2 $100k salaries can buy a $1M-1.3M house
Wow… some of the older threads are still getting a high number of comments. Here’s a recent comment you may have missed:
Why can’t you afford a house in the Bay Area? [Burbed.com]
In other words, $1M is the bench mark, but some people can do better.How do you afford a $1M house? Not very hard. With 2 income earners each making $100K, you can easily qualify for a $800K loan. You put down 20%. Mortage at 6.3% is just under $5000 a month. One person’s salary will cover it. The other person’s salary can be used for living expenses.
If both persons make a bit more than $100K, then you can move into the $1M – $1.3M range. It’s very doable, and if you’re in that market, you’ll find plenty of company. How do I know? Been there, done that, and I’m just your typical Silicon Valley tech guy.
What do you think? Agree? Disagree?
December 13th, 2007 at 7:00 am
Sadly, yes I do agree with this analysis…
What I really don’t get is who the heck the engineers are that are making <100K here. The lowest salary offer I *ever* got here was 70K for a game coding spot, and that was straight out of school back in 1997. For the record, I turned it down for another 100K position and I make close to twice that now.
And if you are consistently making <100K as an engineer, and you are unhappy about the cost of living here, you should really consider leaving. Something in your plan is just not working out for you and you’re hopefully still young enough to do something about it beyond whining about it here. I’d guess that either you suck as an engineer (I’ve interviewed quite a few engineers whose skills did indeed suck) or you have godawful social skills (making you even more unlikely to find a partner who makes 100K+) or both. If you didn’t suck in at least one of these ways, you’d be able to make more here. It’s not like talent isn’t in demand. But seriously, the world needs a lot more than an unending supply of coders and you’re bound to good at *something* so go figure it out.
With all that said, this place is built on boom and bust so if you don’t suck, and you’re making the bucks, I’d rent for now, the bust is coming, just like the next boom. Except of course for Cupertino, which is the center of the universe as everyone who doesn’t suck has already figured out apparently.
December 13th, 2007 at 7:27 am
As pointed out here before, only 6% of households in the bay area make 200K plus. Only 22% make 100K+. No matter what anyone says, it is not typical to have 2 engineer salaries in one household. Perhaps it is in your circle of friends, but that is entirely anecdotal. Read the census data.
December 13th, 2007 at 7:43 am
Ooh. This topic and the ensuing arguments are almost as fascinating as which slut-of-the-day (Brittany, named after a dog? Paris, Lindsay,or?) will spread their legs for the camera…
Enough Already. Move On, Please. Thank you.
December 13th, 2007 at 8:26 am
Disagree: the standard mortgage affordability metric I learned years ago was: 3x salary (comfy) or 4x salary (a stretch). I’ve seen nothing since then, living in 3 countries and watching the USA situation, to contradict that.
Your ability to get a mortgage far exceeding these standards doesn’t mean that it makes financial sense, and in the “old days” a bank would just say “no” if you did not qualify. This is the role we need banks and other lenders to play: if they had said “no” when they should have, you would not have had the house pricing bubble or the sub-prime mortgage situation.
December 13th, 2007 at 8:31 am
Just to clarify that last bit: the 800k mortgage you quote is 4 x 2 x 100k, so by my old guidelines it is affordable at a stretch. Better hope interest ratee don’t double. However, I disagree that it is “normal” to have 2 x 100k salaries in a household, especially not if there are or will be kids: childcare costs.
December 13th, 2007 at 8:35 am
Sad that we’ve reached a point where two salaries have to be factored into the equation. The American Dream?
December 13th, 2007 at 9:13 am
Well, if you have only one $100K income then you can just about afford an entry-level one-bedroom condo near the Sunnyvale train station ($350K). I’m sure I’m not the only one who finds that ludicrous.. but hey, if all the Silicon Valley wants is techies, then it can find out for itself what happens when they’re the only ones that can afford anything.
December 13th, 2007 at 10:17 am
Sure you CAN afford a $1 million home, but life changes. If you’re relying on two earners, one of you could lose a job. You could have a kid and decide that one parent want to stay home for a few years to raise the kid(s).
And then let’s not forget to add HOA dues on top of that (easily a couple grand per year), home maintenance costs, many of which will be unexpected (probably another couple grand per year, easily), property taxes (another $10,000 per year), and earthquake insurance for another good $3,000 or so on a home of that price, if your HOA dues don’t cover it.
