How can anyone justify paying $200,000 for a home

[npk]

When that same home cost about $80,000 twenty years ago. This artificial inflating of homes value is one reason that our economy is in the shit tank it is n. Prices of homes have become so expensive that the only way to sale real estate is to loan people money at enormous interests rates with 30 year mortgages. People are so far in debt, with just home loans, that if just 5% of those people can't meat that loan or default on that loan, this is the result.

One thing that I can't escape in my mind, is how much home prices have sky rocketed versus how employment wages have not been able to keep up. This can not continue. This greed cannot continue.

[ronnykmarshall]

1. $200K sounds good to me.

Our place was $705K

[Doityourself]

11. 200K in my hood will get ya 1 bedroom condo..maybe 2 bedrooms

[yardwork]

33. Same here. And wages in NC have definitely not kept up.

[slampoet]

46. Then you don't live in a hood.......whitey.

[Doityourself]

62. LOL...I'm black.

[slampoet]

80. 3

[Doityourself]

82. It was a play on words Roscoe!!! I often refer to my neighborhood as my "hood" I don't consider it

a negative conotation, just a word I used growing up...so it sticks.

[Glaseatr]

67. Damn

I thought it was only Repugs that were racist. So much for thinking.

[Jersey Devil]

85. You can't even buy a vacant lot here for $200K

Even with the downturn in real estate a vacant 75x100 foot lot costs about 250-300k.

[Matariki]

93. 200K in my neighborhood will get you a condo in YOUR neighborhood

Here? Nothing.

[joop]

24. OP can't be from CA!

Holy crap, two total teardowns at the end of my street 2/1 houses are over $700 right now. One smells of animal urine so strongly you can smell it before you enter and the other is "special" because the drug dealer who lived there died and wasn't discovered for days.

Agreed, home prices are way too high glad we bought when we did and have no plans of moving.

[anneboleyn]

38. Or from Indiana, very few homes under 175,000 (except very old houses that need work)

[Johonny]

64. I know

Housing went from 500-600 K to 1-1.3 mil in my area. gone was any chance to buy a house. So why to I want to bailout this inflated housing market.

[buckettgirl]

88. $200k buys a McMansion here

Rural Kansas living... this is why I would never live in CA or NY or FL
My home cost me $65,000 in 2007... 1400 sq ft ranch with 400 sq ft partially finished basement, 3bd, 1.5 bath, attached garage, plus separate shed and workshop, has been VERY well maintained too. This is what you ought to get for your money. And I'm not that rural... live in a town of 3500, 20miles away from a town of 25,000... jobs are plentiful and wages are fair, and gas has not once hit $4.00/gallon.
If a person is making wages similar to my household ($60k/yr), I don't know how they could possibly afford a home loan over about $120k... The house payment alone would leave you house poor...

[kypp]

2. I would've loved $200K - ours was $425K.

[JBear]

3. Because we kept building!

The claim was that we have a housing shortage and so we have to build, build, build...

This drove up the cost of building materials (not to mention the 3 rivers gorge dam in China!!)

Now to build that $80k house, it takes about $130-$150k. Add on the land and builder profit and viola!

Another side effect of build, build, build, is that the land value goes up. So when the lot price goes from $8k per site to $40k per site, homes go up in price too.

Simple supply and demand - if you ignore the fact that we really don't have a housing shortage.

:bounce:

[TheBigotBasher]

57. It is an addiction to inflation - not building.

It is because the US (and the UK) got addicted to property price inflation, while opposing general inflation. Property prices were effectively removed from inflation indexes which meant taht inflation was allowed to sky rocket. This did have the effect of helping people "feel wealthy". So expensive cars were bought by people in $40k jobs on the back of rising property prices.

Eventually, if there is no significant inflation in the rest of the economy (especially pay), the market will correct. For a while this correction was being paid for by consumers, now it is being paid for by bansk and they want a bail out.

[AlCzervik]

4. we paid $209,000 in 2000, we live in California, that was stall a deal.

[npk]

19. Damn that is good deal in Cali

I just can't believe how home prices have skyrocketed so high. I mean it is good for people that got into their homes before the explosion, but not so good now. I recently looked at a home that was being sold for $275,000. The homes was only 1400 Sq feet. That same size home twenty years ago would have sold for under $100,000. Homes are getting more expensive, but necessarily bigger.

