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    19 Replies Latest reply on Nov 20, 2008 11:02 AM by ronwardcpa

    How Much Should A Home Cost?

    ronwardcpa Wayfarer
      How Much Should Someone Pay For A Home--Period? What do You Think?

      I am currently offering a Live, Two-Hour Workshop, The Price of The Home is Wrong, that provides some key insights and solutions, especially relative to the foreclosure crisis. By the way, The Price of This Workshop is Right!

      For additional information, please visit Our website at www.ApostleRonCpa.com. Your consideration is appreciated. Have a great day!

      Peace, Ron
        • Re: How Much Should A Home Cost?
          DomainDiva Ranger
          Why is the price of the home wrong? What is the context of this question Is the builder or seller trying to rip someone off or is the buyer making 40,000 a year trying to buy an 800,000 home?

          What if the consumer does not know what he is doing? What if the mortgage broker is trying to sell a bad mortgage instrument to a know nothing consumer? An uneducated consumer is more dangerous than a boatload of crooks. Crooks are just crooks, they only make money when uneducated people play along. Kind of like the Commodity Futures Modenization Act of 2000 that basically legalized gambling with stocks, check out page 262 where the pre emption for prosecution under state and local gambling laws is stated. The one that 100 US Seantors voted for...talk about uneducated!!!!! Uneducated people come in all shapes and sizes and are everywhere.

          Hence the mortgage crisis.

          I looked at your website. It spends a lot of time telling people what you believe, but in my business experience, if people have to keep telling you what they believe, then they probably can't remember what they believe.

          You are having a seminar about housing prices being wrong. Mayhap you need to educate people and then let THEM determine if the price of the house is wrong. All I see here is someone trying to play the blame game for personal misfortune on someone else.
          1 of 1 people found this helpful
          • Re: How Much Should A Home Cost?
            Navigator
            I've personally seen the price of homes balloon quite rapidly. The current house I am in went from 72,000 to 95,000 on the market just within 6 months. I believe the initial price is well for what it is: a 3 bedroom, 2 bath ranch-style in South Carolina, but it seems the going price now due to the current state of affairs.
            • Re: How Much Should A Home Cost?
              intechspecial Ranger

              Expect to save at least 25% from what the home is actually worth.

              This is a "buyers" market currently, and some homes will sale for 50% of what they are actually worth.

              The recession cannot last forever, and if you have the ability to buy a home, it is best you do it now with the current pricing being in the basement.
                • Re: How Much Should A Home Cost?
                  ronwardcpa Wayfarer
                  Good Morning intechspecial,

                  Thanks for responding. Good Point.

                  Food for thought... What are these homes actually "worth"?

                  Have a great day!

                  Ron
                    • Re: How Much Should A Home Cost?
                      DomainDiva Ranger

                      "Food for thought... What are these homes actually "worth"?"

                      A home, like anything else is 'worth' what someone will 'pay' for it. There are older 'homes' in Dallas that are in areas that are turning over. These homes although small and sometimes ragged are sold for hundreds of thousands of dollars. Then they are torn down to make way for a new mcmansion.

                      The word 'worth' has so many definitions and contexts in the area of real estate and mortgages that it is quickly becoming a moot point.
                      1 of 1 people found this helpful
                        • Re: How Much Should A Home Cost?
                          ronwardcpa Wayfarer
                          Good Morning Domain Diva,

                          Very astute observation.

                          But consider this. Should the value, cost, price or "worth" of a home be a moot point? Let's examine a few scenarios.

                          A home is 40 to 80 years old. It originally sold for $10,000. The same home sold for $150,000 ten years ago. The same hold sells today for $300,000. A new home could be built to replace it today for $175,000.

                          Next, You bought a 60-Year Old house for $80,000. You did as good a job as You could of maintaining it, but could not avoid some deferred maintenance issues. After living in the house for ten years, You are considering selling it. Not paying much attention to the "market", You think to Yourself, maybe I can get $90,000 to $95,000 for it. But lo and behold, the Real Estate Agent said that You could get about $200,000 to $250,000 for it.

