How do people afford...

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:One of three things:

- they’re bringing money from a previous house sale
- family money (this one is the biggest imo)
- incomes for the highest earners have gone up way more than you realize. I don’t think ppl realize how much extra money the high end service workers, small business owners, contractors etc are making compared to 5 years ago. DH and I work in unrelated industries and both of us have doubled our very high incomes from five years ago. Based on the cars in our kids school, I’m guessing others have the same. But this kind of income increase wasn’t shared with ppl making, like, $120k. Who probably got around $20k of boost and that’s it.

I agree with this. Incomes have gone up wildly

I read the M&F dcum forum pretty regularly, and I don't think people on this forum realize how many very wealthy people there are, and how many more there are now compared to 5 years ago. I'm not saying it's normal or it's everyone. But people in their 30s, 40s and early 50s, if they were in good private sector jobs pre-covid (like, $150k+), they've likely doubled their salaries in the last five years. So in a city like DC, of the people in those age brackets, easily 10-20% of those people in the DC area are making mad, mad money these days. Now, if you take into account people outside those age brackets, and students, and sahms, and part time workers, the number ends up being just 5% of the region. Which tracks with the general idea that incomes over $200k are "wildly rich" and not the norm. But when you narrow in on the relevant demographic - people in their highest earning years who actually work - then we're talking about a sizable chunk of the region. Still less than half, sure. But lots of bodies to pay for $1m+ mortgages.

Let's use the example of big law lawyers. As a very, very conservative estimate, there are 100 "big law" firms with offices in DC, and they probably have an average of 100 lawyers each. (Some have way more: like covington and burling, hogan etc with 500+, and others are more branch offices with 50 - so i think 100 is actually really conservative). So my conservative number means 10,000 big law lawyers in DC working at big firms. The starting salaries one year out of law school at big law is $210k. So every one of those lawyers is making at least $210k. And there are 10,000+ of them in the DC area.

That's a lot of bodies who can buy $1m homes without even blinking an eye. I think a lot of people making $150k can't fathom how many bodies in cities like DC are making really high salaries in their 30s-50s.

Yes and those biglaw associates become partners after around a decade…

Like me…

[Anonymous]

Anonymous wrote:

Anonymous wrote:2 tech people might be clearing 600K per year.

Sure, if you both work for FAANG, then $600K is doable for two people,.

Experienced FAANG engineers make more than that…

[Anonymous]

What people are saying isn’t wrong…there are a lot of very high income individuals in this area. But you can look up the median income for DC and the surrounding counties and they will definitely show you that the average home price is not remotely affordable for the average household. Not at these rates. It’s no wonder OP has questions!

[Anonymous]

Anonymous wrote:What people are saying isn’t wrong…there are a lot of very high income individuals in this area. But you can look up the median income for DC and the surrounding counties and they will definitely show you that the average home price is not remotely affordable for the average household. Not at these rates. It’s no wonder OP has questions!

But laws of supply and demand are in effect. If no one could afford these homes then the homes wouldn’t be at that price.

[Anonymous]

I’m a mortgage underwriter and see a ton of broke rich people. We give them loans anyways. They just gotta keep running in that golden hampster wheel.

[Anonymous]

Anonymous wrote:I’m a mortgage underwriter and see a ton of broke rich people. We give them loans anyways. They just gotta keep running in that golden hampster wheel.

This makes me feel a bit better. Can you give some details into this observation?

[Anonymous]

Anonymous wrote:I’m a mortgage underwriter and see a ton of broke rich people. We give them loans anyways. They just gotta keep running in that golden hampster wheel.

Lived in SF area in early 2000s for a few years (right before and during the tech bubble burst). So many people were over extended. They figured their stock options would ultimately be worth something...... until they weren't. But they had bought a house, taken vacations, bought cars with the idea that this money would eventually be coming. Houses dropped over 500K in value and many couldn't sell without actually owing money to the bank. The people we knew in their late 20s/early 30s were not investing for retirement (and would talk about this), because pending stock options would make that unnecessary. Basically everyone was enjoying the good life at the high end and not much savings.

Even knew several people who had "purchased their options so it would eventually be LTCap Gains", except you then owe taxes on this, even if the stock is worthless. As in people owing mid 6 figures in taxes, yet their stock options are no longer worth anything.
Meanwhile, we always waited to execute the same day we sold. Sure we paid more in cap gains, but we never owed big taxes for something that was completely worthless.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I’m a mortgage underwriter and see a ton of broke rich people. We give them loans anyways. They just gotta keep running in that golden hampster wheel.

This makes me feel a bit better. Can you give some details into this observation?

Why does it make you feel better? If they buy a $2m house and pay it off after 30 years, at least they will have $2m which is a lot more than most Americans will have.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I’m a mortgage underwriter and see a ton of broke rich people. We give them loans anyways. They just gotta keep running in that golden hampster wheel.

This makes me feel a bit better. Can you give some details into this observation?

Why does it make you feel better? If they buy a $2m house and pay it off after 30 years, at least they will have $2m which is a lot more than most Americans will have.

Except most that are "on the hamster wheel" don't actually pay off the house, they keep refinancing over time, often taking out money each time. So that only works if you actually pay off the mortgage.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I’m a mortgage underwriter and see a ton of broke rich people. We give them loans anyways. They just gotta keep running in that golden hampster wheel.