[AlCzervik]

23. i could have sold 2 years ago for $450k, today i'd be lucky to get $275k.

lickily we haven't had to borrow anything off the equity---we were lucky and we totally understand that, i feel for those they were not as lucky as us.

[uponit7771]

78. You stole that house!!!!! :-)

[WeDidIt]

5. I paid $214 for my home

It's pretty small.

Bigger homes in my area go for $420K.

[Zenmaster]

6. 200K is great. My house is 297

[Nye Bevan]

7. That's less than 5% per year appreciation

A better question is why someone would pay $1.2 million for a home that cost $650,000 *three* years ago, which was the kind of thing that people were doing before the bubble burst.

Greed is largely the answer, as with all bubbles. The thing is, you don't know how much longer the bubble will keep going. If you get out right before it pops, you will be fine. Of course you never know when it is just about to pop.

And of course people need somewhere to live. I hope that most people have learned their lesson- RENT to start with (or live with your parents); SAVE until you have a down payment of 20%; DON'T overextend yourself; and get a conventional fixed rate mortgage when you do buy a house. Just because your brother-in-law bought a 6 bedroom McMansion with creative financing and a 3-car garage for his leased Lexus SUV doesn't mean that you have to.

[OmahaBlueDog]

63. I think a lot of young couples should really think about their weddings

I know it's "her special day", but when families regularly blow $30K on a wedding, everyone should ask if that money could be better used for a down payment on a home, or to pay student loan debt.



http://money.cnn.com/2005/05/20/pf/weddings/

[vanderBeth]

83. Yes, those weddings are ridiculous. It is unfathomable that anybody would spend that much,

especially if the would need that money for future use.

FYI: Don't ever watch My Super Sweet 16. It would probably make you ill.

[justiceischeap]

8. In Norfolk, VA you can't find a 1BR condo for less than $150K

Unless you want to buy in unsafe areas and most people want to live where there is relative safety in their neighborhood.

[Thothmes]

45. I paid $125K for my house in Hampton, VA,

but that was 25 years ago.

[FrenchieCat]

9. We paid $330,000 in 1991.......

Uh....holding on to property for 18 years, I would hope that my house appreciated.

[Orrex]

10. Where is the 200K house located?

If my very modest home and property were moved just 40 miles south, their value would triple.

[LynneSin]

20. Hell if mine just moved 5 blocks up the road It would probably be another $75-100k

And five miles down the road, about a million.

[Orrex]

55. Look--everyone can see that you're totally stalking me

I can hardly blame you, but really!

[Rob Gregory Browne]

12. Man, where do you live?

I paid $220,000 for my home almost twenty years ago.

[Rob Gregory Browne]

13. Man, where do you live?

I paid $220,000 for my home almost twenty years ago.

[mohc]

14. 200,000 2008 dollars would be like 108,000 1988 dollars

To appreciate from 80 to 108 in real dollars is not really that big a return. Most of the excessive growth happened in the past few years, but inflation and real appreciation is the main reason behind home price increase across the last 20 years. On the other hand, I bought my home for 325k in 2004, near the end of 2006 it would have gone for 450k. That was an unreasonable increase with no basis in inflation. Now its worth about 250k.

[LynneSin]

15. Do you know anything about the Real Estate market?

I do just a little bit and I know that $200k is a fancy home in some regions of the country and the slums in others.

Me, I could have bought a $200k home but went for $175k instead but an extra $50k would have moved me to a very well established neighborhood but I just didn't think I had the money to swing it. But had I stuck with $150k I would have been in a much lesser area then what I have.

[npk]

26. I confess no.

Not a wiz in that regard. I just don't see the value in today's homes. There are small one bedroom condos in my city that cost more than $300,000. I just can't justify spending that kind of money.

[npk]

27. I confess no.

Not a wiz in that regard. I just don't see the value in today's homes. There are small one bedroom condos in my city that cost more than $300,000. I just can't justify spending that kind of money.

[LynneSin]

30. Well I'm not sure where you live and I probably don't know much more

I did just buy a house a year ago and it's a crazy world out there. But honestly, it's all about 'Location, Location, Location' when it comes to real estate.

Take my Wilmington DE rowhome. If I took this same house and moved it 5-6 blocks north it would be worth about $75k more since that is a prime real estate area BUT if I moved it about 5-6 blocks south it would be worth about $75k less since that is a high crime area.

