Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Gross anatomy: Home price vs salary
Old 01-01-2008, 10:55 AM   #1
Dryer sheet aficionado
 
Join Date: Feb 2005
Posts: 39
Gross anatomy: Home price vs salary

Right now, I'm looking at homes that are 2.3 - 3x my annual gross salary?

What are your %'s and do you believe in the "buy as much house as you can philosophy?

Any regrets...one way or another---i.e. should have gone up, down, etc.
__________________

__________________
Mary_From_Georgia is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 01-01-2008, 11:36 AM   #2
Recycles dryer sheets
 
Join Date: May 2005
Posts: 192
Quote:
Originally Posted by Mary_From_Georgia View Post
Right now, I'm looking at homes that are 2.3 - 3x my annual gross salary?

What are your %'s and do you believe in the "buy as much house as you can philosophy?

Any regrets...one way or another---i.e. should have gone up, down, etc.
When we bought our house in December 2006, the mortgage was 2.42x our salary. The housing expenses were over twice our rental expenses (including utilities, taxes, etc.) But the quality of life increase was unquantifiable.

At first, we noticed the hit pretty hard. We were never close to missing a payment, but we still felt it. However, we still maxed out my 401K and IRA, eliminated some debt, and stashed some more other places. This year, we should be able to max out my 401K (and I will also start making some Roth 401K contributions), my Roth IRA, her Roth IRA, and pay down a fair amount of debt.

Based on a lot of the calculators I used, we were stretching it with our mortgage payments, but in the end it all worked out well. Now I have a fixed housing payment I know we can afford, and the payments will only get easier as time goes on.

I'd suggest living on your estimated housing budget for a while (saving the extra $$ to apply at closing) to make sure you can afford it. If so, go for it.
__________________

__________________
Niko is offline   Reply With Quote
Old 01-01-2008, 12:58 PM   #3
Recycles dryer sheets
 
Join Date: Oct 2007
Posts: 463
1.8x

I don't believe in buy as much house as you can.
__________________
TickTock Rule Of Finance - heavily discount any promises of money/benefits to be paid to you in the future

"I've traded love for pennies, sold my soul for less" -Jim Croce, Age
TickTock is offline   Reply With Quote
Old 01-01-2008, 01:03 PM   #4
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
kcowan's Avatar
 
Join Date: Jul 2006
Location: Pacific latitude 20/49
Posts: 5,739
Send a message via Skype™ to kcowan
Only overbuy to avoid a future essential upgrade because of the cost of selling and moving. Otherwise just buy enough to be comfortable after purging of unnecessary stuff.
__________________
For the fun of it...Keith
kcowan is offline   Reply With Quote
Old 01-01-2008, 02:04 PM   #5
Thinks s/he gets paid by the post
 
Join Date: Aug 2006
Posts: 1,361
When I bought my house, my mortgage was about 2.5x my annual salary (including the second mortgage to avoid PMI). However, I bought the house with the general plan that I would share it with my SO other at the time, and that she would pay some rent.

We eventually got married, and if you include her salary in the calculation, our mortgage balance is at about 1.25x our income (we paid the 2nd off pretty quick).

I could have afforded the house at 2.5x alone, but it would have cut back significantly on my savings.
__________________
Hamlet is offline   Reply With Quote
Old 01-01-2008, 02:09 PM   #6
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
brewer12345's Avatar
 
Join Date: Mar 2003
Posts: 16,391
When we bought our place, the house was 2.7X my income, 2X that of DW and mine combined. Since we knew she would drop out of the labor force at some point, we based our ability to carry the mortgage on my income alone. It was kind of tight at times, but we are fine now 5.5 years later. There are a few things I wish the house had, but no deal breakers unless we unexpectedly have a third child (no present plans forthat) and find ourselves short of a bedroom. But I am not sure if we would move even then. We could have stretched farther, but it would have been outside my comfort levels.
__________________
"There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest have to pee on the electric fence for themselves."



