Tell me what’s wrong with society
When everywhere I look I see
Young girls dying to be on TV
They wont stop ’til they’ve reached their dreams
Diet pills, surgery
Photoshop pictures in magazines
Telling them how they should be
It doesn’t make sense to me
Is everybody going crazy?
Is anybody gonna save me?
Can anybody tell me what’s going on?
Tell me what’s going on
If you open your eyes
You’ll see that something is wrong
Crazy — Simple Plan
When we start to look at property pricing through the post-bubble-burst lens, you see just how crazy these prices are. This property is going to require an income of somewhere between $150,000 and $200,000. If you make that kind of money, is this the place you were envisioning as your dream home?
Asking Price: $600,000
Purchase Price: $650,000
Purchase Date: 2/5/2007
Address: 3 Acorn #85, Irvine, CA 92604
1st Loan $520,000
2nd Mtg. $125,000
Downpayment $5,000
Beds: 3
Baths: 2.5
Sq. Ft.: 1,448
$/Sq. Ft.: $414
Lot Size: 3,000 sq. ft.
Type: Condominium
Style: Contemporary/Modern
Year Built: 1979
Stories: Two Levels
Area: Woodbridge
County: Orange
MLS#: S497736
Status: Active
On Redfin: 37 days
From Redfin, “Great looking condo, new gas stove and microwave, new kitchen cabinets and new title. Very clean and ready to move in!”
Short but sweet.
Is that the front door, or is that an exterior broom closet?
The white tile kitchen is very stylish, or at least it was in 1985.
.
.
This is going to be a short sale, and I wouldn’t be surprised to find the “owner,” and I use that term loosely, has not made many, if any, mortgage payments. If the place is empty now, how likely is it than anyone ever lived there? If there was no owner occupant and no tenant, and the owner has two loans for $645,000, that is a major negative cashflow. Do you think he reliably made all the payments? Do you think he feels any particular obligation to pay the bank for the short sale? I am not holding my breath…
If this seller gets his asking price, and if the bank approves the sale, the owner stands to lose his $5,000 downpayment — big deal. The bank stands to lose $81,000. It is any wonder we are experiencing a credit crunch?
I think your comment about the “exterior broom closet” front door was spot on. Gawd, no curb appeal, but a kitchen from the 80’s!
—–
Slate has a collection of housing/mortgage cartoons posted today; http://cartoonbox.slate.com/hottopic/?topicid=155&image=0
That got me laughing. Funny, but true. It’s crazy how expensive these houses are. No thanks to that.
$600k? I think the Kool Aid man just dropped four tabs of bad acid.
This dumpy condo is a capital S – hitbox! The backyard landscaping looks like something out of a prison yard. I half-expected to see a guy wearing blues carrying a barely concealed shank over by the bushes. This looks like the kind of place that would have pit bulls in the back yard barking 24/7. And you gotta love the RedFin photos. Hey, when I’m ready to spend over a half-million on top quality real estate like this, I have to know two things: One: what does the plexiglass-window in the garage door look like? And two: I must have a close-in photo of the top of the stairs, with cheapo railing and wear- crushed $ 3.50 sq/yd. carpet included. Great job by the realtor here: the only thing missing is the incompletely scrubbed blood spatters on the walls and the poorly concealed termite damage…
This place looks like poison incarnate. I’d rather live in my car.
Who gets a bailout?
Two things.
First, thanks for reinforcing the point about income and home values. I don’t think that can be overstated since it seems to have been utterly forgotten.
Second, I’m a photographer. I thought that it might be fun to shoot some homes for real estate. Why not? I mean, I’ve spent a stupid amount of time looking over MLS listings and if there is any group of people that need help photographically, it’s realtors. It kills me that people selling $2 crap from their attic on eBay have half a dozen or more decent pictures but a realtor selling a half million dollar home is absolutely content with one cell phone picture of the listing’s bathroom. Or something like that.
