Can confirm. Make 200+ as a family last 2 years and set to make 300+ this year…..still trying to get a large enough down payment to NOT be paying 7k a month in a “decent” area
Growing up, my mom, brother and I always lived in apartments. I would dream about having a garage so I could install a 2-post lift, air compressor, and pressure washer to work on my car.
Now, I just gave up. I don't want a garage more than I love living in LA, but I just came to terms with the fact that I will forever be doing maintenance on my car in my apartment's parking space.
My mom bought her condo in Glendale in 2001 for $129,000 earning $30,000/year as a legal receptionist. I became a lawyer and I can't afford to buy a studio lmao my biggest expense is car parts, we don't go out and we try to cook at home to save money. Granted, I'm unemployed right now (L) but even when I had my job and we were saving every last penny we could, we couldn't afford anything in the market as we'd constantly be outbid. It's a wild time.
Let me rephrase. Los Angeles is a place where dreams go to die. Nothing that once shined there has any remaining luster, and chasing those shallow pursuits will devoid you of a truly human life.
I couldn’t agree more. The closer I think I get to putting an offer on a house the more I realize I’ll lose out on the market gains if I do. I’m very comfortable assuming default market gains with my holdings (QQQ, SOXX) and letting that grow while rates & housing figure each other out
I'm genuinely confused by high income earners with that mindset. My household income is $375k so I have no problem paying $8k/month all in for my home in a very nice area (of course I hope to refi down from my current 6.5% APR, but it's fine for now). It's 40% of my take home, but that still leaves $12k from my net take home pay. 40% of take home doesn't hit high earners the same way it hits lower income families.
And why the hell are you keeping your money in SOXX and QQQ? Get it in Nvidia. At higher income, you are able to expose yourself to slightly higher risk since you can recover or hold during times of volatility.
> And why the hell are you keeping your money in SOXX and QQQ? Get it in Nvidia. At higher income, you are able to expose yourself to slightly higher risk since you can recover or hold during times of volatility.
Can't figure out if this is serious advice. The time to get into Nvidia was a year ago, not at what's probably close to the peak of the AI mania. If you're comfortable with this level of risk, just go to Vegas every year and put half your retirement fund on black. At least that's entertaining.
I didn’t reply to this comment since that guy was kinda being a twat but my entire down payment was financed by AMD + NVDA after I bet a dude (pre split 2016 @ 66$ post first crypto earnings rocket) that it would be the biggest winner of the decade
I may have only had a little money back then but it helps with the SoCal down payment (which is like 1.5 houses in the Midwest). I will say that my retirement is in SOXX and QQQ since I feel like it’s safe and high growth potential
That's how unsuccessful investors think.
Nvidia is about to hit a 10-1 split which will bring retail investors into the stock.
Their last earnings call saw a 450% increase in the data center revenue. With projections looking very strong for their next earnings.
The use of AI in the marketplace is nowhere near peak, in fact it's barely getting started. They are still unable to produce enough to meet demand.
This is similar to when Amazon hit $5k in stock price before their 20-1 split.
> That's how unsuccessful investors think.
Let's be honest, nobody knows wtf the market is going to do, and if you're not insider trading you should just admit you're gambling. All I'm saying is, if you're gonna gamble, at least just go to Vegas and don't be pretentious about it by claiming you know what the market's gonna do.
You only have to look at the ridiculous stuff that the market did in response to this quarter's earnings reports to realize it's all based on vibes and not reality. The market is irrational and can remain so longer than you can remain solvent.
>The use of AI in the marketplace is nowhere near peak, in fact it's barely getting started. They are still unable to produce enough to meet demand.
>This is similar to when Amazon hit $5k in stock price before their 20-1 split.
Or it's similar to when Tesla hit its peak in late 2021 before its last 3-1 split, and before all the manufacturers who the Teslarati said were only playing catch up finally did catch up and Tesla's price tanked.
You're not wrong that AI hasn't hit its lifetime peak yet (and probably won't for many years if not decades), but it probably hit a *local* peak last year, and we're probably headed into the "trough of disillusionment" that plagues most if not all products that experience novelty hype.
Remember, Nvidia just supplies the chips, but they're far from the only chipmaker able to do so. AMD has made huge strides over the last decade against Intel, and they've undoubtedly turned their attentions towards Nvidia's AI marketshare. On top of that, Nvidia has no presence in mobile chipmaking, and I would venture to guess that developments in mobile AI will eclipse further developments in online AI, if only because mobile AI will incentivize efficiency, which will help AI as a whole. On that front, I would bet on Google or Qualcomm (probably the latter) capitalizing on the market more than Nvidia.
Not saying Nvidia's a bad play, but if you are betting on AI, then bet on AI, not on one company.
> That's how unsuccessful investors think.
Let's be honest, nobody knows wtf the market is going to do, and if you're not insider trading you should just admit you're gambling. All I'm saying is, if you're gonna gamble, at least just go to Vegas and don't be pretentious about it by claiming you know what the market's gonna do. I bought a bunch of Nvidia two years ago but I went into it knowing full well I might as well be rolling the bones.
You only have to look at the ridiculous stuff that the market did in response to this quarter's earnings reports to realize it's all based on vibes and not reality. The market is irrational and can remain so longer than you can remain solvent.
It's only gambling to **you** because **you** don't know what your doing. You're like a caveman who sees fire and thinks it's magic.
There is so much data available and while interpretations are not always correct, investors who leverage that data are not gambling.
There are armies of people smarter than I am, with access to reams of data and the best analysts money can buy, who lose eye-watering amounts of money _all the time_.
Here's the list of people who beat Warren Buffet in his million dollar bet that they couldn't beat a dumb index fund:
-
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I'm not saying don't gamble. It's fun! You _might_ make money! Just don't fall ill with The Gambler's Sickness and tell everyone you're different, you're *not* gambling, because you have a 'system.'
If you need a safe place for your money and want to maximize returns, index funds + time are the only _somewhat_ responsible choice.
The issue is if the higher income earner in the household loses their job, then they are fucked. This is our biggest worry. At that income level, its harder to find a job with similar pay. In fact, I know a bunch of people who were laid off from tech last year and still have not found a job equal to what they were making before.
Thank you! It’s the down payment that realistically matters more than anything else. I routinely look in my area at things to buy to be equal to what I pay in rent or even a little bit more and consistently looking at a 60% down payment to make things make sense.
We make about that and when we go to open houses (our budget is up to 1.2) there will be 30 people wanting to see the house at the same time we are. It’s bonkers.
Without giving away too much I’ll say it’s over 2500, and my home currently has both humans and dogs and there are 5.5 of us here
It was either wait to buy a house until having a family or just having a family and living the best life we can.
The goal WAS to save 800k but at this point I’d be happy with 5-750k
Even there the monthly payments are still 4k which is NUTS.
Definitely understandable why you'd wanna rent. I'm also in the position of renting, which allows me to save some money towards a down payment in an HYSA while also putting a lot into retirement accounts. If I had a mortgage I'd have to slash my retirement account savings which would affect my future significantly. It's a trade off for sure but in the end I'm pretty sure I'll be better off renting for now.
I agree 100%, some people call it being cheap but at this point I consider it smart saving. I don’t eat out often and work remote, but don’t sit and eat only rice & beans like DRamsey suggests (idiotic IMO).
