How much to expect to spend on a new house?

[Anonymous]

If you are in a position that you can actually buy something on one salary, including the lower of the two, in this area- good for you. It sounds like OP probably could. However, there are plenty of families that cannot. I'm not saying this is a good thing or something that should be encouraged, it's just reality.

[Anonymous]

Anonymous wrote:

Anonymous wrote:
This is about how I view most of these situations as well. My own situation is a little sticky because one of us is in private industry (technology) and makes SO much more than the other (me, the saving the world nonprofit manager), so to buy a home on one salary is tricky in that if I lost my job we would be fine but if he lost his job it would be much more difficult. At the same time it feels far too cautious to buy a home based on my 65K salary when there is a person earning 3 times that nearly in the equation.

I'm so with you. My husband is in a much higher paying career (and we still have a HHI of "only" $140Kish). If we'd bought based on just my salary...well, honestly we couldn't have. There is nothing in this area where a family could live comfortably on just MY salary. My salary allows us to put money in savings, and that's about it. When my job almost went away last summer, we had to tighten our belts, cut our savings and lived on just his salary for a short time.

This is why we STAYED in this area, though - my husband felt he had a lot more possible employment options here in case of a job loss for him, so that we wouldn't be completely screwed.

The point Elizabeth Warren makes in her book is that when one person loses his or her job, you have two people in the family who can try to cobble together enough work to replace the lost income. (She calls it a reserve wage earner.) So say DH makes 150K and DW makes 65K, they decide to budget for a 150K HHI, then DH loses his job. They need to replace 150K income, but DW's 65K already fills a big chunk of that gap. Between the two of them, they are more likely to find enough temp work, odd jobs, second jobs, whatever, to replace the rest until DH finds another "real" job. They are more financially prepared to weather the crisis than they would be if they already needed DW's 65K just to pay the mortgage and/or other necessary expenses.

Warren opens her book with the statistic that more children in America live in a family that will experience bankruptcy than divorce. And that was before the recent Great Recession. It just blew me away when I read that. The whole book is a fascinating read, but just one more point: She attributes a large part of the phenomenon to families using the second salary to buy homes in areas with better schools, homes they couldn't afford on one salary. It's not so much that they just want a fancier house-- they are trying to ensure the well being of their family-- but they are actually putting themselves in a more precarious financial situation.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:
This is about how I view most of these situations as well. My own situation is a little sticky because one of us is in private industry (technology) and makes SO much more than the other (me, the saving the world nonprofit manager), so to buy a home on one salary is tricky in that if I lost my job we would be fine but if he lost his job it would be much more difficult. At the same time it feels far too cautious to buy a home based on my 65K salary when there is a person earning 3 times that nearly in the equation.

I'm so with you. My husband is in a much higher paying career (and we still have a HHI of "only" $140Kish). If we'd bought based on just my salary...well, honestly we couldn't have. There is nothing in this area where a family could live comfortably on just MY salary. My salary allows us to put money in savings, and that's about it. When my job almost went away last summer, we had to tighten our belts, cut our savings and lived on just his salary for a short time.

This is why we STAYED in this area, though - my husband felt he had a lot more possible employment options here in case of a job loss for him, so that we wouldn't be completely screwed.

The point Elizabeth Warren makes in her book is that when one person loses his or her job, you have two people in the family who can try to cobble together enough work to replace the lost income. (She calls it a reserve wage earner.) So say DH makes 150K and DW makes 65K, they decide to budget for a 150K HHI, then DH loses his job. They need to replace 150K income, but DW's 65K already fills a big chunk of that gap. Between the two of them, they are more likely to find enough temp work, odd jobs, second jobs, whatever, to replace the rest until DH finds another "real" job. They are more financially prepared to weather the crisis than they would be if they already needed DW's 65K just to pay the mortgage and/or other necessary expenses.

Warren opens her book with the statistic that more children in America live in a family that will experience bankruptcy than divorce. And that was before the recent Great Recession. It just blew me away when I read that. The whole book is a fascinating read, but just one more point: She attributes a large part of the phenomenon to families using the second salary to buy homes in areas with better schools, homes they couldn't afford on one salary. It's not so much that they just want a fancier house-- they are trying to ensure the well being of their family-- but they are actually putting themselves in a more precarious financial situation.

