[Cody Dawg]

We are house shopping because our house is too small for our family (growing boys) and the market here in South Florida is so out of control it's unbelievable.

Our house is on the market for just below $400K. To the average person in this country, $400K for a home seems like a lot of money for a home. IT IS. Believe it or not, we have buyers already after one week on the market. Why? Because 400K is a great price believe it or not.

Here in Palm Beach county, that is an entry level single family home price - and just an average home, nothing special.

It's that when we start to look at ANYTHING even SLIGHTLY larger that it gets depressing. We looked at a 2000 square foot home on 1/2 an acre, home built back in 1988, nothing special at all, and the price is $565K. It's wood frame construction ranch-style. Nothing that would make you say, "Wow." In fact, there is nothing notable whatsoever about it.

When we look at new construction in a new development, the average home starts at $700K and goes up from there - for 3 bedroom/2 baths. It's an average home in my opinion. This home up in Indiana or Ohio or someplace normal would be $250K tops. Maybe less.

There is no question that we have to move, none. We bought this home where we are at because we had one child. Now we have more and it is just too small. The question is where to move to and how much do you agree to go into debt for?

The mortgage broker is like, "Well, you're not going to get into anything decent for less than $550K and closer to $600K, that's just a fact." "And if you really want something with new construction you're looking at opening prices of $700K."

It's really making me depressed because that is a LOT of freaking money for an average home that would be a beautiful HUGE home somewhere else, even here in Florida. These are not homes on the water, or even with pools, or on property (acreage). These are average homes in average neighborhoods.

We're watching interest rates start to creep back up and we really cannot wait to move - we've been waiting while the market slowed down a bit - and we can't build any additions onto our home because of codes and because of the size of our house and lot already.

Any ideas on good mortgages, also? We're looking at standard 30-year mortgages, nothing special. There are all kinds of mortgages out there, interest only for 5 years, ARM, etc. I just don't want to get involved with some ballooning payment on a mortgage either.

No matter where we look, homes start at $400K and go up in price down here. Heck, even townhouses are in the $350K to $450K range. I honestly don't know how average people live here (translation: Middle Class - or what's left of it.)

[Mastrap]

That was one of the reasons why we moved from London. An average family home in a neighborhood you actually want to live in will set you back around $1.200.000 and upward. That's just insane.

Here in Toronto we just bought a Victorian home, in need of total renovation, for less than $300.000 CAN. Renovation will set us back another $25.000 but add about $80.000 to the value of the house.

[The Godfather]

My house is 1500 ft^2 on a 3000 ft^2 lot and I call it average. You call 0.5 acres (21000 ft^2) average?

[Cody Dawg]

Yes, because it's out in an area where the lots are about 1 acre+ in a place called "The Farms" because it's out in what used to be farmland.

Where we live now is a tiny lot. Our house now is about 2000 square feet under air (w/o garage). Wood frame, nothing special. In fact, this house in Ohio or the Midwest would be worth about $150K tops - in a nice neighborhood.

But the thread is about real estate prices and not the size of an average lot.


Mastrap, your house will be beautiful. What I don't understand about any of these situations (including London - it is REALLY expensive there) - is how AVERAGE people afford homes? Seriously?

[The Godfather]

Q: How average people live there?

A: They are not average people.

Cody. Take some credit and admit that your neighborhood household income is in the 80-something percentile respect to the nation. That's why it is more expensive there, because the freaking house buyers keep buying.

[sabrejim]

Isn't that always going to be the situation? If you sell your place with an intention to upgrade, you're going to pay more if you stay in the same area?

[ghporter]

Cody, if you're in a large-lot area of course the home prices are going to be high-it's part of the deal. You get a lot of land to put a lot of house on, but since the developer could have subdivided that one lot into a number of smaller lots, you pay a premium.

I have a fairly deep lot that's 6600 square feet (55X120) with an 1800 square foot home on it. In my area this is a moderate to small house on a moderate-sized lot. You can buy this same floor plan on a similar lot in a development just blocks away from me for about $180k starting, which is over $50k higher than my starting price four years ago.