- Will Rogers
brewer12345 is offline   Reply With Quote
Historical perspective
Old 01-01-2008, 02:22 PM   #7
Recycles dryer sheets
 
Join Date: Aug 2007
Location: S.W. Minnesota
Posts: 134
Historical perspective

First house (1970) $14,900 about 3x
Next
__________________
waltwill8 is offline   Reply With Quote
Old 01-01-2008, 02:35 PM   #8
Thinks s/he gets paid by the post
growing_older's Avatar
 
Join Date: Jun 2007
Posts: 2,609
First house just under 1x, with almost nothing down, but then mortgage rates were nearly 18%. Appreciated nicely.

Second house almost 3x with 20% down. Sold at a loss 4yrs later.

Both worked just fine with budget at the time.
__________________
growing_older is offline   Reply With Quote
Old 01-01-2008, 02:59 PM   #9
Thinks s/he gets paid by the post
 
Join Date: Nov 2005
Location: North of Montana
Posts: 2,753
1973 - 1st house: 4 X salary, 10% down
1978 - 2nd housse: 2.5 X, 50% down
1998 - 3rd house: 1.5 X, cash

In my location, salarys grew much faster than houses inflated.
__________________
There are two kinds of people in the world: those who can extrapolate conclusions from insufficient data and ..
kumquat is offline   Reply With Quote
Old 01-01-2008, 03:02 PM   #10
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
dex's Avatar
 
Join Date: Oct 2003
Posts: 5,105
Quote:
Originally Posted by Mary_From_Georgia View Post
Right now, I'm looking at homes that are 2.3 - 3x my annual gross salary?

What are your %'s and do you believe in the "buy as much house as you can philosophy?

Any regrets...one way or another---i.e. should have gone up, down, etc.
What is your mortgage to net income ratio. It is probably a better indicator.
__________________
Sometimes death is not as tragic as not knowing how to live. This man knew how to live--and how to make others glad they were living. - Jack Benny at Nat King Cole's funeral
dex is offline   Reply With Quote
Old 01-01-2008, 03:07 PM   #11
Recycles dryer sheets
Charlotte's Avatar
 
Join Date: Feb 2007
Posts: 176
When we purchased the house, our mortgage was 3x my husband's salary. We were both working at the time, though, so my salary has fed our retirement savings and paid for the niceties in life, while his salary covers all the basics of living.

We were determined that if one of us ever lost of our jobs, that we'd be covered and able to live off of one salary.

Could we have bought a much larger house? You bet, or at least the bank said so. But I sleep much better at night knowing we're not over-extended.
__________________
Charlotte is offline   Reply With Quote
Old 01-01-2008, 05:21 PM   #12
Thinks s/he gets paid by the post
lazygood4nothinbum's Avatar
 
Join Date: Feb 2006
Posts: 3,895
this house was about twice my salary but i put three times as much work into it.
__________________
"off with their heads"~~dr. joseph-ignace guillotin

"life should begin with age and its privileges and accumulations, and end with youth and its capacity to splendidly enjoy such advantages."~~mark twain - letter to edward kimmitt 1901
lazygood4nothinbum is offline   Reply With Quote
Old 01-01-2008, 05:30 PM   #13
Full time employment: Posting here.
 
Join Date: Oct 2007
Location: New York
Posts: 898
My starter home (in Chicago) was only 1.5x my salary.

My 2nd and current home (in NYC) was about 2.9x my salary, but I put down 30% so the mortgage was more like 2x. It'll be paid off in 14 months, if I ever buy a third home it'll be a cash transaction.
__________________
Money's just something you need in case you don't die tomorrow.
Maurice is offline   Reply With Quote
Old 01-01-2008, 05:34 PM   #14
Recycles dryer sheets
 
Join Date: Sep 2007
Posts: 87
We just bought our first house in fall of 2006, but here are the stats.

First house $99k. Income $79k.
__________________
ChemEng is offline   Reply With Quote
Old 01-01-2008, 06:06 PM   #15
Thinks s/he gets paid by the post
SecondCor521's Avatar
 
Join Date: Jun 2006
Location: Boise
Posts: 2,406
Price / gross salary was about 2.8.
Mortgage / gross salary was about 2.2.

