Author Topic: Salary to home value ratio  (Read 7166 times)

Kaplin261

  • Bristles
  • ***
  • Posts: 321
  • Age: 39
  • Location: Richmond Va
    • Michael Foutz
Salary to home value ratio
« on: August 04, 2015, 10:29:00 AM »
Family of 2 adults and one child.
Current numbers:
$140k household income
$225k house that is 1700 sqft (Mortgage of $150k with 12 years remaining 2.9% Interest) Built 1988
100 total minutes 90 miles of driving a day for careers
Below Grade Schools

We would like a newer home that is less than 5 years old, a home that has friendly neighbors and who take care of there homes. Children in the neighborhood who are good influences to our son. A home that is in a good school district. Would love to eliminate the long comutes that we both have but we both work on the opposite sides of town. We could lower our salaries and get jobs that have a shorter commute.

Some of the problems we have encountered are that homes that are newer and are in nicer neighborhoods are huge, 4 bedroom mcmansions 3000 sqft. How do we get a high end new home with sqft below 2k? Will it hold its value if we found one, if there are no homes being built like this there be a reason and that reason is there is no market for them.

Ideal Home:
2200 sqft or less
$315k or less
Less than 5 years old
Great Neighbors!!
Minimal Commute!!
Top of the line home and lots of ammentities

At our combined salary whats the maxium home value we should consider? We will bring 20% downpayment. We do not have any other debts and have about $300k in 401ks and IRAs
« Last Edit: August 04, 2015, 10:52:39 AM by Kaplin261 »

Mississippi Mudstache

  • Handlebar Stache
  • *****
  • Posts: 2162
  • Age: 36
  • Location: Danielsville, GA
    • A Riving Home - Ramblings of a Recusant Woodworker
Re: Salary to home value ratio
« Reply #1 on: August 04, 2015, 11:12:47 AM »
The more restrictions you place on your search, the less likely you are to be successful. I completely understand a cap on price and wanting a short commute, but why on earth would you restrict your options to homes built in the last 5 years? If new ones are too big, look for older ones.

dragoncar

  • Walrus Stache
  • *******
  • Posts: 8897
  • Registered member
Re: Salary to home value ratio
« Reply #2 on: August 04, 2015, 11:39:47 AM »
typically you have to build if you want something new and not huge

Kaplin261

  • Bristles
  • ***
  • Posts: 321
  • Age: 39
  • Location: Richmond Va
    • Michael Foutz
Re: Salary to home value ratio
« Reply #3 on: August 04, 2015, 11:40:40 AM »
The more restrictions you place on your search, the less likely you are to be successful. I completely understand a cap on price and wanting a short commute, but why on earth would you restrict your options to homes built in the last 5 years? If new ones are too big, look for older ones.

A home less.then 5 years old is not going to be a fixer upper. It will also be energy efficient, modern appliances, newer modern exterior designs. And in most cases there are more family's with younger children and that's what we're looking for so our son has neighborhood friends.

ShoulderThingThatGoesUp

  • Magnum Stache
  • ******
  • Posts: 3057
  • Location: Emmaus, PA
Re: Salary to home value ratio
« Reply #4 on: August 04, 2015, 12:06:29 PM »
Around here, the new homes that are around 1500 square feet are ranch homes. Your price per square foot will be intense, though.

zephyr911

  • Magnum Stache
  • ******
  • Posts: 3628
  • Age: 41
  • Location: Northern Alabama
  • I'm just happy to be here. \m/ ^_^ \m/
    • Pinhook Development LLC
Re: Salary to home value ratio
« Reply #5 on: August 04, 2015, 01:16:28 PM »
Have you considered moving a bit farther? My area is loaded with VA transplants who are generally surprised by how much they like it, and what you describe is easily had for half your target price.

The weirdest part is, at least if you're in tech or defense, you make almost the same money here.