People are still discovering that they CAN qualify for a mortgage-and service that mortgage without starving, so they're still spurring the builders to build, and that lets the builders charge more and more. Unless there's a huge spike in mortgage defaults, this will continue. Real estate is also being "churned" by speculators-they buy a property with the express intention to sell it again, often without any changes or upgrades, and they ALWAYS make a good profit.

The issue you're seeing, Cody, is almost certainly because speculators have jacked up the prices through churning the market because South Florida is a "prime, attractive and hot" real estate market (in other words, people will pay through the nose for a house there).

[snoopy199]

I hear ya, I live in massachusetts and the housing market here is only riveled by california. Small houses are on the market for 450 to 500k. I saw a new development go up last year and they're asking for almost a million dollars for them. Many of these houses are on the main drag where people drive in excess of 50 mph. Seems kind of crazy to plunk down a 1,000,000 for a house 1/8 of mile away from i95 and on the main road to i95.

The market is slowing down here in Mass, inventory is up and prices are slowly creeping down. I have a neighbor whose house has been up for sale since the fall, they've reduced the price a total of 30k and still no bites - kind of sad, I hope they sell.

[Cody Dawg]

I gave ONE example of a home that was on half an acre.

The homes that are $600K and $700K are on NO property at all - they are just on a lot - and they're nice homes, but yes, nothing extraordinary.

And Godfather, yes, we - and the people around us - are AVERAGE people. We are middle class people with a middle class income and we have a budget we live on and we live a no frills life. What IS "80-percentile," Godfather, as regards income? The people in my neighborhood make between $50K to $100K based on one or two incomes (most of the time two incomes). For Palm Beach county, the average salary is $40K.

I'd move away except my spouse's job is here and doesn't want to move.

[snoopy199]

Addendum:
I figured creating a new post rather then editing my existing one makes more sense in this case.

My wife and I decided instead of spending 400 to 500k on a new house and having to then throw in another 50 to 80k on renovations we added on to our house. 4 bedroom houses in our location were going for well above 500k and only small starter houses seems to be in the low 400 range. The 4 bedroom houses that were on the market in our price range required work so much so that we decided not buy one but instead renovate out house.

We added on a whole second floor, came out nice here's a few small before and after pictures. We started the whole ordeal in April of 05 and it was finished in september. It was tough but well worth it and we probably saved anywhere from a 100 to 200k on our mortgage by going this route as opposed to buying a bigger house.

[Cody Dawg]

We explored that option, but the code where we live will not allow us to go upwards on our wood frame house due to hurricane codes. That is understandable. The lot is too small to expand the house. So, we can only move if we want more space which we actually need - it's not a "it would be nice to have" situation. It's a necessity.

[chris v]

I think the market is definitely in a speculation bubble. Fortunately, unlike tulips, houses have an intrinsic worth that'll keep the crash down to a dull roar, but one is coming. Waaay too many people have been buying and selling houses strictly as an investment, and mainly to one another. If you're selling one house to buy another, you're probably not at too great risk, seeing as how you're exposed just by owning a home in the first place, but I would not be buying a home now with an eye towards its future value.

[Dork.]

Call Spliffdaddy. He'll build one for you.

[scaught]

I'm doing a refi on my home equity account. When I did the financing for it, it was prime +2% which in early 05 wasn't that big of a deal. With prime in the 8's now, it absolutely sucks. So a refi it is. My appraisal came back about 10K short of what I thought it would be, which makes the rate I'm going to get suck. ohwell.

[snoopy199]

Originally Posted by Cody Dawg

We explored that option, but the code where we live will not allow us to go upwards on our wood frame house due to hurricane codes.

Bummer

[Doofy]

Originally Posted by Cody Dawg

What I don't understand about any of these situations (including London - it is REALLY expensive there) - is how AVERAGE people afford homes? Seriously?

Ummm... ...they don't. It's becoming a major problem here. They need to start pumping up the interest rates to cool the market.

[andi*pandi]

looks nice darth. We may have to do that someday, the bedrooms in this house are pretty small. Probably finish the basement first though.

Cody, 400K is base price for a house here too, we bought our house for slightly less than that and now it's worth more. It's not a mcMansion by any means, just a cape needing a bunch of work. 3-4 bedrooms (one is really an office).

