s/o - feeling "poor" at these ludicrously high incomes. what are they actually missing?

[Anonymous]

Anonymous wrote:PP here who bought house in 99. When I started out, 20+ years ago, I noticed that my senior colleagues were much much better off than me. They made more than me, sure, but the big difference was that they were paying the same in mortgage payments as I was for my one bedroom appt.

I realized that buying a house is insurance against rent increases. So, I bought what I could afford -- on my income. Money was tight for the first few years. But in time, my income increased -- from 60K when I bought the house (1999) to 170K now. Some of that was inflation, but most was career growth. Now, my mortgage was at 8%, not 3.7%. So, with the same monthly mortgage payment as a fraction of income, I would be able to borrow 480K with an inflation adjusted salary to 85K. (same Loan to debt ratio).

That means a 600K house, which is basically what I live in.

More to the point, when we hire someone out of grad school, after a few years (same place in life), they are making about 100K. At 100K, with current interest rates, they could buy my house today.

In 20 years, assuming modest inflation, they will be comfortable/

Just stop it. Someone making 100K cannot afford a 600K house.

I bought a condo in Arlington in 1997 for $60K, when I was making, I think, $54K a year. Those condos now sell for about $250K--four times what I paid. But people in the job I had then are not making $200K a year. They are making about $90K. There is no way they can afford to buy what I could on my salary 20 years ago. And they are not getting the appreciation either to get started on the property ladder.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:PP here who bought house in 99. When I started out, 20+ years ago, I noticed that my senior colleagues were much much better off than me. They made more than me, sure, but the big difference was that they were paying the same in mortgage payments as I was for my one bedroom appt.

I realized that buying a house is insurance against rent increases. So, I bought what I could afford -- on my income. Money was tight for the first few years. But in time, my income increased -- from 60K when I bought the house (1999) to 170K now. Some of that was inflation, but most was career growth. Now, my mortgage was at 8%, not 3.7%. So, with the same monthly mortgage payment as a fraction of income, I would be able to borrow 480K with an inflation adjusted salary to 85K. (same Loan to debt ratio).

That means a 600K house, which is basically what I live in.

More to the point, when we hire someone out of grad school, after a few years (same place in life), they are making about 100K. At 100K, with current interest rates, they could buy my house today.

In 20 years, assuming modest inflation, they will be comfortable/

r.
You won the housing lottery and totally ignoring the difference between a $40k down payment vs $120k down payment.

I took a risk. It paid off. I also work hard. When I was starting out, the mountain seemed high.

With that said, no one earning what I am earning is poor\

You didn't take a risk. You yourself said buying was cheaper then renting, and your house cost barely 3x what you made vs 6x what you contemporary example would be paying -- BUYERS NOW are taking a risk.

You just got lucky, but don't have the graciousness to admit it.

[Anonymous]

Anonymous wrote:

Anonymous wrote:PP here who bought house in 99. When I started out, 20+ years ago, I noticed that my senior colleagues were much much better off than me. They made more than me, sure, but the big difference was that they were paying the same in mortgage payments as I was for my one bedroom appt.

I realized that buying a house is insurance against rent increases. So, I bought what I could afford -- on my income. Money was tight for the first few years. But in time, my income increased -- from 60K when I bought the house (1999) to 170K now. Some of that was inflation, but most was career growth. Now, my mortgage was at 8%, not 3.7%. So, with the same monthly mortgage payment as a fraction of income, I would be able to borrow 480K with an inflation adjusted salary to 85K. (same Loan to debt ratio).

That means a 600K house, which is basically what I live in.

More to the point, when we hire someone out of grad school, after a few years (same place in life), they are making about 100K. At 100K, with current interest rates, they could buy my house today.

In 20 years, assuming modest inflation, they will be comfortable/

Just stop it. Someone making 100K cannot afford a 600K house.

I bought a condo in Arlington in 1997 for $60K, when I was making, I think, $54K a year. Those condos now sell for about $250K--four times what I paid. But people in the job I had then are not making $200K a year. They are making about $90K. There is no way they can afford to buy what I could on my salary 20 years ago. And they are not getting the appreciation either to get started on the property ladder.

