How much a family of four needs in annual income to afford a single family home

[PandaBear]

Whatever you guys mention here, happens all over the world. It is mainly due to urbanization in the world and the job markets switched from farming to factories to now service based economy (i.e. supporting automation of manufacturing is also considered service economy).

So, we end up with urban people can't afford to live where they grew up at (because the urban density has increased and cost in the once suburb now urban location has gone up). I saw that all the time.

Home price always track income in the nearby area. There is no way around it.

 

[PandaBear]

I'll use my buddy as an example, nobody here knows him. 43 y.o., earns over $200k, never purchased a home for whatever reason (maybe because they had below market rent for 12 years--$1,200 for a 3 bed / 2 bath condo in a nice condo development). Approved for $600k mortgage based on income, has $0 he can contribute for downpay, just as he had $0 5 years ago. He says he's good with never owning a home, wife cries about it, 3 kids. He told me he hopes that none of his kids decide to go to college (when I told him another buddy said $48k after financial aid for a mediocre school). I get we could all say poor him, his income is better than some. But at the same time, he's a real person with a real family and cannot afford a home.

I do feel that if he is sure he's never going to own a home? Then move across the street and see if any of the new condos are for rent. If so my guess is $4000 mo--buy that comfort. Otherwise do the opposite and save for the downpay which has to be six figures I guess.

One of my theories is unfortunately lifestyle fits the gross, not net, income. You know it's bonus time when my buddy has a new car. He got one 2024 and 2025. it's easier said than done to say, save that bonus 100%, and do it 4 years in a row, and there's your downpay, literally.

We all make choices. Some people move ahead because they do more than the others, some people enjoy now and pay for it later, or his children pay for it.

200k income, 1200 rent, 3 kids, and he couldn't save enough for downpay (that means he didn't invest either if he doesn't want to buy a home). He also doens't want his kids to go to college?

I don't feel sorry for him. These are the kind of people that we cannot save with a 100% employment rate without causing hyper inflation. I hope his kids turn out ok.

 

[PandaBear]

Starter homes simply have not been made in a long time and the ones that are still around are 50+ years old and need an immense amount of work (that nobody has because full time work and kids) or simply not made because townhouse have been substituted for starter homes.

Then we get to the price of homes and loans where the lender wants you to make 3x your monthly salary of the house. For a basic 350k starter home here with no frills and thrills, that means a family needs to make at least $6k/month. Nearly impossible to ask for while paying for $2k rent on a 1-2 bdrm apartment, childcare, and associated bills.

They have been build for low income housing, but not a simple to build home in a big lot.

Most people today consider condo a start home, and when a home becomes under valued in a good neighborhood, investors will come in and buy it, remodel it, flip it, or tore down a small home to build a big one, or a handy person would buy it then self remodel while living inside.

Today's home cost is mostly land and location (commute distance, school district), not construction cost.

 

[Dave Hess]

The house next to my son’s home renting for $3800 per month.

I see people stopping by and reading the For Rent sign.

Renting a house can get expensive and people are still broke after paying for utilities, food, childcare, car expenses, heath insurance, etc…

 

[johnmyster]

I’m using this response as an example, you can reply if you want, or not. I’m not trying to poke at your reply, but it’s all about choices. You didn’t state how much you pay in taxes, property taxes, what you don’t do for your kids, what you don’t have. And just how far in the boonies you live. And, when you actually bought. Many places have doubled in value in the last five years or so. You refinanced in 2021, which means you bought before, things were different. Sure there were times with 15% mortgages. Heck, my parents drove cars with no air conditioning. It doesn’t mean that folks didn’t sacrifice. But the asset cost structure in many places has not kept pace with incomes; appreciation has outpaced incomes, particularly all-in with all sorts of insurance, repair costs, etc. etc. factored in.

I'm in Lynchburg VA, in the city limits. It's not a big city, but I can walk kids to the elementary school, bike to one of two groceries, etc. We're not in the boonies using an outhouse. It's a three college town.