How far away would you have to move to find something more affordable? How far is your husband willing to commute?

And congrats btw on the new addition to be.

[ghporter]

Cody, about 12 miles from my house is a "neighborhood" called "The Dominion." Houses there START around $1.5M. That's $1,500,000.00. It's "snoot city" as far as a lot of people are concerned-over priced, fakely "exclusive" and gated with guards. But if it's so high falutin', then why do a lot of people who live there need their own security gates? Anyway, it's all about location, and as I pointed out, South Florida is a desirable location so people will pay what's asked.

I agree with you that it's dumb, dumb, dumb, but that's why it's like that where you are. In places like Massachusetts, it's about limitations on location. It's a small state, and there's just not much space to build in. That means that existing properties appreciate quickly and strongly-and it's why a three-bedroom bungalow can fetch half a million dollars.

[zmcgill]

Originally Posted by Cody Dawg

I gave ONE example of a home that was on half an acre.

The homes that are $600K and $700K are on NO property at all - they are just on a lot - and they're nice homes, but yes, nothing extraordinary.

And Godfather, yes, we - and the people around us - are AVERAGE people. We are middle class people with a middle class income and we have a budget we live on and we live a no frills life. What IS "80-percentile," Godfather, as regards income? The people in my neighborhood make between $50K to $100K based on one or two incomes (most of the time two incomes). For Palm Beach county, the average salary is $40K.

I'd move away except my spouse's job is here and doesn't want to move.

How can a family with a combined income of $50K a year afford the mortgage on a $400,000-$500,000 house??

My family bought our 2000-2500sq. ft. house (4 bed, 3 bath, formal dining area, fireplace rooms, living room, etc etc) for $106,000, spent a few thousand remodeling the kitchen, redoing some bathrooms, adding a deck, etc. Now it was appraised at over $160,000. My dad's not happy because that meant his homeowner's insurance goes up.

Cody: you said the average income in your area was ~$40,000. But you've said many times you make >$100,000, and your husband does about as well. How, if you're making 2.5 times the average salary, can you call yourself average?

And since when is a 2000 sq. ft. home too small for two kids? My (three kid, two adult) family lived quite happily in less than that before we moved to our current house. And even then we had more than enough room.

[snoopy199]

Originally Posted by andi*pandi

looks nice darth. We may have to do that someday, the bedrooms in this house are pretty small. Probably finish the basement first though.

Thanks

If there's any advice to impart on renovations of that magnitude, don't live in the house while its going on. We made that mistake and man we regretted it. Very difficult, and very dirty. You cannot imagine where the plaster dust goes.

It was a small two bedroom bungalow, and it ended up as a 4 bedroom house. Good thing too, because in June of 05, we found out my wife was expectating - twins no less. so what became a roomy house suddenly got small again. the girls are now 5 months and it was a blessing in disguise. we have a large house with a managable mortgage. If we bought a house and sunk money into it as was starting to shape up too, we'd be really up the creek because of the babies.

[Eug Wanker]

I empathize, but in truth, maybe you should consider yourself lucky. It sounds like you're doing a heluvalot better financially than most of your neighbours.

A 2000 square foot home on 1/2 an acre is quite large for many places. Around here a nice house of that size in a nice area with a 1/2 acre lot could be pushing CAD$1 million+ bux (or US$900+ grand), and you can't deduct mortgage interest either.

And I couldn't imagine trying to buy a place in London or New York or San Francisco or whatever.

[shunt]

It doesn't sound like you need a new house to me, it sounds like you enjoy talking about needing a new house. Here's whatcha do...

Buy some bunk beds, or whatever it takes to house your children now. Open up an account for each kid. Take any extra money each month, divide it equally into the three accounts, let it grow.

When the kids reach the age to leave the nest, one by one go to them and say, "I know it sucked being cramped in this house, so here's a big wad of cash...for your future." and give them the money. They will cry and hug you, the end.

[Eug Wanker]

^^^ LOL. If life were only that easy...

[eltrut]

I'd consider moving.

Buying a house in the current market in FL is like throwing money out the window. If you could wait a year or two, you'd get so much better prices. Since you can't, you are caught between a rock and a gard place.

