Salary vs House Cost

[Anonymous]

Anonymous wrote:... so the options were buying or renting and paying the same in rent as in PITI. In those circumstances, and in the current market we thought it makes sense to buy. Nobody knows, but we think prices are more likely to increase than decrease over the time we are. So far so good, prices in our section of the market up 10% y.o.y.

Agree with you. We bought a house in a sought after neighborood where we were renting. Houses are equivalent but our mortgage + insurance + taxes is still 25% less that what we were paying in rent. This + low rates + the fact that prices are just starting to increase in the DC area after being flat for 6 years make me very confident prices wil keep rising.

[Anonymous]

The issue is that housing in the DC area in good school districts are expensive - period! the 3xs your salary rule goes out the window, unless you bought before 2004 and inside the beltway.

So all the smug folks on here who are proud of their high HHI and low mortgages are scewing (sp?) the responses and reality to be quite frank.

We have a HHI of $320K, and if we were in the market, our price range would be $800K-$1M max and even that buys you a shit box....

I'd take an 800k shitbox in a NY minute.

Secondly, yes, houses are expensive, maybe the 3x/salary rule doesn't always apply, but the people with high HHI and low mortgages are not screwing up the responses, its just that they either have a different standard of living or they bought early.


Anyway...
HHI 240k, Mortgage 400k, house in DC worth between 560 and 580k, crapola school. 2 young kids, soon we will be dealing with school and probably moving.

However, our HHI was about 140k until 3 years ago, we each got promotions and new jobs, but are heading to the top range of our incomes for a while. We are going to move in the next 3 years, probably, but hope to keep our mortgage no more than 2times gross income, in order to max retirement and college savings (we had lots of loans to pay off and are behind in savings) so I hope to stay in the 650k range for a house, with a mortgage about 2x/salary.

[Anonymous]

I think these responses are not near the norm for those buying now. Our house is worth about $950K, Mtg is around $750K and HHI is around $250K. And we are even ok with having a 15 year mtg. And we still take nice vacations, max out our 401Ks, save for 529s, etc. I don't oversave for college, because my house will be paid off when the kids are in school and I can pay as I go for about 50% or so. We are not interested in private schools, our cars are paid for, no student loans or credit card debt and somewhat stable young careers where we expect to make more money each year while the P&I remain fixed.

It costs a ton to change houses. It could easily be $100K in transaction costs if I wanted a nicer house in 5 years. So I bought a little more house than I needed, but with the idea that this will be a house I can live in for 15+ years. and I'd rather have the appreciation on $950K than $750K. to me it is forced savings.

[Anonymous]

On talk of outliers, I think most of the people posting here are the outliers. Debt posts on this blog attracts the more frugal types. Given costs of living In the DC metro area, middle and lower income are on the higher end of debt ratios on housing (google it and you can find the stats). I would expect it is not much different for the higher brackets. Why would one expect lower debt ratios in one of the most expensive housing markets in the country.

To each his own, but people should stop being so sanctimonious about perfectly acceptable mortgage debt ratios for high income earners.

[Anonymous]

About 2 x our salary.

[Anonymous]

Anonymous wrote:On talk of outliers, I think most of the people posting here are the outliers. Debt posts on this blog attracts the more frugal types. Given costs of living In the DC metro area, middle and lower income are on the higher end of debt ratios on housing (google it and you can find the stats). I would expect it is not much different for the higher brackets. Why would one expect lower debt ratios in one of the most expensive housing markets in the country.

To each his own, but people should stop being so sanctimonious about perfectly acceptable mortgage debt ratios for high income earners.

I don't necessarily think so. I many, many tons of big law partners and lobbyists who make high 6-figure or 7-figure salaries. Most of them live in houses that are $1.5M and under.

[Anonymous]

I am in a similar field (high professional income and high job security) but earlier career. Most friends and colleagues with $250-350k HHIs in their early to mid thirties have been buying homes in the last couple years in the $800k-$1m. I expect they are putting down 20-30%. These are folks with a decent amount of income growth ahead and they don't seem inclined to under purchase with historically low interest rates.

A good portion of homes are in this price range in areas like N Arlington and they are certainly not being bought by people with multimillion dollar salaries as posters here suggest.

In the end my view is also only anecdotal- I'm sure the stats are out there.

[Anonymous]

Anonymous wrote:

Anonymous wrote:On talk of outliers, I think most of the people posting here are the outliers. Debt posts on this blog attracts the more frugal types. Given costs of living In the DC metro area, middle and lower income are on the higher end of debt ratios on housing (google it and you can find the stats). I would expect it is not much different for the higher brackets. Why would one expect lower debt ratios in one of the most expensive housing markets in the country.

To each his own, but people should stop being so sanctimonious about perfectly acceptable mortgage debt ratios for high income earners.

I don't necessarily think so. I many, many tons of big law partners and lobbyists who make high 6-figure or 7-figure salaries. Most of them live in houses that are $1.5M and under.

This may come as a shock to you but your friends and their modest 1.5 M houses are actually the outliers refer by pp.

[Anonymous]

Income of $310,000, bought our house for $935,000 this summer with 20 percent down. But actually Went under contract right before I got a large and unexpected raise, so we planned to buy at this price with an income of about 265,000.

[Anonymous]

I'm a PP with a low-ish debt to income ratio. Not at all sanctimonious about it. OUr reasons were that we do not have build up financial security--both in 40s, with young kids, not a lot saved, etc. We want to stay under 3:1 for those reasons.

Also, its easier to have a low debt to income ratio once your HHI crosses a certain threshold. The COL for a family of 4 is goign to be relatively similar for people all across the board with the exception of housing--thus even if you're buying a really modest house in the area, if your HHI is 120k, your debt to income is likely going to be higher than someone making 900k, unless they've chosen to live in really outrageously expensive housing.

[Anonymous]

You take the monthly payment with taxes and insurance and make it 40% of your gross monthly.

[Anonymous]

I agree with the previous poster---we bought at $960 with 30% down and a income of $250K. Almost all of our friends/neighbors are in the same situation--HHI about $200-350K. House purchase price $800k--1.1. It's very much the norm.