I often wonder this myself. Around here, $450k gets you a small, older house in a fairly unfashionable suburb. Who the heck are all these people living in the nice areas? We are talking miles and miles of million dollar homes. How many 1%ers can a city possibly have?
My theory is a lot of people are inheriting houses and selling them, then using the proceeds as a downpayment on a more expensive house.
Remember that as you get wealthier, you can afford to spend a higher fraction of your income on a house, because the fixed expenses like food tend to become a smaller fraction. Someone making double the income might be able to spend 3x as much on a house. Not to mention the DINK effect.
Say a city has a million in it’s metro area. 1% is 10,000 people. Let’s say average family size is 4. That’s 2,500 1%er families.
No shit. Here that’d cost you $3 million.
Apparently quite a few!:eek:
*The Loudoun County, Virginia suburb of Washington, D.C. currently ranks as the highest-income county by median household income. The Washington suburb of Arlington County, Virginia ranks as the highest-income county by median family income.[1]
Many of the top counties in the following lists are found in the Northeast Megalopolis, particularly in the Washington metropolitan area and the New York metropolitan area.
I also live in the Midwest, although not in the Kansas City area. There are a lot of McMansions where I live too, usually on postage-stamp sized lots, and at least around here, it seems that they are mostly purchased by Indian physicians. Regardless of their ethnicity, they often furnish the living room and dining room, the master bedroom, and the kids’ bedrooms, and the rest of the house is vacant, and it’s not uncommon to drive through such a neighborhood and see beach towels or bedsheets on the windows.
The houses here almost always have swingsets and other play equipment in those tiny backyards, so they’re probably occupied by younger families.
p.s. Half a million dollars here would get you a 6BR 5BA house that might even have a guest house in the backyard, if not over the garage. Some may be occupied by relatives who look after the kids in exchange for living there, or they may rent them out.
In DC, you have to have more than $550,000 in household income to be part of DC’s top one percent.
Somewhere around one in six DC households have more than $200,000 in income. There’s more wealth here than you’re estimating.
To put this in another context, one of my Facebook friends recently shared a real estate listing he found in Palo Alto, CA for a 2BR 1BA house, built in a slab, in very bad shape. The price? $1,400,000. :eek: Depending on the neighborhood, a house like that would be 50K tops around here.
Which would be what- three upscale neighborhoods?
18% of homes sold in DC last year sold for over $1 million-- and there are quite a few suburbs that are just as expensive if not more. Who are all these people? There can’t possibly THAT many lobbyists!
So, if you make $200,000 or more, you can afford a $1m house. One in six DC households make more than that, one in six houses are sold for more than $1m. Makes sense.
For DC, a dual income professional family making $200k? Very doable. If you have two spouses who are GS-13s: bam, they are “rich.”
I can’t speak for your neighbourhood, but in my area most of a house’s price comes from the value of the land. If a hovel costs $600,000 and a modest older house costs $700,000 and a huge new house costs $800,000, then it’s tempting to pay an extra 15% and get a much nicer house. (Those numbers are probably low now.)
I guess I don’t consider $200,000 to be a particularly comfortable income to be paying for a million dollar house with, unless you have a sizable downpayment. And building up that sizable downpayment without outside help isn’t made any easier by the sky-high rents. How many GS-13s are sitting on $200k in cash?
That sounds about right. 16 years ago when we were looking, we were interested in $300K houses in Los Gatos. The agent, frustrated at our naivete, showed us the only one - a shack on a hill, not nearly as nice as places I stayed in the Boy Scouts and needing to be torn down.
Where I live, not nearly as ritzy as Shallow Alto, 2,000 sq ft homes go for over $1 million.
However many people have equity, so the down payment would be higher and mortgage payments lower for someone who sold a house which appreciated.
Well, two 27 year old GS-13s probably don’t have the savings for a down payment. But two 40 year olds? Sure, especially if they are selling their $600,000 home they bought for $400,000 some time ago.
The general rule is that a mortgage shouldn’t be more than 36% of your monthly gross. For $200k, that’s about $6,000 in mortgage, which is surely a $1 million house.
You can do a $500K-$700K house on $125-$150K household income if the rest of your expenses and debt are in order (and in higher cost of living areas that KS, no less). That total debt level is a huge part of it: there’s a huge difference between “newly married, have our bachelor’s, making $70K each, don’t have any student debt because of (in-state and worked / scholarship / parents / etc)” and “have our bachelor’s, making $70K each, and we have $200K of student loans between the two of us”. I have to imagine there are a ton of $60-$80K type jobs in and around KC with all of the big companies there, so it’s not out of reach for a two-income couple that has their finances otherwise in order.
(Then again, there’s a very comparable question in and around Boston wondering who is buying all of the $1.5M-$3M houses that seem equally out of reach…)
Gabrielle’s parents.
I just met them, and even though they (and Gabby) dress like hippies and care more about finding a great BBQ joint than gourmet cuisine, they live in a huge ($750k) house in… Overland Park, Kansas.
So I asked her parents what they did. They each started their own computer company.
People who know the difference between there, their, and they’re and your and you’re can afford them.
Yeah, here $700k would get you a new 2 bedroom, 1800 sq. ft. condo. 400k is something built in the 40s well away from public transportation.
I used to work with a woman who, along with her now ex-husband, bought a 5BR 4BA McMansion because they took the “mortgage that’s twice your income” thing a little too seriously, plus they must have had a very unethical Realtor, I guess. She’s a pharmacist and he was a high school teacher (probably still is) with a combined income of about 150K at the time, so of course they spent 300K on their first home together even though they didn’t have kids yet.
They later had two (I think she oopsed him on the second one - don’t get me started on that :dubious:) and when I saw their real estate listing before they moved away to her hometown, in a futile attempt to salvage their doomed marriage, I restrain myself from grabbing her and shaking her and saying, “WHY IN THE HELL DID YOU BUY A HOUSE THAT BIG IN THE FIRST PLACE?!?!?” They bought a similar-sized house at their destination, and while she was never the type to constantly whine about how broke she was, you can’t tell me that this wasn’t a factor in the breakup of their marriage.
(Before they moved away, she was telling everyone at work that she believed her husband was cheating on her with at least one of his students. :eek: If that was true, he belonged in jail, and if it wasn’t true, it’s an accusation that’s as vile as accusing him of messing with the kids when there’s no evidence that he is.)
My sister has lived in San Diego for many years. Her house could, in some circles, almost qualify as a Tiny House; it’s a 3-room cabin built ca. WW II as part of an artist’s colony, and is probably 300ft2 with a small yard that she shares with several other cabins. IDK what her rent is, and probably don’t want to. But she manages to get by.
When I went out to visit her in 2007, a house on the next street was listed for sale, and I took a flyer. A house of that style wouldn’t exist here in the Midwest, but one of that approximate size, with no yard at all, might list for, oh, 300K or so, and might even be considered a condo if it had another house attached to it. This house listed for over $1 million.