You know how they put blinkers on horses so they aren't distracted by the carnage going on around them?
I think that's how lots of realtors are feeling, like we wish we had blinkers on.
I need a little attitude adjustment. Need to light the real estate candle, tidy up my desk, and focus on the good stuff that's going on. And, there is a lot of good stuff. Maybe it's just January that's getting to me.
Wednesday, February 13, 2008
Monday, February 4, 2008
So I'm hoping to make $169,000 this year
I was talking to my mom on the phone and she was talking about how they paid off the mortgage a while ago. She told me that when they had us 3 kids, my dad had one week where they had only $6 left, because they paid the mortgage that week.
I was like -- WHAT??? --- YOU COULD PAY THE MORTGAGE ON ONE PERSON'S SALARY???
And what's more, my dad was paid weekly so it was just ONE WEEK'S SALARY.
God in heaven! My attorney husband's salary takes two weeks of work to pay one week of mortgage -- and we have a cheap house.
So I pulled together some stats:
Current Nerstrand Stats
(Where my parents live)
A house down the street for them sold for $120,000 recently. Some sold for more, some less, we'll use $120 as our average.
Mortgage on $120,000, with 5% down, FHA 5.5% interest:
$642 each month
$78 taxes
$720 total
To pull in a salary to pay that mortgage payment in one week's salary, you would need to make $57,200 per year.
The factory my dad was working in when they bought the house is still around. My sister works there now too, and she is not making ANYWHERE near $57,200. I think salaries there are in the high $20k-$30s for the average workers.
So now let's do St. Paul.
I pulled the average house price for my area, Merriam Park. Average house price is $329,530.
Mortgage on $329,530, 5% down, FHA 5.5%
$1777 payment
$338 tax
$2115 total
To make $2115 after-tax each week, you would need to make $3250 pre-tax, for a pre-tax income of, yes, $169,000.
I don't know anyone that makes $169,000 in a factory when they are 28.
I was like -- WHAT??? --- YOU COULD PAY THE MORTGAGE ON ONE PERSON'S SALARY???
And what's more, my dad was paid weekly so it was just ONE WEEK'S SALARY.
God in heaven! My attorney husband's salary takes two weeks of work to pay one week of mortgage -- and we have a cheap house.
So I pulled together some stats:
Current Nerstrand Stats
(Where my parents live)
A house down the street for them sold for $120,000 recently. Some sold for more, some less, we'll use $120 as our average.
Mortgage on $120,000, with 5% down, FHA 5.5% interest:
$642 each month
$78 taxes
$720 total
To pull in a salary to pay that mortgage payment in one week's salary, you would need to make $57,200 per year.
The factory my dad was working in when they bought the house is still around. My sister works there now too, and she is not making ANYWHERE near $57,200. I think salaries there are in the high $20k-$30s for the average workers.
So now let's do St. Paul.
I pulled the average house price for my area, Merriam Park. Average house price is $329,530.
Mortgage on $329,530, 5% down, FHA 5.5%
$1777 payment
$338 tax
$2115 total
To make $2115 after-tax each week, you would need to make $3250 pre-tax, for a pre-tax income of, yes, $169,000.
I don't know anyone that makes $169,000 in a factory when they are 28.
Signs of recovery
Last week we had the big Edina Expo -- a big conference at the Xcel Center for all of the Edina agents.
We had an economist there talk about the state of the market and the possibility for recovery. He believes we will see better conditions for home sellers and stabilizing prices near to the end of this year.
He also shared the elements that he says will tell us that the market is turning and the bottom is past:
1. The number of new listings is less than previous months and less than the same month last year. This will signal two things: Sellers have realized now is NOT a good time and the foreclosure new listings are decreasing.
2. Days on market is decreasing. This means houses are selling more quickly and there is more demand.
3. The listing price and the sold price are closer to each other. This will signal that buyer have less bargaining power.
We have seen none of these things yet. I am thinking of running these stats in just my neighborhood. I do know we had fewer listings in my neighborhood in 2007 than 2006. I'll keep you updated as to the results.
We had an economist there talk about the state of the market and the possibility for recovery. He believes we will see better conditions for home sellers and stabilizing prices near to the end of this year.
He also shared the elements that he says will tell us that the market is turning and the bottom is past:
1. The number of new listings is less than previous months and less than the same month last year. This will signal two things: Sellers have realized now is NOT a good time and the foreclosure new listings are decreasing.
2. Days on market is decreasing. This means houses are selling more quickly and there is more demand.
3. The listing price and the sold price are closer to each other. This will signal that buyer have less bargaining power.
We have seen none of these things yet. I am thinking of running these stats in just my neighborhood. I do know we had fewer listings in my neighborhood in 2007 than 2006. I'll keep you updated as to the results.
What is "subprime" anyway?
The news media sure does love talking about the "subprime mortgage mess."
But it seems some of the talking heads don't really know what they are talking about.
There are a few things going on in the mortgage mess. Here's part of the story:
1. Subprime. Subprime borrowers are people that had credit scores and/or debt to income ratios that were less than would qualify them for mortgage programs and rates that people with average to good credit would get. Most of the subprime borrowers got into morgages with tough terms, some had adjustable rates, and some of the borrowers were given more mortgage than they could actually afford. Some of these borrowers did not have enough money to pay the first payment.
2. Adjustable rates. Many homeowners, some of them subprime and some of them good credit borrowers, took advantage of the very low teaser rates that the Adjustable Rate Mortgages offered. These mortgages all have different rules on how and when the rates adjust up, but the monthly payment difference from the first cheap payment to the subsequent adjusted payments are usually pretty steep. Lots of borrowers assumed that property values would continue to increase, and they would be able to refinance out of the now-adjusted loan. However, some ARM borrowers bought at the height of the market, and the house is not worth what they paid for it, making it impossible to refinance.
Both of these scenarios have lead to the foreclosure mess. It is not just subprime borrowers getting foreclosed, but lots of people. Of course, those people that are most economically vunerable are the most affected. I am seeing foreclosures in virtually every neighborhood, in the city, in the suburbs, in the gated communities.
But it seems some of the talking heads don't really know what they are talking about.
There are a few things going on in the mortgage mess. Here's part of the story:
1. Subprime. Subprime borrowers are people that had credit scores and/or debt to income ratios that were less than would qualify them for mortgage programs and rates that people with average to good credit would get. Most of the subprime borrowers got into morgages with tough terms, some had adjustable rates, and some of the borrowers were given more mortgage than they could actually afford. Some of these borrowers did not have enough money to pay the first payment.
2. Adjustable rates. Many homeowners, some of them subprime and some of them good credit borrowers, took advantage of the very low teaser rates that the Adjustable Rate Mortgages offered. These mortgages all have different rules on how and when the rates adjust up, but the monthly payment difference from the first cheap payment to the subsequent adjusted payments are usually pretty steep. Lots of borrowers assumed that property values would continue to increase, and they would be able to refinance out of the now-adjusted loan. However, some ARM borrowers bought at the height of the market, and the house is not worth what they paid for it, making it impossible to refinance.
Both of these scenarios have lead to the foreclosure mess. It is not just subprime borrowers getting foreclosed, but lots of people. Of course, those people that are most economically vunerable are the most affected. I am seeing foreclosures in virtually every neighborhood, in the city, in the suburbs, in the gated communities.
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