I think you'll find that for most people looking to buy - $200k is a reasonable price for a home and for many (ie California) that's what they wish houses were worth since the real estate market is horrible there.

[jbonkowski]

16. Appreciation and inflation

The price from inflation alone over the last 20 years would raise it from $80k to $144k. The remaining appreciation is not that big at all. It is the rapid appreciation in the last 10 years that is the problem.

Your overall points are valid. however. Especially concerning stagnant wages.

jim

[zulchzulu]

17. $200K house in Madison WI would a a tiny, crumbling fixer upper

I lived in SF where $200K wouldn't even get you a 1-BR condo.

[TheCowsCameHome]

18. That's what a nice two car garage brings these days.

[Silent3]

21. We're living in a pretty crappy apartment waiting for our under-construction...

...new house to be finished. Our old house has already been sold (whew!), and the mortgage for the new house approved, but with the economy in this much of a mess I worry about the money we have in the bank from the sale of the old house lasting the 2-3 weeks left until the new house is built (it's more than the $100K FDIC limit), and the commitment for the mortgage being rescinded.

All we can do is hold on tight and hope that it somehow all works out.

[abumbyanyothername]

74. Do not have uninsured funds in the banking system

Anywhere. And don't count too heavily on the insurance.

Wells.

[CANDO]

22. We paid 85k for our fixer upper in 2002

I still cannot fathom how people are affording these cookie cutter mcmansions in former corn fields while probably making less money than myself. I try and figure how they budget a $2000 mortgage and all the other items a modern household needs to function. Utilities, food, transportation, insurances, heating/cooling, cable, telephone, internet, school activities, holy crap the list goes on and on. Really don't know how people are doing it.

[AspenRose]

25. That would be wonderful

But then East Coast homes are outrageously expensive

[Doityourself]

29. Yes they are. I'm in NJ..bought in 2003..4 bedroom 3 baths..for 175K and put a chunk down

my brother and nephew do home renovations in their spare time..and fixed up or changed a whole bunch of stuff for me, for babysitting and other trade-offs. My mortgage is only 75K..thank goodnes.. I can sell for quite a bit more ...question is will anyone buy..lol! I'm way over in equity..hallelujah!

The real estate agent kept trying to talk me out of it..and into something for a lot more money..kept telling me, oh you can afford it easily...I thought What if...no thanks lady.

[FlaGatorJD]

28. The house I grew up in went from $35K to $450 K!

Now that was a 40-year period, but I totally agree that this fake value stuff
has been a large part of the problem. That home would cost about $100K to build.

Since the bottom dropped out, I believe the value is now around $300K.
(By the way, my parents sold it for about $100K, around 10 years ago)

Everyone was using their fake equity to get real money on fake credit,
which of course is a problem when the fake equity goes away. (or something like that)

[kerry-is-my-prez]

31. try living in SW Florida or Cali - or any area near a large city....

n/t

[krkaufman]

32. Which came first, the chicken or the egg?

The bubble didn't come out of nowhere. One reason housing prices have escalated is precisely because banks have, over time, loosened their mortgage guidelines... from downpayment requirements, acceptable ratio of income to mortgage, and then the nightmare ARMs of late.

There is no question that the root of this housing market problem is that housing prices have not grown in coordination with the income of the American population, far outracing any "growth" in income.

[Mz Pip]

34. Can't by a lot for that

around here. :shrug:

[azmouse]

35. Paid $149,000 in 1991 for our house.

Today it's valued around $375,000.
At the peak of the housing craziness we were valued around $600,000... that was total insanity.

The drop in housing prices will certainly cause pain to many who don't deserve that pain but in the long run I think it'll be better for the economy to have home prices at a more reasonable level.

[Zenmaster]

36. The housing market right now is a fairly normal market...

As far as prices go, in most places, right about now you are getting about fair market value for houses and they aren't artifically driven up.

Of course that sucks for those who bought houses in the last few years when things were really drastically inflated. And prices will probably sink a bit lower now to be undervalued for another couple years.

But right now you are paying about what they are worth, thanks to the financial collapse.
If you have good credit, its actually a pretty good time to buy a home (that you are planning to live in for a long time. Not to flip for profit)

[krabigirl]

37. wow $200K? Where I live, you haven't been able to get a home for that amount since 1989 or 1990.

