If you're paying PMI...

EdFred said:
The new home price is skewed because everyone overbuilds/overbuys. Back in 1970 they weren't throwing up McMansions like crazy. Houses were bought based on need, not what you need to keep up with Chris and Rachael. Build a new house based on a 60's/70's mindset and you won't be anywhere near 273k. Kids shared bedrooms, the guest bedroom was a fold out couch, the office was the kitchen table while it wasn't being used. All of those things are considered "needs" by today's standards, that's why your new home price ratio is 6:1 rather than 3:1

Cars are more of the same.
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I'm fairly conservative financially, but even I want more than a 1K sq. ft. house with no garage. Dad and I built my current house 25 years ago. 2,800 sq. ft plus another 1700 ft in the mostly-finished basement. Hardwood floors, beautiful cabinetry, large walk-in closets, stained french doors to the dining room and den, etc. When we had it appraised for the initial financing I was hit by some scathing remarks. Who knew, but by 1990 my 8 ft ceilings were out of style, everyone was at least 9 ft by then. My countertops weren't granite, my deck was only 150 sq. ft., colonial-style interior trim and solid-core 6-panel interior doors. In a $300-$400K neighborhood, he said our house was borderline substandard because of these features.
 
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Gerhardt said:
I'm fairly conservative financially, but even I want more than a 1K sq. ft. house with no garage. Dad and I built my current house 25 years ago. 2,800 sq. ft plus another 1700 ft in the mostly-finished basement. Hardwood floors, beautiful cabinetry, large walk-in closets, stained french doors to the dining room and den, etc. When we had it appraised for the initial financing I was hit by some scathing remarks. Who knew, but by 1990 my 8 ft ceilings were out of style, everyone was at least 9 ft by then. My countertops weren't granite, my deck was only 150 sq. ft., colonial-style interior trim and solid-core 6-panel interior doors. In a $300-$400K neighborhood, he said our house was borderline substandard because of these features.
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But we are talking starter houses here. Not a-after-you-have-some-equity -from-the-starter-house-to-put-down-on-a-new-house house. Even then, do you 'need' 4500 sq ft of finished space?

My next house will be an "overbuild" for me, but I will be financing exactly $0 of it. It won't be my first house.
 
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EdFred said:
But we are talking starter houses here. Not a-after-you-have-some-equity -from-the-starter-house-to-put-down-on-a-new-house house.
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Does a young family of 4 (or 5) still need to start in the starter house?
 
OK - you need to tell me what is up with these homes in Grand Rapids - why are they so cheap??

http://www.grar.com/property/mls/15015837

That is not on par with about anything, anywhere else in the country. I'm almost tempted to buy a bunch of these and rent them out.
 
SkyHog said:
OK - you need to tell me what is up with these homes in Grand Rapids - why are they so cheap??

http://www.grar.com/property/mls/15015837

That is not on par with about anything, anywhere else in the country. I'm almost tempted to buy a bunch of these and rent them out.
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A lot of them - demographics. That park just to the SE on the map view - 4 teams would show up to play softball on Sunday afternoons. Guys brought their families, they would grill out, bring out a sound system, people from the neighborhood would come watch, so there was probably a hundred or so people that would show up. I was one of three white guys there.

It was some of the most fun playing ball I had, and while I didn't live there, on Sundays I was part of the neighborhood. But, right or wrong, a lot of people would probably show up to look at that house, and based on the demographics, say no thank you. Funny thing is, if you were part of the neighborhood, you had nothing to worry about. But it's hard to sell people on that.
 
EdFred said:
But we are talking starter houses here. Not a-after-you-have-some-equity -from-the-starter-house-to-put-down-on-a-new-house house. Even then, do you 'need' 4500 sq ft of finished space?

My next house will be an "overbuild" for me, but I will be financing exactly $0 of it. It won't be my first house.
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The theme kinda morphed into how much more houses have to have these days and I was just ranting about my disappointment.

As for the sq. footage, there was no reason not to. It was a once-in-a-lifetime opportunity and it cost me nothing but materials and labor for the cabinetry. Even today, each winter I pick one room in the house and completely remodel it, sometimes going to the studs. The only area that's not finished are the storage rooms under the garage. I don't recall exactly, but I think at the time it cost us around $120K.

