too.

[Joe]

I don't know how young people can buy a house now. DH and I have often discussed how thankful we are that we got into the housing market when we did, b/c otherwise there'd be no way.
And even then you guys live out in BFE!

[Peaches]

*lol*

We didn't start out here. We started out MUCH closer to civilization. Why we live where we do is a long story. Part of it has to do with house prices, but only a bit.

Of course, there's no way we could have afforded our current house where we used to live. We know that for a fact, since the builder was building the same model in our old location--for $150k more.

[salsachinita]

Ooooh, I'm late on this thread......

In general, housing prices in Australia had enjoyed a boom for what seems likke the longest boom (around a decade) anyone remembers; due to historically low interest rate & banks becoming more flexible in lending. There was also the First Home Buyer's grant, which can save you at least $7k (which normally just covers the stamp duty etc).

These days it's very common to see people commiting themselves to 90-100% home loans. And yes, we are seeing some defaults/mortgage auctions around, but the chance of snapping up a bargain is still rare.

The doom had been forcasted for sometime. Eventhough there are signs of Melbourne market softening, it has not really affected the inner city area where we live. I believe Sydney has experienced some price drop (but they have also endured some pretty steep price rise in the last few years).

Our renovation is finally all completed, and it's soooooo satisfying to live your own vision. While it's no mansion, I bet it has to be one of the best in its own category (1960's Solid Brick low-rise two bedroom apartment) :raisebro: !

I bought it in '99 for $190k (which was certainly no bargain); and our current valuation (took place before the renovation was completed) is $300k, conservatively. We are about 6kms out of the city centre & 3 kms from the beach.....

Apart for dancing, property is my other passion. Still learning.

We are waiting for the price to drop a bit further (and pay back our current loan a little more) before doing any investment project. Exciting times ahead :cool: !

[DancinAnne]

I am now feeling quite fortunate to live in a smaller city in the midwest. My first house cost $70k about 3 years ago. Turned it into a rental and bought another house with new hubby. Older home, bigger than either of the houses we already owned (turned his into rental as well), cool historic neighborhood and we thought we paid alot at $160k. It needs a little TLC, but is truly a lovely home. I think we'll stay here for a bit! Though the sacrifice is that there are not as many dancers and social events as we'd like. But then, it's just a few hours or so to 3 or 4 major cities...

As for weddings, we ran away. We did do a reception for about 200, but I think we did a great job keeping costs down. We had nowhere near $30k in our wedding, honeymoon and reception. Thankfully!

[Sagitta]

I don't know how young people can buy a house now. DH and I have often discussed how thankful we are that we got into the housing market when we did, b/c otherwise there'd be no way. I've got friends in this situation now. College grads, reasonably good jobs, dual income a lot of the time, and they can't afford a house.

It's a heckuva catch-22. If they go with the small down payment, they can't afford the mortgage payments, but there's usually no way they can save enough for a substantial down payment. Meanwhile, rent for a 2-bedroom apartment is about as much as my mortgage. It's insane. And I'm not even talking about great real-estate locations.

My brother's solution is to take a contract in Iraq for a year...THere are quite a few good first-time homebuyer programs out there. My friend in putting money away in one such program and in return her investment of maybe 2000 over 12 months will be turned into about 7000 (difference given by govt. agency) to put into buying a house. The income limits for this are quite high so one doesn't have to be low low income....she's a starting teacher making 40K I think...Maybe the tlimit is 50/55K....

[Sagitta]

Ooooh, I'm late on this thread......
Our renovation is finally all completed, and it's soooooo satisfying to live your own vision. While it's no mansion, I bet it has to be one of the best in its own category (1960's Solid Brick low-rise two bedroom apartment) :raisebro: !

I bought it in '99 for $190k (which was certainly no bargain); and our current valuation (took place before the renovation was completed) is $300k, conservatively. We are about 6kms out of the city centre & 3 kms from the beach.....

Apart for dancing, property is my other passion. Still learning.

We are waiting for the price to drop a bit further (and pay back our current loan a little more) before doing any investment project. Exciting times ahead :cool: !

190k for a 2 bedroom? How big? That's a lot, but with the price appreciation you definitely are sitting pretty! And brick definitely is good. I myself am looking into using my current home and renting out to people for maybe graduations etc (while I go on holidays) and using that money to get another place. Maybe I'll buy a piece of land and build a home on it...maybe a pre-existing place.

[mamboqueen]

We have a brick house and I'd be hardpressed to buy a non-brick one if I ever moved. All I hear from my neighbors is that they have to repaint their houses every 7 or so years to the tune of $8,000+ (there's some big houses in the development behind me).

[Sagitta]

Oh... I just paint the house myself. A 7k job works out to maybe 300? Just supplies...

