Making it in Massachusetts?

The cost of Massachusetts housing is.....was?.....such that it was damn near impossible to live on one income anywhere near Boston, unless you were a corporate lawyer, doctor, or finance professional.

What's brutal for my family (of 4) is daycare. We're in a bit of trap. We can't live on one income, so we both work. This would normally give us plenty of extra dough, but daycare at between $2-3,000 a month is leaving us with bupkis. I can't complain though. In a couple of years we're out of it with #1 and we don't have to eat the government cheese anymore. ;-)

And as a RE lawyer friend once said during the recent troubles in Zimbabwe, "I spent the morning on the phone with someone screaming at me. People are losing their minds over this meltdown. On the other hand, no is chasing me with a machete. My troubles aren't that bad."

That calculator is a joke! My husband and I make an income 5 times more than what is considered "self sufficient" according to the calculator, and we barely get by. I cannot imagine how a family with 2 children lives on 60K. It's so unfortunate. At least they have a savings of 150K. But given the cost of living today, size of their family and just the one income that could go rather quickly.

They should just put it under the mattress for now...I guess..

I'm the person who submitted the original e-mail to Rona. It's not an outrageous burden to live on $60K. We get by --my wife is home so we don't have to pay for child care though we do have preschool (for $350/month.) And we rent 1/2 of a fine multi-family w/3 bedrooms for $1700/month. We just keep driving the same 7-year-old car and I bike/T to work and generally try to live fairly frugally. It's good for the spirit! And we haven't touched our savings at all in 3 years.
However, I do seriously wonder what the increase in heating oil is going to do to us this winter. Hopefully it won't push us over the edge.

My father was making $50k/yr in 1985 when he was working for Digital and he bought a home in Northboro for $135,000. My Mother stayed home with me and my sisters... One income 23 years ago... $50k and a $135,000 house was 2.7 times salary. He did it right unfortunately for me and my generation we are making $60k a year and that same house is $350k so you need your spouse to make another $60k to give you $120k/yr... Things will come back down especially when first time homebuyers find that they need 20% to buy a home while they still pay down there $30k in Student Loans. I think the houses that were selling for $350k will be selling for $270k in a year.

I am not judging anyone but it doesn't sound like they are too bad off if they can afford preschool. Some times things are so obvious where to cut back. There are so many library programs/ playgroups/ moms clubs in every town that make preschool seem a bit obsolete.

Don't get me wrong my children attended preschool, but it isn't like preschool is a must if you are complaining about finances and worried about heat..

Well, my husband and i live off of one income (his ~ 45,000 a year), at least right now. I'm a full time college student (although i do get my GI bill benefits so that's another 1200 a month added onto the mix but that goes to school expenses). I think there must be some weird disparity of mindsets in Massachusetts. We don't find it a struggle at all but we moved here from Honolulu so we have always lived in expensive towns. We don't spend our money very often except on things we really want to do or see. Most of our money is spent on good fresh food and fun local (often free) events and such. I don't do a lot of shopping and most of that is done at farmers markets, goodwill, and online. I realize that we don't have kids and that makes a huge difference and unfortunately, we cant quite make it work with out some student loans but even with our one income, we are managing to pay almost everything off on those loans each year. And we could still afford a trip two week trip to Germany this last summer.

First, congrats on your down payment savings and discipline not to over lever yourself.

Second, I am going to stick my nose where it doesn't really belong - except you invited it by letting Rona post your email and responding . . .

$1700 / mo in rent is a $280,000 mortgage. 280,000 mortgage + 150,000 down payment is a 430,000 house. According to redfin, there are tons of houses in the metrowest & in your price range if you can swing $1700 rent with no problems. (Including one in Newton that now I know about and will look at this weekend thanks to you. Thank you.)

Whether it is a good time to buy or not depends on what type of buyer you are and what your personal circumstances are. I see a home as 80% investment and 20% home - I could live anywhere - as long as my commute is 45 min door to door and, if at all possible, I don't have to drive. My friend is the opposite: 10% investment and 90% home. She has little concept of a home as an asset and will not think twice of losing money on a property on a fully inclusive basis. Economist call this concept utility. Normal people call it "to each his own".

Houses are not investments, they are liabilities. An investment has realized gaines. Seeing a house as an investment is what got this country into this mess. It does not have a promise of return and if that is where you store your money you are in bug trouble.

just me,

If you follow your argument to the logical end, then no one should ever own a home. I tend to favor your argument that houses are a lousy store of value, but you can invest in housing if you are prudent and disciplined.

