How did you afford your $1M plus home?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:OP again. We take home about 19k (after paying into healthcare costs which are high for our firm, 401k, etc). Nanny is 3500/month. Family help is about 2k/month now but that will go up in time. We've also had to bail out the parents from a foreclosure and pick up emergency health expenses so all of those things took a toll early on and ate up money we could have saved. Also, we weren't as disciplined about savings until the last few years (paid for our own modest wedding etc). Student loans from college are 1k/month. Hoping we find a house eventually that has room for an au pair so we can cut way down on childcare costs. For those who have incomes similar to ours, thanks so much for posting your budgets. We know we can cut down in some areas but there aren't huge areas of excess (lavish vacations, jewelry, fancy clothes, cars, etc).
I'd like to put together a larger downpayment (wait until we can save enough) rather than raising our monthly cost if possible. It just seems excessive to spend more than 4500/month. We realize our HHI income is high now so it worries me to take on even more monthly expense.

I think your situation demonstrates very nicely the hedonic treadmill and why people who earn lots of money still feel poor. Just think about how "rich" you would be if you discarded your attachment to the $1 mil house and bought a $500k house. You'd be rich! But since you've developed this concept that you have to have a $1 mil house, you're essentially going to be financially exactly the same as my family in terms of disposible income (we earn almost half what you do and are looking for a 500k house). I guess you could argue that you get 2x the pleasure out of your $1 mil house as I do out of my $500 k house. But I truly believe that we adjust to our circumstances in terms of happiness -- as long as your home is safe, clean, and comfortable, you won't really notice the difference.

By your logic then, shouldn't you be looking at a $250K house? Why do you think you should buy at the same price point as you when they make twice as much. This doesn't make any sense to me

You seem to be saying that everyone should live to the maximum extent of their means, and as we can see from the meltdowns of the last several years, many Americans agree with you.

What PP is saying is that past a certain price point, everything else is gravy - and that the gravy is a waste of money, especially if it cuts into your disposable income (and hence, quality of life).

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:OP again. We take home about 19k (after paying into healthcare costs which are high for our firm, 401k, etc). Nanny is 3500/month. Family help is about 2k/month now but that will go up in time. We've also had to bail out the parents from a foreclosure and pick up emergency health expenses so all of those things took a toll early on and ate up money we could have saved. Also, we weren't as disciplined about savings until the last few years (paid for our own modest wedding etc). Student loans from college are 1k/month. Hoping we find a house eventually that has room for an au pair so we can cut way down on childcare costs. For those who have incomes similar to ours, thanks so much for posting your budgets. We know we can cut down in some areas but there aren't huge areas of excess (lavish vacations, jewelry, fancy clothes, cars, etc).
I'd like to put together a larger downpayment (wait until we can save enough) rather than raising our monthly cost if possible. It just seems excessive to spend more than 4500/month. We realize our HHI income is high now so it worries me to take on even more monthly expense.

I think your situation demonstrates very nicely the hedonic treadmill and why people who earn lots of money still feel poor. Just think about how "rich" you would be if you discarded your attachment to the $1 mil house and bought a $500k house. You'd be rich! But since you've developed this concept that you have to have a $1 mil house, you're essentially going to be financially exactly the same as my family in terms of disposible income (we earn almost half what you do and are looking for a 500k house). I guess you could argue that you get 2x the pleasure out of your $1 mil house as I do out of my $500 k house. But I truly believe that we adjust to our circumstances in terms of happiness -- as long as your home is safe, clean, and comfortable, you won't really notice the difference.

By your logic then, shouldn't you be looking at a $250K house? Why do you think you should buy at the same price point as you when they make twice as much. This doesn't make any sense to me

You seem to be saying that everyone should live to the maximum extent of their means, and as we can see from the meltdowns of the last several years, many Americans agree with you.

What PP is saying is that past a certain price point, everything else is gravy - and that the gravy is a waste of money, especially if it cuts into your disposable income (and hence, quality of life).