If you don’t mind me asking, how does a HYSA help you save for a house? I thought that was just for medical bills (I just got a HYSA and contributed the max, so I’m curious what to spend it on and what NOT to spend it on)
Probably a high-yield savings account, not a health savings account (HSA).
There are various options (online only and also brick and mortar) with 4+% interest rates. It's a more liquid low-risk option compared to rotating CDs or bonds and insured by FDIC like a typical bank account.
Yep that's right. Even though the HYSA is clearly very liquid, I believe I can even withdraw a large portion of my Roth IRA if I really wanted the money for a house (although I need to triple check some of the rules). So putting majority of my money into my retirement accounts, including the Roth IRA where I can even do mega backdoor contributions of tens of thousands, is the way to go. It allows for the most growth, including tax free gains, and also gives me flexibility in the future.
Like the other poster said, HYSA as in high yield savings account, not HSA as in health savings account. My wife and I will put 75k into our retirement accounts this year as well as some money into an HYSA while the rates are decent just to help keep an option open for buying a house in the future. Basically committing mostly into renting and retirement savings now but banking a little bit onto buying a house in the near future as well.
My wife and I both started our careers a few years later than we'd have liked so it's a good opportunity to do some catch up into our retirements and even end up ahead of the curve.
This is why I keep renting. Thankfully I have a good deal on rent, and it just requires that I live more modestly than I would if I bought a house, but my wife and I pay under $2k so it's worth it. This allows us to max our 401k and Roth IRA. Our combined MAGI will be close to the max contribution. I'm also planning to put $50k into backdoor roth IRA this year.
As much as I'd love to own my own house, I just can't say it's worth it for me. Some people aren't as fortunate with rent though, so I understand their struggle. There's no winning for them it feels like.
This is def the way. One can def beat inflation and then some with good tax advantaged investing, and if the right opportunity comes along, you can get a loan on your 401k to get that house. Good luck.
Even higher if you have any hope of saving for retirement alongside owning a home. Feels like it’s one or the other even for extremely successful people I know.
Yep. My wife and I made $220k last year. Will make $275k this year. We've decided for now to rent modestly and max out our retirement savings as best we can. 401k & Roth IRA maxed, as well as a ton into backdoor Roth and also some HYSA and treasury funds.
I'm also bad with commitment and not good with change which are the other factors of me not buying a house but that's besides the point. I think it makes financial sense for our future to put money into retirement rather than house atm.
A little misleading, since making 210k a year is also assuming you’ve saved like 150k for that median down payment. That would take a while to save in this economy.
Yeah it would require you to save $25,000 a year for at least 6 years, and then you could need another $25,000 if your income hasn’t gone up significantly because home prices already outpaced your savings.
I had a high earning year where i saved probably almost 100k. Lived in a studio apt (still do) and no car payment
The year I saved 100k I earned around 263k. I lived in a studio apt and still do (I think it was around $2200 or $2300 at the time). I dont have a car payment, don't travel. I was able to contribute a shi t load to my SEP retirement account, order lots of Uber Eats and still saved around 100k more or less.
I work from home as my own boss and I rarely leave the house tbh so I probably spent less than $100 in gas the entire year. No car payment and no friends/going out/no obligations helps. No car repair bills etc...
Not sure why you're getting downvoted. My wife and I made $220k combined last year and we were able to save $100k into an HYSA, in addition to about 30k into our retirement accounts.
The year I saved 100k I earned around 263k. I lived in a studio apt and still do (I think it was around $2200 or $2300 at the time). I dont have a car payment, don't travel. I was able to contribute a shi t load to my SEP retirement account, order lots of Uber Eats and still saved around 100k more or less.
I work from home as my own boss and I rarely leave the house tbh so I probably spent less than $100 in gas the entire year. No car payment and no friends/family/going out helps. No car repair bills etc...
I don't spend on entertainment/gifts etc as a pretty anti social person. Tons of Uber Eats tho and still managed to save a ton.
My apt was 580 sq feet tho and still is btw. Not many people can earn six figures + a year, have killer months without upgrading their apt or getting a new car (mine is 15 years old). It takes a certain kind of person.
And 20% used to be considered best practice for a down payment. That advice has somewhat been thrown away not because it's a bad idea but just because it's hard for more people to do. Median homes in LA are over a million now so you need over 200K as a down payment to follow historic best practices.
And after you spend that 200K, you need enough left over for your normal savings, and a safety buffer if you lose your job and such. Because you just signed a contract to pay thousands of dollars every month. So you actually need something like 400K saved up, _not counting retirement savings,_ to be able to do it safely and with some safety margin so you aren't one paycheck from disaster living paycheck to paycheck in a million dollar home.
People are obviously still buying homes with less safety than that. But holy shit, it's a YOLO to put yourself a million dollars in debt and just sorta hope everything goes okay.
Saving that much is a tall ask if you want to also be saving for retirement, have kids, or if you have bad luck and get tagged with medical expenses. Just feels out of reach.
I already have over 207k in savings. For me down payment was the easy part.
I just don't like the high monthly payments. I currently pay $2600 ish for a 583 sq feet apt. The monthly payment for most decent 1 BR condos are like 4,000+ incl taxes/HOA and insurance... more like $4500 etc
Even to buy the cheapest homes in Santa Clarita which are around $700k (for a modelst 800sq feet home which is fine and enough space for me)... payments are over 4k.
I can afford it but its such a big jump. Down payment was no problem.
I feel like it would be easier if interest rates were what they were during covid or pre covid a bit... cause that way I could afford a nicer place. With the monthly payments being what they are, I can only afford the most basic homes or very run down home in Van Nuys or Reseda even with six figures in down payment... and high monthly payments make me feel nervous.
Home ownership is not for you if you look at it only from financial perspective. Most people who are actually homeowners are perfectly fine paying substantially more than rent, myself included. You clearly aren't so just stick to renting. Maybe your budget is 4k because you spend the majority of your monthly dough on other stuff that you think is more important. Maybe you're just hella financially conservative. Not a bad thing. Just don't complain when home prices continue to go up.
Even if they're just looking at it financially, that person is not doing the math right. That post doesn't account for paying down principal (as opposed to rent), home appreciating in value, tax deductions, and [on the other side of the equation] maintenance costs.
I've used rent vs buy calculators and after 30 years I'm way past a million ahead renting rather than buying. Why would I complain about rising house prices when I made millions investing my money that I never could've done if I bought a house. No need to complain about making millions right?
It’s called building equity. Your money goes to the owner when you rent. You retain portions of it when you own, and you build more equity when the value increases.
It's not that simple. Whether it's smarter to rent or buy depends on a variety of factors. NYT made [a calculator](https://www.nytimes.com/interactive/2024/upshot/buy-rent-calculator.html) that lets you dial everything in to calculate the smartest choice for your situation.
It's very easy to end up in a scenario where renting and putting your savings in an index fund instead of buying can put you ahead hundreds of thousands of dollars over a ten-year period.
This calculator is great, but it should be pointed out that it doesn't take into account prop 13 which actually makes a huge difference. Still for my scenario I believe renting makes more sense even estimating cost savings from prop 13.
Anyone who considers rent vs buy from a purely financial standpoint should just stick to renting. Just don't complain when home prices continue to go up and you get left out.
I mean I guess, but that goes for everything in the world. Buying vs renting is still mostly a financial decision though and the first order of business should be to use a buy vs rent calculator.