[mamboqueen]

That's pretty good. It usually takes the pro's (about 2-3 of them) 3-4 days to paint one of these jumbo homes. I can't imagine one of my neighbors doing it themselves....they'd probably rather spend the 8 grand and have their week in Aruba...*LOL*

[Peaches]

THere are quite a few good first-time homebuyer programs out there. My friend in putting money away in one such program and in return her investment of maybe 2000 over 12 months will be turned into about 7000 (difference given by govt. agency) to put into buying a house. The income limits for this are quite high so one doesn't have to be low low income....she's a starting teacher making 40K I think...Maybe the tlimit is 50/55K....

Hmmm...that's a program I hadn't heard of...that's an interesting one.

It's starting to get better here, in the sense that housing prices have leveled off. But, for a while, housing prices were jumping so quickly even a program like that wouldn't have helped much. I mean, the government kicking in $5k over a year doesn't help much when housing prices were jumping $50k in 6 months, ya know?

DH and I bought our first with a special program for first-time home buyers--it let us get in with 2% down. We were fortunate to be able to still afford the payments. But friends are looking at those programs now, and although 2% on $250K is a reasonable $5000 down payment (which is about reasonable for a starter townhouse or condo), it leaves them struggling with a mortgage of $1300+mortgage insurance+homeowners insurance+tax escrow. By the time you're finished you're looking at an $1800 payment, min, and a lot of people just can't quite handle that.

OTOH--with rent increasing the way it is, a lot of people can't save enough for a down payment that would keep their total monthly payments in line comparable to their current rent. I mean, when things are sorta snug to begin with, it's a bit hard to come up with $50k, which would be the traditional 20% down payment on a $250k house.

Never mind all the closing costs and whatnot. Which is a whole 'nother problem.

It's getting to be a very sad situation. People just keep moving further and further away from civilization to be able to afford anything, sprawl increases drastically, traffic gets horrendous, and it's just one huge mess.

[tj]

Having just moved, been exploring the area for the past few weeks, and according to one of those populur realtor websites, there are several 100's of houses between $150k-250k in the town that I'm currently working in... very tempting!

[SPratt74]

I have worked at the Board of Realtors this summer, and I noticed that the prices had gone up and that no one was buying. Realtors were complaining, but not only because of that though, all of their paperwork had changed, and I was responsible for making sure that everyone had the correct contracts (try dealing with around 3000 realtors). I had to sit through five classes hearing their lawyer go over the contracts with the realtors, and I tell you make sure to read your contracts before you buy. Make sure you understand about the other costs as well as the overall price. ;)

[salsachinita]

190k for a 2 bedroom? How big? That's a lot..

We are talking about Australian dollars though :raisebro: ...........

*what was the exchange rate again? Around 75c USD per $1 AUD....?*

[tj]

We are talking about Australian dollars though :raisebro: ...........

*what was the exchange rate again? Around 75c USD per $1 AUD....?*

Just looked it up - according to this website. (http://www.x-rates.com/d/AUD/USD/graph120.html) It's at around 1.28 Australian dollars to a US dollar.

So that's about $150k US dollars. Reasonable for a place inside a city. The going rate for a one bedroom in Arlington, VA (just outside DC) is probably near that.

[Joe]

$150k will barely buy you anything in the DC area. There are only 2 condos currently listed under $160k in Arlington...

[Sagitta]

WEll, then I'm happy that I am where I am. A house that I can afford, plus an enjoyable job. :-)

[Peaches]

$150k will barely buy you anything in the DC area. There are only 2 condos currently listed under $160k in Arlington...

My thoughts exactly. I'm out in the sticks, and $150k still doesn't buy much.

[cornutt]

We have a brick house and I'd be hardpressed to buy a non-brick one if I ever moved. All I hear from my neighbors is that they have to repaint their houses every 7 or so years to the tune of $8,000+ (there's some big houses in the development behind me).

Tell me about it. The house we used to live in was about half brick, half siding with wood trim. Nearly all of the wood rotted out over the ten years we lived there. I had to replace every bit of the soffit and fascia, and nearly all of the wood trim, and of course it all had to be painted... this all after an earlier paint job, so we painted twice in ten years. And of the house's 13 wood windows, ten of them rotted out or lost their seal and had to be replaced, including a very expensive moon window. (The three that didn't were all protected by porch overhangs.)

The exterior of our new house is all brick, stucco, and m e t a l. No exposed wood anywhere other than the deck flooring. (We were going to use composite for that, but it was just too expensive. Maybe later.)

[cornutt]

My thoughts exactly. I'm out in the sticks, and $150k still doesn't buy much.

Where I live, $150K will buy you a decent starter home (about 1200 sq ft) in an older neighborhood in town, or a somewhat larger new home (~1600 sq ft) further out. Seven or eight years ago, you could find a starter home in a decent edge-of-town neighborhood for $70K, but now it's more like $100K. Real estate inflation here has leveled off for the moment, but some people think it will pick up again this year.