That $5,000 per month can pretty quickly become $6,000. Sure you can write off the interest, but even so, you’re still left paying a good 4% to borrow for an asset that historically only increases about 3% per year.
No thanks. I’ll go rent a single family home in Cupertino for about $3,000 (there are plenty of decent ones in this range on Craigslist at this very moment) and invest the extra $3,000 in savings per month in the market, which historically returns about 10% each year.
December 13th, 2007 at 10:35 am
Well I really disagree with the first poster. I work for a really successful software company in the bay area. QA engineers are treated like second class citizens. I have decent English skills. (English is my first language) Good coding skills, and good QA process knowledge. I’m at the senior level and I’m making 95k. So does that mean I suck as an engineer? I’m sure senior devs here make 120k+
December 13th, 2007 at 11:13 am
One person’s salary will NOT cover a $5000 a month mortgage, especially with rising gas and utility costs and the high price of food in the Bay Area, plus the fact that a $5000 a month mortgage basically eliminates all discretionary spending in your household, so you get to spend all your time enjoying that shitty-ass house you busted your ass to get. We ran the numbers in our house. It’s possible, but uncomfortable in the extreme.
December 13th, 2007 at 11:30 am
The first poster who is making claim that all the engineers make more than 100k got to back up his claim with some reliable data.
It reminds me that old story where a traveler was about to enter a village. He saw a blind man and determined that all the villagers are blind.
December 13th, 2007 at 12:53 pm
“The first poster who is making claim that all the engineers make more than 100k got to back up his claim with some reliable data.”
Another day, another strawman. I didn’t say all engineers make more than 100K. I asked “who the heck the engineers are that are making <100K here.” This is, of course, a different question. In my experience, unless you’re a googler (where the perks alone are worth 15K a year IMO) then if you can’t find a 100K+ engineering job than either a) you suck or b) you aren’t trying to find one (and thank you BTW for taking one for the team and subsidizing the low-cost software development).
I’ll finish saying that numerous articles in recent months have indicated 1) 80K is the poverty level for SF and that 2) Cops and fireman are making 100K+ around here. If you can’t read the tea leaves inherent in those two easily looked up factoids, you have way bigger problems than the price of a house around here.
“Well I really disagree with the first poster. I work for a really successful software company in the bay area. QA engineers are treated like second class citizens. I have decent English skills. (English is my first language) Good coding skills, and good QA process knowledge. I’m at the senior level and I’m making 95k. So does that mean I suck as an engineer? I’m sure senior devs here make 120k+”
So you’re being treated like a second class citizen and your response to your mistreatment is to grumble about it on a housing message board? Does this not explain in full why you are being treated like a second class citizen? Seriously, if you have the talent, really, I’ll hire you and net you an instant 15K+ pay raise. You’re just one cool project on your resume and a job interview away from that magical salary point (unless of course you suck at which point you have been marked to market). The jobs are out there. Come get them.
December 13th, 2007 at 1:16 pm
Hmm, my understanding of the traditional guidance wasn’t that it was against the total on the mortgage – it was against the total cost of the house. So $1M / $200k = 5x income. Traditional guidance also included putting 20% down, of course, so that was assumed in the calculation.
That said, it became quite common *before* the bubble for people to pay 5x income, or even 6 or 7 – and yes, they “qualified” for loans for that amount too. Doesn’t matter – it’s still a really dumb idea.
Even leaving aside the 50% premium over rent price, leaving aside the lost opportunity cost on $200k (which, really, is about another $15-20k/year), it would STILL be radically risky for a couple making $200k to get a $800k loan, and pay $5k/month on it, thus consuming 50% of their disposable income.
Why? Let’s take a look at what that other $5k/month needs to cover:
Property taxes and insurance (which works out to about a wash with the tax savings from the monster mortgage)
Car expenses+Food+Fuel+Utilities: Figure $1k
401k: $2k (what, you’re not neglecting your future, right?)
Household Maintenance: $1K (maybe as low as $.5k) Roof, heater, plumbing and electric, all are infrequent but expensive.
Congrats, you’ve got $1k of play money every month with a $200k income. Better put that in savings though, since you don’t have any savings, you just used $200k to buy the darn house.
Better hope you both keep those sweet jobs.
Sure, you could cut and trim (no new cars, don’t fix that leaky roof), but the numbers aren’t going to magically get 50% smaller here.
And, sad to say, the odds of your salary going up significantly aren’t terribly high either.
