Wednesday, July 4, 2007

Our Real Estate Struggle

When I say 'our' in the title I am directly referring to Darcy and I. However, 'our' is also referring to my entire generation of Californians, of course minus those who happen to have found a way to make mega bucks early on in life, or those with oodles of family money that they have access to.

Darcy and I and those a few years older and of course younger are entering the real estate market after the great boom that has taken place the last 10 years. In this time, property values in many cases more than doubled. Some more, some less, but everyone who owned real estate thought of it as the best investment they ever made, and in many cases, wish they'd have bought more. People made instant cash flipping houses, and people bought and sold in a five year period making hundreds of thousands of dollars in which they could put toward a bigger house in a better neighborhood.

Now in our late twenties and having owned a condo for over two years, we would love to move into a house. Unfortunately, just about every house we would want to buy in our area is out of our price range, and as much as we want to stretch ourselves to buy our dream home, we don't want to be "house poor". Had we bought our condo in 2001 for $250k (what is was worth then) and sold it in 2005 for $450k, it would have been easy for us to buy a home we wanted. But now with the stagnant market, we stand no chance of making that kind of equity over the same amount of time. We missed the wave, and our birth certificates are to blame.

In the bay area, a typical 1500 sq. ft., three bedroom, 2
1/2 bath house in a decent neighborhood is at around $800,000. This means that if you're lucky enough to put $80k down your monthly mortgage payment is roughly 5 grand a month. This is out of the question for anybody making less than $200,000/year if they want to ever think about going out to dinner, going on vacation, or buying nice clothes. Therefore, the only way to afford this house with less than $200k yearly income is to have a large down payment. But, for somebody in their mid-late 20's like us, they haven't worked long enough to have that much cash, and are also too young to have capitalized on the housing boom of the last 10 years! The people who are able to snatch up these $800k+ homes are the 30-somethings or even older who were able to buy their first real estate investment 5 or more years ago, and then sell it and make an instant 200k+ just on the value of their property going up! Without this luxury (since the market has slowed), Darcy and I are wondering how long we'll be stuck living in our condo. Could it be another 2 years? Perhaps longer?

It's frustrating, but it is what it is, and we are happy. We have made vast improvements to our condo, and love the area that we live in. As much as we want a house, we accept the fact that we have to wait, and know that our time will come.

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