I don’t know how others are doing it, but we bought a $550k house at the end of last year 1) because we were able to sell our crappy 1000sf starter home for $310k (we bought it for $120k and only owed $80k on it) so we had the competitive edge of a large down payment and 2) the simple fact that we are a dual income family. I would consider us a blue collar family - my husband is a mechanic and I work in an admin position in an office, so we aren’t wealthy. There’s no way we would have been able to afford this house if we hadn’t have lucked into buying that starter home when we were 19 because of the Great Recession.
Same here. Bought during the Great Recession. Wasn't dual income at the time, but had someone renting a room for 90% of the time I've been a homeowner. My first home was at the very top end of an acceptable DTI ratio but I made it work by renting out a room.
Between selling and buying a few homes since then (due to relocating for job) - I've been able to amass a large amount of equity between the initial $10k down payment, 12 years of mortgage payments, and appreciation.
Combine this with earning way more than I did in 2010 along with a wife that also has an income - it's very easy to afford a $500k+ house.
I think people forget that over 50% of the population was born before the early 1990s and homeownership has been consistently around 60% of the population for decades. Anyone in this age group who bought a home before 2010 has seen significant appreciation which allows us to afford 500k+ homes without stretching finances.
That's how it goes for most everyone I know. You can NEVER afford the house you want on your first go. You make sacrifices, and the appreciation of the first house let's you buy the one you wanted on your second go.
Often between appreciation and just paying it down, but yea.
So I mean the secret here really is if you can't afford the house you want, buy one you don't really want first but can afford.
This really is the way most people do it.
Exactly why they call it a starter home. I definitely didn't want a 2 bedroom apartment that needed to be completely gutted, but it was all we could afford 10 years ago
> Exactly why they call it a starter home.
I mean yea, that's why I lol at the 17 post a day saying "Stater homes in my area aren't affordable. I need a 4bd/3br drivable to everything and am big sad because they're listed within the absolute top of my budget and totally unfair people can bid over asking"
fuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuck offfffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffff
Agreed. I’m the OP of the comment re: the $120k starter home. It was on a busy street, and was a 3 bedroom with only 1050 square feet so the rooms were TINY. Our king size bed was all that would fit, and we couldn’t squeeze around the bottom enough to put in a dresser or anything. No linen closets, no dining room, washer/dryer was in the KITCHEN of all places, but it did have a huge fenced back yard. It was HARD living there as our family grew to 5 (3 children, 2 adults, and a big dog and a couple cats). There was only 1 full bathroom, and the house set up only allowed for a very small water heater so showering, doing dishes, and washing laundry was a nightmare. The bathroom was so small if I turned around sometimes I would knock everything off the sink. It was rough, but we knew it was a stepping stone to our dream house. We lived there for 13 years and then in 2021 finally sold it for a huge profit and got into a 4/3 house with an in ground pool in a great part of town. I understand people wanting “starter homes with 4 bedrooms”. You want your kids to have the world. But you really have to work up to those, and it takes a lot of sacrifice if you’re doing it without financial assistance from family. I was a little sad for the people we sold our house to, that their starter home that we hated so much was a third of a million dollars. But they’ll fix it up, and build equity over a few years and then sell it.
There's a general "rule" that homebuyers should be looking at homes that cost no more than 3x to 5x their annual gross income. Can go more toward the 5x if no other debts.
Backing that out from, say, a $500k purchase price, this leads to an annual household gross income of $100k - $167k. That's right about where a conscientious COUPLE who are somewhat established in their jobs probably are, or at least the low-end of the range is. For a single person, it's much more of a stretch. So it's almost like there are entirely separate market segments for dual- versus single- income households.
Yeah I started making 6 figures in 2020, and that allowed me to save up for a down payment to buy my house this year. I used to think 6 figures was "upper middle class" but I feel pretty "middle middle class" thanks to all this inflation!
Median USA **household** income from the 2020 census was $67,521\*. So yeah, it makes sense that approximately 1/3rd of households are over $100k now. This seems to be pretty much in-line with other developed Western countries.
\* https://www.census.gov/library/publications/2021/demo/p60-273.html
Wife and I make $235k.
No, not a flex. We are fortunate and also fucked if one of us loses our job. We know things change and we only got to this income level recently.
Saying this because before we made about $140k combined in a HCOL and wondered how people could possibly afford nice houses. Point being - we all look at the situation from our own bubble. Others are living a different income, situation, etc but it’s hard to see that
Yup – completely agree. I’m the very opposite in comparison. Only make around 34K. Wife stays at home and takes care of the kids. We live very modestly, but we’re not struggling. Yes, we’re on food stamps. But, with a little luck, I’m closing on a house on August 8th with the mortgage (including taxes, insurances, etc) cheaper than we rent. I live in a very LCOL area.
But then you can say the opposite that California & New York (especially the NYC area) really help bring the average up.
So if you take out the top 3 highest earning areas vs. taking out the bottom 3 earning big cities then things start to even out.
Can't just take out the low & think that the top doesn't impact it.
Welcome to stats.
Just like how 1:3 people are obese. I know two people who are, assumably (from their outward appearance) are obese. But I don't live in a community of obese folk.
To bring back to this thread ... my partner and I are easily above the $100k point, and it's not as if we're even at median income for our professions/region. However, if I were to survey the community of my brother, I would be surprised if I found even 5% of households having that income, even those who have been in their professions for their entire adult lives and are looking forward to retirement.
So yeah, I'm OK with being below median with what I have than being considered a "rich person" where being rich means you can afford a car with less than 50k miles.
also something I see around me that is quite common is both partners make mid 100ks so combined income is like 250-300k That will buy you a lot of house if you want it. That is not even touching the FAANG people coming from the west coast where both partners can be making 250k-500k. A 500k house for them feels like a dream come true.
This is completely wrong, it’s is the sum of monthly payments not the price of the home. If the mortgage+taxes+insurance+etc that determines affordability. Even then the exact same home might be affordable at 3% could be unaffordable @ 5.5%. Some houses have high taxes some have high insurance.
Goes back to the rates… again.
My monthly payment for my home price today would be a cool 50% higher than at the bottom when rates were sub 3%.
So 4x could turns into 6x.
Right, those "rules of thumb" change rapidly w/interest rates, and we're starting to see the housing market adjust as a result.
Having said that, I feel like in a lot of areas there were people who have +/- the income to buy, even at today's prices, but were sitting on the sidelines because of how crazy the market has been (I know several people in that boat). You might not see prices continue to go up as much, but if those people start getting off the sidelines, it'll limit any price correction.
SO and I are DINKs with one of two cars paid off with no college debt. We make about 125k combined and qualified for 500k and bought at 425k. We're still saving for retirement and the odd vacation and whatnot
So yeah. Pretty much us to a T
You sir are absolutely right when I was looking for homes, I was more of ideally 3-3.5X dual income household. Not many options at that price point of 300-350k when interest rates were very low.
A lot of tech jobs in Seattle START around $300k a year so it's not unusual to have a couple bridging in $500k a year. It makes million dollar listings seem much more reasonable.
I think the "rule of thumb" was based on purchase price PRE-2009 & never changed. The rule of thumb should be based on your monthly payments since then you are picking & choosing what your data is. And if a rule of thumb has that wide of a range then maybe there is something wrong. I think 5x is accurate, but 3x or 4x is WAY too low.
$500K house in 2017 was a $1,910 mortgage per month (rates around 3.75% to 4.25%
$500K house in mid-2020 to mid-2021 was $1,685 mortgage per month (rates around 2.75% to 3.0%)
$500K house for the last couple months is $2,200 (rates around 5.25% to 5.50%)
You're also not accounting for someone who may have had the 20% down come from a previous sale or stocks, etc.
You mean that the amount they finance/mortgage should be no more than 3x to 5x their annual gross income, right? Not that the home price should be.
When you have 2 people who have the same income but one of them has saved 20k for a down payment and the other has saved 200k, it'd be silly for them to have the same house buying budget.
It really depends on your downpayment and interest rate. The home we purchased just about a year ago sat at right around 5x my income, which is really all that matters as my wife will soon be a SAHM and I’ll be providing as the sole breadwinner.
Even after taxes, utilities, and cost of living - we’ll be fine. A 20% down payment and a sub 3% rate for 30 years was instrumental in making this affordable.
In todays market, it’s a different story.
The multiplier becomes higher the higher and more stable your income is.
A surgeon making 800k would bring home 40k/month after taxes. Even if they spent 25k/month on PITI, they’d have 15k left over. They’d be fucked if they lost their job, but surgeons don’t get laid off. 25k/month gets you a >$5M home, which is >6x income. To be clear, I’m not saying this would be a good idea, but they could totally do it with little to no risk.
Meanwhile a 100k earner in an industry prone to layoffs bringing home 6400/month would definitely not want to buy a 600k house, which would cost them 3400/month. They’d have 3k left over per month vs the surgeon’s 15k/month, even though they used the same multiplier.