So I make the pitch to one broker and his agents and the broker goes into this thing how, if we use my services the agents could then charge the additional half percent for the deluxe listing. I’m shocked. No really. I ask him, why not use me on all your listings and make them stand out from everyone else’s? Why knock the client for another few thousand for, and here’s the punch line, a service I charge $50 for (flat fee per home).
And guess what, to date, not one call from that realtor. And yes, I looked, their new listings look just as bad as their old ones. I do not understand these people. Especially in a time when the market is getting more competitive. Why not stretch a little?
I have no sympathy for them. They deserve whatever bad things befall them.
Just think … there are politicians that are presently talking up the idea of bailing out these fools. It seems a little outrageous!
Moral Hazard ~ Financial bail-outs of lending institutions by governments, central banks or other institutions can encourage risky lending in the future, if those that take the risks come to believe that they will not have to carry the full burden of losses.
new gas stove and microwave=$600, why bother mentioning it?
Why does this require an income of somewhere between $150,000 and $200,000? You mean earning that much only qualifies you for $600,000??? That doesn’t sound right or is my perspective really skewed? How much do you need to purchase a million dollar home?
Do you think sellers are getting desperate?
telly,
I am glad you asked the question. Things have recently changed. The recent credit tightening has eliminated 8 and 10 times income borrowing.
Perhaps lendingmaestro or one of our other lenders could post the income qualifications for a $600,000 mortgage or some combination of mortgage and downpayment this property would require.
The bitter reality…
This place was bought for 650k in Feb of THIS year. By then, even the Bushmen tribe in Africa knew there was a housing bubble. Who is more stupid, the person who bought this place, or the lender willing to give the loans.
Now, this condo isn’t all bad. It has an attached garage and what looks like its own large private patio (in bad shape, true). It also looks like there is no-one else living above or below. The listings details say there is only one common wall. The only real problem I have with this place is the square footage. With 3 bed and 3 ba, its just too small.
I would guess it needs about 80k in remodel and in a normal market this should fetch about 300k, although, I have no idea what the common area is like etc. Some of you who live in Irvine would know better than me what the neighborhood is like.
In a past listing, I saw a realtor describe white tile as:
“White Porcelain Italian Tile.”
No matter how you describe it – it’s still apartment-grade WHITE TILE. 🙂
Even the Irvine Company has upgraded to granite in kitchens and bathrooms in their new apartments.
So, now apartments look better than this place.
Freddie Mac Net Drops on Provision for Housing Slump (Update5)
http://www.bloomberg.com/apps/news?pid=20601087&sid=aFXg8PAVkdn0&refer=home
Freddie Mac, the second-biggest U.S. mortgage finance company, reported quarterly profit fell 45 percent after setting aside $320 million for losses as the housing slump deepened.
$50 flat fee. How can I get in touch with you?
Great pictures there. Here are some stairs, here is a car parked in front of your garage. Here is a shoe. Here is an unkempt backyard. Now give me $600,000.
I am still trying to figure out the picture of the stairs. Was this supposed to be an art shot with the lines of the stairs and rails interplayed with the sunlight and shadows?
Well, at least the property has some yard space, and a 2 car side to side garage.
Assuming the property doesn’t have major issues or termites, I’d be willing to pay around $350k for it, maybe up to $400k if it’s in good location of Woodbridge (short walk to lake?). But not $600k.
Yes, its a classic Hitchcock pic. Leave it up to peoples imagination as to what might be at the top of the stairs.
Haloween is just around the corner.
Woodbridge interesting. There’s several places where prices after taxes are getting close to rents. But… will rents hold. I don’t think so, too many places empty.
Very good points…make sure to bring a rake (or five) for that backyard.
“Simple Plan – Crazy”, nice tune.
Realtors are salespeople, don’t forget that. To explain why most of the pictures are bad or not enough is this; If a home shows well, then you will see lots of nice pics, if the home does not show well (a dump) then you will see very few pics, less is more. It is that simple. They are hoping that prospective buyers curiosity will get the better of them and they will go out to inspect the home. That is the only way I can explain it, other than some are really not that smart. REALLY.
OFHEO results are out for the second quarter
Go to
http://www.ofheo.gov/HPIMSA.asp
then from the dropdown pick
Santa Ana-Anaheim-Irvine, CA (MSAD)
Flippers fuel foreclosures
Real estate speculators drove prices up in some of the hottest markets during the boom. Now they’re making foreclosures jump.
http://money.cnn.com/2007/08/30/real_estate/flippers_fuel_foreclosures/index.htm?section=money_topstories
As of June 30, in Nevada, 32 percent of all prime mortgage in default and 24 percent of subprime defaults were on non-owner occupied properties, according to the MBA. The numbers for Arizona were 26 percent prime and 18 percent subprime. In California, they were 21 percent and 15 percent respectively.
…
In Nevada and Arizona, 29 percent of all the prime mortgage loans written in 2005 were for non-owner occupied home purchases. In California, it was 14 percent and in Florida, a whopping 32 percent, according to the MBA.
Ha!
You guys missed the most important aspect of this place…a “new title”.
I guess that means the old lender just walked away and the seller, or whoever whipped up the new title, gets to keep the $600k.
If you had the 20% down, you would need an income of approx $120k to qualify. That’s assuming a 7.25% jumbo loan, which may not be a reality anymore.
For $600k of leased money, you need an income of $150k.
Different calculators gave me different results, but there weren’t drastic differences.
Another depressing, super unappealing 600k condo. I’m having a hard time understanding why anyone would make the financial committment to own one of these things. The thought of making a huge commitment for a condo like this one is just not something I ever see myself doing. I would much rather rent the rest of my life than be financially tied to one of these dogs. Unless you are very wealthy the housing choices available to you in Southern Cal are not very appealing at todays prices. I just don’t understand why onyone would want to own their “apartment.” Given that it appears home values will be decling for the next few years I could see in some circumstances the merits of buying an SFR, but buying a crappy Aptarment. Opps I mean Condo? Condo sound so much sexier than Apartment. But let’s get real here, these are all just Apartments.
Sub-prime borrowers not alone
Even people with good credit are having to pay much higher rates for some types of loans, if they can be found.
http://www.latimes.com/business/la-fi-loans30aug30,1,463269.story?coll=la-headlines-business&ctrack=8&cset=true
In a sign of how out of whack things have become, the Mortgage Bankers Assn. reported Wednesday that 30-year, fixed-rate prime loans were averaging 6.41%, lower than the 6.51% average for one-year adjustable-rate loans.
Adjustable loans normally have lower rates because the ability to reset payments makes them less risky for lenders. But because more jumbo loans have adjustable rates, a jump in jumbo rates lifted the average rate on adjustables, the lender association said.
Beyond jumbo loans, the rise in interest rates for other mortgages that don’t conform to the standards of Fannie Mae and Freddie Mac has been even more pronounced, Lazerson said.
For example, in the sub-prime market for people with poor credit, fixed-rate mortgages that were in the 7% to 8% range six months ago can still be had, but only at 9% to 11%, Lazerson said.
I thought there was no problem with prime mortgages. This must be wrong, because all the television commentators are assuring us there is no and will be no problem with prime mortgages.
Here in the Pacific NorthWET, everyone likes to pretend we have a SoCal climate, so the building envelopes were not designed for a winter of frequent rainfall. As a consequence, most condos get “outside curtains” after about 5-15 years. What’s the point of building a place if you’ve just got to rebuild half of it a few years later?
