How do people afford $800k - $1.2 million homes? (Austin: real estate, lease)

[supadad33]

I feel like my wife and I do VERY well for ourselves with our salaries and savings, but we don't feel like we could afford a house > $600k. How is it that one can afford a $800k+ house? Like, how much money do you need to make to afford that? Are we just being really conservative with how much we're willing to pay for housing?

[Jennibc]

Intergenerational transfers of wealth and good timing in the stock market. People selling homes prior to the bubble bursting that they bought in the mid 90s.

We can't afford a 600K home either, and the only reason we can afford what we do own as a single income family is because we sold our house in Seattle and had a nice chunk of change to roll over into a home here. When we bought our first house here in 1999 and then sold it in 2001 that provided us a decent down payment for our next house. It all had to do with timing.

[sinking]

I am not sure what the terms are for jumbo loans but for my loan I could not have a debt to income ratio of greater than 45% so doing the math assuming no other debt and putting 20% down and $20k for annual taxes and insurance on a $800k home one must make at a minimum $148,985 gross income per year.

[hoffdano]

None of the people I know who have homes in that range inherited their money. Most of these people are dual income famililes with annual earnings > $250K (I'm guessing based on the careers they have). A few are single income families with the same income level. These people are software executives or highly paid technical people.

Some people benefited from equity gains in their previous home(s). If you have $200K to put down on a $600K house, it suddenly becomes affordable (to many).

Fortunately for all of us in this area, exotic mortgages are relatively uncommon, and we don't have too many people that bought that $600K home with an interest-only mortage.

OP - I hope you do not feel a need to keep up with the Joneses. I think too many Americans are not conservative enough with their finances. If 1/4 of cars today are leased as a radio ad claims, I bet a majority are high end or near high end vehicles. And their owners ALWAYS have a car payment. They'll never drive anything more than three years old. Then there are people like me who drive good vehicles, but have no car payments.

I hate debt.

[CptnRn]

They must have bought Dell stock back when the company was first starting, or something similar.

It is surprising to me how many houses in that price range exist in Austin.



Estimate of home value of owner-occupied houses in 2009 in Austin, TX:

Less than $10,000: 703
$10,000 to $14,999: 352
$15,000 to $19,999: 396
$20,000 to $24,999: 450
$25,000 to $29,999: 406
$30,000 to $34,999: 386
$35,000 to $39,999: 405
$40,000 to $49,999: 864
$50,000 to $59,999: 1109
$60,000 to $69,999: 1359
$70,000 to $79,999: 1758
$80,000 to $89,999: 1882
$90,000 to $99,999: 2461
$100,000 to $124,999: 8798
$125,000 to $149,999: 14516
$150,000 to $174,999: 17919
$175,000 to $199,999: 12201
$200,000 to $249,999: 20176
$250,000 to $299,999: 15000
$300,000 to $399,999: 17257
$400,000 to $499,999: 10684
$500,000 to $749,999: 10133
$750,000 to $999,999: 2708
$1,000,000 or more: 3250


Read more: //www.city-data.com/housing/hou...#ixzz1LP1hRhyR

The annual property taxes on those pricey homes is more then some people make per year.

[centralaustinite]

I get the 800K and 1.2 million dollar homes, it is the sizable stock of 2 million plus homes that I find hard to understand. And I know several people who live in them! At that level, most pay cash and their wealth is based in the stock market (capital gains tax is way lower than income tax) and ownership of companies.

The 800K to 1.2 million dollar market is still generally filled with income earners like doctors (over $300K a year) directors at large companies ($200K and up), lawyer partners, and folks with significant inter-generational transfer.

The high taxes boggle my mind -- at least it kept the real estate bubble away -- you can borrow for the house, but not the annual taxes! But some folks pay nearly 6 figures in property taxes! (often their income from all sources is around 2 million a year)

[supadad33]

Originally Posted by hoffdano

OP - I hope you do not feel a need to keep up with the Joneses. I think too many Americans are not conservative enough with their finances. If 1/4 of cars today are leased as a radio ad claims, I bet a majority are high end or near high end vehicles. And their owners ALWAYS have a car payment. They'll never drive anything more than three years old. Then there are people like me who drive good vehicles, but have no car payments.

I hate debt.

We definitely don't feel a need to "keep up" with the Joneses. We're more curious about what they're doing / have done to afford such expensive houses. Are they just being stupid with their money (taking on too much debt and getting in over their heads)? Do they make ridiculous salaries ($500k+)? More likely, however, it sounds like quite a few of them may have accumulated wealth via equity gains of some form or another. Thus, it is not the salary that matters but rather the savings/investments.

We too hate debt and have none.

[cinnamon_toast]

Before the real estate crash, we made a lot of money buying and selling homes and were able to trade up substantially. Our mortgage did go up, but stayed stable as a proportion of our income.

I doubt that most folks are putting down just 20% on a home. If they've been paying a mortgage for a while and trading up in a hot market like we did, they probably have a very substantial down payment.

[FueledByBlueBell]

We make >$200k per year, live in a $360k house and I still wonder this every day. It just seems like there are so many $800k plus houses in Austin... amazing.

[rickc007]

I just moved from South California

Was amazed how many were buying 900k+ houses.
The answer, they just simply borrowed the money, many on an ARM
The Majority living WAY over their means, or "living" for their house.

It was no problem to get a loan for more then you could pay back.

Today, you need more wealth to back it up
Would be surprised to see a lot of "buyers" of 800k homes here in Austin.
Would not be surprised to see them "listed" though