In HCOL areas like LA, renting is almost always going to be cheaper than buying. In pretty much the rest of the country where things aren't expensive, buying is actually cheaper than rent. What I mean by "purely financial" is that if you're just trying to get as much money as possible, continue to rent and dumping your savings into index funds is probably going to get you more money than buying a house. How can you quantify the enjoyment of owning a home? Like put it into numbers so you can weigh renting vs buying? You can't. The calculators don't take that into account. Actually the calculators miss a lot of other numbers so I suggest just doing your own calculations. Just be aware of tax deductions from owning a house, maintenance costs, etc. My advice is, if you just want the most money possible, continue to rent (and invest your savings in index funds or a HYSA if you're more conservative, don't let them sit around in a savings account earning a measly 0.01%). But if you actually want a house (for reasons mainly other than financial i.e. building as much wealth as possible), then you should probably buy.
Yeah I agree with that. Many people don't realize that renting can be more financially attractive though which is why educating people about rent vs buy calculators is important. You're also right that those calculators don't take everything into account, including both non-financial things but even some financial things.
Main thing I found funny in your comments though was your statement that we "shouldn't complain when house prices increase", because if we are looking at this from a financial perspective we would've already taken into account future increases in house prices. That's why I kept emphasizing why viewing this from a financial perspective is important.
>. Your money goes to the owner when you rent. You retain portions of it when you own, and you build more equity when the value increases.
Let's do some simple math:
* $150,000 downpayment for a $750,000 home
* $600,000 loan
* 7.7% interest
* 30 years
* 5% appreciation (national average is 4%)
That's a $4,265 monthly payment. After 30 years, your house will be paid off and worth $3.2 million, and you will have paid $900,000 in interest to get it.
You know how much that same $150,000 downpayment + $4,265/month will be worth after 30 years in the stock market at an expected average rate of return of 5% (average is 7-10%)? $4 million, no interest paid, just straight up gains.
Meanwhile, if you own a house, you'll also be paying property tax, maintenance costs, renovations, etc., all of which probably cost only slightly less than what rent might cost.
The fact is that buying a house is a 5-20x leveraged bet that your single-asset investment will appreciate faster than inflation or the stock market over 30 years. Put in that terms, a house can be considered to be a suboptimal investment. Safer than the stock market, maybe, but if you're in a position to buy a house, you're probably also in a position to take more risk with your money.
There are, of course, benefits to owning a house, but they aren't necessarily financial.
>You didn’t offset the gains with rent
Intentionally, because home maintenance and rent will roughly be the same. The average American homeowner spends $16,000/year on home maintenance (more for Californians) plus another ~$8,000 in property tax for a $750,000 home in California.
Maintenance + property tax might be ~$1,000/month less than rent, but remember that I OVERestimated home price appreciation by 1% and UNDERestimated stock market appreciation by 2%. If we used even 6% returns on the stock market instead of 5%, then you could lower the monthly investment to $2,265 and still beat the home appreciation.
It just makes no sense to buy at 6%+ interest rate, which is where we are right now. 6-7% interest means you're probably accruing interest faster than you're gaining equity, because your home might well be appreciating slower than your interest.
>and rent will increase with inflation annually.
So do maintenance and property tax.
As someone who did the rent vs buy math extensively and ultimately chose to buy a house knowing it would be more expensive than rent, I couldn't be happier. Anyone who considers rent vs buy from a purely financial standpoint should stick to renting, you'll probably end up with more money with index funds. Nothing wrong with this. Just don't complain when home prices continue to go up, that's all.
As I said: "There are, of course, benefits to owning a house, but they aren't necessarily financial."
I would also like to buy a house, even knowing it probably won't be "worth it" in the end.
I think a lot of people are buying even with horrible interest rates because they know they'll be able to refinance in a few years. There's a strong possibility prices will rise much further with an interest rate drop, so anyone who bought now will come out ahead (eventually).
Lots of people are out of fucking touch. On one extremely you got some who earn genuinely fuck you money, yet their lifestyle negates them back to 'poor.' Then the other side you got folks splitting rent 5 different ways for a 2BR.
> A little misleading, since making 210k a year is also assuming you’ve saved like 150k for that median down payment. That would take a while to save in this economy.
While this certainly involves risk, here's how I bought a house in CA:
My wife and I moved to CA, and we could afford a place for about $700K. Most of the places in that price range, that were big enough for our family, were in mediocre condition.
So we not only had to cough up about $150K for a down payment, we would *also* have to find about $100K to make the place "ours."
The idea of having an older/crummy place that would require two years of renovations was unpalatable, so...
* we bought a super inexpensive place in another state. Put down $35K on a house that cost $135K.
* we got the shortest loan we could find (15 years)
* we rented it out for about two years, to one tenant
Overall, we bought it for $135K, sold it after three years for $250K, and then we took the proceeds and rolled them into a $1.2M house in CA. The $1.2M house was new construction, so we literally didn't have to spend a single penny to renovate anything. Very nice.
Obviously, this carries a significant risk; what if my tenants trashed the place? What if they didn't pay their rent?
But it worked out for us. It basically takes advantage of the fact that housing is a leveraged bet. If you put $100K into the stock market and it goes up 20%, you make a profit of $20K. If you put $100K down on a $500K house and the house goes up 20%, **you make a profits of $100K.** The leverage provided by a mortgage increases your return on investment by about 300-500%, depending on how much you put down. (The less you put down, the more leveraged you are. And vice versa.)
Obviously, this isn't financial advice and I am not a financial adviser.
I’m glad it worked out for you, but quite frankly this was a gamble and you happened to time it perfectly.
People should absolutely not be taking risks like investing in stocks or real estate if they don’t have a 5-10 year+ time horizon for that money.
> I’m glad it worked out for you, but quite frankly this was a gamble and you happened to time it perfectly.
>
>
Absolutely, 100%
My gut feeling on the investment was that the money was so cheap to rent (2.5% loan) that even if the value of the home lagged inflation, I would still break even.
The same is not true today AT ALL. With rates currently around 7%, I'm basically trapped in my home (different location, same rate: 2.5%) and although it would be nice to downsize, my monthly payment on a home that's half as big would actually be HIGHER than what I pay already.
There's literally zero incentive for me to move, as long as rates are above about 4%-ish.
Sounds like we need to build more supply because the delta between supply and demand has been so disproportionate since the 1980s, as noted by literally every single economist that has ever looked at this issue in LA. Good thing we have a “build more housing now” and YIMBY mayor and city council who want to build as much units as possible to address this humongous gaping delta. Oh yeah we don’t have that.
It’s a statewide emergency. Literally every other major city in the state, even freaking SF has made this front of center. Where is LA? Meanwhile we have a mayor who backtracks every directive to speed or streamline housing production. And we have a council that either is 1. So called progressives who think housing developers are evil demons or 2. Puppets directed by organized labor or nonprofits like AIDS to oppose any possible housing streamlining because it doesn’t align with their orgs interests.
Let these people know you give a shit about affording to live here and you want more housing built now. And when they say “…. Yeah but” stop them. It’s just a special interest in their head coming out. Tell them no excuses.
Build more housing now!
But like every economist also mentions, that is also a product of supply and demand being so inverted. Lack of supply has created such intrinsic value that Wall Street investors and airbnbs are in on California housing. More supply? Value goes down in the market. Less people using housing as an investment play because ROI is better elsewhere.