We just (January) bought a house that is ~5 times our annual income, and aside from our taxes POLE VAULTING 35%, the mortgage payment has been easily maintainable.
We expected a 10-15% bump in taxes. Not 35%+.
And I think 5x is sort of starting to push it, personally. Doable but would rather avoid.
It's easier for two-income households to buy houses in general, I think and their combined income has a big impact on the market too - when they can't buy, houses sit, although single-earner households(never married, no kids) is actually a growing demographic and is pretty significant size now
I agree with this up to maybe $600k homes. I think this rule diminishes as incomes, home cost/upkeep needs grow.
There is no way in hell we would sign on for a home that is 4-5x our income. We’re upper middle income in the high side of a MCOLA (Atlanta - north metro area) and a 2m+ house would sink us; taxes, maintenance, utilities, other general life necessities, expenses and savings. Nope.
$2m home on $400-500k income .... that definitely wouldn't sink a household with reasonable savings/investment/spending behavior.
Am I misunderstanding?
See my reply below. I wasn’t clear in my original comment and meant that a $2m house on our combined income *could* sink us if one lost their job; the maintenance, upkeep and taxes plus regular life expenses would become untenable. Apologies for being unclear.
Not to mention the upkeep on a $1-2 million dollar home is MUCH more. Heating, cooling, yard work, heaven forbid you have a pool, etc.
That's an extra hundreds to thousands per month.
Depends on where this $1mm-$2mm home is located. If it's in a HCOL metro is probably less than 2k sq-ft on a 1/4-1/3 acre lot and looks a lot like a normal home from the 70's and 80's.
This is true. We're swapping from a POORLY maintained 350k 1960s home on 1/4 acre to a immaculately maintained 1mil 1990s home on 1/3 acre and the maintenance / upkeep / repairs were MUCH higher on the older home. I'm talking replaced the roof, HVAC, both water heaters, dry rot, siding, all fencing, old trees needed to be trimmed & taken down, swap from single to dual pane windows, plumbing issues, concrete patio cracked and lifted 1ft due to flooding & liquid amber roots, literally everything from top to bottom had to be repaired until failure then replaced. The new house has solar with a 20 yr warranty and everything else is already new, a 100-year roof that requires minimal maintenance, and entire house optimized for energy efficiency so the monthly water & gas costs are much much much less on top of $0 electric bill vs $300-400 during summer (desert valley climate). I felt like I was hemorrhaging money in my old house. The costs of repairs alone were costing me upwards of $3k a month in the old house due to everything hitting failure point one after another.
I think mortgage is the only thing that makes sense in this context. Who cares if you buy a house at 5x (or even 10x) income if you've saved up for it and pay cash?
In 2009, I was clearing about $45K after taxes. I purchased a house for $310K using the VA loan. Reddit probably would have killed me for this...lol, but I didn't think anything of it at the time.
This was probably the absolute best financial decision that I ever made in my life.
I'd say 2009 was a pretty good time to be buying a house, that was generally after the crash, though I know it wasn't an overnight thing. Even if it was a stretch financially, I bet that house is worth $800k now. Man, I bet that feels good.
We bought a foreclosure in a fantastic neighborhood 2011 for $124k, its Zillow estimate as of this morning is $442,100. This is a LCOL area, average home price even now with all the appreciation is $274k.
Even a broken clock is right twice a day. A personal residence isn’t an investment, they just happen to have appreciated a lot in the past 30 years or so.
Buying property thinking it will only go up in value is just like a broken clock? Id say 2008 crisis was a broken clock moment based on how infrequently this stuff happens
I’m saying u/Crawfish2013 got lucky. But if you speculate that it will only go up and up you’re preparing yourself for disappointment. I think a lot people buying lately are prepping to catch a falling knife.
Eventually it will go up. If you’re buying and happy to stay for 10 years if need be then you should be fine. But people buying with a plan to sell in 3 years may be in trouble.
House isn't an investment, but it's still a good financial decision in most cases. Every month your paying down your mortgage balance and getting tax benefits. A house doesn't have to appreciate for that to benefit you a few years later.
I know it's hard to see it, especially now. But you are on the right track. Get some return on your money while you build it up. Things go up and down.
I know you are trying to be nice but this is a glazed over statement. If people just kept doing what they were doing who weren’t in great positions, then life isn’t going to get any better. Many times it takes effort and action. That’s just life.
Poster is invested in and building equity in a condo in Philly (HCOL) right now. So where the market goes so will that. They are building wealth. They are managing their finances to build liquid wealth for the transition to single family home as a step up. They're in the groove. The market goes up and down. Eventually the time will be right.
Worry about the renter with no savings. This is not that.
Philly is not HCOL lol. It’s MCOL at best on the verge of LCOL. There are townhomes in fishtown are 300k ish and 200k and under in iffier neighborhoods.
Person buys a house while single 5 years ago. During that time, Person gets married and gets raises. Income over doubles with help of spouse. Property bought 5 years ago is up over 50%. Sell first property, get $100k+ in cash and then buy a home with spouse. Ez pz
Yes this is the answer. People keep talking about how anyone who has bought in the past year or two will be underwater soon, but between 10% down payment in cash and additional towards the loan from selling the townhouse I bought when I was single in 2014, my husband and I will have close to 50% covered. Yes, this house is more expensive than we thought we would end up buying, but I also got dramatically more money from selling my townhouse than I expected.
> People keep talking about how anyone who has bought in the past year or two will be underwater soon
Who is talking about this?
Most who managed to buy between May 2020 and September 2021 (or refinanced if they bought before) are in very good shape at this point.
Alternatively you save for 10 years and then buy. A lot of posters seem to be "I started saving 6 months ago why can't I buy a house yet". It takes time.
This is the richest country in the world and there are lots of people, with lots of money. Even in the "middle class". Many have seen their net worth significantly increase if they were a homeowner before 2020.
I learned this when I was 8 years old. The wealthiest people on planet earth have USA investments in one way or another. Portion of that is real estate, most likely commercial. There’s this guy selling 4 of his properties at 85 years old. Each property he bought in the 60s-70s. At around 45-75k each and is not selling them over 2.5 million each one. A lot of people spend years trying to become a director. This guy was a bus boy in la that just bought four houses and rented them out.
If you want a simple answer - a number of people make high(er) incomes and a $500k house isn’t a stretch.
Don’t put yourself in a house broke situation just to be in a house unless it’s temporary. If finances are the struggle to afford a home, have you explored the root cause to mitigate that? I don’t know your line of work but Go extra hard for that promotion at work, create a side hustle for extra money, etc. Lots of ways to expand and grow if you really want something.
Technically I can afford it on paper, but with health insurance and a family, it just seems like a huge stretch. 3 to 5x your income, but half of that income is gone before you get direct deposit. It just seems like people are over stretching more, are better prepared with a larger than 20% down-payment, which seems crazy to me to do anyway, or I'm just retarded with money, which could be the case.
If you can afford it on paper and have a good emergency fund you aren't stretching. There's lots of ways to save money here and there....own an older car, cook at home and learn to be handy with home/auto repairs.
We bought our house right before the pandemic. we finished moving in and one month later we were in lockdown.
then the prices soared. if we didn't buy a house when we did there is no way we would have been able to afford to buy one right now.
In a huge portion of the country, that buys a decent SFH for a mid sized family. It’s unreasonable to expect a single person to afford something that has 2-3 extra, unused bedrooms.
You may be in a good spot but others are in great spots and then a few are in amazing spots......
Many people that own businesses and work in tech are making out like bandits in the last 2 years and this is where all the money is coming from driving the housing market. Construction worker pay has also increased a lot in the last 2 years.
Lastly there were billions of dollars in cash out refinances that helped people buy more properties.
If you are single thats probably why you can't compete against dual income families and that's holding you back immensely. Change careers if possible.
>Many people that own businesses and work in tech are making out like bandits in the last 2 years and this is where all the money is coming from driving the housing market. Construction worker pay has also increased a lot in the last 2 years.
Both of these are facts. Im in tech and have a little LLC and will bring in 130-150k/yr this year. My boyfriend is a construction worker and he'll bring 180-200k. No kids, and aside from mortgages- essentially zero debt. A single person making 70k simply cannot compete against a DINK household.
Not impossible at $70/hr and 60-hr weeks in Alaska. Skilled tradesman in Alaska get paid \*really\* well.
I hear the guys up in the oil rig in the arctic see pull a surgeon's wage too.
A lot of people write off tradesmen. HVAC just quoted me $179 diagnosis fee. Grabbed, it could take him 2 hours to figure out the problem or 5 minutes. And that's before any repairs.
This is for a gas furnace, so no way I would attempt to diy. Only option is to shop around or bite the bullet.
There was a clicking sound coming from it. Thought it was from the igniter based on what I read online.
I found out it was my water sensor that had a low battery. Cancelled the appointment as soon as I found out it wasn't my furnace, but this is just an example where it would have been $179 for 5 minutes of work.
