jtal19

Housing Market Tracker - Commercial Real Estate Review

Wait, the housing market is so much over priced, that I do not know why people are complaining now that prices are dropping to realistic levels. Let face it, what normal working person can afford the median home at $350,000 (in South Florida for example), with taxes (around $5-7,000 a year) and insurance (at least another $5,000 per year), on a median income of $62,000 per year (for a family of 4).


Here it is broken down:
Price of Home: $350,000
Assume down payment of 20% to avoid PMI: $70,000
(note people do not put down 20% but much less)
Borrow from Bank: $285,000 (includes $5k rolled in closing)
1. Principle and Interest at 5.75% (30 yr Fixed): $1,663.00

2. So. Florida Taxes (for example Miami Beach, Millage of 20.1746, homestead of 25,000, assume assessment of 75% of market price
(75%*350,000)-25,000=2... (taxable)
(237,500*20.1746)/1000 =$4,791 (the tax bill)
Taxes per month = $399

3. Home owners Insurance, assume around $4,000 per year which is low.
Homeowners Ins. per Month = $333

Total Monthly Payment (PITI: P&I, Taxes, Insurance):
$1,663+$399+$333 = $2,395
So, an average home would cost $2,395 per month.

Loan "rule of thumbs"
Suggested: 28% of Gross Monthly Income
At $62,000 per year or $5167 per month
$5167*.28=$1,446

High End (more common): 36% of Gross Monthly Income
$5167*.36=$1860


As you can see, the median person can comfortably afford only $1860 for PITI, which is $534 below the payment needed. At an Gross MI of 5167, you would need to contribute 46% or almost half towards PITI. This leaves little for other bills, car, gas, fed/state taxes, etc. THis explains why the sub-prime loans and ARM were so attractive to recent buyers because of the lower monthly payment.

You would not to gross $102,642 per year to comfortably afford the median home. This income is 1.7x greater than the median income.

The math DOES NOT work for the average (median) person. The market has to come down, or other buyers of greater means need to fill the gap. That is happening with the Europeans, Middle Easterners, etc but they can only buy so much. The real estate market will fall to go more inline with median income.





www.hhsc.state.tx.us/r...


www.pr.com/press-relea...

www.mortgage-calc.com/...

www.miamidade.gov/pa/l...

The American Dream Is Overbought and Overbuilt

I have personal experience in the Miami Beach (South Beach) Florida real estate market. I bought my one bedroom condo which faces Biscayne bay on the north west tip of South Beach for a mere $115 k in March of 2000. Now similar units in my condo routinely sell between $275K to $350K. Everything has at least tripled on the beach, and price per square foot is topping $450 per square foot. I am actually looking forward to the major market correction so that I can afford to buy another condo which is bigger. My question is will the prices of these new high rise luxury condos in mid-town Miami and on the beach drop enough to be reasonable to purchase? Will the lenders and developers keep the completed projects empty until they cover as much as they can, or will they simply stop building and leave the condo incomplete?

Thanks