Five years later I helped dad build my brother's first house which was about the same size. By then Lowe's and Home Depot had moved to town and building supply prices had dropped like an anchor. He got a house for around $80K. And sold it last year for just under $300K.

One thing's for sure, I enjoy looking at houses being built. Just make sure you post pictures here of EdFred Manor as the erection commences.
 
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Gerhardt said:
I respectfully disagree. 20% is a lot. Here's an example.

A young professional couple just starting out, let's say they make a combined $70K/year. They want a modest but nice starter house at $175K. That's a fairly typical scenario in my area at least.

20% down is $35K...an incredible amount to come up with up front. Made even more difficult if they're paying rent until they can save up enough. Add to that $35K the closing costs and furnishings for the house and I can easily see where your scenario would be impossible for most people starting out. Add in some real-life expenses like student loans, car payments and typical expenses we all face...I think 5-10% skin in the game for people like this is reasonable.

The only thing is that there are far too many people who never have any intention of keeping their promise of making their mortgage payments and trash the house on their way out. People like that hurt us all.
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Awwww, then I guess Jack and Sally just starting out don't get to buy a $175K 'starter home'. I guess they'll have to suck it up, pay off the stupid student loans they took out, live cheap and SAVE MORE MONEY for the 20% down.
 
Gerhardt said:
The theme kinda morphed into how much more houses have to have these days and I was just ranting about my disappointment.

As for the sq. footage, there was no reason not to. It was a once-in-a-lifetime opportunity and it cost me nothing but materials and labor for the cabinetry. Even today, each winter I pick one room in the house and completely remodel it, sometimes going to the studs. The only area that's not finished are the storage rooms under the garage. I don't recall exactly, but I think at the time it cost us around $120K.

Five years later I helped dad build my brother's first house which was about the same size. By then Lowe's and Home Depot had moved to town and building supply prices had dropped like an anchor. He got a house only slightly smaller for around $80K. And sold it last year for just under $300K.

One thing's for sure, I enjoy looking at houses being built. Just make sure you post pictures here of EdFred Manor as the erection commences.
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Oh, I get how that goes, but the force behind that is, people want what you have RIGHT NOW, for their first house. As far as a Manor goes for me, not likely - quite the opposite - but still overbuilt for what I need. The plan is to be as close to 100% energy efficient as I can with it.
 
EdFred said:
A lot of them - demographics. That park just to the SE on the map view - 4 teams would show up to play softball on Sunday afternoons. Guys brought their families, they would grill out, bring out a sound system, people from the neighborhood would come watch, so there was probably a hundred or so people that would show up. I was one of three white guys there.

It was some of the most fun playing ball I had, and while I didn't live there, on Sundays I was part of the neighborhood. But, right or wrong, a lot of people would probably show up to look at that house, and based on the demographics, say no thank you. Funny thing is, if you were part of the neighborhood, you had nothing to worry about. But it's hard to sell people on that.
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It appears that rental prices in that area are around $500-$800 per month. If that is true, I might have found my next business. Research time.
 
JCranford said:
Awwww, then I guess Jack and Sally just starting out don't get to buy a $175K 'starter home'. I guess they'll have to suck it up, pay off the stupid student loans they took out, live cheap and SAVE MORE MONEY for the 20% down.
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If that were to happen more often, maybe the $175k starter house might drop its price to $150k to find a buyer. Likewise, when you inject lots of unqualified people running around with no-money down, "fog a mirror" liar loans, you get a bubble in housing prices. Hoocoodanode? :rolleyes:
 
SkyHog said:
It appears that rental prices in that area are around $500-$800 per month. If that is true, I might have found my next business. Research time.
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I work mostly with people in Indiana and several years ago when the auto industry bubble burst they had the same situation. Houses that had just been built for $150k-$200k were selling for 25 cents on the dollar. LOTS of investors from out of state. The down side is that those towns are still dwindling and the only people who want to rent are the kind who move in, then quit paying and trash the place when the sheriff finally comes to evict them.
 
Henning said:
What tenants? Why would someone move there?
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Because they just got divorced? Or maybe because they're ready to upgrade.

Who knows - but if the house exists, I'd imagine there's someone to live there.
 
