I was talking to my aunt about 3x versus 4x just the other day. My guess is that 4x is thrown around now to account for how much lower interest rates are today than they were in the early 80s when she was first looking at buying a house. Thoughts?
The house we just got into contract for is 3.07x our household annual salary. Winning!
Agree with your guess, especially absent any other debt, plus a good down payment.
Congrats on an accepted offer! 3.07x is awesome!!!
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Just to fuck with people in flyover states, I'll throw some fuel onto this fire. We live across the Bay from ysette9, on the "less expensive" side.
Our house is 2600 sf, 4 + 3.5. In 2013, we paid $928k on a short sale. It is a custom house, full of features that nobody needs. It also has a bitchin' 1050sf garage, which we use thoroughly, but we've never parked a car in, lol. Our property taxes are over 11k per year. No HOA or Mello-Roos, though. At the time of purchase, it cost about 10 times DH's annual salary. We were pre-qualified and pre-approved for a mortgage. For other reasons, we decided to pay cash.
How? We had both been in the CA Real Estate market for decades with long, low-interest mortgages. We sold two very appreciated properties and had the cash on hand, plus we had our FI number in other investments.
The new house has gone up in value an average of $100k per year since we've owned it. That's right, the house is earning more than DH, who is no slouch. When the folks next door finish building their 3000sf forever home, our values will get another big bounce, probably at least 100k more, as ours is kind of overimproved for the neighborhood, hence the short sale.
BTW, We are four adults, one of whom has Alzheimer's. We are walking distance to DH's work. We are FI, I am also RE.
Here's the point, HCOLA or LCOLA: It is what is. Learn your market, save your money and then make the best decision that fits your circumstances. We didn't buy this house to make money and until it's sold, nothing is guaranteed. We bought it to suit our needs at this time in our lives, and it's just what things cost where we live. Meh.
To the OP's original point, theirs might be a stupid purchase, it might not. Hard to tell from the outside. Perhaps one of them has a trust fund or a fat inheritance. You just never know the full story based on outward appearances. There's always the possibility that there might be a little green-eyed monster peeking out from behind the blinds as well.