Who can afford to own a house?

I’ve committed to remaining in our $2500/month one bedroom apartment for as long as we can stand it with our soon-to-be child. I’ve even gotten to appreciate the forced closeness we’ll have living in a small space with kiddo, especially in the first year when it’s recommended baby sleeps in the same room with parents…

However, I’m very concerned about what happens “next.” Yes, we can leave this overpriced corner of the country and live somewhere that a much lower salary would enable home ownership. I don’t even care about “owning” so much as I care about being able to afford some sort of residence that feels less like an apartment and more like a home. A townhouse would be perfectly fine, especially if it has a little grassy area in the back, and a community park nearby…

But renting a townhouse — say a 2 bedroom, 2 bath — would still be $4000 a month, a $1500/month increase from our current rent. Mentally, I feel like once we’re paying $4000 a month in rent, we should be considering owning (even though owning said townhouse would be more like $6000+ per month, I think.) And ownership has lots of issues that go with it that I’m unsure I want, especially while figuring out how to be a parent. A condo/townhouse makes a lot of those issues easier (not much property to deal with) but you still have to fix things when they break and such, and those costs add up too.

I’m sad about not having a home to invite people over to… even though we don’t know that many people. Well, our one bedroom apartment still looks like “just-graduated-from-college” people live here, so we have to fix that. But even when we get a new couch and upgrade the rest of the furniture a bit, it’s still a one bedroom apartment. There just isn’t a lot of space. There’s a balcony we don’t use but it doesn’t have privacy–it could be decorated nicer for sure (you know, my dead plants don’t really do it justice) but this place just doesn’t have all that much potential for a long-term abode.

What’s most upsetting, in true first-world problem style, is that I have this job that pays pretty good money (even my base is over $150k and with bonus and stock it could end up being closer to $250k this year) I can’t afford a house. I can’t afford a house because my base on its own is not enough to afford a house and I can’t afford a house even more so because I’ll never feel stable in a job and it’s impossible for me to commit to earning $150k+ for the next 30 years of my life with no break…

Even with that salary, that’s about $7000 a month take home after tax… well, houses around here, the basic ones, cost that much a month in mortgage plus basic repairs (and HOA if buying a townhouse or condo.) My husband does make money too — but he makes about $4000 a month after tax and if he switches careers like he plans, that will be more like $2500 a month after tax. So, let’s say even if we do both continue working and making what we expect to make for the next 30 years, we’ll be at about $9000-$10k a month after tax. That’s not bad at all… but you can’t have a $7,000 month mortgage on $9000 after-tax pay per month. I mean, you can but you’re screwed if either of you loses a job (or decides to take time off) and you’re certainly living quite frugally to afford just owning a home.

What I’d hope — in going into buying a home — or even looking at living in a more expensive rental unit for longer term — is that my husband or my salary alone would reasonably cover the cost of the rent/mortgage. So, my salary would be ok if we were to have a rental that costs $4000 a month. We’d have to cut back a lot, were my husband not to work, but it would be doable. My husband’s salary, assuming he’ll be taking home $2500-$3000 a month after tax, will not cover a $4000 a month apartment–it would barely cover our current $2500 a month one bedroom (assuming we supplement our costs for a while with savings to eat and such.) Given my husband’s career plans, I do not feel comfortable moving into a place that costs more than $2500 per month. My job will never be stable enough to support that decision.

And, this is why I’m feeling sad. I’m feeling sad because I look around at my one bedroom apartment, and in a spoiled sort of way, I wish I was able to have more space–especially a little backyard with privacy where I can sit outside and read and feel the rays of the sun on my back and not be bothered by other people nearby. A place for my kid to run around a bit outside without having to “walk to the park” to have this freedom.

Maybe when I hit $1,000,000 in savings/stocks, I’ll start considering buying a house or spending more on rent. The problem is that the costs are going up so fast around here… a house that costs $1.3M now will probably cost $1.8M then (in 4-5 years, when I plan on having $1M if all goes well.) So, then we basically have to make the call to move somewhere that we can afford a house. I don’t want to leave this area, but it’s just impossible unless I can commit to earning $250,000 a year for the rest of my working life. With base salary around $150k, it’s just not possible to commit to that, even now, even if I may actually end up taking home much more if I can maintain my job and my employer likes me and opts to give me lose to my full bonus and I am able to vest my stock grant fully.

