What constitutes a "starter home"?

[klarose]

I'm in the midwest, and like someone else mentioned you can get a very nice home for under $100,000 around here. It's all about location.

[creditcardfree]

Just for kicks I looked up homes under $100K in the last town I lived in Iowa, a town with a population of around 130,000, more if you count the surrounding smaller towns.

There were 63. A quick look and most are under 1500 sq ft, maybe one bath and between two and four bedrooms. These are older homes, easily more than 60 years old.

[disneysteve]

Take away those easy-to-use credit cards/reward points system, and opt to a more direct payment like CASH-ONLY system (sorry Visa, AMEX), the mindset will shift into a more prudent spending habit

Off-topic (but it's my thread) but I am much more responsible with my spending when using a credit card than when using cash. The credit card spending has consequences - a bill is going to come and need to be paid at the end of the month. With cash, the money is essentially already spent once it leaves my account as it no longer appears in my bank balance or on my spreadsheet. It's much easier to fritter away cash because it's painless. With a credit card, I'm always cognizant of what I'm charging knowing that I'm going to have to settle up when the bill arrives (which we always pay in full).

[Fishindude77]

Nothing wrong with a 60 year old house, heck mine is over 100 years old. Not too much that you can't update to modern standards, and some of the older homes have some real nice woodwork, built in shelving, masonry work, etc. that you won't see on new stuff.

My starter house was $25,000, 1,200 SF on 1.5 acres, 2 bed, one bath, etc.
Worked fine for us, did remodeling pay as we go one room at a time and made it a real nice home.

[disneysteve]

Nothing wrong with a 60 year old house

Our house was built in 1964, so 51 years. I think this is often part of the problem. People want new construction despite the fact that the older homes are probably far better built than the stuff they slap together today. I often wonder if some of the houses I see going up today will still be standing 100 years from now.

[tripods68]

And what's the median household income in that area?

$84,769 Household Median (unemployment rate 5.69%)

[disneysteve]

The median price home where we live (near Sacramento) is $320,000. State: California.

$84,769 Household Median (unemployment rate 5.69%)

So the median household needs to spend about 3.8x income to buy the median home. How do people handle this? Do they just overextend themselves and cut back in other areas in order to afford a house? Do more people rent rather than buy? It would be interesting to see the median household income of home buyers.

[msomnipotent]

Out of curiosity, I just looked up my city's info. Median home sale price is $364,300, which I think is a little low. My house will be the cheapest on the market in my subdivision when I list next month, and the price is $420,00. Median income varies depending on what site I look at, but it is around $109,000. One site said over $130,000.

[disneysteve]

I looked up my town. The numbers vary depending on where you look but here's what I found.

Median household income: $88,183
Median family income: $105,786 (not sure what that represents vs. household)

Median home price: $246,000

So the median household can afford the median home and stay within the 3x income guideline.

[tripods68]

So the median household needs to spend about 3.8x income to buy the median home. How do people handle this? Do they just overextend themselves and cut back in other areas in order to afford a house? Do more people rent rather than buy? It would be interesting to see the median household income of home buyers.

Trulia this year
Median Home value $269,600
Median Sales Price $335,00

Housing Occupied 95%, Vacant 5%
Homeowner Occupied = 71%
Renter Occupied = 29%

Census
Median monthly owner costs -with a mortgage, 2010-2014 = $2,034
Median Renter, 2010-2014 = $1,480

[disneysteve]

Trulia this year
Median Home value $269,600
Median Sales Price $335,00

Housing Occupied 95%, Vacant 5%
Homeowner Occupied = 71%
Renter Occupied = 29%

Census
Median monthly owner costs -with a mortgage, 2010-2014 = $2,034
Median Renter, 2010-2014 = $1,480

So it is considerably cheaper to rent, and about 30% of people do that which makes sense in that market environment. I'd bet that the median income of people buying houses exceeds the overall median income.

[Singuy]

That's something I've never really understood. We always hear how home prices are crazy high in certain areas, like parts of California, and that the prices are way above what people can afford. Yet those homes still get sold at those prices, which means somebody is buying them. Otherwise the prices would come down. That's how supply and demand works.

Our house was built in 1964, so 51 years. I think this is often part of the problem. People want new construction despite the fact that the older homes are probably far better built than the stuff they slap together today. I often wonder if some of the houses I see going up today will still be standing 100 years from now.

In regarding to the first statement..it has a lot to do with concentration of wealth. There are many high earners in Cali due to tech companies and also very well compensated professionals driving up housing prices IN THE CITY. The awesome weather doesn't hurt either. There are also city provisions that prevent new housing development or new apartment complexes above a certain height in the city which also limits supply. So you either have people making 300k/year concentrated in the city..or you have people who works at Starbucks renting 25 miles out of the city. Of course people will try to buy above their means if they want to touch anywhere close to the cities.

As for houses built in 1964. Many people want new constructions because it is just easier to live in an up to date house that meets the newest code. No one wants to deal with lead in their paint or corrosion in their copper pipes and unsafe electrical wiring. It's not always about the granite countertops and the vaulted ceilings (but doesn't hurt).

[tripods68]

So it is considerably cheaper to rent, and about 30% of people do that which makes sense in that market environment. I'd bet that the median income of people buying houses exceeds the overall median income.

I couldn't not get the breakdown of renter's median income. I would assume it will be less than $84K median income of household today.

I think once the interest rate starts to go up in the range of 4%-5%, the affordability index will shrink to the point that, the renters population will go up (median renters percentage greater than 29%) since first time home buyers will rent first. The current interest rate suggest, we are not there yet.

[Fishindude77]

As for houses built in 1964. Many people want new constructions because it is just easier to live in an up to date house that meets the newest code. No one wants to deal with lead in their paint or corrosion in their copper pipes and unsafe electrical wiring. It's not always about the granite countertops and the vaulted ceilings (but doesn't hurt).

Almost all of the above statement is BS promoted by realtors, new home builders, home improvement shows, etc.

CODE -
For starters there are darned few code requirements in residential construction to start with, and not many that would make a 1964 house non compliant. Many states don't even require contractor licensing.

LEAD PAINT -
You are going to be hard pressed to find lead paint in a house, period. That stuff was mostly used in industrial applications, and hasn't been used since the 60's. Homes were traditionally painted with oil based paints before latex became so popular.

COPPER PIPES -
There is nothing wrong with, or hazardous about copper water pipes. It is still very commonly used in commercial and institutional projects because it is a better, more durable product. They use the new plastic PEX piping in most homes now primarily because it is simply cheaper and requires far less skill to install.

UNSAFE ELECTRIC -
There are very few homes surviving that don't have breakers and aren't wired with modern Romex type wiring which is the same stuff new homes are wired with. You might find a real antique type place with knob & tube wiring and screw in fuses, but anybody buying this sort of thing knows they are taking on a restoration project to start with. A ****ty wiring job is a ****ty wiring job whether it's old or new. have a competent electrician look it over before you buy if you are concerned.

I build for a living, and there are exceptions, but most of the new homes I've looked at are pretty cheap construction and won't last near as long as an older one. They just throw them together as cheaply as possible, and everything is focused on flash & show.

[Nutria]

LEAD PAINT -
You are going to be hard pressed to find lead paint in a house, period. That stuff was mostly used in industrial applications, and hasn't been used since the 60's. Homes were traditionally painted with oil based paints before latex became so popular.

In the city who's suburb I live in, even in the 1990s there were lots of old houses with with old, white, lead-based paint. Mostly inhabited by poorish black people.