Your quote sums it up nicely:

“The biggest spenders (in proportion to their incomes) will be the biggest losers.”

If you can comfortably afford your home, don’t sweat it.

It’s those who are stretching to make payments that need to worry now.

I’ve seen so many people settle for these POS pillboxes in city which were never meant to be more than worker housing (tricked out w/ granite, et al). Find a killer location and go from there. I know a guy who can build a great “Northwest Craftsman” for $300K ($100/SF). Basically, there is so much profit right now, the finished retail price to joe consumer is out of hand. But if you own a lot or can get something decent, you can create a brand new home suited to your needs. Some of the sacrifices people are making to call home are a joke. Mostly land value.

For example, I know a guy who just built a custom contemporary in NE Seattle (modest finish and small, only 2000 SF) for $275K. He bought the lot for $50K in 1999 so he’s sitting pretty – value around $600K. Just going to rent it out and sit tight.

Bottom line – do it yourself and act as gc you will learn a lot. Look for teardowns – they are out there w/ an occasional lot or two. For better locations you will be $400+ now, but that may change. I have been looking myself for a while – wish I would of pulled the trigger on a rare Washington Park lot @ $450K last year.

How was the market so far out of balance back in those days that a below median income allowed you to buy a house??? Sure I know people making below the median that have bought recently – but the caveat is they didn’t pay for the house using their income!

Here’s my quick calculation:

Required Income (Current):
$ 230000
Required Income (Future)
$ 415405.58
Years Until Retirement: 20
Years After Retiring: 30
Annual Inflation 3.0 %
Annual Yield on Balance 7.5 %

You need to accumulate $7172321.19 by the time you retire (assuming 55 years old — yeah it’s early) in order to replicate your $230K income that you enjoy today and live for another 30 years.

So, you indicate that you have a networth of $1M — which indicates that you are 1/7 of the way to what you may need to continue your lifestyle after you retire. Your actual question was how much house can you afford — but I think the question you really need to answer is where should you put your money to be sure that it grows to $7M in 20 years. If putting your money in your house will achieve that kind of return, then do it.

IOW, how much house you can afford should be based on more than just your abilty to make mortgage payments.

Now I have a question for the prognosticators among you. Regarding those of us under the median income, who bought a long term residence we could afford in an unfashionable neighborhood: what will the impact of a bust be like for us? We have a conservative fixed mortgage based on about 20% or our incomes and bought three years ago. But I guess I’m curious about the big picture. Won’t the biggest spenders be the biggest losers? Or is this just denial?

“Your data isn’t complete enough to speculate about your financial fortitude. How old are you, and what is your net worth?”

We are both in our mid thirties, with a toddler. Both have professional jobs. Myself a professional geek at MS, and my wife a senior level finance manager at a fairly large company.

We have been somewhat lucky in various investments and have about 400K cash saved up. This is excluding 401k, of which we have an additional 300K between the both of us. So including our house equity, our networth is around 1 million.

Your data isn’t complete enough to speculate about your financial fortitude. How old are you, and what is your net worth?

We have a 560k mortgage on a 900k house (well, zillow thinks 1.1, but I beg to differ).

We pay about 3800/month for PITI, which (after doing this for a year or so) feels relatively affordable.

1.) Sell your house, move into a rental in Black Diamond and wait for signals from above

or

2.) Buy in Ballard

as for a real answer, usually 2.5 to 3 times your income as a mortgage

I’d take that profit and rent for the next year, keeping a close eye on what’s happening in the market (ie. how fast and far it’s falling).

I would NOT buy a house based on the 2 incomes. We may be in for some very rocky times ahead.

Hmm…that’s not exactly a large income, and how much good will it do if prices keep going up?

um, if median income is around $50K, that means half of people are earning less, thus making 2X median is not alot of money ? Everyone can’t be above average :-)!

Hmm…that’s not exactly a large income, and how much good will it do if prices keep going up?

I believe this was the intent of the article. I’ve been scratching my head about this piece, but your comments have put the article in perspective.

When a childless (for now) couple with maybe twice the median household income and presumably cashing out some previous equity can’t afford anything closer than Lynnwood, it’s a sign of how unsustainably out of whack things are. With the recent price runups, who is going have the money to buy anything? Welcome to Seattle, where 3/4 of the population are above median.

Unfortunately an article like this won’t be seen as indicative of any kind problem. It’ll just encourage more people to leverage themselves to death in fear of being priced out.

Lynnwood is horrible…