Our plan, as long as we’ve been married, was always to have Big Country finish school, get a fulfilling, decent-paying job that left plenty of time for family, live frugally, avoid debt, buy land, and build our own cabin or yurt.
That is, until we thought we were going for the gold in pursuing a medical career and instead ran ourselves into the ground emotionally and financially.
Playing big and putting all your chips on the table means that sometimes you lose big. But, what can you do? Perhaps a bit of vagabonding and stumbling through the building of a homemade tiny house for your family of five? That sounds reasonable.
But really, this unique vantage point has opened our eyes to the myriad of people also under the gun to find sustaining jobs and housing. And perhaps nowhere else is there a more challenging place to be hustling for housing right now than in Northern Colorado.
What’s going on in Northern Colorado?
Recently The Denver Post discussed the phenomenon of this area’s unprecedented housing prices in terms of affordability. Although there is evidence that we’re over the crest of the boom and growth is slowing, it’s still a very hot seller’s market with homes being snapped up mere hours after listing or sooner.
But are these homes affordable? To whom? Out of the dozen most unaffordable counties in America in relation to wages, seven are in Northern Colorado.
Let’s take a look at the area’s biggest city.
The average home price in Fort Collins, CO is $350,200, which comes out to a high $203 per square foot.
- Mortgage: For the above house, say you’re able to come up with 10% down, plus closing costs, etc. A 30-year mortgage of $315,200 at today’s 3.92% interest rate would mean a mortgage payment of $1490/month.
Add in . . .
- Utilities: electricity, gas, water, trash, recycling, internet… $200/month is a ballpark estimate, as factors such as local rates, a home’s insulation, and personal preferences make all the difference.
- Maintenance: common rule of thumb is 1% of the purchase price per year, so $3502/yr or $292/month.
- Property tax: a percentage based on a percentage. First, the assessed fair market value of a property is generally 80-90% of the sale price. Then the county or state collects tax on this figure. Larimer County collects .64%. Let’s say 85% of $350,200, which is $297,670. Then, .64% of this is $1905/yr or $159/month.
- Private mortgage insurance (PMI): required for down payments of under 20% to protect the lender (the bank) from the borrower (you) defaulting on the loan. This can be .3%-1.5% depending on credit score and down payment amount. Let’s say 1%, so $3502/yr and $292/month.
- HOA fees, lawn care, tree service, and/or anything else applicable to home ownership. Homeowner Associations (HOAs) are all over the board in what they charge and what services they provide, and there really is no meaningful average. Fort Collins is green and full of trees. Let’s throw out $100/month.
- . . . and you could be looking at shelling out $1043 + the mortgage of $1490 = $2533/month for housing related costs.
Most lenders consider 28% as the standard “housing ratio,” which is the maximum responsible allocation of pre-tax income toward housing (consisting of principal, interest, taxes, and insurance).
So if we were to take out utilities, maintenance, HOA, and other services, the house above would come out to $1901/month.
$1901 is 28% of $6789. And so, to afford this average Fort Collins home, the average home buyer would need to make $6789/month, or $81,471/year.
These numbers are representative of the Front Range region in general. Some neighboring towns as well as outlying areas, foreclosures, short sales, and the daunting “handyman specials” run somewhat more affordable.
“Hot” areas like Timnath and Berthoud can run even more expensive, into the half-a-million-dollar range for, at the end of the day, yet another single family dwelling. And of course this is not to mention the separate unaffordable universes of Boulder, Vail, and Telluride.
For comparison, the average monthly rent for a 2 bedroom apartment in Fort Collins runs $1400, although this can only accommodate a family of four under the city’s “two person max per bedroom” rule. Families with even one baby more than this (like us) have to go bigger.
These numbers are all fine for a working professional who makes a high steady income and wants to put down roots in a vibrant, desirable area of the country. For the rest of us, we have to get more creative.
Families who Hustle
We know a family who both lives for free and draws an income from their work on a grass-fed cattle ranch. The gentleman farmer-owner, a doctor in the city, needed a manager for the estate and someone to renovate the farmhouse. The husband of the young family hired for the job has experience with both cattle and carpentry, so it was a perfect fit.