But see, it took you three sentences to get there...the "but things are different now" statement excuse. (I heard Del McCoury's cover of Bob Dylan on the radio yesterday. Changes aren't new.) GenZ/Millennial disparaging is somehow entitled to say today is worse than things were ten or even five years ago. The "american dream" hasn't evaporated in that time. I see houses selling in the neighborhood. The price is higher, but I've spent those five/ten years saving. I could do it again. Perhaps my home value has doubled since purchase. My net worth has gone up >4x.

In many places, implies there is a choice. Choose a place with cost structure that you can afford. Want to live in a place where homes are expensive? Fine, what are you going to sacrifice in your budget?

Repair costs? I fix everything myself. I'm thankful for that skill. Typically those that moan and gripe can't handle how expensive it is to pay others to fix their house, build their house, fix their car, etc. Yeah, relying on others to hand everything to you is expensive.

I'm not going to pretend the world is perfect. The two generations before me did a particularly bad job of corporate culture, turning everything into a share price decision. Yet somehow I'm proving the article wrong.

 

[SC Maintenance]

Whatever you guys mention here, happens all over the world. It is mainly due to urbanization in the world and the job markets switched from farming to factories to now service based economy (i.e. supporting automation of manufacturing is also considered service economy).

I think we all know what urbanization is, and unless it only started in 2020 I don't think that is what were discussing.

So, we end up with urban people can't afford to live where they grew up at (because the urban density has increased and cost in the once suburb now urban location has gone up). I saw that all the time.

That is called gentrification, and its also different and been happening for a very long time. Its a very local phenomenon, vs the overall housing price rise.

Home price always track income in the nearby area. There is no way around it.

Not true currently and that is exactly what is being discussed. Notice the 40% housing price step from 2020 to 2022. I don't think incomes rose by 40% in those two years, mine did not, although I already own a home so in a way it did not affect me.

We could maybe absorb the 40% except interest rates are at a 20 year high also. So its a double whammy.

Home prices have been financialized by vast increase in base money and debt. When it raises the price of stocks everyone cheers. When it raises the price of homes, homeowners cheer and would be home owners do not. Most don't connect stock run up with housing run up, but they were caused by the exact same thing.

 

[John105]

The house next to my son’s home renting for $3800 per month.

I see people stopping by and reading the For Rent sign.

Renting a house can get expensive and people are still broke after paying for utilities, food, childcare, car expenses, heath insurance, etc…

I know someone who stopped by yesterday to say Happy Easter. Said their rent is going over $3,000 now as it went up. They already sold their home for a nice gain 5 years ago, and I think at the time it made sense to me, to get rid of the upkeep and lock in the gains. I'm thinking today, it's just like that successful business owner who closes the doors after 50 years, because the landlord keeps raising the rent. It becomes a bad, powerless scenario. Seems there's an inflection point where it would be better to pay the upkeep and taxes. What that point actually is, I'll never know.

Just as I've only purchased 4 cars in my lifetime over $2k, 3 new and 1 used, I've only purchased one home and likely that would be it as well. It's funny how I learned to try my best and move on when something might be unfair (I opened a credit card for $200. They never gave it to me, said nothing they can do. I let it go, which I never would have done 20 years ago, I'd do the BBB and FTC and Yelp and Google--no. Let it go. 2 mos later a manual $200 adjustment appeared, that's life).

The original question--I think the answer is, a lot. The number will vary by locale. But no question, for a median income'd person, it will take sacrifice. It has to, there is math behind it (median income v. median home price).

How much a family of four needs in annual income to afford a single family home​

 

[SC Maintenance]

I know someone who stopped by yesterday to say Happy Easter. Said their rent is going over $3,000 now as it went up. They already sold their home for a nice gain 5 years ago, and I think at the time it made sense to me, to get rid of the upkeep and lock in the gains. I'm thinking today, it's just like that successful business owner who closes the doors after 50 years, because the landlord keeps raising the rent. It becomes a bad, powerless scenario. Seems there's an inflection point where it would be better to pay the upkeep and taxes. What that point actually is, I'll never know.