[Eug Wanker]

Originally Posted by eltrut

I'd consider moving.

Buying a house in the current market in FL is like throwing money out the window. If you could wait a year or two, you'd get so much better prices. Since you can't, you are caught between a rock and a gard place.

Well, I bought a place 5 years ago thinking I could move after 6-7 years. The good news is my place went up 50% in value. The bad news is every other place around here has gone up 30-60% in value too.

[Goldfinger]

Is that 500k for wooden house? Move to a place where there are no hurricanes, the houses are cheaper and where the houses are made out of stone. I really wonder why everybody builds wooden houses over there. Especially with all the hurricanes. What does a home/fire insurance cost over there ??

Ah well averge house where I live is about €1.000.000, but then again we don't have wooden houses and those are all +200sq m. and +2000 sq. m. gardens.

Is you house paid off ? Then why don't you just get a loan for the extra 3-400k you'll be needing. That's not much with a 200k combined income like yours.

[Monique]

Here in Calgary, the housing market is also out of control. A small house (2 bedrooms) can easily go up to 400,000. If you want something cheaper you have to move to the pheripheries of the city which means it takes you 1 to 2 hours to go downtown by transit; if you can get a bus.

Now you talk about high prices, but isn't it prices versus quality. Here you do not get good quality housing, if you want quality you are going to pay through your nose. And it is funny, the quality of entertainment is still low versus cities like Vancouver, Toronto, and Montreal. Toronto is not that bad; I really thought it would cost a lot more than 500,000 for a family home.

[zmcgill]

Originally Posted by Cody Dawg

We are middle class people with a middle class income and we have a budget we live on and we live a no frills life.

Originally Posted by wikipedia

A net worth, what a person's total material assets are worth, minus their debt. Most economists define "middle-class" citizens as those with net worths of between $125,000 and $250,000. Those with net worths between $250,000 and $500,000 typically are categorized as upper middle class.

I'm not sure what your debt is, but if you've got a $400,000 house I'm guess you would be AT LEAST upper middle class.
And I believe none of your no-frills life bull-honkery. In your "I hate Apple because they don't give everyone discounts" thread you said:

Originally Posted by Cody Dawg

I have spent $100K on Apple equipment for our HOME in 10 years.

In the past...well...forever, my family has managed to spend no more than $3700 on Apple, and two of those purchases were mine with my money: $1300 Performa 6116CD in '95 (my dad bought that one), a $1100 iMac in 2000, and $1300 iBook in 2004. If your life is no-frills, I must be dead.

[Eug Wanker]

Originally Posted by Monique

Here in Calgary, the housing market is also out of control. A small house (2 bedrooms) can easily go up to 400,000. If you want something cheaper you have to move to the pheripheries of the city which means it takes you 1 to 2 hours to go downtown by transit; if you can get a bus.

Now you talk about high prices, but isn't it prices versus quality. Here you do not get good quality housing, if you want quality you are going to pay through your nose. And it is funny, the quality of entertainment is still low versus cities like Vancouver, Toronto, and Montreal. Toronto is not that bad; I really thought it would cost a lot more than 500,000 for a family home.

It does. I live here. CAD$500000 gets gets you a small bungalow (1600 sq. feet over two floors with minimal yard and no garage), unless you're willing to move out somewhere with a 1 hour commute.

But yeah, I do agree it's outta control in Calgary. Toronto used to be much more expensive, but just in the last couple of years Calgary has caught up. I guess that's what happens when your province is doing so well financially. I just wonder what would happen if oil prices drop below $50 again. That would hit Calgary hard. I don't think they will, though.

[eltrut]

Originally Posted by Gossamer

And I believe none of your no-frills life bull-honkery.

That is all relative.

What is no-frills in Palm Beach county is living rich and large in other areas.

[zmcgill]

Originally Posted by eltrut

That is all relative.

What is no-frills in Palm Beach county is living rich and large in other areas.

-t

Well I'm just talking average US citizen. Does everyone you know spend over $10,000 a year on computers alone? (She said $100,000/10 years to Apple directly, I'm assuming 3rd party accessories and such are more)

[ort888]

The solution is easy. Just save up the $700,000 and buy it with cash. It's so simple.