[LisaM]

39. OP's point wasn't the dollar value, it was the inflation rate

Houses are always more in certain parts of the country than others, especially where wages don't keep pace (Seattle, for example). Add in people both buying AND selling houses for more than they are worth, the unscrupulous lenders, and voila. $200K sounds good in a lot of markets now (though tell that to people in Detroit), but not when its real value is far less.

[alcibiades_mystery]

40. Try $461,000 for a three bedroom condo

Where you livin' at $200,000?

:shrug:

[progressiveforever]

41. I paid 200, 000 and it's not the Taj Mahal

I wish I could have paid less, but there was nothing lower to be had.

[TheDonkey]

42. $200,000 is a STEAL in Los Angeles. But I agree. The housing market is still bubbled

and a bailout will not address this issue. Affordable housing is also a crisis in America not only the falling DOW.

[JuniperLea]

51. $200k in LA will get you...

A 500 Sq Ft five story walk up in the ghetto.

[TheDonkey]

71. in need of some 'TLC' lol

the prices here are downright sickening and the Countrywide Jumbo Loan Credit Extravaganza only helped inflate them.

[slackmaster]

43. Housing prices became de-coupled from inflation in about 1995 for many reasons

You are correct. Because wages have not kept pace with housing it is a fact that someone with an average job cannot afford to buy an average home right now.

[BlueIdaho]

44. You should get out more...

Try taking an economics class or two at the local community college - try both macro and micro economics. Then learn about adjusting for inflation. When you're done - take a look at housing price increases over the last half of the 20th century. Then ask yourself what percent of income an $80,000 house was twenty years ago and what percent of income it is today. Things are seldom as simple as they seem.

[npk]

50. I know what you are saying is true.

But years ago, you saw many traditional one family incomes. Where usually the husband worked for a decent wage, and the wife took care of the home. Plus many families had at least one child. Even so people were able to still afford to purchase a home and feed their families, even with only one person earning an income. Nowadays you rarely ever see a one family income being able to support a home and their family. Most middle class families cannot afford to have a single income wage earner anymore. I guess that was my point. Everything has become so inflated we are losing a little piece of what used to make this country great.

[BlueIdaho]

52. Single wage earner families disappeared in the 1960's...

That was almost half a century ago.

It was also a time before civil rights, women's rights, and the end of the cold war are we sure we want to go back there?

[Barack_America]

47. I watched homes in my neighborhood double in 4 years.

I was scoping them out and following their prices. When I saw that their prices continued to soar with no appreciable change to the neighborhood, I decided to stay out of the market.

But people are still buying them at their inflated prices. I simply don't understand why.

[JuniperLea]

48. Pft! $200k is a down payment in Southern California!

When those that went for $450k were commanding $750k, now that was silly.

[crankychatter]

49. my folks paid 12,500 for a place my sister just sold for 750K

and it's a postage stamp in the barrio

[sandnsea]

53. Wages have not kept up with housing

A $4.00 hr job in 1980 pays about $12.00 hr now. A $25,000 house in 1980 is worth $200,000+ now.

It seems pretty obvious to me too, the denial in this thread aside.

[aint_no_life_nowhere]

54. My parents paid $36,000 for a 3 bedroom house near Newport Beach California in 1970

on a half acre of land. It was right on the back bay, about 2 blocks from where Chris Cox' parents have a grandiose estate (the current SEC Chairman). My dad was a retired career military officer living on his military pension and he was able to afford it. I think the down payment was $5,000, virtually everything my parents had. Salaries have maybe doubled or tripled since then, but housing prices in California have gone up maybe 15 or 20 times what they used to be.

[kestrel91316]

56. $200k MIGHT get you a studio condo in a lesser neighborhood around

these parts. Fixer-upper 1950s tract homes in decent areas go for $600k-$800k. After the slump.

[ecstatic]

58. wasn't gas 25 cents 20 years ago?

I think the prices for everything increased. I'm not justifying it though. And minimum wage has barely gone up.

[npk]

60. Gas was still under a buck where I live

before that corporate puppet bastard shit head took office in 2001. Sorry for the language.

on edit: I would like to add greedy to my line of expletives.

[RebelOne]

92. No, more like 45-50 years ago.

I remember back when there were gas wars and it was just cents per gallon.

[OmahaBlueDog]

59. Using the rule of 72, that's about 6% per year increase in value over 20 years

Honestly, that makes the home a moderately decent investment when compared to bonds or stocks over the same period.