I'm a believer in the "buy as little home as you need" philosophy. I probably bought a little too much house than was ideal, but I did get a good deal and it met all of my other requirements.

2Cor521
__________________
"At times the world can seem an unfriendly and sinister place, but believe us when we say there is much more good in it than bad. All you have to do is look hard enough, and what might seem to be a series of unfortunate events, may in fact be the first steps of a journey." Violet Baudelaire.
SecondCor521 is offline   Reply With Quote
Old 01-01-2008, 06:18 PM   #16
Moderator
Walt34's Avatar
 
Join Date: Dec 2007
Location: Eastern WV Panhandle
Posts: 16,579
First house was about 2.5 x then combined income for me and first wife. Second was 2.5 x my own income by myself. It was VERY tight for a while, I considered having a roommate or taking a 2nd job to keep it because Reagan raised taxes. A "big night on the town" was sending out for pizza and a bottle of wine. Probably what saved my butt was that I had virtually no employment-related expenses. My employer furnished a car and equipment. Also I had about as secure a job as one can find - law enforcement - so layoffs were something I read about in the newspaper.

But I knew I was scheduled for raises and was confident that being "house poor" was a temporary condition. Three years later all was good. Had it paid off in 14 years. But I have a frugal lifestyle - not much for high-end restaurants, far-flung vacations, etc. and I brown-bagged lunches for years. The only "weakness" was radio control airplanes and associated tools. Overtime (which I never counted on) paid for that.

I could have found something less expensive but I wasn't comfortable in those neighborhoods.

Hint: Stop by the local police station and ask about the area you're thinking about. If you get a blank look, that's a good sign. If they start rattling off war stories, rethink that location. Appearances can be very deceiving in that regard. Some expensive neighborhoods were not very nice places to live.
__________________
I heard the call to do nothing. So I answered it.
Walt34 is offline   Reply With Quote
Old 01-01-2008, 06:22 PM   #17
Thinks s/he gets paid by the post
Rustic23's Avatar
 
Join Date: Dec 2005
Location: Lake Livingston, Tx
Posts: 3,624
House is valued at 3.8 times income. However, mortgage is 1 times salary. This is our last home not the first.
__________________
Rustic23 is offline   Reply With Quote
Old 01-01-2008, 06:26 PM   #18
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
cute fuzzy bunny's Avatar
 
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,697
Never actually thought about it, but dang near 3x on every home I ever bought until I retired.

Another thought...break out the megans law web site and look for sex offenders in these neighborhoods. Seems theres a direct correlation between serious sex offenses and places people dont really want to live.
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
cute fuzzy bunny is offline   Reply With Quote
Old 01-01-2008, 08:28 PM   #19
Recycles dryer sheets
 
Join Date: Jul 2007
Location: East Bay CA/Long Island NY
Posts: 166
2x my salary. 1.2x of our combined salary.
wanted something that one of our individual salary could support.
__________________
Salaryman is offline   Reply With Quote
Old 01-01-2008, 08:43 PM   #20
Recycles dryer sheets
 
Join Date: Jun 2007
Posts: 97
What I'm looking at is 3.5-4.5 income. Given that I can put down a lot, it doesn't seem to be too much. Although, I am planning on getting a roommate after I move in (mostly because I can't fathom living alone).
__________________

__________________
starter82 is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Where was that great website about home price trends? spncity FIRE and Money 5 12-31-2007 09:34 PM
2005 Gross Income Survey Danny FIRE and Money 9 11-27-2005 05:22 PM
What percentage of your gross income do you save? SLC Tortfeasor Young Dreamers 152 11-03-2005 08:12 AM
Bill Gross calls CPI fraudulent haha FIRE and Money 1 10-13-2004 01:12 PM
Home Price Appreciation Forecasts Hyperborea FIRE and Money 0 09-05-2004 10:19 AM

 

 
All times are GMT -6. The time now is 03:26 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.