This makes me feel a bit better. Can you give some details into this observation?

Why does it make you feel better? If they buy a $2m house and pay it off after 30 years, at least they will have $2m which is a lot more than most Americans will have.

Except most that are "on the hamster wheel" don't actually pay off the house, they keep refinancing over time, often taking out money each time. So that only works if you actually pay off the mortgage.

+1. Our big law partner friend and his SAH wife are very honest about being bad with money. They openly state that they “have no idea where it all goes” and if the partner lost his job they would have to “put a for sale sign in their front yard” the next day. We make less than half what they do and have at least double the NW.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I’m a mortgage underwriter and see a ton of broke rich people. We give them loans anyways. They just gotta keep running in that golden hampster wheel.

This makes me feel a bit better. Can you give some details into this observation?

Why does it make you feel better? If they buy a $2m house and pay it off after 30 years, at least they will have $2m which is a lot more than most Americans will have.

Except most that are "on the hamster wheel" don't actually pay off the house, they keep refinancing over time, often taking out money each time. So that only works if you actually pay off the mortgage.

+1. Our big law partner friend and his SAH wife are very honest about being bad with money. They openly state that they “have no idea where it all goes” and if the partner lost his job they would have to “put a for sale sign in their front yard” the next day. We make less than half what they do and have at least double the NW.

You believe everything people tell you, eh? No one would have any idea how much I actually have because I live more simply and frugally than many do, although still nicely enough.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:One of three things:

- they’re bringing money from a previous house sale
- family money (this one is the biggest imo)
- incomes for the highest earners have gone up way more than you realize. I don’t think ppl realize how much extra money the high end service workers, small business owners, contractors etc are making compared to 5 years ago. DH and I work in unrelated industries and both of us have doubled our very high incomes from five years ago. Based on the cars in our kids school, I’m guessing others have the same. But this kind of income increase wasn’t shared with ppl making, like, $120k. Who probably got around $20k of boost and that’s it.

I agree with this. Incomes have gone up wildly

I read the M&F dcum forum pretty regularly, and I don't think people on this forum realize how many very wealthy people there are, and how many more there are now compared to 5 years ago. I'm not saying it's normal or it's everyone. But people in their 30s, 40s and early 50s, if they were in good private sector jobs pre-covid (like, $150k+), they've likely doubled their salaries in the last five years. So in a city like DC, of the people in those age brackets, easily 10-20% of those people in the DC area are making mad, mad money these days. Now, if you take into account people outside those age brackets, and students, and sahms, and part time workers, the number ends up being just 5% of the region. Which tracks with the general idea that incomes over $200k are "wildly rich" and not the norm. But when you narrow in on the relevant demographic - people in their highest earning years who actually work - then we're talking about a sizable chunk of the region. Still less than half, sure. But lots of bodies to pay for $1m+ mortgages.

Let's use the example of big law lawyers. As a very, very conservative estimate, there are 100 "big law" firms with offices in DC, and they probably have an average of 100 lawyers each. (Some have way more: like covington and burling, hogan etc with 500+, and others are more branch offices with 50 - so i think 100 is actually really conservative). So my conservative number means 10,000 big law lawyers in DC working at big firms. The starting salaries one year out of law school at big law is $210k. So every one of those lawyers is making at least $210k. And there are 10,000+ of them in the DC area.

That's a lot of bodies who can buy $1m homes without even blinking an eye. I think a lot of people making $150k can't fathom how many bodies in cities like DC are making really high salaries in their 30s-50s.

Yes and those biglaw associates become partners after around a decade…

Like me…

What's the typical outcome for a biglaw associate who doesn't make partner? $50k non profit salary? No. It's still going to be comfortably six figures. Double that with spouse you still have your 350-450k HHIs and that can get you a $1M+ property. Which is the point about wealth.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Seeing house prices as they are today, how do people afford the $1M+ houses/townhomes that will amount to nearly $9K-$10K/month mortgage? Plus I see them switching to newer cars every so often. These are two income software professionals in the household, and I don't understand the math. What am I missing?

There was a time recently where a 800k mortgage, on a 1M home, was $3,300 a month. If it’s a smaller home or townhome with minimal maintenance then you could have afforded that with like a $120k income (2 60k earners). Crazy, but that was reality. Make 150k and you could have had those nice cars as well!

We have earned that income and no way we could afford a million dollar house. Be real. You have ultiiles, property taxes, upkeep, furnishing it and more.

+1
We could afford a $400k mortgage on that income. Barely.

At 2.75% interest, the monthly payment on a $800k loan is $3,265, without tax of insurance. With those, it woudl approach, if not exceed, $4k per month. Taking that on with a $10 *gross* income would be insane.

[Anonymous]

There is so much money out there. I bought a stock in mid September and sold it yesterday as it had ran up 50 percent. My other stock which I bought a month ago, shows 29 percent return as of now and it has yet to have its run.
My third stock I bought during October lows, shows 7 percent return and this also has yet to run.
I have no idea why people sit on their CD's. The prices and all info needed is available to all. If they don't run, make sure they are the stocks you would love to hold long term, and use the your left over cash.
Also, "Don't chase, replace." Not Financial advice.

[Anonymous]

Family Money