I sold a house in 2006 and rent while owning income generating properties. I will get back in the market when the cost of renting equalizes with home ownership costs. Arguments how far prices fall are 2.7 - 3.5 median income ratios, some say affordability ratios among others. I think they say essentially the same thing and they will converge especially with the coming changes in the Boston financial services markets.

no, an investment has gains and losses. People didn't see their houses as investments, they saw them as lottery tickets. There's a huge difference.

The line that people shouldn't see their houses as investments drives me nuts. It effectively says that the cure for stupidity, is even more stupidity.

People should see their houses as investments, the biggest they will ever make. And they should spend some time actually understanding that investment.

The reason why many people feel like they can never get ahead is because of that dirty little secret that government's love: inflation. See, inflation gives the illusion of economic growth because it causes asset prices to rise. But that rise in asset prices comes at the expense of diminished purchasing power of the currency. So, we have to pay more for everything we buy while incomes lag. It wasn't too long a ago that a family of four could live comfortably on a single income. My parent's did it. Sure we were not rich, but we still lived a good life and we didn't have to struggle to make ends meet.

But, an explosion in the money supply (inflation) over the last 30 some years, which started when Nixon took us off the gold standard, has manifested itself in higher prices for homes, health care, food, energy, tuition etc., over the last 10 to 15 years. Meanwhile incomes can't keep pace with the rising prices and the only way for people to get ahead is to take on massive amounts of debt. And so here we are, with the credit markets in shambles because we have borrowed and consumed our way into oblivion.

Years ago I would have been thrilled to be making the $65K I now make. However, as a woman alone, divorced, no kids, I can't survive on this in the Boston marketplace. When I first got divorced and had to make things work, I lived off credit. Now, I have so much debt from the past, I still can't break even. Rent takes a huge chunk - and I don't live in a swanky neighborhood or have a big place. Recently I gave up my car as I found I can get by without it. With the recent financial woes in the market, I just don't see a way out of this ever. Except perhaps moving to the midwest.

It astounds me how much chatter there has been in the past few years about how "unaffordable" Massachusetts is to live in. True, the run up in real estate over the past decade made it a challenge for young families. But, give me a break. I am a livelong Boston resident. If I had a penny for ever person I meet who moved here from upstate New York, Indiana, Southern California, Chicago...I'd be loaded!
The fact is...Massachusetts must have something special because people just keep moving here, gentrifying traditional neighborhoods and then complaining how Boston isn't like ________. If you can't afford it, move to Detroit, where housing is down 50%.

Houses are investments, whether you choose to think of them that way or not. Imagine someone who buys a home and lives happily there until they die. The home is usually sold, and someone walks away with the appreciation. And this is an exception: most people count home value as a big part of their retirement. The fact is for most of us there are few other investments out there where we can leverage an enormous amount of someone else's money. What people forgot is that it should be a long-term investment, and it's fundamentally different from, say, stock in that you require it to cover your backside from the elements.

I agree with some of the more optimistic posts here...your savings of $150K are not returning anything by sitting in the bank. My home is my greatest (and only) investment. As a single-income family living in Back Bay, my mortgage is close to what yours would be on a $400K house and I am getting by on a lot less. There couldn't be a better time to "buy low" so to speak...just research your desirable neighborhoods and stay on top of inventory. There are plenty of great deals to be had if you do your homework. There are also ways to save money in the buying process including some agents that are offering rebates to home buyers in addition to helping negotiate a low price. Territoryre.com has a great search feature that shows every MLS listing and refunds their commissions back to the buyer at closing.

Since we've been paying upwards of $1000 mth in rent since 1999 while earning salaries for "creative" jobs, my husband and I have not been able to save for a downpayment. That's our reality--never lived at home with parents and were underpaid for years. I guess we only have ourselves to blame.

"I think there must be some weird disparity of mindsets in Massachusetts. We don't find it a struggle at all but we moved here from Honolulu."

Ah yes, it is weird here in MA, where everyone tries to keep up with the Joneses and live well beyond their means. Look in the driveway: two SUVs. Look in the backyard: gotta have a pool. Look in the closet: Coach and Louis handbags. Look in the living room: 50" flat screen with premium cable. Look in the kitchen: stainless appliances and not a crumb in the cupboards because they eat take out every night.

The problem with MA is the enitlement culture reaigns supreme here. Everyone feels they are owed something and that working hard, scrimping and saving, and earning your keep are things of the past. Parents made sacrifices to give you what you had as a kid, it's time y'all realized that and cut a few expenses.

To the original emailer: there's limited inventory given the downturn, but you can definitely find something. As long as you don't want two acres, a five-minute commute, a three-car garage... You get the point.

Wow, Andrew, that's a very broad brush you're painting with. Most people do work very hard, scrimp and save, and earn their keep. And if you think the "entitlement culture" is a phenomenon in MA and not anywhere else it's time to step away from the Kool Aid.

