Peter Boutell, Lending a Hand: It takes median income to buy a median priced home

okay... let's do the numbers.

purchase price =$425,000
10% down payment =$42,500
mortgage =$382,500
30 year fixed @ 5.375%
mortgage pmt =$2,142
pmi payment =$166
property tax =$400
insurance =$50

and the answer is... 2,142+166+400+50=$2,758

now take the assumed house payment of $2,840 and subtract the $2,758. the difference is $82. that's $82 per month for 30 years.

so what is that extra $82 for? well, if you do a time value money calculation, and use the 5.375% rate, you get a present value of $14,644. that's right, 14,644 real dollars that you the borrower is paying for. did peter mention that in his advertisement?

and so, what is the extra $82 for you ask.

http://www.topix.net/forum/source/santa-cruz-...

http://www.topix.net/forum/source/santa-cruz-...

A median (middle) income enables a family to buy a house that costs three to four times their median income. That means in Santa Cruz,$300K, max. Anything else gets them in over their heads. Maybe this clown never noticed, but everything in this goofy little town is very expensive, from the $4 loaf of bread to the $6 box of cereal. Gas is $3/gallon. Gas and electricity is very expensive. As services continue to collapse, you wind up having to compensate, and all this requires cash. The largest employer in the city is about to institute an 8% pay cut.

It is absolutely shameful that the Senile runs this clown's criminally insane advertisements.

wtf wrote:

A median (middle) income enables a family to buy a house that costs three to four times their median income. That means in Santa Cruz,$300K, max. Anything else gets them in over their heads. Maybe this clown never noticed, but everything in this goofy little town is very expensive, from the $4 loaf of bread to the $6 box of cereal. Gas is $3/gallon. Gas and electricity is very expensive. As services continue to collapse, you wind up having to compensate, and all this requires cash. The largest employer in the city is about to institute an 8% pay cut.
It is absolutely shameful that the Senile runs this clown's criminally insane advertisements.

But wait! If you are comfortable:
1. Not having children or sending your kids to an underfunded, inadequate public school
2. Riding your bike to work over in Silicon Valley (or wherever the good paying jobs are left)
3. Skipping health insurance
4. Skipping retirement savings/college savings for kids
5. Eating Ramen Noodles 5 nights a week
6. Buying your clothes at the Goodwill...
Then you CAN afford a house.

It all depends on your "comfort level", remember?

I hope Peter Boutell will just go away like Gary Gagnes. With the pending tsunami of Alt-A and Option ARM resest coming later this year, he probably will. The big drop for the west side of Santa Cruz is finally approaching, and the county median will become realistic again, I'm predicting $200K by 2012.

Our family's income is $95k/year. Our rent is $1700/mo. After bills are paid, gas, food, dentist, clothing, other necessities, there is nothing left at all. How can we ever hope to save a downpayment much less make a huge mortgage payment like $2840? As it is, we can't even save for retirement!

Maybe when homes drop down to $125,000 or $150,00, all of the beaches and parks are closed and crime is running even more rampant than now, then maybe we can be homeowners. Goody!

Oh the horror of a desperate clown continues. His escape is, as always, blame the customer for stupid decisions while slamming the sales pitch full of lies and fraudulent omissions down their throats. The new, more realistic appraisal rules are under fire to be repealed. O is trying to re-inflate the housing bubble. It absolutely won't work. Did you notice the unemployment numbers this week. Housing will go down for several more YEARS and there will be NO recovery. The next time I see Peter, I'll be asking him for extra mayo and onions on that burger.

FHA currently will approve lending schemes of whopping 47% of a persons income - policies which has little to do with HUD one way or another.

Beyond 30% of income applied to housing, mortgage, taxes,- even RENT, etc - is recipe for disaster which led market crash to begin with, financed atop already grossly over appraised real estate properties values accross the board.

HUD acquires homes to sell from failed FHAs to begin with, with a growing number of inventory daily.

Median houses around here are not even worth $200,000 - much less $425,000. People are simply not making these income requirements and, if they do, prefer to be in less rural regions like Santa Barbara or Malibu, typically.

Market here hasn't bottomed out yet, much less forcast to a slow recovery. Before too long, homes in Eastside Santa Cruz will be boarded up with windows for plywood.. like whats happening across the country.

I nearly became a debt slave in May 2004. Pulled out of the deal at the last minute and shut out all hope of buying in that market. Started reading www.patrick.net , http://www.oftwominds.com/blog.html , http://globaleconomicanalysis.blogspot.com/ way back in 2005 and it helped open my mind to the unsustainable nature of the bubble. Everyone thought I was a loon for suggesting that housing prices were going to come down and would ignore me if I cautioned against buying a place.
I posted here under Boutell's column sometime in 2007 arguing against buying a home and following this guy's terrible advice. The best response I got was: Remember, this is an ad for this guy, believe it as you would believe any advertisement in the newspaper. The Sentinel needs to post his column as an ad-- maybe the new publisher will do that.

