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Stanman, what is so bad about people fresh out of college not being able to afford a home?
I think it is a good thing that young people have to save for a few years and learn how to practice financial discipline before buying a home and starting on a family.
Let's say two young people fresh out of college, a nurse and an engineer, start saving at 22. They both make $50k/yr and they are saving 10% of their income. In five years they will each be making about $75k/yr and have $150k saved up. Then they can buy their starter home of $800k with 20% down and comfortably make the PITI of $4.5k ($3k after tax breaks) on their take home pay of $100k or so. Then they can start saving for their retirement. $800k is still a very nice starter home in most of the Bay Area. If you want to live in The City, you are going to have to either sacrifice a bit on size or neighborhood, but you can still live here. You can live well in one of the near in suburbs, like Berkeley or Daly City. You can live very well in an outer suburb like Livermore. And remember this is just your starter home for a couple not even 30 yet!
Sure, this is the cream of the upper middle class here, but if you want to live well in the Bay Area, you have to have two college educated breadwinners.
You can still make it on less, but of course your standard of living will be lower. Two MUNI busdrivers, each making $45k/yr who have saved $90k can afford a tiny starter home in someplace like the Excelsior or something nicer in Oakland or Daly City.
Prices are right at the point where fewer and fewer can afford, especially with a 30 year fixed mortgage. Which is one reason that they cannot keep appreciating at above income rates for much longer.
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Here's the thing...
Over the last few weeks or so a lot of threads have gotten a bit heated. For some reason talking about the housing market, and the bubble in particular, seems to get a lot of people really riled up. Why is that?
We've all heard the various rants:
Bubbleheads/bears are jealous renters who are just angry and bitter that they didn't buy.
RE bulls are nervous owners who are over leveraged using NAAVLP's and are too afraid to admit they are soon going to see their finances in ruins when the market crashes.
And so on.
Why do you think people are so emotional beyond the obvious arguments listed above? Is it because of a general nervousness about the market, a belief that the bubble is over-stated or just some sort of strange denial about the whole thing?
Give us your opinion BUT keep it civil. The threadmaster will delete at will.
#housing