But interest rates are lower so you can afford more house.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I agree PP - our HHI is 145$ and we live comfortably in NWDC. I can't buy every thing I want, and we go on one simple beach vacation a year. I cook dinner every night and we don't eat out often. Our cars are 12 and 6 years old subarus with no plans for new ones in sight. My kids wear hand me downs and clothes from Target. My husband and I pack lunch for work. I am a teacher so my hours make it so we don't need aftercare or camp.

I certainly don't feel poor. I feel fortunate. If you're always looking at what you DON'T have, you won't be happy.

mon
pp, do you own your place?
We don't and with a similar income, we are barely able to afford a 1-bedroom.
Household utilities, car insurance, car payments and groceries adds up to more than $4000 per month.

PP, what kind of cars do you drive??? It is difficult to imagine spending $4,000 on these things.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:PP here who bought house in 99. When I started out, 20+ years ago, I noticed that my senior colleagues were much much better off than me. They made more than me, sure, but the big difference was that they were paying the same in mortgage payments as I was for my one bedroom appt.

I realized that buying a house is insurance against rent increases. So, I bought what I could afford -- on my income. Money was tight for the first few years. But in time, my income increased -- from 60K when I bought the house (1999) to 170K now. Some of that was inflation, but most was career growth. Now, my mortgage was at 8%, not 3.7%. So, with the same monthly mortgage payment as a fraction of income, I would be able to borrow 480K with an inflation adjusted salary to 85K. (same Loan to debt ratio).

That means a 600K house, which is basically what I live in.

More to the point, when we hire someone out of grad school, after a few years (same place in life), they are making about 100K. At 100K, with current interest rates, they could buy my house today.

In 20 years, assuming modest inflation, they will be comfortable/

Just stop it. Someone making 100K cannot afford a 600K house.

I bought a condo in Arlington in 1997 for $60K, when I was making, I think, $54K a year. Those condos now sell for about $250K--four times what I paid. But people in the job I had then are not making $200K a year. They are making about $90K. There is no way they can afford to buy what I could on my salary 20 years ago. And they are not getting the appreciation either to get started on the property ladder.

But interest rates are lower so you can afford more house.

I guess your PhD is not in math. The rate may be half as much but that doesn't mean the payments are half as much, even if the principal is the same. You could get an $85,000 condo at 4% for the same payment as my $60,000 condo at 7%. That's pretty far from $200,000.

There's a big difference between spending about 15% of your takehome on housing, which is why I was doing 20 years ago, and spending more like 30%. Housing costs are why people around here with high incomes don't feel rich. It's irrelevant to say you bought a house almost 20 years ago and are doing fine.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:PP here who bought house in 99. When I started out, 20+ years ago, I noticed that my senior colleagues were much much better off than me. They made more than me, sure, but the big difference was that they were paying the same in mortgage payments as I was for my one bedroom appt.

I realized that buying a house is insurance against rent increases. So, I bought what I could afford -- on my income. Money was tight for the first few years. But in time, my income increased -- from 60K when I bought the house (1999) to 170K now. Some of that was inflation, but most was career growth. Now, my mortgage was at 8%, not 3.7%. So, with the same monthly mortgage payment as a fraction of income, I would be able to borrow 480K with an inflation adjusted salary to 85K. (same Loan to debt ratio).

That means a 600K house, which is basically what I live in.

More to the point, when we hire someone out of grad school, after a few years (same place in life), they are making about 100K. At 100K, with current interest rates, they could buy my house today.

In 20 years, assuming modest inflation, they will be comfortable/

Just stop it. Someone making 100K cannot afford a 600K house.

I bought a condo in Arlington in 1997 for $60K, when I was making, I think, $54K a year. Those condos now sell for about $250K--four times what I paid. But people in the job I had then are not making $200K a year. They are making about $90K. There is no way they can afford to buy what I could on my salary 20 years ago. And they are not getting the appreciation either to get started on the property ladder.

But interest rates are lower so you can afford more house.

I guess your PhD is not in math. The rate may be half as much but that doesn't mean the payments are half as much, even if the principal is the same. You could get an $85,000 condo at 4% for the same payment as my $60,000 condo at 7%. That's pretty far from $200,000.

There's a big difference between spending about 15% of your takehome on housing, which is why I was doing 20 years ago, and spending more like 30%. Housing costs are why people around here with high incomes don't feel rich. It's irrelevant to say you bought a house almost 20 years ago and are doing fine.