I don't think that. It just seems they are lecturing someone else when they are putting themselves in the same position. Why doesn't that person buy a $250K home and adjust their happiness level so they can feel "rich"? Just a worthless argument to me.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:OP again. We take home about 19k (after paying into healthcare costs which are high for our firm, 401k, etc). Nanny is 3500/month. Family help is about 2k/month now but that will go up in time. We've also had to bail out the parents from a foreclosure and pick up emergency health expenses so all of those things took a toll early on and ate up money we could have saved. Also, we weren't as disciplined about savings until the last few years (paid for our own modest wedding etc). Student loans from college are 1k/month. Hoping we find a house eventually that has room for an au pair so we can cut way down on childcare costs. For those who have incomes similar to ours, thanks so much for posting your budgets. We know we can cut down in some areas but there aren't huge areas of excess (lavish vacations, jewelry, fancy clothes, cars, etc).
I'd like to put together a larger downpayment (wait until we can save enough) rather than raising our monthly cost if possible. It just seems excessive to spend more than 4500/month. We realize our HHI income is high now so it worries me to take on even more monthly expense.

I think your situation demonstrates very nicely the hedonic treadmill and why people who earn lots of money still feel poor. Just think about how "rich" you would be if you discarded your attachment to the $1 mil house and bought a $500k house. You'd be rich! But since you've developed this concept that you have to have a $1 mil house, you're essentially going to be financially exactly the same as my family in terms of disposible income (we earn almost half what you do and are looking for a 500k house). I guess you could argue that you get 2x the pleasure out of your $1 mil house as I do out of my $500 k house. But I truly believe that we adjust to our circumstances in terms of happiness -- as long as your home is safe, clean, and comfortable, you won't really notice the difference.

By your logic then, shouldn't you be looking at a $250K house? Why do you think you should buy at the same price point as you when they make twice as much. This doesn't make any sense to me

You seem to be saying that everyone should live to the maximum extent of their means, and as we can see from the meltdowns of the last several years, many Americans agree with you.

What PP is saying is that past a certain price point, everything else is gravy - and that the gravy is a waste of money, especially if it cuts into your disposable income (and hence, quality of life).

I don't think that. It just seems they are lecturing someone else when they are putting themselves in the same position. Why doesn't that person buy a $250K home and adjust their happiness level so they can feel "rich"? Just a worthless argument to me.

Show me a $250K house in this area that PP might want to buy.

PP isn't lecturing. S/he is pointing out that in this area, it IS possible to buy a nice family home for $500-$700K and that if spending a million instead for a "dream" house will restrict other, significant life activities, then it just doesn't make sense. You can only use one toilet at a time, YK?

[Anonymous]

Actually as a family of 6 we can use more than one toilet at a time.

[Anonymous]

Anonymous wrote:

Anonymous wrote:OP, try not to get caught up in this notion of having to live close in. The fact is that people who live as far out as Rockville are happy with their commutes. Instead of committing financial suicide, look at more reasonably priced houses further out. BTW, we have a HHI of 445 K and we are NOT looking at anything over 950,000.

I totally DISAGREE. There are exceptions, of course, but study after study shows that a longer commute decreases quality of life. People also underestimate how much time they spend commuting in an effort to convince themselves that it really isn't so bad. However, if you add up a "mere" extra 20 minutes of commuting per day (10 minutes one way, and 10 back), 5 days/week, that's over 80 HOURS of commuting annually. Can you imagine what you would do with basically two entire work weeks? I'd rather spend that time with my family than in a car.

First of all, work and its location could move, so after you put so much into the commute dream then some executive decision could change things.
Also, housing comfort changes stress levels too. We lived in a ONE bathroom house in Tenley when I grew up so that parents could be close to work. The fights that broke out tore our family down. When my sister was a teen and spent a long time in the shower, my father would almost kick the door in so that he would not be late for work. It was not until two older sibs went to college did we move to Bethesda into a FOUR bathroom house. Away went the stress, family life changed for the better. It was not just the bathroom, it was a general sense that everyone needed more space.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:OP, try not to get caught up in this notion of having to live close in. The fact is that people who live as far out as Rockville are happy with their commutes. Instead of committing financial suicide, look at more reasonably priced houses further out. BTW, we have a HHI of 445 K and we are NOT looking at anything over 950,000.

