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The Illusion of Affordability

Posted by Scott Van Voorhis May 27, 2014 06:52 AM

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What's truly affordable these days? And can a middle class family pulling down a median income in Boston - $67,540 - really swing a $332,000 home?

According to Trulia, that's the upper limit of what a family making the median can afford to buy - about five times their annual income. I included it in my post Friday on what's available in Greater Boston for $600,000.

But that number has sparked incredulity on the comment boards from local homeowners who say it bears no relationship to their actual experience.

In fact, to really be able to afford a $332,000 house, a family needs to be pulling down $100,000 to $120,000 a year, contends nolongerthirty, who bought a $300,000 house while making just over six figures.

Those Trulia figures are nuts. You CANNOT reasonably afford to buy a house which is 5x your annual income. You might be able to swing the deal, and might be able to make those payments, but it is very unlikely that you will be able to do so AND save for your kids' college AND save for retirement. Dumping your entire cash flow into a house is a poor excuse for an investment plan.


Nor was he the only one to have this reaction.

Here's mfunk:

I don't understand why everyone spouts off numbers like in this article about the price a family can afford on a house based on some income. I just bought a house for high $300k's on my family's $150k income and that's basically the upper end of what we can comfortably afford. We pay our mortgage, all other bills, and still manage to save some money every month so maybe that is the discrepancy. But no way in h e l l is a family with an income of $68k affording the mortgage on a $300k house in anything remotely resembling a comfortable way.

These are important questions - will be following up today with Trulia's chief economist, Jed Kolko, to get some answers.

Here's more from nolongerthirty:

Somebody making $100k-$120k can reasonably afford a house in the low $300s. They generally have absolutely no business buying a $600k property. Go ahead and do it if you disagree with me, or if you believe your circumstances are exceptional, but it is typically a stupid choice that will leave you impoverished unless your income continues to expand.

I suspect there are many more $600k houses here than there are people who can afford them. People should STOP DECIDING TO BE POOR and refuse to pay these prices. Maybe then housing costs will come down to more rational levels?

This blog is not written or edited by Boston.com or the Boston Globe.
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About boston real estate now
Scott Van Voorhis is a freelance writer who specializes in real estate and business issues.

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