I have a pool. Came with the house. When it falls down we'll get rid of it. For now the kids enjoy it during the two weeks a year it's warm enough to actually go into it. My Coach purse is real, but my high school senior's isn't...and she bought it at a flea market with her own money. Yes, even teenagers can work hard and save for what they want. Put your brush away. You don't know enough to be painting with it.

Funny thing is, I'm the only person with kids at my work who is in a dual-income family. Everyone else has a stay at home husband or wife. I think it's very realistic to have a single-income family just as long as one of the parents has a non-liberal arts college degree. Any type of business, engineering, or science degree should land you a job that pays enough to support a family by the time you're in your mid-30's.

I agree with some of the more optimistic posts here...your savings of $150K are not returning anything by sitting in the bank.

Low returns are better than negative returns, which is what houses now offer.

There couldn't be a better time to "buy low" so to speak

I find this fascinating, in sort of a Mutual of Omaha Wild Kingdom, nature-show kind of way. Still, at this late date, on the verge of global economic collapse, we can find people parroting NAR press releases who have not learned how to look up a whit of data for themselves. Amazing. Uh oh, here comes a hungry bear stalking the lost young pup.

Andrew-
Sounds to me like you're coveting thy neighbor's goods, and you're trying to keep up with the Jones' and failing. We're a ~30y/o couple who are living within our means- yes we have an SUV, but we also have a sedan, we have a SIXTY inch plasma and "pay" channels! I have Louis bag(s) (sorry, don't like Coach) nice furniture, new SS appliances, and a beautiful home that we can afford in a nice town with nice neighbors...know how we did it?? We saved our money renting so we could pay cash for everything we bought and we got a conventional mortgage.
But we only eat out on the weekends, so I do have food in the cabinets :-)
It's a blanket statement that you've made, and I have to say, it's wrong. Sounds to me, like you feel 'shorted' since you can't keep up with everyone else. I hope I'm wrong and you're not really that bitter. If so, maybe move to the south?

ha ha, HA HA, HAHA HA HA HA HA HA.

Please, oh please, show me the houses in Westwood, Wellesley, or Dover that you can truly own for $1406 a month. Perhaps the quonset huts along the Charles River?

I'm with Marcus. Why is buying halfway through a market crash such a good deal?

Is there some source of free crack in Mass, and I got left off the distribution list?

Sure, buy now and lose 10% on your house, and experience the magic of leverage in reverse. You too can understand intimately what took out AIG, Lehman, Merill, WaMu, Wachovia, Bear Sterns and whoever is next..

After all, when you put 150k down on a 400k house, and lose 10%, you are losing over 25% of your downpayment... There are a number of homeowners in massachusetss who are experiencing the wonders of negative equity. Aren't they lucky!

What are you people smoking?

This is supposed to be a market in capitulation????

Andrew - You think MA has a keeping up with the Jones' issue, try atlanta! I moved down from MA but got the same priced house I had up there, so it may be that I moved to better off hood, but the people here are way too into things. This is coming from someone that was always accused of having a keeping up with the Jones' issue myself in MA. I don't recall ever seeing a Hummer in MA except if it was driven by a Patriot, they are all over here (well they were until a year ago, now hybrid Tahoes or whatever are every where). It may be just because the housing is cheaper and the work seems to pay the same for educated people, so they have more to burn. But, there are like NO dual income families, the wives are all tan, decked out, and either really fit from affording personal trainers or really fat from gluttony (spelling?). I love it here, and it's much more affordable, but the consumerism is crazy. Even going to the dentist feels like I'm going to a 4 star spa.

To the writer of the email - wow - $1700 rent? You are paying THEIR mortgage, taxes and giving them rental income. It is a buyers market right now and I'm sure, rather than tossing your money away w/o any equity in return you could find your own home. I would not never put my entire savings for the downpayment though, yikes, $150k is a good nest egg to be sure, do the downpayment for the nest with some of it, keeping a good 6 mos or so of 'what if I lose my job' money in the savings. You'd have to play around with the math, consider town taxes, water rates and all else. Where we live, the schools are falling down/temp accredidation/dangerous so we have to pay for private, taxes and water/sewer rates are beyond ludicrous and trash is $3 a bag to dispose of - so take a good look and factor everything in.