I totally DISAGREE. There are exceptions, of course, but study after study shows that a longer commute decreases quality of life. People also underestimate how much time they spend commuting in an effort to convince themselves that it really isn't so bad. However, if you add up a "mere" extra 20 minutes of commuting per day (10 minutes one way, and 10 back), 5 days/week, that's over 80 HOURS of commuting annually. Can you imagine what you would do with basically two entire work weeks? I'd rather spend that time with my family than in a car.

First of all, work and its location could move, so after you put so much into the commute dream then some executive decision could change things.
Also, housing comfort changes stress levels too. We lived in a ONE bathroom house in Tenley when I grew up so that parents could be close to work. The fights that broke out tore our family down. When my sister was a teen and spent a long time in the shower, my father would almost kick the door in so that he would not be late for work. It was not until two older sibs went to college did we move to Bethesda into a FOUR bathroom house. Away went the stress, family life changed for the better. It was not just the bathroom, it was a general sense that everyone needed more space.

I grew up shairng a bathroom with my parents and sister. we all survived. So while more than one bathroom is nice, it isn't a necessity. Although these days people tend to think that living in anything with one bathroom is living in poverty.

[Anonymous]

Anonymous wrote:

Anonymous wrote:OP, we are in a similar situation to you. We are under contract to buy a $900K home. We are currently in a sh*tty school district, area w/ higher crime than we feel comfortable with, etc. It feels ridiculous to us, too, given our HHI, but it is a stretch for us to buy the $900K home. HHI is $340K. That will go up to $400K next month when the one of us who is not currently employed starts working. Nanny is $50K/yr. Pre-school $15K. We are paying off law and grad school debt, have 1 car note at $350/mo, pay for life insurance, disability insurance, college savings, retirement savings, emergency savings, etc. We take a modest 1 wk. vacation (maybe $2-3K) every 2-3 yrs. We are putting down $180K, and with closing costs added, that's $210K. We saved 3/4 of this, but I am taking a loan from my 401K to fund the balance. A loan means no tax penalty--it has a 4% rate and I'll pay it off from paycheck deducts over 2 years. To us, it was the right thing to do, b/c our children are almost school age so the school issue is looming, the interest rate we are getting on our new mortgage (3.875% on first trust, 4.25% on 2nd) is historically unprecedented and makes our monthly payment $3,600ish, with insurance and taxes added, $4600ish. That's definitely doable on our take home, but after paying for life and disability insurace, college savings, retirement savings that are not as great as I'd like them to be, etc., there is very little left. This is a very expensive area to live in, espec. if you want to be in the better school districts.

Wow. Live in a 3300 square foot home in a great school district that is worth $750,000, and I have a 10 minute commute to work. I'd say really broaden your thinking.

Huh? Broaden our thinking how? Being close to our offices is important for us, too. The neighborhood in which we are buying is the perfect location to keep both of our commutes to a minimum, give us excellent schools, wonderful neighbors, a house we love, be 4 blocks to the Metro, stores, etc. so we can walk instead of drive everything. The house also has a full in-law suite for our in-law moving to live with us. We've been looking for a year and a half and it's not easy to find that combination of elements. The difference between a $750K and $900K mortgage, in terms of monthly payments, is $750/mo--once our kids are in school in 1 and 2 years, respectively, our $50K in nanny cost and $12.5K in preschool cost goes away (Hallelulah!), giving us $5000 more in cash flow per month. Worth it, IMO, to suck up 1-2 more years of not having much excesss cash flow, to buy in this location, w/ these interest rates, now.

[Anonymous]

Interest rates will be low for at least 3 more years. Bernanke made a big discosure announcement about that at the last FOMC mtg.
I'd be more concerned with overpaying for your next, bigger home than all this other math. Focus there instead and do the comps yourself.

[Anonymous]

Anonymous wrote:Actually as a family of 6 we can use more than one toilet at a time.

We had seven and just one toilet. We all have fond memories of the old house and it one of those things that keeps from from 'stretching' for a bigger place.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:OP, try not to get caught up in this notion of having to live close in. The fact is that people who live as far out as Rockville are happy with their commutes. Instead of committing financial suicide, look at more reasonably priced houses further out. BTW, we have a HHI of 445 K and we are NOT looking at anything over 950,000.

