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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: MSI who wrote (1257)	12/29/2001 12:16:56 PM
From: GraceZ	Read Replies (1) \| Respond to of 306849

I don't think that index measures other things that a mortgage company would normally take into account like existing installment or revolving debt, it just measures median home prices against median family income and applies the P&I payment as a percentage. So obviously it is greatly effected by falling or rising mortgage rates. Way back when, when I bought my very first house I remember the mortgage broker telling me that the company would allow me to have a monthly P&I that was up to 23% of my adjusted monthly gross. That figure seemed unreasonably high to me considering it didn't include real estate taxes and insurance. At the time I had zero debts but I was planning to buy a car so I knew I'd have a car payment. When you add in the cost of maintaining the property which never is a nice even amount, 23% is far too high for anyone to spend on a house. When you adjust the figure for everything that is left out and adjust your income for taxes its almost half of your after tax income. My first house payment was considerably below that percentage, something like 15% and it got smaller as mine and my husband's income rose. That was the smartest move I ever made, to live beneath my means (or what the real estate company and mortgage industry said was my means) for the next eight years. It allowed me to save and invest a bundle. With the money I saved I was able to buy my current house, which is a little piece of paradise.