Articles Like This Will Make You Poor For Life

[Singuy]

http://money.cnn.com/infographic/real_estate/what-you-need-to-earn-to-afford-a-home/?iid=hp-stack-dom

Every number on this list exceeds 3x your yearly salary. WTF CNN. Keeping the American public financially chained!

[Joan.of.the.Arch]

Interesting that the table is ordered by income needed. It's was back in the early 90's that we bought a home equal to one year's gross income, though I looked for six months for one that would have been 73% of annual income. I found lots of them, that were "nice" by my modest standards, but I was holding out for brick construction and in the end had to go higher on the price to get that.

[LivingAlmostLarge]

yeah $700k in SF that has to be old.

[disneysteve]

That chart makes absolutely no sense. Those numbers are ridiculous. How could someone making 70K possibly buy a house for 369K? That's more than 5 times their income.

[JoeP]

HSH used the average interest rate for a 30-year fixed-rate mortgage in the first quarter 2016, and assumed buyers would make a 20% down payment and spend no more than 28% of their gross income for housing.

I don't know about the rest of you, but my first house needed new windows, new carpet, and an entry door just to make the place livable. Add in paint, window treatments, appliances, furnishings, lawnmower, snowblower, probably water heater and new roof...the first 2 years are very expensive.

That table is irresponsible.

[bjl584]

I don't know about the rest of you, but my first house needed new windows, new carpet, and an entry door just to make the place livable. Add in paint, window treatments, appliances, furnishings, lawnmower, snowblower, probably water heater and new roof...the first 2 years are very expensive.

That table is irresponsible.

Let's see....

New carpet, new hardwood flooring, 2 bathroom remodels, drywall in the garage, paint throughout, extensive landscaping outside, and the kitchen remodel is still pending. I bought my house significantly below market value and did most of the work myself. I saved a ton in the long run. These charts are definitely irresponsible.

I live in Pittsburgh. I guess if I made just shy of $30K, a $688 mortgage payment wouldn't be bad as long as I didn't pay any of the utilities, need to put gas in my truck, or need to eat food.

[disneysteve]

Do those numbers only include principal and interest? What about taxes and insurance? I don't have time to do the math but I don't think you can buy a house for 5x income and have a payment that is only 28% of your income. I think it needs to be 3x or less for that to work.

[JoeP]

Do those numbers only include principal and interest? What about taxes and insurance? I don't have time to do the math but I don't think you can buy a house for 5x income and have a payment that is only 28% of your income. I think it needs to be 3x or less for that to work.

Yeah, at the bottom:

Notes/Methodology

*Average jumbo mortgage rate used; HSH.com determined the yearly before-tax salary a buyer would need to afford the total cost (including, principal, interest, tax and insurance payments) of a median-priced home in the 27 largest U.S. markets based on population. HSH used the average interest rate for a 30-year fixed-rate mortgage in the first quarter 2016, and assumed buyers would make a 20% down payment and spend no more than 28% of their gross income for housing. Median home prices are for the first quarter of 2016 and from the National Association of Realtors.

For more information about the methodology click here.

[phantom]

I don't know about the rest of you, but my first house needed new windows, new carpet, and an entry door just to make the place livable. Add in paint, window treatments, appliances, furnishings, lawnmower, snowblower, probably water heater and new roof...the first 2 years are very expensive.

That table is irresponsible.

My first house was new construction, so it came with all of those things except furnishings, a lawnmower, and a snowblower. We had to buy a lawnmower, but we made due with second hand furnishings and shoveling snow by hand for awhile. Our house was about 3x our yearly salaries and payments were about 20% of our yearly salaries. I'm sure we could have managed 28% of our salaries, but I'm glad we didn't get something that expensive.

When you start with the assumption that you're going to save up 20% before buying, I don't see anything that crazy on the chart. Note that the person in San Francisco has to save $154k to buy that house. If he can do that on $144/year before taxes, I think he can afford his $3,365/month house payment. Are there better ways to spend his money? Possibly. But, if buying a $770k house is what he wants to do, he should be able to do it.

[Nutria]

and assumed buyers would make a 20% down payment and...

I bet it didn't assume car payments, credit cards and SLs.

