Buying a home is harder than what you may have been told

If you’ve tried to buy a home in the Twin Cities, you know the impossible task for mere mortals. If you can find a half-way-decent house to buy, the price is through the roof.

The Star Tribune reported on Sunday that one of the problems is that people who were underwater in their mortgage, haven’t fully recovered and are unable to “move up.” So their “starter homes” aren’t coming on the market to allow young people to buy.

That opens up an entirely different conversation on how we view our homes and why, if we like the homes we bought, we want to move up and reset the mortgage clock at all?

Whatever the reason, it’s tough being a young person wanting to get into the homeowner game.

As mentioned in this space yesterday, many young people can expect to lead a nomadic existence of short-term gigs. That’s not conducive to owning a home.

But there’s also the immediate cash outlay. Who’s got the kind of cash hanging around that one needs to buy a home?

That’s why the story from CNBC today seems a little out of whack.

It says people need a $36,605 salary to put 10 percent down on a median $220,714 home in the Twin Cities. For a 20 percent downpayment, one would need a salary of $30,572.

This seems like nonsense. Sure, a smaller salary would support smaller mortgage payments, but who can afford to put $44,000 away when making $30,572 a year?

At current interest rates, a 30-year mortgage would cost $877.41. Throw in insurance and tax escrow amounts, and the monthly payment would likely be closer to $1500 a month.

Income taxes would likely eat up most of whatever is left.

And there you are with a house with no furniture.

These are the sorts of stories that sneak into the news and paint a false and distorted picture of reality.

Why? Because all of the data for the story came from Unisom, which makes its money financing homes. It’s in the best interest of the company to make mortgages look as affordable as possible. That’s why the real cost of home ownership isn’t revealed. That’s the shady side of the mortgage-provider business.

Even despite the inaccuracy, we get a better picture of just how unaffordable home ownership can be because in larger cities — where jobs are — the rock-bottom method of estimating a needed salary is staggering: More than $179,000 in San Francisco, near $90,000 in New York, and $80,000 in Boston.

This is the kind of financial illiteracy that helped break the economy in 2008.

What’s the reality? Read the responses to Kerri Miller’s tweet request above.