Will Never Afford a CA Home - Will Never Leave CA? (San Jose: to rent, mortgage)

[jbunniii]

Originally Posted by Charles

That means your talking close to double. What's inflation? 4%? 72/4 = 18, 18+1997 = 2015

1.04^(2012-1997) = 1.8

1.8x250k = $450k [assuming for example a very typical LA house that would have gone for $250k in 1997]

Sounds pretty reasonable to me. I'm willing to go as high as $500k if I like the house and area enough. That assumes a 20% downpayment of $100k and a $400k mortgage, which I can afford without any funny-money loans or overstretching, while still being able to afford to save for retirement and make extra payments toward the mortgage principal to pay it off early. (This, to me, is the whole point of owning a house.)

If the average house does not come down to this price range or lower in every metro area in the state, then the vast majority of residents will be unable to afford to buy. That is, of course, by definition impossible once equilibrium is reached.

[Kalika]

Great comments so far. I agree with much of what is said...it really does come down to personal preference. My employer in Los Angeles brought in a financial planner to talk to us a few years ago. He brought up an interesting point...that not everyone chooses to pump their money into real estate. Some opt to dump their money (savings) into retirement and rent/lease. He said that those who put their money into a house are not necessarily smarter. There are many variables involved. For example, if you are buying in an area that is depreciating in value, you are obviously not making the wisest investment (no brainer).

Also, lifestyle is a big factor for some people. I had friends in CA who opted not to have kids in order to more fully enjoy the CA lifestyle. To each his own. Many people choose to live in a NYC apartment where the cost of living is even higher, but to them, it is worth it because the City has so much to offer. They would give anything to live in NYC. Again, a personal decision.

I posed the question because I do like hearing about what is important to different folks.

[Boompa]

Housing in my desired location is running about $1.4m and I'm on a pension

[Snort]

Ultimately, we're all renters. Is there anyone here planning on living forever?

[SOON2BNSURPRISE]

Originally Posted by Snort

Ultimately, we're all renters. Is there anyone here planning on living forever?

Other than the property tax, would love to pay off the homes.

[Kalika]

Originally Posted by Snort

Ultimately, we're all renters. Is there anyone here planning on living forever?

Profound spiritual statement. One that is quite true. An Indian sage (his name escapes me) used to tell his disciples that God laughs when men refer to land as "mine."

[MtnSurfer]

Originally Posted by Snort

Ultimately, we're all renters. Is there anyone here planning on living forever?

Gotta agree with you there Snort. We are just passing thru... So focus on the things that really matter like friends, family and loved ones. Then if owning a home makes sense at some point then do it. Just don't let the four walls that you live in own or define you.

[Charles]

Originally Posted by jbunniii

If the average house does not come down to this price range or lower in every metro area in the state, then the vast majority of residents will be unable to afford to buy.

Yes, we're in sync here.

Here's a good tool to check out what the median incomes (and all sorts of useful demographic data) are by zip code. You can compare tons of zip codes side by side (and copy and "Paste special" - transpose into excel and really have fun). You'll see that very few zip codes in LA and OC have median incomes in the six figure range.
Moderator cut: link removed, linking to competitor sites is not allowed

My definition of "affording a home" means maxed out 401(k), maxed out Roth IRAs, maxed out college savings accounts, no credit card balance, and mortgage payment as a percent of income in the normal 28%-34% range.

Here are the median incomes for several zips in south OC:

ZIP City Median:

92673 Talega $92,073
92679 Coto de Caza$112,998
92694 Ladera Ranch $104,306
92629 Dana Point $64,622
92677 LN $80,146
92653 LH $46,716
92692 MVe $82,690
92691 MVw $75,184
92688 RSM $74,173
92656 AV $74,688

With those median incomes, and median house prices where they are at, I question how many people can "afford" to live there. (Obviously this doesn't apply to people who purchased ten years ago when housing prices where in the $150/sqft range and weren't out of sight with respect to incomes.)

Now, with housing prices crashing like a lead zeppelin, the house price to income ratios are approaching those dictated by classic models.

[NYSD1995]

Look to New York City for your future.

Every so often the Times runs an article about a highly influential writer, composer, photographer who inevitably is 70-years old, never having had children, never having owned a home, living with his elderly wife in a 600sf 1BR Manhattan apartment they have lived in for 30 years, usually on rent control, sometime to the tune of 2500+ for an apartment that probably cost 300/mo in 1975. NYC is a city of renters and it hasn't hurt them a bit.

If that is the life you want, you can have it. Not me though.

[bayarea-girl]

There is nothing like pulling up to your own drive way. Or building and or remodeling your home to ones own likely. Or bringing home your children to their new home. There is nothing like not having to worry about the person below you or above you. There is nothing like not smelling someone's smoke. Or being able to install whatever you won't in your own home. When you house is paid off it is nice to know you can't be kicked out if you loose your job and there is no worry if the lease will expire.

In CA renting is a better option unless you have tons of money to throw around. Owning a home is great when you can realistically pay it off. Otherwise, renting here or anywhere is better. I know too many people that own and can't pay their property taxes let alone pay for any type of repairs and or maintenance on their place.