Here’s How Outrageously Expensive It Is To Buy A House Right Now

Over the weekend, The Juice saw a story about homeowners who once had a target mortgage payment of around $4,000 to $4,500 upping that number to $7,000 a month. They’re shrugging their shoulders, calling the present housing environment the new normal at the same time as they make the assumption that interest rates will come down. Once they do, they can refinance at a more favorable rate and lower monthly payment. 

Poof. Problem solved. 

We have to wonder if mortgage lenders and real estate agents are the ones giving this guidance. Pretty incredible that people in these professions are doubling as armchair economists. Talk about playing Russian roulette with your budget and overall personal finance. Nobody has a macroeconomic crystal ball. Not world class experts. Definitely not your Facebook friend who became a Realtor during lockdown.

Editorializing that we freaking love to do aside, we ran some numbers on this madness. 

• Using the standard of not committing more than 30% of your income to housing, you have to earn nearly $280,000 a year – $23,333 a month – to be able to afford a $7,000 mortgage payment. 
• Assuming a 10% down payment for a 30-year loan with a 7% interest rate (yep, we’re still at or around 7%), including taxes and insurance, households earning that kind of cash can (technically) afford a $905,000 home. 

A $905,000 home. With a hefty $90,500 down payment, assuming you’re able to do 10%. That’s a lot of money to save, save, save then immediately part with. 

And, of course, that mortgage payment doesn’t include regular maintenance, unplanned expenses and those semi-frequent trips to Home Depot (HD) for plants, fixtures, patio furniture and other random crap we love to conveniently forget when we consider our total, actual housing expense. 

We’re editorializing again. Thank goodness that’s what we do here because it’s impossible to resist. 

Here’s something even more amazing. 

A household making $280,000 a year can’t afford a median-priced home (using list price) of $1.2 million in Los Angeles. A number that’s up 19% year-over-year by the way, according to Realtor.com. So much for that housing cooldown. 

Using the same input as above, you need $120,000 down and you’ll pay a whopping $9,280 a month just to get a (median) middle of the road home in LA. To afford this much house, you need to earn about $30,933 a month, or approximately $371,200 a year. 

Forget LA. Let’s make the popular journey from Southern California to Las Vegas. In Vegas, the median list price of a home, as of June 2023, is actually down 8.5% year over year to $438,000. 

Plug in the numbers and you need a down payment of $43,800 for the right to secure a roughly $3,388 mortgage payment. 

Here at The Juice, we’re old enough to remember when people were escaping that high of a house payment in California to pay half that for tons of square feet in Sin City. Like $29-a-night hotel rooms and smoking cigarettes at the craps table, those days are gone. 

To be able to afford the typical home in Las Vegas, you need to earn $135,500 a year, or about $11,293 a month. 

For the record, as we type this, it’s 110 degrees in Las Vegas. You basically can’t live there without air conditioning running like 24/7. We’ll see how it shakes out, but headed into summer, some predictions said consumers in Southern Nevada could expect electric bills of around $470 this July alone. (If you’re in Vegas, let us know how you’re faring). 

The madness! It just never ends. 

The Bottom Line: As we’ve recently reported, places do still exist where you can secure affordable housing. Places like Toledo, Ohio. The median list price of a crib there is just $120,000. And that’s actually up 9.2% annually. Your middle of the road monthly payment in Toledo – just $929. You could easily swing that on LA’s minimum wage! 

All of this to say, you don’t have to move to Toledo. 

Hopefully, you’re one of the millions upon millions of U.S. households with no mortgage payment at all or a loan secured with a sub-4% interest rate back when the gettin’ was good. 

If not, here’s a nickel’s worth of free advice.

Don’t set your target mortgage payment at $7,000 a month. Unless you’re super wealthy or you won that Powerball lottery last week. 

Even then, it’s never a bad idea to not get too carried away with money.

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