[mamboqueen]

Tell me about it. The house we used to live in was about half brick, half siding with wood trim. Nearly all of the wood rotted out over the ten years we lived there. I had to replace every bit of the soffit and fascia, and nearly all of the wood trim, and of course it all had to be painted... this all after an earlier paint job, so we painted twice in ten years. And of the house's 13 wood windows, ten of them rotted out or lost their seal and had to be replaced, including a very expensive moon window. (The three that didn't were all protected by porch overhangs.)

The exterior of our new house is all brick, stucco, and m e t a l. No exposed wood anywhere other than the deck flooring. (We were going to use composite for that, but it was just too expensive. Maybe later.)

Oooh, but I hear those composite decks are worth their weight in gold -- perhaps where I live moreso than where you live, though. I'd be restaining every 2 frikkin' years here. The other upside with stone is the insulation. We stay pretty cool in the summer and pretty warm in the winter (although having a wood stove helps tremendously). Yes, we do have to paint the wood trim from time to time, but honestly, it's really not too bad compared to what my non-brick friends go through.

[cornutt]

Oooh, but I hear those composite decks are worth their weight in gold

I hear you. Northern Alabama is the dry rot capital of the world (well, next to South Florida). It just wasn't in the budget, and we had to get something out there to pass inspection. So we got the typical PT pine. From previous experience, I expect it will go 5-6 years before it starts having major problems, and maybe at that time we can replace it with composite. I do know one thing: after seeing the buffoons who did my mom's deck, I'm doing the work myself. They couldn't understand the concept of fastening the composite from the underside. Instead, they top-screwed it. Besides being unattractive, there's also the fact that the manufacturer's instructions say explicitly not to do that, so they have invalidated the warranty. "But that's the way we always do it!" The things you see, when you haven't got a gun... :headwall:

[Joe]

Trex!

[salsachinita]

Just looked it up - according to this website. (http://www.x-rates.com/d/AUD/USD/graph120.html) It's at around 1.28 Australian dollars to a US dollar.

So that's about $150k US dollars. Reasonable for a place inside a city. The going rate for a one bedroom in Arlington, VA (just outside DC) is probably near that.

Thankyou, tj :D !!

Bear in mind that Aus dollar was having a real tough time around '99..... almost half the value of US dollars :shock: !!! I remember spending the (northern hemosphere) summer in the US..... my money was worth so little, I was living on water, cornflakes & watermelon in order to afford salsa at night (cover charge & cab fee) :( .........but it was sooooo worth it ;) !

[tj]

Joe, Peaches,
Re: $150k

Weird, when I first did a search on Realtor.com, it came up with more than 2 entries, which is why I posted that in the first place, but now that I just checked again, I got only two, like what Joe said. Oh well, maybe I put in Arlington VT or something, lol.

SC,
Re: Australian dollar vs US dollar
I think the US dollar has been falling against just about every currency over the past 5 years or so. But unless you were buying a lot of imports from the US, I don't think it would've affected your situation money-wise? Which I guess means, you've got a better paying job now?

Regardless on the reasons, congrats on the better situation!

So a question for all of you folks: if you were in a situation where you moved around a lot due to work, would you tie yourself up with a house even if you could get a nice little house for around $150k? I think that sums up my situation.

[DancinAnne]

Would you be renting the property out? And if that is the case, will you be around enough to manage it? You can also hire someone to manage it... at any rate, I think real estate is always a good investment, especially if the location is good. Also good for tax breaks if you operate it at a 'loss.' My H and I have 2 rentals in addition to the house we live in and there has been a small time investment (repairs, maintenance and such), but still worth it, as the mortgages are both being paid down and the locations are good enough that the properties are appreciating.

Hope that helped!

[Sagitta]

Interesting. Also factor in having a place for 5 years tj. I used to scoff at the notion that one should be prety sure that one will want a place for 5 years, but I ran some calculations and for my place I need to wait for the 5th year to be making money on it's resale, but if I stay for 10 I'll be probably making 30 grand without counting appreciation. I had to throw in about 8 grand of repairs last year, plus I want to do some painting etc and that just eats away any appreciation I have the first 5 years or so.

[DancinAnne]

No doubt real estate is a long term investment. But it is pretty solid if the location is good. My first house appreciated $20k in 3 years with little needed in maintenance and repair. Maybe $3-4k or so. My investments don't look so hot. If the investment isn't needed or important to you, then I would say owning a house might be more trouble than it's worth. IMHO.

[tj]

Definitely some good points. Thanks, all.

