I guess it has been about five years ago now that my wife and I decided to start looking for a new home. Actually, probably closer to six because it took us nearly a year to find our current home. As we were looking, I had a pretty clear idea in my head what I was willing to pay per month.
I handle pretty much all of the finances in our household, but not because of some antiquated social norms or anything like that. My wife just simply has no interest in having any part in it. I have offered more than once for her to have a more active role in the budget, but she always declines.
Anyway, I knew going in that I didn't want to spend more than $800 per month for our mortgage. We had planned setting up an escrow account for our taxes, insurance, and other stuff, so back then that $800 was a pretty easy figure.
Knowing our budget, I was actually comfortable paying $850 per month, but keeping the final cost under $800 would give us the ability to put some extra money per month towards the principle of our mortgage. That is exactly what we have been doing for the past five years or so.
I guess I should be happy to say that the housing market has been slowly growing over the past several years. The investment we made in our house has paid off as it is now valued at close to $50,000 more than what we paid for it. The neighbors house sold a year or two ago and it went for much more than I expected it to. This is where the problems start...
In our hold neighborhood, the price of land was declining. My wife purchased her house for $80,000 before the housing market collapse of 2008 happened and by the time her and I got together the house was worth maybe $60,000. A neighborhood that once had a per home value of ~$100,000 suddenly was down in the $50,000 range. It was also an older neighborhood, so as those people passed away, new buyers came in at the much lower price range.
I think the house down the road from us sold for $20,000. These lower income families had no desire to invest in their homes, so our neighborhood basically became like a trailer park. That was one of the main reasons we knew we needed to get out. We were able to sell our house for about $75,000, so we took the money and ran.
Given that scenario, I wasn't fully prepared to live in a neighborhood where our property values would actually increase! As has been the case for the past five years, I got our annual mortgage statement the other day only to find out that our escrow account was short by just about $300. With taxes and property values going up, and some bond issues that passed, our new mortgage payment was going to be $848 if we didn't pay that $290 out of pocket.
In a perfect world my wife and I would be getting raises each year which would probably cover that deficit. Since we work in public education, that isn't always the case. We frequently have to take pay freezes or cuts to help them balance the budget to account for lost revenue from students leaving the district.
So anyway, the TL:DR of this whole post is, what about other families who weren't as lucky to keep their jobs during the pandemic. What about families that live in neighborhoods which have seen exponential growth? I can only imagine how much their payments are going up. It is very easy to see how people can suddenly be priced out of their homes and might be facing foreclosure.
If I ever buy another house I will definitely be taking into account these things which weren't on my radar five years ago. I think too often people get that loan amount they qualify for from the bank and they go looking right at the top of that range. They don't take into account all of these things which really add up and can put them in a very bad position.
So that is what I have been thinking about this weekend. Let me know your thoughts!
Sports Talk Social - @bozz.sports
All pictures taken by myself or @mrsbozz
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Dude, in our house those financial roles are reversed. I just have no interest in it. Our property values have greatly increased since we bought. I'd be paying about double the amount in rental vs our bond.
!CTP
Interesting to read about housing in the US. One can only dream of prices like this in Austria. If I actually could buy a house for 100k in USD it would be in the middle of nowhere and would probably not even have electricity and warm water.
I came from listnerds :)
!invest_vote
I live in a pretty reasonable region of the US as long as you stay away from the water. Anything on the water in Michigan goes at a premium.
Those house prices are to dream of!
I just got the latest tax assessment and sure enough I will be paying more this year. I did fight the last increase, simply because it came during the depths of the last housing crisis. But now we have so many people moving in from the North who IMO are way overpaying for their houses that the comps are out of control. I guess when you pay $500 k for a shack in New Jersey anything in North Carolina seems like a bargain. I might have to start looking for a less desirable place to call home.
Do you live in the Ashville area? That place seems to be booming! My wife and I have a friend that moved down there for a teaching job. North Carolina is a beautiful state so I can understand the desire to leave jersey!
I do not live in Asheville. Asheville to me is a little of an outlier, beautiful place with a real "artsy" vibe which stands in complete contrast to its "Hillbilly" surroundings.
Ah, okay. I remember visiting Cherokee National Forest when I was a kid, but I don't remember much beyond that. I am looking forward to making it back there some day with my wife. I really want to share the scenery with her.
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Here is a little taste of the scenery. I took this photo at the top of Elk Knob which is near Boone. The very last ridge line is about 70 miles away. If you look very closely at the last ridge line you might be able to make out a small knob just left of center that is called Pilot Mountain.
This is Pilot Mountain up close. The name comes from the fact that early settlers used the "knob" of Pilot Mountain to set their course and get their bearings
That is pretty awesome. I remember climbing up Clingman's Dome when I was a kid. I forgot to mention that. I think that is right on the border though.
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That is Deep in them Hills!
There are so many aspects to owning a home that you never consider until you have to deal with them personally. The county/city we live in (Ramsey/St. Paul) is notorious for huge property tax hikes, double digit increases to the taxable market value of your home (we've seen as much as 23% in a year) and also, "special assessments" that can add thousands more per year to your property tax burden.
We typically get hit with 2-3 of these special assessments per year. I remember during the Housing Crisis of 2008 they charged us nearly $5k for a single assessment that had to be paid in 90 days or else it would be added to escrow and we'd be charged a sizable interest rate. That sure was "special". Lol.
