Anonymous wrote:OP here again. Thanks for the comments received thus far.

A few points:
Part of our frustration is that while we live centrally, I work downtown and my wife works in Fairfax. So we can't really move further east without worsening her commute (which is already terrible on 66). Of course, going west really doesn't help the affordability problem at all. Otherwise, we'd be able to consider Brookland, H St., Takoma, or PG.

Additionally, another frustration has been our lack of being able to save due to childcare costs, etc. We have decent savings, retirement, and are beginning to save for college costs.

Saving for a down payment on top of that in this environment is intimidating and would take years. In fact, you could argue that houses are appreciating faster than we can save. What's the point of saving, say, $15,000 per year when house values rise $40,000 per year? It's clear that you've missed the boat and that 'path' is no longer viable. Further, I'm not comfortable putting only 3.5% down. I'll be paying PMI forever and I hate paying interest on anything as it is. It's just more money down the drain.

Anonymous wrote:

We came at $375k a few ways:
1. Many calculators recommend putting 20% down. $75k is the upper end that we'd be able to muster in a best-case scenario while factoring in closing costs. Also, we don't want to drain our emergency fund to come up with additional money and we may have another kid soon, in which case we'll need additional savings. Based on previous comments, I may consider putting less down and paying PMI but that will be a bitter pill that I'd rather not take if I can help it.
2. Many calculators recommend not going above 2.5x annual income. That may be conservative but it's what we're comfortable with.
3. Many calculators talk about 28-36% gross income for mortgage payment, but this seems really high, particularly since we'd only probably be able to afford a fixer upper (which will require additional money along the way). Right now our rent is much less than that and we'd like a mortgage that's close to our current rent. That way our cost of living will be predictable. And that's in addition to existing childcare costs, college savings, and retirement savings (let alone groceries, etc.)! Paying 28-36% toward a mortgage payment would substantially change our household expenditures picture.

All of these factors steer us in the vicinity of $375k. Evidently most folks are willing to stretch themselves further than this (hence the high prices). I can't think of any other way.

OP, if you purchase a house for $375,000 with 20% down, you'll have a mortgage of assuming a mortgage of $300,000. Assuming taxes of $3000/year and an interest rate of 4.5%, your monthly PITI will be roughly $1820. (I imagine that's considerable less than your rent right now). That's $21,840 per year, or 14.5% of your gross. I understand you don't want to get up in the 28-36% range, but you're a long way from there at $375,000. And nased on what you've said you want, $375,000 just isn't realistic.

Anonymous wrote:Saved a 20% down payment and bought a house for half the amount we were approved for in SS, which is too "ghetto" for half the people on this board.

Anonymous wrote:My wife and I have rented in the West End for the past 8 years. Since that time we've had a child and hope to have another one in the not too distant future. In other words, we're outgrowing our apartment and are considering the need to live in a larger space.

We like the DC area and would like to stay, but we're pricing out houses in the area and it's clear that it's going to be tough if not impossible to do so. My wife and I make a combined income of approximately $158K, and according to most house-affordability calculations that results in being able to afford $375K houses. This figure, as you know, does not go far in the area.

We are still left wondering how people afford homes in this area. We thought about what others have done and eventually compiled a list which comprise what we've called 'the seven paths to DC-area home ownership' (in no particular order):
1. Command a massive dual-income salary
2. Willing to live far outside the beltway/endure a long commute
3. Willing to live in an undesirable area (poor housing stock, bad schools, no nearby amenities, high crime rate, etc.)
4. Have saved up a down payment over a very long time
5. Willing to be extremely 'house poor' (>35-40% of income going to mortgage service)
6. Get help from family (inheritance, or have gotten help from family for other costs (ex. parents paying for college) which allowed saving for down payment)
7. Bought pre-boom (and have since enjoyed incredible appreciation)

Of course, some folks have taken multiple and overlapping approaches, and there's also the chance we're missing some.

At the end of the day we recognize that we are much better off than most and count our lucky stars each day that we have what we do. We recognize we are truly fortunate. And we don't want this post to be construed as a 'woe is us' lament. However, it's disheartening that mid-career professional families can scarcely afford the area.

I would like to hear about those of you who want to buy in the area eventually and face similar circumstances as us. Which path to home ownership are you planning to take?

Anonymous wrote:

Anonymous wrote:I'm confused why you would rent for 8 years when we had a nice market bottom in 2008/2009. Why not buy then?

Now you're trying to buy something at the top of the market again. I'd wait.

Market bottom? Prices inside the beltway basically tripled over the 2000s, and in 2008/2009 they dropped like at most 10%...

Incomes didn't triple, so that 10% really didn't provide any help in affordability (and banks weren't lending, so good luck as first time home buyer).

Geez, OP, you should have expected the Fed would pump up housing and assets with QE, everyone knew that...

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:$156K is a good salary for the region. $375k on that salary is too conservative. Even with a 5% mortgage and 0 down, 30 year fixed on that is $2k a month. Add in 350 for taxes and insurance and you are looking at only 18% debt to income ratio, *FAR* shy of the 28%-33% ratio that most people subscribe to. Using 28% as a ratio, your "affordability" figure jumps to about $580k, which can buy you a nice townhome in Fairfax, or even a single family in some of the older but still nice neighborhoods like Burk.

I am not a Realtor, just someone who has done enough of these types of calculations to know when people are over/under extending themselves.

We had a lower combined salary than you and purchased a home for $537K with 3.5% down in 2009. 4.5 years later we make a tad more than you do, but have two kids in daycare now. We manage just fine. We don't have the discretionary income that others do, but as you said there has to be some wiggle room in your expectations for the DC area.

In 2009, our HHI was $120k, we bought a 1600 SF condo steps from Vienna metro for $365k with 20% down and $350/month hoa fee. Two kids and managed fine financially.

We came at $375k a few ways:
1. Many calculators recommend putting 20% down. $75k is the upper end that we'd be able to muster in a best-case scenario while factoring in closing costs. Also, we don't want to drain our emergency fund to come up with additional money and we may have another kid soon, in which case we'll need additional savings. Based on previous comments, I may consider putting less down and paying PMI but that will be a bitter pill that I'd rather not take if I can help it.
2. Many calculators recommend not going above 2.5x annual income. That may be conservative but it's what we're comfortable with.
3. Many calculators talk about 28-36% gross income for mortgage payment, but this seems really high, particularly since we'd only probably be able to afford a fixer upper (which will require additional money along the way). Right now our rent is much less than that and we'd like a mortgage that's close to our current rent. That way our cost of living will be predictable. And that's in addition to existing childcare costs, college savings, and retirement savings (let alone groceries, etc.)! Paying 28-36% toward a mortgage payment would substantially change our household expenditures picture.

All of these factors steer us in the vicinity of $375k. Evidently most folks are willing to stretch themselves further than this (hence the high prices). I can't think of any other way.

Anonymous wrote:I'm confused why you would rent for 8 years when we had a nice market bottom in 2008/2009. Why not buy then?

Now you're trying to buy something at the top of the market again. I'd wait.