Re: renting
Yes, it's an option, although if I ended up renting it, that would mean that I left the area. From what I understand, there are companies that, for a relatively small fee, will handle the renting, etc, and just charge you a fee (a percentage of the rent) to handle most of the administrative things, including handling the repairs, and just sending you the bill for it.

Re: 5 years - summing up my thoughts:
Well, obviously, it depends, of course. Some factors to consider - back when I last had a mortgage, like 90%+ (of the first few years) went towards PITI meaning that I could deduct it against my taxes. That's almost like getting 1/3 of that back.

If the value of the house/property goes up, that's gravy, but given that the market has gone up a lot in recent years, that's a risky proposition, and shouldn't be counted on over the next few years.

Factor in the difference between the mortgage and my current rent. There's a decent chance that given tax breaks, etc, that it could be less than my current rent.

But I also have to consider that if I sell it, I'll be sending about 5-7% towards the agents. Needs to be weighed vs keeping it and renting it out.

...I'll probably end up buying. I'm in no rush, however.

[salsachinita]

......I guess...you've got a better paying job now?

Regardless on the reasons, congrats on the better situation!

:friend: Thankyou, tj!! I'm much better off financially, now that I've returned to full time work. Of course, that means I had to given up my all salsa-no work life :roll: ...........

*I wrote this in Sept 2004*:

MY life: Sleep late, have my toasted muesli soaked in soymilk with fruits, DF a little, make quilts/write instructions, run errands/shop, catch up with friends over lunch/coffee, debate a little salsa-related issues in the street, home to have dinner with my family, than out dancing salsa finished by a bite to eat with fellow dancers/muscians. Drop everyone home, then get some sleep before the day starts again.

http://www.dance-forums.com/showthread.php?t=4821

Ok, back to property. It is my choice of investment (because I love it).

Wasn't it Robert Kiyosaki ("Rich Dad Poor Dad") who said something like: 'you have to love the kind of invemsment you choose, because you will take better care of it'.....?

Just like the way we learn the dance of our choice. Your heart has to be there (so you stay motivated to learning & delveloping).

I'm appliying the same attitude I have been for salsa......which means I've also joined a forum called propertyinvestment.com.au (....ok, I'm bias. Nothing beats DF & SF), where I still feel like a newbie with two left feet & poor timing :mrgreen: ..........

tj, you would know best what to do. If you are happy to put in some time & effort to research (location, tax benefits, type of property/loan, management strategy etc), there is no reason why you couldn't own at least one property in each place you worked, as long as it makes dollar sense :cool: .

[salsachinita]

....I remember spending the (northern hemosphere) summer in the US..... my money was worth so little, I was living on water, cornflakes & watermelon in order to afford salsa at night (cover charge & cab fee) :( .........but it was sooooo worth it ;) !

BTW, the above described my vacation in US, mid '99. Normally there would be no reason for dollar exchange rates to affect my day-to-day expenses :p .

[Pacion]

Just more "depressing news" in the papers today, re UK and mortgages :?



Britain's booming housing market is forcing people to take out record mortgages totalling a staggering £1.1 billion every day.

With house prices rising up to £75 a day in some parts of the country, people are risking the family finances taking out the biggest-ever home loans.
New figures reveal home-buyers typically borrowed about £142,000 to buy a home in November, compared to just £45,000 a decade ago. For a person earning the average salary of £23,500, this is six times' their salary, a staggering multiple which puts people under intense pressure.


In London, it is much more than that - I recall figures of £200,000+ versus £87,000 over that same period? Think average salary of £23,500 or even £30,000 and the situation looks even worse for London!

[Dave]

In London, it is much more than that - I recall figures of £200,000+ versus £87,000 over that same period? In terms of ratio, London's really not that different - it's just even 10 years ago London prices were scary. Factor in salary inflation and the fact interest rates are lower now and the "real term" rise in prices is probably a factor of about 1.3 - 1.4. Which is still pretty bad, given most considered the prices ridiculous in 1996.

[Pacion]

Dave, I still do not think salaries have risen as much, interest rates aside. Yes, salaries in London have always been higher, but in the 10 years, depending on your job, they have not risen in the same way.

I know someone (newly qualified lawyer) who sold and bought another two bedroom apartment in a very nice part of London back in 1989/90 (both apartments were a couple of blocks from each other). Today, a newly qualified lawyer, same level and all other things being exactly the same etc etc CANNOT afford those same two bedroom apartments. Yes, prices have risen outside of London and there are also big affordability issues, but I don't think the difference is as marked (apart from say the "popular resort areas" where certain Londoners have been buying 2nd/3rd weekend homes).

[Pacion]

Looking at it another way:

The national minimum wage:
£5.05 per hour from 1/10/05 to 30/09/06
£3.60 per hour from 1/04/99 to 30/09/00

Someone earning £3.60 per hour, could more likely afford a property £87,000 than someone earning £5.05 and a £200,000+ property. (This is not even looking at how other bills have increased.)