[shunt]

Originally Posted by Eug Wanker

^^^ LOL. If life were only that easy...

what part was difficult...the hug?


*burn*

[jamil5454]

I remember my parents getting a 3200 sq ft home on a 1/3 acre lot in Katy (suburb of Houston) for $159,000. We sold it 6 years later for $200,000 and moved into a ~2000 sq ft home, but it's on 27 acres . Six people living in a 2000 sq ft home is a little difficult, but only really during the summer when my sis and I are home from uni. Eh, you can make it work if need be.

We're only 1 mi from Katy Mills and development is springing up all around us, so I'm excited for my parents.

[zerostar]

If your household income is $200K you should easily be able to afford a nice $700K home, and still have at least $13K monthly for bills, savings, etc.. you either have some serious debt or something doesn't add up.

If the real question is "this doesn't seem worth $700K" then to you it is not worth it, you can wait for the market to keep cooling but your house will also be less, or move to a less desirable area and save some cash.

[Mastrap]

Originally Posted by Eug Wanker

It does. I live here. CAD$500000 gets gets you a small bungalow (1600 sq. feet over two floors with minimal yard and no garage), unless you're willing to move out somewhere with a 1 hour commute.

But yeah, I do agree it's outta control in Calgary. Toronto used to be much more expensive, but just in the last couple of years Calgary has caught up. I guess that's what happens when your province is doing so well financially. I just wonder what would happen if oil prices drop below $50 again. That would hit Calgary hard. I don't think they will, though.

Toronto is ok really. You can still get a very nice house in a downtown neighbourhood like Little Italy for about $500.000. We bought our house in one of the last cheap pockets close to downtown, Little Portugal. The area is being gentrified rapidly, we have about three renos going on on our street alone.

The trick is to buy rentals - nobody wants them as they're usually in poor condition and our house was no different. We took it down to the brick walls and are in the process of rebuilding everything, including recreating a family home from several rental units. Thankfully we have another place to live during the renovations.

[chris v]

Originally Posted by Goldfinger

Is that 500k for wooden house? Move to a place where there are no hurricanes, the houses are cheaper and where the houses are made out of stone. I really wonder why everybody builds wooden houses over there.

It's a giant sand bar. They'd probably have to import bricks from Georgia.

[Eug Wanker]

Originally Posted by Mastrap

Toronto is ok really. You can still get a very nice house in a downtown neighbourhood like Little Italy for about $500.000. We bought our house in one of the last cheap pockets close to downtown, Little Portugal. The area is being gentrified rapidly, we have about three renos going on on our street alone.

The trick is to buy rentals - nobody wants them as they're usually in poor condition and our house was no different. We took it down to the brick walls and are in the process of rebuilding everything, including recreating a family home from several rental units. Thankfully we have another place to live during the renovations.

Yeah, I know what you mean... some potentially really good deals. However, I'm not really a do it yourselfer, and the sizing and proximity of the houses kinda bothers me, as does the lack of a garage in most of the places. Plus I'd have to live there during the renos, cuz I'd probably have to sell my current place first. I may still consider it though, cuz I don't want to have to move to way far out of town.

P.S. When you finish your house, have a nice meal at Chiado. Awesome Portugese restaurant near where you are.

[Dork.]

Originally Posted by ort888

The solution is easy. Just save up the $700,000 and buy it with cash. It's so simple.

(The message you have entered is too short. Please lengthen your message to at least 3 characters.)

[Monique]

What about Ottawa, I might be able to move there in the near future. How do you find a descent place to live. I do not want a house, just an apartment downtown to near do to downtown because I love the theatre and shows and you do not have interesting stuff to do in the pheripheries.

[Mastrap]

Originally Posted by Eug Wanker

P.S. When you finish your house, have a nice meal at Chiado. Awesome Portugese restaurant near where you are.

When we're done with everything we'll be too poor to go to Chiado.