It's really wise to consider property taxes when deciding where to buy. Since most county websites will allow you to just plug in the address of any property and see the tax history it's easy to do. Our son is going to be in the market for his first home this year and we're trying to educate him as much as we can.
Wow, that is pretty horrendous! I wouldn't be able to handle it. Even if it was my dream home we would be moving. Getting hit that hard multiple times per year would wipe us out! That is great that you are doing your best to educate him. There is still so much I am learning after all these years. Thankfully we have a good friend that is a title officer so she knows the ins and outs of the whole system!
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It's pretty bad here. We're looking at all of our options now. I'd be happy buying a few acres away from the city and building a small house. That huge assessment in 2008 was a big financial hit for us, thankfully we both had decent jobs but with all of the expenses we still were barely treading water.
Our son is making really good money now as a plumber but we're trying to instill in him to borrow substantially less than the banks and brokers say he can afford.
It's amazing once you start looking into other countries, their different tax situations, and how those tax dollars are spent. Once you start to really examine it, it's unbelievable how much we get taxed (and in so many different ways) here in America. It may appear that tax rates are higher in other countries but sometimes their systems are just more transparent and they seem to get a lot more in return.
It's great to have friends like that on the inside of the system! Knowledge is power.
Yeah, that sounds like what I would like to do as well. The biggest drawback to our current house is the fact that we don't have any acreage. Sure, it only takes me a half hour to push mow the lawn, but I would like to actually own some property. My wife really likes the city water, city sewer, and natural gas though! Being honest I am a pretty big fan of it as well!
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The riots of the past year and some of the disruptions in the supply chain have me thinking about living outside of the city for the first time in my life. It would be great to have just a few acres...some woods to walk through and a vegetable garden. There are certainly advantages to living in the city too, I guess it's all a question of what kind of lifestyle you want to live.
I hear you. Right now we really have the best of both worlds. If only we had a little more property. There was a house we got outbid on that would have been perfect and it was right down the road from our friends. Fenced back yard with about five acres of woods behind it.
Never forget the endless part of the mortgage, taxes... I know quite a few people who moved in at lower prices only to get priced out with taxes as the neighborhood got bought up and built up with bigger fancier houses. Then the taxman comes by and blankets the whole area with higher taxes.
Yes indeed, our taxes have been going up as well. Luckily, we are going to be able to cover it, but I can definitely see how many people find themselves caught in the trap!
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I've been pondering the same kind of stuff for a good year now. It is something a lot of people don't consider when making a large purchase of any kind. But then again, the education on such basic life skills is still hard to find or rarely offered. Our market here in southern NJ is all over the place. Property values have been on the rise for the better part of the year though.
I am still learning a ton as I go. I have to have my wife read the statement over every year and explain to me what is going on because it seems so random sometimes!
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A mortgage is the biggest responsibility most of us will take. We have lucky to live through times of fairly low interest rates, but I know others had it tough not so long ago where the mortgage could be a lot more than the house was worth. Our house has gone up a lot in value, so that's not an issue, but then prices everywhere are up and so moving might not be cheap. As @revisesociology says your prices seem cheap compared with a lot of the UK, but then salaries can be different too.
The pandemic is likely to affect a lot of people, but they should be helped to keep their homes.
I think there are some programs out there now to help people with mortgage relief and things like that. The problem is you want to live in a nice neighborhood, but when you do, you have to pay the price for that, not just at the time of purchase but in the future as well.
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Well. I shall also try to take into account these radars while buying house. Good share.
Where do you live in the US?
You guys seem to be having such a different economy from the European one, and Romania is not even matching the rest of the continent.
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We live in Michigan in a small town near the Saginaw Bay. It is moderately rural, but we are just a couple of miles from the expressway and about two miles from the first Costco in this area. I'd say the median house price in our area is around $200,000.00
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This is the issue with the nice perks in life, everything costs, especially where is a demand. I hope both of you manage to get through the extra cost and maybe close the mortgage earlier so that the taxes can be fine and live as you deserve to live. Teachers are, except for South Korea the most underrated professions in the world.
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Thanks, neither of us are teachers though :) She is a school social worker and I am the technology director. We still get the shaft most the time! Our hope is to get the house paid off a little early so we can have a little more freedom with our money. I have considered upping our payment now that we have her car and our travel trailer paid off.
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I was thinking you are a teacher because you like to explain things easily.
That would be awesome, so that you might enjoy everything earlier.
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Coming from the UK those house prices sound insanely cheap!
It is certainly a good plan to budget for $100 or so under what you can afford for just such a contingency.
But I can't see how there aren't going to be millions of people who can't afford to keep up their mortgage payments into 2021, the world over.
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We live in a fairly small town, so the prices are pretty decent. The biggest city Detroit is about two hours away. Besides that we have Flint and Saginaw, but those cities are notorious for their high crime so the house prices aren't much better. If we lived a couple of miles NorthWest of where we do now, the house prices would be much more expensive.
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La verdad amigo que la hipoteca es como un cancer, si te descuidas te lleva, saludos, y suerte.
OMG!!! The Prices of homes there are so cheap!!!
Why am I living here, hehehe!!!
Not to rub it in, but we paid around $125k for our house about five years ago. Right around 1700 square feet on .25 acres.
You and your wife have it made @bozz! Keep doing what you doing!!!