I am so thankful to see now that more people are speaking up about Peter's terrible advice. I'm also glad that people now see through the garbage the NAR tries to stuff down our throats. Yeah!

if nobody can afford it and the prices are still too high, how come people are still buying and in some cases people are still paying more than asking.
I have been out bid over asking 3 times now.

So Peter, how much house can I afford if I am a self-employed contractor who has been out of work for 6 months? Do you have ANY idea what is going on around here? Hope and change fucktard, the economy is imploding.

Been a teacher nearly thirty years. Making about $10,000 LESS than the median income with 60+ units and two teaching credentials. Working two-three part-time jobs AND teaching summer school to pay the bills. Not living an extravagant lifestyle.

Ha; go figure!

Such a Joke wrote:

Been a teacher nearly thirty years. Making about $10,000 LESS than the median income with 60+ units and two teaching credentials. Working two-three part-time jobs AND teaching summer school to pay the bills. Not living an extravagant lifestyle.
Ha; go figure!

But Becky the town crackpot claims that teachers earn $800 A day in Santa Cruz.

Well, I certainly appreciate how Peter broke down the numbers for us today. Here is additional breakdown...
1. If you earn $74,125/yr. you STILL have to pay social security and medicare taxes even if you no longer have to pay federal/state taxes due to all of your new tax deductions (mortgage interest, prop. taxes, points).
2.$74,125/yr. less FICA/med. equals $68504/yr. Now take away your house payment $34,080 ($2840 x 12 mos.) and your left over income is $34,424 or $2,868/mo. Sounds like a lot of disposable income, yes?
3.$2,868 minus utilities, food, car payment, insurance, health insurance, retirement contributions, tithing, clothes, etc. Hmmm, what else???
4. Take a couple of days and check out the houses listed on MLS and see what kind of house $425,000 gets you. Now factor in all of the repairs the house will need and say goodbye to one (or more) of the items spelled out in #3 above.
5. Forget about saving money for a rainy day, a major illness or accident, etc. and take pride in knowing you live in the most beautiful, special places in the world. You are the envy of everyone (NOT!)

$2800/month is over 1/3 of a $74000 annual paycheck. Landlords typically dont want to rent to people who don't earn 3X the rent. It is not advisable to spend half your income on housing - not because you're a cheapskate but because it means you're neglecting saving for retirement or going without health insurance or some other thing.

Hey Peter,
Have another drink, here's a link for you.
http://www.aa.org/lang/en/subpage.cfm
You know you lost money (millions?)on your foolish investment in Watsonville, the question is where did that money come from?

like people who can't buy a house becuase, I don't make enough, I am out of work, I don't have a downpayment, mommy and daddy are still alive so I can get my lazy ass inheritance.

Boo Hoooo

You all sound wrote:

like people who can't buy a house becuase, I don't make enough, I am out of work, I don't have a downpayment, mommy and daddy are still alive so I can get my lazy **** inheritance.
Boo Hoooo

I can't speak for anyone else on this comment stream; however, I have a lucrative career and plenty of money to buy a house. But just because I CAN doesn't mean I SHOULD and I WON'T because the numbers just don't make sense right now. Two years from now will be a perfect time to buy.

By the way, two years ago, I ask on these comment boards, if anyone ever thought it would be possible someday to buy a 2 bedroom house in Aptos for under $450k. Several posters made snide comments and one of them, whose reply seemed particularly condescending, told me to take my pipe dreams and move to Stockton or Modesto.

You all sound wrote:

like people who can't buy a house becuase, I don't make enough, I am out of work, I don't have a downpayment, mommy and daddy are still alive so I can get my lazy **** inheritance.
Boo Hoooo

You may feel that way because it is easy to stereotype. I own a house and was planning to trade up in 2004. Because I waited I was able to save during the boom. Now, I could buy a house outright because prices have come down (keeping the place I'm in for a rental). But I'm just going to wait a while longer because with Alt-A about to blow up, I think the market is going to stay low for a while.

It never ceases to amaze me how many tools there are in Santa Cruz. I bought in the Santa Cruz mountains 30 years ago for about $100k and got a 4 bedroom 2 bath house that is about 2500 square feet. I can get to SC in about a half hour when I want to. When it is lame and foggy down there it is sunny and 80 here. Why live down there?