Affordable & unaffordable real estate markets

Nords

Nords

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Here's Bankrate.com's version of the 25 most-affordable and least-affordable housing markets.

The National Association of Home Builders ranks 162 metropolitan areas by estimating the percentage of homes sold that would be affordable to a family earning the area's median household income. Nine of the top 10 most-affordable markets in the National Association of Home Builders' Housing Opportunity Index are in Ohio, Michigan or Illinois. All of the top 10 least-affordable housing markets are in California.

http://www.bankrate.com/dls/news/mortgages/20050113b1.asp?print=on
 
I think affordable in this context compares median household income or some such measure of income to median house price.

For retired people, I think the most useful is raw data on cheap housing costs. Since most of us will not be working, the level of income in the community isn't very important except for whatever it might say about livability.

Anyone know a source for information on real estate prices, rentals etc.?

Mikey
 
Median home price to median income measures are not a good indicator of affordability or market "bubble-ness". There are some markets where there is a bimodal distribution of incomes (a big hump in the lower income grouping and a big hump in the upper income grouping and very few at the median). This occurs in markets that have a concentration of very high income earners (often in a small number of professions).

Another factor that can skew this kind of affordability measure is immigration into the community. If enough people move into a community with wealth or income from outside the community (retirees, telecommuters, overflow from nearby centres of high income, etc.) that is higher than can be earned locally then that will drive up housing prices. Natives to that city or region will then find that housing prices climb out of their reach. Examples of this are probably communities around New York and the SF Bay Area. The locals hold down jobs at the grocery store, school, etc. while the high income earners who work in finance in New York city or software in the SF Bay Area drive up the median home price.
 
I think affordable in this context compares median household income or some such measure of income to median house price.

For retired people, I think the most useful is raw data on cheap housing costs. Since most of us will not be working, the level of income in the community isn't very important except for whatever it might say about livability.

Anyone know a source for information on real estate prices, rentals etc.?

Mikey:
Good point, and probably would take a sociologist, rather than a real estate expert to explain the Calif. spread between local wages and the cost of housing.
I am a native Californian, and this spread has always amazed me.
I think one fact about California that comes into play, is the acceptance that immigrants find out here. In the Bay area of Calif. for instance, I have seen two families buying one home to get a foothold on home ownership.
It is truly different than any other area I have seen.
I have been waiting for the other shoe to drop, since buying my first home in 1964 :)
Jarhead
Click to expand...
 
Housing prices around here (Dallas/Fort Worth metroplex) seem affordable and in most markets have not budged much in the last 10 years. But, property taxes are a killer. For our home property taxes are almost as much as we are paying in interest 1 year into our 15 year 5% note. So, if you are going to be a house rich and income poor retiree this area is not the place. The tax man taketh about 2.5 grand per year per 100K of appraised value. Homeowners insurance is a killer too here in the buckle of the southern plains baseball size hail belt.

So - look at all the costs when considering housing costs.
 
I think Texas real estate prices are generally very low, compared to other areas I am familiar with, even the DFW metroplex if compared to other large urban areas.
Outside of the larger cities, the pricing advantages in Texas over the northern rural midwest may be slight but
the weather is a hell of a lot better :)

JG
 
I think Texas real estate prices are generally very low,...
Click to expand...
They are on the increase in the Texas Hill Country. Too many people want to own a few acres "away from it all" but only an hour or so from Austin or San Antonio. Don't even think about moving here. ;)
REW
 
I bought my small acreage ranch in Texas Hill Country about 4 years ago at $6500 per acre on the highest ridge in the county.

I just finished negotiating and am awaiting closing on 11 1/2 acres more to capture more of the ridgeline next to my place. Am againg paying a bit more than I feel it should be at $8200 an acre.

This additional acreage allows me to better preserve my agricultural exemption on taxes ... rate is just over $2 per acre .. keep anyone from building in my view ... (see my online photo website, check my member profile for it)
... and since I have enough market exposure, it will serve as a good investment as the boomers from San Antonio (50 minutes away), and Austin (1 hour away) begin looking for their own small acreage ranch. Being born in 1946 I have always been able to predict boomer behavior by my own wants and needs.

I figure by 2007 - 2011 when the masses begin to retire the land will be much more valuable. Time is running out for anyone who wants to stay ahead of this curve. Buy your special place now ... do not wait much longer!

Raw and just 10 miles closer to the cities is going for $10,000 per acre and up for small parcels. ! and 2 acres 'estate lots' near shopping are going $15,000 - $20,000 ...
 