Just as I've only purchased 4 cars in my lifetime over $2k, 3 new and 1 used, I've only purchased one home and likely that would be it as well. It's funny how I learned to try my best and move on when something might be unfair (I opened a credit card for $200. They never gave it to me, said nothing they can do. I let it go, which I never would have done 20 years ago, I'd do the BBB and FTC and Yelp and Google--no. Let it go. 2 mos later a manual $200 adjustment appeared, that's life).

The original question--I think the answer is, a lot. The number will vary by locale. But no question, for a median income'd person, it will take sacrifice. It has to, there is math behind it (median income v. median home price).

How much a family of four needs in annual income to afford a single family home​

I like owning my home as an inflation hedge, and being a renter sucks. Having said that the cost of upkeep has easily doubled. A roof, exterior paint, whatever, is also double. From a monthly expense standpoint $3K, or $36K per year, might not be any more than owning on a monthly basis.

A friend of mine owns rentals, and he is not getting rich on the rental income - although he does benefit from the appreciation.

 

[John105]

I like owning my home as an inflation hedge, and being a renter sucks. Having said that the cost of upkeep has easily doubled. A roof, exterior paint, whatever, is also double. From a monthly expense standpoint $3K, or $36K per year, might not be any more than owning on a monthly basis.

A friend of mine owns rentals, and he is not getting rich on the rental income - although he does benefit from the appreciation.

My buddy is a dream renter--he and wife treat properties as you and I would rental cars--like our own. Unfortunately, the response by the management co. is poor. Oil leaks, hvac failures, trees falling, they take days to a week to respond, which would make me angry if I paid rent. Sometimes he goes overboard and doesn't make sense, trimming hedges, making the lawn greener, etc. Well, at least he takes pride in the house he rents....

 

[SC Maintenance]

My buddy is a dream renter--he and wife treat properties as you and I would rental cars--like our own. Unfortunately, the response by the management co. is poor. Oil leaks, hvac failures, trees falling, they take days to a week to respond, which would make me angry if I paid rent. Sometimes he goes overboard and doesn't make sense, trimming hedges, making the lawn greener, etc. Well, at least he takes pride in the house he rents....

During the GFC I became a renter after owning as we had to move for employment, and a landlord at the same time - I rented out our former family home, because I did not want to part with it. I never want to rent again.

Their experience is the same as mine, and all my rentals were via professional property managers. The places while all nice at one point, in very nice neighborhoods, but were worn out, dirty, and lacking maintenance.

I rent an apartment for my daughter in the city, and its spotless actually. I guess large multi family places are just easier to maintain?

Airbnb for a week is as close as I want to get.

 

[Quattro Pete]

I would concur with the MACRO figures on the graphic.

Yeah, and hence not very useful. You need to look at micro level, depending on where specifically you want to live/buy. Around here, home prices are driven be ratings of school districts, as is probably the case in many places. Our housing money would go a lot further living just a few miles away if we didn't have to worry about where our kid goes to school.

 

[John105]

Yeah, and hence not very useful. You need to look at micro level, depending on where specifically you want to live/buy. Around here, home prices are driven be ratings of school districts, as is probably the case in many places. Our housing money would go a lot further living just a few miles away if we didn't have to worry about where our kid goes to school.

I was taught to “care” about the school district, as I am a product of a public school system that all these years later has done consistently well.

What I’ve noticed is often the barrier to entry of better school systems is the cost of the homes. Interestingly, taxes are often LOWER. Talk about winning for those who get the more expensive homes.

Here in PA it’s tricky. The mailing address does not indicate school district, the township does. I’m not sure if 3 is possible, but many zip codes are in two different school districts. Wayne, PA is one example.

 

[JHZR2]

I'm in Lynchburg VA, in the city limits. It's not a big city, but I can walk kids to the elementary school, bike to one of two groceries, etc. We're not in the boonies using an outhouse. It's a three college town.