I pull in ~100k as a GS-12 and ANG O-4, and have a 3BR that I absolutely love for $122k.

hdatontodo

  • Bristles
  • ***
  • Posts: 287
  • Location: Balto Co, MD
Re: Salary to home value ratio
« Reply #6 on: August 04, 2015, 04:15:26 PM »
Have you looked in King George VA

http://www.zillow.com/homes/king-george-va_rb/

GFPchicken

  • 5 O'Clock Shadow
  • *
  • Posts: 10
Re: Salary to home value ratio
« Reply #7 on: August 04, 2015, 07:23:48 PM »
Older homes can be nice and energy efficient too! We recently bought our 654sqft house (yes, not typo, it's that small and awesome!) It was built in 1950. We bought it from an environmental-minded developer who bought it and did a complete gut-rehab. It looks completely new inside, all the most energy efficient appliances, giant south-facing windows, central AC, R-40 roof insulation, etc. So I wouldn't rule out older homes, especially ones that have been renovated with energy efficiency in mind.

lr

  • 5 O'Clock Shadow
  • *
  • Posts: 63
Re: Salary to home value ratio
« Reply #8 on: August 04, 2015, 07:41:08 PM »
Real estate is local, so maybe your criteria are great, or maybe they're bonkers. The best way to find out is to grab an agent and start trying it out.

I've lived in areas with lots of new construction that hits most of your points (except price, maybe), but that's because they're metros with limited land, and the homes tend to be small townhouses that "infill" tiny lots where older homes were knocked down. When I've lived in areas with lots of land, the homes tended to be massive with giant parks for backyards.

As far as ratio, that's super personal. The banks all have calculators that show you the averages and their maximums, but you need to consider whether your costs and savings rates can live within that, and make quality of life tradeoffs on top of that. At 140k/year, you probably have some flexibility in that decision, but you didn't mention what your retirement/savings plans are. Depending on your age, you might be a rockstar or in trouble.

grettman

  • 5 O'Clock Shadow
  • *
  • Posts: 79
Re: Salary to home value ratio
« Reply #9 on: August 05, 2015, 03:18:40 AM »
Don't assume new construction is energy efficient.  I implore you to ask around for home inspectors who do thermography in their inspections.

This is coming from someone who has a home that was built in 2004.  Windows installed poorly (all the fancy technology won't do you shit if that is done wrong).  Shitty insulation above garage where my master bedroom is....The utilities are costing me a fortune and I freeze in the winter.  I don't mind freezing when it is my choice and I am being badass but the home builders made the decision for me to be badass and I don't like that!   Buyer beware.

icebox92

  • 5 O'Clock Shadow
  • *
  • Posts: 27
Re: Salary to home value ratio
« Reply #10 on: August 05, 2015, 04:25:05 PM »
Don't assume new construction is energy efficient.  I implore you to ask around for home inspectors who do thermography in their inspections.

This is coming from someone who has a home that was built in 2004.  Windows installed poorly (all the fancy technology won't do you shit if that is done wrong).  Shitty insulation above garage where my master bedroom is....The utilities are costing me a fortune and I freeze in the winter.  I don't mind freezing when it is my choice and I am being badass but the home builders made the decision for me to be badass and I don't like that!   Buyer beware.

This.  I'm a superintendent for a large commercial general contractor.  We don't do residential, but did so some very large military family housing developments across the country, one of which I was on back in 2006-2009.  We were shocked at the lack of quality in the residential contracting community.  New homes are just simply not built like they use to be, not just in the above mentioned ways, but structurally as well.  I'm not say all new builds are low quality, and that there aren't good residential contractors out there, but they are few and far between. 

The hubby and I are also routinely amazed at what friends pay for crap new houses.  Give me a nice older home in an established neighborhood that has been upgraded (or preferably we upgrade).  This is definitely a bigger bang for your buck...
« Last Edit: August 05, 2015, 04:38:28 PM by icebox92 »

jedichikin

  • 5 O'Clock Shadow
  • *
  • Posts: 15
Re: Salary to home value ratio
« Reply #11 on: August 07, 2015, 08:19:29 AM »
I would just make sure the payment is something you can pay comfortably, and something you can pay on 1 income, or something you could pay even with no income at all for awhile.