[wallinbl]

Cody,

One thing I have not seen you mention is how much equity you have in your house. If you've lived there a long time, then you have likely made a lot of money on it. We have the same pricing problems here, and I recently paid $375K for my house. It seems really high, but since I made so much on the previous house, I have around $200K in equity. Real estate commissions really suck when the prices are this high! Even at the 4% I was able to get, that's still $14K on selling a $350K house.

Also, when you are looking, please remember to factor in property taxes. Many counties in Florida have caps on the amount that an existing homeowner can be increased each year. In my county (Pinellas), the cap is 3%. So, when home values are increasing rapidly, you are safe from massive increases. The downside is that when you try to move, they get to reassess the taxes for the home. So, my property taxes nearly tripled when I moved even though I only paid 10% more for my new house than I sold the old one for. Believe it or not, I now pay more in property taxes than I do in FICA.

Also, you asked about mortgages. If you need a 3 or 5 year ARM to afford a house, then don't buy it. Don't take any interest only loans either. If rates continue to go up, you'll find yourself unable to afford your mortgage. Even though rates are in the low 6% range, they are still low when compared to history. It's not as good as the last few years, but history says it's still very good. They've even been as high as 17% in the last 30-40 years.

[wallinbl]

Originally Posted by Gossamer

I'm not sure what your debt is, but if you've got a $400,000 house I'm guess you would be AT LEAST upper middle class.

Assets: $400,000 house

Liabilities: $375,000 mortgage on house

Net worth: $25,000

[wallinbl]

Originally Posted by eltrut

I'd consider moving.

Buying a house in the current market in FL is like throwing money out the window. If you could wait a year or two, you'd get so much better prices. Since you can't, you are caught between a rock and a gard place.

Eh? Florida is running out of land, especially near the water. We're not Texas or Colorado or some other big empty space. The prices in the urban/suburban communities near the water aren't going down any time soon. There might be a price adjustment, but that would affect Cody's sale price as well, since it's in the same market. The only savings to her in that situation would be on realtor commission and closing costs and possibly property taxes.

[Y3a]

I guess it's time for the BIG DECISION.... Move completly out of the area, find NEW JOBS, in a NEW AREA. Try the Maryland, DC, Virginia area.

[ort888]

Most of Maryland is just as bad. The nicer parts anyway.

[zmcgill]

Originally Posted by wallinbl

Assets: $400,000 house

Liabilities: $375,000 mortgage on house

Net worth: $25,000

I addressed that situation with the 'I'm not sure what your debt is' clause.

Originally Posted by wikipedia again

Upper-middle class; Persons with a graduate degree, PhD, or professionals degree, a houshold income of over $65k and more than $250k in net worth.

I don't know about education (or net worth, really) but I think $200K a year would qualify them.

This thread discussion is just one more reason I will continue to "throw away my money" and rent.

I love the convenience of not having to worry about fixing junk and if I get sick of the place, pack up and in a month can be living somewhere else without worrying of financing, selling, buying, property values, etc. Seriously, you homeowners have gotta be a stressed-out lot having to deal with all of that. I got better things to do with my stress.

[zmcgill]

Originally Posted by screamingFit

This thread discussion is just one more reason I will continue to "throw away my money" and rent.

I love the convenience of not having to worry about fixing junk and if I get sick of the place, pack up and in a month can be living somewhere else without worrying of financing, selling, buying, property values, etc. Seriously, you homeowners have gotta be a stressed-out lot having to deal with all of that. I got better things to do with my stress.

But at the end of the day they've got a home in their name, equity, collateral for a loan, etc. What do you have? A piece of paper saying you're allowed to live somewhere. For some people it's worth the trouble.

[Eug Wanker]

When I was still in training for my job, I had the choice of renting or buying. I chose to rent. After going though all the calculations for all associated costs of buying and how much I could realistically afford, I determined that in my situation I would have to own the place 3 YEARS before it became worth while, and that's even including an average appreciation of the value of the place of several percent per year. And that's not even counting the headache associated with moving if I had to move after 3 years. (I wasn't sure I was going to get a job in the same city as where I was getting my training.)

Now, things a bit different since in many places the appreciation is far more than "several percent", but nonetheless there are good reasons to rent, especially if you have no children. I do agree with you that owning is usually a good investment, but it's not for everyone.