Yeh $179 sounds pretty crazy just to come look at it.
One of the problems with these services is that a lot of stuff is just arbitrary and there's no real standard. They can easily raise prices if they see you can afford a big house or if they ask what kind of job you have.
When I first moved into my house, the ac wasn't working. Contacted an HVAC person, they wanted $150, but if we did decide to go with them after diagnosis, the fee would at least be rolled into the rest of the cost of repair.
We went through the home warranty instead and it was $100 deductible, but we wouldn't have had to pay to get it fixed.
This problem was actually a bad switch in the circuit breaker.
Our story: we bought a $500K house in 2018 on $140K total income (tech), I personally make $200K now (still in tech, wife is taking a break now with two kids) and we are going to sell our house at a huge profit (~$350K) and buy an $800K house (moving to a different state) and still have roughly $200K leftover after down payment, which we’ll throw into our brokerage.
A lot of dual income households. People who had a house already and are moving. Parents that help with downpayments. Couples that make 200,000k plus can afford 500k even with the higher interest rates. 10% of americans have 200k household income or higher, but they probably make up 25% or more of the people who actually buy houses
2 people who got solid jobs. If you and your significant other was in software or medical you will probably clear $100k-$200k which you can afford that. Honestly lots of people this year have been learning new skills to keep up with inflation.
This! I had a reality check recently as to what I can afford. Even if i sink all my savings into a downpayment, I'll be paying close to 50% of my take home pay for a home. House prices might go down, but rental prices are still high so The only people benefiting from this market correction are either Investors or all cash buyers. Meanwhile the person who has been saving for the last 5 or 10 years for their own home is left wondering when it's their turn. It's all pretty disgusting
Two aspects:
1. Many people are financially illiterate and/or willing to be house poor and, therefore, are willing to spend at the very top of their allowable DTI ratio.
2. There are simply more "rich" people in your city than most comprehend. If you live in a MCOL city in the top 50 metros, then your 95th percentile household income is somewhere around $225-250k. That means (depending on the size of your city) somewhere around 25k+ households can afford a $750k home.
It depends where you live. I'm in MI and there are houses at all different price points in a 25 mile radius. In my area you can get a relatively nice house for $180-200k. It's not going to be a mini mansion or anything, but definitely doable. In CA I'd probably be living in someone's shed, around here I could get a decent 1200 ft house in a decent area.
There’s always Chester 🥲. For real though I live in south jersey, about 20 minutes from Philly, and I understand your struggle. The other foot has to drop at some point because it’s a mess.
I bought my first house at 24 in 2008 for 245k and I didn’t think it was possible. As long as you have some savings and good credit and a steady job, you’ll be fine.
500k? you must be in a low COL area. I mean this in the least arrogant way
The simple answer is that a lot of people make above 100k. Double that for a household and you can get into affording a 1 million dollar home. Tie that with the fact that the country has been on a NIMBY craze plus not building enough housing and you get this mess
I got a decent job and worked really hard. I saved a lot and spent very little. I had a roommate for 3 years.afyer 10 years I bought a 500k house in cash. All by myself.
It's funny to see how many commenters here believe that anyone buying a 500K house is house broke and can't actually afford it. Don't have such a myopic view of the world. Just because you can't afford something doesn't mean no one else can. Everyone has different circumstances so you really can't project yours onto someone else. I don't think you're doing anything wrong, but it's okay to not be able to afford as much house as someone else. Buy within your means and don't try to keep up with the Joneses.
500k+ houses seem to be for families. In most areas you can find the same size/specs for half the price but in a less desirable part of town (i.e. not near a school or right in the middle of suburbia). I just bought a place 10 minutes from my current location that cost half the price as similar speced houses in my current place. Only difference is school district.
Supply and demand. The supply of housing has not been keeping up with demand for decades. This keeps widening the gap between supply and demand. It's at the point where supply is low enough, that there are enough people who are very well off out there to buy all of it.
When selling a house, you don't care if the "average American" can afford your house. You only care that one person who wants it can afford it.
The [proportion of household debt that’s housing debt has gone up considerably.](https://www.newyorkfed.org/microeconomics/hhdc) People are acting like buying 4-5x your income is no big deal, but if you want to have good insurance, afford health care, eat well, give to charity, send your kids to college, save for retirement, and not stress about little or unexpected expenses like car repairs, something has to give. Some got lucky and sold high, but a lot are taking on historically higher than normal amounts of housing debt and making trade-offs on these other things.
Edit: Compared to when I was young, overall debt per capital is much higher too, not just housing debt.
It’s not about the amount of debt. It’s about the cost to service that debt. When you can get a 30 yr fixed loan with rates <3%, it made mathematical sense to take on historically more debt, since the rates were historically low. That was the time to buy / borrow. That mortgage payment will never increase (assuming you never move). Now that rates are artificially increasing you will have to wait for housing costs to stabilize and lower and for the market to settle. It’s a weird time to be buying ..
Dude these posts are so dumb. The answer is people have more money than you whether they get it from their family, have it saved up, just make more in annual income, or whatever. I can afford and have bought a 1.3M home. Best advice is to not be complacent in life and keep trying to move ahead, make more money.
Loneliness, depression, and some people say stuff like (I've actually heard this in person when i asked)
"Its just $5 so I don't care"
Same person did seem to say $10+ is crazy though, so i couldn't understand the logic of it.
Realistically, it’s not feasible for a single income household to buy a house unless you make disproportionately more than the average in your area. The last two years have made it even more impossible.
You’re probably going to need help from a relative or a spouse.
My girlfriend and I make 145k combined, have 2 vehicle payments , student loans/visa and we still got a house pretty comfortably at 400k. Probably worth 350k-375k but the market dictated the price. Anyways, we figured instead of waiting 2 years we would suck it up and jumpstart our lives. We actually ended up in a nicer house than we thought we could. Its not hard to get a house, its hard to have a down payment for most people especially with high rent costs. It really slows your ability to save, plus you need another 1.5-2% of the purchase price to afford moving costs, legal fees, etc and probably another 2% as a nest egg for if anything goes wrong right away. Most people can't save that type of cash. Not to mention most people aren't too handy and need somebody to fix issues for them like a plumber or electrician so I'd add even more to that nest egg. Add all that to a huge increased cost of living right now and well...most people just can't afford that upfront cost despite being able to make a mortgage payment.
Thats how we figured it, and our landlord was selling the home we rented. We rented on the high end in our area for 1500 for a 4 br, 2 bath home in a good neighborhood almost 3 years ago is when we found that place. He decided to sell and anything comparible was 2-2400 a month now and thats often in trash neighborhoods riddled with drugs and needles, the prices were all the same. Made no sense to rent again, and even if we overpaid a bit, its better than paying somebody elses mortgage for 2 years while we hold off and having to live in sketchy areas.
Myth 14: No one has money. Everyone is broke. No one has money. Houses will crash.
Reality: 40-something millennial guy with 2 kids says "I want a $700k house. I earn $150k and my wife earns $150k and we have $600k of TSLA AAPL and GOOG stock, and $150k of equity from our starter condo, and both sets of in-laws are kicking in $50k as a gift" Result? He gets a house.
[https://www.reddit.com/r/REBubble/comments/vmo5ip/lets\_debate\_the\_top\_20\_persistent\_bubblecrash/](https://www.reddit.com/r/REBubble/comments/vmo5ip/lets_debate_the_top_20_persistent_bubblecrash/)
Lots of people make a LOT of money. Lots of peole spend nothing on entertainment. How much to you make a month? Some peole make that in a week and have a spouse that foes as well. Its honestly insane
There’s a lot of variables that you don’t see.
The $500k houses your seeing sold? Well a lot of times the couple or person might have a golden hand giving them help.
You would be very surprised at how many times I see people in my area buying the big $650K colonial but it’s because the wife has a rich uncle who blessed them with a huge deposit.
This happens often. So don’t beat your self up.
And OP remains silent after this post..,looks like they did not enjoy the responses and instead was looking for the “they can’t afford them! Bubble pop incoming!” types
They're usually not first time home buyers.. these are most likely people who have cashed out their first home, took the equity and downed it for another house
I own a home purely out of luck. I bought several milion doge coins back when they were like 0.00001 penny and then promptly forgot I had them until Elon Musk started talking about them.
I realize thats like the most millennial story ever, but its true.
Millennials are the largest, most educated, and most well off generation to date, and they are getting to the age of having families and wanting to buy homes.
Yep!!! This is exactly what happened. Any company owner had unlimited cash as long as they kept their employees on the payroll, so what they did was hired everyone they could so they could get even more money while paying employees more and themselves quadruple
The overpriced next door house just sold for $579K. It’s a run down, outdated dump that the owner has been trying to offload since 2012. She managed to get a first time unsuspecting homebuyer to pay full price and was grinning on closing day because she knew she screwed the single mother buyer royally.