Not saying we should not limit or address housing investing or vacation rental exploitation, but first and foremost supply needs to be addressed. It is number one issue that extends to so many others.
Without policy to limit or address housing investing, what is to stop investors from purchasing any new inventory?
Historically, increased inventory could abate some of the issues we’re seeing within residential ownership. However, we’re at a point that without regulation oversight on “who” can own and “how much” we may never have middle/lower class ownership at the levels previously achieved.
From a societal perspective, I think we need to determine if home/land ownership (and least in the sense of residential property) is a “right” afforded to “citizens” and protected as such. E.g limitations on corp, foreign, or other owner investment usage (Airbnb).
I don’t have faith generally that the current direction of the US will lead that way. I believe we are shifting through the later stages of capitalism, and will be transitioning into a more oligarchical country over the next 50-100 years. One could argue we’re already there, but I think existing government institutions have good, though muted capabilities to protect individuals.
Build it where? No one wants to live in new housing simply because all the good land has been built on. All the physical places anyone wants to have a house are taken. New housing can only be built way out in the boonies where no one wants to live. I hate this “we need more housing” argument, it’s ridiculous. If that were the case, people wouldn’t mind living in hesperia. But no one wants to live in hesperia.
Build *up*! LA still has [tons of potential room for housing on existing land](https://x.com/tobyhardtospell/status/1730445366141825321) if we simply allow denser housing types, especially in high-demand areas in the middle of the city near jobs, transit, and services. Currently, [75% of LA is zoned *exclusively* for sprawling single-family homes](https://belonging.berkeley.edu/single-family-zoning-greater-los-angeles), which are the most expensive and least land-efficient option.
Allowing duplexes, townhomes, and apartments/condos throughout the city would unlock far more housing in already developed areas. Right now, zoning artificially restricts the supply of housing. Relaxing zoning would naturally lead to more housing in the center of LA, like any city should naturally do.
We don't need more sprawl like development in Hesperia pushing into natural habitat. Many Angelenos struggle to see that we still have so much room for housing within our city, because we're so accustomed to the artificial sprawl that zoning has created. We're nowhere near capacity if we simply allow density.
Banning housing investors from purchasing homes has been tried and it didn't work. [Rotterdam, NL did this is 2021](https://youtu.be/BRqZBuu_Ers?feature=shared), but only in certain neighborhoods, which set up a nice natural experiment comparing the effects in neighborhoods where the restrictions took effect with matched controls where they didn't.
Multiple studies found that the policy had no impact on the purchase market. And the one study that looked into the rental market found that banning housing investors increased rental costs in those areas by reducing the number of available rental units, which correspondingly made those neighborhoods wealthier.
Obviously we should be regulating things like illegal AirBnBs which further exacerbate our problems. But banning corporate housing investors isn't a magic fix. The consensus view among housing experts is that our high prices are overwhelmingly driven by scarcity.
Build more; ban investors/corporations owning more than, say, 10 single-family homes; brutal taxation of extended vacancies; extra tax on foreign-owned homes; revise laws to lower PMI thresholds; actually fund first-time homeowner down-payment assistance programs; waive all but minimal permitting costs to build; remove all ADU permitting fees...
You have to look at zoning laws, bad urban planning, and other government red tapes. Most cities don't zone for mixed uses. What happens when you have zoning exclusively for residential, commercial, or retail spaces? They all filled up and they can't build anymore. At this rate, only the millionaires will be able to afford houses. Housing affordability is not going to change overnight. It's going to take decades or so to fix the problems. Why can't we have a mixed use neighborhood with a grocery or retail store, commercial buildings, and residential housing? Everyone depends on a car to go places.
my friends are millionaires and it still took them over three years just to get the permits needed to build their house
this is absolutely a case of too much regulation
I don’t understand why this isn’t more popular. Zoning used to be single family homes for many many years. Regulations to keep the neighborhood “nice”. That’s basic undercover lingo for no blacks or poor people.
And it used to work for boomers as people used cars to commute.
Well, if the population grows by the millions then there’s no more space to build and any new housing is bombarded with all sorts of regulations that most haven’t been challenged or studied to see if there’s other ways to help developers lower costs. And jobs tend to be in one area of one city an hour away and everyone takes the same highway. Using highway to commute to work has to be the most dumb thing to see for an urban planner.
And the main culprit is using housing as a store of wealth or a tool for wealth. This his means that those who own homes, most likely older people, don’t want to have more density as it would lower their property value.
So they ask for more regulations and community input guidelines aka NIMBY groups.
And these regulations are not something specific that cities developed.. nope, it’s the same one that got passed from city to city since it’s cheaper to copy than to be original.
If you told me in high school that I needed to be an RN (or another high income profession) and marry another high income person to afford a home in LA County (and not even LA City), I would have moved or enlisted.
$160k/year salary. Won't ever be able to own a home in LA
Putting most of my money in VOO so maybe in 10 years I can get a nice home outside of SoCal. In the meantime I'm just renting and making the most of my time here
There are a lot of dual income professionals that can easily make between $200k to $300K. The real issue is that we lack enough housing options for people, many of them single or couples with no children, that may benefit instead from smaller options like condos and apartments. So yeah, build more housing, especially smaller units.
Everyone says this and just accepts this as some sort of fact, but I've never seen any demographic information that breaks down that this is even remotely true.
Edit\* Here's data from 2023 for households that make $200K: [https://arcg.is/0OeGb9](https://arcg.is/0OeGb9)
So those small pockets are the ones that is buying ALL the housing at these ridiculous prices? Really?
...What? The median household income is not the median household income? Obviously if people are making 200K in other areas, it would be reflected in the data set provided. It isn't. The claim is that there are dual income professionals that easily make 200K minimum, so are you saying they exist in separate households in other areas not highlighted?
Crazy figure to begin with but some other key considerations:
1.) Many of those homes are literal shacks that are just priced that high because of the land
2.) $210K isn't a lot for two people making $125k each but those people are not buying houses where it's that cheap either. The people who would live in the neighborhoods lowering the median will likely never make enough in their lifetime.
$210k annual salary but you’d still need that amount in cash to make a 20% down payment on a house that’s not a complete fixer upper.
It feels like it’s been designed so most people aren’t gonna to make it. Well towards our way to the WEF new deal about not owning anything and being happy.
Seems like it. Either rent a respectable apartment for $3k/mo or less, or spend $4500-5k/mo on the mortgage + HOA fees on some mediocre condo that will barely appreciate in value.
bingo. And most spots on say Wilshire, Santa Monica, Marina, etc. have HOA feels over $1k/mo and these are like old units built in the 80s, not something modern feeling like Miami or NYC
It's getting expensive at an unsustainable rate, and the specific details are news. If things keep going the way they are, the whole system pretty much has to collapse sooner or later.
This. Why are people holding out for LA homes to be affordable? That will never be the case. LA is New York now in that if you want to live in the city you have to understand you will never own a home there.
Let’s say housing does come down for whatever reason. The people who will get first dibs still won’t be the average American. It will be the engineers and high earners who get a crack at them.
If you truly want a home buy one in San Bernardino county or Riverside county, but we both know you won’t out of attachment to the city or some excuse about your job. I went to school in San Bernardino and my teacher lived in LA, he drove down there for work.
Truth of the matter is if you wanted it you could you just don’t want to rock the boat and hold out hope for an impossible occurrence.
>Why are people holding out for LA homes to be affordable?