We have friends who pay a small mortgage on rural land, live in a 400 or so square foot converted Tuff Shed, and slowly build their home as earnings come in. They have debated whether to go the route of a construction loan to move things along, but banks don’t typically understand their unconventional plans for a homestead.
A sweet former student of mine and her husband and two boys just moved to a 600 square foot loft in downtown Loveland. The rent’s a bit pricey, but it’s a perfect location to be close to family, work, and community.
We have friends who rent a farmhouse they worked hard to renovate and beautify for their first year’s rent. They’re happy here and have no foreseeable plans to move or buy. Still, they have struggled with the nebulously communicative owners who at times have seemed suddenly eager to sell it out from under them.
We have friends who went in with their older parents to buy a rural farm and have moved all three generations together to enthusiastically establish a life for themselves, complete with gardens, bees, chickens, and ducks.
We have acquaintances who lived in little more than a room when their son was born and placed him in a dresser drawer beside their mattress. “Just take him into bed with you!” encouraged the wise midwife.
Other friends stay temporarily in basements of friends, with something always cooking in the kitchen and little kids’ screams and laughter ringing through all the rooms.
An enterprising single woman we’re privileged to know lived for two years at a family member’s empty condo. Then, with that family member’s assistance, she bought and completely renovated a home in a desirable neighborhood. She now lives in a beautiful home of her own and rents out two of the rooms for $600/month apiece to other single ladies.
Another couple we know VRBOs two rooms in their home, making $18,000 last year alone.
Several friends bought homes they don’t love at much lower prices a few years ago, but they probably won’t sell high because they can’t afford anywhere else. They instead are cautiously renovating and preparing their homes in case an opportunity presents itself to make an advantageous lateral move.
Others have left the state for opportunities to build a life elsewhere, usually staying with family for a season while getting established.
And many others struggle on, paying 50% or more of their earnings on housing, as we did before the tiny house adventure.
So what is the answer to an increasingly unaffordable, even skyrocketing housing market when you’re a hardworking, blue collar family?
Big Country and I continue to learn many things that help formulate an answer to this apparent quandary of shelter.
- Pursuing a house for your family in a hot market is about getting smart, working hard, earning more, and spending less. That’s it. It doesn’t have to be an impossible quest or a pie-in-the-sky dream to be financially fit, have a comfortable home, and build a legacy for your family.
- Recognize what currency you possess. It may be youth, flexibility, education, health, physical strength, good communication, a particular skill, a language including native English, a willingness to be frugal for your goals, or simply a joyful heart. In an abundant society, there are opportunities to leverage even small assets for big dreams.
- Talk to friends about their housing journey. You’ll be surprised what you learn.
- Familiarize yourself with different attitudes towards housing, risk, and debt. Most people pay their minimum monthly mortgage payment and spend almost everything else, or more. Some people seek to aggressively pay down their mortgage as soon as possible and live mortgage-free. Others prefer to leverage extra money into additional rental properties or other investments and believe the risk and stress to be worth the payoff. Consider your personality and family goals in light of different options.
- Study historical trends of both the housing and business cycles.
- Learn and know the housing market of your area. Download the Zillow app, get updates on houses that go up for sale, take realtor friends to coffee, attend realty seminars. Make it a goal to get good at estimating prices based on many factors. It’s fun!
- Consider what level of fixer-upper you are game for. The more you can do yourself, over time, paid with cash, the richer you will be, but hardcore insourcing must be balanced with the reality of your skill set and family life.
- Learn what you really want and need in a home. For us, an east-west orientation with south-facing windows is way more important than square footage.
- Be fluid; be patient. Your picture of the right home may change over time. And there is no joy in making the pursuit of a house into an idol.
- Opportunities come in very unexpected ways. We would have never foreseen the blessings of the past year and a half: housesitting for two different families, totalling six months; having incredible, skilled help on the tiny house from our wonderful host family of 12; being able to work hard and live for free on a beautiful farm. What’s next? I can’t wait to find out.