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Good detailed calculation! But you forgot the federal\state tax, cost of kids care/education etc...
My budget for 2 adults, no kids, no car payments, no health insurance works out to about $2,000 a month.
Medical Expenses = 75 (900 per year)
Renters Insurance = 15 (180 a year)
Electricity / Gas = 150
Telephone / DSL = 50
Cable / Movies = 15
Auto Gas = 180
Auto Insurance = 108 (650 per half year)
Auto Maintainance = 50 (600 per year)
Groceries & Household = 240
Gym and Dance Classes = 75
Clothing = 83 (500 per half year)
Dining out = 400
Entertainment = 100
Hair Care / Body Care = 50 (300 per half year)
Cash = 60
Gifts = 100 (1200 per year)
Charity = 50 (600 per year)
There are a few more categories
Saving for tax (in case you are underpaying tax)
Health Insurance (becuase your company probably doesn't cover it in full)
Home Maintainance (especially on older houses)
Laundry and Maids (don't forget money for coin laundries)
Music and Software
Travel
IRA (or 401K or both)
Anyway, Sliverbox said
> So in order to get into the median price home, you would need a bare
> minimum of a $71,000 a year salary.
That's after taxes!
Anyway, 71000 a year is about 6000 a month. Add the 2000 above, plus another 1000 for the other categories and saving as well. So you need 9000 a month after taxes. Double it to get an idea of the pre-tax salary. So you need 216000 a year to leave a middle class life and buy a house.
Now mortgage interest and property tax are deductible, but at an income of 216000 you're likely subject to AMT whence the property tax deduction pretty much disappears. And also, even though you get the mortgage interest deduction and some property tax deduction, these itemized deductions are phased out because of your high AGI.
> This in my opinion is no way to live and all the little quips of SF aren't
> enough to warrant the prices. The prices are only high because of
> restrictive growth measures that artificially limit the supplies anyway.
There still seem to be so many houses in SF. It does not seem underbuilt to me in any way.
My budget for 2 adults, no kids, no car payments, no health insurance works out to about $2,000 a month.
Medical Expenses = 75 (900 per year)
Renters Insurance = 15 (180 a year)
Electricity / Gas = 150
Telephone / DSL = 50
Cable / Movies = 15
Auto Gas = 180
Auto Insurance = 108 (650 per half year)
Auto Maintainance = 50 (600 per year)
Groceries & Household = 240
Gym and Dance Classes = 75
Clothing = 83 (500 per half year)
Dining out = 400
Entertainment = 100
Hair Care / Body Care = 50 (300 per half year)
Cash = 60
Gifts = 100 (1200 per year)
Charity = 50 (600 per year)
There are a few more categories
Saving for tax (in case you are underpaying tax)
Health Insurance (becuase your company probably doesn't cover it in full)
Home Maintainance (especially on older houses)
Laundry and Maids (don't forget money for coin laundries)
Music and Software
Travel
IRA (or 401K or both)
Anyway, Sliverbox said
> So in order to get into the median price home, you would need a bare
> minimum of a $71,000 a year salary.
That's after taxes!
Anyway, 71000 a year is about 6000 a month. Add the 2000 above, plus another 1000 for the other categories and saving as well. So you need 9000 a month after taxes. Double it to get an idea of the pre-tax salary. So you need 216000 a year to leave a middle class life and buy a house.
Now mortgage interest and property tax are deductible, but at an income of 216000 you're likely subject to AMT whence the property tax deduction pretty much disappears. And also, even though you get the mortgage interest deduction and some property tax deduction, these itemized deductions are phased out because of your high AGI.
> This in my opinion is no way to live and all the little quips of SF aren't
> enough to warrant the prices. The prices are only high because of
> restrictive growth measures that artificially limit the supplies anyway.
There still seem to be so many houses in SF. It does not seem underbuilt to me in any way.
If all goes well, my family and I may end up in Colorado very soon! I'm very excited about the change, about a new place, meeting new people and getting to know a new town. CA has gotten too ridiculously expensive!! Many people say that once you leave CA, it's very hard to come back. Well, I can't think of anything that would make me want to come back here. Been struggling to keep up with the rising costs of everything, spending evenings and weekends working to make that extra buck, instead of spending some quality family time.
