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Who's Going to Buy My House?

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January 16, 2007 – Comments (6)

Not that I'm selling it yet, though. My kids ( one boy, one girl, beautiful ,smart, both in advanced placement classes,) have six more years of school before they are both off to college (I Hope). So I am expecting to be staying put for that long. The question is then what happens? My house is 5 bedrooms, 1/2 acre, 2700 square feet on Long Island in a good school district and right now it is worth

$550,000 (Hooray!) The identical house across the street just sold in July 2006 for $640,000 (I would never have paid that much!). O.K. so lets say my house is worth only $500,000 ('Only' I cannot believe I am saying 'only' about $500,000 dollars) If a potential buyer wants my house and puts 10% down their mortgage will be 2600/ month, plus taxes will make a monthly payment of $3000 ( My taxes are relatively low for Long Island). When i was 20 years old it was suggested that your monthly home expense should not exceed 1/4th of you monthly income (ha ha that was then) now lets use 1/3rd as a guideline. $3000 x 3 x12 = $108000 dollars annual income (gasp!). According to Wikepedia 75% of US households earn less than $80,000/year (households, not individuals). And that top group is mostly boomers of which I am almost the youngest, born in 1960.

Many times during my life my older boomer brothers and sisters have gotten there first. Leaving me crumbs to pick up. At 30yrs old My new wife and I went shopping for our first house only to find that housing had skyrocketed the previous 7 years, and it took our entire incomes to purchase a starter home. Then the housing market flattened for the next 5 years. So we put $30,000 of improvements into our first house and after 5 years were able to sell it for what we had paid for it. (Not even getting the $30,000 back). But we had gotten ahead of some of the Boomers and that $500,000 dollars our current home is worth is twice what we paid for it. But the housing market has begun to flatten again. And now 30 million of them (us) are going to retire, sell their houses, and not trade up. 6-10 years from now it will be my turn to retire.

On L.I we have lots of new jobs in service now. Wal Mart, Target, and the like. Lots of people who do not make enough to buy my house, or any of my retiring friends houses either. Nope, those 30yr old professionals are earning $60k combined. And there are less of them now. Lots more of them are earning even less.

I have to make my kids dinner now, but I am still wondering...

Who's going to buy my house?

6 Comments – Post Your Own

#1) On January 17, 2007 at 10:49 AM, TMFBent (99.82) wrote:

Interesting question!

Is the answer still, "anyone who can sign up for ARM mortgage payments of 40% of income at the teaser rate?"

Sj

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#2) On January 17, 2007 at 12:13 PM, PLynchJr (99.91) wrote:

Nice post. I often wonder the same things. I make a good living. My wife also works. We are considering starting a family and moving to a larger house with a little more of a yard. Here in Columbus, OH it seems that you can't find a nice house that doesn't need some major renovating for less than 300K. That may not sound like a lot to those in California or the NY area but it still seems like a lot to me. I don't want to live under the weight of a heavy mortgage. I'd like to be able to...you know...actually afford things...invest...someday retire.

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#3) On January 17, 2007 at 7:51 PM, devoish (98.65) wrote:

Seth,

Nice to meet you.

I have a hunch that type of loan will not be as popular in six years.

Just a hunch.

Regards,

Steven

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#4) On February 18, 2007 at 11:44 AM, djrue (52.36) wrote:

Great post!

Here in Miami, you can see a lot of the same going on. Cost of living rising, salaries not up to par, and tons of living spaces (condos and subdivisions) going up and selling at outrageously high prices.

As a prospective buyer, I can't help but wonder who these developers are looking to sell these properties to (there are only so many foreign investors they can bank on). Demand is already leveling off, but pricing remains a bit more reluctant IMO.

Couple that with poor urban development planning and the wave of foreclosures that is bound to hit us... I feel it's a win/win for me to wait for prices to get back to reality before I buy your house.

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#5) On February 19, 2007 at 10:57 AM, iLikePie (58.33) wrote:

Wow, that hit the nail right on the head! My concern is from the other side of your fence, "how in the world could I EVER afford your house?"

Salaries are growing slower than inflation and cost of living. Where I work, we all got a whopping 2% salary increase for the 2007 calendar year...but I was told to increase budgets by 3.7% for inflation.

I am certainly left wondering and worried about how I'm going to raise the necessary cash to purchase a home. For now, a friend and I are sharing a house so we can afford it...but values in our town are on the decline and we probably won't get as much out of the house as we've put in. Ouch, indeed.

Sean

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#6) On February 10, 2009 at 4:54 PM, TMFAwesome (97.53) wrote:

What a great post even though it's two years old.  I am a potential first time home buyer that luckily avoided the carnage of purchasing at the height of the market. My college friends, now out of school for 10 years have postponed buying due to the ridiculously high prices in DC.  They all make a good living and do not wish to be house poor for a less than starter home.  I'm not sure who will buy your house in 4 years. It is doubtful that you will be able to get 500k for it unless the government manages to keep housing prices inflated.   But then folks like me with cash but no home will still have to dedicate a much larger portion of our income on housing and less for everything else...

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