Irvine Housing Blog

I agree. If the California Govt does not mend its way soon, we will probably see a slow erosion of population and jobs to other places.

I see this comment a lot but is it really all that much more of a trap than single income?

If the single earner gets sick… aren’t you in a worse scenario because ZERO money is coming in? At least in a dual income household, if one stops, the other is still there providing some kind of money flow.

And in the case that the other spouse is able to work, the non primary in the single income house may have a harder time finding a job due to either inexperience, outdated job skills or lack of current qualifications.

Either way, if the family budgets and plans correctly, they can deal with sudden losses with savings and insurance.

irvine_home_owner,

Think about it this way.  If a wage earner has a 5% chance of losing his or her job, that translates to a 95% probability of keeping that job.

If you have two wage earners, each with a 5% probability of losing his or her job, that means there is roughly a 90% chance that atleast one will lose his or her job (0.95 x 0.95).

Oops, I meant a 90% chance that both will keep their jobs.

Oh nevermind, I was right the first time too.

No wait, I meant a 10% chance that atleast one loses his or her job.  This is getting confusing so I will stop.

But I’m more focusing on the outcome if a wage earner loses their job.

In the single income family, a job loss equals 100% lost income, whereas in a dual income family that’s 30-70% depending on which one lost the job.

Plus, in a dual income, they can probably take a lower paying job and still get by… not so sure with single income.

Again, it all depends on budget management but a dual income household seems “safer” to me.

That’s true.  But if the dual income home needed to stretch in order to afford their monthly payments, the outcome will be the same whether one or both lose their jobs.

Alternatively, think about it this way.  Take a single income home with a husband who works and a wife who stays at home.  If that husband loses his job, both he and his wife can try to go out and find new employment.

BTW, I have watched Elizabeth Warren’s two-income trap lecture on youtube.

The key here is that a 2 income household should not stretch a lot to afford a home.

For the house I bought the DTI is 34 which I think is excessive with one income, however with my wife’s income it reduces to 17 which is very comfortable.

If you have stretched to buy $1 million+ homes with DTI’s > 35 with 2 incomes it is very risky and not financially healthy at all. Looks like a lot of people were just doing that during the bubble , look where it has landed us.

That’s true.  But if the dual income home needed to stretch in order to afford their monthly payments, the outcome will be the same whether one or both lose their jobs.

The math doesn’t compute. You need to make the comparisons equitable to work. If the single had to stretch to make their nut, they would be worse off than the dual if only one earner lost their job. Think of it more as comparing a single earner who had his/her wages cut to a dual income where one of the earners lost their job.

Alternatively, think about it this way.  Take a single income home with a husband who works and a wife who stays at home.  If that husband loses his job, both he and his wife can try to go out and find new employment.

Not so fast. I mentioned this previously.. but what will make that wife viable in the marketplace? Who will take care of the kids (which I assume she stayed home for).

A working couple can find work more readily than a working spouse and a non-working spouse because the former has a bigger and more current network to leverage in addition to updated skill sets the market may require.

Again… buying a home is a trap regardless of single or dual income if the household is not budgeted correctly. I don’t think single income is any more safer than dual.

I don’t think there’s anything wrong with my math.  No income or 1/2 income—if they were stretching to make their payments before, it won’t matter because the outcome will be the same—they’re screwed.

I think you have a point about the hypothetical couple with the wife with little or no experience.  On the other hand, that was the situation when my parents bought their home almost 20 years ago.  Today, my mom, who was a stay-at-home house wife for much of my childhood, makes more money than my dad.

I think it absolutely is a more dangerous trap when you’re dependent on two incomes, especially if you’re dependent on two fairly high incomes.

I don’t think there’s anything wrong with my math.  No income or 1/2 income—if they were stretching to make their payments before, it won’t matter because the outcome will be the same—they’re screwed.

It does matter. With 1/2 income, you’re screwed but you can eat, with zero income, you starve too. In a dual income, you can lose your home but still rent somewhere… in a single, you’re done.

I would choose 1/2 income over zero income any day.

And why is dual income more dangerous? You assume they are fairly high incomes but I would think in a single income, that would have to be fairly high (if not higher) too. Like I said… make an equitable comparison and either is just as much of a trap.

The point isn’t whether one or both parents should work.  The point is that it’s more dangerous to buy a home that requires two incomes instead of just one, which, I know, is obvious to everyone, but nevertheless, that’s what most married couples are doing nowadays.

We’re not talking about people starving or anything like that.  We’re talking about people losing their homes or filing for bankruptcy, etc.

You’re still missing the point.

If EITHER (single income or dual income) has to make a certain amount to buy a home… BOTH are EQUALLY dangerous.

AHHH but you forgot the part about the probabilities…

Just like in a RAID disk with no data mirroring—as you increase the number of disks, you increase your chances of failure.

Everything in life is a risk.

The risky part of buying with 2 incomes has nothing to do with losing a job.  You never avoid those type of life risk.

The risky part is the wife realizing she wants to be a stay at home mom, but can’t and is miserable.

This is a valid point. If there is any doubt in the mother’s mind that she might want to stay at home , keep the DTI with one income reasonable…period.

“You never avoid those type of life risk.”

In that case, by all means, buy your 750K house with your combined income is 150K.  Shut off your brain and do whatever you want and you’ll have a front row seat for the collapse of the middle class.

The calculation also assumes a 130K down payment.  Even if you have a 130K salary, it will take time to save up that much.  More important—is it really worth it?

High DTI’s are common.  You can look them up at the census.gov website, but I remember a pretty high percentage of Irvine is > 35%.

As for the $130k down payment, I totally agree that it is not really reasonable to couple that with a $130k salary.  Saving 10% takes 10 years. 

It’s ironic that the era of most rapid appreciation of homes, with the fastest move-up market, was also seeing the lowest down-payments.

However, there are still 10% down loans and a 585k would be a gse loan for Irvine.

Pleasonton, CA?

No, that’s a comp for Bakersfield.

No, that’s a comp for Bakersfield.

LoL

What’s with the hate?

Pleasanton may have a smaller population, but has plenty of high tech / high paying jobs, is close enough to commute to two different major job centers (SF & San Jose), median household income of $100k+, median home sale price ~$650k.

San Ramon and Pleasanton are both very good comps for Irvine.  Don’t listen to the hate.  It’s nice up there—- nicer than Irvine, in fact. And the schools are just as good.  Actually, better than Irvine in San Ramon.  If I had to move up there, San Ramon would be at the top of my list. Pleasanton would be a close 2nd.

My bako comment was harsh.  There is too much nice farmland and empty space for Pleasonton to be a comp.

btw, I don’t live there, I live in Irvine. I used to live in Danville, and Irvine always reminds me of that entire area.  There’s plenty of farmland in Irvine too…

I used to live up there, too—- for four years.  And spent a lot of time working on clients in the tri-valley.  Anyone who says that area is not a comp for Irvine does not know what they are talking about. Of course Danville is not really a comp, though.  It’s much more exclusive than Irvine.

Atherton, CA is nice
Similar to parts of Irvine.