With new homes, the energy efficiency is such that a green 3k square foot homes electric/gas usage is less than a 1k sq. ft condo (I am being literal, I rent out a condo built in 2008, and live in a home built in 2013 that fits these descriptions) and my utilities are actually cheaper in the bigger home.

I would love to hear a ratio like no mortgage greater than 2 years combined salary etc.....but really it comes down to payment, and with low rates still around. Buy the house you want , if you can afford it.

Good luck.

I'm a red panda

  • Walrus Stache
  • *******
  • Posts: 8010
  • Location: United States
Re: Salary to home value ratio
« Reply #12 on: August 07, 2015, 08:47:21 AM »

A home less.then 5 years old is not going to be a fixer upper. It will also be energy efficient, modern appliances, newer modern exterior designs. And in most cases there are more family's with younger children and that's what we're looking for so our son has neighborhood friends.

You're making quite a few assumptions. There is some real shoddy construction out there.

(When we were looking, we found a home that looked nearly identical in floor plan and 'look' as the house we ended up buying. It cost quite a bit less. We asked our realtor why, he grabbed the eave over the garage and shook it.  It was terrifying. He then pointed out at least 10 other 'cut corners' inside the house.  We spent more.)

We bought a home that was about 2x our total household income (the 'value' is now much higher than that; but not the sale price).  But we live in a place where doing that is possible. We could find a nice home for 3/4 of our salary, quite honestly.  In some markets you just can't do that- so without knowing where you live that whole "maximum budget based on salary" isn't really something that can be advised on. It still doesn't mean that the rent vs. own doesn't tip in favor of own.

zephyr911

  • Magnum Stache
  • ******
  • Posts: 3628
  • Age: 41
  • Location: Northern Alabama
  • I'm just happy to be here. \m/ ^_^ \m/
    • Pinhook Development LLC
Re: Salary to home value ratio
« Reply #13 on: August 07, 2015, 10:19:30 AM »
You're making quite a few assumptions. There is some real shoddy construction out there.

(When we were looking, we found a home that looked nearly identical in floor plan and 'look' as the house we ended up buying. It cost quite a bit less. We asked our realtor why, he grabbed the eave over the garage and shook it.  It was terrifying. He then pointed out at least 10 other 'cut corners' inside the house.  We spent more.)
Yep. My townhouse built in 2011 is going to need an entire section of roof replaced, and some reworking of the attic frame, because it wasn't done right the first time. It has water damage in two different areas because flashings are missing or improperly installed. The wiring is sloppy and probably not all to code. The list goes on. I was an idiot and "saved" $350 not getting an inspector. This work has cost or will cost thousands.
Quote
We bought a home that was about 2x our total household income (the 'value' is now much higher than that; but not the sale price).  But we live in a place where doing that is possible. We could find a nice home for 3/4 of our salary, quite honestly.  In some markets you just can't do that- so without knowing where you live that whole "maximum budget based on salary" isn't really something that can be advised on. It still doesn't mean that the rent vs. own doesn't tip in favor of own.
Our is about 85% of wages, and it's truly everything we want, but our particular confluence of high local wages and LCOL is pretty rare. We could easily double or triple that and still keep SR over 50%.

lostamonkey

  • Bristles
  • ***
  • Posts: 454
  • Location: Canada
Re: Salary to home value ratio
« Reply #14 on: August 07, 2015, 11:21:00 AM »
I read an article that the median house in Toronto is 8x the median family income.

Even in smaller Canadian cities it seems like most people spend 5x salary. I am a bit jealous of American real estate prices.

