Both look like they’re ready to pop and for the same reason. Their prices are out of reach for many Americans. From Eric Peters at ericpetersautos.com:
Houses in my area – a rural county in SW Virginia – didn’t used to cost so much that most who live here couldn’t afford to buy one.
They do now.
Here is an example. This small house – it is only about 1,100 square feet – just went on the market for just shy of $300,000. It would cost (according to the estimate that runs with the ad) some $2,100 per month to live in this house, assuming you could afford to put 20 percent – just shy of $60,000 – down. Plus just shy of $12,000 on top of that for closing costs – for a grand total of just over $70,000 due on the day you get the keys.
The average individual living in the area earns just shy of $26,000 annually. Family income (dual earner) is just shy of $46,000. Very few individuals or families who live here can afford such a house.
The usual lending standard defining “affordability” is the 4-1 ratio of income to home cost. Thus, a family with a $46k annual income could handle the payments (including the down payment) on a home that cost about $184,000.
There are fewer and fewer homes available for that amount of money in my area. The question arises: Who is buying these $300k-plus homes, then?