Theoretically I could get really good at my job and get promoted and make more money and eventually, in the next five years, move into a vice president role, either at my company or another. That could come with a base salary of $200k-$250k (I’m not really sure) but I know myself and I’m not vice president material. I’m not good at managing or delegating and my true value is in doing the work. People who do the work don’t get paid $200k-$250k (unless you’re an engineer. I’m not an engineer.) Those who make more money have huge responsibilities and are consistent in ensuring their team hits deliverables and achieves results. I just don’t see how my role ever is worth that much. I still think I’m overpaid, but then for this area and for a company doing well, I think my base is pretty reasonable. I trust my boss gave me a good offer and opted to not negotiate at all, which was the right decision. Even an extra $10k a year would not suddenly make it possible for me to afford a nicer place to live in the long term, so it’s just not worth it. The only way I’m going to afford a nicer place to live is figuring out how to keep my job for a long time.

But I do think a lot about–how could I earn $250k base a year–which is what I really need to afford staying here. I still wouldn’t feel comfortable buying a house on that– but with $14k or so in take-home after tax, I could spend $4k in month on rent, put a lot into savings to make up for any time that I was out of work and my husband’s salary could not afford the rent. I think I’d really need that $250k base to ever feel comfortable leaving this one bedroom apartment. Maybe $220k or something, but it has to be in that ballpark. I just can’t count my bonus or stock into my income, because I know very well I could be fired or laid off a week before I’ll be paid for all that, and then it’s gone.

In my career, though, I do think the only way to earn that kind of money is to be a vp, which, again, is not something I’m capable of (and, quite frankly, probably not something I want when I have kids.) So, I just don’t understand how my salary increases work from here-on-out, other than “cost of living” increases if I’m so lucky. I can definitely see being bumped up maybe to $170k, then $180k, then $190k… but there’s no reason for someone in my role, for what I contribute, to make more than $200k. If anything, I’ll be let go, and go to another org where my skills will be considerably worth less to start.

Again, it’s not that I make a bad salary — for perspective, if my husband goes back to become a teacher he’ll be making $50,000 a year to start and after many years of teaching, he’ll maybe get to $120,000. I make good money. I’m not complaining about my income at all. I just don’t know how to make the life I want work here on this. If we’re taking home $10k a month after tax–what should our lifestyle be? Am I being ridiculous in not moving to a 2 bedroom apartment now since that would cost $1k more a month and we can afford that? Or, am I right to stay in this one bedroom apartment because if I lost my job, living on my husband’s salary and paying $3500-$4000 a month would just be unreasonable–requiring dipping too deep into my savings and getting in the way of all these seemingly more important longer term goals.

I’m sure I’m not the only one here wondering about all of this. I assume most people who have two parents each earning $150k, with a take-home of $14k a month joint, are able to afford a $4k-$5k a month rental or $6k mortgage without it feeling quite so scary. It’s still ridiculously expensive, but that seems more doable. Although it would be nice if my husband were to make more money, I know his heart is in teaching, and the world needs more passionate teachers like him. I’d rather him be happy then I force him into a career he hates just so he makes $150k a year.

But the pressure I have to figure this out… to try to somehow find a path to a $250k-a-year role in the next five years or so, well, I lose a lot of sleep over it, because it feels and might actually be impossible. I can’t really talk to my husband about it… he’d like to live in a nicer place, but I know he also feels like it’s just impossible so it’s not worth discussing or we’ll figure it out when we get there. I wish I could talk to him more about all this, but I understand it’s just not worth talking about when it is what it is– he knows my job stability is non-existent (the man has seen me get fired from 7 jobs over our relationship) and he has no interest in pursuing a career that earns a substantial salary. So what is there to talk about? If I can’t hold a job, I certainly must value that he’s maintained his $80k-a-year contract role for pretty much the entire time I’ve known him. How can I judge or ask any more of him? I can’t. I have to figure this out on my own.

 

 

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8 comments

  1. Thank you for sharing this. I’m living in a third world country and its pretty much the opposite but very similar with how things go in first world countries. The opposite; houses are cheaper. The similar; we still can’t afford to own a house because of low salaries. Never thought first world and third world countries would have the same issues. It seems to me now that owning a house is more of a privilege than a need.

  2. oh the housing dillemma… and in california too! good luck to you. was paying 2155 for 2 bedrooms in hollywood and i thought that was bad. now paying $1k for 1 bedroom in NC… still looking for cheaper…

    hi, there! saw you on rockstar blogroll… i have to say i am going to steal your idea of having your net worth and future goals w/age on your left side bar! genius! I’ve been looking for a way to make that easily accessible not just to me but readers… i was looking at a plug in for a countdown…but this seems much easier… oooh i might even add some links! thanks for sharing your story and dilemma….10 years! wow!

