I see a lot of expensive houses being built in my area. A LOT. And the weird thing is that they’re being bought pretty quickly. Are these people just making more money than me? If so, what are they doing for a living? Or are they just living house poor? How exactly are they affording these places?
Edit: For reference, my neighborhood is starting to become popular (because the other popular neighborhoods have priced most people out of affording places there). The normal price of newer homes here is $700k. My home, built in 1965, which is 2500sq ft on a quarter acre of land, is $500k.
This is funny, because I consider OP’s house to be obnoxiously expensive, let alone all the newer homes they mention.
There are MANY calculators out there as to how much house one can afford, and personally I think most of them over-estimate the amount. But based on very rough numbers, you could spend about 3x to 4x your yearly salary on a house. So to afford a $500k house, one “should” be in the $150k/year range. To afford a $700k house, one should be in the $200k/year salary range.
Personally I think both those numbers are bonkers and rather live well below my means than be house-poor.
The reason there are just so many expensive homes is that people are terrible at personal finances. They don’t mind being in debt and then there is the awful FOMO mentality that is helping drive home prices up for no good reason. Add in the fact that for years now new home construction has simply not kept up. There were homes being built, of course, but many of them were on the top end of the market because local town governments rather get the taxes for ten $10M homes, rather than force developers to build 50 $250k homes. So there is so much blame to pass around.
It’s not FOMO, it’s financial sanity. If I pay rent for another thirty years, I have nothing to show for it except a period of non-homelessness and years more of rent to come. If I pay a mortgage for the same amount for thirty years, I’m rewarded with a house for the rest of my life and no more mortgage - and I can resell the house when it no longer suits my needs, or give it to a younger family member
I think it’s awful that people are willing to be house poor in order to live in an expensive home, likely with no way to deal with it if something goes sideways.
FWIW, we bought the house when it was $330k with a sizeable down payment. We wanted to make sure that only one of us can pay for it, in case the other loses their job, or good forbid something worse happens.
You sound like me! Your situation and everything is similar. I also refuse to follow the herd when it comes to 30 year loans. No way, no how am I being enslaved by debt for that long.