I figure by 2007 - 2011 when the masses begin to retire the land will be much more valuable. Time is running out for anyone who wants to stay ahead of this curve. Buy your special place now ... do not wait much longer!

Raw and just 10 miles closer to the cities is going for $10,000 per acre and up for small parcels. ! and 2 acres 'estate lots' near shopping are going $15,000 - $20,000 ...
Click to expand...
Old Rancher,
One word of caution--watch out for the city dwellers. I will agree in your part of the world probably less risk, but the in the environmental kook world we have in much of the West, there seem to be a different perspective about property development. In King Co Wash (Seattle) the greenies (County Govt is controlled urban dwellers--8 of 11 councilpersons) have decided everything outside the urban growth zone has to be "protected" by new zoning rules requiring owners to keep at least 65% of their property in native cover. (Minimum tract size is already 5-10 acres). Effectively kills development for many owners especially when coupled with separate state laws relative to wetland buffers and stream bank set asides (protects salmon). One guy with 10 acres could not even add a separate garage much less subdivide. Results is more that one ER and R has seen their development rights and returns eliminated.
Watch out for those city folks who want to play in your yard while you pay the cost.
NWsteve
 
"here in the buckle of the southern plains baseball size hail belt"

Bill, too funny (but true).
 
...
Click to expand...

At least they have been easing up those restrictions in Snohomish County. I don't know how the process works for King, but at least in Snohonish County, the county planners often have public planning and comment sessions. Currently they are looking at expanding the urban growth boundary, so we went to one of the planning sessions to make sure that the expansion covered our property. As a result of a lot of people doing exactly what we had done, they redrew some of the proposals to include our area. We'll see what they finally do. If you know others who have similar complaints as you, have them write the county council/planners.
 
I bought my small acreage ranch in Texas Hill Country about 4 years ago...

Time is running out for anyone who wants to stay ahead of this curve. Buy your special place now ... do not wait much longer!
Click to expand...

Ol_Rancher, no telling who is reading this stuff. Mum's the word on the Hill Country. Summers are way too hot anyhow.:-X

REW
 
All this talk about the hill country is really making me want to FIRE. The Man keeps me up here in north Texas for now. I agree that the summers and the fire ants do make the hill country undesirable ;)
 
I have been all over Texas except for the Corpus/Brownsville area. It really is like a whole other
country. The hill country has its charm. I suppose my favorite area is the piney woods of east Texas. It reminds me of Upper Michigan, i.e. lots of woods and water. I spent a lot of time looking for property in that area, but ended up north of Dallas mainly as I had already lived there and knew my way around. I think
if that had not been the case, and we were still set on Texas, we would probably settled in around Toledo Bend
somewhere. Where we ended up is a bit more
"upscale" being so close to the Metroplex, but looking
ahead I figured that would make our property easier to sell in the event we wanted to make a move later on. Of course, our "later on" is much reduced now
and so it may be my heirs who reap the benefits. Anyway, whoever said "location location location"
knew what they were talking about. Both our homes
are in fast growing areas and on the lower end of the
price scale. Selling either should never be much of a problem if it comes to that.

JG
 
Re: Affordable & unaffordable real estate marketsT

California can actually be a friendlier place to retire "if" you own your home there. The reason is that Prop13 limits property taxes.

We have a place (for aging parents) in NJ and a place in CA (for ourselves). It's amazing that property taxes are higher in NJ for a place that is valued at less than 1/3 of what our CA place is.

What's even more amazing is that we have a retired school teacher and a retired beautician on either side of us in CA. They probably pay less than $2K annually in property taxes for houses worth over $1M.
 
Re: Affordable & unaffordable real estate marketsT

California can actually be a friendlier place to retire "if" you own your home there. The reason is that Prop13 limits property taxes.
Click to expand...

That's one of the reasons that the state is in debt. Arnold is trying to raise on other things, i.e., college tuition.
 
Re:  Prop 13:

I have lived in California and now live in Arizona.  The point about the advantage of having your property taxes capped under prop 13 should not be ingnored.  The politicians can't work the numbers (it seems they are in concert with the realtors)  to appraise your house as high as they can for ad valorem taxes in California.  This helps prevent the "Tax and Spend" cycle they would other wise engage in to buy votes and remain in power from eventually evicting us ER's from our homes.  If you control taxes you control the tyranny of political graft for votes, usually taking from the haves to buy the votes of the have nots.  Here in Phoenix the assesor is very aggressive and uses the realtors data and the MLS to justify the constant increase in taxes on home ownership attributable to a paper increase in home resale values.  I am not selling my home, bought it years ago for cash, so why should I pay a form of ongoing capital gains tax for money I have not realized?  I like flat taxes.  I will pay my share for services.  But I want a way to keep these political empire builders under control.  I do not want to be taxed out of my own home.