But see, it took you three sentences to get there...the "but things are different now" statement excuse. (I heard Del McCoury's cover of Bob Dylan on the radio yesterday. Changes aren't new.) GenZ/Millennial disparaging is somehow entitled to say today is worse than things were ten or even five years ago. The "american dream" hasn't evaporated in that time. I see houses selling in the neighborhood. The price is higher, but I've spent those five/ten years saving. I could do it again. Perhaps my home value has doubled since purchase. My net worth has gone up >4x.

In many places, implies there is a choice. Choose a place with cost structure that you can afford. Want to live in a place where homes are expensive? Fine, what are you going to sacrifice in your budget?

Repair costs? I fix everything myself. I'm thankful for that skill. Typically those that moan and gripe can't handle how expensive it is to pay others to fix their house, build their house, fix their car, etc. Yeah, relying on others to hand everything to you is expensive.

I'm not going to pretend the world is perfect. The two generations before me did a particularly bad job of corporate culture, turning everything into a share price decision. Yet somehow I'm proving the article wrong.

So you live in a geographically distanced area from population centers, do most everything yourself, and bought at a different time period. Sure you’re proving the article wrong, and it’s great what you’re making happen. But not everyone has those capabilities, and probably not exclusively at their fault.

You’re 100% right that if folks want everything handed on a platter, it’s expensive. And as I’ve said time and time again, I can’t stand the “I deserve” culture.

But face it… if you were trying to live in the nice part of Richmond, or a safe area around dc, that had a reasonable commute, you wouldn’t be making it on your income the same way. Sure it’s a choice to want to be there vs anywhere else. And your choice for location may well be the best one. But folks have their reasons for what they do, and it’s not just because they’re all lazy and entitled.

You should be proud of your achievements. But not everyone falls in the same outcomes… and folks that are in high COL places do have a hard time. I commiserate with them. Homes in my town have doubled in a short time. Have any perspective young families had their incomes double in that time period? And no, it’s not just going out and hustling more.

It is indeed smart decisions. And setting proper expectations. But it’s easier some places than others.

 

[johnmyster]

But face it… if you were trying to live in the nice part of Richmond, or a safe area around dc, that had a reasonable commute, you wouldn’t be making it on your income the same way. Sure it’s a choice to want to be there vs anywhere else. And your choice for location may well be the best one. But folks have their reasons for what they do, and it’s not just because they’re all lazy and entitled.

"Nice part of Richmond" reeks of "I deserve to live in the nice neighborhood." I wouldn't live in Richmond or DC metro unless I had a salary that I could make work in those areas. I don't think anyone would offer me my salary at the Bethesda MD NRC office. So the choice to live there can't be looked at in isolation.

I used to commute pretty often to DC and Richmond (and NYC) for freelance gigs. It was a good place to go for work. I could see living in Richmond but my friends that worked in DC (usually for a season) made other decisions commiserate with that choice. They didn't live in 2700 sq houses.

Companies like mine exist in cities like this precisely because the standard of living they can offer outside of major metro areas...and this town isn't unique in that.

Again, the "it's so hard out there" baiting of these articles ignores that the spectrum exists. Newsflash, some combinations of life choices aren't possible. Duh.

 

[JHZR2]

"Nice part of Richmond" reeks of "I deserve to live in the nice neighborhood." I wouldn't live in Richmond or DC metro unless I had a salary that I could make work in those areas. I don't think anyone would offer me my salary at the Bethesda MD NRC office. So the choice to live there can't be looked at in isolation.

I used to commute pretty often to DC and Richmond (and NYC) for freelance gigs. It was a good place to go for work. I could see living in Richmond but my friends that worked in DC (usually for a season) made other decisions commiserate with that choice. They didn't live in 2700 sq houses.

Companies like mine exist in cities like this precisely because the standard of living they can offer outside of major metro areas...and this town isn't unique in that.

Again, the "it's so hard out there" baiting of these articles ignores that the spectrum exists. Newsflash, some combinations of life choices aren't possible. Duh.