If you have two incomes in stable job fields you should be fine and this is reflected in the DC market, that is why prices are high for houses. In places with high unemployment you can definitely afford a house on 1 income because housing prices are much lower to reflect that aspect. Her book probably isn't geared to the DC area.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:
This is about how I view most of these situations as well. My own situation is a little sticky because one of us is in private industry (technology) and makes SO much more than the other (me, the saving the world nonprofit manager), so to buy a home on one salary is tricky in that if I lost my job we would be fine but if he lost his job it would be much more difficult. At the same time it feels far too cautious to buy a home based on my 65K salary when there is a person earning 3 times that nearly in the equation.

I'm so with you. My husband is in a much higher paying career (and we still have a HHI of "only" $140Kish). If we'd bought based on just my salary...well, honestly we couldn't have. There is nothing in this area where a family could live comfortably on just MY salary. My salary allows us to put money in savings, and that's about it. When my job almost went away last summer, we had to tighten our belts, cut our savings and lived on just his salary for a short time.

This is why we STAYED in this area, though - my husband felt he had a lot more possible employment options here in case of a job loss for him, so that we wouldn't be completely screwed.

The point Elizabeth Warren makes in her book is that when one person loses his or her job, you have two people in the family who can try to cobble together enough work to replace the lost income. (She calls it a reserve wage earner.) So say DH makes 150K and DW makes 65K, they decide to budget for a 150K HHI, then DH loses his job. They need to replace 150K income, but DW's 65K already fills a big chunk of that gap. Between the two of them, they are more likely to find enough temp work, odd jobs, second jobs, whatever, to replace the rest until DH finds another "real" job. They are more financially prepared to weather the crisis than they would be if they already needed DW's 65K just to pay the mortgage and/or other necessary expenses.

Warren opens her book with the statistic that more children in America live in a family that will experience bankruptcy than divorce. And that was before the recent Great Recession. It just blew me away when I read that. The whole book is a fascinating read, but just one more point: She attributes a large part of the phenomenon to families using the second salary to buy homes in areas with better schools, homes they couldn't afford on one salary. It's not so much that they just want a fancier house-- they are trying to ensure the well being of their family-- but they are actually putting themselves in a more precarious financial situation.

If you have two incomes in stable job fields you should be fine and this is reflected in the DC market, that is why prices are high for houses. In places with high unemployment you can definitely afford a house on 1 income because housing prices are much lower to reflect that aspect. Her book probably isn't geared to the DC area.

That's probably true to a certain extent, although I think many people misjudge the stability of their jobs. When the recession hit, I'm sure many teachers in this area were surprised to lose their jobs. Many people working in the financial sector in NYC were shocked to lose theirs, as well. When experiencing good times, I think it's human nature to think they will always continue.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

If you have two incomes in stable job fields you should be fine and this is reflected in the DC market, that is why prices are high for houses. In places with high unemployment you can definitely afford a house on 1 income because housing prices are much lower to reflect that aspect. Her book probably isn't geared to the DC area.

I think this is missing the point, to an extent. Losing your job is only one of many "unexpected" things that happens in life. You might want to work forever, but you also might:
-need to take care of an aging or ill parent
-have a special needs child
-have a child experience significant illness or injury (for example - I had a neighbor growing up whose child fell backwards off a swing one day - the head injury from this random accident rendered him intellectually disabled, requiring full time care into adulthood)
-experience an illness or injury yourself
-your spouse becomes ill - maybe you have disability insurance for your spouse, but probably doesn't cover your need to take time off work to care for him/her
-change your mind in 10 years

Those are just a few things that come to mind, but none of these things are impacted by how stable your job is and how much you love it.

[Anonymous]

Just agreeing with pp-I never planned to SAH, and I'm not very good at it, but I had to quit my job when we had a SN child who requires extensive care. I'm now 9 years out of the workforce.