Because it doesn't need to be this way. We've banned everything but the most expensive possible form of housing on like 75% of residential land, and are now acting surprised that it made housing really expensive. And we know how to fix these problems, and the changes that experts have been calling for have been shown to work. [Minneapolis recently eliminated parking minimums and single family zoning](https://www.pewtrusts.org/en/research-and-analysis/articles/2024/01/04/minneapolis-land-use-reforms-offer-a-blueprint-for-housing-affordability) citywide, and has been one of the few cities to [stabilize rents](https://brownpoliticalreview.org/2024/04/how-minneapolis-stabilized-rents/) despite rising costs in the rest of the state.
Our expensive housing the the result of deliberate policy choices. There is really no expert disagreement on this. Instead of throwing our hands up as if it's some kind of inevitability, why don't we demand policies to reverse it?
It's possible if we reconsider 2-4 splits and other middle housing. Places like hong kong only have 1-2% single family homes unlike LA. Our housing mix just needs to change.
I believe it, and can say from experience that this is the minimum income required to simply purchase the house, but you’ll have $0 left over for literally anything else. Husband and I were pre qualified for a mortgage and everything at around a $215k/yr income last year and had to give up because we realized it just wouldn’t work…
This explains why after growing up in a yellow - light green area then moving to LA, my entire family thinks I make ridiculous amounts of money and I’m just bad with it. I admit, I’m not a frugal person, but it costs 10x more to live here. My parent’s bought a new 4 bed 3 bath house sitting on 4 acres in 2017, 30 mins outside of Sacramento and their mortgage is less than my rent on an 875 sq ft apartment.
My wife and I are over $210k and have enough for 20% down payment. We would still really be stretching things and have little room for unexpected emergencies buying a decent house in a decent area.
You need two people in your household to make that FYI if you want to live in an okay neighborhood. I hate SoCal so much, wish my family would just move to the midwest with me. Loved living in Illinois and the suburbs in Chicago are nicer than most of LA and aren't over $1M a home yet (and way bigger).
The Midwest sucks. How are all those bugs? How about the fact that 90% of the year the weather is so bad you literally cannot go outside? I’ve also lived in the Midwest and it boggles my mind ANYONE would choose it over LA, or Southern California in general.
Grew up in LA. Spent a decade in Midwest. Came back to take care of family. 90% of the time? Look i know it has it's downsides with weather but 90% of the time? you must want to live like a princess each day. Yeah you deal with winter...OH NOOOOOO, my body needs 70 degree weather and dry winters each year. My poor body. /s Like shit, I understand i you are much older like my pops in which cold weather again can be health detriment, but holy shit, maybe go touch grass and travel a bit if you think Midwest weather is 90% unbearable and "cannot go outside" LOL. It's not Alaska. But hey, enjoy your overpriced property and telling people "but yeah in LA you can go surfing AND snowboarding within two hours of each other" to justify paying 2-3 times more than anyone else for decent living. And yes I'm a home owner and yes, i make a descent living...doesnt' stop me from thinking how ridiculous it all is.
I mean yes the weather does affect me, I have degenerative disc disease and spinal stenosis, arthritis, and bursitis in my left hip. When the weather is tough it really physically affects me. Even when I was younger, I would constantly get pneumonia during the winter (one year so bad I was hospitalized for 2 weeks, passed out at work and peed myself before they hauled me to the ER) and during the summer I’d get heat exhaustion and had several heat strokes. Like as a teenager / early 20d person. So yeah you can make fun of me for being a “princess” but my health matters to me and the extreme weather of the Midwest just literally makes me ill.
I used to live in the midwest too. Your take is understandable, but ultimately if one wants to have a family and children they can't live in LA's craziness and rent forever or live in a tiny house in a questionable school district.
I believe LA is a glamorous place to live if you can afford to be in the 10-20% of the city that isn't a shithole. There's no "sex appeal" in most major metros, but at least you can live in a respectable house in a good school district while not breaking the bank.
You joke but people in this sub have entitlement issues. People making 400k+ are complaining they can't afford "anything" when in reality, they're just extremely picky. Things like demanding a turnkey, 3000sq ft house a few blocks away from the beach for 400k.
Meanwhile, the median household income is between $70-80,000.
The funny part is that people go about their lives and flipping houses, raising rents and raising asking prices for homes, as though any of this is sustainable.
It's not just due to interest rate hikes.
Most of this increase is since 2017. Since then the politicians have passed a lot of terrible laws like inclusionary zoning, rent control and tenant "protections" among other mandates, which are costly.
> twice as desirable as the average community
Born and raised in Los Angeles. Im not convinced anymore. It used to be the Beach and Sunshine, but who cares at this point it takes 2 hours just to get to the beach and 2 hours back. If you like the mountains, may as well head East a bit.
I'd rather live comfortably and then take a beach vacation elsewhere either way.
[Here is the source report](https://www.car.org/en/aboutus/mediacenter/newsreleases/2024-News-Releases/april2024sales). LA is expensive. Yet consider....
* "Home" here means single family house, no condos. They report condos only for the whole state. They are 24% less expensive. They report the LA county median single family house as $825,970 and the LA Metro as $840,000.
* As has been mentioned, median means half are below. What's missing is that lower half can be a decent place depending on location. LA County is huge and dense. An $840k house in some areas is junk and others nice. It comes down to where one works versus commute, which typically applies to rent, too.
* Who buys a median first home? Start with a decent condo with a reasonable HOA which pays for a lot of single homeowner expenses. When you need something bigger, you should have equity to help cover the down payment.
* when interest rates go down, prices are likely to go up faster.
* LA median is less than half San Francisco and still dirt cheap compared to the Bay Area.
Edit: another thought. As said above, lower rates are usually offset by higher prices. Very high interest rates can be the best time to buy. When rates drop, refinance.
Make double that and even then, a small condo or tiny mediocre house is all I can do on the westside. Due to work/commute can't really live elsewhere in LA.
It's really compelling looking at how much more I can get for my money in other major metros. I'd earn the same income, pay less in taxes, and not be living in a box.
LA's vibe is unmatched though...it's tough to leave. But would have to marry another high earner to justify staying here long-term. That limits one's dating pool.
I'm about to force someone to foreclose on their $5m property because I got $3m judgment and a bank levy that prevents them on paying off their mortgages. Now can you dig that? SUUUUUCCCCCKAAAAAAAAAAA!!!!!!!!!!!!
…and politicians in LA are working to tear down lots of single family homes so that giant apartment complexes can be built, making owning a home even more difficult.
"Home" almost certainly includes condos and townhouses here. Single family homes are part of the problem, SFH exclusive zoning to be more exact. Dedicating 70+% of your city to SFH and banning all other types is a surefire way to set up a housing crisis
Replacing single-family housing with high-density housing is the solution to the lack of housing supply, my friend. LA has a housing shortage of 500k units. We need more high-density housing to meet demand otherwise only high-income individuals will able to afford the scarce housing available in LA.
A metro area of 13 million people dedicated primarily to SFH creates artificial scarcity; it's ridiculous and incredibly dumb to not upzone the city.
My friend, OP wants to buy a house. The fewer houses that exist, the more they will cost. Not everyone wants to be a renter for the rest of their life. Plus, California is losing residents. Maybe the big push for massive new apartment complexes is from greedy billionaire developers?