The odds of your house value going down are rather higher than that, though.
So, sure, you buy that house. Good luck with that.
I’ll rent a crummy 3br @ $1800/month instead, and bank the difference. ‘Cause if there’s one thing that’s Special about the Bay Area, it’s the RENTS are SO SO SO LOW compared to buying a house.
December 13th, 2007 at 1:26 pm
Whoops, math error in my post: I assumed that the original figure of $10k take home was correct on a $200k salary. Just realized it isn’t.
It’s more like $12k take home – sorry about that.
I also forgot to figure the cost of child care, since you both MUST work. But sadly, I don’t actually know how much that runs, I think it’s like another $1k, isn’t it?
So it’s really more like $2k in play money. Congrats! your world no longer totally sucks inside your tiny little Cupertino shack. But it still ain’t anything like what your parents thought it would be when they heard their dear child was pulling in The Big Bucks, along with their trophy-spouse.
Of course, it’s all worth it as long as house prices go up, up, up!
But if they go down, down, down? Hows that work out?
December 13th, 2007 at 1:42 pm
There’s the big mistake right there:
>>401k: $2k (what, you’re not neglecting your future, right?)
That’s money you can put towards buying a bigger house. Your house -is- your investment. When you’re ready to retire, you just sell it or get a reverse mortgage.
Besides, when you put money into your 401k you’re putting it into risky mutual funds, that can go down and where fees eat your money.
http://finance.yahoo.com/expert/article/richricher/30687
So… might as well invest it in something secure and guaranteed not to go down: The REAL Bay Area Housing.
December 13th, 2007 at 2:32 pm
> 2) Cops and fireman are making 100K+ around here.
That sounds like a Realtor gives ONLY ONE example overbidding and trying to show that the real estate market is still hot. Well, one instance does not represent the whole market.
Similarly, you left some finer details for cops and firemen. How many cops earn 100k+? How many firemen earn 100k+? What is the ratio between cops who earn 100K and who earn less than 100k. Any idea?
You cannot show 4 examples of VTA drivers having income 100k+ and tell me most of the VTA drivers earn 100k+. Come on!
Needless to mention that most of the cops and firemen earn that much after doing many hours of overtimes (and overtime hourly rates are higher than normal hourly rate).
And SF’s poverty level could well be 80K. Let’s assume a guy who live in Richmond and commutes everyday to SF. His income has no relation with the affordability of SF.
December 13th, 2007 at 3:33 pm
What if….. in calculating housing costs, everyone just moved the decimal point in their income over to the left 2 places?
So, if you make $80k, your affordable housing cost should be $800 a month. If you make $100K, it should be $1000, if you’re only making $20k, then you should be in a shared hour or something where your costs are only $200 a month?
Has anyone over the course of recent history come up with this ratio? It would be a hell of an accomplishment in the BA to stay within this ratio, it means a $100k earner has to share a $2000 a month place or rent a slummy apartment for $1000 a month, it means if you’re making $20k you live at home with Mom if you can, or in a shared house. Or if you’re a single male maybe you stay in a place in exchamge for yardwork or something.
I can sure say that when I was making $80k, it was a big mistake to move above paying $800 rent.
December 13th, 2007 at 3:35 pm
The first poster is an elitist a**.
If you look at Salary.com the median police officer is making between 50k and 70k. He’s probably getting his facts from the newspaper which reports on the annual budgets of various cities. Sure, a few police officers pull in over 100k from doing double overtime or from being the police chief, but that is not the norm.
Most professional jobs are not making 100k. Your average office worker below Director are less than 100k. Most entry level office work is still in the 40k to 50k range.
The average “4 years of experience” software engineer is under 100k. You won’t find many guys over 100k who have less than 8 years of experience. You could argue that consultants will be able to pull in 100k with overtime, travel, etc… But most software engineers are probably bordering the 90k 100k line.
December 13th, 2007 at 3:45 pm
Actually, you can see the police and bus driver salaries here:
http://www.burbed.com/2007/10/09/bay-area-incomes-support-high-housing-prices/
December 13th, 2007 at 3:45 pm
And there were at least 22 bus drivers who made $100k+
December 13th, 2007 at 4:28 pm
@Big Spenduh
Well.. I wasn’t being very forthcoming with my first post. I do get a decent bonus, and I have been compensated with what are at this point really good stock options. As you can tell I am sore that my base salary sucks.
