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

[Anonymous]

Anonymous wrote:

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.

Sure, if you make $500K/year, then you can easily afford that. I think the point is that most of the people around here who live in million-dollar homes aren't making anything close to $500K/year.

[Anonymous]

Similar story here. Bought in '98 for $300k. Had made small profit on condo prior to that. Sold last year for $760k. Paid $880k for current home, but mortgage is half that.

We're a two-income household of about $225k. And yes, saving for retirement and college.


We just got lucky with the timing, as did many others.

[Anonymous]

Anonymous wrote:

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.

I'm the idiot b/c by downsizing, we're saving - easily each year - $$36K just in "extra" money?

I don't think so.

[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.

As a realtor, how do you know what someone's income is? I have never shared my income with a realtor when buying or selling. I'm not intending to be rude by asking, I'm just curious. Are you seeing paperwork or are people just sharing this information with you?

[Anonymous]

Another realtor here. Offers are nearly always accompanied by what we call a "Financial Information Sheet" which the buyers fill out with enough information to assure the sellers that they will be able to procure a loan and close. Salary information is part of that.

[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.

As a realtor, how do you know what someone's income is? I have never shared my income with a realtor when buying or selling. I'm not intending to be rude by asking, I'm just curious. Are you seeing paperwork or are people just sharing this information with you?

Have you EVER bought a home before?

What bank is going to hand out a loan to a potential buyer w/o knowing income? Our realtor knew our combined income, and when we sold our home, we, in turn, knew how much our buyers were making.

[Anonymous]

Anonymous wrote:

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.

As a realtor, how do you know what someone's income is? I have never shared my income with a realtor when buying or selling. I'm not intending to be rude by asking, I'm just curious. Are you seeing paperwork or are people just sharing this information with you?

Have you EVER bought a home before?

What bank is going to hand out a loan to a potential buyer w/o knowing income? Our realtor knew our combined income, and when we sold our home, we, in turn, knew how much our buyers were making.

Yes, I've bought a home before. No, my agent didn't act as my BANK so why would she have known our income? Why are you mixing a bank and a realtor together as though they are somehow serving the same function?? My bank provided a pre-approval letter. Given that my realtor wasnt GIVING me money but was TAKING IT, I didn't realize that any knowledge about our financial situation, other than that we were approved for a certain amount and was putting another amount down, would be any of her business or that she would ever come across such information. Oh, and thanks for the unnecessarily obnoxious response.

[Anonymous]

Anonymous wrote:Another realtor here. Offers are nearly always accompanied by what we call a "Financial Information Sheet" which the buyers fill out with enough information to assure the sellers that they will be able to procure a loan and close. Salary information is part of that.

If this is actually common here, it's yet another way in which the DC market is completely insane. I've bought and sold houses in other places in the country, and no one ever suggested that I should give my realtor any financial information (other than telling them that I could qualify for a loan and how much I wanted to spend).

[Anonymous]

OP here, thanks for all of the responses! I have been wondering about this for a while now and have a much better understanding of how it all works, and has worked out over time with prices having been much lower in the 90's. My father is an architect but works for the govt. in TX and my mom's a teacher. Mid-level professionals. They live in a modest home in the best school district in San Antonio (Alamo Heights) surrounded by completely awesome amenities. They are appalled when they visit that my husband and I are also mid-level professionals, but live in a totally ghetto area. At least I understand how it all works!

[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.

It's irrelevant that they people who purchased at a certain $ amount in the past can't afford the current (higher) market value of their home. They can afford the mortgage that they locked in at purchase (based on the purchase price and the fixed interest amount). That amount the owner pays doesn't change if the house increases in value over time. In fact, that cushion of equity means that the owner has a lot of flexibility if/when they want to sell. They might even opt to sell in order to realize that equity and roll it into another home. Either way, it is irrelevant to whether or not other buyers will be able to afford to by the house at todays market price. And, as we know by basic laws of supply and demand, the price will fall if buyers can't afford it. That's normal - not some sort of new phenomena. You may worry that wages/salaries can't help sustain home prices, but that is a different concern from the one you articulated.

[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.

It's irrelevant that they people who purchased at a certain $ amount in the past can't afford the current (higher) market value of their home. They can afford the mortgage that they locked in at purchase (based on the purchase price and the fixed interest amount). That amount the owner pays doesn't change if the house increases in value over time. In fact, that cushion of equity means that the owner has a lot of flexibility if/when they want to sell. They might even opt to sell in order to realize that equity and roll it into another home. Either way, it is irrelevant to whether or not other buyers will be able to afford to by the house at todays market price. And, as we know by basic laws of supply and demand, the price will fall if buyers can't afford it. That's normal - not some sort of new phenomena. You may worry that wages/salaries can't help sustain home prices, but that is a different concern from the one you articulated.

I thought the point of that post was that wages/salaries by themselves can't sustain today's home prices. The only reason those prices are affordable is that we've had a big recent run-up in prices, so the current owners paid a lot less than the current prices. But if the current owners move away, new buyers with the same income won't be able to afford those prices. Nothing in your response explains why that's not a worry.

[Anonymous]

Accountants
Consultants
Software sales
IT folks

All of the above make around $90K-$150K after a few years (5-10) in the workforce unless that choose to stay in entry level jobs.

[Anonymous]

Sr manager at a very large defense contractor, and a sr manager in sales for Microsoft. COmbined HHI just shy of $500k/yr. We also bought yrs ago and kep trading up.

Plenty of people in our neighborhood are lawyers, IT professionals, Congressman, doctors. All houses are are in $1.2 - $1.6m range.

We (and neighbors) are late 30s, early 40s.

[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?

I hope you're not my friend. My $6k/month mortgage isn't a big deal for a $500k/yr salary. Maybe you don't realize just how much I make with my bonuses...?

[Anonymous]

Principal engineer at a consulting firm and a GS13, HHI $250K+ and some really lucky timing on some home sales...