For the schenfreude crowd, check out the http://www.msn.com homepage. In the upper left corner featured story area with picture there’s a guy with a “For Sale” sign and the headline “Quarterly Report Another Blow for Housing Market” with details “Growth slowest in two decardes; 131 of 287 cities show declines”
Here’s a link to the top 500 foreclosure zip codes:
http://money.cnn.com/2007/06/19/real_estate/500_top_foreclosure_zip_codes/index.htm
None in OC, but the Inland Empire, San Diego and Sacramento are real hosed.
And, Las Vegas… this time, what’s happening in Vegas is NOT staying in Vegas.
LOL
Good catch. I missed that one…
Reading it makes me feel like I”m watching a Quentin Tarantino movie …
First Magnus fallout casts a pall over the local economy
http://www.explorernews.com/article/show/19670
Makes me depressed just looking at the photos. I dare say we have better accomodations in our single wides up here in Oregon. At the very least we have better views.
The up side of a down market
Contractors, brokers and lawyers make good money in bad times for real estate.
http://www.ocregister.com/ocregister/money/article_1750424.php
That was somewhat my theory for the bad photos too.
The people that actually want to see a property that has such horrible photos must be serious about the property. So, the bad photos are kind of a realtor’s filter for seperating the serious prospective buyers from the looky-lou’s.
Although this theory gives too much credit to realtors. I think a lot of the poor photos/listing descriptions are just due to plain old ineptitude.
Some light reading for those of you who are sure the only problem is the subprime market and are sure that once the Fed deals with the subprime problem, things will normalize.
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aSEguZCZ9ZpY
What did Buffett call OTC derivatives?
Thanks Genius,
What would the payments be on a 30 year fixed?
I imagine this place would rent for $2300-$2500 a month.
Even more Tarantinoesque
Down, but not out: “I’m not a real estate bum,” Realtors say
http://www.sptimes.com/2007/08/26/news_pf/Business/Down__but_not_out___I.shtml
“I’m not a real estate bum,” the president of Executive Preferred Properties announces. “I wear diamonds, Rolexes and necklaces. I’m a classy Realtor.”
Current infaltion is managable. Here is the proof.
http://www.thnt.com/apps/pbcs.dll/article?AID=/20070829/COLUMNISTS/708290339
It’s not difficult to find renters if you’re willing to simply under-cut the market price a little. Taking a small monthly cash-flow hit is better than not collecting any rent at all.
If you can buy this property for $350k with 20% down and use it as income property, you might break even or come close to it. $600k is impossible.
You can breathe easy. The government says home prices are increasing.
http://money.cnn.com/2007/08/30/real_estate/OFHEO_index_rises/index.htm?postversion=2007083011
This place is a dump. It’s older too.
In order to get a decent rate you’ll need to put 183k down and then obtain a mortgage for 417k. IF you can qualify full-doc you’ll probably get a 6.5% 30 yr fixed.
payments = $2,635 P&I Taxes = $625 HOA/Mellaroos = $250?
Total payments = $3,510 a month.
you’ll get a tax break on the yearly interest of $31,620. Assume tax rate of 30% and this equals a monthly tax savings of $790 a month.
3,510 – 790 = $2,720 net monthly cost.
You must also take into account the opportunity cost of not earning interest on your down payment. 183k invested in a 12 month CD @ 5.5% will yield interest income of $838 a month. This wipes out the benefit of the tax savings.
2300 rent – 838 offseting interest income = $1,462 net rent
Any questions?
Interesting discussion on that going on over in the http://calculatedrisk.blogspot.com/2007/08/ofheo-house-prices-slow.html comments about why the OFHEO and Case_schiller indexes are different
————————————-
From the OFHEO:
“The methodology used by OFHEO in computing the Index is a modified version of the Case-Shiller geometric weighted repeat sales procedure.”
Here are the differences I’ve identified from Case-Schiller, based on their respective methodology documents:
1) Case-Schiller is limited to 20 metro areas.
2) Case-Shiller data taken from all repeat sales recorded by local deed offices, whereas OFHEO uses “conforming” mortgages by Freddie Mac and Fannie Mae. This EXCLUDES all jumbo loans.
