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Ha ha ha. Oh so THIS explains it. That is what they are telling these dumb-asses now? FOUR TIMES annual salary.
That is ridiculous. Of course they won't have much savings etc. paying that much for a house. FOUR TIMES LOL no effing way. How do you save money, go on trips, pay for healthcare and SAVE MONEY for emergencies? LOL no way. Ok that explains what they paid LOL OMG. Is everyone doing this?
Not the point. The point is that the gap between the upper quintile and the median is now large enough that those earning near the median, such as OP, find it puzzling how so many people are buying $400k houses.
No I don't think this point is valid. This isn't a new phenomenon. You don't think people in small towns wondered the same thing 30 years ago?? How people in larger metro areas could afford such 'expensive' houses? The answer is pretty simple, it's all relative(wages and COL). The median home price in my county(a suburb of Washington DC) is in the mid 400k. The median salary is also much higher than whatever small town a 400k house is considered exorbitant.
The whole income inequality argument has to do with like the top fraction of the 1%, who are mega rich. You don't have to be rich to afford a 500k home. Typically in high cost of living places where people have to spend that much wages are also significantly higher than places where homes are dirt cheap.
This is true, but wages and cost of housing don't scale equally. I'm an extreme example, but I could expect to double, or even triple my salary by moving to NYC. Sounds pretty good, right? However, the cost of housing in NYC is probably 20-30X what it is where I live.
This is true, but wages and cost of housing don't scale equally. I'm an extreme example, but I could expect to double, or even triple my salary by moving to NYC. Sounds pretty good, right? However, the cost of housing in NYC is probably 20-30X what it is where I live.
NYC is also an extreme example. Possibly the most expensive housing market in the world. I agree it doesn't scale perfectly but it is pretty relative. Using where I live(suburb of Washington DC) and my wife's small hometown in North Carolina as examples, I expect my salary would decrease by 40-50%. Judging from what I've seen in home prices, they are maybe 70% cheaper in that small town. Although I could easily move further away from Washington DC and have a longer commute and get my current housing costs down to where it was closer to a 50% difference.
So I may come out a little ahead in COL. A big issue though is how long it would take me to find that job that paid 50% of my current salary in small-town NC. And once I found it I'd better not ever change jobs. God forbid if I ever got laid off. The time I spent unemployed looking for a new job that paid enough is also a factor in home prices.
NYC is also an extreme example. Possibly the most expensive housing market in the world. I agree it doesn't scale perfectly but it is pretty relative. Using where I live(suburb of Washington DC) and my wife's small hometown in North Carolina as examples, I expect my salary would decrease by 40-50%. Judging from what I've seen in home prices, they are maybe 70% cheaper in that small town. Although I could easily move further away from Washington DC and have a longer commute and get my current housing costs down to where it was closer to a 50% difference.
So I may come out a little ahead in COL. A big issue though is how long it would take me to find that job that paid 50% of my current salary in small-town NC. And once I found it I'd better not ever change jobs. God forbid if I ever got laid off. The time I spent unemployed looking for a new job that paid enough is also a factor in home prices.
That's a good point that I hadn't considered before. But, it's pretty indeterminate. If I were laid off in NYC, for example, I'd better be able to have a new job lined up that afternoon, to justify the huge difference in cost of housing.
In the DC area, where most family incomes gross 125K+ and we can easily go 4x income. It's when we get below 100K we need to check the percentage of debt to income, as that can easily run 10 - 15% of income. The calculation (of income x _______) should only be done in the head as a quick reality check, anyway, or at least that's what I use it for. And when I come up with a max #, I am pretty clear that is for full payment, including HOA. (Had one recently @ 225K sales price with a $698 condo fee which is the equivalent to 100K borrowing power). Each borrower is different - some are up front about everything and others are like a thread you must constantly pull to get to the truth. It's like they think if they don't tell you about whatever they decide to hide, you'll never find it. Rarely is that true.
But how are they doing it? High incomes, low down payments, family money, huge bonuses (have current client getting > 105K bonus next week).
Scrimped and saved. Lived like a semi-monk. No debt. Old paid off cars. Limited eating out. Watched my budget almost DAILY. Scrutinized every purchase above $40-50. Gambled in the stock markets. Stressed out most of the time.
Took two years. Saved ~120-130K. Bought a place for ~770K.
Stock bonus was the ONLY thing that made this possible on a single income.
First, not everyone who buys a $400K house can afford it.
That said, we both had good jobs and managed to save a 20% down payment on a nice condo in a great area. It was far below what the bank claimed we could afford.
We continued to work our way up in our careers and after about 8 years, our income had doubled and our house had increased in value by about $60K. We had easily saved a good amount of money and had the equity in our condo.
We were able to buy a house over $400K with 30% down and a 15 year fixed-rate mortgage. It was just living below our means for years, saving a bunch of money, and working our way up the professional ladder. We have have a pretty substantial income, but we have never, and would never, spend more than 3 times our annual gross income on a house.
I am a public school teacher. I haven't had a television or cable bills for 25 years. I'm single and don't have children. I pay my credit card balance in full each month and live rent-free in a "haunted" house that no one else will live in just so that it will be maintained in good condition. I have no water bill, no gas bill, no trash collection bill. I pay $100/month for my telephone and Internet. I don't take vacations or have many luxuries. I have no debt, not student loans, no auto payments, nothing. I don't even have an air conditioner, just a fan.
I earn 68 k /year and have saved 160 k. my credit rating is 815 so I qualify for a very good mortgage rate. The home I want to buy is 294 k and I still can not afford it and maintain an emergency fund buffer. I don't think I could live with that much debt.
It is my opinion that homes are much too expensive for the average person.
I am a public school teacher. I haven't had a television or cable bills for 25 years. I'm single and don't have children. I pay my credit card balance in full each month and live rent-free in a "haunted" house that no one else will live in just so that it will be maintained in good condition. I have no water bill, no gas bill, no trash collection bill. I pay $100/month for my telephone and Internet. I don't take vacations or have many luxuries. I have no debt, not student loans, no auto payments, nothing. I don't even have an air conditioner, just a fan.
I earn 68 k /year and have saved 160 k. my credit rating is 815 so I qualify for a very good mortgage rate. The home I want to buy is 294 k and I still can not afford it and maintain an emergency fund buffer. I don't think I could live with that much debt.
It is my opinion that homes are much too expensive for the average person.
In some markets they are. Change markets if living in a cheaper one exceeds many of your other wants.
I qualified on my own (without my wife) back in 2014 for $274K, with a lower income, and a lower credit score than yours.
I see no reason for you to not afford it, and no reason for you to not maintain an emergency fund...
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I have been wondering this myself.