[Dave]

Dave, I still do not think salaries have risen as much, interest rates aside. Yes, salaries in London have always been higher, but in the 10 years, depending on your job, they have not risen in the same way.Which is exactly what I said: I said houses are about 1.3 to 1.4 times more expensive in real terms (i.e. cost of mortgage relative to salaries). So salaries have not kept pace, but the difference is smaller than the base figures might suggest.

I know someone (newly qualified lawyer) who sold and bought another two bedroom apartment in a very nice part of London back in 1989/90 (both apartments were a couple of blocks from each other). Today, a newly qualified lawyer, same level and all other things being exactly the same etc etc CANNOT afford those same two bedroom apartments. In general, people buy pretty close to the boundary of what they can afford, so all this really tells you is that the flats are less "affordable" than they were. (Which, again, I agree with). Also, in 1989/90 the housing market was still recovering from the price-crash caused by the whole ERM (and high interest rates) debacle.

Yes, prices have risen outside of London and there are also big affordability issues, but I don't think the difference is as marked (apart from say the "popular resort areas" where certain Londoners have been buying 2nd/3rd weekend homes).Seems to me prices everywhere are pretty high now. It used to be a standard joke that people living in London would visit other places and be drooling over the house prices. Now in most areas I look and think "well, it's less, but it's not that much less". There are various links showing house affordability (prices v.s. typical local income) for the UK regions, and apparently there are a lot of places worse than London.

As for the minimum wage figures: they show a yearly increase of about 5.5%, so extrapolating back 10 years, you get £2.93/hr or so. So 10 years ago, £80000 was about 27300 hours at minimum wage. £200000 is 39600 hours. So by that measure, houses are 1.45 times more expensive. Now factor in the change in interest rate (it's cheaper to borrow now) and I think you'll find my factor of something between 1.3 and 1.4 is pretty much right.

In case it's not clear: I think houses in London 10 years ago were stupidly unaffordable, so for them to be 30% more unaffordable now is crazy. But it's "only" 30%, not the 200% many people seem to think.

[tj]

:friend: Thankyou, tj!! I'm much better off financially, now that I've returned to full time work. Of course, that means I had to given up my all salsa-no work life :roll: ...........

http://www.dance-forums.com/showthread.php?t=4821


Ah, ok. I think I always had the impression that you were working, so now I know.

tj, you would know best what to do. If you are happy to put in some time & effort to research (location, tax benefits, type of property/loan, management strategy etc), there is no reason why you couldn't own at least one property in each place you worked, as long as it makes dollar sense :cool: .

So true, sc. Plus it would give me one more reason to go back and visit these cities, even if I wasn't working there at the time.


Re: Property values/mortgages

Not sure how true it is, but I've heard that since the property values in Japan were so outrageously high, that it's typical for a family to get a 100 year mortgage in order to keep the monthly payments down?

[Pacion]

...extrapolating...

I was following you until I came across that word ;) (anything beyond "business maths" is not my forte :( )

Also, in 1989/90 the housing market was still recovering from the price-crash caused by the whole ERM (and high interest rates) debacle.

Wasn't the ERM/high interest rate thing in the early 90s, when interest rates went up to 15% literally overnight and the £ was suspended (I think suspended is the term)? I remember I was visiting a friend at the time and we hadn't met until 1991 - another friend was due to travel to the UK and couldn't get £s to buy...

[Dave]

Wasn't the ERM/high interest rate thing in the early 90s, when interest rates went up to 15% literally overnight and the £ was suspended (I think suspended is the term)? ...Googling... Yes, you're right. For some reason I had 1987 in my mind, but it was 1992. Actually 1990 was only a little past the peak, which invalidates my point somewhat. Sorry.

With the ERM crash, interest rates went from 10% to 15% in a day or two. (Think it was inside 24 hours, but two working days), but didn't stay at 15% for many hours. So it's interesting looking here (http://www.moneyextra.com/dictionary/Interest-rate-history-003455.html) that apparently interest rates were consistently around 15% in 1990 though - I certainly don't remember that!

[cornutt]

With the ERM crash, interest rates went from 10% to 15% in a day or two. (Think it was inside 24 hours, but two working days), but didn't stay at 15% for many hours. So it's interesting looking here (http://www.moneyextra.com/dictionary/Interest-rate-history-003455.html) that apparently interest rates were consistently around 15% in 1990 though - I certainly don't remember that!

USA interest rates were higher than that through most of the '80s up until about 1990. I bought a house in 1990 (my first house) and I was overjoyed to get a mortgage at 10%. Two years later, rates were under 5%.