December 13th, 2007 at 5:42 pm
Here is a snippet from an online post by a Canadian in 2006:
>>
Now, I’d like to make it clear that I am sympathetic to anyone whose IT job
gets outsourced. I’ve been working in IT for over 10+ years now. I live in
Canada, and a 2001 salary of $46,000 US would be worth about $60,000 in
Canadian dollars. I would have pulled out my eyeball to make that kind of
money back then. With that kind of money (in Canada) you are considered
upper middle class and you can easily buy a house. I guess you could say
that I am poor and I don’t even know it.
I’ve survived about 20 rounds of layoffs during the Dot-Com crash
(2001-2004) and during this time I received no significant raise in salary.
I was grateful to still have my job. I recently got a new job a few weeks
ago from a company (whose HQ is in Sunnyvale) where I am making 50% more
money compared to my previous job. To me, the money that I’m making at this
new job seems like all the money in the world–yet I still make less than
the $46,000 US (although not by too much). I feel like I’m stealing from
the company. So you could say that I’m probably a beneficiary of
outsourcing.
I’m not accusing American IT workers of being spoiled. I’m quite certain
that the cost of living in San Francisco is insanely high. I just happen to
live in an area of Canada that has a good economy and relatively cheap
housing (although house prices have shot up significantly in the past 2
years, lucky for me, I bought my house 2 years ago). A kid who graduated
from a computer science program at a local community college might enjoy a
reasonable standard of living with a $25,000/year job living in a
high-unemployment area in the US whereas someone in Silicon Valley might
have to make $75,000 a year to enjoy that same living standard.
So when I hear about people barely getting by making “only $100,000 a year”
this seems like a totally different world to me. It seems like it’s a
completely unsustainable way to make a living if that is the money you have
to make in order to get by. I’ve never met ANYONE who made that kind of
money in IT (except maybe for my bosses I suppose). If someone wants to
start an IT business right now, it would be economic suicide for him to open
an office in the Bay Area unless his idea for his company is very unique and
there’s very little competition in the marketplace.
<<
December 13th, 2007 at 6:09 pm
SCC:
Well, go get yourself an O’Reilly book or two and become a dev. If you can code, there’s nothing stopping you from becoming a really good coder other than yourself. I’ve seen far more dramatic rags to riches stories around here than that. Don’t let someone else tell you what you’re worth – go find that out directly.
Best of Luck,
Elitist A**
December 13th, 2007 at 9:36 pm
Burbed:
Silly me! Of course you don’t need to contribute to a 401k if you have a house. What a silly renter’s mistake!
P.S. Love your work.
December 13th, 2007 at 9:38 pm
Burbed wrote:
And there were at least 22 bus drivers who made $100k+
Well! And here we were counting on Google! Who needs ‘em! Gosh we’re special.
December 13th, 2007 at 9:47 pm
X-S-R wrote:
So, if you make $80k, your affordable housing cost should be $800 a month.
Err, what? 12% of gross on rent? Where’d that number come from?
Leaving aside that that’s about what I’ve paid since about 2001 (thank you, dot-com crash), the usual recommendation there is no more than 30% of gross on rent. Which in the bay area, is real, real easy. ‘Cause we’re special.
Heck, even the 20k earners I know can do that (by sharing 5 to a house, and no, they’re college students, not gardeners).
December 13th, 2007 at 10:09 pm
Well, money can’t buy class. That’s pretty evident from this thread.
Anyway, <100k is definitely possible for a decent engineer if they’re willing to obtain some sweat equity at a start-up. I wouldn’t disparage someone going that route (though obviously someone here would). I guess if all the risk-takers go for the base salary instead of the option piece then SV wouldn’t really be SV would it?
Conservative and arrogant–sounds like our administration doesn’t it?
December 13th, 2007 at 10:25 pm
Many of the comments seem to infer that it’s a stretch to live in a $1M house based on two $100K salaries. Well, Have I got a surprise for you: You can still max out your 401K, take a vacation, go out to eat every weekend, and drive a Bimmer.
The people who make those comments are short-sighted. Life is only hard for the first few years of home ownership. After a while, salary rises, and your home increases in value. All of sudden, you’re living in a $1.5M house on two $120K incomes. Life becomes a piece of cake again. That’s what would’ve happened if you bought 4 years ago.
Those people who try to save money by renting a dump and not going out are the ones who are sacrificing their quality of life.
