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

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

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[quote=Anonymous][quote=Anonymous][quote=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.[/quote]

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.[/quote]

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. [/quote]

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