Last week, we went to an open house in our townhouse complex. The price was $389,000 for a 2 Bedroom, 1.5 Bath townhouse with a “stream” view (read: pipe with flowing water). The seller was nice enough to us despite knowing that we are not in the market to buy but rather just curious. She told us it is 1200 sq ft (which, as I found out online later, was a lie — it is listed under 1000 sq. ft).

Anyway, we started talking about saving enough money for a down payment in this crazy housing situation, and she handed us a card of the lender she works with and to give her a call. She said we’d be surprised what we could afford. Alarm bells rang. I would be surprised how much I can afford? Really?

Using an online mortgage calculator, it turns out I need to pay ~$2900/month on a $389,000 mortgage. That’s almost $130,000 per year when you factor in car and student loan payments (who doesn’t have those). What about bills? Electricity? Gas? Food? Fuel? Living expenses? HOA?

This is why the housing market is on the downswing. This sort of pricing simply isn’t sustainable. There are a million and one ways to finance something you can’t afford — but in the end, you still can’t afford it! People are financing $500K houses with interest-only loans, ARMS, or 60-year loans. SIXTY YEARS! These are all signs that the houses are way, WAY overpriced.

The best you can do in these situations is find a cheap place to rent and weather this storm. And when a loan agent tells you that you’d be surprised at how much house you can afford, don’t buy into it. As for that townhouse, it’s still on the market after 2 1/2 months.