By the way, I don’t believe in any kind of fund. Why invest in something managed by someone else whose motive is to take a cut of the money, rather than invest in your own home?
December 13th, 2007 at 11:18 pm
“Anyway, <100k is definitely possible for a decent engineer if they’re willing to obtain some sweat equity at a start-up. I wouldn’t disparage someone going that route (though obviously someone here would). I guess if all the risk-takers go for the base salary instead of the option piece then SV wouldn’t really be SV would it?”
Oh dear, as someone who went that route several times before it finally paid off (and I never accepted <100K to do so), let me suggest that unless you’re an officer of a startup, you’re most likely being played. The guys in charge of these things are mostly alike and very few of them know what to do once the VCs give them the keys to the figurative Ferrari other than drive it right off a cliff. It’s not like any of the startup executives I have known were sacrificing with their 150K+ salaries and bizarre off the books perks (the glider, the strippers, the yacht etc), but feel free to believe in your noble sacrifice if that comforts you in the years of bitterness to come when you find out just how f’ed up your CEO likely is.
For the Googles are few and far between. I’d consider that the most important lesson I learned here over the past decade. So in the end I held out until I got both the base salary and the stock options in one package. And at the time and now I view such options as little more than free lottery tickets.
Why oh why do you so many of you guys convince yourselves that short-changing yourselves is somehow a good thing? And this isn’t even about renting versus buying. This is about a basic approach to life. Why *should* you give some clown with a big idea and an even bigger ego the time of day let alone your precious talent? Aren’t you worth more than that?
Sincerely,
Elitist A**
December 13th, 2007 at 11:48 pm
Yes, 2 $100k salaries can certainly afford an $800k house (that’s only 4x income, after all).
Too bad less than 10% of families in the bay area fall into this category.
Median household income is $80k. Less than 15% of families can afford to buy any house at all.
Being one of these > $100k engineers, I know full well that there ARE couples out there with dual $100k incomes. However, MOST of the engineers are single (divorced, never married, or homosexual), and there just aren’t very many women involved in the industry at all.
I’d bet that there are less than 100,000 software industry jobs paying $100k in the bay area, but there are over 7 million working people. That’s only 1.4% of the population.
It’s far more common to see couples where the husband works (making $100k+) and the wife stays at home with the kids than it is to see couples where both people work good jobs.
Honestly, I don’t understand the obsession with house prices, though. I can rent a beautiful place for less than 20% of gross, and I have more disposable income than anyone in my family who lives in cheaper cities. So I don’t own a house? Big deal. Cars still cost $25,000 and iPhones still cost $400 no matter where you live. I’d much rather make $120k a year and spend $3000 a month on rent than make $50k a year and spend $600 a month on a mortgage.
“By the way, I don’t believe in any kind of fund. Why invest in something managed by someone else whose motive is to take a cut of the money, rather than invest in your own home?”
Now this is just a plain moronic statement. You should invest in whatever makes financial sense to you. I’ll gladly pay a fund manager a healthy cut of my earnings if he’s generating double digit growth for me.
December 14th, 2007 at 8:40 am
Written by Kevin:
“Cars still cost $25,000 and iPhones still cost $400 no matter where you live. I’d much rather make $120k a year and spend $3000 a month on rent than make $50k a year and spend $600 a month on a mortgage.”
Extend this a bit, and you can see why more than 3x or 4x income is doable for a mortgage if income is higher. 11 years ago, I bought a car for $21,000. In the intervening years, my salary+bonus has more than doubled. But, I just bought a car, for $27,000. Also, I probably spend less on food now than I did then, just because I rarely go to restaurants now.
If your family income is >$200k, you can live as if it’s $100k and put the balance into housing, if having a nice house floats your boat. Or save more for later. Or rent and go on extravagant vacations and get a $100k car. There’s a lot more flexibility.
In my experience, engineers with > 8 years experience generally make more than $100k. Almost always if you include options.
And regarding the 2-engineer families. I know plenty. The demographic trick is, there’s not very many 2-engineer families where the wife is born in the US. Most of these in my experience are immigrant wives. For whatever reason, US-born women tend to not be engineers, but Asian-born women are often engineers. Maybe 30% of the immigrant engineers I know are women, maybe 5% of the US born engineers I know are women.
One other comment, I was thinking about the median income to home price mismatch. ALso, in CA, the %age of owners is lower than nationwide. So the median income person is probably not buying the median priced house, since the bottom 25% or so rent. (plus many others, this is not an anti-renter comment). also, there’s a lot of older folks, with low income, but high home price. E.g, in Los Altos, the median home price is around 1.7m, but the median income is around 170k. BUT, there’s lots of retirees who bought houses in 1960. Their house is worth 1.7 now, but their income is <$100k. I’ve seen many houses in Los Altos/Saratoga/etc where it’s for sale because the owner went to a home, or passed away. So their income vs home value is obviously skewed.
To know what’s going on, we’d have to look at the 75th or80th %ile income vs median home price. I know several people who have bought in recent years, and they aren’t stretching into 6x income mortgages or what have you. So there’s more than meets the eye.
December 14th, 2007 at 9:38 am
*WOW*. “Real Estater” deserves a front-page Burbed mention for his pie-in-the-sky “idealism” that is so amusingly wrong-headed. Especially in current times. Next he’ll tell you, “Real estate never decreases in value!”
The fact of the matter is I’d rather spend 1.5M and get something more than a 3br/2ba for my troubles. If I’m spending that kind of money, it’s not going to be here in the Bay Area.
December 14th, 2007 at 10:20 am
Burbed, all these talks just prove you wrong, the Bay Area is not insane, in fact it is quite manageable since EVERYBODY is making 120k and couples make 200k+.
December 14th, 2007 at 10:33 am
Hedda, btw, it is possible to get a reasonable 3/2 for < $1m. I live in Cambrian Park, in a 3/2, worth $700-$750k based on recent sales. It’s not Saratoga but it’s not bad.
It is true that I could sell out and live in the Midwest in the same house for far less. Or spend the same in a much larger house. Of course, those guys are dealing with ice storms now. And hot and humid in the summer. I like Silicon Valley, so for me it’s worthwhile to live in a smaller house here vs a bigger place in Texas. For others the tradeoff is different.
OT but I don’t get the people that live here and constantly complain. “Too much traffic” “Too expensive” “Too many immigrants” etc. If living here is not enjoyable, then why pay the premium?
December 14th, 2007 at 1:05 pm
> That’s what would’ve happened if you bought 4 years ago.
What would’ve happened if you bought your home 1 year ago?
> After a while, salary rises, and your home increases in value.
I thought home prices are going down. Any data to indicate otherwise?
December 14th, 2007 at 3:42 pm
“Statewide, the 10 cities and communities with the greatest median home price increases in October 2007 compared with the same period a year ago were: Santa Barbara, 24.4 percent; Arcadia, 21.3 percent; Redwood City, 20.6 percent; Newport Beach, 18.4 percent; San Ramon, 14.4 percent; Cupertino, 11.7 percent; San Carlos, 9.5 percent; Redlands, 8.8 percent; Redondo Beach, 8.7 percent; and Sunnyvale, 7.6 percent.”
http://www.svdaily.com/realestateprices.html
I know that median price is not the absolute value, it can be skewed by the mix of houses actually sold. But it’s pretty clear that the west side of the 85 corridor (Mountain View down to Los Gatos) is not seeing the significant declines that the Central Valley is seeing.
And the poster who made that statement was probably thinking multi-year anyhow. It’s likely that SV prices will be flat to down in the next year or so, but in 10 years they’ll likely be higher. Unless “it’s different this time.”
December 14th, 2007 at 9:37 pm
oh dear, a jaded 32 year old software engineer trying to lecture folks on VC tendencies. How many jobs have you bounced around in 10 years (if you have so much experience)?
December 14th, 2007 at 10:32 pm
Rubbish. An 800K loan requires over a 250K salary unless you want to be a slave to your house and not save a dime for the future. This is why our country is in such a horrifying debt situation. People figure the mortage as if you never have to plan for a rainy day. They forget you have to contribute to health insurance, car insurance, maybe a car payment (even without it you have maintenance costs, gas costs). They say, oh, I’ll build equity – I can borrow from that. Yeah, suck more value out of your “investment” and pay the bank for the privilege.
December 15th, 2007 at 3:34 pm
Greg: Oh, ONLY $750,000 for a 3/2. Is that all.
December 16th, 2007 at 10:17 am
This is kind of an aside, but Kevin’s statement “Cars still cost $25,000 and iPhones still cost $400 no matter where you live” nicely encapsulates the American debt crisis. Who really *needs* an iPhone? Nobody. A $25K car seems reasonable in view of the thousands of Clevelanders who live in $80K homes with $60K Escalades parked out front, but still: I bought my Honda Civic brand-new for $13,500 cash, and even that seems excessive given that I commute by bicycle. As someone else alluded to above, if you feel you truly need a house, then curtailing frivolous spending elsewhere will significantly extend the range of homes you can afford.
December 16th, 2007 at 12:18 pm
Bleen, there is a grain of truth in that, but with two-engineer families making $200,000 a year, there’s no reason they can’t buy an iPhone AND a house. They just can’t do it here.
December 17th, 2007 at 2:33 am
“Extend this a bit, and you can see why more than 3x or 4x income is doable for a mortgage if income is higher.”
Doable, but not sensible. Why would you bust your ass to have 2 high incomes in your family (and let someone else raise your children for you) just so that you can buy some shitty house when you could rent the same house for a fraction of the price and wait until prices return to sane levels?
“And regarding the 2-engineer families. I know plenty. The demographic trick is, there’s not very many 2-engineer families where the wife is born in the US. Most of these in my experience are immigrant wives. For whatever reason, US-born women tend to not be engineers, but Asian-born women are often engineers. Maybe 30% of the immigrant engineers I know are women, maybe 5% of the US born engineers I know are women.”
Yes, they exist — but they’re not “common” by any means. The median income still is what it is, and very few families are making $200k a year, period.
“ALso, in CA, the %age of owners is lower than nationwide. ”
No, it isn’t (at least not in any statistically significant way).
“This is kind of an aside, but Kevin’s statement “Cars still cost $25,000 and iPhones still cost $400 no matter where you live” nicely encapsulates the American debt crisis. Who really *needs* an iPhone? Nobody.”
Who *needs* a house? Who *needs* any car at all? The answer to all of these things is “nobody”. If you only bought what you “needed”, you could live in a 1 bedroom shack and eat beans and rice. It wouldn’t exactly be a happy life though, would it?
That wasn’t the point of my comment at all, though, which clearly went way over your head. The only thing that really costs any more here than it costs anywhere else is housing. Food and fuel are marginally more expensive, but as a percentage of your budget they don’t matter. What seems like a high end luxury in Ohio is a reasonable expense here due to the inflated salaries. When you’re dropping $2k a month on rent, $400 for a playstation or whatever seems cheap.
Sacrificing all the other enjoyable things in life so that you can buy a bigger house is a fine choice if you spend your entire life at home. Personally, I spend about 12 hours a day at home and at least 8 of those are spent sleeping.
I rent for $2200 instead of buying for $5000, because I know damned well that if I was shelling out $5000 a month for mortgages we’d never go out to eat, never be able to travel to see family, never be able to buy the fun things that we enjoy like video games and movies, and generally wouldn’t be very happy. We’d be slaving away for the sake of the mortgage.
It’s either that or rack up credit card debt like the other morons who want to keep up with the joneses so that I can have the nice vacations, the iphones, AND the big house. Awesome, then when I have to declare bankruptcy I can use it as an opportunity to teach my children how to best panhandle at convenience stores.
Wait, but let me guess — if I just bought now and held out for 15 years I could be enjoying those things then when my pay finally catches up with my mortgage payments? What a dream!
December 17th, 2007 at 3:58 pm
That’s what would’ve happened if you bought 4 years ago.
*smacks head* Of course! Why didn’t I think of that – where’s my time machine?!? That’s what’s needed – time machines!
After a while, salary rises, and your home increases in value
Really? Salaries and home prices increase going into a recession? Really? What do you know that we don’t know? Gosh, I feel uninformed.
there’s not very many 2-engineer families where the wife is born in the US. Most of these in my experience are immigrant wives
Oh! So that’s the trick! Marry an Asian engineer!
Whoops, I did that – but turns out she’s a civil engineer, and makes <$60k. Oh well, got it half right.
That’s what makes me so happy to read Burbed – see all the tips we can pick up here?
Marry an Asian, find a time machine and get pay raises during a recession, and that great house can be yours!!!
December 18th, 2007 at 6:25 pm
To the first poster,
Where are you working? I will like to join your company if I can make over 100K and I am a great software developer, work well with people and teamplayer. The place that I worked for always out-source to India, Romania, etc and it’s just not fun. Boss are saying that they can pay 10 skill software enginners which the salary of one here. So, which company is not out-sourcing? I want to know. Thank you.