Gerhardt said:
I work mostly with people in Indiana and several years ago when the auto industry bubble burst they had the same situation. Houses that had just been built for $150k-$200k were selling for 25 cents on the dollar. LOTS of investors from out of state. The down side is that those towns are still dwindling and the only people who want to rent are the kind who move in, then quit paying and trash the place when the sheriff finally comes to evict them.
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I wonder if you could require some sort of foreitable collateral to rent to avoid such a scenario....
 
SkyHog said:
I wonder if you could require some sort of foreitable collateral to rent to avoid such a scenario....
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People who rent these places aren't the type to have anything of value.

I'm not trying to be too negative here. I'm a slumlord myself and encounter this on a regular basis. There can be money to be made, but it's not much, and it's not easy money. I've had several friends think it looks easy and try it, only to discover what a nightmare and money pit it can be. I've had years where I lost ten grand or more on rentals, mostly due to them destroying the place after being forcefully evicted. Other years will fly by with no problems.
 
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SixPapaCharlie said:
So in my area, our property values are sky rocketing.
I pay PMI in my monthly payment but I got to reading and if at any point your value is 20% or more than your payoff, you can drop PMI. For me that means knocking $200/ month off my house payment.

Just thought I would share in case you happen to be paying this too.
I called the bank, and they checked and said "Yep, get a formal appraisal and if it exceeds x, we will drop the PMI from your payment"

Anyway, I don't know how many people pay PMI or what housing prices are doing elsewhere but it was sort of a random fluke that I started looking at this and sure enough, I am going to save some money. Thought I would share.
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TWO HUNDRED??? Jeesus... how much is your mortgage? My place had a $20 premium. I didn't bother with it, since it was so paltry, and they finally approached me about dropping it 10 years in.
 
Doggtyred said:
TWO HUNDRED??? Jeesus... how much is your mortgage? My place had a $20 premium. I didn't bother with it, since it was so paltry, and they finally approached me about dropping it 10 years in.
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PMI premiums are typically from .75% to 1.5% of the original amount financed. So if you buy a $200K house your annual PMI premium will be somewhere around $2,000.
 
Doggtyred said:
TWO HUNDRED??? Jeesus... how much is your mortgage? My place had a $20 premium. I didn't bother with it, since it was so paltry, and they finally approached me about dropping it 10 years in.
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Mine is about $300. I think you're thinking of something other than PMI.
 
SkyHog said:
Because they just got divorced? Or maybe because they're ready to upgrade.

Who knows - but if the house exists, I'd imagine there's someone to live there.
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When you consider the standard market economics models, and the prices of those houses, that logic stream is a murky one. Landlord is not exactly a new idea on your part. If the economics were as obvious as you predict them to be, don't you think a local landlord would have snatched them up?

That brings up another issue, long distance/absentee landlord. Now you have to pay a management firm to take care of everything, there goes your profit.
 
Henning said:
When you consider the standard market economics models, and the prices of those houses, that logic stream is a murky one. Landlord is not exactly a new idea on your part. If the economics were as obvious as you predict them to be, don't you think a local landlord would have snatched them up?

That brings up another issue, long distance/absentee landlord. Now you have to pay a management firm to take care of everything, there goes your profit.
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Ed'll do it for me.
 
SkyHog said:
Ed'll do it for me.
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No.

SkyHog said:
Because he refuses to pay PMI while he saves up 20% down.
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I don't want to deal with dead beat renters. I looked into it, talked a few people that have done it, and all but one are trying to get out of it. I'm well past 20%. It's amazing how much money you can bank when you don't date (though this is more involuntary than voluntary),don't have kids, and have had your mortgage paid off for over 10 years.
 
Bryan, if possible PMI is somthing I'd avoid. If you can possibly get out of paying it due to a chance in the LTV then it is worth looking into. Good luck
 
How much does it cost to get out of the PMI vs what is saved on PMI I would think is the applicable factor at this point. :dunno:
 
Henning said:
How much does it cost to get out of the PMI vs what is saved on PMI I would think is the applicable factor at this point. :dunno:
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I can send you an appraisal for a couple hundred bucks. It'll be just as accurate for your house as it was for mine. Home appraisal is a racket like most of the real estate and mortgage crap is.
 
kayoh190 said:
This all comes down to the shrinking middle class, IMO. Take a look at median incomes in a given area, and then the median home value. It's gotten pretty crazy. In my zip code, the median household income is $88K. The median home value is $574K.
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What's the median age? Could be older homeowners who have lived there a long time.
 
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