Weird salary comparision based on my house hunting experience

[gamecock43]

I went house hunting last week during a 2 1/2 day stay in my dream city. I was very excited. I had emailed the realtor 8 listings I wanted to see. All needed work ranging from minor to major, but I was looking for a challenge to really put my own sweat equity into and have a proud jewel to show for it in 5-8yrs. That was the plan.

I am sad and disapointed to say that 250k does not stretch in this southern city. The real estate listings didnt mention that crime and drug deals abound in the neighborhoods I picked out. The ads failed to specify that although one bathroom needs work, the other was had been partially demo'd and was a pile of rubble. And that the floors in one room had holes so big in them, weeds were growing through. One house was unlivable- totally uninhabitable, the next house was livable, (there was a crackhead actually living there when we walked in- I am generalizing. He may not have been a crackhead- he could be the starving artists type with the long beard, long hair, rail thin, wearing no shirt and producing enough ribcage to make a supermodel jealous- or he may have been a crackdealer).
And the 3rd house was nice and updated, but the neighborhood would force me to invest in an alarm system, a rottweiler, and still be unable to leave the house after dark. No thank you. The rest of the houses were in equal or worse neighborhoods so I told the realtor to forget it.

I worked hard for my money. I am having a hard time realizing how much my money DOES NOT stretch. I am also having a hard time understanding how I, a lower middle class, masters degreed proffessional was going to live on rice and pasta for a few yrs to pay my mortgage in these neighborhoods (after putting 20% down), but much lower income (assumed) people are affording to live there??? I assume they are lower income because men were trolling the streets in packs during a weekday, they seemed to have nowhere to go and nowhere to be, and the cars lining the street are rusty beaters...Forgetting the argument that I may be generalizing and making inaccurate assumptions based on non scientific judgement calls, and assuming these neighborhoods are populated by high school degreed, working for alternative payment methods, and non tax paying incomes- do they really make that much?!
I guess I am wondering, if you pair up street smarts/hard labor/illegally risky activities and compare the income generated from those activities, do they make as much or more than white collar, degreed proffessional middle class jobs?

[Joan.of.the.Arch]

Your basic question is whether people working under the table or in crime make as much money as you do? My answer is I doubt it.

[MonkeyMama]

There are 2 issues here.

1 - A lot of people bought with 0 down and ARMs. Doesn't mean they can afford it in the least. That is something that has been going on a solid decade, though is slowing down now.

2 - Secondly, and this is something I deal with daily. People who paid 5, 10, or 30 years ago paid a hell of a lot less than people buying today. Thus if the people there had bought their homes many years ago, they probably don't need near the income for their (low) mortgage payments.

This is really magnified where I live because housing prices went up 200%+ in just a few short years. We moved here from the land of super expensive and bought our dream home for $300k, in 2001. (As opposed to the sheer nothing $300k bought us back home).

You don't know how many people have marveled how "rich" we must be though I know full well their mortgages and rent payments are much higher than anything we pay, usually for MUCH smaller digs.

The difference is they were buying or renting at the peak, and we have been here 7 years. I just can not believe the comments we hear sometimes.

Likewise, I Can't help but think if we bought 2 years earlier we could have got the same house for $150k anyway. I get frustrated that people assume we paid $400k+ for our house. We moved here precisely to avoid that kind of insanity.

As a tax preparer I also have a lot of retired clients with paid off houses. In areas like this housing is THE expense. Pay off your house and you don't need much to live on. I know many who live very upper middle class lifestyles on say $30k, because their children are grown and their house is paid off, etc. So their dollars certainly stretch MUCH farther than the young people here.

Back home it has always been rather expensive, so it is not quite the same. (You couldn't buy anything reasonable even a decade ago). But all the same, people are paying $1 million for a home like my parent's. They paid $100k in the 80s. My dh's parents paid $50k in the 70s for the same kind of home.

Obviously they don't need the income, for their paid off homes, that new kids coming through and paying $1 million need.

My experience is very extreme, but I assume it is much the same concept where you were looking. Crazy credit has run up prices, and older people, who paid their mortgages off long ago, don't need near the income to live in the same neighborhoods.

[FrugalFish]

I think MonkeyMama covered a lot of great points. We are in a similar area where prices climbed dramatically over the past few years (but are now falling). Had we not purchased our 20% off, fixer upper in 2002, we would not live here.

One trend we see a lot here is referred to as stack-and-shack- that's basically several families living in a single family home. This means that you might have 4-6 incomes (or more) paying for one house. This arrangement sometimes brings less desirable people to more desirable neighborhoods; sorry, don't mean to sound like a snob, but we were just visiting friends whose neighborhood is going downhill that way and they were complaining about all the little kids playing in the street all night long. The people who live in these houses turn over often too- one group disappears and another moves in.

There are also some stories in our area where welfare recipients got IO loans and bought $400K houses. Lenders were so unscrupulous; too many recent mortgages were about brokers getting their cut and not worrying about the aftermath since regulation was weak.

I'm sorry you are feeling so frustrated.

[gamecock43]

yeah...those were along the lines I was thinking. That these places were purchased long ago. It was younger men (twenties) patrolling the streets, so I guess they live with their parents who were out working. And many of these people may rent the house, and they might pack in quite a number of extended family, because grandparents, uncles, aunts, kids (adult and small) often form tight families in times of low economic prosperity (in some cases).
I got frusterated, but have to remember that these men I saw might not be the owner of the house, and they likely dont live alone!
So house huntings on hold. My realtor is trying to talk me into a little bitty condo and it will take awhile for reality of what my money will buy to catch up to the dreams I need to let go.

[LivingAlmostLarge]

Definitely the same here. It's when you buy. We could not afford to buy if we hadn't bought 6+ years ago. But we made a few sacrifices to buy back then, which others refused to make.

And that is a big difference.