Who can afford 800K-1M homes? Genuine Curiosity!

[Anonymous]

SH is a scientist and I work in communications -- HHI is over $200K but nothing astronomical. The thing that really helped us was our timing in the housing marked. Bought first house for $206K in 2000 with $10K down that DH's parents gave us as a gift. We had saved nothing towards a down payment as we were paying off student loans prior to 2000.

That house sold just three years later for...$405K! We put a ton of low cost, high "visual value" surface improvements into the house...lots of elbow grease but very little money.

Next house, 2005, price: $525K. Made tons of surface improvements to this house, too (nothing too expensive but it looked much, much better when we sold it). Then had two kids, needed to move for schools. Market was beginning to tank. Sold for $611K in mid-2010 and took on pretty hefty mortgage (~$600K) for our current $810K house in great school district.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I know a ton of youngish (35-45) families buying $1m homes in NW.

I wouldn't consider that youngish.

A 35yr old buying a million dollar home is very youngish.

How do you figure? That's plenty of time to save.

Oh brother. If you are 35 and you can afford to purchase a 1mil home you are in the top .1% of earners for your age bracket. Just stfu.

If that upsets you then you're living in the wrong place.

[Anonymous]

My house is worth $800,000 now, but we bought it for $350,000.
People build up equity over the years. I don't think it's unusual for a couple of 40 year old professionals to have $500,000 or more equity in their home.

[Anonymous]

I live in a neighborhood with a lot of youngish families where homes start around 800K. They all fall into the following categories, and often more than one:

(1) Bought in the 90s and either stayed in their house that is now worth at least twice as much, or sold their 90s "starter" home and used the equity to trade up;

(2) At least one, usually the husband, is in a high earning profession (on our block, it seems everyone is either a lawyer, doctor or lobbyist, with lawyers being the majority);

(3) Has family money (and all of the people I know with family money also have a high paying job).

In the early and mid 90s, you could easily buy a house on Capitol hill for $100-300K. I know several people who did. The $900K houses in upper NW sold for around $450K then, so you still would have had to have been a fairly high earner to buy in NW in the 90s, whereas, there are a lot of people living on the Hill who never would have been able to buy their houses at today's prices. I think this is why there are more "middle class" people who live on the Hill.

[Anonymous]

As a realtor I can tell you it's a combo of people who have left over money from buying and selling at peak times, people who make saving for a house the number one priority in life (above college education or retirement for example), and people who have some kind of family trust, starter money or inheritance. True most of these people have hhi's close to 200k but very few are over 400k.

[Anonymous]

Mostly people who 1) are 2 income families, 2) made money on their first condos or starter homes, to help with the downpayment, and 3) sometimes get a little bit of padding from family money.

[Anonymous]

Anonymous wrote:As a realtor I can tell you it's a combo of people who have left over money from buying and selling at peak times, people who make saving for a house the number one priority in life (above college education or retirement for example), and people who have some kind of family trust, starter money or inheritance. True most of these people have hhi's close to 200k but very few are over 400k.

wow this makes me feel better about the fact that we can't afford an expensive house. Our budget isn't great but my DH and I each contribute 15%+ to our 401K and more money in college savings.

[Anonymous]

One of the things that make me nervous about the DC real estate market is how many people are living in homes that they can afford only because they bought when prices were much lower (in other words, they couldn't afford to pay today's prices). That works fine as long as you don't have very many people leaving and/or you have a steady stream of new people arriving to buy. But without that, prices aren't sustainable. So if the job market in DC starts to slip, prices are going to drop. I'd be a lot more confident in the market here if everyone currently living here made enough money that even if they had to start over, they could still afford the same house.

[Anonymous]

Anonymous wrote:One of the things that make me nervous about the DC real estate market is how many people are living in homes that they can afford only because they bought when prices were much lower (in other words, they couldn't afford to pay today's prices). That works fine as long as you don't have very many people leaving and/or you have a steady stream of new people arriving to buy. But without that, prices aren't sustainable. So if the job market in DC starts to slip, prices are going to drop. I'd be a lot more confident in the market here if everyone currently living here made enough money that even if they had to start over, they could still afford the same house.

The thing is, this is true for most of our parents and hasn't been a problem. My parents bought their house for 50, 100 or 150k, and it's worth a lot more than that now - but they couldn't afford to buy it now. They don't even work! Inflation.

[Anonymous]

Anonymous wrote:

I'm at home with a baby now, and since I will probably be home more if we have a #2 or working part-time, we want to be more conservative about home price. What I can't figure out is who is buying the 900K places in Capital Hill?

Who can afford $1 million? The short answer is, two-earner couples where one parent does not quit working to stay with the baby. Harsh truth.

-- a SAHM, kicking around in a veritable ghost town up here in NW DC, 8 a.m. to 7 p.m, Mon - Fri

Well, we're a 2-income family who can't afford that.

So your statement is NOT the norm in my circle.