[tripods68]

When you start with the assumption that you're going to save up 20% before buying, I don't see anything that crazy on the chart. Note that the person in San Francisco has to save $154k to buy that house. If he can do that on $144/year before taxes, I think he can afford his $3,365/month house payment. Are there better ways to spend his money? Possibly. But, if buying a $770k house is what he wants to do, he should be able to do it.

I had family member worked and live in San Fran for 5 years on Bush Ave. He had 4 roommates split rents + utilities. Each spend on average $1200 a month making about $70K. Doable for single people & DINKs, not for a single mother with kids.

[Singuy]

My first house was new construction, so it came with all of those things except furnishings, a lawnmower, and a snowblower. We had to buy a lawnmower, but we made due with second hand furnishings and shoveling snow by hand for awhile. Our house was about 3x our yearly salaries and payments were about 20% of our yearly salaries. I'm sure we could have managed 28% of our salaries, but I'm glad we didn't get something that expensive.

When you start with the assumption that you're going to save up 20% before buying, I don't see anything that crazy on the chart. Note that the person in San Francisco has to save $154k to buy that house. If he can do that on $144/year before taxes, I think he can afford his $3,365/month house payment. Are there better ways to spend his money? Possibly. But, if buying a $770k house is what he wants to do, he should be able to do it.

Perhaps assuming making 144k/year post tax. Cal will tax you up the a#$ with its state income tax at around 8-9% in that bracket. Then you have federal taxes, payroll taxes, and property taxes.

The house cost 616k after 20% down. Then you add in insane closing cost with a 616k mortgage of probably 25k..there's no way anyone can afford this house at 144k gross. Monthly payments according to U.S mortgage calculator with insurance/property tax factored in is 4333/month. 6k/month is probably what you get post tax.

[phantom]

The house cost 616k after 20% down. Then you add in insane closing cost with a 616k mortgage of probably 25k..there's no way anyone can afford this house at 144k gross. Monthly payments according to U.S mortgage calculator with insurance/property tax factored in is 4333/month. 6k/month is probably what you get post tax.

I'm not sure where you're getting your numbers. Bankrate says gives me 3.5-3.8% on jumbo loans in San Fransisco. 3.75% gives me $2852.79/month. This page claims I can expect to pay $4,235.00 in property taxes on a $770,000 house. So, that's an extra $352.92/month. Assume $150/month for insurance, and you're just under the $3,365/month that the article came up with.

I don't think you need to factor into the monthly payment for closing costs. Buyers often either ask the sellers to pay the closing costs or bring them to the table in addition to the downpayment.

[sv2007]

I had family member worked and live in San Fran for 5 years on Bush Ave. He had 4 roommates split rents + utilities. Each spend on average $1200 a month making about $70K. Doable for single people & DINKs, not for a single mother with kids.

SF has rent control so it should be very stay-able once the renter is happy with the initial rent. I don't know the increases but it is very low according to co-workers. $4800 in 2011/2 can rent a decent place in SF. If he stayed there, he can easily charge roommates a lot more which many do against their lease there.

[MonkeyMama]

I am with Phantom. Since I am from SF, this list is just *shrugs* to me.

Of course, with large down payments and low interest rates, I don't think these numbers are a big deal. But I grew up knowing that the roof over my head would cost a lot.

From a regional perspective, we are crazy conservative. I would probably never consider taking on more than a $200k-ish mortgage. The SF house on the list horrifies me from that standpoint. I'd have to have one heck of a steady job before I'd ever consider borrowing that kind of money. But it's the large sum versus the "5x income" that bothers me.

All that said, I give you at face value that the numbers are kind of horrifying. We know most people don't think these things through, don't put money down, aren't financially conservative, have other debts, etc.

But in my circles, people tend to be pretty conservative. The SF salary doesn't say much since our friends have other benefits like large bonuses and stock options. Most anyone I know who has bought a house bought with hundreds of thousands of dollars of home equity built up starting with a condo or a townhouse first. I have a friend who chose to live in the slums basically for 15 years until she could save up the cash for a condo in a wealthy neighborhood. Etc., etc. I don't know people literally buying $700k+ homes with only that kind of income ($141k?) to back them up. Only if they saved up hundreds of thousands of dollars first or earned it through home equity.

We personally put a large down payment and never had any other debts. We also never plan to buy up. Interest rates are at a historic low. So these are all reasons I feel pretty "meh" about the numbers.