People seem to like using the analogy that if you buy, you're going to make out better because of tax deductions? If you look at the reality of the situation, those reductions aren't going to whittle your payments that much. Even if you found a way to weasel your way out of it by writing off everything, expect a little visit from the IRS asking for an audit.
Look people- no way around it. A house that costs 650k is going to cost you that, plus interest, plus taxes, plus repairs, and so on. If you can't afford that price, then don't buy. No amount of tiny "tax savings" is going to make one damned bit of difference. RE agents WANT you to buy. If they mention this, tell them they're full of it.
People seem to like using the analogy that if you buy, you're going to make out better because of tax deductions? If you look at the reality of the situation, those reductions aren't going to whittle your payments that much. Even if you found a way to weasel your way out of it by writing off everything, expect a little visit from the IRS asking for an audit.
Look people- no way around it. A house that costs 650k is going to cost you that, plus interest, plus taxes, plus repairs, and so on. If you can't afford that price, then don't buy. No amount of tiny "tax savings" is going to make one damned bit of difference. RE agents WANT you to buy. If they mention this, tell them they're full of it.
I've always thought the tax savings aspect of home ownership to be a crock. You have to have a roof over your head. Check that -- most people want to have a roof over their heads. In our world, that means you have to pay for that roof.
If you rent or if you buy, you will bear the brunt of a mortgage, plus interest, plus taxes, plus repairs, and so on -- a landlord isn't going to rent you a house or apartment cheap just because you're cute. A landlord rents you an apartment to make a profit.
Even though there is so much talk about the sub prime market and it's effects, and the effects that easy money and creative financing have had on real estate (keep in mind -- those are TWO VERY DIFFERENT THINGS) there is still somewhat an air of how easy it is to buy a house. And how easy it is to treat your house like an ATM -- another thing that hasn't made it easy for the American homeowner. It's just saddling them with far more debt they can't handle with no way out if the house is worth less than the loan.
So I have to agree with Sliver -- if you can't afford a 650K mortgage payment, you can't afford a 650K house. And I'll add -- if you can't save even 10% down, you need a reality check and take some time to learn something about basic financial budgeting.
One of the best things I heard about this sort of thing was from Suze Orman. If you want a house that's 650K, and you don't know if you can afford it, calculate the mortgage amount. I did -- at 7% interest (you can find higher and you can find lower rates) and no down -- a 650,000.00 30 year mortgage is 4324.47 a month. For 6 months -- pretend you have that mortgage, and "pay" it to your savings account. You will see if you really CAN afford that house, and you will have a decent start on a down payment.
Even though there is so much talk about the sub prime market and it's effects, and the effects that easy money and creative financing have had on real estate (keep in mind -- those are TWO VERY DIFFERENT THINGS) there is still somewhat an air of how easy it is to buy a house. And how easy it is to treat your house like an ATM --
I agree. Financial priority has been reversed. If you are a 35 year old man or woman, then your first order of business should be setting up various investments, retirement funds, and good-ole-fashioned savings. These days, it seems that people are instead puring almost all their income into a mortgage on property that at this time is not appreciating.
The idea is that houses outperform stocks, and that they are safer investments. Totally untrue. Even given the tech crash, if you compare even the California housing appreciation levels to stocks over a 10 year period, Stocks still outperform real estate by over 50%. So if a person who was truly a believer in using income to grow financial gain, the person who poured thousands of dollars into stocks would be by far better off than the home buyer.
A house is something you buy for the long-term so that if you DO retire( which some of these folks might not be able to do so), then at least you will have some form of equity to ease you into a smaller living assisted situation versus becoming a cost to your family. That is IT.Otherwise, you should be counting on what you have saved for retirement, of which the latest figures show you need AT LEAST 950,000.
Even though there is so much talk about the sub prime market and it's effects, and the effects that easy money and creative financing have had on real estate (keep in mind -- those are TWO VERY DIFFERENT THINGS) there is still somewhat an air of how easy it is to buy a house. And how easy it is to treat your house like an ATM --
I agree. Financial priority has been reversed. If you are a 35 year old man or woman, then your first order of business should be setting up various investments, retirement funds, and good-ole-fashioned savings. These days, it seems that people are instead puring almost all their income into a mortgage on property that at this time is not appreciating.