Winter will be scary, we're already stretching meals and skipping movies and eating out, buying only necessities and stocking up on sales. The supermarket is scarier than fuel oil right now, everything has doubled or tripled as the packages shrink. You've been very smart savers, now you just have to be smart spenders. I confess I'd be reevaluating that $350/mos for pre-school, everyone seems under pressure to get their kids started in school sooner and sooner. Pre-school is just socialization and there are heaps and heaps of free programs to satisfy those needs from local libraries to playgroups at churches along with plenty of places to explore for free etc. Even if your wife paid for some activities, such as a day at the zoo or a local museum, you'd still save a bundle there and probably have a happier kid! We wish you well, like I'd said, you've been smart savers, now be smart spenders - so far as owning a home in terms of investment if you wish to look at it that way, return is typically 10% though it may take the market 10 years to bounce back, it still beats the interest having it sit in the bank. Better that retur be yours than your landlords! Good luck!

"oh please, show me the houses in Westwood, Wellesley, or Dover . . . "
I said Metrowest. The Globe real estate section has a passable definition of Metrowest.

Below, I limited the search to "near" metrowest, all 3 BR, all greater 1000 sq ft, all less than 425M.
Westwood: 395 Washington, 131 High Rock, 169 Providence
Wellesley: 218 Cedar Street
Newton: 8, 6 under 400
Natick: 34, 31 under 400
Needham: 32 Mellen St, 29 Davenport
Hopkinton: 19 under 400m
Weston: 0
Dover: 0
Wayland: 8 , 6 under 400
Waltham; 36, 31 under 400

Taking my back of the envelope estimate from my original post, it is best to shoot for a 400m sale to approach an equivalent $1700 rent payment on a tax effected basis (53m AGI, 20% marginal tax rate). However, I do not know the op personal circumstances which is the only way a real analysis can occur.

So, ummm, yeah Joe., it seems like there are more than 110 homes from which to choose in 'near' metrowest.

Observer,
"You are paying THEIR mortgage, taxes and giving them rental income." has been debunked with fact time and again. Put "Rich Dad, Poor Dad" down and look at the numbers.

WS Jevons, I admire your attempts to inject facts into this - and utility curves even! - but I think you are channelling Sisyphus.

Noble effort though.

Observer, to say Renting is always worse than Owning is just not very reflective of reality, like just about any other black and white statements. I've been a tenant (like now) and I've been a landlord. Which is better depends on the math at any given time.

Doing the math tends to be much more accurate than spouting platitudes.

To those who posted thinking I can't keep up, I don't covet any of those things. This is me:

1. I own a condo in Cambridge - 30 year loan, full down payment.
2. I own a car - fully paid up. Not an SUV - a CAR. But I don't drive to work; my company has an MBTA reimbursement.
3. I go to grad school, and pay for a lot of classes up front, while working full time.
4. I own the same TV I bought five years ago, because it still works so why trade it in? No cable, because who needs it with Netflix and the internet?

The broad brush I paint with comes from talking to countless twenty- and thirty-somethings who complain about living paycheck to paycheck while sipping their third Starbucks of the day. From talking to friends who put zero down on their homes and are now upside down on a five year ARM. From walking through the BU campus and seeing kids growing accustomed to amenities and a lifestyle that their meager graduating incomes won't afford them (have you seen the gym? a juice bar??).

So to the person bragging about the fake Louis their kid has, your kid scrimps and saves for a status symbol, and a counterfeit one at that. Glad to see that teenagers care about things that really matter. Will your kid even be able to afford that on their own when they get out of school?

WS Jevons- Some assistance with the math on a $430,000 house:

A mortgage payment in most cases includes property taxes and homeowner's insurance (and they are factored into a buyer's ability to qualify for a loan even if paid separately). If taxes and insurance run $400-500, then the mortgage amount is not $280,000, but closer to $200,000 and the sales price is closer to $350,000.

Most of the houses under 425K are going to need work, which a single income family at the above level will find difficult to afford.

ElJay,

Please note I said tax effected basis with a tax rate of 20% on $60,000 and that my calculations were back of the envelope.

Lets break that down:
+60,000 Income
-16,500 Y1 Interest @6.1%
- 4,250 Property Tax
- 800 Insurance
= 38,450 taxable income

= 5,700 taxes for the new home owner (the tax rate is 15%, I quoted the the single person effective tax rate before)

versus ~ 7,500 taxes to continue renting.

So the net effect after the tax break is about $260 per month. So, 1700 - 260 = $1440 mortgage payment. Which is a $390,000 house. Which is pretty darn close to my recommendation to shoot for a $400,000 house. This means that there are 93 homes in the closest metro west communities from which the gentleman can choose.

Whether or not the homes need renovation is completely subjective unless they are uninhabitable. For example, I am certain that Herb Chambers would completely renovate my newly built space if he were interested in downsizing.

ElJay is proof positive that people need to take a holistic approach to the purchase of a home and that additional financial education is needed in this country.