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this post was submitted on 30 Nov 2023
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Edit: before folks reply with a comment about people being worse off, I know. I agree. This is just a scenario description.
It is very easy to be strapped with a modest sized house or apartment in the "right" zip code.
As in a 1.2mil mortgage on a 3 bedroom house that's never been renovated since the 70s. That mortgage could be 5k / month.
150000 a year is 8.7k a month, after taxes. If you have student loans, any medical debt, kids, that remaining 3.7k is pretty critical. You aren't swimming in liquid chocolate every night and wiping with singles.
If you own a home things can happen out of nowhere. I personally just had to replace my sewer line last month. 17k for the work and 1.5k for new concrete. Not covered by my home insurance because I didn't opt for the rider on my account. My fault there... My finances are a bit different than the above description but if you were the 150 + paycheck to paycheck situation, you'd be in hot water.
This isn't a "woe to the 150 crowd" comment. I'm well aware folks are way, way worse off, but when a 150 household talks about being paycheck to paycheck, it's totally possible.
At least in CA where the property tax is 1%, last time I fed the info into one of those calculators a few months ago, a 1.2m house (exactly the type you describe) with a standard 20% down-payment would run closer to $8k/mo with good credit. That includes property tax and homeowners insurance, which is required to get a loan.
So yeah, that doesn't leave a whole lot to live off of.
There's also the upkeep cost for repairs and to renovate.
We've let our gutters stay broken for several years now because we just can't afford to get them fixed. We had to have an emergency repair to our heat pump yesterday and that's going to be hundreds of dollars out of pocket. We're on a single income. My wife gets paid well (not $150,000 a year well) and our mortgage is low, but we're barely making it.
$150k is twice what my parents made combined back in the 90s, and they lived a solid upper middle class life in an upscale suburb of a small city. Always had a nice TV and my dad and I both had PCs that we upgraded every year AND they saved up two years worth of college for me. Amazing how quickly things have changed. They bought their house for $180k and it's now worth nearly $500k.
My career now is generally a higher valued one than theirs, but adjusting for inflation, my pay has always been lower than theirs at the same point in their careers. And that's the story. Incomes may have doubled since the early-mid 90s, but everything else has tripled or quadrupled.
Inflation has doubled since 1999 so I'm not sure what your point is
Isn't a mortgage as high as your whole salary for 10 years unwise from the get go?
In general yes, but many many people are doing this to attempt a "normal" home the likes of which they grew up in, and that they themselves want to raise a kid in.
OR consider a household where 2 incomes of around 150 were earned when the house was purchased, but now one earner is not earning appreciably any more...maybe a stay at home parent or illness or whatever.
Again just saying some possibilities, not the normative experience.
I guess the rough reality is that some people want to live where their family lives but can’t easily afford it. I don’t know how far you need to live from SF for prices to return to reality, but I suspect it’s a 1h+ drive