                          You then marvel at the workings of high finance as You look around the same house that You have been living in for the past ten years that is certainly no better physically or functionally than it was before. In fact, it suffers from functional obsolescence. One thing for sure, You surely couldn't afford to pay that much for a house, and neither can most of the other People living in the neighborhood. Nevertheless...

                          Now, what should the Price of the home be in each case? What are the other ramifications? These are typical real world situations that Working Class People face every day. Is The Price of The Home Right or Wrong? This is something that must be firmly established in ways that make sense economically and ethically.

                          Have a great day!

                          Peace, Ron
                            • Re: How Much Should A Home Cost?
                              DomainDiva Ranger
                              Your brain is moving in about 4 directions. I will for a fee consider putting your post into a mind map in visio to try and help you find some logic.

                              Your scenariois change so quickly that there is no linear logic trail.

                              Might I suggest, very seriously that you contact a mathematician and develop an algorithim for what you are trying to do.

                              Part of the problem you are having is that you are not factoring in the value of the dollar currently versus the value of the dollar say ten years ago. You will need to put this in your algorithim as well as inflation rates, location of property and local tax rates + school taxes as well.

                              You started out with worth, now you added value, cost, price. These are four distinct classes. You are confusing them by trying to lump everything into one category. You also may want to contact a real estate professional that deals in higher end properties for some real life perspectives and how these terms translate into money and the market as a whole.

                              For what its worth (no pun intended here) the price of the home is right when you can pay for it without having to sacrifice food, clothes and health care. Mayhap you ahousl teach a class on how to manage money and how to know wehn you can't afford something. Or how to know when to walk away from a deal.
                              1 of 1 people found this helpful
                      • Re: How Much Should A Home Cost?
                        NoBullFunding Scout
                        How much should a home cost? The rule of thumb used to be 3xs your annual income, but where I live that rule is pretty much shot to hell.

                        If you rephrase the question as: "what's the most someone should pay for a home", then I'd say quite simply that you should not buy something with a payment beyond what you can afford based on a fixed rate 30 year mortgage. If everyone stuck to this notion, home prices would not have appreciated like they have in the last 5 - 10 years.
                          • Re: How Much Should A Home Cost?
                            ronwardcpa Wayfarer

                            Good Morning NoBull Funding,

                            Good Point.

                            Question for You. There were other "rules of thumb" of paying twice (2x) Your Annual Income (not Your Lifetime Income) for a house, 1.5x, etc. Whose or Which thumb is the right thumb?

                            Pricing based on percentages of income can be extremely hazardous to Your health. Why are 20%, 30%, 38%, 52% of Your Lifetime Income acceptable amounts to pay for a home? Reflect on that for a moment, perhaps while out walking or jogging in Your neighborhood...

                            Consider this. Let's use Your Model of paying 3x Your Annual Income for a house. If Your Annual Income is $30,000, the purchase price of the house would be $90,000. However, if the price is 38% of Your Lifetime Income (30 Years), the price of the house would be $342,000 not including interest, calculated as follows:

                            $30,0000 x 38% = $11,400 Per Year x 30 Years = $342,000 (Not Considering Interest), or
                            $30,000/12 Months = Monthly Income of $2,500 x 38% = $950 Per Month x 360 Payments = $342,000

                            Just double, triple or quadruple this amount with an interest bearing mortgage. And heaven forbid what would happen if You have leveraged Your home equity with Refinanced Mortgages, Home Equity Loans and Reverse Mortgages... Guess You will be passing on this debt for generations to come... Oh, by the way with respect to inflation, is $342,000 any more or less significant to Poor and Working Class Folks than it was 20, 30 or 40 Years ago... Ah, the time value of money as a critical component of Our invesment decisions...

                            Thanks for Responding, and have a great day!

                            Peace Ron