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I don't think that owning a house is nearly out of reach for a family making $62k/yr. Standard advice is that one can afford a house costing 2.25 times one's an

by isaacg 6y ago

I don't think that owning a house is nearly out of reach for a family making $62k/yr. Standard advice is that one can afford a house costing 2.25 times one's annual income. That means the median family can afford a $140k house. Briefly checking my city, paying $140k for a house in my city is enough for a 3 bedroom detached house with a large yard, in the suburbs, with a 15 minute drive to downtown.

Swizec 6y ago
What the heck where do you live? $140k gets you a beat up garage everywhere I’ve ever checked. The 2.25 advice is interesting. By that logic me and my girl can afford $750k which juuuust about starts to get you in the starter fixerupper homes here in SF. But we can’t afford the downpayment. And to make it worth buying, we’d have to stay there for 10+ years and then suddenly a starter 1.5bedroom becomes a little small when you consider what usually happens to couples in our age group on a 10 year timeline.
- rockostrich 6y ago
  The 2.25 thing seems like it's very conservative. The general advice is that the most you should spend on rent in a given year is 30% of your salary, but let's bring it down to 20% to be conservative. Let's say we get a shitty mortgage rate of 4% over 30 years. Assuming your income won't change at all over the course of the 30 year mortgage and spending the equivalent of 30% of your salary per year, you end up spending 9 times your income on the house. Going off of Google's mortgage calculator, the cost of the mortgage is about 172% the cost of the loan for 30 yr/4% so that means you could buy a house that's ~5.25x your income to be equivalent to the money spent on rent. Obviously this is ignoring a lot of things like HOA fees and taxes, but if even if you're mortgage payment is 50% of your monthly housing expenses you could still pay for something that's more than 2.25x your salary.
  - Swizec 6y ago
    Sure and all of this is moot if you can’t afford a down payment. The down payment and closing costs on a 1.5mil home are massive Paying the mortgage itself isn’t the problem. We already pay the landlord’s mortgage.
    - AlexTWithBeard 6y ago
      5% downpayment for $140k home is $7k. This is one quarter of an average wedding expenditure in the US [1] [1] https://www.weddingstats.org/average-cost-of-a-wedding/ https://www.weddingstats.org/average-cost-of-a-wedding/
      - Swizec 6y ago
        Yes but $140k homes are not available where I want to live.
  - PeterisP 6y ago
    I believe that the 2.25x estimate comes from a time where a mortgage rate of 4% would not be considered shitty but rather impossibly low. Lower interest rates have increased the home value that people can afford for the same monthly payment, and thus has been also a factor in driving up home prices.
- notsureaboutpg 6y ago
  You must live on the coasts. I moved back to the Midwest during COVID, and all my old friends from school have bought houses because good houses here cost $100k-$200k, and I have a yearly salary around that amount and cannot afford to even get a mortgage on a house on the coasts.

by isaacg 6y ago

Swizec 6y ago

What the heck where do you live? $140k gets you a beat up garage everywhere I’ve ever checked. The 2.25 advice is interesting. By that logic me and my girl can afford $750k which juuuust about starts to get you in the starter fixerupper homes here in SF. But we can’t afford the downpayment. And to make it worth buying, we’d have to stay there for 10+ years and then suddenly a starter 1.5bedroom becomes a little small when you consider what usually happens to couples in our age group on a 10 year timeline.

rockostrich 6y ago
The 2.25 thing seems like it's very conservative. The general advice is that the most you should spend on rent in a given year is 30% of your salary, but let's bring it down to 20% to be conservative. Let's say we get a shitty mortgage rate of 4% over 30 years. Assuming your income won't change at all over the course of the 30 year mortgage and spending the equivalent of 30% of your salary per year, you end up spending 9 times your income on the house. Going off of Google's mortgage calculator, the cost of the mortgage is about 172% the cost of the loan for 30 yr/4% so that means you could buy a house that's ~5.25x your income to be equivalent to the money spent on rent. Obviously this is ignoring a lot of things like HOA fees and taxes, but if even if you're mortgage payment is 50% of your monthly housing expenses you could still pay for something that's more than 2.25x your salary.
- Swizec 6y ago
  Sure and all of this is moot if you can’t afford a down payment. The down payment and closing costs on a 1.5mil home are massive Paying the mortgage itself isn’t the problem. We already pay the landlord’s mortgage.
  - AlexTWithBeard 6y ago
    5% downpayment for $140k home is $7k. This is one quarter of an average wedding expenditure in the US [1] [1] https://www.weddingstats.org/average-cost-of-a-wedding/ https://www.weddingstats.org/average-cost-of-a-wedding/
    - Swizec 6y ago
      Yes but $140k homes are not available where I want to live.
- PeterisP 6y ago
  I believe that the 2.25x estimate comes from a time where a mortgage rate of 4% would not be considered shitty but rather impossibly low. Lower interest rates have increased the home value that people can afford for the same monthly payment, and thus has been also a factor in driving up home prices.
notsureaboutpg 6y ago
You must live on the coasts. I moved back to the Midwest during COVID, and all my old friends from school have bought houses because good houses here cost $100k-$200k, and I have a yearly salary around that amount and cannot afford to even get a mortgage on a house on the coasts.