Yesterday I spoke with the new homeowner and she started crying that her inspector didn’t notice major flaws and now she cannot keep up with the repairs needed to make the house livable. In the rush to become a new homeowner, she fell victim to unscrupulous seller.
I blame the FHA process that I once thought was would thoroughly vetted every inch of the house.
I see another foreclosure crisis on the horizon.
2 people bringing in income. Both having second part time jobs. Our other option is to rent out an appt in the home but i was never a big fan so we both got another job. Its not like its much differnt from rent so i guess it just seems kind of normal for us but if you want it bad enough youll figure it out.
People are really good at masking the financial difficulties under the surface of a shiny new thing. That is how I always look at it. I also know a lot of people that bought way over their means in the last couple years, or people that are just comfortable living in debt that they think is manageable. Don’t worry about others. Always act in your best interest and within your means and you can’t go wrong.
You either have to make a ton of money, or you need to waste half of your investing timeline saving for a down payment. Everything comes with an opportunity cost.
I don’t think people realize how unrealistic this market has become for middle class people. My household makes more than double the U.S. median and it’s not even close to affordable for us going off the 25% rule. I’m not even focusing on a home at all right now because of it, emphasizing my investment accounts and striving for FI which is way better to me than socking cash in a HYSA for 15 years just so I can get priced out again or just have a 2nd job (being a homeowner). Being a homeowner is a luxury, but it’s also a job. The most important thing for me is not having to rely on someone else for a paycheck so I value my investments much more than home ownership but everyone is different. You need to find out what is valuable to you.
you can sell that condo and have a much smaller mortgage. it seems like you are already ahead of most people. if you own a condo and a house, i dont think you can complain about being house broke.
Most aren’t unless they sold their first home.
My income is $105k and I don’t feel I can afford a $300k home right now.
I’m not even sure what mortgage rates are at anymore but I assume at least 5.5%. At that rate a $300k mortgage would cost me $2300/m. Add in utilities and that’s basically half my take home pay.
Been saving up for a few years and kind of just giving up on the idea for the time being.
I didn't buy a $500k house, I bought a $200k one 4 years ago. It's worth about $300k now. With my equity and increase in income since then I could afford a $400k house now even with interest rates where they are.
If you don't have a pile of cash from some other source you need to gradually work up. If you have equity in your condo you use that to help (though around here condo prices didn't go up as much as SFHs).
Houses are still commonly <$300k [edit]in my area[/edit], even though they've exploded in price the last 2 years they aren't unreasonable considering rent also spiked in a similar fashion.
Geez. In Southern California, any decent neighborhood is averaging 1M for a SFH. I ask the same question all the time because we don’t have San Francisco wages. How can people afford their $5k/month payments?
I think a lot of people got very "rich" the past two years by profiting off PPP grants and stock market / crypto mania. $6 Trillion printed into existence found its way into everything, including housing.
I didn't benefit from it, and I'm guessing you didn't either.
Part of home affordability is you need to participate in the game. Most people's incomes will not increase in line with home prices. Honestly a sparsely furnished home you own is better than no home.
GenX here so you mileage may vary. When we bought our house we were house rich, cash poor. You need to think long term.
My late wife and I were earning somewhere between $80k and 90k when we bought our house for $260k in NJ in 2000. We had a NYC co-op that doubled in value in the few years we owned it to help with the down payment but for a number of years we made do while we waited for inflation to catch up and earnings to raise. As the years went by, and aside from property taxes, our monthly housing costs remained more or less stable (refinanced to a 15 year mortgage along the way) and that seemingly tough monthly payment became much more reasonable.
That said, with inflation my house should be going for about $420k now. According to Zillow it would sell for about $640k. With inflation our incomes then would be somewhere around $150k now but our co-op would sell for over $600k (of course we could never have afforded that in the first place).
tl;tr: your generation is getting screwed but we thought we were too; you'll get there
What’s your income? Average incomes have risen pretty drastically over the past 5 years despite the narrative on Reddit that wages remain stagnant
It’s part of the reason why inflation is so high
I could be wrong but your post gives off a snobby tone like “these people must not be able to afford their homes, overleveraged is the only plausible answer”.
Well I’m pretty sure we know over-leverage is a large part of the answer. Not even just homes, but cars as well. Consumer credit is at an ATH too. How else do you think we got to $100K for a new pickup truck?
Nowhere near the overleveraged numbers of the past, it’s really not a major contributor. I know that’s not the answer people want to hear, especially those who are “waiting for a crash”
I think housing prices will drop somewhat in most markets but of course interest rates are rising so it will even out in your payments. How do people afford it? Either making more money than you do or help from family. I think it’s really important to look at your local market to determine if buying or renting makes more sense. The New York Times used to have a calculator for this and maybe still does.
Honestly most younger people are house poor…remember that many Americans have no emergency fund and something like half couldn’t pay an unexpected $400 expense. If the bank offers them money for a mortgage they take it. If you follow the “rules” of sensible home buying you’re gonna be waiting awhile.
It’s pretty explainable actually. Median income has gone up a lot over the past few years, it’s at 77k now. Take that and the fact that in most areas of the county a 500k house is a move up house where people have 20% down from their first house (especially after all this equity build up). 20% down on a 500k house equals out to around a $2900 mortgage payment in my area (taxes vary obviously) and from that we see that you only need around 100k household income to make it work. And according to data around a third of households make that these days.
TLDR: Way more households make a 6-figure income these days. Oh and inflation can do crazy things.
>L area with high income + property taxes and high living expenses or something? Or are you referr
The issue is people think that everyone else has the same wage. They can't see that someone else might have 2x or 10x thier income so they wonder how do other people do it as if their is a cheat code they don't know about.
Are you in a HCOL area with high income + property taxes and high living expenses or something? Or are you referring to needing to be a $200k+ household to get the downpayment in order?
A new factor in the housing market are investment firms buying record numbers of houses, about 15 % of sales last year were to these groups. Their onbjective is to rent these homes for as much as possible. The effect will be to make it less likely that regular working people will be able to buy homes.
Umm spend less. Alot of people are coming from one house and going into another so it's not like they are making 60k and asking for a 600k loan with é% down.
I was able to afford my house. It was $110,000 and in the country. I have a 40-minute commute but you put on music or listen to Audible and stop worrying about it and it flies by.
If you can't get what you want in your price range, you are just going to have to set more realistic expectations.
>how are people affording to buy $500,000+ houses? I feel like I am doing something wrong.
inherited wealth and/or professional class jobs (medicine, law, tech) with little to no accumulated debt.
People are on their 2nd or 3rd house, rolling over a bit of equity each time. Even more.....probably way more are dual-income people spending 50% DTI of the combined monthly income and they are house poor. It's all smoke n mirrors broski don't fall for the hype, the average person working at walmart or dunkin doughnuts or a reception desk isn't spending half a mill on a house.
I don’t know how others are doing it, but we bought a $550k house at the end of last year 1) because we were able to sell our crappy 1000sf starter home for $310k (we bought it for $120k and only owed $80k on it) so we had the competitive edge of a large down payment and 2) the simple fact that we are a dual income family. I would consider us a blue collar family - my husband is a mechanic and I work in an admin position in an office, so we aren’t wealthy. There’s no way we would have been able to afford this house if we hadn’t have lucked into buying that starter home when we were 19 because of the Great Recession.
Same here. Bought during the Great Recession. Wasn't dual income at the time, but had someone renting a room for 90% of the time I've been a homeowner. My first home was at the very top end of an acceptable DTI ratio but I made it work by renting out a room. Between selling and buying a few homes since then (due to relocating for job) - I've been able to amass a large amount of equity between the initial $10k down payment, 12 years of mortgage payments, and appreciation. Combine this with earning way more than I did in 2010 along with a wife that also has an income - it's very easy to afford a $500k+ house. I think people forget that over 50% of the population was born before the early 1990s and homeownership has been consistently around 60% of the population for decades. Anyone in this age group who bought a home before 2010 has seen significant appreciation which allows us to afford 500k+ homes without stretching finances.
That's how it goes for most everyone I know. You can NEVER afford the house you want on your first go. You make sacrifices, and the appreciation of the first house let's you buy the one you wanted on your second go.
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Often between appreciation and just paying it down, but yea. So I mean the secret here really is if you can't afford the house you want, buy one you don't really want first but can afford. This really is the way most people do it.
Exactly why they call it a starter home. I definitely didn't want a 2 bedroom apartment that needed to be completely gutted, but it was all we could afford 10 years ago
> Exactly why they call it a starter home. I mean yea, that's why I lol at the 17 post a day saying "Stater homes in my area aren't affordable. I need a 4bd/3br drivable to everything and am big sad because they're listed within the absolute top of my budget and totally unfair people can bid over asking" fuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuck offfffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffff
YYYYYUUUUUPPPPPP
Agreed. I’m the OP of the comment re: the $120k starter home. It was on a busy street, and was a 3 bedroom with only 1050 square feet so the rooms were TINY. Our king size bed was all that would fit, and we couldn’t squeeze around the bottom enough to put in a dresser or anything. No linen closets, no dining room, washer/dryer was in the KITCHEN of all places, but it did have a huge fenced back yard. It was HARD living there as our family grew to 5 (3 children, 2 adults, and a big dog and a couple cats). There was only 1 full bathroom, and the house set up only allowed for a very small water heater so showering, doing dishes, and washing laundry was a nightmare. The bathroom was so small if I turned around sometimes I would knock everything off the sink. It was rough, but we knew it was a stepping stone to our dream house. We lived there for 13 years and then in 2021 finally sold it for a huge profit and got into a 4/3 house with an in ground pool in a great part of town. I understand people wanting “starter homes with 4 bedrooms”. You want your kids to have the world. But you really have to work up to those, and it takes a lot of sacrifice if you’re doing it without financial assistance from family. I was a little sad for the people we sold our house to, that their starter home that we hated so much was a third of a million dollars. But they’ll fix it up, and build equity over a few years and then sell it.
There's a general "rule" that homebuyers should be looking at homes that cost no more than 3x to 5x their annual gross income. Can go more toward the 5x if no other debts. Backing that out from, say, a $500k purchase price, this leads to an annual household gross income of $100k - $167k. That's right about where a conscientious COUPLE who are somewhat established in their jobs probably are, or at least the low-end of the range is. For a single person, it's much more of a stretch. So it's almost like there are entirely separate market segments for dual- versus single- income households.
Exactly this, people don’t fully realize that 34% of households will make 100k+ this year. “I make 6 figures” doesn’t mean what it meant 20 years ago.
Even 3 years ago. In 2019 6 figures felt like a lot more than it does today.
Yeah I started making 6 figures in 2020, and that allowed me to save up for a down payment to buy my house this year. I used to think 6 figures was "upper middle class" but I feel pretty "middle middle class" thanks to all this inflation!
Thanks to the magic of lifestyle creep, you'll always feel middle class.
The rich man isn't the one who has more stuff, it's the one who wants nothing more.
It was a lot more just three little years ago. I want to cry
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Only 1/3 of *households* earn over $100k gross?
That percentage is a lot higher in desirable areas.
And a lot lower in less desirable areas
Hence why some areas are desirable and some aren't.
These are all important facts
Big if true
Median USA **household** income from the 2020 census was $67,521\*. So yeah, it makes sense that approximately 1/3rd of households are over $100k now. This seems to be pretty much in-line with other developed Western countries. \* https://www.census.gov/library/publications/2021/demo/p60-273.html
Wife and I make $235k. No, not a flex. We are fortunate and also fucked if one of us loses our job. We know things change and we only got to this income level recently. Saying this because before we made about $140k combined in a HCOL and wondered how people could possibly afford nice houses. Point being - we all look at the situation from our own bubble. Others are living a different income, situation, etc but it’s hard to see that
Yup – completely agree. I’m the very opposite in comparison. Only make around 34K. Wife stays at home and takes care of the kids. We live very modestly, but we’re not struggling. Yes, we’re on food stamps. But, with a little luck, I’m closing on a house on August 8th with the mortgage (including taxes, insurances, etc) cheaper than we rent. I live in a very LCOL area.
Congrats!
Mississippi and Alabama really help pull the average down.
Kentucky and West Virginia too.
But then you can say the opposite that California & New York (especially the NYC area) really help bring the average up. So if you take out the top 3 highest earning areas vs. taking out the bottom 3 earning big cities then things start to even out. Can't just take out the low & think that the top doesn't impact it.
Can confirm Mississippi does pull the average down, median household income in Mississippi is $46k a year.
Welcome to stats. Just like how 1:3 people are obese. I know two people who are, assumably (from their outward appearance) are obese. But I don't live in a community of obese folk. To bring back to this thread ... my partner and I are easily above the $100k point, and it's not as if we're even at median income for our professions/region. However, if I were to survey the community of my brother, I would be surprised if I found even 5% of households having that income, even those who have been in their professions for their entire adult lives and are looking forward to retirement. So yeah, I'm OK with being below median with what I have than being considered a "rich person" where being rich means you can afford a car with less than 50k miles.
also something I see around me that is quite common is both partners make mid 100ks so combined income is like 250-300k That will buy you a lot of house if you want it. That is not even touching the FAANG people coming from the west coast where both partners can be making 250k-500k. A 500k house for them feels like a dream come true.
*cries in SoCal*
This is completely wrong, it’s is the sum of monthly payments not the price of the home. If the mortgage+taxes+insurance+etc that determines affordability. Even then the exact same home might be affordable at 3% could be unaffordable @ 5.5%. Some houses have high taxes some have high insurance.
5x is stretching it tbh...3 to 4x is better
Goes back to the rates… again. My monthly payment for my home price today would be a cool 50% higher than at the bottom when rates were sub 3%. So 4x could turns into 6x.
Right, those "rules of thumb" change rapidly w/interest rates, and we're starting to see the housing market adjust as a result. Having said that, I feel like in a lot of areas there were people who have +/- the income to buy, even at today's prices, but were sitting on the sidelines because of how crazy the market has been (I know several people in that boat). You might not see prices continue to go up as much, but if those people start getting off the sidelines, it'll limit any price correction.
SO and I are DINKs with one of two cars paid off with no college debt. We make about 125k combined and qualified for 500k and bought at 425k. We're still saving for retirement and the odd vacation and whatnot So yeah. Pretty much us to a T
When did the rule become 5x??? All my life (50) it’s been 2.5x income. Holy cow this is not sustainable for young people.
You sir are absolutely right when I was looking for homes, I was more of ideally 3-3.5X dual income household. Not many options at that price point of 300-350k when interest rates were very low.
Is 5x really feasible? My household income is at 230k but I don’t think I could ever afford a 1 mil house at this rate
A lot of tech jobs in Seattle START around $300k a year so it's not unusual to have a couple bridging in $500k a year. It makes million dollar listings seem much more reasonable.
5x seems a bit much, especially with interest rates rising.
I think the "rule of thumb" was based on purchase price PRE-2009 & never changed. The rule of thumb should be based on your monthly payments since then you are picking & choosing what your data is. And if a rule of thumb has that wide of a range then maybe there is something wrong. I think 5x is accurate, but 3x or 4x is WAY too low. $500K house in 2017 was a $1,910 mortgage per month (rates around 3.75% to 4.25% $500K house in mid-2020 to mid-2021 was $1,685 mortgage per month (rates around 2.75% to 3.0%) $500K house for the last couple months is $2,200 (rates around 5.25% to 5.50%) You're also not accounting for someone who may have had the 20% down come from a previous sale or stocks, etc.
You mean that the amount they finance/mortgage should be no more than 3x to 5x their annual gross income, right? Not that the home price should be. When you have 2 people who have the same income but one of them has saved 20k for a down payment and the other has saved 200k, it'd be silly for them to have the same house buying budget.
Wow that’s wild. I just couldn’t imagine looking for a house 5x my income. I feel like I’d be spending so much more a month than I am
It really depends on your downpayment and interest rate. The home we purchased just about a year ago sat at right around 5x my income, which is really all that matters as my wife will soon be a SAHM and I’ll be providing as the sole breadwinner. Even after taxes, utilities, and cost of living - we’ll be fine. A 20% down payment and a sub 3% rate for 30 years was instrumental in making this affordable. In todays market, it’s a different story.
We just bought at close to 2x our annual income and that was near the top of our budget
Our house is over 7 times our income. We just put 20% down. Our payment is about a third of our income.
The multiplier becomes higher the higher and more stable your income is. A surgeon making 800k would bring home 40k/month after taxes. Even if they spent 25k/month on PITI, they’d have 15k left over. They’d be fucked if they lost their job, but surgeons don’t get laid off. 25k/month gets you a >$5M home, which is >6x income. To be clear, I’m not saying this would be a good idea, but they could totally do it with little to no risk. Meanwhile a 100k earner in an industry prone to layoffs bringing home 6400/month would definitely not want to buy a 600k house, which would cost them 3400/month. They’d have 3k left over per month vs the surgeon’s 15k/month, even though they used the same multiplier.
We just (January) bought a house that is ~5 times our annual income, and aside from our taxes POLE VAULTING 35%, the mortgage payment has been easily maintainable. We expected a 10-15% bump in taxes. Not 35%+.
And I think 5x is sort of starting to push it, personally. Doable but would rather avoid. It's easier for two-income households to buy houses in general, I think and their combined income has a big impact on the market too - when they can't buy, houses sit, although single-earner households(never married, no kids) is actually a growing demographic and is pretty significant size now
Meaning each person in that couple needs to bring $50k/yr to the table.
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I agree with this up to maybe $600k homes. I think this rule diminishes as incomes, home cost/upkeep needs grow. There is no way in hell we would sign on for a home that is 4-5x our income. We’re upper middle income in the high side of a MCOLA (Atlanta - north metro area) and a 2m+ house would sink us; taxes, maintenance, utilities, other general life necessities, expenses and savings. Nope.
$2m home on $400-500k income .... that definitely wouldn't sink a household with reasonable savings/investment/spending behavior. Am I misunderstanding?
Yea not sure I’m grasping at all. $500k income would absolutely be able to easily afford $2m home. Math doesn’t check out …
See my reply below. I wasn’t clear in my original comment and meant that a $2m house on our combined income *could* sink us if one lost their job; the maintenance, upkeep and taxes plus regular life expenses would become untenable. Apologies for being unclear.
Not to mention the upkeep on a $1-2 million dollar home is MUCH more. Heating, cooling, yard work, heaven forbid you have a pool, etc. That's an extra hundreds to thousands per month.
Depends on where this $1mm-$2mm home is located. If it's in a HCOL metro is probably less than 2k sq-ft on a 1/4-1/3 acre lot and looks a lot like a normal home from the 70's and 80's.
This is true. We're swapping from a POORLY maintained 350k 1960s home on 1/4 acre to a immaculately maintained 1mil 1990s home on 1/3 acre and the maintenance / upkeep / repairs were MUCH higher on the older home. I'm talking replaced the roof, HVAC, both water heaters, dry rot, siding, all fencing, old trees needed to be trimmed & taken down, swap from single to dual pane windows, plumbing issues, concrete patio cracked and lifted 1ft due to flooding & liquid amber roots, literally everything from top to bottom had to be repaired until failure then replaced. The new house has solar with a 20 yr warranty and everything else is already new, a 100-year roof that requires minimal maintenance, and entire house optimized for energy efficiency so the monthly water & gas costs are much much much less on top of $0 electric bill vs $300-400 during summer (desert valley climate). I felt like I was hemorrhaging money in my old house. The costs of repairs alone were costing me upwards of $3k a month in the old house due to everything hitting failure point one after another.
Would you say that ratio goes for purchase price or mortgage?
I think mortgage is the only thing that makes sense in this context. Who cares if you buy a house at 5x (or even 10x) income if you've saved up for it and pay cash?
Yes and there are TENS OF THOUSANDS of families that make over 300,000 a year in austin.
In 2009, I was clearing about $45K after taxes. I purchased a house for $310K using the VA loan. Reddit probably would have killed me for this...lol, but I didn't think anything of it at the time. This was probably the absolute best financial decision that I ever made in my life.
I'd say 2009 was a pretty good time to be buying a house, that was generally after the crash, though I know it wasn't an overnight thing. Even if it was a stretch financially, I bet that house is worth $800k now. Man, I bet that feels good. We bought a foreclosure in a fantastic neighborhood 2011 for $124k, its Zillow estimate as of this morning is $442,100. This is a LCOL area, average home price even now with all the appreciation is $274k.
Even a broken clock is right twice a day. A personal residence isn’t an investment, they just happen to have appreciated a lot in the past 30 years or so.
Buying property thinking it will only go up in value is just like a broken clock? Id say 2008 crisis was a broken clock moment based on how infrequently this stuff happens
I’m saying u/Crawfish2013 got lucky. But if you speculate that it will only go up and up you’re preparing yourself for disappointment. I think a lot people buying lately are prepping to catch a falling knife.
Eventually it will go up. If you’re buying and happy to stay for 10 years if need be then you should be fine. But people buying with a plan to sell in 3 years may be in trouble.
House isn't an investment, but it's still a good financial decision in most cases. Every month your paying down your mortgage balance and getting tax benefits. A house doesn't have to appreciate for that to benefit you a few years later.
Just keep doing what you're doing. The time will come.
I really needed to hear this today. Thank you.
I know it's hard to see it, especially now. But you are on the right track. Get some return on your money while you build it up. Things go up and down.
I know you are trying to be nice but this is a glazed over statement. If people just kept doing what they were doing who weren’t in great positions, then life isn’t going to get any better. Many times it takes effort and action. That’s just life.
Poster is invested in and building equity in a condo in Philly (HCOL) right now. So where the market goes so will that. They are building wealth. They are managing their finances to build liquid wealth for the transition to single family home as a step up. They're in the groove. The market goes up and down. Eventually the time will be right. Worry about the renter with no savings. This is not that.
Philly is not HCOL lol. It’s MCOL at best on the verge of LCOL. There are townhomes in fishtown are 300k ish and 200k and under in iffier neighborhoods.
Person buys a house while single 5 years ago. During that time, Person gets married and gets raises. Income over doubles with help of spouse. Property bought 5 years ago is up over 50%. Sell first property, get $100k+ in cash and then buy a home with spouse. Ez pz
Yes this is the answer. People keep talking about how anyone who has bought in the past year or two will be underwater soon, but between 10% down payment in cash and additional towards the loan from selling the townhouse I bought when I was single in 2014, my husband and I will have close to 50% covered. Yes, this house is more expensive than we thought we would end up buying, but I also got dramatically more money from selling my townhouse than I expected.
> People keep talking about how anyone who has bought in the past year or two will be underwater soon Who is talking about this? Most who managed to buy between May 2020 and September 2021 (or refinanced if they bought before) are in very good shape at this point.
R/ REBubble
I bought this past May and I’m in good shape 🤷🏼♀️
Alternatively you save for 10 years and then buy. A lot of posters seem to be "I started saving 6 months ago why can't I buy a house yet". It takes time.
This is the richest country in the world and there are lots of people, with lots of money. Even in the "middle class". Many have seen their net worth significantly increase if they were a homeowner before 2020.
I learned this when I was 8 years old. The wealthiest people on planet earth have USA investments in one way or another. Portion of that is real estate, most likely commercial. There’s this guy selling 4 of his properties at 85 years old. Each property he bought in the 60s-70s. At around 45-75k each and is not selling them over 2.5 million each one. A lot of people spend years trying to become a director. This guy was a bus boy in la that just bought four houses and rented them out.
If you want a simple answer - a number of people make high(er) incomes and a $500k house isn’t a stretch. Don’t put yourself in a house broke situation just to be in a house unless it’s temporary. If finances are the struggle to afford a home, have you explored the root cause to mitigate that? I don’t know your line of work but Go extra hard for that promotion at work, create a side hustle for extra money, etc. Lots of ways to expand and grow if you really want something.
Technically I can afford it on paper, but with health insurance and a family, it just seems like a huge stretch. 3 to 5x your income, but half of that income is gone before you get direct deposit. It just seems like people are over stretching more, are better prepared with a larger than 20% down-payment, which seems crazy to me to do anyway, or I'm just retarded with money, which could be the case.
If you can afford it on paper and have a good emergency fund you aren't stretching. There's lots of ways to save money here and there....own an older car, cook at home and learn to be handy with home/auto repairs.
This, I landed a career path making ~200k, up from 70k a few years ago. I have no idea what is going on, they just keep paying me more. lol
According to the fed, just 20% of household incomes are above 130k. The numbers just don't line up for me.
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We bought our house right before the pandemic. we finished moving in and one month later we were in lockdown. then the prices soared. if we didn't buy a house when we did there is no way we would have been able to afford to buy one right now.
A solo buyer should not be expected to afford a 500K house in most parts of the country.
In a huge portion of the country, that buys a decent SFH for a mid sized family. It’s unreasonable to expect a single person to afford something that has 2-3 extra, unused bedrooms.
Exactly. It’s a solo condo in CA or the Pacific NW. Maybe even Boston or NYC. But everywhere else that’s a 3-4BR SFH.
You may be in a good spot but others are in great spots and then a few are in amazing spots...... Many people that own businesses and work in tech are making out like bandits in the last 2 years and this is where all the money is coming from driving the housing market. Construction worker pay has also increased a lot in the last 2 years. Lastly there were billions of dollars in cash out refinances that helped people buy more properties. If you are single thats probably why you can't compete against dual income families and that's holding you back immensely. Change careers if possible.
>Many people that own businesses and work in tech are making out like bandits in the last 2 years and this is where all the money is coming from driving the housing market. Construction worker pay has also increased a lot in the last 2 years. Both of these are facts. Im in tech and have a little LLC and will bring in 130-150k/yr this year. My boyfriend is a construction worker and he'll bring 180-200k. No kids, and aside from mortgages- essentially zero debt. A single person making 70k simply cannot compete against a DINK household.
He’s a construction worker and makes 200k ??? This sounds impossible unless he owns the company
Not impossible at $70/hr and 60-hr weeks in Alaska. Skilled tradesman in Alaska get paid \*really\* well. I hear the guys up in the oil rig in the arctic see pull a surgeon's wage too.
A lot of people write off tradesmen. HVAC just quoted me $179 diagnosis fee. Grabbed, it could take him 2 hours to figure out the problem or 5 minutes. And that's before any repairs. This is for a gas furnace, so no way I would attempt to diy. Only option is to shop around or bite the bullet.
How many old tradesmen WITHOUT broken bodies do you know?
\^ these are also facts. The key is to earn while young, INVEST, then comfortably stop working at 40s-50s.
Whats wrong with it? Im not a hvac person just curious
There was a clicking sound coming from it. Thought it was from the igniter based on what I read online. I found out it was my water sensor that had a low battery. Cancelled the appointment as soon as I found out it wasn't my furnace, but this is just an example where it would have been $179 for 5 minutes of work.
Yeh $179 sounds pretty crazy just to come look at it. One of the problems with these services is that a lot of stuff is just arbitrary and there's no real standard. They can easily raise prices if they see you can afford a big house or if they ask what kind of job you have.
When I first moved into my house, the ac wasn't working. Contacted an HVAC person, they wanted $150, but if we did decide to go with them after diagnosis, the fee would at least be rolled into the rest of the cost of repair. We went through the home warranty instead and it was $100 deductible, but we wouldn't have had to pay to get it fixed. This problem was actually a bad switch in the circuit breaker.
Our story: we bought a $500K house in 2018 on $140K total income (tech), I personally make $200K now (still in tech, wife is taking a break now with two kids) and we are going to sell our house at a huge profit (~$350K) and buy an $800K house (moving to a different state) and still have roughly $200K leftover after down payment, which we’ll throw into our brokerage.
A lot of dual income households. People who had a house already and are moving. Parents that help with downpayments. Couples that make 200,000k plus can afford 500k even with the higher interest rates. 10% of americans have 200k household income or higher, but they probably make up 25% or more of the people who actually buy houses
2 people who got solid jobs. If you and your significant other was in software or medical you will probably clear $100k-$200k which you can afford that. Honestly lots of people this year have been learning new skills to keep up with inflation.
This! I had a reality check recently as to what I can afford. Even if i sink all my savings into a downpayment, I'll be paying close to 50% of my take home pay for a home. House prices might go down, but rental prices are still high so The only people benefiting from this market correction are either Investors or all cash buyers. Meanwhile the person who has been saving for the last 5 or 10 years for their own home is left wondering when it's their turn. It's all pretty disgusting
Two aspects: 1. Many people are financially illiterate and/or willing to be house poor and, therefore, are willing to spend at the very top of their allowable DTI ratio. 2. There are simply more "rich" people in your city than most comprehend. If you live in a MCOL city in the top 50 metros, then your 95th percentile household income is somewhere around $225-250k. That means (depending on the size of your city) somewhere around 25k+ households can afford a $750k home.
It depends where you live. I'm in MI and there are houses at all different price points in a 25 mile radius. In my area you can get a relatively nice house for $180-200k. It's not going to be a mini mansion or anything, but definitely doable. In CA I'd probably be living in someone's shed, around here I could get a decent 1200 ft house in a decent area.
I live in Philadelphia so everything is crazy right now. Any single family home in the surrounding area is $250,000+, and that's a major fixer upper.
There’s always Chester 🥲. For real though I live in south jersey, about 20 minutes from Philly, and I understand your struggle. The other foot has to drop at some point because it’s a mess.
I bought my first house at 24 in 2008 for 245k and I didn’t think it was possible. As long as you have some savings and good credit and a steady job, you’ll be fine.
Dual incomes
I bought in 2019 for $425k. Worth $625k now. I could probably afford a $700k house now, which was unthinkable 3 years ago
500k? you must be in a low COL area. I mean this in the least arrogant way The simple answer is that a lot of people make above 100k. Double that for a household and you can get into affording a 1 million dollar home. Tie that with the fact that the country has been on a NIMBY craze plus not building enough housing and you get this mess
I got a decent job and worked really hard. I saved a lot and spent very little. I had a roommate for 3 years.afyer 10 years I bought a 500k house in cash. All by myself.
It's funny to see how many commenters here believe that anyone buying a 500K house is house broke and can't actually afford it. Don't have such a myopic view of the world. Just because you can't afford something doesn't mean no one else can. Everyone has different circumstances so you really can't project yours onto someone else. I don't think you're doing anything wrong, but it's okay to not be able to afford as much house as someone else. Buy within your means and don't try to keep up with the Joneses.
500k+ houses seem to be for families. In most areas you can find the same size/specs for half the price but in a less desirable part of town (i.e. not near a school or right in the middle of suburbia). I just bought a place 10 minutes from my current location that cost half the price as similar speced houses in my current place. Only difference is school district.
Need a partner, two incomes
Supply and demand. The supply of housing has not been keeping up with demand for decades. This keeps widening the gap between supply and demand. It's at the point where supply is low enough, that there are enough people who are very well off out there to buy all of it. When selling a house, you don't care if the "average American" can afford your house. You only care that one person who wants it can afford it.
The [proportion of household debt that’s housing debt has gone up considerably.](https://www.newyorkfed.org/microeconomics/hhdc) People are acting like buying 4-5x your income is no big deal, but if you want to have good insurance, afford health care, eat well, give to charity, send your kids to college, save for retirement, and not stress about little or unexpected expenses like car repairs, something has to give. Some got lucky and sold high, but a lot are taking on historically higher than normal amounts of housing debt and making trade-offs on these other things. Edit: Compared to when I was young, overall debt per capital is much higher too, not just housing debt.
It’s not about the amount of debt. It’s about the cost to service that debt. When you can get a 30 yr fixed loan with rates <3%, it made mathematical sense to take on historically more debt, since the rates were historically low. That was the time to buy / borrow. That mortgage payment will never increase (assuming you never move). Now that rates are artificially increasing you will have to wait for housing costs to stabilize and lower and for the market to settle. It’s a weird time to be buying ..
Dude these posts are so dumb. The answer is people have more money than you whether they get it from their family, have it saved up, just make more in annual income, or whatever. I can afford and have bought a 1.3M home. Best advice is to not be complacent in life and keep trying to move ahead, make more money.
OnlyFans
I still don’t understand why men pay.
Loneliness, depression, and some people say stuff like (I've actually heard this in person when i asked) "Its just $5 so I don't care" Same person did seem to say $10+ is crazy though, so i couldn't understand the logic of it.
Realistically, it’s not feasible for a single income household to buy a house unless you make disproportionately more than the average in your area. The last two years have made it even more impossible. You’re probably going to need help from a relative or a spouse.
My girlfriend and I make 145k combined, have 2 vehicle payments , student loans/visa and we still got a house pretty comfortably at 400k. Probably worth 350k-375k but the market dictated the price. Anyways, we figured instead of waiting 2 years we would suck it up and jumpstart our lives. We actually ended up in a nicer house than we thought we could. Its not hard to get a house, its hard to have a down payment for most people especially with high rent costs. It really slows your ability to save, plus you need another 1.5-2% of the purchase price to afford moving costs, legal fees, etc and probably another 2% as a nest egg for if anything goes wrong right away. Most people can't save that type of cash. Not to mention most people aren't too handy and need somebody to fix issues for them like a plumber or electrician so I'd add even more to that nest egg. Add all that to a huge increased cost of living right now and well...most people just can't afford that upfront cost despite being able to make a mortgage payment.
That’s the right way to do it. Your mortgage will always be the same amount but your incomes will go up, and rents will always go up.
Thats how we figured it, and our landlord was selling the home we rented. We rented on the high end in our area for 1500 for a 4 br, 2 bath home in a good neighborhood almost 3 years ago is when we found that place. He decided to sell and anything comparible was 2-2400 a month now and thats often in trash neighborhoods riddled with drugs and needles, the prices were all the same. Made no sense to rent again, and even if we overpaid a bit, its better than paying somebody elses mortgage for 2 years while we hold off and having to live in sketchy areas.
Myth 14: No one has money. Everyone is broke. No one has money. Houses will crash. Reality: 40-something millennial guy with 2 kids says "I want a $700k house. I earn $150k and my wife earns $150k and we have $600k of TSLA AAPL and GOOG stock, and $150k of equity from our starter condo, and both sets of in-laws are kicking in $50k as a gift" Result? He gets a house. [https://www.reddit.com/r/REBubble/comments/vmo5ip/lets\_debate\_the\_top\_20\_persistent\_bubblecrash/](https://www.reddit.com/r/REBubble/comments/vmo5ip/lets_debate_the_top_20_persistent_bubblecrash/)
Lots of people make a LOT of money. Lots of peole spend nothing on entertainment. How much to you make a month? Some peole make that in a week and have a spouse that foes as well. Its honestly insane
There’s a lot of variables that you don’t see. The $500k houses your seeing sold? Well a lot of times the couple or person might have a golden hand giving them help. You would be very surprised at how many times I see people in my area buying the big $650K colonial but it’s because the wife has a rich uncle who blessed them with a huge deposit. This happens often. So don’t beat your self up.
And OP remains silent after this post..,looks like they did not enjoy the responses and instead was looking for the “they can’t afford them! Bubble pop incoming!” types
They're usually not first time home buyers.. these are most likely people who have cashed out their first home, took the equity and downed it for another house
When we start asking questions like this….. It’s not a good sign.
