Previous posts in this discussion:
PostHome Ownership in US (Randy Black, USA, 12/04/15 5:00 am)
In his response to John Heelan's 3 December questions about the social class of American homebuyers, John Eipper asked, "what is the situation in the Dallas area?"
According to a year-long study (July 2014-June 2015) of homebuyers nationwide, including Texas and Michigan, and more specifically in the West-South Central region (Oklahoma, Arkansas, Louisiana and Texas), here are the breakdown facts as to homebuyers in Texas and Michigan.
West-South Central region
Buyers: Median age: 43 (means half were older and half were younger)
Median household income: $95,000
34% first time homebuyers
71% bought used homes
68% were married
Median years buyers expect to stay in their newly purchased home: 10
16% are military veterans and 3% are active duty
92% are single-family homes
Median percent of listing price received from buyer: 99%
Median number of weeks from listing to sale: 2
Now, for John's region: East North Central (Michigan, Ohio, Indiana, Illinois and Wisconsin)
Median age: 39
Median household income: $78,700
37% are first-time homebuyers
92% bought used homes
62% were married and 19% were single females
Median years buyers expect to stay in their newly purchased home: 15
12% veterans, 1% active duty
84% single-family homes
Median percent of listing price received: 97%
Median number of weeks to sell: 4
Finally, to answer John Heelan's question/comment, "One hopes that there is better state control over the awarding of mortgages, so that the world is not plunged into another economic crisis, caused by a new 'sub-prime mortgage' fiasco."
Unfortunately, while the sub-prime lenders in the private sector have all but disappeared, the Federal Housing Administration (FHA) has not and continues to issue loans to those with lower incomes, lower credit ratings and past mortgage sins such as prior home loan defaults and even bankruptcy.
From FHA qualification answers:
The FHA is lenient on credit issues and is understanding of personal situations. Some blemishes will be excused with an explanation. If you had a previous bankruptcy, you can get an FHA loan two years after the discharge date. Also, if you had late payments all in a distinct time frame and had a good payment history following that, they will overlook those imperfections. Collections are not a problem. If, however, you have had any federal liens, like tax liens or defaults on student loans, then you will not be eligible for an FHA loan. Your credit score needs to be only a 620 when putting down the minimum three percent...
The best advantage of an FHA loan over conventional loans is the low cash needed at closing. Most first-time home buyers do not have the funds available to put 20 percent down plus pay closing costs. The FHA requires only 3 percent of the loan value to be paid at closing. Some of these funds can come from a gift from a family member also. They will allow for 6 percent in seller concessions, meaning the seller can pay up to 6 percent of the closing costs.
The FHA is fairly lenient about whom they will lend to. As long as you meet the credit requirements, have the 3 percent down payment and have steady employment, you will likely be approved. It can be an easier application process than a conventional loan.
Debt to Income
The FHA allows a high debt-to-income ratio. If you have a car loan, student loans and credit cards, you can still qualify. Perhaps you are getting a raise later in the year but want to buy now. Or maybe your car will be paid off in six months. As long as you feel you can afford the payment, the FHA will allow a 50 percent debt-to-income ratio. This is determined by adding up all of your debt, including your proposed new mortgage payment, and dividing it by your monthly income to receive a percentage.
RB: If anything, loan standards under Obama's watch have been lessened over the past seven years. In my experience dating to 1972, FHA requirements required 5 percent down payment, stellar credit above 700 and a debt-to-income ratio of 25-30 percent. The FHA loan on our first new home, a $25,500 newly built 1,500-square-foot, 3 BR-2 Bath-2 car rear entry garage home in 1972 was 7 percent for 30 years. We were both 24.
Today, it's about 3 percent for the same 30-year time frame, only a 620 credit rating and only 3 percent down payment. I recall that we paid 10 percent down, which was the sum total of our savings over the first 2 years of marriage to my first wife. I still drive through that 42-year-old neighborhood to visit a pal and marvel at how small that first home appears. Yet that brick home still looks good, as does the neighborhood. I never dreamed that four decades later, I'd still be living in a nearby neighborhood and in a home that is more than twice as big.
Of course, I also did not dream that only now at age 70 (Dec. 7), I'd have a 15-year-old daughter, a Russian mother-in-law, a Beagle, a cat and three parakeets under the same roof!
JE comments: I would have predicted the West-South region to have a younger demographic than the North-Central. Granted, these statistics measure home purchasers, not overall population.
So this year's Day of Infamy is also a joyful milestone: Randy Black's 70th!
Congratulations, Randy! Since I have the keys to the website and can arbitrarily do this, I hereby proclaim Randy Black Week, 7-13 December. RB Week will feature some of Randy's best posts of the hundreds he's published over the years. Certainly we'll relive Randy's encounter with golfer Lee Treviño, and his visit to Dallas' Love Field on that tragic November day in 1963.
Home Ownership in US; from Ric Mauricio
(John Eipper, USA
12/05/15 5:20 AM)
Ric Mauricio responds to Randy Black (4 December):
This discussion has piqued my curiosity. Currently, my investment group has an investment approach focused on high-growth areas such as Dallas-Ft. Worth. The strategy is to purchase financially distressed properties, by buying value-add shopping centers, seeking to acquire "broken" centers and then "bring them back to life."
Randy, Happy Birthday. You look quite fit for 70. Must be the chili.
The source that Randy utilized in his post covers quite a broad region. The San Francisco bay area has a diverse range of incomes and demographics. So I opted to focus on more specific areas to satisfy my curiosity.
The question is: how does Silicon Valley compare to similar areas in the DFW area? Plano seems to be the best fit when comparing to my home town of Foster City. Plano is 20 miles NE of Dallas; Foster City is 20 miles south of San Francisco. Both look very similar.
Plano boasts such corporate residents as YUM! Brands, Tektronix, Dr. Pepper, Cinemark, and Frito-Lay (to name just a few). Its median age is 38.2. Median household income is $80,713 (est 2015); median home price is $240,798 (est 2015) and a median detached home is at $273,881 (est 2015).
Foster City, CA boasts corporate residents as the world headquarters of VISA, Gilead Sciences, Illumina, Sony Entertainment, as well as the west coast HQ of IBM. Of course, we are just a stone's throw from Oracle, Genentech, Electronic Arts and Stanford University. Our median age is 40.6; median household income is $122,720 (est 2015); median home price (all) is $968,023 (est 2015); median detached home is $1,610,000 (est 2015).
Since both would be considered middle class, I think I can say that our middle class in America is doing quite well.
And yes, we must be quite vigilant in not causing another real estate bubble. As one can see from the home values in Silicon Valley, most of our homes do not qualify for FHA financing. Thus homebuyers need to qualify with good financials and a substantial down payment.
JE comments: With a median home value of $1.6 million, Foster City can count as "middle class" only in Silicon Valley!
When Ric Mauricio has the chance, I'd like to hear about bringing "deal malls" back to life. The following website is creepy--a melancholy exploration of Americana: