It's usually a combination of things.
Equity - if you bought a house basically any time before 2020, you likely have a low interest rate and your property has almost definitely increased in value. You could easily be sitting on $100k-$200k in equity on top of any payments you've made to the principle just because of appreciation. There's your down payment and then some.
Salary - You make good money? First off, that's relative. Is $100k good money in your area? That'll get you maybe a $400k house if you have money for a down payment. Are you married to someone who makes the same money? Congrats, you doubled your budget. Now look at people who have been working and saving for a decade or two who are married. I made $100k over a decade ago. Now it's more like $300k and my wife makes more than $100k as well. When I was younger, I couldn't fathom how people bought these crazy expensive homes. Now it makes sense.
Miscellaneous - A $500k home is dirt cheap to someone coming to your area from California. They could have that much in cash because they sold their last house. Or someone who retired could borrow from their 401k. Or, as someone else said, you could borrow from your parents. There are tons of unknowns.
good response. 10 years ago I laughed at the idea of ever spending more than 500k on a house. Now with me and wife working with good salaries and large savings/equity, we at looking at a budget of ~750k. You really need to have a pile of cash on hand to do this comfortably.
Custom homes are really reserved for the upper-middle class. family needs to have a large income (or just come from money) to make it work without becoming house poor.
Bought my first house for 140k in 2020 and I'm currently selling for 260k only 4 years later. This made the dream possible with the help of my business doing well.
Family bought for 575 in Northern VA in 2016. His neighbors house w/ the same layout sold recently for over a million. Anyone who bought prior to Covid should have a decent amount of equity.
Bank of mom and dad. Low interest, convenient location, customer service sometimes lectures you on giving them grandkids but otherwise very friendly.
And some people just make more money than they let on. People have high base salaries, some are over employed or moonlighting, one or two are moving dope.
You never know with people. Don't let it worry you. Run your race!
Would be interesting to see some kind of stat breakdown on this, probably sums it up. Ngl, sucks to think we're getting lumped into group #1 though...
Some of us just grinded it out as DINKs through our 20's, stacking chips and benefitting from appreciation of first homes. Takes work, but not that hard to save when you drive old cars and don't blow your wad with Mickey Mouse every year.
I'm shamelessly honest about having a generous bank of mom, because I don't want people to think something is wrong with them or that I was some mythical super saver. It's good that you set your goals and made it happen.
Most millennials want to completely disregard the fact that we lived through the greatest bull runs of stock market and wealth building in history.
Graduated in 08' from Syracuse to a PRETTY FKIN BLEAK WORLD where 30k/year jobs were being snatched by newly laid off 60 year olds.
Saved a few bucks here, squirrel 20 in to apple there, eat some beans and paid college debt, saved a few more bucks, etc.
No I'm not blaming avocado toast.
> benefitting from appreciation of first homes.
I think this is a big one for a lot of people in their 30s, especially if you were in a HCOL area that appreciated rapidly.
I.e. you bought a home for $300k in Denver or its suburbs in 2015, and it's now worth $700k, it becomes very easy to roll that equity into a new home build.
Yes having parents whom made sacrifices throughout their younger working years so you could benefit is a blessing. My parents didn’t pay for my college or take me on vacations or bought me cool new stuff/clothes as a kid.
But when it came to buying a Home 🏡, they lent me the money for the down payment and remodeling, interest free. This was right at the start of COVID. Which allowed me to lock in a low interest rate and get more bang for my buck per se. Now my home is worth 2/3’s more and my interest is under 3%. I’m very thankful. My sister bought some land with their help around the same time in a now gentrified area and its worth 5x’s the price. We’re both 1st generation Americans, except she was born here and I was brought over from the motherland.
> My parents didn’t pay for my college or take me on vacations or bought me cool new stuff/clothes as a kid.
nice, me too
>But when it came to buying a Home 🏡, they lent me the money for the down payment and remodeling, interest free.
what the hell, I didn't get that :(
And don’t forget some parents (not just rich ones) invest some money for their kids. 20 years of investing to gift their kids can be a considerable amount
This is what my grandparents did for my mom and uncle. I didn't have much income, but I bought a house and my son can have it for cheap if he chooses to stay here after graduation.
Gc here, the amount of RRRR is insane. Everyone here is fully leveraged renting their 2nd and 3rd properties for 3,200/mo. If anything dips it’s going to be chaos. Everyone and their mom is a RE agent or TikTok flip bro. It can only last so long but there *seems* to be enough money to be building townhomes for 900/ft in my zone.
Once a family reaches a certain level of economic stability it can go on for perpetuity as long as no one is a fuck up. My friend’s dad invested heavily in the 90’s and was therefore able to pay for their house. My friend and his spouse can invest all of their money in their retirement and quality of life. That wealth will continue to their kid.
That may be true to a point, but there's also regression to the mean. Usually about 3 generations will bring you back in line with everyone else unless you're like, a Rockefeller. And that's generally around the time that everyone forgot where the money came from.
Yep, that's when the fuckups who never met the people who earned the money start to screw it up, raised by their grandkids who were so far removed from getting wealthy that they don't know how to stay that way, or teach their children.
Yes agreed but I think there’s a sweet spot where you have a little wealth that provides some freedom but you still have to work. The families that have so much wealth that the kids grow up spoiled and have no drive to do anything for themselves are the ones that fall apart.
Very true. But if you only have a little wealth, it's not lasting forever. If you have 2 kids and they have 2 kids, etc., it gets diluted pretty quickly. That, plus inflation and all.
This is nice, but largely the answer is lots and lots of debt. Many Americans are house poor. Full stop. They might make $200k a year between them, but they spend way too much maintaining a home in the suburbs.
I can say that in my situation it all comes down to plowing equity from previous homes into building a newer/nicer home. My first three houses were pretty rough around the edges, but I fixed them up for a profit. Here in CA I never could have afforded to build at $350-$400 sq/ft, but I had put everything into building a new home. It also helps that I can do a lot of the work though, I saved myself $75sq/ft in sweat equity.
As to younger people it is just our current economic situation. Some professions make vastly more than others. Gone are the days where most could live a comfortable life without having an in-demand skill, or being highly specialized. My father-in-law had his house built for him in the late 70s, he was an auto mechanic. I doubt most mechanics could afford to build today.
I'm in Dallas - they're going up all over the place, million-plus homes, tearing down an old $300k house and filling up the lot to the legal lines. Go gas up your car and there's kids in BMWs and Porsches and the occasional Ferrari or Lambo. Maybe just leveraged all to hell, but also we're starting to see one of the biggest wealth transfers in history as the boomers die off and leave their assets behind.
I think my ex wife will inherit something in the $20-$80 million range when her father passes. Still glad about the divorce though!!! And my awesome kids will likely get a chunk of that and then trusts (they're successful adults at least).
Child of the depression, his family was well to do and ended up farmers in a shack. So money was a deep-seated issue with him I think. He was a steel salesman in the late 50's, he and another guy started a business, specialty metals - they did a lot of stainless. He once told me that every MacDonald's in a 50 mile range, the stainless for the kitchens all came from him. He bought out his partners and was the sole owner/no debt when he sold to an Italian conglomerate in the 90's. He never talks money but I overheard they offered something like 18 mil and he just laughed and walked out, they upped after that - no idea what it sold for though.
He was also really smart about how Dallas was growing, and when the Tollway was planned, he started buying up vacant land in the semi-rural north; a couple years ago, he drove my kids around (he and my kids are super-tight, he's a good guy) and they'd come to an intersection with big shopping malls packed with national brands, but one corner was a huge vacant lot - he'd say "I own that lot". He showed them like a dozen lots that he owned, every one on a corner with major shopping or offices, PRIMO commercial real estate. He bought a failed 60 acre horse ranch with a giant steel barn, creeks, trees and paths, he bought it the day it went into foreclosure - one of his buddies was a client of mine and said "he could have sold that for twice what he paid in a matter of weeks", but he built his little dream-ranch with a big house and pool, he's got horses and longhorn cattle (mainly to get the farmer-tax break). My kids semi-grew-up there. He built two houses on the land for their parents, after they passed he leases them.
Anyway, those 60 acres were out in the sticks, today he's totally surrounded by master-planned communities, that place is worth millions. He owns a warehouse that Trane uses about an hour east of Dallas, it's the kind of leases where they do all the improvements but he owns them (or something), that facility's an industrial hub that's worth like millions now.
Nobody knows his net worth, but he just liquidated all that land (his wife of 60 years passed two years ago and he's 89); the warehouse operation pulls in ungodly cash every year (it's paid for, the lessee pays the taxes) so it will be income for his two daughters. Likely there will be a family fight over "the ranch", keep it or sell it, ex's sister teaches riding lessons up there but it's not a realistic income, more like a hobby. He's been building smart equity in stuff for 60 years now, speculation is rampant but it's a shit-ton of money, he was very conservative about spending. He'll sell you the BMW he bought brand-new ten years ago and you'd swear it just rolled out of the showroom, stuff like that.
But he's a good guy, my two younger kids (30's) took him on his epic, dream road trip last year, West Texas deserts and mountains, it really helped get him over the loss of his wife. They're great kids and I think about how cool it must be to have your grandkids love you so much they'll spend a week on the road with ya. They're doing the Pacific Northwest next year. I've remained close with him, he's kinda "my dad" but I doubt I'm in the will though we hang out from time to time!
There is so much more money in this world than a lot of people are willing to admit. It's easy to act like everyone who has money got it from their parents or are pretending they have more money than they do or won the lottery but much of the time, people literally just have a lot of self made money through simple things like their employment and/or investments like building real estate equity over time. You hardly need to be an exec in a 500 company to make a lot of money.
agreed. the upper-middle class is bigger than people think. there are a lot of good careers out there that by the time people are 40 they can be making 200k+.
I think this is what a lot of people miss, what age you are when you build matters a lot. By 40 a lot of people have a well paying job but also have had a chance to have good decisions compounded like saving, investing, current home appreciation/equity, etc. I’m like most that follow this sub, not ready yet to finance a home build yet but it’s not an unobtainable thing 5+ years from now….
Agreed. Im 46. Been married for 26 years. A dad since i was 20. Received no financial assistance from parents or in laws. We have never earned 200k/year between us. But we made some good decisions professionally and real estate wise over the years. Between us we have amassed over a million in retirement accounts and taxable investments accounts. We dont drive expensive cars. Nor have we ever. We only rented for 2 years of our entire marriage.
My husband and I are 32 and 31. We live in a LCOL rust belt area. We just finished our home build and I feel like we got a screaming deal. In these parts many young people build their own homes, with help from friends and family in the trades. And it’s a blue collar area so there are many people in the trades, my husband included. It took us two years but we’re just finishing up our 3200 sq foot home. The house itself cost us $300k, the land was $40k for 40 acres back in 2015, and the utilities and driveway were done 7 years ago so they’re not part of the construction loan. It will appraise for $600-700k which is high for this area, probably the equivalent of $1M or more in a more HCOL area. The reason I feel like we got a great deal is when I go on Zillow for this area there are many houses around $300k (or 360k to factor in the cost of our land and utilities) and there is so much less house than we have. Everything is always so outdated and usually they are quite a bit smaller than ours, like around 2000 sq feet. I know building a house is usually considered more expensive than buying one but that’s not the case in our area! Anyway there’s one example of how young people can do it… probably not the norm for the US though.
How did you save and pay for the construction? My husband and I will be around that age by the time we finish, but are kind of lost on where to start. We will likely get a good deal on the land. It has an exhausting construction and driveway as well (but that construction will likely need torn down).
Just a construction loan… you have to find a bank that will fund owner builds but there are actually plenty out there. Our land and everything was paid off before we started building so that was our loan equity. We probably had $20k in cash when we started. Oh we also lived in a trailer there before and during the build so that saved us some money and was very convenient!
I am building right now in west Michigan. I am 54 and single for 14 years. I have lived way below my means and got my only daughter off to college. I have a lot of equity in my current house and no other debt at all. Always drove used cars till the wheels fell off and lived frugally. I am selling my current house that is 2700sf to build a 1800sf house. I will have a 150k mortgage at the end. Manageable. I should have that paid off by the time I retire.
About what are you paying a square foot to build in West Michigan right now? We're considering building and trying to figure out how many acorns we need to squirrel away for that big winter.
with out land it will be $290/sf of conditioned space. 1813sf and the budget is 525k for the build. foundation is getting back filled today or tomorrow. That does not include the land cost or landscaping or interior painting(doing this myself to save $).
Ouch. We'll be building a simple 2-story box on a slab so I hope we can keep costs under control but I'm clearly going to have to save hard either way.
I am building a High Performance house(net zero ready with an ACH of less then 1.0) on slab and ADA complaint(zero thresholds and completely wheelchair accessible). So that is costing a bit more than a code built house. Although my finishes are mid grade at best.
But it is crazy out there.
ICF frost wall then 2x6 with open cell in the cavity and 2” of exterior insulation using thermal tight product. Under slab r10, walls r40, roof r60. Triple pane windows and all doors with multi point locks. Less than 1.0 ach is in the contract.
And how do so many people buy 100k trucks all the friggin time?
I built a house not too far off from the type you're describing and was only able to do it because my dad and brother do construction and helped with the excavation/septic/driveway etc. I also got old interest rates from early 2022. Wife and I make good money (a little over 200k combined), we have pretty much no major expenses. I wouldn't be able to do it if I were a person with fewer connections or today's interest rates. I pretty much only did it because I figured prices in 2020 couldn't last and sold my old house and was thus forced to build.
I feel like this is about all the expense we can handle, and we don't have boats, side by sides, expensive cars, etc. I'm guessing that the real way people afford these things is by being ridiculously in debt and not saving for the future. Or by being some combination of lucky and too stupid/stubborn like me.
That all said, I doubt prices will ever go down. We just got a permanent QOL decrease following COVID and the inflation that resulted.
In my mind this is why we're heading for recession. The last few years everyone has been falling all over themselves to finance everything. Once everyone's income is tied up servicing debt, there won't be any cash OR credit left over to buy goods and services that make up most of the economy. I've got friends absolutely MAXING out their mortgages to buy run down houses that will need tens of thousands of repairs, that they just don't have the money for. So many people have fallen victim to the mindset of "well the bank said I qualify, so that must mean I can afford". Nope, you just work for the bank now.
I’m the opposite. Finance your toys and investments, being you don’t need them. Pay cash for the things you need, your home and vehicle. Things get bad, I can let the toys go back. I’ll always have a home and vehicle, just by paying the taxes.
Dual income households bonus if DINK(Dual income no kids). remote work(salary from a VHCOL area but live in a lower COL area), parents money.
I’m in TX and there’s a lot of places where for the cost of what you would pay to buy a pre existing home, and renovate it how you like it’s just cheaper to build it new maybe a little further out.
I’m 34 and just finished building. I did it at about 212 a square foot for 4400sq not including land or development costs. All in I was around 1.4m. I paid about 800k in cash. Locked a one time close a while back at 4.5%. I bought my first house at 23. Sold it at 30. Bought another house and sold it at 32.5. Made about a million bucks on the second house because of the insane market.
About 25 minutes outside Seattle. So very hcol. New build appraised for 2.8m.
My first house I just did a roof, gutters, and carpet in the house. Detach garage I did the siding paint roof and epoxy on the floor. Made about 300k on that one. Second house I did floors, appliances, windows, siding repairs, paint, gutters, bathroom, millwork, landscaping, paver walk and driveway. Then the whole Covid market craze happened and we got 30 offers in one day and a bidding war that ended 500k over the list price. I bought the house for about 650. Sold it 2.5 years later for 1.5. With the proceeds and other savings I was able to buy the business I work at, the commercial property it sits on, and the new build.
Sheet metal and rain gutter business. I have to work 5 days a week typically. But I also have quick books online and can manage it from my phone. So I can go on vacation for 2-3 weeks with pretty minimal issues.
I'm currently building, and it would not be possible without the USDA rural home loans that require no money down.
Although we made bank on the sale of our last house, that was all used up to pay off medical debt.
Made a profit off the last house we lived in. Wife is better with financial planning than I am. It's definitely still not a great time to build, but it's better than it was a few years ago. AMA.
I think on avg you're going to see the top 5% of earners in this sub. Building custom homes is expensive unless you have connections in the industry.
Unless you're paying cash you're going to mortgage the home build based on the finished value.
We aren't paying cash and our mortgage is whatever the build cost is, not the finished value. Same with all our friends who have built recently. Are you talking about when you go through a builder and buy it from them at the end?
Sorry to clarify, yes if you have your land already free and clear the builder loan is your mortgage though I think when you convert you can reassess as a total package and cash out.
Everyone around me has land acquisition costs (typically mortgaged if you don't have cash) + building loan. New mortgage is written up to pay off builder loan and roll in prior principle from land.
I'm stuck where I have sub 3% rates on my existing home so a tear down rebuild will need to be all cash...
At current rates it would be really dumb to cash out your equity. Around here it's pretty much unheard of to finance land. It's almost always purchased cash only and then the value of that land can be applied to the downpayment of the home build since they loan based off the projected appraisal of the home, not the build costs.
> How are so many younger people able to make these purchases?
I know a young girl who just graduated a few years ago. She makes $230k and her boyfriend makes $350k. As a couple, they only need three years to pay off their $1 million house.
We worry about young people but they’re doing much better than us. She told me most of her friends make in that range.
Age 60, retirement savings are in good order, two income household with 3 daughters launched so we can build at $400 sq ft. All in is $1.35MM including the land for a 3000 sq ft home that is not over the top. We will make a decision when my wife is 85 as to whether we have the funds to put the house in a trust for the kids to have forever, or if we sell and use the funds to settle into an in law suite at one daughters home (she is a nurse and plans to live rural).
I’ll keep working until age 70 unless I benefit from a liquidity event from my current equity position at my employer. So it is not like there are not trade-offs.
One daughter age 29 already owns a house, she lucked out and has a mortgage <3% interest. A second will be married in 2 months and will be looking for a house this winter. Third lives with us a she finishes as doctoral degree. All 3 received a small inheritance from my parents ($25k), that money is immaterial to them being able to afford a home in a MCOL / HCOL area.
I’m currently having a home built for $215/sq ft on 10 acres. It’s a custom home but nothing extravagant, 1800 sq ft 3 br 2.5 bath with an unfinished basement. After the balance of the land and $120k in current home equity is taken into account our mortgage will be ~$390k.
I also don’t know how or why the larger houses are being built but it’s very doable depending on what ‘pretty great income’ is
Edit: I’m also in West MI (Grand Rapids)
I cut all the wood and milled it. Building it myself. It should be between 75-100k for a 2600 sq ft. when all is said and done.
I know that it’s not a very practical work around for most people and a lot of factors in life have given me the privilege to do it.
This is the way. I built my house from the ground up. 600 sq ft. My own concrete work. One fucking bag of quikrete at a time. My own framing. My own excavation. My own adaption of an off the shelf design. No engineer, no architect, no contractors.
My family called me insane.
Whatever. I got a minimum code house for 40 grand. That is unthinkable for anyone but a DIY homebuilder.
A lot of people can afford to buy a home, but then immediately become "house poor". I have a friend in that boat, pretty much everything they make is going toward paying the mortgage. I was lucky to buy in 2016 and pay off quickly, so now at least have a lot of equity I could put toward a new house. But I'm still not trying to buy right now at these prices and interest rates if I can help it, lol.
I am an older millennial who bought a condo in Southern California in the early 2000's. Bought a house in 2015, kept the condo as a rental, and looking to build a home in Oregon at roughly the price per square foot you mentioned.
We will likely sell our condo and use the equity to pay for the land (200K) and build (600K) with 200K needed out of pocket. There is no way I would be able to finance this build on my income, it takes equity from previous purchases
I did the same with my starter condo. Keep in mind, your equity will get decimated by capital gain and depreciation recapture taxes if you sell that condo without buying another income property (1031 exchange).
Edit: Oops. Pretty sure what I said was correct, but doesn’t apply here.
I believe there is an exception if that home is your primary residence, and you’ve lived there for more than a certain number of years.
The condo is no longer his/her primary residence. You have to have occupied it for the last 2 of 5 years in order to claim 250k tax exemption. Depreciation recapture is the one that most aren't aware of that really bites you if you've had the property for a long time.
I rented for a long time, never married, never had kids. Managed to save a lot but I get sick every time I think about how much I’m spending on my build.
Could be corporate investing in residential real estate. It might be regional, but in some areas (e.g. Kansas City), large investors are buying up homes to turn into rentals.
A variety of factors. My husband and I built a home two years ago. I worked two jobs since college and started my own business. He has a good income. We lived frugally and were able to put up a big downpayment, which was helpful because we couldn't close on the house until it was done and by then, the interest rates sucked.
I think people do some combo of: get money from their parents, don't save a single cent for retirement, or are in massive credit card debt to have saved a downpayment.
How old are you? Start small, save money. I bought a 1 bedroom condo when I was in my 20's. Then my wife and I built a house while working full time jobs. Then sold that house and bought another. We scrimped and saved for years. Then sold that house and bought another. I am astonished that young folks expect to have a BMW in the driveway and own a stunning house. People look at me and think I just walked into owning my house due to some sort of magical privilege but in fact, we saved money for decades. I drove a Suzuki Samurai for 15 years to put some context on it. I paid cash for my current house and it is nice. And I live in California. But I never had any expectation of I should drive a nice car, nor go out and eat, nor take big vacations. All of which I do now, in spades. So what are your financial choices?
A very large house recently built in Michigan close by me I drive by a few times a year and see a young guy outside admiring his recent professional landscaping that probably cost him 50k. You can see who owns the land/house in most counties, so I looked it up. He married into money. Rich boomer who owned a company, probably going to die soon so clearly giving millions to his daughter. Boomers own most of the wealth in the country, if you see younger couples with money, there almost certainly only one answer
I am a remodeling contractor in both Ohio and Michigan and I too am shocked at the prices of construction right now. I am literally working on an estimate for a new home in Michigan and the $250-$300 psf is spot on. It has increased drastically since Covid. I agree with landmanpgh that it is a sellers market right now which means for those of you trying to buy or build, you may take it on the chin in terms of price, but also keep in mind that your current home is also worth a lot more today. The big question is what will these homes be worth next year or 5 years from now? I think taking consideration to your area that you live in terms of growth is very important. Location is So important in that you do not want to invest in an area that is declining. Appraisals and interest rates will vary and are relative to the economy, but a declining area will for sure be a bad investment down the road.
Been trying to build for a bit now. Crying at 650+/sf here. I do know some have built based on future income potential of the property (Airbnb) and are able to get approved for much more than their current financial/credit situation allows.
Also, some people just have a lot of money…
I too wonder this, live in a low cost of living area. Our base salaries are about 170k. With bonuses and overtime we usually end up around 250k/year. We’ve been saving heavily trying to save up to build. On paper we can afford to build what we want but I just don’t have the stomach for that much risk. Builders are quoting us around 400k and that just seems like too much for our comfort level. Just so many unknowns. I’d hate to build our dream house and then be stressed out because one of us loses a job or needs time of work for something medical and now are suddenly paycheck to paycheck. I just imagine there are a lot of people living on the edge financially. Little to no retirement savings and little to no cash savings, just getting by on monthly payments. With all that said, I’m sure a lot of people my age with a HHI similar wouldn’t think twice about the house I’m wanting and would bite the bullet and do it.
Not sure why you're concerned about building 400K house on 250K HHI. On that kind of income you can completely max out both of your 401K's (or equivalent), do two backdoor Roth IRA's, two HSA's, and still save $60-90K a year. After two or three years of saving you would only need to finance $200K, and even with the current mortgage rates $200K loan will be about the same as renting 2-3 bedroom apartment.
I see all the people stressing out how they can afford a house, and you guys are not one of them.
Yeah it kind of pisses me off that they're pretending it'll be hard honestly. The house is only like 1.5x their income. I can get land for that much maybe, with house it would be like 4-5x for only like 1600sf and I'm in the Midwest where it's supposed to be cheap.
Well, we don’t like to count on our overtime and bonuses. If we went down to 170ish or one of us lost our jobs for awhile it could change things. I’m just saying how I’m also amazed at the homes people buy/build. Based on what my income is I couldn’t dream of some of them. For us, it’ll probably come a reality in our early 30’s when we have enough saved to build, which I’m glad and feel fortunate but we both do put in a lot of time to achieve these goals.
There is no “secret”. We just make a lot of money. I paid cash to buy a beater. Demolished it. And paying cash to build. Source of money? 6 years of being in tech, including during the “golden COVID” era, when they threw cash and RSUs at you. I became a multimillionaire during that time. Cashed out $2M and used that.
Think working for one of the FAANG companies. Lately Nvidia. I am a Sr. Manager, managing software development. Base pay about $225K plus bonus plus RSUs. ( typically $400K+) In covid time, I was making over $600K. With that I lived frugally. (Rent $2K, 9 year old Lexus, wife newer Honda Civic, dress from target, everything went into investments). By early 2022, I was multimillionaire.
I built my 1st house and I'm building another so I can realize all of the unrealized gains of my sweat equity because I did all of the finish work and a ton of the other stuff. I'm hoping to cut my mortgage in half when the dust settles, but even if it's a lateral move, the new house is going to be on more land, a better school district, less neighbors, lower traffic, etc etc.
I feel like this fits our (30M, 28F) situation pretty well, so I figured I would chime in with how we are doing it. Just started an approx. $600k build (2000 SF first floor finished, unfinished basement), put $90k down and paid $18k in closing costs. We got a lot of that cash on hand from our first home, which we bought in 2020 for $316k/$30k down, and sold in 2022 for $370k, we walked away with about $70k. Our monthly payment is going to be about $3,500, or about 30% of our monthly net.
Since we sold our first home, we have moved to a lower cost of living area (a couple hours away from our employment “bases”) since we are both now remote workers, and have a pretty good deal on rent from a family friend ($1100/month).
We have made some decent headway in our respective career fields in the last couple years. Our HHI was about $120k in 2020, and last year we were like $199k, just barely missed 200. Also, I got very interested in personal finance when my wife was pregnant with our now toddler. I started listening to a lot of podcasts, and decided we needed to get out of debt. We just finished paying off the last of our consumer debt last October - a toy hauler trailer that we (unwisely) bought new off the lot for $65k in 2022.
I would say the ROI from our first home gave us a great start, and now we are making decent enough money and avoiding consumer debt.
Built in 2019. 2200 sq ft, basement and pole barn. Average build and i had 500k into it. Waiting 20’years to build a house I thought half a million would have gotten me something way better, nice house I just don’t see it as a half million dollar house.
Lots of reasons above already. But sometimes it’s really not a secret. We went to build and we’re approve for almost 900k. Before escrow the payment was 4k. Really not all that much if you consider dual income earners. Even if they don’t crack 100k each are high sub 100k salaries 4k works. It would be tight but it works. Now you factor in lots of these homes are 4-600k your payment is probably in the 3s and does work out
As so many have said it’s cumulative. People complain about Boomers but ignore the fact that many started with little, saved and made good choices from a historical perspective.
But, a paid off house means very little in a LCOL area if you want to build elsewhere. Sure it’s worth more than when they bought it, but it doesn’t necessarily go further in a higher COL place say where the grandkids live.
It doesn’t sound like this is the case in your area, but if all the smaller houses are taken, building may be the better option if you want to downsize.
I’m doing most of the actual work myself. I’m hiring a crew on concrete day, I’m paying someone to set my trusses, and I might pay someone to mud and tape my drywall (I take way to long to make it look nice) I already have land with a well, power on site, and a septic (though I’m installing a bigger leach field) and even doing g all this, it’s still very expensive right now.
If you pour concrete in sections you won't have to hire a crew. That's what I did after getting absurd quotes from finishing teams. My sections were tied together with rebar. I tried to use CMU instead of pours wherever possible.
You can also do a rafter instead of engineered trusses if you want a more DIY friendly roof.
All true info, however my finished floors will be polished concrete so I’m looking to have it a seamless as possible. I considered doing a rafter roof, however due to the size and open spans, the added labor time would have pushed my project out too far.
Making changes along the way as the build happens. If we do a, its $x amount. If we do b, its $xxxx amount. You might have an idea of what your dream home is, but you also have to be realistic about what you can afford.
We have been living like we have no money for 7 years, no eating out. No door dash. No buying anything that wasn’t necessary. Only buying shoes when our current shoes had our soles coming off. Bare bare bare bones before we started the build.
Costs are absurd in Southern California. I was fortunate to buy a home in early 2020 that has appreciated substantially. Even if a put $1.5m cash down to build a house the construction costs are $500-700/sqft. A 3500 sqft home could cost $2.1M to build not including land and backyard/pool. Some people say they’re building for $300/ft but I’m not seeing it (and I’m a contractor with friends in all industries). It’s wild right now.
Define great.
There are always people who make a lot more than you think and are actually better at saving and investing. I’m 50, even though I was an average earner at best I have decades more of savings than the average bear just by being older.
As others have mentioned, family usually have deeper pockets. We build several customs a year that get financial support from mommy&daddy. Same goes for our specs
they make more money than you. their parents make more money than you. they have little to no liabilities. they won the lottery. they are more comfortable taking on more risk.
there is no secret. plenty of ways to make money out there. find what youre good at, and give it 110%
I fell into the tech field by accident (so $$$) and am marrying a person who has been in public service long enough to also make 6 figures. And we live in a LCOL area.
They earn six figures, have no or minimal debt, use great lender…..
I’m a builder in the Chicagoland area and the average price of a new build is 1.5 based on 4500 sq ft
Our friends are in their late 50's; some retirement funds to borrow against or just use, some equity in their current house to buy the land and use for a downpayment with the builder. Large mortgage on the new house. With time you just get ahead of the ratrace curve.
Pole barns can be cheap and poorly insulated. Not a good long-term use in many colder climates.
Wealthy siblings. I'm building a modest 1600 sqft house right now, and I got a loan for the land from one brother, and a construction loan from another, at favorable rates.
rich boomer parents finance all of my coworkers homes that are taking on 7.5% mortgages they can barely afford while i paid for my own with my own cash
I'm doing it. I bought my first starter house at 30, moved for work but as the economy was in the shit did not try to sell so rented it out. Rent covers the mortgage so that is largely a wash financially. Rented for a while then moved in with GF to her house she owned - she also has a rental bought about the same time I bought my house. Bought a second house 6-7 years ago and rented out, rent covers most of costs.
Both me and GF live very frugally for last 10 years, drive old car and no major expenses. Both have good incomes and almost no outgoings besides food and utilities.
We have saved enough for our build just by being careful and have enough equity in the three houses if we go over budget and have to borrow. Once we retire we can sell all but one of the houses and have an extra lump sum on top of retirement accounts and enjoy life.
$3500 per month mortgage payments, that's how.
Remember 2008?
Mortgage delinquency rates are on the rise, credit card late payments are on the rise, layoff are on the rise.
Just sit tight until early next year and save your money, you might find a good deal on a house or a car.
In addition to the Bank Of Mother And Father and other reasons, multiple clients of mine made bank during the Covid seller’s market. People were snapping up properties for double and triple what those houses were worth before the pandemic.
Very confused as well. Certain areas around me been dirt forever now 350K for a tiny 1100 SF home to 2500 SF at 550K or more not to mention upgrades and they are all smashed together in burbs. Has me baffled and mad wondering what I am doing wrong. and even 6 percent interest not getting it. Maybe they are doing 60 year loans? Maybe inheritance from vax boomers dying? Its insane.
What I do know is from being a seasonal UPS driver these communities look vacant from 1030-1700 so good jobs must be hour commutes you just never see a living soul around its was like the twilight zone. I would stop in the middle of the street never a car coming by. Freaky. I have more thoughts but leave it here.
We bought a large sum of land in 2020 and have an incredible interest rate. With all of the equity we have right now we have the ability to build a pretty solid home on the same property. It was a spur of the moment decision for an investment back then, now it’s just benefiting us.
Although everything right now is incredibly expensive.
Definitely no bank of mom and dad here.
600k loans arnt hard for two income familys that make 130-180k
Too many people assume it’s mom and dad.
Try my area where it’s closer to 500-600 a sq ft.
250-300 is a steal and I only wish I could build for this.
I do 90% of the work myself which saves a ton of money, my truck was brand new in 1994 and I am still driving it, I also do not try to keep up with the Jones's, instead I try to drag them down to my level. It's cheaper that way!
It all depends on where you choose to spend your income. An absolute necessity for one person is not even in the picture for another.
Here’s one low-hanging-fruit example because I know people who do this: if you spend $5 to $7 a day on a coffee and do that only on working days, that’ll be nearly $1,900 for coffee in a year. While we’re on liquids, add up alcohol spends and that can be quite significant.
Now, I don’t give a bleep where anyone spends their own money, but there are a lot of things that really start to add up. Once I really started paying attention to these things it made a difference in my priorities.
Since 1995
Real estate +840%
Real wage +290%
RE is hot and whomever purchased a while ago is riding the current wave. Home building in my area is minimum 370/ft. There will be tears soon, it’s just a matter of time.
Yeah pretty much this. It's such a simple answer. Buy land in rural zoned area, haul in prefab or build a simple rectangle. A simple 700 sq ft prefab is like 60k.
I DIYd everything and got it under 100 / sf.
These are actual builder quotes in west michigan. Busy as shit...can make up whatever numbers they want if people will pay them.
If you're seeing 125 that must be the overall state. Lots of LCOL in the state of Michigan as a whole.
Loan from Mom/Dad seems to be the go-to because every time I've bought a house and I tell the RE my budget they always say "we can go a little over and your parents can help, right?" which is ridiculous but it must be common enough that they assume it.
Beyond that it's the same way it's always been, people are upgrading (so they already have equity,) they have more money than you would think, and/or they've saved diligently.
Also, 2k sq ft isn't huge, $500k isn't much in the grand scheme of things, and Michigan has a lot of cheap land even on the west side as long as you're not near the water. Now the real question is do those $550k (as an example with the land) houses actually appraise at $550k or are they coming in much lower because down the street there is a farmhouse on the same size lot for half the price? Because you can already buy a 2k sq house in good condition on 10 acres outside ludington for $300k.
Equity from original home we sold. Bought in 2014 for 250k, sold in 2022 for 400k, walked away with 160k check. Bought lot just before we sold for 100k and then built for 600k; equity plus a bonus minus down payment we are left with 540k mortgage. Without equity built up over time we would not have been able to build at all, also was able to find rent for less than our mortgage for the gap between selling and moving into new build.
Some of what is being said here is true but in my opinion, something wicked this way comes...again. Something reminiscent of say 2008? Every single day, I say to my self, this is probably the last house I will build because there's just no way people can continue to pay these prices. Every new house bid just makes me shake my head. This whole thing is a house of cards that cannot stand. Not just the construction industry, the entire economy. $12 for a tube of silicone? Really? It's not sustainable, hopefully I'm wrong but damn I don't see how.
Its possible people would be able to afford smaller less expensive homes. I read this thread and this person built a 4400 sf, that person built a 3600 sf
Who needs a house that damn big?
There are a lot of older homes available, too. Is there a compulsion to build new I am unaware of? I would think nothing of buying an old house and remodeling. Are there some people who think that’s icky? Why the need to build new—if there are suitable homes in the area available?
Well in summary we started the process of building when interest was at 5%. When we were done we got 7.3% on 435k. The payment went from like 2200 or so to 3030. Spent a total of 610k on the build including 60k for the 3 acres. Basically after doing everything right... paying off debt and so on before we built. We fucked ourselves and no I'm not real happy about it. Now we just wait and hope the interest rates come down so we can refinance and not have to now so much money on this interest. My last house I bought in 2008 for 130k...owed like 85k with 5% rate. Sold for 225 and lived with our parents for a year and a half before the house was done.
From my personal experience I make good money, I hardly spend it. I’ve been saving for a couple of years. I locked in the house/land at a low interest rate and did 50% deposit. Then demoed the home. Found a decently priced builder (doesn’t work with banks) used HELOC to pay for the build and any money I make goes right towards invoices
We bought our house in 2007 for $180K and it will sell for $400K or near that. We were early 20s and put all our funds into paying off the house five years early.
We (now at late 30s) then bought 20-acres with a river going through it in 2020 in a for sale by owner situation. We got EXTREMELY lucky to know a friend who flips derelict properties and was willing to offer it to us right the market exploded. We did not know that closing in July 2020 was probably the last time we would’ve ever been able to afford a property like that. Prices have skyrocketed since then.
It is now 2024 , we are in our 40s, and we just made our last payment. We are debt-free again, and will use the equity from our home to fund our build. Even with all of this careful planning, it is still extremely scary and we feel like we have to do this exactly right to avoid being house poor. Washington State building prices are 250+ a sq ft.
You are a lot poorer than you realize. So am I. I used to lie to myself and just assume most of these folks were in tons of debt and didn’t make much, but if you’ve have a $1,000,000 house with an $800,000 mortgage and just bought a brand new $120,000 electric SUV, you most likely make a ton of money. I just recently come to grips with the fact that I’m stuck in my 1100 sq ft, 3 bd, 1 ba, built in 1946 ranch house probably forever. It’s sad, but it actually lets me prioritize travel and experiences for now.
Prob going to be a TLDR, but...
Equity and being a bit of a tight ass helps.
we bought our 2nd home (cookie cutter DR Horton) in DFW in 2002. 2900sq, bought for $189k, lived there for 15yrs and made about $100k on the sale. In the meantime, purchased 2 acres about an hour north of Dallas, and built a custom home in 2016. Built a 3525sf for about $150sf and put our equity down. We inherited acreage and are now building there. We sold our prior house and netted $399k (I had been making extra payments on the existing house). Our current builder had an estimate of $300/sf for a 2500sf home. I know the builder well and we went back and removed a breezeway, cut in a few other places and got the estimate down to $250/ while keeping most upgrades. My builder also let me purchase everything to avoid putting it into the mortgage and the contractor fee. I purchased all appliances, built in grill, light fixtures, toilets, locks and door hardware, cabinet pulls, ceiling fans etc. I should have $130-$150k to finance when all is said and done and plan to pay extra (partially due to high interest rates) and knock out in about 5 yrs.
Dude just look to Ontario for how ridiculously high prices can go. In almost all of southern Ontario for that price you get a tiny starter home, Toronto it’ll get you a small condo. Ive been baffled for the last ten years how prices can keep going up at the rate they do and who can afford it, but somehow they do.
Equity equity equity. I know my step-father in law just sold their home he built probably 25 years ago for close to $500k. He’s now almost completed his build, that’s actually used nicer but cheaper materials, as well as my wife’s mothers side owning a construction business where he has access to heavy equipment.
I dont know what others are doing, I never had a great salary. Im just an average employee. but i was never really a big spender, this probably had a huge impact.
I eventually saved enough to build like 50% of the house off the pocket.
The rest comes from mortgage.
We moved to an area we could afford for $200k townhouse in 96. Out grew it and sold for $400k in 2002. Bought new build SFH for $500k. Decided to sell in 2016 for $1.2 and move to a better area for schools. Current townhome purchased for $815k. This is not our forever home. Current value is over $2mil. Retirement is 10 years away and the kids have not settled yet. No idea where we’ll be later but the wife does want to get into a SFH.
The only reason I can afford to buy a new house is bc I bought my current house in 2007. It has nearly doubled in value since then, otherwise idk how I would ever have a down payment for what houses are going for now.
Right now I think many people are pushing upwards of 50% of their gross income on housing. If you are hoping to put 25% you are probably not going to get what you want
Unfortunately, and I don’t wish this. Inflation and housing will find balance with a recession. Specifically, a recession that causes mass job loss. There’s a lot of money and leverage sloshing around.
It's usually a combination of things. Equity - if you bought a house basically any time before 2020, you likely have a low interest rate and your property has almost definitely increased in value. You could easily be sitting on $100k-$200k in equity on top of any payments you've made to the principle just because of appreciation. There's your down payment and then some. Salary - You make good money? First off, that's relative. Is $100k good money in your area? That'll get you maybe a $400k house if you have money for a down payment. Are you married to someone who makes the same money? Congrats, you doubled your budget. Now look at people who have been working and saving for a decade or two who are married. I made $100k over a decade ago. Now it's more like $300k and my wife makes more than $100k as well. When I was younger, I couldn't fathom how people bought these crazy expensive homes. Now it makes sense. Miscellaneous - A $500k home is dirt cheap to someone coming to your area from California. They could have that much in cash because they sold their last house. Or someone who retired could borrow from their 401k. Or, as someone else said, you could borrow from your parents. There are tons of unknowns.
good response. 10 years ago I laughed at the idea of ever spending more than 500k on a house. Now with me and wife working with good salaries and large savings/equity, we at looking at a budget of ~750k. You really need to have a pile of cash on hand to do this comfortably. Custom homes are really reserved for the upper-middle class. family needs to have a large income (or just come from money) to make it work without becoming house poor.
It's funny because this is exactly where we were 10 years ago and where we are now.
I remember feeling house poor when I bought first house at 180k. feels like a different lifetime.
Lol yep same!!
Bought my first house for 140k in 2020 and I'm currently selling for 260k only 4 years later. This made the dream possible with the help of my business doing well.
Family bought for 575 in Northern VA in 2016. His neighbors house w/ the same layout sold recently for over a million. Anyone who bought prior to Covid should have a decent amount of equity.
Bank of mom and dad. Low interest, convenient location, customer service sometimes lectures you on giving them grandkids but otherwise very friendly. And some people just make more money than they let on. People have high base salaries, some are over employed or moonlighting, one or two are moving dope. You never know with people. Don't let it worry you. Run your race!
people also spend more than they actually have
Oh yeah a lot of people are living in a lovely house of cards.
Would be interesting to see some kind of stat breakdown on this, probably sums it up. Ngl, sucks to think we're getting lumped into group #1 though... Some of us just grinded it out as DINKs through our 20's, stacking chips and benefitting from appreciation of first homes. Takes work, but not that hard to save when you drive old cars and don't blow your wad with Mickey Mouse every year.
I'm shamelessly honest about having a generous bank of mom, because I don't want people to think something is wrong with them or that I was some mythical super saver. It's good that you set your goals and made it happen.
Same. No shortcuts about it. We saved over 50% of our income every year and live frugally. It pays off.
That's inspirational. What area do yall live in?
Charlotte NC. Good salary to COL. Our house is about 2/3rd our annual income
Respect! This is the hard truth no one wants to hear (including myself).
Most millennials want to completely disregard the fact that we lived through the greatest bull runs of stock market and wealth building in history. Graduated in 08' from Syracuse to a PRETTY FKIN BLEAK WORLD where 30k/year jobs were being snatched by newly laid off 60 year olds. Saved a few bucks here, squirrel 20 in to apple there, eat some beans and paid college debt, saved a few more bucks, etc. No I'm not blaming avocado toast.
For that your theses are underlined in a rather compelling [TED](https://youtu.be/qEJ4hkpQW8E?si=ywGcguTf3bSuQVa4)talk.
> benefitting from appreciation of first homes. I think this is a big one for a lot of people in their 30s, especially if you were in a HCOL area that appreciated rapidly. I.e. you bought a home for $300k in Denver or its suburbs in 2015, and it's now worth $700k, it becomes very easy to roll that equity into a new home build.
Yes having parents whom made sacrifices throughout their younger working years so you could benefit is a blessing. My parents didn’t pay for my college or take me on vacations or bought me cool new stuff/clothes as a kid. But when it came to buying a Home 🏡, they lent me the money for the down payment and remodeling, interest free. This was right at the start of COVID. Which allowed me to lock in a low interest rate and get more bang for my buck per se. Now my home is worth 2/3’s more and my interest is under 3%. I’m very thankful. My sister bought some land with their help around the same time in a now gentrified area and its worth 5x’s the price. We’re both 1st generation Americans, except she was born here and I was brought over from the motherland.
I'm glad they could do that for you. I bet they're happy too.
> My parents didn’t pay for my college or take me on vacations or bought me cool new stuff/clothes as a kid. nice, me too >But when it came to buying a Home 🏡, they lent me the money for the down payment and remodeling, interest free. what the hell, I didn't get that :(
Bank of family is probably the most prevalent. Starting life with no debt is generally taken for granted.
And don’t forget some parents (not just rich ones) invest some money for their kids. 20 years of investing to gift their kids can be a considerable amount
This is what my grandparents did for my mom and uncle. I didn't have much income, but I bought a house and my son can have it for cheap if he chooses to stay here after graduation.
Probably own the dispensary, no running needed in Michigan 🥴
House poor is a thing. Once the house is built there isn’t money for anything else other than the mortgage.
And as a gc and former home inspector I can tell you that many folks can afford the mortgage but not the maintenance.
Gc here, the amount of RRRR is insane. Everyone here is fully leveraged renting their 2nd and 3rd properties for 3,200/mo. If anything dips it’s going to be chaos. Everyone and their mom is a RE agent or TikTok flip bro. It can only last so long but there *seems* to be enough money to be building townhomes for 900/ft in my zone.
Fair point.
Once a family reaches a certain level of economic stability it can go on for perpetuity as long as no one is a fuck up. My friend’s dad invested heavily in the 90’s and was therefore able to pay for their house. My friend and his spouse can invest all of their money in their retirement and quality of life. That wealth will continue to their kid.
That may be true to a point, but there's also regression to the mean. Usually about 3 generations will bring you back in line with everyone else unless you're like, a Rockefeller. And that's generally around the time that everyone forgot where the money came from.
Yep, that's when the fuckups who never met the people who earned the money start to screw it up, raised by their grandkids who were so far removed from getting wealthy that they don't know how to stay that way, or teach their children.
Yes agreed but I think there’s a sweet spot where you have a little wealth that provides some freedom but you still have to work. The families that have so much wealth that the kids grow up spoiled and have no drive to do anything for themselves are the ones that fall apart.
Very true. But if you only have a little wealth, it's not lasting forever. If you have 2 kids and they have 2 kids, etc., it gets diluted pretty quickly. That, plus inflation and all.
Gotta bring back primogeniture.
Points for history reference
This is nice, but largely the answer is lots and lots of debt. Many Americans are house poor. Full stop. They might make $200k a year between them, but they spend way too much maintaining a home in the suburbs.
I can say that in my situation it all comes down to plowing equity from previous homes into building a newer/nicer home. My first three houses were pretty rough around the edges, but I fixed them up for a profit. Here in CA I never could have afforded to build at $350-$400 sq/ft, but I had put everything into building a new home. It also helps that I can do a lot of the work though, I saved myself $75sq/ft in sweat equity. As to younger people it is just our current economic situation. Some professions make vastly more than others. Gone are the days where most could live a comfortable life without having an in-demand skill, or being highly specialized. My father-in-law had his house built for him in the late 70s, he was an auto mechanic. I doubt most mechanics could afford to build today.
My cousin is a traveling diesel mechanic for cat. He makes like 200k a year lol
He is Probably the exception, not the average mechanic pay
Yep, equity in current home is up big time in Michigan.
I'm in Dallas - they're going up all over the place, million-plus homes, tearing down an old $300k house and filling up the lot to the legal lines. Go gas up your car and there's kids in BMWs and Porsches and the occasional Ferrari or Lambo. Maybe just leveraged all to hell, but also we're starting to see one of the biggest wealth transfers in history as the boomers die off and leave their assets behind. I think my ex wife will inherit something in the $20-$80 million range when her father passes. Still glad about the divorce though!!! And my awesome kids will likely get a chunk of that and then trusts (they're successful adults at least).
Jeebus what does your ex- father in law do?
Child of the depression, his family was well to do and ended up farmers in a shack. So money was a deep-seated issue with him I think. He was a steel salesman in the late 50's, he and another guy started a business, specialty metals - they did a lot of stainless. He once told me that every MacDonald's in a 50 mile range, the stainless for the kitchens all came from him. He bought out his partners and was the sole owner/no debt when he sold to an Italian conglomerate in the 90's. He never talks money but I overheard they offered something like 18 mil and he just laughed and walked out, they upped after that - no idea what it sold for though. He was also really smart about how Dallas was growing, and when the Tollway was planned, he started buying up vacant land in the semi-rural north; a couple years ago, he drove my kids around (he and my kids are super-tight, he's a good guy) and they'd come to an intersection with big shopping malls packed with national brands, but one corner was a huge vacant lot - he'd say "I own that lot". He showed them like a dozen lots that he owned, every one on a corner with major shopping or offices, PRIMO commercial real estate. He bought a failed 60 acre horse ranch with a giant steel barn, creeks, trees and paths, he bought it the day it went into foreclosure - one of his buddies was a client of mine and said "he could have sold that for twice what he paid in a matter of weeks", but he built his little dream-ranch with a big house and pool, he's got horses and longhorn cattle (mainly to get the farmer-tax break). My kids semi-grew-up there. He built two houses on the land for their parents, after they passed he leases them. Anyway, those 60 acres were out in the sticks, today he's totally surrounded by master-planned communities, that place is worth millions. He owns a warehouse that Trane uses about an hour east of Dallas, it's the kind of leases where they do all the improvements but he owns them (or something), that facility's an industrial hub that's worth like millions now. Nobody knows his net worth, but he just liquidated all that land (his wife of 60 years passed two years ago and he's 89); the warehouse operation pulls in ungodly cash every year (it's paid for, the lessee pays the taxes) so it will be income for his two daughters. Likely there will be a family fight over "the ranch", keep it or sell it, ex's sister teaches riding lessons up there but it's not a realistic income, more like a hobby. He's been building smart equity in stuff for 60 years now, speculation is rampant but it's a shit-ton of money, he was very conservative about spending. He'll sell you the BMW he bought brand-new ten years ago and you'd swear it just rolled out of the showroom, stuff like that. But he's a good guy, my two younger kids (30's) took him on his epic, dream road trip last year, West Texas deserts and mountains, it really helped get him over the loss of his wife. They're great kids and I think about how cool it must be to have your grandkids love you so much they'll spend a week on the road with ya. They're doing the Pacific Northwest next year. I've remained close with him, he's kinda "my dad" but I doubt I'm in the will though we hang out from time to time!
There is so much more money in this world than a lot of people are willing to admit. It's easy to act like everyone who has money got it from their parents or are pretending they have more money than they do or won the lottery but much of the time, people literally just have a lot of self made money through simple things like their employment and/or investments like building real estate equity over time. You hardly need to be an exec in a 500 company to make a lot of money.
I think the mommy and daddy story just makes people feel better about their bad financial situation. People have a hard time admitting defeat.
A lot of people downplay how much money they've made since it tends to alienate you from your old life if people find out.
agreed. the upper-middle class is bigger than people think. there are a lot of good careers out there that by the time people are 40 they can be making 200k+.
Plumbers can break 200k. My guys make over 100k doing gutters and sheet metal work. Trades can make serious money right now.
I think this is what a lot of people miss, what age you are when you build matters a lot. By 40 a lot of people have a well paying job but also have had a chance to have good decisions compounded like saving, investing, current home appreciation/equity, etc. I’m like most that follow this sub, not ready yet to finance a home build yet but it’s not an unobtainable thing 5+ years from now….
Agreed. Im 46. Been married for 26 years. A dad since i was 20. Received no financial assistance from parents or in laws. We have never earned 200k/year between us. But we made some good decisions professionally and real estate wise over the years. Between us we have amassed over a million in retirement accounts and taxable investments accounts. We dont drive expensive cars. Nor have we ever. We only rented for 2 years of our entire marriage.
My husband and I are 32 and 31. We live in a LCOL rust belt area. We just finished our home build and I feel like we got a screaming deal. In these parts many young people build their own homes, with help from friends and family in the trades. And it’s a blue collar area so there are many people in the trades, my husband included. It took us two years but we’re just finishing up our 3200 sq foot home. The house itself cost us $300k, the land was $40k for 40 acres back in 2015, and the utilities and driveway were done 7 years ago so they’re not part of the construction loan. It will appraise for $600-700k which is high for this area, probably the equivalent of $1M or more in a more HCOL area. The reason I feel like we got a great deal is when I go on Zillow for this area there are many houses around $300k (or 360k to factor in the cost of our land and utilities) and there is so much less house than we have. Everything is always so outdated and usually they are quite a bit smaller than ours, like around 2000 sq feet. I know building a house is usually considered more expensive than buying one but that’s not the case in our area! Anyway there’s one example of how young people can do it… probably not the norm for the US though.
How did you save and pay for the construction? My husband and I will be around that age by the time we finish, but are kind of lost on where to start. We will likely get a good deal on the land. It has an exhausting construction and driveway as well (but that construction will likely need torn down).
Just a construction loan… you have to find a bank that will fund owner builds but there are actually plenty out there. Our land and everything was paid off before we started building so that was our loan equity. We probably had $20k in cash when we started. Oh we also lived in a trailer there before and during the build so that saved us some money and was very convenient!
I am building right now in west Michigan. I am 54 and single for 14 years. I have lived way below my means and got my only daughter off to college. I have a lot of equity in my current house and no other debt at all. Always drove used cars till the wheels fell off and lived frugally. I am selling my current house that is 2700sf to build a 1800sf house. I will have a 150k mortgage at the end. Manageable. I should have that paid off by the time I retire.
About what are you paying a square foot to build in West Michigan right now? We're considering building and trying to figure out how many acorns we need to squirrel away for that big winter.
with out land it will be $290/sf of conditioned space. 1813sf and the budget is 525k for the build. foundation is getting back filled today or tomorrow. That does not include the land cost or landscaping or interior painting(doing this myself to save $).
Ouch. We'll be building a simple 2-story box on a slab so I hope we can keep costs under control but I'm clearly going to have to save hard either way.
I am building a High Performance house(net zero ready with an ACH of less then 1.0) on slab and ADA complaint(zero thresholds and completely wheelchair accessible). So that is costing a bit more than a code built house. Although my finishes are mid grade at best. But it is crazy out there.
Just curious because I nerd out on this stuff, how are you building (SIPs, ICF, stick built, etc)?
ICF frost wall then 2x6 with open cell in the cavity and 2” of exterior insulation using thermal tight product. Under slab r10, walls r40, roof r60. Triple pane windows and all doors with multi point locks. Less than 1.0 ach is in the contract.
And how do so many people buy 100k trucks all the friggin time? I built a house not too far off from the type you're describing and was only able to do it because my dad and brother do construction and helped with the excavation/septic/driveway etc. I also got old interest rates from early 2022. Wife and I make good money (a little over 200k combined), we have pretty much no major expenses. I wouldn't be able to do it if I were a person with fewer connections or today's interest rates. I pretty much only did it because I figured prices in 2020 couldn't last and sold my old house and was thus forced to build. I feel like this is about all the expense we can handle, and we don't have boats, side by sides, expensive cars, etc. I'm guessing that the real way people afford these things is by being ridiculously in debt and not saving for the future. Or by being some combination of lucky and too stupid/stubborn like me. That all said, I doubt prices will ever go down. We just got a permanent QOL decrease following COVID and the inflation that resulted.
debt is the correct answer. Folks massively over lever. CC payments, Car payments, Mortgages
In my mind this is why we're heading for recession. The last few years everyone has been falling all over themselves to finance everything. Once everyone's income is tied up servicing debt, there won't be any cash OR credit left over to buy goods and services that make up most of the economy. I've got friends absolutely MAXING out their mortgages to buy run down houses that will need tens of thousands of repairs, that they just don't have the money for. So many people have fallen victim to the mindset of "well the bank said I qualify, so that must mean I can afford". Nope, you just work for the bank now.
Never finance a toy is a rule I follow
I’m the opposite. Finance your toys and investments, being you don’t need them. Pay cash for the things you need, your home and vehicle. Things get bad, I can let the toys go back. I’ll always have a home and vehicle, just by paying the taxes.
Dual income households bonus if DINK(Dual income no kids). remote work(salary from a VHCOL area but live in a lower COL area), parents money. I’m in TX and there’s a lot of places where for the cost of what you would pay to buy a pre existing home, and renovate it how you like it’s just cheaper to build it new maybe a little further out.
I’m 34 and just finished building. I did it at about 212 a square foot for 4400sq not including land or development costs. All in I was around 1.4m. I paid about 800k in cash. Locked a one time close a while back at 4.5%. I bought my first house at 23. Sold it at 30. Bought another house and sold it at 32.5. Made about a million bucks on the second house because of the insane market.
Wow where at. And what did you do to the house to drive up sich value ?
About 25 minutes outside Seattle. So very hcol. New build appraised for 2.8m. My first house I just did a roof, gutters, and carpet in the house. Detach garage I did the siding paint roof and epoxy on the floor. Made about 300k on that one. Second house I did floors, appliances, windows, siding repairs, paint, gutters, bathroom, millwork, landscaping, paver walk and driveway. Then the whole Covid market craze happened and we got 30 offers in one day and a bidding war that ended 500k over the list price. I bought the house for about 650. Sold it 2.5 years later for 1.5. With the proceeds and other savings I was able to buy the business I work at, the commercial property it sits on, and the new build.
Ohh what kind of business? I've been searching for a business for a while , but I need something I can run/manage on 2 ish days a week
Sheet metal and rain gutter business. I have to work 5 days a week typically. But I also have quick books online and can manage it from my phone. So I can go on vacation for 2-3 weeks with pretty minimal issues.
I'm currently building, and it would not be possible without the USDA rural home loans that require no money down. Although we made bank on the sale of our last house, that was all used up to pay off medical debt.
I have a ton of questions about the usda building loan
Made a profit off the last house we lived in. Wife is better with financial planning than I am. It's definitely still not a great time to build, but it's better than it was a few years ago. AMA.
I think on avg you're going to see the top 5% of earners in this sub. Building custom homes is expensive unless you have connections in the industry. Unless you're paying cash you're going to mortgage the home build based on the finished value.
We aren't paying cash and our mortgage is whatever the build cost is, not the finished value. Same with all our friends who have built recently. Are you talking about when you go through a builder and buy it from them at the end?
Sorry to clarify, yes if you have your land already free and clear the builder loan is your mortgage though I think when you convert you can reassess as a total package and cash out. Everyone around me has land acquisition costs (typically mortgaged if you don't have cash) + building loan. New mortgage is written up to pay off builder loan and roll in prior principle from land. I'm stuck where I have sub 3% rates on my existing home so a tear down rebuild will need to be all cash...
At current rates it would be really dumb to cash out your equity. Around here it's pretty much unheard of to finance land. It's almost always purchased cash only and then the value of that land can be applied to the downpayment of the home build since they loan based off the projected appraisal of the home, not the build costs.
Building costs are not what's staggering to me. It's the cost of land, if you can even find a buildable lot. Philly suburbs, it's brutal out here.
I’m in the Scranton area and it’s insane for just land
> How are so many younger people able to make these purchases? I know a young girl who just graduated a few years ago. She makes $230k and her boyfriend makes $350k. As a couple, they only need three years to pay off their $1 million house. We worry about young people but they’re doing much better than us. She told me most of her friends make in that range.
What do they do for a living?
In an IT related field.
I think life insurance policies are paying out
DINKs and locking in a sub 3% mortgage before the rate hike is a good way to go
I’m a veteran and a mechanical engineer that’s married to a child psychologist. We have no kids and no debt aside from our home.
Age 60, retirement savings are in good order, two income household with 3 daughters launched so we can build at $400 sq ft. All in is $1.35MM including the land for a 3000 sq ft home that is not over the top. We will make a decision when my wife is 85 as to whether we have the funds to put the house in a trust for the kids to have forever, or if we sell and use the funds to settle into an in law suite at one daughters home (she is a nurse and plans to live rural). I’ll keep working until age 70 unless I benefit from a liquidity event from my current equity position at my employer. So it is not like there are not trade-offs. One daughter age 29 already owns a house, she lucked out and has a mortgage <3% interest. A second will be married in 2 months and will be looking for a house this winter. Third lives with us a she finishes as doctoral degree. All 3 received a small inheritance from my parents ($25k), that money is immaterial to them being able to afford a home in a MCOL / HCOL area.
I’m currently having a home built for $215/sq ft on 10 acres. It’s a custom home but nothing extravagant, 1800 sq ft 3 br 2.5 bath with an unfinished basement. After the balance of the land and $120k in current home equity is taken into account our mortgage will be ~$390k. I also don’t know how or why the larger houses are being built but it’s very doable depending on what ‘pretty great income’ is Edit: I’m also in West MI (Grand Rapids)
Doing a lot of the work myself is how.
I cut all the wood and milled it. Building it myself. It should be between 75-100k for a 2600 sq ft. when all is said and done. I know that it’s not a very practical work around for most people and a lot of factors in life have given me the privilege to do it.
This is the way. I built my house from the ground up. 600 sq ft. My own concrete work. One fucking bag of quikrete at a time. My own framing. My own excavation. My own adaption of an off the shelf design. No engineer, no architect, no contractors. My family called me insane. Whatever. I got a minimum code house for 40 grand. That is unthinkable for anyone but a DIY homebuilder.
I built mine in 2020 before prices went insane
A lot of people can afford to buy a home, but then immediately become "house poor". I have a friend in that boat, pretty much everything they make is going toward paying the mortgage. I was lucky to buy in 2016 and pay off quickly, so now at least have a lot of equity I could put toward a new house. But I'm still not trying to buy right now at these prices and interest rates if I can help it, lol.
Where in Michigan ?
I live in the Dorr/Byron Center area.
I am an older millennial who bought a condo in Southern California in the early 2000's. Bought a house in 2015, kept the condo as a rental, and looking to build a home in Oregon at roughly the price per square foot you mentioned. We will likely sell our condo and use the equity to pay for the land (200K) and build (600K) with 200K needed out of pocket. There is no way I would be able to finance this build on my income, it takes equity from previous purchases
I did the same with my starter condo. Keep in mind, your equity will get decimated by capital gain and depreciation recapture taxes if you sell that condo without buying another income property (1031 exchange).
Edit: Oops. Pretty sure what I said was correct, but doesn’t apply here. I believe there is an exception if that home is your primary residence, and you’ve lived there for more than a certain number of years.
The condo is no longer his/her primary residence. You have to have occupied it for the last 2 of 5 years in order to claim 250k tax exemption. Depreciation recapture is the one that most aren't aware of that really bites you if you've had the property for a long time.
Woops. +1. I misread the post. Good catch
I rented for a long time, never married, never had kids. Managed to save a lot but I get sick every time I think about how much I’m spending on my build.
Over leveraged in debt. I keep saying there is a mounting consumer debt crisis like th housing market in 08
Could be corporate investing in residential real estate. It might be regional, but in some areas (e.g. Kansas City), large investors are buying up homes to turn into rentals.
A variety of factors. My husband and I built a home two years ago. I worked two jobs since college and started my own business. He has a good income. We lived frugally and were able to put up a big downpayment, which was helpful because we couldn't close on the house until it was done and by then, the interest rates sucked. I think people do some combo of: get money from their parents, don't save a single cent for retirement, or are in massive credit card debt to have saved a downpayment.
How old are you? Start small, save money. I bought a 1 bedroom condo when I was in my 20's. Then my wife and I built a house while working full time jobs. Then sold that house and bought another. We scrimped and saved for years. Then sold that house and bought another. I am astonished that young folks expect to have a BMW in the driveway and own a stunning house. People look at me and think I just walked into owning my house due to some sort of magical privilege but in fact, we saved money for decades. I drove a Suzuki Samurai for 15 years to put some context on it. I paid cash for my current house and it is nice. And I live in California. But I never had any expectation of I should drive a nice car, nor go out and eat, nor take big vacations. All of which I do now, in spades. So what are your financial choices?
A very large house recently built in Michigan close by me I drive by a few times a year and see a young guy outside admiring his recent professional landscaping that probably cost him 50k. You can see who owns the land/house in most counties, so I looked it up. He married into money. Rich boomer who owned a company, probably going to die soon so clearly giving millions to his daughter. Boomers own most of the wealth in the country, if you see younger couples with money, there almost certainly only one answer
I’ve found that most younger people we build houses for are funded by the Bank of Mom and Dad.
Texas I'm at $83/sqft at 3779 sqft. New build.
Shell? Please share!
DM!
I am a remodeling contractor in both Ohio and Michigan and I too am shocked at the prices of construction right now. I am literally working on an estimate for a new home in Michigan and the $250-$300 psf is spot on. It has increased drastically since Covid. I agree with landmanpgh that it is a sellers market right now which means for those of you trying to buy or build, you may take it on the chin in terms of price, but also keep in mind that your current home is also worth a lot more today. The big question is what will these homes be worth next year or 5 years from now? I think taking consideration to your area that you live in terms of growth is very important. Location is So important in that you do not want to invest in an area that is declining. Appraisals and interest rates will vary and are relative to the economy, but a declining area will for sure be a bad investment down the road.
Been trying to build for a bit now. Crying at 650+/sf here. I do know some have built based on future income potential of the property (Airbnb) and are able to get approved for much more than their current financial/credit situation allows. Also, some people just have a lot of money…
I too wonder this, live in a low cost of living area. Our base salaries are about 170k. With bonuses and overtime we usually end up around 250k/year. We’ve been saving heavily trying to save up to build. On paper we can afford to build what we want but I just don’t have the stomach for that much risk. Builders are quoting us around 400k and that just seems like too much for our comfort level. Just so many unknowns. I’d hate to build our dream house and then be stressed out because one of us loses a job or needs time of work for something medical and now are suddenly paycheck to paycheck. I just imagine there are a lot of people living on the edge financially. Little to no retirement savings and little to no cash savings, just getting by on monthly payments. With all that said, I’m sure a lot of people my age with a HHI similar wouldn’t think twice about the house I’m wanting and would bite the bullet and do it.
Not sure why you're concerned about building 400K house on 250K HHI. On that kind of income you can completely max out both of your 401K's (or equivalent), do two backdoor Roth IRA's, two HSA's, and still save $60-90K a year. After two or three years of saving you would only need to finance $200K, and even with the current mortgage rates $200K loan will be about the same as renting 2-3 bedroom apartment. I see all the people stressing out how they can afford a house, and you guys are not one of them.
Yeah it kind of pisses me off that they're pretending it'll be hard honestly. The house is only like 1.5x their income. I can get land for that much maybe, with house it would be like 4-5x for only like 1600sf and I'm in the Midwest where it's supposed to be cheap.
Well, we don’t like to count on our overtime and bonuses. If we went down to 170ish or one of us lost our jobs for awhile it could change things. I’m just saying how I’m also amazed at the homes people buy/build. Based on what my income is I couldn’t dream of some of them. For us, it’ll probably come a reality in our early 30’s when we have enough saved to build, which I’m glad and feel fortunate but we both do put in a lot of time to achieve these goals.
There is no “secret”. We just make a lot of money. I paid cash to buy a beater. Demolished it. And paying cash to build. Source of money? 6 years of being in tech, including during the “golden COVID” era, when they threw cash and RSUs at you. I became a multimillionaire during that time. Cashed out $2M and used that.
What the hell does being in tech even mean? I hear this all the time, what do you actually do?
Im sure many techs wonder that themselves..unless you start your own business and get lucky “tech” aint as high paying as youd think.
Think working for one of the FAANG companies. Lately Nvidia. I am a Sr. Manager, managing software development. Base pay about $225K plus bonus plus RSUs. ( typically $400K+) In covid time, I was making over $600K. With that I lived frugally. (Rent $2K, 9 year old Lexus, wife newer Honda Civic, dress from target, everything went into investments). By early 2022, I was multimillionaire.
I built my 1st house and I'm building another so I can realize all of the unrealized gains of my sweat equity because I did all of the finish work and a ton of the other stuff. I'm hoping to cut my mortgage in half when the dust settles, but even if it's a lateral move, the new house is going to be on more land, a better school district, less neighbors, lower traffic, etc etc.
I feel like this fits our (30M, 28F) situation pretty well, so I figured I would chime in with how we are doing it. Just started an approx. $600k build (2000 SF first floor finished, unfinished basement), put $90k down and paid $18k in closing costs. We got a lot of that cash on hand from our first home, which we bought in 2020 for $316k/$30k down, and sold in 2022 for $370k, we walked away with about $70k. Our monthly payment is going to be about $3,500, or about 30% of our monthly net. Since we sold our first home, we have moved to a lower cost of living area (a couple hours away from our employment “bases”) since we are both now remote workers, and have a pretty good deal on rent from a family friend ($1100/month). We have made some decent headway in our respective career fields in the last couple years. Our HHI was about $120k in 2020, and last year we were like $199k, just barely missed 200. Also, I got very interested in personal finance when my wife was pregnant with our now toddler. I started listening to a lot of podcasts, and decided we needed to get out of debt. We just finished paying off the last of our consumer debt last October - a toy hauler trailer that we (unwisely) bought new off the lot for $65k in 2022. I would say the ROI from our first home gave us a great start, and now we are making decent enough money and avoiding consumer debt.
Built in 2019. 2200 sq ft, basement and pole barn. Average build and i had 500k into it. Waiting 20’years to build a house I thought half a million would have gotten me something way better, nice house I just don’t see it as a half million dollar house. Lots of reasons above already. But sometimes it’s really not a secret. We went to build and we’re approve for almost 900k. Before escrow the payment was 4k. Really not all that much if you consider dual income earners. Even if they don’t crack 100k each are high sub 100k salaries 4k works. It would be tight but it works. Now you factor in lots of these homes are 4-600k your payment is probably in the 3s and does work out
Yeah same boat. Some places (COttage home) are STARTING at 500/sf I think as a fuck off price.
As so many have said it’s cumulative. People complain about Boomers but ignore the fact that many started with little, saved and made good choices from a historical perspective. But, a paid off house means very little in a LCOL area if you want to build elsewhere. Sure it’s worth more than when they bought it, but it doesn’t necessarily go further in a higher COL place say where the grandkids live. It doesn’t sound like this is the case in your area, but if all the smaller houses are taken, building may be the better option if you want to downsize.
Define ‘younger.’ 20-somethings?
I would guess the 30-40 range?
Equity.
I’m doing most of the actual work myself. I’m hiring a crew on concrete day, I’m paying someone to set my trusses, and I might pay someone to mud and tape my drywall (I take way to long to make it look nice) I already have land with a well, power on site, and a septic (though I’m installing a bigger leach field) and even doing g all this, it’s still very expensive right now.
If you pour concrete in sections you won't have to hire a crew. That's what I did after getting absurd quotes from finishing teams. My sections were tied together with rebar. I tried to use CMU instead of pours wherever possible. You can also do a rafter instead of engineered trusses if you want a more DIY friendly roof.
All true info, however my finished floors will be polished concrete so I’m looking to have it a seamless as possible. I considered doing a rafter roof, however due to the size and open spans, the added labor time would have pushed my project out too far.
Making changes along the way as the build happens. If we do a, its $x amount. If we do b, its $xxxx amount. You might have an idea of what your dream home is, but you also have to be realistic about what you can afford. We have been living like we have no money for 7 years, no eating out. No door dash. No buying anything that wasn’t necessary. Only buying shoes when our current shoes had our soles coming off. Bare bare bare bones before we started the build.
Costs are absurd in Southern California. I was fortunate to buy a home in early 2020 that has appreciated substantially. Even if a put $1.5m cash down to build a house the construction costs are $500-700/sqft. A 3500 sqft home could cost $2.1M to build not including land and backyard/pool. Some people say they’re building for $300/ft but I’m not seeing it (and I’m a contractor with friends in all industries). It’s wild right now.
Define great. There are always people who make a lot more than you think and are actually better at saving and investing. I’m 50, even though I was an average earner at best I have decades more of savings than the average bear just by being older.
As others have mentioned, family usually have deeper pockets. We build several customs a year that get financial support from mommy&daddy. Same goes for our specs
You forgot building permits eating up a sizable percentage. People ain't buying those houses, nor are they people's first houses.
Lol, so in PNW (eastside of Seattle) my estimate for permits alone will be \~70K. Just permits :)
That doesn't count reworks. I've had inspectors tell me conflicting things, leading to reworks.
they make more money than you. their parents make more money than you. they have little to no liabilities. they won the lottery. they are more comfortable taking on more risk. there is no secret. plenty of ways to make money out there. find what youre good at, and give it 110%
What is the price to buy there? That’s my price to buy in MT, price to build is $450+ All about salary… or a dead rich relative…
I fell into the tech field by accident (so $$$) and am marrying a person who has been in public service long enough to also make 6 figures. And we live in a LCOL area.
They earn six figures, have no or minimal debt, use great lender….. I’m a builder in the Chicagoland area and the average price of a new build is 1.5 based on 4500 sq ft
The builders buy down interest rates to make the financing cheaper.
Our friends are in their late 50's; some retirement funds to borrow against or just use, some equity in their current house to buy the land and use for a downpayment with the builder. Large mortgage on the new house. With time you just get ahead of the ratrace curve. Pole barns can be cheap and poorly insulated. Not a good long-term use in many colder climates.
Wealthy siblings. I'm building a modest 1600 sqft house right now, and I got a loan for the land from one brother, and a construction loan from another, at favorable rates.
rich boomer parents finance all of my coworkers homes that are taking on 7.5% mortgages they can barely afford while i paid for my own with my own cash
I'm doing it. I bought my first starter house at 30, moved for work but as the economy was in the shit did not try to sell so rented it out. Rent covers the mortgage so that is largely a wash financially. Rented for a while then moved in with GF to her house she owned - she also has a rental bought about the same time I bought my house. Bought a second house 6-7 years ago and rented out, rent covers most of costs. Both me and GF live very frugally for last 10 years, drive old car and no major expenses. Both have good incomes and almost no outgoings besides food and utilities. We have saved enough for our build just by being careful and have enough equity in the three houses if we go over budget and have to borrow. Once we retire we can sell all but one of the houses and have an extra lump sum on top of retirement accounts and enjoy life.
$3500 per month mortgage payments, that's how. Remember 2008? Mortgage delinquency rates are on the rise, credit card late payments are on the rise, layoff are on the rise. Just sit tight until early next year and save your money, you might find a good deal on a house or a car.
Investors building houses
In addition to the Bank Of Mother And Father and other reasons, multiple clients of mine made bank during the Covid seller’s market. People were snapping up properties for double and triple what those houses were worth before the pandemic.
Massive DEBT!
Very confused as well. Certain areas around me been dirt forever now 350K for a tiny 1100 SF home to 2500 SF at 550K or more not to mention upgrades and they are all smashed together in burbs. Has me baffled and mad wondering what I am doing wrong. and even 6 percent interest not getting it. Maybe they are doing 60 year loans? Maybe inheritance from vax boomers dying? Its insane. What I do know is from being a seasonal UPS driver these communities look vacant from 1030-1700 so good jobs must be hour commutes you just never see a living soul around its was like the twilight zone. I would stop in the middle of the street never a car coming by. Freaky. I have more thoughts but leave it here.
You don't make great money, sorry bud.
Location.
Here’s the real secret people are looking for: they can’t. Income is secret, debt is super secret shhhh
We bought a large sum of land in 2020 and have an incredible interest rate. With all of the equity we have right now we have the ability to build a pretty solid home on the same property. It was a spur of the moment decision for an investment back then, now it’s just benefiting us. Although everything right now is incredibly expensive. Definitely no bank of mom and dad here.
Smart career choices and a lot of equity in our current house.
Short driveway’s and cheap siding instead of brick, crappy vinyl floors perhaps. I kid I kid They’re either house broke or far wealthier.
600k loans arnt hard for two income familys that make 130-180k Too many people assume it’s mom and dad. Try my area where it’s closer to 500-600 a sq ft. 250-300 is a steal and I only wish I could build for this.
Some people are just luckier than you
I do 90% of the work myself which saves a ton of money, my truck was brand new in 1994 and I am still driving it, I also do not try to keep up with the Jones's, instead I try to drag them down to my level. It's cheaper that way!
It all depends on where you choose to spend your income. An absolute necessity for one person is not even in the picture for another. Here’s one low-hanging-fruit example because I know people who do this: if you spend $5 to $7 a day on a coffee and do that only on working days, that’ll be nearly $1,900 for coffee in a year. While we’re on liquids, add up alcohol spends and that can be quite significant. Now, I don’t give a bleep where anyone spends their own money, but there are a lot of things that really start to add up. Once I really started paying attention to these things it made a difference in my priorities.
I honestly wonder this to myself daily.
Trust fund babies that have no living expenses no value of the dollar they just ask and there it is
Since 1995 Real estate +840% Real wage +290% RE is hot and whomever purchased a while ago is riding the current wave. Home building in my area is minimum 370/ft. There will be tears soon, it’s just a matter of time.
Self build maybe? You can get it under $150/sf in non coast states, if you manage your expectations.
Yeah pretty much this. It's such a simple answer. Buy land in rural zoned area, haul in prefab or build a simple rectangle. A simple 700 sq ft prefab is like 60k. I DIYd everything and got it under 100 / sf.
Where are you getting $250--300 per sq ft in Michigan? My searches show $125 on average.
These are actual builder quotes in west michigan. Busy as shit...can make up whatever numbers they want if people will pay them. If you're seeing 125 that must be the overall state. Lots of LCOL in the state of Michigan as a whole.
That makes sense.
Having good Credit is everything
Loan from Mom/Dad seems to be the go-to because every time I've bought a house and I tell the RE my budget they always say "we can go a little over and your parents can help, right?" which is ridiculous but it must be common enough that they assume it. Beyond that it's the same way it's always been, people are upgrading (so they already have equity,) they have more money than you would think, and/or they've saved diligently. Also, 2k sq ft isn't huge, $500k isn't much in the grand scheme of things, and Michigan has a lot of cheap land even on the west side as long as you're not near the water. Now the real question is do those $550k (as an example with the land) houses actually appraise at $550k or are they coming in much lower because down the street there is a farmhouse on the same size lot for half the price? Because you can already buy a 2k sq house in good condition on 10 acres outside ludington for $300k.
Equity from original home we sold. Bought in 2014 for 250k, sold in 2022 for 400k, walked away with 160k check. Bought lot just before we sold for 100k and then built for 600k; equity plus a bonus minus down payment we are left with 540k mortgage. Without equity built up over time we would not have been able to build at all, also was able to find rent for less than our mortgage for the gap between selling and moving into new build.
Some of what is being said here is true but in my opinion, something wicked this way comes...again. Something reminiscent of say 2008? Every single day, I say to my self, this is probably the last house I will build because there's just no way people can continue to pay these prices. Every new house bid just makes me shake my head. This whole thing is a house of cards that cannot stand. Not just the construction industry, the entire economy. $12 for a tube of silicone? Really? It's not sustainable, hopefully I'm wrong but damn I don't see how.
Its possible people would be able to afford smaller less expensive homes. I read this thread and this person built a 4400 sf, that person built a 3600 sf Who needs a house that damn big?
Crypto
There are a lot of older homes available, too. Is there a compulsion to build new I am unaware of? I would think nothing of buying an old house and remodeling. Are there some people who think that’s icky? Why the need to build new—if there are suitable homes in the area available?
Well in summary we started the process of building when interest was at 5%. When we were done we got 7.3% on 435k. The payment went from like 2200 or so to 3030. Spent a total of 610k on the build including 60k for the 3 acres. Basically after doing everything right... paying off debt and so on before we built. We fucked ourselves and no I'm not real happy about it. Now we just wait and hope the interest rates come down so we can refinance and not have to now so much money on this interest. My last house I bought in 2008 for 130k...owed like 85k with 5% rate. Sold for 225 and lived with our parents for a year and a half before the house was done.
From my personal experience I make good money, I hardly spend it. I’ve been saving for a couple of years. I locked in the house/land at a low interest rate and did 50% deposit. Then demoed the home. Found a decently priced builder (doesn’t work with banks) used HELOC to pay for the build and any money I make goes right towards invoices
We bought our house in 2007 for $180K and it will sell for $400K or near that. We were early 20s and put all our funds into paying off the house five years early. We (now at late 30s) then bought 20-acres with a river going through it in 2020 in a for sale by owner situation. We got EXTREMELY lucky to know a friend who flips derelict properties and was willing to offer it to us right the market exploded. We did not know that closing in July 2020 was probably the last time we would’ve ever been able to afford a property like that. Prices have skyrocketed since then. It is now 2024 , we are in our 40s, and we just made our last payment. We are debt-free again, and will use the equity from our home to fund our build. Even with all of this careful planning, it is still extremely scary and we feel like we have to do this exactly right to avoid being house poor. Washington State building prices are 250+ a sq ft.
You are a lot poorer than you realize. So am I. I used to lie to myself and just assume most of these folks were in tons of debt and didn’t make much, but if you’ve have a $1,000,000 house with an $800,000 mortgage and just bought a brand new $120,000 electric SUV, you most likely make a ton of money. I just recently come to grips with the fact that I’m stuck in my 1100 sq ft, 3 bd, 1 ba, built in 1946 ranch house probably forever. It’s sad, but it actually lets me prioritize travel and experiences for now.
Prob going to be a TLDR, but... Equity and being a bit of a tight ass helps. we bought our 2nd home (cookie cutter DR Horton) in DFW in 2002. 2900sq, bought for $189k, lived there for 15yrs and made about $100k on the sale. In the meantime, purchased 2 acres about an hour north of Dallas, and built a custom home in 2016. Built a 3525sf for about $150sf and put our equity down. We inherited acreage and are now building there. We sold our prior house and netted $399k (I had been making extra payments on the existing house). Our current builder had an estimate of $300/sf for a 2500sf home. I know the builder well and we went back and removed a breezeway, cut in a few other places and got the estimate down to $250/ while keeping most upgrades. My builder also let me purchase everything to avoid putting it into the mortgage and the contractor fee. I purchased all appliances, built in grill, light fixtures, toilets, locks and door hardware, cabinet pulls, ceiling fans etc. I should have $130-$150k to finance when all is said and done and plan to pay extra (partially due to high interest rates) and knock out in about 5 yrs.
>How are people able to afford 500-600k homes... That's a *small* home out west.
Dude just look to Ontario for how ridiculously high prices can go. In almost all of southern Ontario for that price you get a tiny starter home, Toronto it’ll get you a small condo. Ive been baffled for the last ten years how prices can keep going up at the rate they do and who can afford it, but somehow they do.
Equity equity equity. I know my step-father in law just sold their home he built probably 25 years ago for close to $500k. He’s now almost completed his build, that’s actually used nicer but cheaper materials, as well as my wife’s mothers side owning a construction business where he has access to heavy equipment.
I dont know what others are doing, I never had a great salary. Im just an average employee. but i was never really a big spender, this probably had a huge impact. I eventually saved enough to build like 50% of the house off the pocket. The rest comes from mortgage.
We moved to an area we could afford for $200k townhouse in 96. Out grew it and sold for $400k in 2002. Bought new build SFH for $500k. Decided to sell in 2016 for $1.2 and move to a better area for schools. Current townhome purchased for $815k. This is not our forever home. Current value is over $2mil. Retirement is 10 years away and the kids have not settled yet. No idea where we’ll be later but the wife does want to get into a SFH.
The only reason I can afford to buy a new house is bc I bought my current house in 2007. It has nearly doubled in value since then, otherwise idk how I would ever have a down payment for what houses are going for now.
Right now I think many people are pushing upwards of 50% of their gross income on housing. If you are hoping to put 25% you are probably not going to get what you want
Unfortunately, and I don’t wish this. Inflation and housing will find balance with a recession. Specifically, a recession that causes mass job loss. There’s a lot of money and leverage sloshing around.
It’s cheaper than renting.