Pop goes the bubble?
The real estate market is absurd. Is that a headline? I don’t know. But it’s nut here. Truly nuts.
Since we moved I’ve been trying to make sense of it all. It doesn’t. I can’t. Neither can our realtor.
Example. 3,100 sq ft brand new colonial on 2.7 acres in Gardiner, New York. New Paltz schools, nice neighborhood of newer homes. Price? $559,900K. There is another home right across the street on a slightly larger lot listed for $579,900. In 2003 two homes sold in the area. One for $459K and the other for $479. Do the math. That means that houses in that neighborhood rose 50 thousand dollars per year or at 10%. The national average is 6-7%. So, if we buy the house for $525K, in three years the house would sell for nearly $700 thousand dollars. Right?
Questions: Who is buying these homes? How can they afford them? Who is making that much money to afford them? Where do they work? Where are the jobs to sustain the prices? Who would pay – or be able to pay - $700 thousand dollars for that home in three years?
Some Answers: Median resident age: 37.7 years. Median household income: $54,432 (year 2000). At the average rate of 4% raise per year, that means they are now making about $63,000 per year. That’s not nearly enough to afford a home worth $700 thousand dollars. In order to afford a $600 thousand dollar mortgage (figuring about 10% down) your income should be nearly $250 thousand dollars gross. That is 4 times the average in Gardiner. Median commute time: 30 minutes. That means most people in Gardiner work in Newburgh, NY which is a half an hour drive. Some may work in New Paltz, or even drive to Poughkeepsie, but that city is nearly an hour away by car. The nearest train to NYC would be Newburgh. Daily commute time would be 3 ½ hours.
Who is/are buying these homes? People from NYC, or so they say. People in Gardiner, according to our realtor, feel that people from NYC can/will pay a premium price to live in the country. The problem is that most people who live in Gardiner don’t work in NYC, they work in Newburgh and hence they don’t make 6 figure salaries to afford half-a-million dollar + homes. Hence, there’s the bubble.
It all makes my head spin.
To buy or not to buy. That is the question.
Since we moved I’ve been trying to make sense of it all. It doesn’t. I can’t. Neither can our realtor.
Example. 3,100 sq ft brand new colonial on 2.7 acres in Gardiner, New York. New Paltz schools, nice neighborhood of newer homes. Price? $559,900K. There is another home right across the street on a slightly larger lot listed for $579,900. In 2003 two homes sold in the area. One for $459K and the other for $479. Do the math. That means that houses in that neighborhood rose 50 thousand dollars per year or at 10%. The national average is 6-7%. So, if we buy the house for $525K, in three years the house would sell for nearly $700 thousand dollars. Right?
Questions: Who is buying these homes? How can they afford them? Who is making that much money to afford them? Where do they work? Where are the jobs to sustain the prices? Who would pay – or be able to pay - $700 thousand dollars for that home in three years?
Some Answers: Median resident age: 37.7 years. Median household income: $54,432 (year 2000). At the average rate of 4% raise per year, that means they are now making about $63,000 per year. That’s not nearly enough to afford a home worth $700 thousand dollars. In order to afford a $600 thousand dollar mortgage (figuring about 10% down) your income should be nearly $250 thousand dollars gross. That is 4 times the average in Gardiner. Median commute time: 30 minutes. That means most people in Gardiner work in Newburgh, NY which is a half an hour drive. Some may work in New Paltz, or even drive to Poughkeepsie, but that city is nearly an hour away by car. The nearest train to NYC would be Newburgh. Daily commute time would be 3 ½ hours.
Who is/are buying these homes? People from NYC, or so they say. People in Gardiner, according to our realtor, feel that people from NYC can/will pay a premium price to live in the country. The problem is that most people who live in Gardiner don’t work in NYC, they work in Newburgh and hence they don’t make 6 figure salaries to afford half-a-million dollar + homes. Hence, there’s the bubble.
It all makes my head spin.
To buy or not to buy. That is the question.
posted by Mike at 11:19 AM
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