That was not the PhD poster. I posted that. You could buy a 250k condo on a 100k salary.

Math actually is my forte. We have a 7 figure HHI and our house is paid off. I think the easiest solution is to get a higher paid job.

[Anonymous]

I make approx $100k. I would not be able to buy a $600k house. Currently our mortgage is $485k and monthly payments Piti are $2910. That is approx 1/2 of my take home pay. Spending 1/2 of my take home pay on a mortgage is not a wise move.

[Anonymous]

It never fails.
In every one of these income posts someone comes in and advises, "Why are you foolishly spending $800K on a close-in house??? Just buy in 1999 like I did".

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:PP here who bought house in 99. When I started out, 20+ years ago, I noticed that my senior colleagues were much much better off than me. They made more than me, sure, but the big difference was that they were paying the same in mortgage payments as I was for my one bedroom appt.

I realized that buying a house is insurance against rent increases. So, I bought what I could afford -- on my income. Money was tight for the first few years. But in time, my income increased -- from 60K when I bought the house (1999) to 170K now. Some of that was inflation, but most was career growth. Now, my mortgage was at 8%, not 3.7%. So, with the same monthly mortgage payment as a fraction of income, I would be able to borrow 480K with an inflation adjusted salary to 85K. (same Loan to debt ratio).

That means a 600K house, which is basically what I live in.

More to the point, when we hire someone out of grad school, after a few years (same place in life), they are making about 100K. At 100K, with current interest rates, they could buy my house today.

In 20 years, assuming modest inflation, they will be comfortable/

Just stop it. Someone making 100K cannot afford a 600K house.

I bought a condo in Arlington in 1997 for $60K, when I was making, I think, $54K a year. Those condos now sell for about $250K--four times what I paid. But people in the job I had then are not making $200K a year. They are making about $90K. There is no way they can afford to buy what I could on my salary 20 years ago. And they are not getting the appreciation either to get started on the property ladder.

But interest rates are lower so you can afford more house.

I guess your PhD is not in math. The rate may be half as much but that doesn't mean the payments are half as much, even if the principal is the same. You could get an $85,000 condo at 4% for the same payment as my $60,000 condo at 7%. That's pretty far from $200,000.

There's a big difference between spending about 15% of your takehome on housing, which is why I was doing 20 years ago, and spending more like 30%. Housing costs are why people around here with high incomes don't feel rich. It's irrelevant to say you bought a house almost 20 years ago and are doing fine.

That was not the PhD poster. I posted that. You could buy a 250k condo on a 100k salary.

Math actually is my forte. We have a 7 figure HHI and our house is paid off. I think the easiest solution is to get a higher paid job.

So what PP bought a house when starting out, now similar person would need to buy a cheap condo (250k will be pretty awful).

I can see why contemporary person feels squeezed (literally, crummy condo not 1/4 acre!)

Also, condos have been a terrible investment last decade and have high and rising condo fees. NOT a good starter home.

Easiest solution is to get higher paying job???? . I've been trying to move up from contract engineering but don't see path to that much higher income.. Need to start own company but we don't have means to handle that risk...

How did you hit 7 figure Hhi?

[Anonymous]

Anonymous wrote:I make approx $100k. I would not be able to buy a $600k house. Currently our mortgage is $485k and monthly payments Piti are $2910. That is approx 1/2 of my take home pay. Spending 1/2 of my take home pay on a mortgage is not a wise move.

Let me go back. I am the one who bought the house in 1999. In 1999 I was earning like a GS 14 step 1. My wife was earning as a GS5 step 6. Combined family income was about 90K.
Today a GS14 step 1 and a GS5 step six would be earning 108887 an 39967, time adjusting my HHI to about 150K. I qualified for the 225K mortgage at 7.26 % with 90K. My monthly payment in 1999 was about $2000, so lone to income was 2000*12/90000, or 26%.

For the same 26% 150000*.26/12 = 3250. My House -- worth 600K today -- on a 30 year mortgage, would be 2740 (P & I) +664 Tax & Ins., or 3404. So in terms of affordability, it is a little less affordable: $150/month than my house was back in 1999. But, that is only 5% difference.