I totally DISAGREE. There are exceptions, of course, but study after study shows that a longer commute decreases quality of life. People also underestimate how much time they spend commuting in an effort to convince themselves that it really isn't so bad. However, if you add up a "mere" extra 20 minutes of commuting per day (10 minutes one way, and 10 back), 5 days/week, that's over 80 HOURS of commuting annually. Can you imagine what you would do with basically two entire work weeks? I'd rather spend that time with my family than in a car.

First of all, work and its location could move, so after you put so much into the commute dream then some executive decision could change things.
Also, housing comfort changes stress levels too. We lived in a ONE bathroom house in Tenley when I grew up so that parents could be close to work. The fights that broke out tore our family down. When my sister was a teen and spent a long time in the shower, my father would almost kick the door in so that he would not be late for work. It was not until two older sibs went to college did we move to Bethesda into a FOUR bathroom house. Away went the stress, family life changed for the better. It was not just the bathroom, it was a general sense that everyone needed more space.

1) You can't make a decision about a house based upon where your offices MIGHT relocate. There's absolutely zero indication on OP's part that work places might move in the future.
2) There's a big difference between having 1 bathroom and more than 1. I can definitely see the need for 1.5 or 2 bathrooms. But few families use 3 at the same time.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Actually as a family of 6 we can use more than one toilet at a time.

We had seven and just one toilet. We all have fond memories of the old house and it one of those things that keeps from from 'stretching' for a bigger place.

We live in america the most developed nation in the world, why should I subject my family to 3rd world living conditions. FYI I have lived in the 3rd world.

[Anonymous]

The other thing about just one bathroom is the resale value. Even if I could manage with only one (which I can't), it will be harder to find a buyer who is happy with just one when I go to sell my house.

[Anonymous]

14:12, your nanny won't go away entirely just because your kids will be in full day school, right? Who is going to pick them up at 3:30 every day, and cover school workdays, snow days, sick days?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:OP again. We take home about 19k (after paying into healthcare costs which are high for our firm, 401k, etc). Nanny is 3500/month. Family help is about 2k/month now but that will go up in time. We've also had to bail out the parents from a foreclosure and pick up emergency health expenses so all of those things took a toll early on and ate up money we could have saved. Also, we weren't as disciplined about savings until the last few years (paid for our own modest wedding etc). Student loans from college are 1k/month. Hoping we find a house eventually that has room for an au pair so we can cut way down on childcare costs. For those who have incomes similar to ours, thanks so much for posting your budgets. We know we can cut down in some areas but there aren't huge areas of excess (lavish vacations, jewelry, fancy clothes, cars, etc).
I'd like to put together a larger downpayment (wait until we can save enough) rather than raising our monthly cost if possible. It just seems excessive to spend more than 4500/month. We realize our HHI income is high now so it worries me to take on even more monthly expense.

I think your situation demonstrates very nicely the hedonic treadmill and why people who earn lots of money still feel poor. Just think about how "rich" you would be if you discarded your attachment to the $1 mil house and bought a $500k house. You'd be rich! But since you've developed this concept that you have to have a $1 mil house, you're essentially going to be financially exactly the same as my family in terms of disposible income (we earn almost half what you do and are looking for a 500k house). I guess you could argue that you get 2x the pleasure out of your $1 mil house as I do out of my $500 k house. But I truly believe that we adjust to our circumstances in terms of happiness -- as long as your home is safe, clean, and comfortable, you won't really notice the difference.

By your logic then, shouldn't you be looking at a $250K house? Why do you think you should buy at the same price point as you when they make twice as much. This doesn't make any sense to me

Yeah, we're trying to go as low as we can and not compromise the uncompromisable, like lead paint/moldy basement, an unmanageable and costly commute, and feeling like we can walk around at night w/out being mugged! We'll do that for as low as we can go, but $500k seems realistic at this point for "adequacy," though I am hoping for more in the 400k range. If we can't find it, we'll continue renting. I'm sure there's a term for this in economics: the base level you need that you can't go below, which in my opinion is $500k for DC for upper middle class people. Is it "inelastic"?

Perfectly willing to admit that this is subjective and am willing to be argued below that!

[Anonymous]

We sold our house last year and it was a slow process despite great location and terrific condition because there was only 1 full bathroom upstairs. All the feedback we got from realtors focused on the "one full bath up" issue...it was a real detractor.