‘Is everyone buying a home now house poor at these interest rates?’: I make $270k a year and wonder if I should keep renting or buy a $1 million home. Who’s affording homes today?

Hi Money Minder,

My wife and I are living the good life in the PNW, pulling in around $270k a year. We’ve got a sweet $265k sitting in our brokerage account – $190k in cash earning 5% in SPAXX, and $75k in VTI. We’re renting a place and managing to save $5k a month, throwing $2k into VTI and leaving the rest as cash in the brokerage. The secret to our success? Working in healthcare, living frugally, sharing a paid-off car, taking public transit, biking to work, and keeping lifestyle inflation in check while still having fun with friends and travel.

The average million-dollar home in our neck of the woods would gobble up $200k of our savings and saddle us with a $6,000 mortgage. That’s more than our rent when you factor in all the costs. We could swing it, but it seems a bit crazy. Is everyone biting off more than they can chew in this market? Should we keep on renting, enjoy the interest on our cash, and let our investments grow? Or should we hop on the homeownership train like everyone else, seeing as things aren’t getting any cheaper?

Thanks for listening!

Edit: Thanks for giving us a reality check on where we stand in this city (middle class Seattle). It looks like we’re doing pretty well compared to most of the country, except around here. Didn’t mean to come off as a snob. Just sharing the facts. Maybe I should have posted in a different place. Got some good advice overall. Seems like the consensus is to suck it up, look at other areas with a lower cost of living, aim lower than $1 million, or just keep renting and see where the housing market goes.

Response from THE MONEY MINDER:

Hello There,

Congratulations on achieving such financial success and for being mindful of your spending habits. It’s clear that you and your wife have worked hard to get to where you are today. Regarding your dilemma about buying a home and whether it makes financial sense, it’s important to evaluate your priorities and financial goals.

Given that the cost of a million-dollar home in your area would significantly deplete your savings and result in a substantial mortgage, it might be prudent to consider alternative options. It sounds like you are in a comfortable position with renting, saving a significant amount each month, and investing wisely.

One practical approach could be to continue renting for now and focus on growing your investments, especially considering the current housing market conditions. You could explore other areas with a lower cost of living or look for more affordable housing options that won’t strain your finances.

In the end, the decision to buy a home should align with your long-term financial objectives, lifestyle preferences, and comfort level with taking on a mortgage. It’s essential to weigh the pros and cons carefully and make a decision that aligns with your financial values. Whatever path you choose, continue to prioritize saving, investing, and living below your means to secure your financial future.

Best of luck with your decision, and remember to stay focused on your financial goals. If you have any more questions or need further guidance, feel free to reach out.

Farewell from THE MONEY MINDER.