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Old 02-05-2018, 11:35 PM
 
1,162 posts, read 1,266,139 times
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Iím looking at moving to an area where the median household income is only $60k/yr, but the median three bedroom home is $600k.

How does that even work?

My household income will finally be more than sustenance level, but even grossing more than 3x the median I canít afford a freaking $600,000 home (well not without a down payment and sticking to the rule of 28).

This is a crazy world we live in.
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Old 02-05-2018, 11:44 PM
 
Location: Formerly Pleasanton Ca, now in Marietta Ga
4,110 posts, read 3,400,520 times
Reputation: 5633
What am I not getting?
You make 180k a year and you can't afford a 600k house?
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Old 02-06-2018, 12:01 AM
 
Location: Phoenix-Valley of the Sun
2,461 posts, read 1,200,617 times
Reputation: 3046
Quote:
Originally Posted by aslowdodge View Post
What am I not getting?
You make 180k a year and you can't afford a 600k house?
I think this person wants more "cushion" for their mortgage.
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Old 02-06-2018, 12:34 AM
 
1,015 posts, read 737,884 times
Reputation: 1611
Quote:
Originally Posted by MDrenter223 View Post
Iím looking at moving to an area where the median household income is only $60k/yr, but the median three bedroom home is $600k.

How does that even work?

My household income will finally be more than sustenance level, but even grossing more than 3x the median I canít afford a freaking $600,000 home (well not without a down payment and sticking to the rule of 28).

This is a crazy world we live in.
It's actually pretty easy to explain. It's what happens when supply doesn't meet demand. Take LA County for example.

10,000,000 people
3,500,000 housing units
At any given time time, only 20-30,000 of those homes are for sale.

You're not competing against the median income to buy a home. You're only competing against the top 20-30,000 people looking to buy a house in LA County at any given time. That's probably about 10% of the people that want to buy a home, so really you're competing against top 10% incomes in the metro. The other people have no chance to own a house, unless they inherit a family home, live in a really rough neighborhood, or commute from the parts of LA county that are on the edge of the Mojave desert 2 hrs away. They are stuck living crammed in to smaller apartments or houses with a third to half their income going to rent.

A similar picture exists in all major West Coast Metros, as with geographic constraints and robust economies, there isn't really anywhere to build new housing near job centers. Also, if you make >$180/yr, you should be able to afford a $600K house if you have reasonable credit.
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Old 02-06-2018, 01:02 AM
 
1,162 posts, read 1,266,139 times
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Quote:
Originally Posted by Texamichiforniasota View Post
It's actually pretty easy to explain. It's what happens when supply doesn't meet demand. Take LA County for example.

10,000,000 people
3,500,000 housing units
At any given time time, only 20-30,000 of those homes are for sale.

You're not competing against the median income to buy a home. You're only competing against the top 20-30,000 people looking to buy a house in LA County at any given time. That's probably about 10% of the people that want to buy a home, so really you're competing against top 10% incomes in the metro. The other people have no chance to own a house, unless they inherit a family home, live in a really rough neighborhood, or commute from the parts of LA county that are on the edge of the Mojave desert 2 hrs away. They are stuck living crammed in to smaller apartments or houses with a third to half their income going to rent.

A similar picture exists in all major West Coast Metros, as with geographic constraints and robust economies, there isn't really anywhere to build new housing near job centers. Also, if you make >$180/yr, you should be able to afford a $600K house if you have reasonable credit.
That is an interesting take on it.

I have credit a bit north of 800, not perfect, but it should be good enough to get the best possible rate from what Iíve seen.

$180k after state, federal, and FICA leaves me around 11,500 net and a 600,000 mortgage after closing costs and PMI will run me about $4,100/month.

The thumbrule of keeping your housing costs st 28% makes it seem like Iíll be over extended at $600,000.

Iíll still have about $88k (but even with no debt) after modest household expenses, an annual vacation, and funding retirement accounts plus 529ís for the kids thereís not much left.

It just doesnít seem like this is how itís supposed to be.

If Iím debt free, making 3x median, I donít think I should be just squeezing by.

What does that leave for anyone else?
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Old 02-06-2018, 03:01 AM
 
Location: Sydney Australia
597 posts, read 302,176 times
Reputation: 868
That 28% rule is not really applicable for high income earners. They can afford a much higher percentage on a loan as they do not need to spend a great deal more on the basics than average people. They may choose to, but they do not need to.
In Sydney the median house price has hit 13 times the median family income. Yet people are still buying. It is incredibly difficult in some parts to find anything to buy. They go in off market sales or in a week on the market. Enough people are prepared to make a big commitment and I think often pay 50 % of income.
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Old 02-06-2018, 05:10 AM
 
Location: The Triad (NC)
26,833 posts, read 57,830,396 times
Reputation: 29215
Quote:
Originally Posted by MDrenter223 View Post
I’m looking at moving to an area where the median household income is only $60k/yr,
but the median three bedroom home is $600k.

How does that even work?
Your new area isn't the Los Angeles suburbs... right?

Look harder at your information sources.
Something is missing.
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Old 02-06-2018, 05:33 AM
 
3,026 posts, read 1,206,807 times
Reputation: 5977
Quote:
Originally Posted by MDrenter223 View Post
That is an interesting take on it.

I have credit a bit north of 800, not perfect, but it should be good enough to get the best possible rate from what Iíve seen.

$180k after state, federal, and FICA leaves me around 11,500 net and a 600,000 mortgage after closing costs and PMI will run me about $4,100/month.

The thumbrule of keeping your housing costs st 28% makes it seem like Iíll be over extended at $600,000.

Iíll still have about $88k (but even with no debt) after modest household expenses, an annual vacation, and funding retirement accounts plus 529ís for the kids thereís not much left.

It just doesnít seem like this is how itís supposed to be.

If Iím debt free, making 3x median, I donít think I should be just squeezing by.

What does that leave for anyone else?
I donít think most people would consider funding retirement accounts/529s, and an annual vacation ďjust squeezing byĒ by most accounts. Those are all variable expenses that can be expanded/contracted as circumstances change. This is particularly the case in LA county, where a lot of people often end up selling their homes and move to lower COL areas when they are at retirement age and then they end up with a nice wad of cash when they sell and can buy another home with cash in their lower COL area.

These debt-to-income ratios are usually based on what are considered required expenses like utilities, food, transportation, health insurance, etc.
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Old 02-06-2018, 05:33 AM
 
11,304 posts, read 5,834,479 times
Reputation: 20949
Quote:
Originally Posted by MDrenter223 View Post
Iím looking at moving to an area where the median household income is only $60k/yr, but the median three bedroom home is $600k.

How does that even work?

My household income will finally be more than sustenance level, but even grossing more than 3x the median I canít afford a freaking $600,000 home (well not without a down payment and sticking to the rule of 28).

This is a crazy world we live in.
Why donít you have a down payment if youíre making 3x a median of $60k?
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Old 02-06-2018, 05:35 AM
 
Location: DFW - Coppell / Las Colinas
29,920 posts, read 34,517,946 times
Reputation: 35917
Get a job in Kansas.
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