3) Case-Shiller deweights transactions with:
a) statistical price anomalies (vs its metro area) which are assumed to involve physical changes (remodelling or neglect)
b) high turnover frequency which are assumed to be not arms-length.
c) long time intervals between transactions (homes assumed to experience greater physical changes). OFHEO doesn’t seem to differentially weight these (or other) special cases in constructing their index.
I unfortunately didn’t have time to review the mathematical construction of the indices, but they appear at a glance to be similar, to the extent of sharing the same variable names in equations.
S&P/Case-Shiller methodology:
http://www.macromarkets.com/ csi_…_discussion.pdf
OFHEO methodology:
http://www.ofheo.gov/Media/Archi…se/ hpi_tech.pdf
DarrylR | 08.30.07 – 1:18 pm | #
Price is determined by the next buyer and seller, not zillow. I do like zillow, though. It is fun, but not an accurate prognosticator of pricing.
Zillow is about as good as throwing a ball at a wall with a bunch of targets on it that show the value of your house. Take it for what it is worth…nothing like many of the other “dot.com” bs sites out there.
If they had included house prices in the CPI, interest rates would have gone up, providing a check on prices-ironic, ain’t it?
That was amortized over 30 years at a fixed rate, I should have specified, sorry.
IR,
I have been a fan of this blog for months now. You do an amazing job and it is nice to see that “high end” areas can suffer big drops even on very expensive, luxury homes.
I started a blog to prove the same thing can happen in Santa Monica. For those in LA who think the westside is immune, it may be worth checking out a site that I will be updating every once in a while when I find signs of distress.
http://smdistress.blogspot.com/
Zillow is fun…accuracy is probably another matter. It’s interesting how they have their one estimate, plus they also give a value range. On today’s property, for example, its “value range” is $613,239 – $781,711, meaning you’re probably going to find a good value somewhere in that $168,472 spread 🙂
just an fyi – certain investors can still offer a jumbo loan with the same parameters at a 6.500% (10 Year ARM) with no points/no prepay. although not a 30 year fixed, it still offers relatively long-term stability.
result – not all jumbo loans are “ugly” if you are going full doc, have good FICO’s and have some “skin in the game”
by the way, this home might attract a buyer at $350K
I remember quite clearly that until late February ’07 RE industry speakers were saying that the worst was over, which in fact…was *not* over, was coming…New Century went down, then the others.
I always have said the a little comma here or there makes a BIG difference.
Probably whoever bought this property made the bid in Jan ’07 and closed escrow in Feb ’07.
IR – I would be very interested in seeing the flops in the so-called loft-like/high-rise properties off Jamboree (ie. The Plaza, Marquee, Avenue One, etc.).
I see about 20% of the lights on at night.
Especially with Central Park West going up nearby, it would be difficult to attract a buyer with a $1,000+ monthly HOA for some of these properties. MLS shows quite a few of these for sale.
Yeah, I’d think so. My big concern with evaluating rental buys right now is figuring out how much of the rent increase of the last few years is “real” and will stick versus how much was driven by rentals being stripped from the market and put up for flips.
At 20% down and 7.25% interest (investor, not owner occupier), PITA runs ~$2500/month.
As an owner, at 6.5% slightly less $2369.
lendingmaestro- thanks for the detailed breakdown. It was helpful to see it broken down to the monthly payment amount. You can’t get any clearer than that! Thanks again.
Case-Schiller index
http://www.latimes.com/news/printedition/asection/la-fi-homes29aug29,1,1262758.story?coll=la-news-a_section
Home prices dropped 3.2% in the second quarter compared with the same period last year, according to the S&P/Case-Schiller quarterly index, which tracks existing single-family home price trends in major metropolitan areas.