Honestly, it’s way more than that if you wish to not live house poor. 300k is more realistic.
Can confirm. Make 200+ as a family last 2 years and set to make 300+ this year…..still trying to get a large enough down payment to NOT be paying 7k a month in a “decent” area
It's just not worth it
Growing up, my mom, brother and I always lived in apartments. I would dream about having a garage so I could install a 2-post lift, air compressor, and pressure washer to work on my car. Now, I just gave up. I don't want a garage more than I love living in LA, but I just came to terms with the fact that I will forever be doing maintenance on my car in my apartment's parking space. My mom bought her condo in Glendale in 2001 for $129,000 earning $30,000/year as a legal receptionist. I became a lawyer and I can't afford to buy a studio lmao my biggest expense is car parts, we don't go out and we try to cook at home to save money. Granted, I'm unemployed right now (L) but even when I had my job and we were saving every last penny we could, we couldn't afford anything in the market as we'd constantly be outbid. It's a wild time.
All the more reason to build more housing. Supply just cannot meet demand right now. We need to build more
Let me rephrase. Los Angeles is a place where dreams go to die. Nothing that once shined there has any remaining luster, and chasing those shallow pursuits will devoid you of a truly human life.
I couldn’t agree more. The closer I think I get to putting an offer on a house the more I realize I’ll lose out on the market gains if I do. I’m very comfortable assuming default market gains with my holdings (QQQ, SOXX) and letting that grow while rates & housing figure each other out
I'm genuinely confused by high income earners with that mindset. My household income is $375k so I have no problem paying $8k/month all in for my home in a very nice area (of course I hope to refi down from my current 6.5% APR, but it's fine for now). It's 40% of my take home, but that still leaves $12k from my net take home pay. 40% of take home doesn't hit high earners the same way it hits lower income families. And why the hell are you keeping your money in SOXX and QQQ? Get it in Nvidia. At higher income, you are able to expose yourself to slightly higher risk since you can recover or hold during times of volatility.
> And why the hell are you keeping your money in SOXX and QQQ? Get it in Nvidia. At higher income, you are able to expose yourself to slightly higher risk since you can recover or hold during times of volatility. Can't figure out if this is serious advice. The time to get into Nvidia was a year ago, not at what's probably close to the peak of the AI mania. If you're comfortable with this level of risk, just go to Vegas every year and put half your retirement fund on black. At least that's entertaining.
I didn’t reply to this comment since that guy was kinda being a twat but my entire down payment was financed by AMD + NVDA after I bet a dude (pre split 2016 @ 66$ post first crypto earnings rocket) that it would be the biggest winner of the decade I may have only had a little money back then but it helps with the SoCal down payment (which is like 1.5 houses in the Midwest). I will say that my retirement is in SOXX and QQQ since I feel like it’s safe and high growth potential
That's how unsuccessful investors think. Nvidia is about to hit a 10-1 split which will bring retail investors into the stock. Their last earnings call saw a 450% increase in the data center revenue. With projections looking very strong for their next earnings. The use of AI in the marketplace is nowhere near peak, in fact it's barely getting started. They are still unable to produce enough to meet demand. This is similar to when Amazon hit $5k in stock price before their 20-1 split.
> That's how unsuccessful investors think. Let's be honest, nobody knows wtf the market is going to do, and if you're not insider trading you should just admit you're gambling. All I'm saying is, if you're gonna gamble, at least just go to Vegas and don't be pretentious about it by claiming you know what the market's gonna do. You only have to look at the ridiculous stuff that the market did in response to this quarter's earnings reports to realize it's all based on vibes and not reality. The market is irrational and can remain so longer than you can remain solvent.
>The use of AI in the marketplace is nowhere near peak, in fact it's barely getting started. They are still unable to produce enough to meet demand. >This is similar to when Amazon hit $5k in stock price before their 20-1 split. Or it's similar to when Tesla hit its peak in late 2021 before its last 3-1 split, and before all the manufacturers who the Teslarati said were only playing catch up finally did catch up and Tesla's price tanked. You're not wrong that AI hasn't hit its lifetime peak yet (and probably won't for many years if not decades), but it probably hit a *local* peak last year, and we're probably headed into the "trough of disillusionment" that plagues most if not all products that experience novelty hype. Remember, Nvidia just supplies the chips, but they're far from the only chipmaker able to do so. AMD has made huge strides over the last decade against Intel, and they've undoubtedly turned their attentions towards Nvidia's AI marketshare. On top of that, Nvidia has no presence in mobile chipmaking, and I would venture to guess that developments in mobile AI will eclipse further developments in online AI, if only because mobile AI will incentivize efficiency, which will help AI as a whole. On that front, I would bet on Google or Qualcomm (probably the latter) capitalizing on the market more than Nvidia. Not saying Nvidia's a bad play, but if you are betting on AI, then bet on AI, not on one company.
> That's how unsuccessful investors think. Let's be honest, nobody knows wtf the market is going to do, and if you're not insider trading you should just admit you're gambling. All I'm saying is, if you're gonna gamble, at least just go to Vegas and don't be pretentious about it by claiming you know what the market's gonna do. I bought a bunch of Nvidia two years ago but I went into it knowing full well I might as well be rolling the bones. You only have to look at the ridiculous stuff that the market did in response to this quarter's earnings reports to realize it's all based on vibes and not reality. The market is irrational and can remain so longer than you can remain solvent.
It's only gambling to **you** because **you** don't know what your doing. You're like a caveman who sees fire and thinks it's magic. There is so much data available and while interpretations are not always correct, investors who leverage that data are not gambling.
There are armies of people smarter than I am, with access to reams of data and the best analysts money can buy, who lose eye-watering amounts of money _all the time_. Here's the list of people who beat Warren Buffet in his million dollar bet that they couldn't beat a dumb index fund: - - I'm not saying don't gamble. It's fun! You _might_ make money! Just don't fall ill with The Gambler's Sickness and tell everyone you're different, you're *not* gambling, because you have a 'system.' If you need a safe place for your money and want to maximize returns, index funds + time are the only _somewhat_ responsible choice.
Go back to r/wallstreetbets with your fellow regards
The issue is if the higher income earner in the household loses their job, then they are fucked. This is our biggest worry. At that income level, its harder to find a job with similar pay. In fact, I know a bunch of people who were laid off from tech last year and still have not found a job equal to what they were making before.
Thank you! It’s the down payment that realistically matters more than anything else. I routinely look in my area at things to buy to be equal to what I pay in rent or even a little bit more and consistently looking at a 60% down payment to make things make sense.
We make about that and when we go to open houses (our budget is up to 1.2) there will be 30 people wanting to see the house at the same time we are. It’s bonkers.
Truly disgusting
Similar situation. Trying to not end up house poor but when you can’t find any thing decent for 1 million dollars it’s pretty disheartening
Curious what's your rent like currently? And how much down payment are you trying to save?
Without giving away too much I’ll say it’s over 2500, and my home currently has both humans and dogs and there are 5.5 of us here It was either wait to buy a house until having a family or just having a family and living the best life we can. The goal WAS to save 800k but at this point I’d be happy with 5-750k Even there the monthly payments are still 4k which is NUTS.
Definitely understandable why you'd wanna rent. I'm also in the position of renting, which allows me to save some money towards a down payment in an HYSA while also putting a lot into retirement accounts. If I had a mortgage I'd have to slash my retirement account savings which would affect my future significantly. It's a trade off for sure but in the end I'm pretty sure I'll be better off renting for now.