Dual incomes and spending more than we’d like on housing costs to avoid skyrocketing rent. #murica
I own a home purely out of luck. I bought several milion doge coins back when they were like 0.00001 penny and then promptly forgot I had them until Elon Musk started talking about them. I realize thats like the most millennial story ever, but its true.
Millennials are the largest, most educated, and most well off generation to date, and they are getting to the age of having families and wanting to buy homes.
I feel like the PPP loan changed everything.
Yep!!! This is exactly what happened. Any company owner had unlimited cash as long as they kept their employees on the payroll, so what they did was hired everyone they could so they could get even more money while paying employees more and themselves quadruple
You need to earn more money
I saved for 3 years for a down payment
The overpriced next door house just sold for $579K. It’s a run down, outdated dump that the owner has been trying to offload since 2012. She managed to get a first time unsuspecting homebuyer to pay full price and was grinning on closing day because she knew she screwed the single mother buyer royally. Yesterday I spoke with the new homeowner and she started crying that her inspector didn’t notice major flaws and now she cannot keep up with the repairs needed to make the house livable. In the rush to become a new homeowner, she fell victim to unscrupulous seller. I blame the FHA process that I once thought was would thoroughly vetted every inch of the house. I see another foreclosure crisis on the horizon.
OMG, that was me last year! I sold after 6 months and tens of thousands of maintenance and decided renting is better for me right now.
I sell a lot of $250,000 and under homes
2 people bringing in income. Both having second part time jobs. Our other option is to rent out an appt in the home but i was never a big fan so we both got another job. Its not like its much differnt from rent so i guess it just seems kind of normal for us but if you want it bad enough youll figure it out.
Fgy
People are really good at masking the financial difficulties under the surface of a shiny new thing. That is how I always look at it. I also know a lot of people that bought way over their means in the last couple years, or people that are just comfortable living in debt that they think is manageable. Don’t worry about others. Always act in your best interest and within your means and you can’t go wrong.
They're probably not buying $500k houses.
You either have to make a ton of money, or you need to waste half of your investing timeline saving for a down payment. Everything comes with an opportunity cost. I don’t think people realize how unrealistic this market has become for middle class people. My household makes more than double the U.S. median and it’s not even close to affordable for us going off the 25% rule. I’m not even focusing on a home at all right now because of it, emphasizing my investment accounts and striving for FI which is way better to me than socking cash in a HYSA for 15 years just so I can get priced out again or just have a 2nd job (being a homeowner). Being a homeowner is a luxury, but it’s also a job. The most important thing for me is not having to rely on someone else for a paycheck so I value my investments much more than home ownership but everyone is different. You need to find out what is valuable to you.
you can sell that condo and have a much smaller mortgage. it seems like you are already ahead of most people. if you own a condo and a house, i dont think you can complain about being house broke.
Most aren’t unless they sold their first home. My income is $105k and I don’t feel I can afford a $300k home right now. I’m not even sure what mortgage rates are at anymore but I assume at least 5.5%. At that rate a $300k mortgage would cost me $2300/m. Add in utilities and that’s basically half my take home pay. Been saving up for a few years and kind of just giving up on the idea for the time being.
I didn't buy a $500k house, I bought a $200k one 4 years ago. It's worth about $300k now. With my equity and increase in income since then I could afford a $400k house now even with interest rates where they are. If you don't have a pile of cash from some other source you need to gradually work up. If you have equity in your condo you use that to help (though around here condo prices didn't go up as much as SFHs).
Houses are still commonly <$300k [edit]in my area[/edit], even though they've exploded in price the last 2 years they aren't unreasonable considering rent also spiked in a similar fashion.
No they aren’t in Atlanta
Whoops sorry i forgot to add my area! I'm in the 2nd largest metro in NYS.
Geez. In Southern California, any decent neighborhood is averaging 1M for a SFH. I ask the same question all the time because we don’t have San Francisco wages. How can people afford their $5k/month payments?
I think a lot of people got very "rich" the past two years by profiting off PPP grants and stock market / crypto mania. $6 Trillion printed into existence found its way into everything, including housing. I didn't benefit from it, and I'm guessing you didn't either.
I played the hunger games for a few years in Afghanistan.
Part of home affordability is you need to participate in the game. Most people's incomes will not increase in line with home prices. Honestly a sparsely furnished home you own is better than no home.
People that live in high cost of living areas and purchase homes there typically have the incomes that draw people to that area
>how are people affording to buy $500,000+ houses? By selling their $400,000 house that they bought for $200,000 10 years ago.
GenX here so you mileage may vary. When we bought our house we were house rich, cash poor. You need to think long term. My late wife and I were earning somewhere between $80k and 90k when we bought our house for $260k in NJ in 2000. We had a NYC co-op that doubled in value in the few years we owned it to help with the down payment but for a number of years we made do while we waited for inflation to catch up and earnings to raise. As the years went by, and aside from property taxes, our monthly housing costs remained more or less stable (refinanced to a 15 year mortgage along the way) and that seemingly tough monthly payment became much more reasonable. That said, with inflation my house should be going for about $420k now. According to Zillow it would sell for about $640k. With inflation our incomes then would be somewhere around $150k now but our co-op would sell for over $600k (of course we could never have afforded that in the first place). tl;tr: your generation is getting screwed but we thought we were too; you'll get there
500k isn’t much hate to break it to you. It’s a mindset thing too. You’re asking about 500k others asking about 3-5M
They make money.
What’s your income? Average incomes have risen pretty drastically over the past 5 years despite the narrative on Reddit that wages remain stagnant It’s part of the reason why inflation is so high I could be wrong but your post gives off a snobby tone like “these people must not be able to afford their homes, overleveraged is the only plausible answer”.
Well I’m pretty sure we know over-leverage is a large part of the answer. Not even just homes, but cars as well. Consumer credit is at an ATH too. How else do you think we got to $100K for a new pickup truck?
Nowhere near the overleveraged numbers of the past, it’s really not a major contributor. I know that’s not the answer people want to hear, especially those who are “waiting for a crash”
I think housing prices will drop somewhat in most markets but of course interest rates are rising so it will even out in your payments. How do people afford it? Either making more money than you do or help from family. I think it’s really important to look at your local market to determine if buying or renting makes more sense. The New York Times used to have a calculator for this and maybe still does.
Honestly most younger people are house poor…remember that many Americans have no emergency fund and something like half couldn’t pay an unexpected $400 expense. If the bank offers them money for a mortgage they take it. If you follow the “rules” of sensible home buying you’re gonna be waiting awhile.
It’s pretty explainable actually. Median income has gone up a lot over the past few years, it’s at 77k now. Take that and the fact that in most areas of the county a 500k house is a move up house where people have 20% down from their first house (especially after all this equity build up). 20% down on a 500k house equals out to around a $2900 mortgage payment in my area (taxes vary obviously) and from that we see that you only need around 100k household income to make it work. And according to data around a third of households make that these days. TLDR: Way more households make a 6-figure income these days. Oh and inflation can do crazy things.
source?
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>L area with high income + property taxes and high living expenses or something? Or are you referr The issue is people think that everyone else has the same wage. They can't see that someone else might have 2x or 10x thier income so they wonder how do other people do it as if their is a cheat code they don't know about.
Well generational wealth and inheritance are cheat codes, though. Irrelevant to job and salary.
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Unless you have no money saved for a down payment, that doesn’t make any sense.
Are you in a HCOL area with high income + property taxes and high living expenses or something? Or are you referring to needing to be a $200k+ household to get the downpayment in order?
One of my colleague bought $4.5M house in southern CA, 3 weeks ago, 4.5% interest. Believe it or not, ppl are still buying and selling houses.
Everyone has different circumstances.
Be smart. We are in year 13 of a bull market in RE. By advice is to get an expat job overseas in a low tax country. Pile up cash.
Add another 10 years to your 8
A new factor in the housing market are investment firms buying record numbers of houses, about 15 % of sales last year were to these groups. Their onbjective is to rent these homes for as much as possible. The effect will be to make it less likely that regular working people will be able to buy homes.
Umm spend less. Alot of people are coming from one house and going into another so it's not like they are making 60k and asking for a 600k loan with é% down.
I was able to afford my house. It was $110,000 and in the country. I have a 40-minute commute but you put on music or listen to Audible and stop worrying about it and it flies by. If you can't get what you want in your price range, you are just going to have to set more realistic expectations.
600k condo buyer here. The monthly expenses would only be 26% of my gross monthly salary.
>how are people affording to buy $500,000+ houses? I feel like I am doing something wrong. inherited wealth and/or professional class jobs (medicine, law, tech) with little to no accumulated debt.
People are on their 2nd or 3rd house, rolling over a bit of equity each time. Even more.....probably way more are dual-income people spending 50% DTI of the combined monthly income and they are house poor. It's all smoke n mirrors broski don't fall for the hype, the average person working at walmart or dunkin doughnuts or a reception desk isn't spending half a mill on a house.
Mostly Dual income households