One idea, though there must be others that would work.  Make a tax on a square foot basis across an entire district, and put any ad valorem tax increases for the entire district up to vote as a form of fiscal control, just like a bond referendum. What occurs in most places is a home owner - property tax payer's death by a thousand cuts, each year a few percentage points higher and higher, until you have a tax bill that is more onerous than your fomer mortgage, and you are taxed out of your home.  Just present the county budget to the tax payers, and the ad valorem means to finance it, and do it on a district based, rather than property by property based method.

There is plenty I did not like about California's politics, but Prop. 13 is one idea that I believe should be used nationwide, perhaps with some modifications.  

I resent the ad valorem tax rates. They are a threat to anyone over time if unchecked.  The increase in house prices will require a forced sale on many retired folks property without real compensation to remedy this tax abuse.  All of us have limits on our budget.  The county should be limited by direct vote as to  their annual taxing authority and the methods they use to obtain taxes. Recall that history is full of peasant revolts to unjust property taxation by the ruling class.  Prop 13  was the equivalent of the Magna carta in this battle.  We need more, not less of this type of legislation for fair tax allocation. (I have to leave now, as the County Assesors Secret Police might trace this message to my address.)  8)
 
Revoking prop 13 is a red herring anyway. The average homeowner moves approximately every 7 years anyway, causing a tax revision on each home bought and sold. The number of people who live in a home for a very long time without making a change that could trigger a reassessment (adding on, building a garage, putting in a pool, etc) are small and probably principally elderly retirees or soon-to-be retirees.

All a revokation would do is accellerate some tax revenues into the current tax year, followed by roughly the same annual incremental revenues. Not a panacea by any means.

And it'd be really great for anyone living near the coast who has been in their home for more than 20 years. I'd bet a huge percentage would have to sell. There are a boatload of homes that were bought for <100k that are worth 6-10x that now.

I wish there was an economically reasonable way to hang onto my wifes old house...she owned it for 14 years. Property taxes on a 1400sq foot house on 1/3 acre is ~$420 a year. Pretty sweet.

Its nice knowing that my property taxes wont double and triple to support ridiculous spending programs that dont work half the time.

As far as affordable vs unaffordable, I've been making some good hay selling appreciated properties in the midst of growth explosions and then buying again just on the edge of the urban sprawl. I dont really have any way to do that again at this point as all real estate within an hour radius of where I live now is hideously overpriced.

As Jarhead will attest, I live in the middle of the "least affordable" area by this study's measure of income vs home prices. A lot of folks around here are living near the poverty line among homes that have quadrupled in value in the last 6 years. Its only a matter of time before landlords make the same decision I just made on my wifes old house...rent it for $1000-1200 a month with headaches or sell it for $240-250k. We should experience a wholesale change in demographics around here over the next 3 years. I just dont know where all the poor people are going to move to unless its wayyy out of the area or out of state.
 
There is plenty I did not like about California's politics, but Prop. 13 is one idea that I believe should be used nationwide, perhaps with some modifications.
Click to expand...
Capping property tax increases seems like a good idea but prop-13 is grossly unfair and runs counter to free market principles. Say I move to CA with my wife and a kid. Why should I pay 2,3, or 5x what the neighbors are paying in property tax? That neighbor might even have 4 or 5 kids and are therefore using more resources. Seems to me that the people of CA are saying we want lots of government services, but let's make the newcomers pay for them. Was the business lobby opposed? Maybe it didn't have a big affect when the economy was booming, but the cost of housing (and taxes) are certainly a deterrent now.

It seems to be that there are other ways to solve the problem that aren't unfair. For example, Lex's sqft idea, or the option to defer a portion of payments until the house is sold.
 
Well theres always the option where the government doesnt spend stupid amounts of money and spreads the cost fairly and evenly.

I think there is currently a small group of Chupacabra that are proposing this to the legislature in a secret session in area 51 right this minute. ;)

Given that option isnt going to work ever because its diametrically opposed to the way politicians work, you're stuck with simply trying to protect long term residents, especially retirees, from being priced out of their home.