It's the homes that went from 200,000 to 400,000 in 2 years (as happened in South Florida) that got people into lots of trouble.

[AZBlue]

61. You can't even get a little condo here for that price.

[lithiumbomb]

65. because we need a place to live

80k 20 years ago, at 4% inflation per year (i'm guessing) for 20 years equals 175k today, I think. So 200k is certainly in the ballpark for what you would pay today for the same house assuming the area hasn't significantly deteriorated or gentrified.

[marigold20]

66. OP must live in an area similar to mine

small city, rural area, no large cities nearby. $200,000 will get you a lovely, newer ranch on a sizeable lot. Our property values never skyrocketed and now on the other side of the bubble, they aren't collapsing either. On the other hand, it's pretty boring around here!

[Erin Elizabeth]

73. Yep, I don't live in a bubble either, and never have.

Our property values have sort of flatlined. But they were never artificially high to begin with so....shrug.

[MoonRiver]

68. OMG, surely you jest!

:wtf:

[babydollhead]

69. our 1998, $67,500. My sisters, 2003, 675,000.00

[lumberjack_jeff]

70. 80k @ 5% interest for 20 years is 212k.

Seems about right to me.

The problem is in the places where that house is now $600k.

[Erin Elizabeth]

72. No that's pretty reasonable appreciation.

On the other hand, my friends moved to Austin, Texas in 1997 right before the property bubble started there and they bought a 60 year old 900 sf two bedroom home for $60K. In a rough part of town (no kids).

In 2004, just seven years later, they sold it for $250K. Now THAT is ridiculous.

[Realityhack]

75. sounds super cheap to me. MA n/t

[Hepburn]

76. Ummmmm....I live in the Los Angeles area....

...you cannot get anything around here for under $500K. I am talking a one-bedroom condo for that kind of money and not in a great neighborhood.

$200K ~~ I wish!

[NashVegas]

77. Ponzi Scheme

The idea isn't to buy a long-term home, the idea is to buy a home with the express purpose of selling in 1-3 years.

As the prices inflated, those who didn't get in on the ground floor were shut out from reasonable deals, especially when their wages / salaries didn't rise with the cost of housing.

[DustyJoe]

79. Old Folks

Well at least some, luckily see that a big home after the kids leave aren't needed. Neither are mortgages. Sold my urban home had just enough equity to buy 2 acres in the country 25k, put utilities on it 10k, and a 'trailer', yes a trailer just the right size 45k, had to special order the floor plan. Paid cash for all of it and am so very very glad we did what did years ago. This sucks in so many ways for the younger generation just trying to start the dream.

[spanone]

81. my parent paid 7,000 and sold for 45.000 thirty years later...justified

[pnwmom]

84. In a growing area, it's because more people are competing for a limited number

of homes. Here in the Seattle area, we have growth limits concentrating our housing in the cities (in an effort to keep rural areas green). This has an effect on housing prices.

[madrchsod]

86. my parents bought the house i`m living in for 35,000 in 1973

the house was appraised at 90,000 when i bought it from their estate . the house is in a very good neighborhood where most of the houses appraise at 80-125 thousand and are on the market for less than two months.

one positive thing to come out of this is realist values in housing pricing.

[Raineyb]

87. I couldn't even buy a condo for that where I am

They're building a something down the street and the condos are starting at about half a mil.

I don't know why anyone would pay that here the neighborhood's not worth that.

Regards

[EstimatedProphet]

89. Maybe it has a view of Russia

[izzybeans]

90. I might be able to get a studio for that now.

[fencesitter]

91. What I'm seeing here is folks are pretty well off.

I can't buy a home here in SE PA, because a 200,000 home doesn't exist. Well, maybe in places you really would not like to live. A one bedroom condo starts about 300K. I make a fairly good living, but there is no way I can afford a 1500. - 2000. mortgage, plus taxes, plus insurance, plus upkeep and improvements, plus a condo fee, etc., and expect to have anything left over. I've always wondered who buys these new homes for 400-500K, what do they do for a living, where do they come from? BTW, there a few forclosures here.

[all.of.me]

94. I live in northern NM. 200K will get you a trailer, small condo or summer cabin in the woods.

A decent house goes for about 350K. Wages suck. We have a lot of second homes here.