Priced out of your home?
I guess it has been about five years ago now that my wife and I decided to start looking for a new home. Actually, probably closer to six because it took us nearly a year to find our current home. As we were looking, I had a pretty clear idea in my head what I was willing to pay per month.
I handle pretty much all of the finances in our household, but not because of some antiquated social norms or anything like that. My wife just simply has no interest in having any part in it. I have offered more than once for her to have a more active role in the budget, but she always declines.
Anyway, I knew going in that I didn't want to spend more than $800 per month for our mortgage. We had planned setting up an escrow account for our taxes, insurance, and other stuff, so back then that $800 was a pretty easy figure.
Knowing our budget, I was actually comfortable paying $850 per month, but keeping the final cost under $800 would give us the ability to put some extra money per month towards the principle of our mortgage. That is exactly what we have been doing for the past five years or so.
I guess I should be happy to say that the housing market has been slowly growing over the past several years. The investment we made in our house has paid off as it is now valued at close to $50,000 more than what we paid for it. The neighbors house sold a year or two ago and it went for much more than I expected it to. This is where the problems start...
In our hold neighborhood, the price of land was declining. My wife purchased her house for $80,000 before the housing market collapse of 2008 happened and by the time her and I got together the house was worth maybe $60,000. A neighborhood that once had a per home value of ~$100,000 suddenly was down in the $50,000 range. It was also an older neighborhood, so as those people passed away, new buyers came in at the much lower price range.
I think the house down the road from us sold for $20,000. These lower income families had no desire to invest in their homes, so our neighborhood basically became like a trailer park. That was one of the main reasons we knew we needed to get out. We were able to sell our house for about $75,000, so we took the money and ran.
Given that scenario, I wasn't fully prepared to live in a neighborhood where our property values would actually increase! As has been the case for the past five years, I got our annual mortgage statement the other day only to find out that our escrow account was short by just about $300. With taxes and property values going up, and some bond issues that passed, our new mortgage payment was going to be $848 if we didn't pay that $290 out of pocket.
In a perfect world my wife and I would be getting raises each year which would probably cover that deficit. Since we work in public education, that isn't always the case. We frequently have to take pay freezes or cuts to help them balance the budget to account for lost revenue from students leaving the district.
So anyway, the TL:DR of this whole post is, what about other families who weren't as lucky to keep their jobs during the pandemic. What about families that live in neighborhoods which have seen exponential growth? I can only imagine how much their payments are going up. It is very easy to see how people can suddenly be priced out of their homes and might be facing foreclosure.
If I ever buy another house I will definitely be taking into account these things which weren't on my radar five years ago. I think too often people get that loan amount they qualify for from the bank and they go looking right at the top of that range. They don't take into account all of these things which really add up and can put them in a very bad position.
So that is what I have been thinking about this weekend. Let me know your thoughts!
All pictures taken by myself or @mrsbozz
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