This pill is particularly aimed at HCOL people. I see a lot of posts here on bling of people saying they want to buy this house worth $X, but some of these prices are absolutely insane, and I don’t know how y’all can comfortably afford these homes, even with very high TC. Let alone the kind of house you’re getting for this kind of money. Example, this house: https://redf.in/MN5er0 in Cupertino. 3b3b, 1600 sqft, built in 1960. Just under $2.6M. Like I said, how the hell are people okay with paying multi 7 figures for this kind of house??? Never-mind that. Redfin estimates this house at $15K a month, assuming 20% down, 6% interest, 30 year mortgage. I don’t know about y’all, but I’ve been taught to keep my housing under 1/4 of my income, maybe 1/5. If I’m a homeowner, I might push that to 1/3 all in, so let’s say you want to spend 1/3 max of your take home pay every month on housing. That means your monthly household take home pay has to be $45K, and HCOL states tend to be tax heavy so pre tax household income is an estimated 65K-75K, let’s say $70K. For the sake of this argument, I’m not counting RSU as “income” because most people don’t immediately sell their RSU and take it as income monthly/quarterly/annually. So yeah, $70K CASH income pre tax monthly. This means that you need to make $900K pre tax before RSU or other non-cash compensation annually to conservatively afford a $2.6 million dollar house, which I know many of you don’t make. Some do, but most don’t. Are some of you really spending more than half of your monthly income on homeownership just to live in your crime and drug infested metro areas? The housing market in some of these areas is absolutely insane, and I don’t know how some of you do it. Yesterday there was a post of someone asking if they should buy a $2M house in a bad school district or a $3.5M house in a hood school district, and I’m in absolute disbelief that there are cities in which a $2m house is in a bad school district. In my area, the $2M+ homes are in the best neighborhoods with the best schools, and a new construction 3/2 or 3/2.5 sub $2K sqft house costs $300K and is most likely in a good to great school district. Discuss below. TC 97K Dallas area YOE < 1 Poll: how much of your household take home pay goes towards home ownership?
1. Many sell their RSUs 2. People live here because they can become multimillionaires before 30. I'm personally aiming for $1m before 40. 3. As crazy as that price is, it typically still keeps appreciating.
I don’t see how it’s possible for homes in that area to appreciate given how many people are leaving due to poor QOL and terrible political decisions
Well you can see it by going to Zillow and look at the historic property value over time. People said the same thing during the pandemic and I bought my house for $3k under asking. It then appreciated ~$300k because people realized that even with remote work, having property in the bay is still extremely valuable.
You can't not count RSUs. IRS treats them as cash for taxation purposes. Many homes are bought with all cash offers. For the rest, $1 mil down isn't uncommon. It's only 2 to 3 years of savings to get $1 mil in cash. Some of us fled the Bay Area for Seattle Eastside, where $2 mil can get a respectable house and there's no state income tax. Note both CA and WA have low property tax, which allows property prices to boom unlike TX.
2-3 years to get $1mil cash savings - Mind breaking down how that works?
Assume DINK SWE couple. Both mid level, 300k TC each, so around 275k after 401k and other things. In WA this would be 195k per person or 390k combined. Annual expenses of ~72k is still a decent life for 2 people, so 318k leftover every year. With any appreciation, 3 years of this gets 1 mil.
I assume people put more down due to selling RSUs and also consider power couples where both husband and wife make over $500K TC so HH TC is over $1M.
You know the South Bay Area is bad when you visit the nice areas of Los Angeles and everything seems “affordable”.
Lots of us don’t see the Bay Area as a long term home. It’s a place where you maximize income and try to keep expenses as low as possible. For many this is renting as rents are half of what a mortgage plus taxes would be. Do this for a decade and then FIRE in some form in a lower cost area. But if you don’t end up moving then overtime incomes and wealth grows faster than housing and putting down a large downpayment is plan b to bring monthly costs down. Anecdote: I make around 380k TC. My rent is 3500 a month. So as you can tell most of my income is getting invested. My long term plan is to move to a cheaper place in California where my friends and family are and coastfire.
What exactly is coastfire?
Coastfire is when your retirement fund will grow without future contributions to your retirement goal so you not longer need to contribute. This provides flexibility where your job now needs to just fund your lifestyle and you don’t need any excess for retirement. So you can either increase your qol or take a less stressful job that makes less.
I don't need 4k sq ft house or a backyard larger than fitting the maybe 12 friends I'll have over for a bbq. Plenty of public parks and stuff with year round spring weather. I also don't need a three car garage, a boat, or a cleaning person every week, private pool, ect. I don't need to "keep up with the Joneses". The point is what many here see as a downgrade, I just see as a downsize. Once you reduce your footprint, you can better enjoy the benefits that come with these HCOL areas.
This is a solid point, to each their own. I lean towards more the LCOL side of things. Me and my gf’s dream is to live on a modest house on land, have some horses, chickens, etc which she tends to, and I have a shop on the property where I can store the fishing boat, equipment, tools, and whatever project car(s) I have at the time.
I spend less than 13% of monthly gross on my house. ez pz
People who have voted <20% have interest rates below 3%
Or they have the brains to rent.
It’s simple. When rates are high either put down a massive downpayment or rent and invest the difference. When they are low do the opposite.
People put a lot more than 20% down
20% down is $517K, how many of us have that much cash?
Big tech stonks, ipos, existing housing equity. I would bet the number of first time homebuyers is about 0 that are buying 2.6 mil houses. The 1.8 mil houses are for first time buyers.