That article is useless. First they use Realtytrac data which is awful. First RealtyTrac over reports now they are under reporting. Plus that was old data since it was a June article so teh most recent data was from May. June and July have seen increases since then and let me tell you August is startin to look really nasty. In the first 18 business days of August OC has already had as many NODs as in all of July. 16 homes went back to the bank to the bank today and that is only the Santa Ana courthouse.
I don’t think you really understand how bad the foreclosures are and how month after month they keep getting worse.
By the way 49 Chantilly 92620 went back to the bank for $570k today.
Genius is correct on his math… EXCEPT for 1 small thing (that is often overlooked).
Debt ratio is based not ONLY on the mortgage payment, but the property taxes, homeowners insurance, melaroos, HOA, Credit card payments, auto loan payments, student loan payments, personal loan payments, etc…
The average person in So. Cal. carries a SIGNIFICANT amount of debt (we have an extreme negative savings rate).
Factor in all the debt for 1 or 2 people, and watch those income requirements skyrocket!
🙂
What investor is buying these loans? None that I know of right now.
I have friends that work for brokerage firms and they can’t place a jumbo loan to save their life. I’m not saying it’s impossible, but even if a few investors are buying, it’s not enough to save the market.
lendingmaestro – a few portfolio lenders/banks who are not immediately dependent on the secondary market are offering attractive jumbo rates on the “best” borrowers. of course this never equates to great long-term business sense.
most of the jumbo loans that are seriously affected are the non-full doc loans, especially at the higher loan-to-values. there are still attractive jumbo rates on the lesser documentation types when there is significant equity.
and I agree, the portfolio lenders who still offer relatively attractive rates on jumbos will not save the market. regardless of what current rates might be, it will not (and should not) save the overvaluation in the current market. in fact, current market cycles should play themselves out rather than be artificially sustained only to collapse at a later date.
The table is relative. I would imagine that as foreclosures in OC mount, the same will happen in other places.
So, all in all, the table is important in that it reflects the RELATIVE rankings, not the absolute numbers.
Capis?
IR, can you help locate the discussion on the article I posted last night regarding Dollar devaluation. I can’t seem to locate the discussion in the forums. Thanks.
o.k., I’ll bite. What’s an outside curtain.
I am moving into Irvine for business in october. I am a family man with three kids so I definetely have to have a large (2500 sf or more) 4 bed house. I am under a million. In my negotiations, realtors have been telling me that for these types of houses I should expect to pay $350 a sf at least. Naturally I never have trusted realtors so I have knocked $100 off. My offers have all been between 275 to 290 a sf.
Given the state of the current market and its foreseeable decline, what price per sf is reasonable? What was the price per sf at back before the bubble hit for these types of homes? Any feedback would be greatly appreciated.
Bush Moves to Aid Homeowners
http://online.wsj.com/article/SB118851742988914064.html?mod=googlenews_wsj
I know you’re planning to buy, but if you want to consider renting, there are 3 bedroom units availabe at various Irvine locations at http://rental-living.com/, the Irvine Ranch apartment buildings.
Renting a 2 bedroom with 4 kids myself for now (rather it was 3, but didn’t have those by the school I wanted when I moved here at the last minute last year).
Also, there are reviews of the various Irvine neighbourhoods (Turtle rock, Northwood, etc.) on this blog that would have been helpful to me when I moved down – look though the archives for them.
That particular conversation has been spread across several threads. Perhaps you could just start a new thread. With that topic, you will get a lot of debate.
And you can find data on the various Irvine Unified School District here
List of schools
http://iusd.org/schools/index.html
Look up assigned schools by street address
http://iusd.org/asp-bin/whichschool/
Irvine Unified School District FAQ
http://iusd.org/enrollment/FrequentlyAskedQuestionsAboutEnrollment.html
Also, I was surprised by all the requirements before I could even put my kids into public school here. Need proof of address (ex. get that gas and electrical bill – or if you move earlier, will need a letter form the gas or electric company saying you have service there – ask for it early, takes a few days to process and mail it to you), and all sorts of health requirments documentation for my kindergardener & first grader before they could attend. See more at this URL.
http://iusd.org/enrollment/RequiredDocuments.html
Yeah, I skipped that part 😀 I have zero debt, other than about $1k left on my student loan and my cc bill that I pay off every month(usually). My bad in assuming that everyone is like that, because most people I know are at least up to their knees in debt.