I'm a red panda

  • Walrus Stache
  • *******
  • Posts: 8010
  • Location: United States
Re: Salary to home value ratio
« Reply #15 on: August 07, 2015, 12:04:24 PM »
Yep. My townhouse built in 2011 is going to need an entire section of roof replaced, and some reworking of the attic frame, because it wasn't done right the first time. It has water damage in two different areas because flashings are missing or improperly installed. The wiring is sloppy and probably not all to code. The list goes on. I was an idiot and "saved" $350 not getting an inspector. This work has cost or will cost thousands.

I'm not sure I really trust inspectors anymore. I mean, I've had them point out a few decent things, but since they can't get into the walls, they miss SO much. Wiring is one of those things; they can only see what is exposed.  We had one tell us a roof would need to be replaced in about 5 years. Okay- NBD, we were buying an old house.  The roof leaked badly enough to strip the paint off our bedroom walls TWO WEEKS after we moved in.  We probably would not have bought the house if we had been warned the condition was THAT bad.

zephyr911

  • Magnum Stache
  • ******
  • Posts: 3628
  • Age: 41
  • Location: Northern Alabama
  • I'm just happy to be here. \m/ ^_^ \m/
    • Pinhook Development LLC
Re: Salary to home value ratio
« Reply #16 on: August 07, 2015, 01:40:59 PM »
I read an article that the median house in Toronto is 8x the median family income.
You mean North America’s Fourth Largest Miscalculation?
Quote
Even in smaller Canadian cities it seems like most people spend 5x salary. I am a bit jealous of American real estate prices.
Jealous of our lack of a bubble? If you own a house, you may want to sell it. If you don't, keep renting until the inevitable correction.

lostamonkey

  • Bristles
  • ***
  • Posts: 454
  • Location: Canada
Re: Salary to home value ratio
« Reply #17 on: August 07, 2015, 01:43:11 PM »
I read an article that the median house in Toronto is 8x the median family income.
You mean North America’s Fourth Largest Miscalculation?
Quote
Even in smaller Canadian cities it seems like most people spend 5x salary. I am a bit jealous of American real estate prices.
Jealous of our lack of a bubble? If you own a house, you may want to sell it. If you don't, keep renting until the inevitable correction.

No, it was a different article. Yes, definitely jealous of your lack of a bubble. I do not own a home and don't plan on it unless there is a housing crash.

zephyr911

  • Magnum Stache
  • ******
  • Posts: 3628
  • Age: 41
  • Location: Northern Alabama
  • I'm just happy to be here. \m/ ^_^ \m/
    • Pinhook Development LLC
Re: Salary to home value ratio
« Reply #18 on: August 07, 2015, 01:48:16 PM »
No, it was a different article. Yes, definitely jealous of your lack of a bubble. I do not own a home and don't plan on it unless there is a housing crash.
I was asking (rhetorically) about Toronto, not which article... but that is good thinking ;)

jooles

  • Stubble
  • **
  • Posts: 135
Re: Salary to home value ratio
« Reply #19 on: August 19, 2015, 02:42:48 PM »
New does not automatically mean energy efficient.  Don't assume that.  You may get unpleasantly surprised.

What can you afford?  Or what will a bank allow you to borrow? Most banks will allow up to 36% of your gross monthly pay to be directed toward debt.  If you have no other debt that would equate to approx a $4,200/month mortgage payment.  Just because you could get a loan for that does not mean you should do it. 

Online mortgage calculator says $315k house, $62k down, 30 years at 3.67 = $1,161 principal and interest. 

The question I ask myself is - How little can I live with and be happy and satisfied so that I can save the maximum and pull the trigger on full-time freedom as soon as possible.

MgoSam

  • Magnum Stache
  • ******
  • Posts: 3643
  • Location: Minnesota
Re: Salary to home value ratio
« Reply #20 on: August 19, 2015, 02:52:20 PM »
I closed on a home that met every one of your criteria except that it is 30 years old. Absolutely nothing in it needs to be fixed (knock on wood), so I wouldn't only look for 5 years or less. You may find it, but anything less than 5 years old likely will be a much bigger than you are looking for. If you think about it, demand from most buyers is for bigger and better houses.