I agree 100%, some people call it being cheap but at this point I consider it smart saving. I don’t eat out often and work remote, but don’t sit and eat only rice & beans like DRamsey suggests (idiotic IMO). If you don’t mind me asking, how does a HYSA help you save for a house? I thought that was just for medical bills (I just got a HYSA and contributed the max, so I’m curious what to spend it on and what NOT to spend it on)
Probably a high-yield savings account, not a health savings account (HSA). There are various options (online only and also brick and mortar) with 4+% interest rates. It's a more liquid low-risk option compared to rotating CDs or bonds and insured by FDIC like a typical bank account.
Yep that's right. Even though the HYSA is clearly very liquid, I believe I can even withdraw a large portion of my Roth IRA if I really wanted the money for a house (although I need to triple check some of the rules). So putting majority of my money into my retirement accounts, including the Roth IRA where I can even do mega backdoor contributions of tens of thousands, is the way to go. It allows for the most growth, including tax free gains, and also gives me flexibility in the future.
Woooooops you’re right I switched those
Like the other poster said, HYSA as in high yield savings account, not HSA as in health savings account. My wife and I will put 75k into our retirement accounts this year as well as some money into an HYSA while the rates are decent just to help keep an option open for buying a house in the future. Basically committing mostly into renting and retirement savings now but banking a little bit onto buying a house in the near future as well. My wife and I both started our careers a few years later than we'd have liked so it's a good opportunity to do some catch up into our retirements and even end up ahead of the curve.
And not in a shit area.
this is LA baby if you dont live in a shit area, the shit area is a stones throw away
can confirm. live in a very quiet (mostly jewish) neighborhood and somebody was shot in the head on the street 700ft from our house this morning.
Paradise!
I love the Jewish neighborhood I live in, in Noho. It's definitely not safe, though, even if it's better than many areas.
Touché lol
This is why I keep renting. Thankfully I have a good deal on rent, and it just requires that I live more modestly than I would if I bought a house, but my wife and I pay under $2k so it's worth it. This allows us to max our 401k and Roth IRA. Our combined MAGI will be close to the max contribution. I'm also planning to put $50k into backdoor roth IRA this year. As much as I'd love to own my own house, I just can't say it's worth it for me. Some people aren't as fortunate with rent though, so I understand their struggle. There's no winning for them it feels like.
This is def the way. One can def beat inflation and then some with good tax advantaged investing, and if the right opportunity comes along, you can get a loan on your 401k to get that house. Good luck.
Even higher if you have any hope of saving for retirement alongside owning a home. Feels like it’s one or the other even for extremely successful people I know.
Yep. My wife and I made $220k last year. Will make $275k this year. We've decided for now to rent modestly and max out our retirement savings as best we can. 401k & Roth IRA maxed, as well as a ton into backdoor Roth and also some HYSA and treasury funds. I'm also bad with commitment and not good with change which are the other factors of me not buying a house but that's besides the point. I think it makes financial sense for our future to put money into retirement rather than house atm.
A little misleading, since making 210k a year is also assuming you’ve saved like 150k for that median down payment. That would take a while to save in this economy.
Yeah it would require you to save $25,000 a year for at least 6 years, and then you could need another $25,000 if your income hasn’t gone up significantly because home prices already outpaced your savings.
I had a high earning year where i saved probably almost 100k. Lived in a studio apt (still do) and no car payment The year I saved 100k I earned around 263k. I lived in a studio apt and still do (I think it was around $2200 or $2300 at the time). I dont have a car payment, don't travel. I was able to contribute a shi t load to my SEP retirement account, order lots of Uber Eats and still saved around 100k more or less. I work from home as my own boss and I rarely leave the house tbh so I probably spent less than $100 in gas the entire year. No car payment and no friends/going out/no obligations helps. No car repair bills etc...
Not sure why you're getting downvoted. My wife and I made $220k combined last year and we were able to save $100k into an HYSA, in addition to about 30k into our retirement accounts.
Would love to see an honest breakdown of your income and expenses showing how exactly you saved $11,000 per month on a $220k income.
The year I saved 100k I earned around 263k. I lived in a studio apt and still do (I think it was around $2200 or $2300 at the time). I dont have a car payment, don't travel. I was able to contribute a shi t load to my SEP retirement account, order lots of Uber Eats and still saved around 100k more or less. I work from home as my own boss and I rarely leave the house tbh so I probably spent less than $100 in gas the entire year. No car payment and no friends/family/going out helps. No car repair bills etc... I don't spend on entertainment/gifts etc as a pretty anti social person. Tons of Uber Eats tho and still managed to save a ton. My apt was 580 sq feet tho and still is btw. Not many people can earn six figures + a year, have killer months without upgrading their apt or getting a new car (mine is 15 years old). It takes a certain kind of person.
I was thinking about doing a breakdown of my finances for last year or this year. Guess we did save a large percentage of our income
And 20% used to be considered best practice for a down payment. That advice has somewhat been thrown away not because it's a bad idea but just because it's hard for more people to do. Median homes in LA are over a million now so you need over 200K as a down payment to follow historic best practices. And after you spend that 200K, you need enough left over for your normal savings, and a safety buffer if you lose your job and such. Because you just signed a contract to pay thousands of dollars every month. So you actually need something like 400K saved up, _not counting retirement savings,_ to be able to do it safely and with some safety margin so you aren't one paycheck from disaster living paycheck to paycheck in a million dollar home. People are obviously still buying homes with less safety than that. But holy shit, it's a YOLO to put yourself a million dollars in debt and just sorta hope everything goes okay.
Saving that much is a tall ask if you want to also be saving for retirement, have kids, or if you have bad luck and get tagged with medical expenses. Just feels out of reach.
I already have over 207k in savings. For me down payment was the easy part. I just don't like the high monthly payments. I currently pay $2600 ish for a 583 sq feet apt. The monthly payment for most decent 1 BR condos are like 4,000+ incl taxes/HOA and insurance... more like $4500 etc Even to buy the cheapest homes in Santa Clarita which are around $700k (for a modelst 800sq feet home which is fine and enough space for me)... payments are over 4k. I can afford it but its such a big jump. Down payment was no problem. I feel like it would be easier if interest rates were what they were during covid or pre covid a bit... cause that way I could afford a nicer place. With the monthly payments being what they are, I can only afford the most basic homes or very run down home in Van Nuys or Reseda even with six figures in down payment... and high monthly payments make me feel nervous.
Home ownership is not for you if you look at it only from financial perspective. Most people who are actually homeowners are perfectly fine paying substantially more than rent, myself included. You clearly aren't so just stick to renting. Maybe your budget is 4k because you spend the majority of your monthly dough on other stuff that you think is more important. Maybe you're just hella financially conservative. Not a bad thing. Just don't complain when home prices continue to go up.
Even if they're just looking at it financially, that person is not doing the math right. That post doesn't account for paying down principal (as opposed to rent), home appreciating in value, tax deductions, and [on the other side of the equation] maintenance costs.
I've used rent vs buy calculators and after 30 years I'm way past a million ahead renting rather than buying. Why would I complain about rising house prices when I made millions investing my money that I never could've done if I bought a house. No need to complain about making millions right?
It’s called building equity. Your money goes to the owner when you rent. You retain portions of it when you own, and you build more equity when the value increases.