I misinterpreted Sue’s post at first…thought she meant she’d rather it were 3 kids.
Kim
Too little, too late. I don’t see this having much of an impact, if any, in this neck of the woods (socal). It is encouraging to hear them specifically say that they are targeting the homowners and not a bail out of wall street or the lenders. Not that I’ve ever trusted them.
Once the rate on the jumbos went up, the game was really over. It’ll just take people another year to realize it.
If they are as serious as they say they are about not letting this happen again, then they’d better let punishment take its course. They can talk about bail out as soon as they pry my tax dollars out of my cold, dead hands.
Used to be shrinkwrap, now it’s tarp/netting on scaffolding while they rip away the old building envelope and replace it. Tends to cost about 10-20% of what the condo originally cost. Google “leaky condo” for more.
4 kids are fun. It’s always a party, even with the TV off :).
Sorry I have to disagree the numbers are useless because the data come from a notoriously terrible data collector RealtyTrac.
The rankings mean nothing without adjusting for housing stock and that could either put OC cities on the chart or make some on the chart worse. We don’t know and I won’t take the time to find out.
But know this that the sales volume since May has been the worst on record when adjusting for the housing stock. That and I have a feeling we may more NODs in August than sales if not September for sure.
The way foreclosures have increased at the rate that they have we will be shattering all the records of the 90s very soon.
Comment by awgee
2007-08-30 12:33:50
Good catch on that link, awgee. Funny how the piece was not written by some so-called financial writer, but a professor of law in flyover country.
If anyone clicked on Sue’s MSM link, note the complete incompetence (surprise!) of the government official and the author of the piece to even know how to differentiate between “the bottom” and “stabilization.” Oh, could the author have used the term “the arid west like CA” just a couple of more times?
San Diego is already well above foreclosures per capita peak from the 90s downturn.
The algorithm zillow is using for their “zestimates” seems like its written by a 1st year comp sci major. It is not very reliable and I think that they need to really start reworking it. Anyone know how they try to determine how the prices might fluctuate?
(Btw, I’m a computer professional & have a degree in comp sci, so I do know a bit or two about computers)
You’re joking I hope.
If you make a 20% down payment on a $600K home, that leaves you with a $480K mortgage, which is pretty much the most you should ever take on a $150K income, and comfortable on a $200K income.
Remember, you have utilities, and a monster tax load on this. Plus, you possibly have children, college expenses, and automobiles to pay for. Nice autos, at that.
Then, perhaps you would like to eat something besides Raman noodles and shop places other than Aldi’s, and not just HAVE to buy your clothes at Target and consignment shops.
And, dare a person dream, might you want to SAVE MONEY?
So you really do need that much income to buy such a home. In the past, before the days of mortgage securitization through CMOs and CDOs, 2.5X your income was pretty much the rule for mortgages, given 20% down. My mother bought her place in 1971, had plenty of money in the bank after making a 40% down payment, and still felt squeezed on a mortgage only 1.75X her income, because she was not used to the expenses and sudden surprises of home ownership.
These days, a “conservative” loan might be 3X your income given 10% down. That is sort of tight, especially since there will be PMI, and that will be higher than a couple of years ago. But if you have no other debt to speak of, it is perfectly doable.
4X your income or more is very dangerous, however, and for the life of me I can’t figure out how people could ever think it was safe to go to a higher multiple.
This house is on the market for $499,900 as of 11/15. This is almost a 25% drop from the February purchase and the home still is not selling.