[cornutt]

I know someone (newly qualified lawyer) who sold and bought another two bedroom apartment in a very nice part of London back in 1989/90 (both apartments were a couple of blocks from each other). Today, a newly qualified lawyer, same level and all other things being exactly the same etc etc CANNOT afford those same two bedroom apartments.

That's kind of like the situation that existed in Silicon Valley in California in the '80s. While I was living in Ft. Lauderdale, circa 1985, I knew of a couple that moved from there to Mountain View to go to work for Sun (both of them). In Ft. Lauderdale, they had a small but comfortable two-bedroom house in walking distance from the beach. (If you know the area, it was in Lauderdale-by-the-Sea.) When they moved to Mountain View, they not only couldn't afford to buy anything, but just to rent a two-bedroom condo they had to take a roommate. They moved back in a year.

[Pacion]

...Googling... Yes, you're right. For some reason I had 1987 in my mind, but it was 1992.

Also... Googling... :lol: perhaps some of the reasons you remember 1987 - the stock market crash and the hurricane (and Michael Fish's apparent misquote that there would be no hurricane)



[I]1986 - London Stock Exchange's "Big Bang" - trading moved out of the pits off the market floor and on to the telephone and computers.
1987 - October - Black Friday 16/Monday 19 - the stock markets crashed, second in size only to the 1929 Wall St crash. (The Friday also saw a hurricane sweep through Southern England.)
1992 - October - Black Wednesday; sterling drops 16% in value and effectively withdraws from the ERM

Michael Fish:
One thing he is looking forward to is setting the record straight about his infamous evening forecast on October 15th 1987, the night of ‘the great storm.’ During his broadcast, Michael said; “Earlier on today apparently, a lady rang the BBC and said she heard that there was a hurricane on the way. Well don’t worry if you’re watching, there isn’t.” However, he wasn’t talking about the UK at this point and was referring to a story in the News.

Explains Michael; “My remarks referred to Florida and were a link to a news story about devastation in the Caribbean that had just been broadcast. The phone call was a member of staff reassuring his mother just before she set off there on holiday! I did say, ‘batten down the hatches there’s some really stormy weather on the way’ – if the full clip is used all would be revealed.”

[Pacion]

I bought a house in 1990 (my first house) and I was overjoyed to get a mortgage at 10%. Two years later, rates were under 5%.

I feel for you! Hopefully it is a much better % now.

[Pacion]

Dave, just saw in the papers today re London, the average house price is now £287,000 (£87,000 more than I recalled!) I googled and seems the average London price was £93,999 in 1990. (I wasn't too far off.)

In London, it is much more than that - I recall figures of £200,000+ versus £87,000 over that same period? Think average salary of £23,500 or even £30,000 and the situation looks even worse for London!

There are places outside of London where the average price is >£300,000 but is probably the 'trader belt' ;) where the wealthy financial traders live and commute to London.

Oh, and houses selling for >£10 million do not help the 'average' figure...

[cornutt]

I feel for you! Hopefully it is a much better % now.

Oh, I've long since sold that house. But thanks.

[Dave]

There are places outside of London where the average price is >£300,000 but is probably the 'trader belt' ;) where the wealthy financial traders live and commute to London.The thing is, there are various "out of band" factors that mean averages don't mean an awful lot.

For example, you talked about minimum wage, but obviously no-one on minimum wage is going to get a mortgage (for a house in London, at any rate), so without being harsh, they don't really enter into the equation. Conversely, the "rich end" seem to be getting 10% rises year-on-year. It's the "bedrock of society" workers - nurses, teachers, etc. who are really getting squeezed. London weighting for those people is more than somewhat inadequate.

But there's a similar thread going on on another forum I'm on, and the "mortgage = 1/3 of income after bills" rule of thumb still seems to be holding reasonably true. Lower interest rates and moves to people buying jointly, taking interest only mortgages etc. mean the outgoing hasn't actually risen that much.

The question is how fragile it all is. People taking out mortgages on 6 x joint income seems a huge risk - obviously that's unsustainable if one person loses their job (or gets pregnant - says the man whose wife is due in 4 weeks!). Ten years ago you wouldn't have got half that.

[cornutt]

The thing is, there are various "out of band" factors that mean averages don't mean an awful lot.


Apologies for a Yank butting into this, but isn't London itself pretty much out-of-band? I got the impression from talking to people when I was there a few years ago that building in London is highly restricted, and the result has been an increasing populating competing for a finite supply of real estate.

[SPratt74]

Apologies for a Yank butting into this, but isn't London itself pretty much out-of-band? I got the impression from talking to people when I was there a few years ago that building in London is highly restricted, and the result has been an increasing populating competing for a finite supply of real estate.