I was recently there. It can mean many things. And since Richmond was once the murder Capitol of the USA, it doesn’t have to mean a lot besides someplace relatively safe.

But you made an important point. “I had a salary that I could make work”. Thing is, there are a lot of folks with a lot of lower paying jobs that need to exist in the population centers. That can’t exactly be avoided. And with the blight that exists in those not so expensive parts of the population centers, how is someone that wants to have a safe place to raise kids going to do it? Just escape and live and work elsewhere? Maybe. Have super long commutes and let their kids be latchkey?

Yes, sacrifice. And no, I’m not for putting high rise apartments in nice towns, destroying them. There absolutely is a basis of control and frugality that needs to be had. But to just say that folks should live somewhere else because it’s expensive is also short sighted. Thus why I’m against the “I deserve” culture (live within your means and make things happen by doing without some things that aren’t important), but I also have some empathy for the folks who do want to work and live relatively near the population centers and have a hard time doing so. I have no empathy for the folks who are wasting their money in the bars and restaurants and wasting money on frivolous things, while not making it… or on the government’s dole.

 

[johnmyster]

I was recently there. It can mean many things. And since Richmond was once the murder Capitol of the USA, it doesn’t have to mean a lot besides someplace relatively safe.

But you made an important point. “I had a salary that I could make work”. Thing is, there are a lot of folks with a lot of lower paying jobs that need to exist in the population centers. That can’t exactly be avoided. And with the blight that exists in those not so expensive parts of the population centers, how is someone that wants to have a safe place to raise kids going to do it? Just escape and live and work elsewhere? Maybe. Have super long commutes and let their kids be latchkey?

Yes, sacrifice. And no, I’m not for putting high rise apartments in nice towns, destroying them. There absolutely is a basis of control and frugality that needs to be had. But to just say that folks should live somewhere else because it’s expensive is also short sighted. Thus why I’m against the “I deserve” culture (live within your means and make things happen by doing without some things that aren’t important), but I also have some empathy for the folks who do want to work and live relatively near the population centers and have a hard time doing so. I have no empathy for the folks who are wasting their money in the bars and restaurants and wasting money on frivolous things, while not making it… or on the government’s dole.

It sounds like we agree more than we disagree. For me, I wouldn't move into a high COL pop center if I didn't have the business case to support it. At this point in life the salary would come first.

200 years ago people were relatively attached to the land that they farmed. The attachment to place is much looser now. I'm not ignorant, I used to freelance in big cities and wondered how bus drivers, grocery clerks, and hotel service workers could exist in Long Beach, NYC, Atlanta, Chicago, etc. Then again, I was there as a gig worker and all my fellow gig workers were making it work via hustle. In any case, that's a choice, and there's relative job security at the bottom end of the salary range. (Those basic service jobs always exist and are easy to train into.) But place is still a choice.

If people want to live in a place but can't afford, that's really both the person's decision and the local government's fault. It's a difficult and inconvenient decision to change, but it's still a decision.

To be completely fair, if I lived in an urban center there are things in my budget that wouldn't exist. It's not an even trade, but it's a trade. I'd pay more in housing and taxes but I'd expect more in convenience of locality, public transport, public services, bicycle use, etc. Fewer cars, etc.

 

[SC Maintenance]

I'm in Lynchburg VA, in the city limits. It's not a big city, but I can walk kids to the elementary school, bike to one of two groceries, etc. We're not in the boonies using an outhouse. It's a three college town.

But see, it took you three sentences to get there...the "but things are different now" statement excuse. (I heard Del McCoury's cover of Bob Dylan on the radio yesterday. Changes aren't new.) GenZ/Millennial disparaging is somehow entitled to say today is worse than things were ten or even five years ago. The "american dream" hasn't evaporated in that time. I see houses selling in the neighborhood. The price is higher, but I've spent those five/ten years saving. I could do it again. Perhaps my home value has doubled since purchase. My net worth has gone up >4x.

