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$100k for a down payment - how many years of saving does that take and what happens to that $500k price tag during those years of saving? One hardship like a me

$100k for a down payment - how many years of saving does that take and what happens to that $500k price tag during those years of saving? One hardship like a medical issue, a setback in employment, or a child you weren't ready for, then what? And I'm not sure you could find a one bedroom, one bathroom for $500k in a city with tech jobs.

neogodless 3y ago
In places where houses are $500K, rent is probably $2000 / month. (More like $1200 - 5000 / month, but depending on the size, location, amenities, luxuriousness of fixtures, etc.) If you make barely $100K, and are spending $24K on rent, let's say you spend half of the rest on living. That leaves you with $38K savings per year. So it takes you 32 months to save up $100K for a down payment. The secret is don't spend all of the money you make. Well it's not a secret, but it's also not "normal." It's culturally normal to spend all of your money, and then wonder why you can't build up savings. But if you're a software engineer with an income of 6 figures, you really should be able to figure out how to live a good life without spending every last dollar.
- sokoloff 3y ago
  Does this $100K/yr earner pay no income taxes and FICA somehow?
- anvil-on-my-toe 3y ago
  You forgot taxes. $38k - $27k in taxes = $11k savings. So 9 years to save up, by which time housing inflation will have taken the price to ~$700k. You are then $40k short for the down payment.
  - neogodless 3y ago
    Do you know a lot of software engineers that barely make $100k? That's why I'm not getting caught up in the particulars of this example.
    - SoftTalker 3y ago
      There are many people in software that are making under $100k Anyone working in in a government position, or for a state university, or for a nonprofit is probably not earning $100k except maybe in high COL areas or those with quite senior positions.
      - phero_cnstrcts 3y ago
        In Europe frontend is about 60k annually.
    - anvil-on-my-toe 3y ago
      Don't you think it's interesting that taxes dramatically skew the example? Think about people earning $50k - $100k. 37 million households in the US. Another 34 million households earn less. 128 million households in America total.[1] 12, give or take 2, years into professional life, you sign a 30-year note and cash out all of your savings. Wages and cost of living won't be constant, but that's basically the optimistic case. Working 42 years to retire by owning one basic shelter. [1] https://www.statista.com/statistics/203183/percentage-distribution-of-household-income-in-the-us/ https://www.statista.com/statistics/203183/percentage-distri...
      - neogodless 3y ago
        To be sure if we want an example with someone making $80k after tax, we should really not be looking at houses above $400k. Yes, home prices are nuts, as I observed, but no one should be spending 5x gross income and 6.25x net income on housing. In my own life, I spent about 2.5x gross income for both of my home purchases. And they were arguably more home than I needed. When I bought my first house, I was single, and I rented out the two other bedrooms. My spouse and I bought a house together, but ultimately could not have children, so the house is too big. (We also live on an acre and have a lot to maintain.) Now I know these Philly suburbs are nothing compared to California real estate, but it's still a medium to high cost of living area compared to the rest of the country, where we're minutes away from any kind of shopping or entertainment we'd want, and 45 minutes from the large international airport. For sure the rising housing costs make it even harder for households making less than the median. I never argued otherwise. My point was about that which started this thread, that there is "no option" but to work for a big, awful tech company. I disagree, and elevated housing costs don't change that.
oooyay 3y ago
It took me about five years to save my down payment. I lived very frugally, don't have a wife, don't have a kid, I paid less than $20k on note for each of my cars, and do not have college debt. I'd say it's fairly difficult if you start moving any of the knobs I minimized or set to zero above. Even then, after my down payment money was tight for the first year because it was everything I had. I got a mortgage similar to what OP mentioned but I have a veterans home loan. Most people I know don't have one of those, so their mortgage that was gotten at the same time as mine is closer to $4k/m.
- ta988 3y ago
  So you are a both a bit of an exception nowadays with no family and no debt.
  - oooyay 3y ago
    I'm largely an exception, yes

neogodless 3y ago

In places where houses are $500K, rent is probably $2000 / month. (More like $1200 - 5000 / month, but depending on the size, location, amenities, luxuriousness of fixtures, etc.) If you make barely $100K, and are spending $24K on rent, let's say you spend half of the rest on living. That leaves you with $38K savings per year. So it takes you 32 months to save up $100K for a down payment. The secret is don't spend all of the money you make. Well it's not a secret, but it's also not "normal." It's culturally normal to spend all of your money, and then wonder why you can't build up savings. But if you're a software engineer with an income of 6 figures, you really should be able to figure out how to live a good life without spending every last dollar.

sokoloff 3y ago
Does this $100K/yr earner pay no income taxes and FICA somehow?
anvil-on-my-toe 3y ago
You forgot taxes. $38k - $27k in taxes = $11k savings. So 9 years to save up, by which time housing inflation will have taken the price to ~$700k. You are then $40k short for the down payment.
- neogodless 3y ago
  Do you know a lot of software engineers that barely make $100k? That's why I'm not getting caught up in the particulars of this example.
  - SoftTalker 3y ago
    There are many people in software that are making under $100k Anyone working in in a government position, or for a state university, or for a nonprofit is probably not earning $100k except maybe in high COL areas or those with quite senior positions.
    - phero_cnstrcts 3y ago
      In Europe frontend is about 60k annually.
  - anvil-on-my-toe 3y ago
    Don't you think it's interesting that taxes dramatically skew the example? Think about people earning $50k - $100k. 37 million households in the US. Another 34 million households earn less. 128 million households in America total.[1] 12, give or take 2, years into professional life, you sign a 30-year note and cash out all of your savings. Wages and cost of living won't be constant, but that's basically the optimistic case. Working 42 years to retire by owning one basic shelter. [1] https://www.statista.com/statistics/203183/percentage-distribution-of-household-income-in-the-us/ https://www.statista.com/statistics/203183/percentage-distri...
    - neogodless 3y ago
      To be sure if we want an example with someone making $80k after tax, we should really not be looking at houses above $400k. Yes, home prices are nuts, as I observed, but no one should be spending 5x gross income and 6.25x net income on housing. In my own life, I spent about 2.5x gross income for both of my home purchases. And they were arguably more home than I needed. When I bought my first house, I was single, and I rented out the two other bedrooms. My spouse and I bought a house together, but ultimately could not have children, so the house is too big. (We also live on an acre and have a lot to maintain.) Now I know these Philly suburbs are nothing compared to California real estate, but it's still a medium to high cost of living area compared to the rest of the country, where we're minutes away from any kind of shopping or entertainment we'd want, and 45 minutes from the large international airport. For sure the rising housing costs make it even harder for households making less than the median. I never argued otherwise. My point was about that which started this thread, that there is "no option" but to work for a big, awful tech company. I disagree, and elevated housing costs don't change that.

oooyay 3y ago

It took me about five years to save my down payment. I lived very frugally, don't have a wife, don't have a kid, I paid less than $20k on note for each of my cars, and do not have college debt. I'd say it's fairly difficult if you start moving any of the knobs I minimized or set to zero above. Even then, after my down payment money was tight for the first year because it was everything I had. I got a mortgage similar to what OP mentioned but I have a veterans home loan. Most people I know don't have one of those, so their mortgage that was gotten at the same time as mine is closer to $4k/m.

ta988 3y ago
So you are a both a bit of an exception nowadays with no family and no debt.
- oooyay 3y ago
  I'm largely an exception, yes