The idea is that houses outperform stocks, and that they are safer investments. Totally untrue. Even given the tech crash, if you compare even the California housing appreciation levels to stocks over a 10 year period, Stocks still outperform real estate by over 50%. So if a person who was truly a believer in using income to grow financial gain, the person who poured thousands of dollars into stocks would be by far better off than the home buyer.
A house is something you buy for the long-term so that if you DO retire( which some of these folks might not be able to do so), then at least you will have some form of equity to ease you into a smaller living assisted situation versus becoming a cost to your family. That is IT.Otherwise, you should be counting on what you have saved for retirement, of which the latest figures show you need AT LEAST 950,000.
950K? Jeez -- that seems low...
I think real estate can be a part of your investment strategy, but it shouldn't be the whole thing. And that's what I don't think people get. I know quite a few people that are house rich and cash poor -- not an enviable thing. And then they turn around and pay off the bills with their house... and start building up their bills again.
When I started investing at 30, I decided where I wanted to be fiscally when we retired. And WHEN I wanted to retire. Then I had to learn how to get there. Our house is about 1/3 of our retirement. I'd like to clear 400K out of it when we sell in 2-5 years. Hopefully people will be out buying houses then.
Other wise, we'll take out the cash for a home back in PA, and turn this into a rental.
The so-called liberal atmosphere of California is bull**** anyway. There used to be people here who lived free lives, but those are not the corporate yuppies who are Democrats and drive SUVs. The whole thing has gone away in such a short period of time. Poof into thin air. This place is despicable now. I can't stand to be here and am leaving as soon as my job is up. I can't believe I ever came back.
I used to be sad that I was too late to get in on the ground floor, but now I'm glad I'm not locked into a mortgage in a place I don't like anymore. Of course, I could have always sold (though not anymore for the poor unfortunate suckers who are trapped here now). It's not going to be pretty when the economy takes the nose.
The so-called liberal atmosphere of California is bull**** anyway. There used to be people here who lived free lives, but those are not the corporate yuppies who are Democrats and drive SUVs. The whole thing has gone away in such a short period of time.
Ya, the yuppie-liberal atmosphere kind of bothers me too, but not in the same way. In general,I've never been much of a metropolitan person. I grew up in the absolute middle of nowhere. While I appreciate the Bay Area for what it is, I am not into the whole 'Metrosexual' character that seems to waft around. It also seems funny to me that being liberal is so entirely wholesale and mainstream here. It's almost as if what makes being liberal attractive- which is this sense of semi self-righteousness - loses it's meaning since everyone acts basically the same. Everyone loves to believe in the notion that everyone here is accepting, open-minded, and appreciative of other ethnic groups. At the same time, when I go to the largely Hispanic Flea market down the road from me, I'm usually the only white guy there. Same when I go to Mexican Bakeries.
I think what bothers me the most is the fervent belief that people in the Bay Area have that where they live is simply the best place in the USA, and that the rest of the country is full of stupid haysees.
I could live with all of that. What it boils down to is expense and opportunity. As it stands now, I could continue to jump from job to job to job, year after year, and position after position, making 100k or more per year, yet getting absolutely nowhere. The very best situation would be that we would be able to put a down payment on a very modest home in 5 years and be doing like most other people here, which is putting close to 50% or more of our take-home pay into a home that we would likely sell anyway upon retirement- only to move to another state. I fail to see the reasoning behind that, hence we will move and be well on our way towards retirement 20 years early.
I am a California native and live in Pleasant Hill. I am a single mom with 2 teenagers and am fed up with the high cost of living in a small townhouse with high utility bills and barely (and i mean barely) scraping by month to month. We have made the decision to move out of state in the spring and are looking in North Carolina. I will be able to get around $500k for my tiny townhouse and buy a single family home for around $250k and put some money in the bank and get back to enjoying my life.
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Me, me, I want to leave CA!