[Anonymous]

Anonymous wrote:As a realtor I can tell you it's a combo of people who have left over money from buying and selling at peak times, people who make saving for a house the number one priority in life (above college education or retirement for example), and people who have some kind of family trust, starter money or inheritance. True most of these people have hhi's close to 200k but very few are over 400k.

We have several friends with a $6K mortgage.

If they weren't my friends, I'd call them idiots to their faces.

Who pays $72K/year in mostly interest?

[Anonymous]

Anonymous wrote:

Anonymous wrote:One of the things that make me nervous about the DC real estate market is how many people are living in homes that they can afford only because they bought when prices were much lower (in other words, they couldn't afford to pay today's prices). That works fine as long as you don't have very many people leaving and/or you have a steady stream of new people arriving to buy. But without that, prices aren't sustainable. So if the job market in DC starts to slip, prices are going to drop. I'd be a lot more confident in the market here if everyone currently living here made enough money that even if they had to start over, they could still afford the same house.

The thing is, this is true for most of our parents and hasn't been a problem. My parents bought their house for 50, 100 or 150k, and it's worth a lot more than that now - but they couldn't afford to buy it now. They don't even work! Inflation.

My parents could very easily afford to buy their house now if they had to, and I think that's true of most people their age. Sure, it's worth 5 times what they paid for it (inflation, as you said), but their incomes are also much higher than they were back then (again, inflation). In a place where property values have just gone up gradually over time, most people would be able to afford their house if they had to start over -- their incomes will have gone up, too. But around here, it's not just a gradual rise. Real estate values are just vastly higher than they were 10 or 15 years ago, and incomes haven't gone up anywhere near as much.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:One of the things that make me nervous about the DC real estate market is how many people are living in homes that they can afford only because they bought when prices were much lower (in other words, they couldn't afford to pay today's prices). That works fine as long as you don't have very many people leaving and/or you have a steady stream of new people arriving to buy. But without that, prices aren't sustainable. So if the job market in DC starts to slip, prices are going to drop. I'd be a lot more confident in the market here if everyone currently living here made enough money that even if they had to start over, they could still afford the same house.

The thing is, this is true for most of our parents and hasn't been a problem. My parents bought their house for 50, 100 or 150k, and it's worth a lot more than that now - but they couldn't afford to buy it now. They don't even work! Inflation.

My parents could very easily afford to buy their house now if they had to, and I think that's true of most people their age. Sure, it's worth 5 times what they paid for it (inflation, as you said), but their incomes are also much higher than they were back then (again, inflation). In a place where property values have just gone up gradually over time, most people would be able to afford their house if they had to start over -- their incomes will have gone up, too. But around here, it's not just a gradual rise. Real estate values are just vastly higher than they were 10 or 15 years ago, and incomes haven't gone up anywhere near as much.

It's a bubble. And around here (at least in DC and the close-in suburbs), it hasn't popped yet.

[Anonymous]

Anonymous wrote:Mostly people who 1) are 2 income families, 2) made money on their first condos or starter homes, to help with the downpayment, and 3) sometimes get a little bit of padding from family money.

This.

My husband was stationed here in 2006. I knew very little about economics, but even I could tell the housing market was wildly out of control. Enlisted families who had bought tiny shacks by Quantico or Ft. Belvior around 2000-2002 had sold for double and more in 2005/2006, walking away with a quarter million in cash. We looked at these houses and said WHO in God's name has half a million dollars to spend on a tiny 1960s brick box??

I started following the market very closely, and I came to the same conclusions:

1). Two income families
2). People who lucked out with the timing of the insane housing market
3). Family money

Even now, with the fake wealth gone, and gone spectacularly, I look at the boom McMansions and wonder who paid top dollar for them, and what it feels like to see new neighbors move in, knowing they paid less than half. Entire neighborhoods in PWC went that direction.

Anyway, back to million dollar houses...my question is, what about the young 20-somethings of today? How will they ever, ever break into that tier of housing, since #2 is probably gone for good? Are #1 and #3 enough?

[Anonymous]

Anonymous wrote:

Anonymous wrote:As a realtor I can tell you it's a combo of people who have left over money from buying and selling at peak times, people who make saving for a house the number one priority in life (above college education or retirement for example), and people who have some kind of family trust, starter money or inheritance. True most of these people have hhi's close to 200k but very few are over 400k.

We have several friends with a $6K mortgage.

If they weren't my friends, I'd call them idiots to their faces.

Who pays $72K/year in mostly interest?

Maybe you are the idiot (and not a very nice friend). If they can afford it, that $72K/year is a REALLY nice tax deduction. Some of us with what you consider high monthly mortgages (my mortgage is just under $5k/month) make up a lot of it in tax deductions (interest). So when you bring home $500K/year like we do, we can clearly afford the mortgage AND we appreciate having a higher tax deduction. We also have a lot of money saved and put down 20%.

Now if your friends can't afford their mortgages, that is a different story. But don't be so quick to judge.