okay, i'm just floored (Cambridge, Waltham: apartment, renting, condo)

[TexasRoadkill]

Nothing is worth more than someone is willing to pay.
If the rich and investment companies are willing to overpay for real estate as an investment, then just like all investments there is the risk that their values will someday fall.

I am hoping that all this craziness will drive buyers to lower cost and previously overlooked neighborhoods.

[msRB311]

Originally Posted by TexasRoadkill

Nothing is worth more than someone is willing to pay.
If the rich and investment companies are willing to overpay for real estate as an investment, then just like all investments there is the risk that their values will someday fall.

I am hoping that all this craziness will drive buyers to lower cost and previously overlooked neighborhoods.

I'm not sure that it is? seems like people are mainly focusing on the desirable neighborhoods paying through the nose for them.

[Jimbo21]

Originally Posted by TexasRoadkill

I am hoping that all this craziness will drive buyers to lower cost and previously overlooked neighborhoods.

that's how arlington got to be stupid expensive.

[msRB311]

Originally Posted by Jimbo21

that's how arlington got to be stupid expensive.

Exactly!

I do wonder why i place like Winthrop isn't more desirable? I mean it's close to Boston as far as i can see...

[Jimbo21]

Originally Posted by msRB311

I do wonder why i place like Winthrop isn't more desirable? I mean it's close to Boston as far as i can see...

somerville, cambridge, arlington medford, melrose, watertown, waltham... every single town inside of 128 has the same fate at these once-humble towns. it all comes down to supply and demand.

[thinkingotherthings]

Originally Posted by simplexsimon

For this house in particular, the down payment was 30%. You think $8k/month in PITI is tight for a household on $300k? What's your math here? We must have different spending habits.

I can tell you our math because we have a young child, are planning to have a second, and are looking for a house right now so budget is always top of mind .

430k HHI split pretty evenly between me and the wife; about 370k base salary and 60k in bonus and stocks. From our base salaries, gross monthly take-home is about 30k, net is 17k.

After all expenses our monthly leftover cash is about 5k. A big reason for that is childcare, which is super expensive, and if we have a second child we'll need to plan for several more years of it. But I don't think our lifestyle is extravagant in any way.

Currently paying 3500 in rent, so if we were facing a PITI of 8k then we'd only be stashing 500/mo. That is why it feels tight to me.

Now, you could point out that our net pay already deducts retirement contributions, and that childcare costs won't be this high forever (about 4k/mo right now), and that I haven't included the bonus and stocks in our take-home pay (which, while very likely to materialize, are not quite guaranteed). All true.

If I were to spread out the full amount of bonus and stocks as average monthly income then leftover cash would be about 7800/mo currently, or 3300/mo against an 8K PITI. I guess it looks a bit better from that perspective, but still not a ton of breathing room. Also have to budget for home maintenance.

I suppose I'm also somewhat risk-averse. I'd prefer to allow for the possibility that either of us, for one reason or another, end up in a job paying, say, 70-80% of our current salaries. It'd be nice to not feel like that would sink us on the house payments. Maybe others don't think this way.

[msRB311]

If you're paying $3500 a month to rent I'm curious as to why you're willing to pay $7800 a month to own?

It used to be that people paid less on owning a home than on renting.

Is owning a home and paying that much more for it really worth it?

[simplexsimon]

Originally Posted by thinkingotherthings

I can tell you our math because we have a young child, are planning to have a second, and are looking for a house right now so budget is always top of mind .

430k HHI split pretty evenly between me and the wife; about 370k base salary and 60k in bonus and stocks. From our base salaries, gross monthly take-home is about 30k, net is 17k.

After all expenses our monthly leftover cash is about 5k. A big reason for that is childcare, which is super expensive, and if we have a second child we'll need to plan for several more years of it. But I don't think our lifestyle is extravagant in any way.

Currently paying 3500 in rent, so if we were facing a PITI of 8k then we'd only be stashing 500/mo. That is why it feels tight to me.

Now, you could point out that our net pay already deducts retirement contributions, and that childcare costs won't be this high forever (about 4k/mo right now), and that I haven't included the bonus and stocks in our take-home pay (which, while very likely to materialize, are not quite guaranteed). All true.

If I were to spread out the full amount of bonus and stocks as average monthly income then leftover cash would be about 7800/mo currently, or 3300/mo against an 8K PITI. I guess it looks a bit better from that perspective, but still not a ton of breathing room. Also have to budget for home maintenance.

I suppose I'm also somewhat risk-averse. I'd prefer to allow for the possibility that either of us, for one reason or another, end up in a job paying, say, 70-80% of our current salaries. It'd be nice to not feel like that would sink us on the house payments. Maybe others don't think this way.

So $40k/year in excess cash after bonuses, after the big mortgage, and after daycare.

One of you could take an almost 80% pay cut ($40k cut on $200k) and you’d still be within budget and you still have levers like retirement savings to pull if needed. Survive the daycare period and you’re that much further along.

Believe me I’m all about strong personal finances but my question is is your risk aversion costing you anything? I’m not trying to make you spend money, but hope you see the numbers objectively as you’ve laid out.

[id77]

Originally Posted by jayrandom

Spending $500 on rent is untenable if you invest all but $400 of your income. If you take home $400 and invest $0, most would say you can't afford $500 rent. If you take home $4000 and invest $3600, most wouldn't say you can't afford the rent, just that you are choosing to use that money elsewhere.

Someone with a $300k income can likely afford this mortgage. Whether you would make the same choices is just your own projection.

I also didn't say they can't afford it; I said it would be untenable for them.

I do get what you're saying, but many who've worked into that income bracket aren't going to extend themselves to the brink unless they have to. They're going to look at something that would smack them to the tune of 30% PITI and either decide to increase the down payment or pass. Cutting back on retirement is a last resort, reducing HSA contributions is a non-starter, and things like daycare aren't really negotiable in the budget.

It seems I'm looking at this the same way thinkingofotherthings is.

[jayrandom]

Originally Posted by id77

I also didn't say they can't afford it; I said it would be untenable for them.

I do get what you're saying, but many who've worked into that income bracket aren't going to extend themselves to the brink unless they have to. They're going to look at something that would smack them to the tune of 30% PITI and either decide to increase the down payment or pass. Cutting back on retirement is a last resort, reducing HSA contributions is a non-starter, and things like daycare aren't really negotiable in the budget.

It seems I'm looking at this the same way thinkingofotherthings is.

I mean, you've made up an income and a budget and decided it was untenable. It absolutely is doable with the budget you've made, just not in a way you would feel comfortable with. I have to admit I wouldn't feel all that comfortable at $8k PITI, but if forced I could definitely make it work.

My concern with that level of housing cost isn't so much the monthly budget but the ability to withstand long stretches of temporary un- or under- employment.