Well, building in London is tough, because where can you build really? I don't know if you've ever been to London, but I don't see how many other buildings can go into London personally. And Dave is right about the expense. From my friends that have lived in London and that live there now, you have to be really wealthy to get a house or a flat I should say in London. My brother lived with roommates during his time in London, and the house itself wasn't that great, but it was expensive. The only way that he got in was because of his job. If someone like me were to go in with nothing to my name, then you are better to know someone (which thankfully I do if I do decide to go back), or you might as well forget it. They aren't going to give you anything (unless you have a pretty great job, and just a normal job isn't going to cut it).

[Dave]

Apologies for a Yank butting into this, but isn't London itself pretty much out-of-band? I got the impression from talking to people when I was there a few years ago that building in London is highly restricted, and the result has been an increasing populating competing for a finite supply of real estate.Yes, London is "out-of-band", though less so than you might think. My comments were about who was "out-of-band" when considering the (already unusual!) population of London. It's a bit like my understanding of Silicon Valley: there's a sizable "elite" whose salaries are rising way above the national average - they are the ones driving the house prices, and although they'd like houses to be cheaper, they are keeping pace with prices, more-or-less. (In London, the "elite" work in the financial sector, traders etc. In Silicon Valley they are more likely to be in high tech companies. Note that the average London salary for someone working in "the city" is now about $200K, so $1M for a house is actually affordable). Then there's those who have "normal" jobs, (such as teachers): they'd like to own a home in London, but it's not realistic, and they're getting forced further and further afield. Then there are those on minimum wage - probably sharing 4 or 5 to a house in a grotty location, and not likely to ever be able buy somewhere unless their circumstances change.

So the real interest is in the middle - they're the ones having to judge margins: if they go for an extra $50K on the mortgage, are they going to end up living on bread and water if interest rates change?

As for building, it's not so much that it's restricted; the problem is pretty much everywhere is built on, while, ironically, people are wanting bigger and bigger houses. Expectations are changing. People expect to have a room for the baby, a playroom for the baby, and a spare room. 20 years ago, a 2 parent family with 1 child would have a 2 bed flat; now they'd be aiming for a 4 bedroom house.

[SPratt74]

Yes, London is "out-of-band", though less so than you might think. My comments were about who was "out-of-band" when considering the (already unusual!) population of London. It's a bit like my understanding of Silicon Valley: there's a sizable "elite" whose salaries are rising way above the national average - they are the ones driving the house prices, and although they'd like houses to be cheaper, they are keeping pace with prices, more-or-less. (In London, the "elite" work in the financial sector, traders etc. In Silicon Valley they are more likely to be in high tech companies. Note that the average London salary for someone working in "the city" is now about $200K, so $1M for a house is actually affordable). Then there's those who have "normal" jobs, (such as teachers): they'd like to own a home in London, but it's not realistic, and they're getting forced further and further afield. Then there are those on minimum wage - probably sharing 4 or 5 to a house in a grotty location, and not likely to ever be able buy somewhere unless their circumstances change.

So the real interest is in the middle - they're the ones having to judge margins: if they go for an extra $50K on the mortgage, are they going to end up living on bread and water if interest rates change?

As for building, it's not so much that it's restricted; the problem is pretty much everywhere is built on, while, ironically, people are wanting bigger and bigger houses. Expectations are changing. People expect to have a room for the baby, a playroom for the baby, and a spare room. 20 years ago, a 2 parent family with 1 child would have a 2 bed flat; now they'd be aiming for a 4 bedroom house.

London isn't much different than NYC price wise I mean. Well, London is of course more, but a person with a normal job isn't going to be able to afford anything that is relatively considered nice. When I thought about moving to NYC, my friends apartment was going to cost me $1500 just to start off with, and it wasn't that big, but it was the location. I was like good grief. It's not worth that much! (I didn't say that of course, but I was thinking it!)

[Dave]

London isn't much different than NYC price wise I mean. I'm sure. I expect Manhattan averages more than London, in fact. And as you say, it isn't as if you look at a property and think "Yeah, I can see why that costs $1M".

[SPratt74]

I'm sure. I expect Manhattan averages more than London, in fact. And as you say, it isn't as if you look at a property and think "Yeah, I can see why that costs $1M".

Exactly! We have some houses that are being built in a city near us, and they are about that price range and so much nicer!!! I'm thinking why move to NYC for the same cost of a beautiful house where I live right now lol. Of course I can't afford a house right now, but even apartment wise is so much better! ;)

One of the nicer cities that I have been to though is Chicago. Now, they are actually worth the money! It depends where in Chicago, but wow. I loved my brothers apartment. It used to be an old hotel, and they split up all of the levels to where one floor was an apartment. It was so neat! The other places I visited were just as good too!

[Pacion]

The question is how fragile it all is. People taking out mortgages on 6 x joint income seems a huge risk - obviously that's unsustainable if one person loses their job (or gets pregnant - says the man whose wife is due in 4 weeks!). Ten years ago you wouldn't have got half that.

