4 ms·

I think you may be leaving out significant bits of context on your existing financial commitments and/or constraints, which wouldn't apply to most people in you

I think you may be leaving out significant bits of context on your existing financial commitments and/or constraints, which wouldn't apply to most people in your position, if that is true. Take-home pay for a single earner pulling down 200k is ~10.5k/month (let's ignore for the sake of argument any insurance premiums or retirement plan contributions you make - strictly speaking the second are optional and the first aren't likely to swing the numbers that much). A mortgage in today's interest rate environment, after putting down 20% on 1.3m, is maybe a hair over 4.5k/month. Even if you're maxing out your 401k and have remarkably expensive insurance premiums after your employer's contribution, that's still ~4k/month left over. Unless you have an unusually expensive chronic medical condition, that seems like it should be more than enough to get by (considering people do in fact get by on that much pre-tax, not even deducting their own housing expenses). And this is basically the worst-case scenario where you're trying to buy an "average" house as a single person, rather than a condo or even a cheaper house (there are homes listed under 1m in SB). If you're married, your spouse is likely earning an income as well; if they aren't, at least you benefit from a lower tax burden to the tune of ~1100/month, which maybe doesn't quite compensate for their "cost of living" but certainly gets you a fair bit of the way there. And, as always, I forgot to calculate the tax benefits of paying a mortgage, which can be substantial and improve the numbers further.

p1esk 6y ago
Well, let's see: I have zero debt, I have enough savings to put 20% down (even for a 1.3M house), and my take home pay after taxes is ~11.5k/month. I don't make any significant deductions from my paycheck (no 401k, regular health insurance, no health problems). I have talked to multiple loan specialists, and they all recommended I stay below 1.3M prices. I agree with them, because $1.3M house means ~$6k monthly payments (including property tax, HOA, and insurance, and assuming 3% interest rate). This is more than half of my paycheck, and I'm not comfortable spending more than half of my paycheck on mortgage. Sure, I can buy a cheaper home - a small condo, or a house in a poor neighborhood. I can definitely afford a very nice house if I'm willing to commute for 1 hour (one way). But why should I? Why should I settle for a less than average home? We are talking average quality here (median, to be more precise), so those 1.3M houses are nothing amazing. They are just regular homes for middle class. I suspect a significant fraction of homeowners in SB wouldn't be able to afford their houses if they were to buy them today.
- comp_throw7 6y ago
  Sorry, I hope I didn't come off as aggressive or overly intrusive. I just wanted to point out that expecting to be able to purchase a (~median) home on a single income (even if that income is a tech salary) is not something I think most people would regard as a reasonable expectation. To be perfectly clear I agree, given the facts I have available to me, that purchasing a 1.3m house on just that income would not be the most prudent financial decision; it's just not one I would regard as "totally catastrophic" - obviously there's the tail risk of both the real estate & SWE job markets going bust at the same time, but for reasons that are too long to go into here I don't think we'll see anything structurally similar to the dot-com crash ~ever again (though there may be other more localized bubbles that pop). I myself haven't purchased any sort of real estate despite pressure from family because I also live in SoCal and I'd be paying a significant premium over renting for basically no benefit, given my current lifestyle. But I also don't _want_ to own property, so it's mostly just convenient that renting makes more financial sense. I don't think you should "settle", just wanted to clarify that it seemed like you could actually "afford" it in both the most literal sense and in the "how likely does this cause life-ruining financial catastrophe" sense. I don't want to own property myself so I don't totally understand the impulse, but often what someone calls impossible is possible, just not with whatever trade-offs they're currently making.

p1esk 6y ago

Well, let's see: I have zero debt, I have enough savings to put 20% down (even for a 1.3M house), and my take home pay after taxes is ~11.5k/month. I don't make any significant deductions from my paycheck (no 401k, regular health insurance, no health problems). I have talked to multiple loan specialists, and they all recommended I stay below 1.3M prices. I agree with them, because $1.3M house means ~$6k monthly payments (including property tax, HOA, and insurance, and assuming 3% interest rate). This is more than half of my paycheck, and I'm not comfortable spending more than half of my paycheck on mortgage. Sure, I can buy a cheaper home - a small condo, or a house in a poor neighborhood. I can definitely afford a very nice house if I'm willing to commute for 1 hour (one way). But why should I? Why should I settle for a less than average home? We are talking average quality here (median, to be more precise), so those 1.3M houses are nothing amazing. They are just regular homes for middle class. I suspect a significant fraction of homeowners in SB wouldn't be able to afford their houses if they were to buy them today.

comp_throw7 6y ago
Sorry, I hope I didn't come off as aggressive or overly intrusive. I just wanted to point out that expecting to be able to purchase a (~median) home on a single income (even if that income is a tech salary) is not something I think most people would regard as a reasonable expectation. To be perfectly clear I agree, given the facts I have available to me, that purchasing a 1.3m house on just that income would not be the most prudent financial decision; it's just not one I would regard as "totally catastrophic" - obviously there's the tail risk of both the real estate & SWE job markets going bust at the same time, but for reasons that are too long to go into here I don't think we'll see anything structurally similar to the dot-com crash ~ever again (though there may be other more localized bubbles that pop). I myself haven't purchased any sort of real estate despite pressure from family because I also live in SoCal and I'd be paying a significant premium over renting for basically no benefit, given my current lifestyle. But I also don't _want_ to own property, so it's mostly just convenient that renting makes more financial sense. I don't think you should "settle", just wanted to clarify that it seemed like you could actually "afford" it in both the most literal sense and in the "how likely does this cause life-ruining financial catastrophe" sense. I don't want to own property myself so I don't totally understand the impulse, but often what someone calls impossible is possible, just not with whatever trade-offs they're currently making.