Like I said, its not like its a permanent advantage for all...only until somebody moves. While I'm currently paying 40% more in prop taxes on my house than my immediate two neighbors are, statistically they'll sell within the next 4 years and the new neighbors will be paying 30-40% more than I am for 3 years until I most likely move...et cetera.
 
TH:

Aside from the general trend for moving every seven years, which is a good way to ride the equity wave as regional markets expand, once one retires I would suggest retired folks make fewer moves, and the ones they do make are for down sizing from the original kid raising homestead to the lower maintenance condo or town home. The worst case is for a retired couple to have to move due to tax based "eviction" from the home they have lived in for decades.

Many, if not all the ER's on this board who own their own place are going to experience "Property Tax" shock coincident with the rapid escalation of house values and resulting tax base adjustment across most parts of the US. This should be a hot area of contention as folks attempt to live out their retirement on fixed incomes in "the old homestead".
 
Hi LEX. This is one reason why I like owning 2 homes.
I realize not everyone can do it, still.....................if one
gets uncomfortable because of taxes or whatever, we
can sell or lease and live in the other. It's a nice option to have IMHO.

JG
 
TH:

Aside from the general trend for moving every seven years, which is a good way to ride the equity wave as regional markets expand, once one retires I would suggest retired folks make fewer moves, and the ones they do make are for down sizing from the original kid raising homestead to the lower maintenance condo or town home.  The worst case is for a retired couple to have to move due to tax based "eviction" from the home they have lived in for decades.  

Many, if not all the ER's on this board who own their own place are going to experience "Property Tax" shock coincident with the rapid escalation of house values and resulting tax base adjustment across most parts of the US.  This should be a hot area of contention as folks attempt to live out their retirement on fixed incomes in "the old homestead".
Click to expand...

Lex: Don't know if you were living in Calif. when prop 13 was passed, but it was in the late 70's.
Your "property tax shock" statement was exactly what was happening to senior, retired folks in Calif. There was lots of publicity, articles in Wall Street Journal, etc. etc., about long time homeowners that were being forced out of homes unable to pay their property tax.
Most of them were long time Californians, and had spent 20 to 30 years enduring one of the highest, if not the highest state income tax, high sales tax, property tax, when all combined made Calif. a true "Tax Hell".
The spirit of prop 13 was to allow long time residents who had paid plenty of dues to the state, an opportunity to stay in their home.
Actually, the state has done quite well with this approach.
About every 5 years or so, there is an effort to appeal prop. 13, but it hasn't been even close to passing.
The fact that property has appreciated, and when sold reverts to new tax-base, has given the local gummint plenty of money to squander however they see fit.
I am surprised that there aren't more states that have seen fit to try a similar approach.
I for one, wouldn't be in my home if my taxes were what some of the Eastern Seaboard States are paying.
Regards, Jarhead
 
Aside from the general trend for moving every seven years, which is a good way to ride the equity wave as regional markets expand, once one retires I would suggest retired folks make fewer moves, and the ones they do make are for down sizing from the original kid raising homestead to the lower maintenance condo or town home.
Click to expand...

Got some data on that because I'd be interested. Seems to me of the both the "traditional retirees" and "early retirees" that they have just as many moves, if not more in them. I did move once to downsize, but I may upsize within the next 7-10 years. I want to stay where I am as its a PERFECT place for my kid to grow up...a small cul-de-sac full of kids and young parents that actually have good morals and values. But by the time he's a little older we may want to move to some place that isnt 100+ degrees in the summer, and my dad may need to move in with us as he ages.

My moms parents moved a half dozen times after they started collecting social security. My dads parents sold their house, bought an RV and didnt sit still for almost 10 years.

Listening to the ER's here, lots have or will be moving, have bought their 'retirement home' or are planning it, have multiple properties and snowbird, etc. Sounds like a moderately mobile group.

But that aside...I think the original point was the state feeling they're just not getting their tax money and wanting to repeal tax freezes like californias prop 13. I think most people will agree that porking retirees by doing this is bad, but the politicians will find fair game in the non-retired...and theres plenty of good data that shows that the average homeowner sells every 7 years, and the vast majority sell in 10 years. The world average excluding the US is 10 years. With that in mind, I still stand by the statement that the state gets the bulk of their adjustments, they just have to be a little patient before getting them.

Besides, tell me the truth...if we gave the CA legislature 5x the money we're giving them now, you think they still wouldnt find a way to spend it and still be sniffing around for more dinero?
 
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