Uh Dave, I have seen/heard of 6 x single income mortgages! Oh, and congratulations on the future addition to your family! Have you decided on a name as yet? Not expecting to know what it is, just curious if you have decided/whether a decision has been made. ;)

Expectations are changing. People expect to have a room for the baby, a playroom for the baby, and a spare room. 20 years ago, a 2 parent family with 1 child would have a 2 bed flat; now they'd be aiming for a 4 bedroom house.

Now I know where this came from ;) Oh, and you forgot the rooms for the parents and the live-in nanny if there is one! :lol: Seriously, it would appear that part of the reason for the extra pressure on housing in general (possibly more so in London?) is that there are more and more single households. Whereas before, more people would be staying at home and that entails, until they could get a mortgage or sharing and all THAT entails :doh: for the same end; or even getting married earlier. Now, with the delayed start/breakups, yeah, the demand is higher, which does not take into account the extra people moving into London...

[Dave]

Uh Dave, I have seen/heard of 6 x single income mortgages!But that's a lot less risky. With a 6x mortgage based on joint income, if either person gets into difficulties (sickness, loss of job, etc.), then you're not going to be able to pay the mortgage - it will be 12 times a single person's income!. Plus, obviously, the extra problems only available to a couple (having children, splitting up, etc.)

It used to be the level you could borrow jointly wasn't that much more than either person could borrow singly. So one person could pay the mortgage (or at least the interest component of it) if they had to - it would be a huge struggle, but it wouldn't be impossible.

Oh, and congratulations on the future addition to your family! Have you decided on a name as yet?Thanks! We haven't made a firm decision for the name yet: we're down to a short list of 3/4 names for each sex, and kind of hoping "we'll know" when it's born...

Now I know where this came from ;) Oh, and you forgot the rooms for the parents and the live-in nanny if there is one! :lol: Actually, planning a room for the nanny isn't that uncommon either!

Seriously, it would appear that part of the reason for the extra pressure on housing in general (possibly more so in London?) is that there are more and more single households.Sure - I should have said this. I'm just currently more aware of the situation for couples! But again, it's partly a run-on effect. If two people each have a 2 bed flat and get married, they're going to feel they need a 3 bed house at minimum.

But spiraling house prices have an effect too. We have a 5-bed house, which is certainly more than we currently need. But in 10 years we might want 5 beds, and we could afford it now, so having lost out in the past from prices zooming up 50% in a year, we decided to go for the bird in the hand. So fear of house price rises caused us to buy a bigger place than we actually need.

Of course, prices could go down, and technically, we'll have lost money. But our priority was having the house we want to live in 10 years down the line, and this way we have that whatever house prices do. (Yes, we've been very fortunate, financially, to be in this position).

[Pacion]

We have a 5-bed house, which is certainly more than we currently need.

Ah yes, but Dave/Davina jr may acquire siblings - not to mention the friends when they start to stay over! Notice I haven't mentioned anything about grandparents (two sets!) staying over either. Don't worry. I won't tell them you have spare bedrooms if you don't. ;)

(Friends have moved house when pregnant, because they wanted/needed more space! Not adviseable!!!)

[Dave]

Friends have moved house when pregnant, because they wanted/needed more space! Not adviseable!!!)Heh - someone we know went into labour on the day they moved!

[mamboqueen]

When I used to work on residential closings, we had a couple moving from out of state into their brand new house and things were not going according to schedule and the woman, who was 8+ months pregnant, had to be put in the hospital and we had to perform the closing bed-side. It was really weird. And to make the situation worse, the broker had her elderly mother wait at the house for an inspector to come and the poor old woman fell and broke her hip. It was just a disastrous closing.

[Sagitta]

Sure - I should have said this. I'm just currently more aware of the situation for couples! But again, it's partly a run-on effect. If two people each have a 2 bed flat and get married, they're going to feel they need a 3 bed house at minimum.

But spiraling house prices have an effect too. We have a 5-bed house, which is certainly more than we currently need. But in 10 years we might want 5 beds, and we could afford it now, so having lost out in the past from prices zooming up 50% in a year, we decided to go for the bird in the hand. So fear of house price rises caused us to buy a bigger place than we actually need.

Of course, prices could go down, and technically, we'll have lost money. But our priority was having the house we want to live in 10 years down the line, and this way we have that whatever house prices do. (Yes, we've been very fortunate, financially, to be in this position).

That's what I'm risking for, myself. I want to build and I have fixed ideas. Once I'm done it will be all that I want. I'm willing to wait to get the perfect setup, so meanwhile I've got a 3 bedroom that I'm confident will be ok for the next 6/8 years. And will have a good re-sale or rental value.