Plus a house that's that new has no track record. The house I bought has had 2 owners in the past 30 years, and I could tell that it was made well and would require little upkeep.

Being in Richmond, I can understand wanting a newer houses, as the city is likely full of older colonial style houses, but remember that each time you put a condition on what you are looking for, you will limit your available results.

Fishindude

  • Handlebar Stache
  • *****
  • Posts: 2188
Re: Salary to home value ratio
« Reply #21 on: August 26, 2015, 02:56:50 PM »
Although I'm involved in industrial work rather than residential construction, I've seen enough to know that the age of the home has little to do with the quality.
In my view, homes built in the 50's thru 80's are much better constructed than the stuff being build today.   They had better lumber, used plywood or full plank deck rather than OSB, copper and cast iron plumbing, better plumbing fixtures, real fireplaces, real stone or brick instead of stick on, etc.

Although they can be a bit more energy efficient and have a few nice interior features, today's tract homes are junk.  They are all built by the cheapest guys they can find and are thrown up as quickly as possible.   The concrete work is hideous, masonry almost non existent, all sheathing is OSB, all plumbing is plastic, etc., etc.

I think you would be much better served to buy an older home and allow yourself some additional dollars with the purchase to do energy upgrades such as windows and insulation, update the kitchen and restrooms and maybe a few cosmetic or electrical upgrades.

ShoulderThingThatGoesUp

  • Magnum Stache
  • ******
  • Posts: 3057
  • Location: Emmaus, PA
Re: Salary to home value ratio
« Reply #22 on: August 27, 2015, 05:47:31 AM »
Through the 80s? My first home was from 1971 and after opening up a few walls we discovered huge structural problems.

2Birds1Stone

  • Walrus Stache
  • *******
  • Posts: 5717
  • Age: 1
  • Location: Earth
  • K Thnx Bye
Re: Salary to home value ratio
« Reply #23 on: August 27, 2015, 06:37:44 AM »
I would keep it at 2.5 X annual income, and that is IF your jobs are both relatively stable.

Take that with a grain of salt is it is from someone who rents (my rent is 8% of my gross income).

I have many friends who are "house poor" and it sucks.

Pigeon

  • Handlebar Stache
  • *****
  • Posts: 1215
Re: Salary to home value ratio
« Reply #24 on: August 27, 2015, 06:55:18 AM »
I agree with the advice to find a realtor and start looking, because this is going to be very local.  It sounds to me like your requirements are simply for a house that doesn't exist in your price range.

The housing situation where I live seems to be similar.  All the new single family houses in good school districts are open floor plan McMansions, with great rooms with vaulted ceilings.  That means that despite the size of the house, you get not so huge usable space.  They do build slightly smaller townhouses, but they have HOAs with monthly fees that make them ridiculously expensive.

I can somewhat understand your desire for a new house.  I've had old houses, middle aged houses and new houses, and have had fewer expenses with new houses.  But our next house will probably be middle aged. We would like to downsize a bit and find a ranch house once the kids are done with college.  There is no new construction in a good neighborhood of moderate sized ranches that would be cheaper than our existing 4 br/3bath colonial.

Argyle

  • Pencil Stache
  • ****
  • Posts: 909
Re: Salary to home value ratio
« Reply #25 on: August 27, 2015, 07:02:01 AM »
I live in a house built in 1878.  It is wonderful for energy efficiency.  The rooms and hallways are built to get the light, so it is always bright in the daytime without any use of electricity.  It stays cool in the summer, so I'm at 75 degrees when it's 85 out and all the neighbors are working their airconditioners.  It even has working shutters, which are wonderful for controlling temperature.  It has city water, but also its own pump, as well as three fireplaces, so I'm set if there's a natural disaster.  I wouldn't discount older houses.  They knew how to build them back then.