We’ve already established that home prices are likely to rise for the foreseeable future. Too many factors are driving them up. So any corrections will likely be short-term.
But what does this mean for the average person who wants to buy a home? The answer depends on whether or not you already own a home.
First-time buyers are in for some challenges ahead. The median price of a home sold in the greater Austin area in January 2017 was $279,990, according to the Austin Board of Realtors®. I’ve even heard people talk of $250,000 starter homes with a straight face. Seriously? Who can afford a $250,000 starter home?
Lendingtree has some good advice to help you determine how much home you can afford, but let’s just look at one of the qualifications. Your total outlay for your mortgage (principal, interest, taxes, and insurance) should not exceed 28% of your income, according to Bankrate. So if you make the median income for Texas ($55,653), your total mortgage payment cannot exceed $1,298.57, and half of the people in the state can’t afford that payment. At today’s interest rates and Austin’s taxes, you might be able to qualify with only a $10,000 down payment plus closing costs.
But what about the half of the population that doesn’t make the median income? Many semi-skilled and skilled laborers work for $15/hour (more than twice the minimum wage) or less. A $15/hour worker grosses $30,600 each year. Their maximum monthly payment would be $728. To buy that $250,000 starter home, they would have to make a $100,000 down payment. Put another way, the biggest mortgage a $15/hour worker can afford is about $150,000.
Luckily, there are still houses in that price range available in the outlying areas, but even these are getting harder to find.
The bottom line is if you want a house, buy it as soon as you can.
We’d like to help you into your dream home. We can buy your existing home, and we can help you find a home to buy. We may even be able to help you buy a home if you have less-than-stellar credit. We often have owner-financing available or know other investors who do. Remember, we’re here to solve real estate problems, no matter what they are.