So (assuming you have the down payment), the house is about the same in affordability: A GS 14 step 1 and GS5 step 5 can afford it about the same as was the case in 1999.

The difference, and where the wealth comes in is: thanks to career growth, I am earning more than a 14 step 1: 170K, but my payment remains at 2K. So, 14% goes to housing.

Now, you buy the house today, and you have inflation...and you have career growth, your salary will more than double in 20 years. But your payment will not. In 30 years, even if the housing prices stagnate, you will have the fill equity in the house. I was lucky in that my house appreciated from 1999-present by about 2.5x. I know that.


One other comment: My rent in 1999 was 1350; My mortgage was 2000. My mortgage was higher than my rent. But, after the mortgage interest tax deduction, it was about the same.

Oh, I was 35 when I bought my house, a PhD with 4 years experience. YMMV.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I make approx $100k. I would not be able to buy a $600k house. Currently our mortgage is $485k and monthly payments Piti are $2910. That is approx 1/2 of my take home pay. Spending 1/2 of my take home pay on a mortgage is not a wise move.

Let me go back. I am the one who bought the house in 1999. In 1999 I was earning like a GS 14 step 1. My wife was earning as a GS5 step 6. Combined family income was about 90K.
Today a GS14 step 1 and a GS5 step six would be earning 108887 an 39967, time adjusting my HHI to about 150K. I qualified for the 225K mortgage at 7.26 % with 90K. My monthly payment in 1999 was about $2000, so lone to income was 2000*12/90000, or 26%.

For the same 26% 150000*.26/12 = 3250. My House -- worth 600K today -- on a 30 year mortgage, would be 2740 (P & I) +664 Tax & Ins., or 3404. So in terms of affordability, it is a little less affordable: $150/month than my house was back in 1999. But, that is only 5% difference.

So (assuming you have the down payment), the house is about the same in affordability: A GS 14 step 1 and GS5 step 5 can afford it about the same as was the case in 1999.

The difference, and where the wealth comes in is: thanks to career growth, I am earning more than a 14 step 1: 170K, but my payment remains at 2K. So, 14% goes to housing.

Now, you buy the house today, and you have inflation...and you have career growth, your salary will more than double in 20 years. But your payment will not. In 30 years, even if the housing prices stagnate, you will have the fill equity in the house. I was lucky in that my house appreciated from 1999-present by about 2.5x. I know that.


One other comment: My rent in 1999 was 1350; My mortgage was 2000. My mortgage was higher than my rent. But, after the mortgage interest tax deduction, it was about the same.

Oh, I was 35 when I bought my house, a PhD with 4 years experience. YMMV.

In both of your scenarios (1999 and now) the housing costs are 40% of net income (net after taxes--not counting retirement and health insurance deductions). Anyone spending 40% of their take home income on housing is going to feel stretched.

[Anonymous]

Anonymous wrote:It never fails.
In every one of these income posts someone comes in and advises, "Why are you foolishly spending $800K on a close-in house??? Just buy in 1999 like I did".

Lol, I was just thinking this too! Too bad I can't hop in my time machine and do just that.

[Anonymous]

Ok honest answer? I feel poor because of how our friends vacation compared the us. We go with th them to the OBX each year. But they ALSO go somewhere in the Caribbean in Feb, skiing out west in April, ( OBX with us in July), Europe in August or Sept, and then somewhere warm again in Nov (Disney World or Caribbean again). Sigh.

[Anonymous]

Anonymous wrote:Ok honest answer? I feel poor because of how our friends vacation compared the us. We go with th them to the OBX each year. But they ALSO go somewhere in the Caribbean in Feb, skiing out west in April, ( OBX with us in July), Europe in August or Sept, and then somewhere warm again in Nov (Disney World or Caribbean again). Sigh.

Geez how many vacation days do they get each year?

[Anonymous]

Anonymous wrote:

Anonymous wrote:Ok honest answer? I feel poor because of how our friends vacation compared the us. We go with th them to the OBX each year. But they ALSO go somewhere in the Caribbean in Feb, skiing out west in April, ( OBX with us in July), Europe in August or Sept, and then somewhere warm again in Nov (Disney World or Caribbean again). Sigh.

Geez how many vacation days do they get each year?

I think six weeks?