In many places, implies there is a choice. Choose a place with cost structure that you can afford. Want to live in a place where homes are expensive? Fine, what are you going to sacrifice in your budget?

Repair costs? I fix everything myself. I'm thankful for that skill. Typically those that moan and gripe can't handle how expensive it is to pay others to fix their house, build their house, fix their car, etc. Yeah, relying on others to hand everything to you is expensive.

I'm not going to pretend the world is perfect. The two generations before me did a particularly bad job of corporate culture, turning everything into a share price decision. Yet somehow I'm proving the article wrong.

I go to Lynchburg on occasion - I have customers there. Nice town, with a good industrial base. Liberty University is obviously the anchor tenant. Roanoke is similar, and also very nice. I can assure you this is the exception. Unfortunately this type of town is fading away. Look what is happening to your neighbors down the road in Danville. Goodyear plant is closing, so 850 jobs gone out of a reasonably small population. Danville will suffer immediately.

Luckily Liberty University is likely not going anywhere, but I can drive you all around the Southeast and show you town after town that used to be a nice place but a few employers left and now half the houses are abandoned. Most employers want to move to central locations.

I am not really sure why Lynchburg thrives while other towns do not? Why is the Median Income in Charleston SC $90K, while down the road in Florence SC its $40K, with a shrinking population?

The problem becomes if someone who is 50 in Danville now gets let go from Goodyear, not only are there no jobs there, there net worth is too low to move to Richmond and have anywhere near the same lifestyle. The people from up North are arbitraging this the other way - sell their overpriced stuff and move South. I doubt houses in Lynchburg are anywhere near as inexpensive as they used to be.

 

[johnmyster]

I go to Lynchburg on occasion - I have customers there. Nice town, with a good industrial base. Liberty University is obviously the anchor tenant. Roanoke is similar, and also very nice. I can assure you this is the exception. Unfortunately this type of town is fading away. Look what is happening to your neighbors down the road in Danville. Goodyear plant is closing, so 850 jobs gone out of a reasonably small population. Danville will suffer immediately.

Luckily Liberty University is likely not going anywhere, but I can drive you all around the Southeast and show you town after town that used to be a nice place but a few employers left and now half the houses are abandoned. Most employers want to move to central locations.

I am not really sure why Lynchburg thrives while other towns do not? Why is the Median Income in Charleston SC $90K, while down the road in Florence SC its $40K, with a shrinking population?

The problem becomes if someone who is 50 in Danville now gets let go from Goodyear, not only are there no jobs there, there net worth is too low to move to Richmond and have anywhere near the same lifestyle. The people from up North are arbitraging this the other way - sell their overpriced stuff and move South. I doubt houses in Lynchburg are anywhere near as inexpensive as they used to be.

I'd argue that BWXT, Framatome, and similar smaller industrial shops (belvac machinery, hanwah azdel) are the anchor tennants. Liberty has brought huge growth over 20 years. A campus on the road into town is visible, while tucked away industry is less so.

"Half the houses are abandoned." Because people leave to a place where life is sustainable. Employment and COL are the two sides of that coin.

Goodyear's Danville employees can find jobs in other industries. If they want to stay in rubber, plenty of South Carolina should be on their radar where they can work for a better company (in better towns) in factories with much lower fatality rates.

 

[Pew]

I found a new song that I like that has relatable lyrics....

Boy you gotta loooooooooose something
If you wanna live that way

 

[PandaBear]

I like owning my home as an inflation hedge, and being a renter sucks. Having said that the cost of upkeep has easily doubled. A roof, exterior paint, whatever, is also double. From a monthly expense standpoint $3K, or $36K per year, might not be any more than owning on a monthly basis.

A friend of mine owns rentals, and he is not getting rich on the rental income - although he does benefit from the appreciation.

Commercially build apartment complex has a very different cost structure and build cost than mom and pop landlord buying condos and single family home for landlording.

There is also a reason why apartment complexes are priced way lower per unit than condos and SFH in the appraisal.