Reply to How do I calculate what a house will cost in five years? Ten years?

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]We're hoping to stay WOTP where there is not nearly as much room for appreciation as gentrifying neighborhoods.[/quote]

With your relatively low income for your debt and desired place to live I'd just accept renting forever.[/quote]

?? They owe $90K on $270K income. They could literally pay it off this year and live on income that is still more than twice the average HHI in DC.

OP, I wouldn't worry about the debt given that it's at a low interest rate, but I would aggressively save for a downpayment. When you can do 20%, see what that gets you.[/quote]

Lol! They are saving 2400/mo. Where is the rest going to come from? The money tree? [/quote]

The same place it comes from for everyone else who saves up for a downpayment. The idea that you should be able to save for a downpayment in a couple of months is kind of insane unless you are extremely wealthy. If OP wants a $1M house, she needs $200K saved. At current rate of savings, that's 6.5 years (assuming they have nothing saved yet). Many people save for far longer than that to afford a downpayment. If OP wants to buy before then, she can either escalate the saving (which she should be able to do on $270K even with daycare, though it may mean cutting back on other things they enjoy) or look at less expensive homes. That's how this works. She could also do 10% down, but you typically pay for that in the interest rate, so it's not necessarily a win.

Especially if the bump in HHI is recent, take everything over what you previously earned and put it in the downpayment fund, rather than using it for upping quality of life. You won't miss it the way that you would if you'd gotten used to including it in your spending and had to cut back.[/quote]

You stated they could pay a 90k loan down in a year. Keep on topic.[/quote]

On $270K, of course you could, if that were your priority. Even if you assume 40% going to taxes, that's $13,500 a month. Set aside $7,500/month to pay off that debt and that leaves you $5,500--more or less the median household income in DC, after taxes, so clearly it is possible if someone told you you *had* to pay the debt off within the year, even if it would mean not living in your neighborhood or apartment size of choice or using your daycare of choice or eating out or what-have-you. People certainly do make it work at that income by making different choices with their finances.

Does that mean OP *should* do this? No, of course not--presumably they are saving less than that because they have prioritized other things in their budget (like retirement and college savings, neighborhood, preschool, etc.) The point is just that debt is not inherently evil and $90K is a very reasonable amount of student loan debt to have on an income of $270K, and certainly not a level of debt that would preclude buying a home. (Now, $90K in high-interest credit card debt because of problems managing spending--that would be another story.)[/quote]

Not with daycare and rent. Not with 2 people contributing max to 401k, FSA and health. Not with another baby in the way. [/quote]

If you were under pressure to pay down a $90K loan within a one-year window, you wouldn't be making any retirement contributions, let alone maxing them. You wouldn't pay $2K a month for daycare or $3K a month for rent--there are many cheaper options for both. You would make different choices on all of that to free up the necessary money. (Again, not saying OP should do any of this--of course not! But the idea that you can't possibly figure out how to cover basic needs in DC on $5500 a month if you had to is insane. People do it every day.)

To that end, one way that OP can ramp up the downpayment savings would be to temporarily reduce retirement contributions. (A 401(k) loan for the downpayment could also boost it a bit.) They should also go through their budget to identify some of the smaller expenses like meals out and work to reduce those and capture all of those savings for the house, too. If you each get a latte three times a week and can cut that out to make coffee at home, there's $1K right there. The small things add up over the course of a year. Make a plan for when you ideally hope to buy and then backwards map from there to figure out what you need to shift to get to the downpayment.[/quote]

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