  3. Norm says:

    I don’t think it’s worth saving up to buy. I feel like the bottom has to fall out at some point. I just don’t understand how prices can be that high. It just seems artificially high, and investing in an artificially high asset is no good. I suppose prices could keep going up, but the math on that just does not make sense to me. When you compare to the national salary/housing cost average, a dip seems more likely. Compared to where I live, the very average Albany NY, the median salary in the bay area is about 2x, but the median house is 5x.

    I sound like a broken record, but living in an affordable area is so much easier. We’re 36, and in our highest earning year made $140k. We own three properties and they each cost less than that one year’s salary.

  4. Steveark says:

    In areas like yours only the fairly rich or people willing to throw away hours of each day on a crazy long commute can afford it, which is sad. Here in rural flyover country the answer is just about everyone with reasonable job skills. Starter homes, two or three bedroom and two baths here, of say 1,800 sq ft, cost about two to two and a half years of entry level pay for professional workers not counting bonuses and stock gifts. Paying off a house here is pretty easy for hourly blue collar workers and even easier for professionals. I wonder if the soul crushing cost of living and housing in mega-metro areas is going to result in a reverse migration of young urban professionals and job providers to rural areas? What you are saying is true, and I do wonder why it is so popular when there are alternatives. I could have worked in Houston my whole career, the fourth largest city in the US, but my pay would have not been much, if any higher and I’d have had to live in, well, Houston.

  5. Joy ( User Karma: 0 ) says:

    I fully attest this is a “first world” issue and never once will I say that I’m not grateful for having it. That doesn’t make it any less of an issue that I need to figure out.

    To be clear, I don’t live in the city (never did.) I live south of the city in the suburbs where things aren’t much cheaper, about an hour south of the city. My job is also in this area, about 30 minutes from my apartment.

    Your friend who is making $300k and renting a room for $1k a month doesn’t need to be doing that. I don’t know exactly how the home-hiding process works, but I’d assume that he’d be able to outbid my husband and I (who make about $250k together!) I guess it depends what he has for a downpayment but if that’s his income and rental situation, I’d guess he has money saved up for a downpayment too.

    And, yes, we can look into buying a house or condo in the east bay. It’s not that much cheaper and the commute time would make me less likely to stay in my job – which I’d still need to do in order to afford the house. Yes, I could get a 2br townhouse in a not-so-great part of Hayward for $800k plus HOA. That’s still not cheap. Bridge tolls would add up (and will increase over the years.) The traffic is horrible. First world problems, again, but my question is more is it worth buying a $800k townhouse in the an up-and-coming” neighborhood in the east bay, or should we just never buy and rent a smaller place. People do survive with 3 people or even 4 people in a one bedroom apartment.

    If I worked in the city, living in the east bay – esp near BART – would not be so bad. But I don’t work in the city and I’d like to not have to deal with east bay traffic and bridge to get to work. My coworkers that live in the east bay say it takes them about 1.5 hrs to get to work. I did that getting into the city from where I live for two years–without having kids–and I couldn’t take it anymore.

    1. He got outbid too many times and gave up.

      Oh my goodness – my friend told me her sister in law gave birth prematurely and it costed her $700K WITH insurance. This is frightening. I went home right away and looked this up- http://www.dailymail.co.uk/health/article-4512740/Parents-200-000-hospital-bill-insurance-issue.html

      Is there anyway to prevent these things from happening? Even triple checking all lines of health coverage in case of pre mature birth?

      1. I’m not American, so hearing about these *surprise* hospital bills is really frightening.

        Regarding up and coming – you may find that your house may appreciate faster than your pay overtime esp with competing family priorities. You can come home every night to eat and sleep and find that the passive appreciation with your mortgage leverage will be more powerful than annual salary increases – the latter using no leverage but only your sheer brainpower. If monthly mortgage payments are manageable, it can give you flexibility to take a lower paying job along with spouse’s income contribution.

        Even when the market goes thru correction phases, it’s a lot less stressful than watching your portfolio tank because you still need a place to live. A house price dip is less disruptive to daily life than portfolio correction or dividend cuts.

        That $800K house also acts as a hedge against stock market volatility.

        These are my 2 cents if that’s alright. This is your page after all.

        What do your parents think?

  6. Wow. Talk about first world issues. This post totally makes making so much money not go very far at all! I recently saw a clip of an associate professor in the bay making around $100k and tell the audience it’s low income in the bay area and she is living in a 1 bedroom with family of 4 (2 kids).

    It boggles my mind sometimes. I have a friend in a niche field of software engineering making $300k and rents a room for $1k a month. He’s saving boatloads but admits it’s hard to start a family and impossible to bid for a house as a bachelor in silicon valley.

    But there are other stories of people buying a condo or house in east bay and they are better off than slumming it in the city’s rental market

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