You nailed it. "First home"? Fugeddaboudit!!
I'll paint a "real life" picture for you, here.
After taxes, 401k, and my portion of my medical and dental I knock down a shade over $60K. I bought a house 15 years ago in the low-end part of Concord, CA. 3br, 1 ba, 960sqares, built in 1955. Paid $132K. Today, it appraises at about $500K-$525K, but it's been as high as $560K. I owe around $160K on it (re-fi'd and put $80K into a 500sq. ft. addition about five years ago), so I've got plenty of equity. Probably too much, actually, but let's just call it an even $350K.
Anyway, I've looked seriously at relocating to chop my commute by at least 50%, so that puts me into areas where "average" homes run $650K to $750K. So, say I buy a $650K house. I get a $300K loan and decide to go with a 15 year term, so my payments are about $3200 a month. My current tax basis is about $180K, so I'm in for $2,400 a year. My new tax basis of $650K puts me in for over $8,600 a year in property taxes! That's over $700 a month. Throw in $300 a month for PG&E and I'm in for another grand.
Well, just that, right there, adds up to over $4,200 and I'm only walking in the door every month with $5,200. That leaves $1,000 for EVERYTHING else for a family of six, and I'm supposedly one of the guys that's doin' alright.
I just don't see how anyone without $250K in equity (or cash) and a net income of at least $4K a month could get into a house and remain financially solvent. Tragicaly, I think a large number have, over the last several years, taken advantage of crazy loans with terms like "five years at 1.00%" and those five years have begun to run out. I'm afraid we're going to see MANY people discovering that they cannot afford a REAL house payment, and MANY of them discovering that they need to get out from under houses that are now appraising for 5%-15% less than what they paid for them, and that's going to precipitate a considerable financal disaster for many of them.
Best of luck to you.
Have you considered leaving Kaliforniastan because of this? Or would you probably just stay in your current home instead?
This is a real heartbreak for much of the country. I see that you have, no doubt, elected to upgrade your vehicle so that you may better ~ahem~ "enjoy" that long commute.
BTW - that's what I just did. Bought a Highlander Hybrid.
;o)
Hey, neighbor! I'm in Walnut Creek, and chose not to buy a house in the Bay Area - property taxes being one of the major factors. I bought in Las Vegas instead, where the taxes are about a quarter of what they are here. I'll only get to use my house part-time as long as I'm working in San Francisco, but I've been able to rent a condo in Walnut Creek at a rate far lower than my mortgage payments on it would be.
I just don't see how anyone without $250K in equity (or cash) and a net income of at least $4K a month could get into a house and remain financially solvent.
Yes, those are reasonable minimums for entry into the Bay Area market. As you point out, lenders have bent the rules beyond all reason, and a lot of folks are going to get trapped.