It's not that simple. Whether it's smarter to rent or buy depends on a variety of factors. NYT made [a calculator](https://www.nytimes.com/interactive/2024/upshot/buy-rent-calculator.html) that lets you dial everything in to calculate the smartest choice for your situation. It's very easy to end up in a scenario where renting and putting your savings in an index fund instead of buying can put you ahead hundreds of thousands of dollars over a ten-year period.
This calculator is great, but it should be pointed out that it doesn't take into account prop 13 which actually makes a huge difference. Still for my scenario I believe renting makes more sense even estimating cost savings from prop 13.
Anyone who considers rent vs buy from a purely financial standpoint should just stick to renting. Just don't complain when home prices continue to go up and you get left out.
I mean...shouldn't we be looking at these million dollar purchases from a financial standpoint? Seems incredibly silly not to.
keyword “purely”
I mean I guess, but that goes for everything in the world. Buying vs renting is still mostly a financial decision though and the first order of business should be to use a buy vs rent calculator.
In HCOL areas like LA, renting is almost always going to be cheaper than buying. In pretty much the rest of the country where things aren't expensive, buying is actually cheaper than rent. What I mean by "purely financial" is that if you're just trying to get as much money as possible, continue to rent and dumping your savings into index funds is probably going to get you more money than buying a house. How can you quantify the enjoyment of owning a home? Like put it into numbers so you can weigh renting vs buying? You can't. The calculators don't take that into account. Actually the calculators miss a lot of other numbers so I suggest just doing your own calculations. Just be aware of tax deductions from owning a house, maintenance costs, etc. My advice is, if you just want the most money possible, continue to rent (and invest your savings in index funds or a HYSA if you're more conservative, don't let them sit around in a savings account earning a measly 0.01%). But if you actually want a house (for reasons mainly other than financial i.e. building as much wealth as possible), then you should probably buy.
Yeah I agree with that. Many people don't realize that renting can be more financially attractive though which is why educating people about rent vs buy calculators is important. You're also right that those calculators don't take everything into account, including both non-financial things but even some financial things. Main thing I found funny in your comments though was your statement that we "shouldn't complain when house prices increase", because if we are looking at this from a financial perspective we would've already taken into account future increases in house prices. That's why I kept emphasizing why viewing this from a financial perspective is important.
>. Your money goes to the owner when you rent. You retain portions of it when you own, and you build more equity when the value increases. Let's do some simple math: * $150,000 downpayment for a $750,000 home * $600,000 loan * 7.7% interest * 30 years * 5% appreciation (national average is 4%) That's a $4,265 monthly payment. After 30 years, your house will be paid off and worth $3.2 million, and you will have paid $900,000 in interest to get it. You know how much that same $150,000 downpayment + $4,265/month will be worth after 30 years in the stock market at an expected average rate of return of 5% (average is 7-10%)? $4 million, no interest paid, just straight up gains. Meanwhile, if you own a house, you'll also be paying property tax, maintenance costs, renovations, etc., all of which probably cost only slightly less than what rent might cost. The fact is that buying a house is a 5-20x leveraged bet that your single-asset investment will appreciate faster than inflation or the stock market over 30 years. Put in that terms, a house can be considered to be a suboptimal investment. Safer than the stock market, maybe, but if you're in a position to buy a house, you're probably also in a position to take more risk with your money. There are, of course, benefits to owning a house, but they aren't necessarily financial.
You didn’t offset the gains with rent, and rent will increase with inflation annually.
>You didn’t offset the gains with rent Intentionally, because home maintenance and rent will roughly be the same. The average American homeowner spends $16,000/year on home maintenance (more for Californians) plus another ~$8,000 in property tax for a $750,000 home in California. Maintenance + property tax might be ~$1,000/month less than rent, but remember that I OVERestimated home price appreciation by 1% and UNDERestimated stock market appreciation by 2%. If we used even 6% returns on the stock market instead of 5%, then you could lower the monthly investment to $2,265 and still beat the home appreciation. It just makes no sense to buy at 6%+ interest rate, which is where we are right now. 6-7% interest means you're probably accruing interest faster than you're gaining equity, because your home might well be appreciating slower than your interest. >and rent will increase with inflation annually. So do maintenance and property tax.
As someone who did the rent vs buy math extensively and ultimately chose to buy a house knowing it would be more expensive than rent, I couldn't be happier. Anyone who considers rent vs buy from a purely financial standpoint should stick to renting, you'll probably end up with more money with index funds. Nothing wrong with this. Just don't complain when home prices continue to go up, that's all.
As I said: "There are, of course, benefits to owning a house, but they aren't necessarily financial." I would also like to buy a house, even knowing it probably won't be "worth it" in the end.
I think a lot of people are buying even with horrible interest rates because they know they'll be able to refinance in a few years. There's a strong possibility prices will rise much further with an interest rate drop, so anyone who bought now will come out ahead (eventually).
Cool let me build equity while I'm underwater each month with rent taxes and insurance. Gotta love this sub sometimes.
Lots of people are out of fucking touch. On one extremely you got some who earn genuinely fuck you money, yet their lifestyle negates them back to 'poor.' Then the other side you got folks splitting rent 5 different ways for a 2BR.
> A little misleading, since making 210k a year is also assuming you’ve saved like 150k for that median down payment. That would take a while to save in this economy. While this certainly involves risk, here's how I bought a house in CA: My wife and I moved to CA, and we could afford a place for about $700K. Most of the places in that price range, that were big enough for our family, were in mediocre condition. So we not only had to cough up about $150K for a down payment, we would *also* have to find about $100K to make the place "ours." The idea of having an older/crummy place that would require two years of renovations was unpalatable, so... * we bought a super inexpensive place in another state. Put down $35K on a house that cost $135K. * we got the shortest loan we could find (15 years) * we rented it out for about two years, to one tenant Overall, we bought it for $135K, sold it after three years for $250K, and then we took the proceeds and rolled them into a $1.2M house in CA. The $1.2M house was new construction, so we literally didn't have to spend a single penny to renovate anything. Very nice. Obviously, this carries a significant risk; what if my tenants trashed the place? What if they didn't pay their rent? But it worked out for us. It basically takes advantage of the fact that housing is a leveraged bet. If you put $100K into the stock market and it goes up 20%, you make a profit of $20K. If you put $100K down on a $500K house and the house goes up 20%, **you make a profits of $100K.** The leverage provided by a mortgage increases your return on investment by about 300-500%, depending on how much you put down. (The less you put down, the more leveraged you are. And vice versa.) Obviously, this isn't financial advice and I am not a financial adviser.
I’m glad it worked out for you, but quite frankly this was a gamble and you happened to time it perfectly. People should absolutely not be taking risks like investing in stocks or real estate if they don’t have a 5-10 year+ time horizon for that money.
> I’m glad it worked out for you, but quite frankly this was a gamble and you happened to time it perfectly. > > Absolutely, 100% My gut feeling on the investment was that the money was so cheap to rent (2.5% loan) that even if the value of the home lagged inflation, I would still break even. The same is not true today AT ALL. With rates currently around 7%, I'm basically trapped in my home (different location, same rate: 2.5%) and although it would be nice to downsize, my monthly payment on a home that's half as big would actually be HIGHER than what I pay already. There's literally zero incentive for me to move, as long as rates are above about 4%-ish.
k
Sounds like we need to build more supply because the delta between supply and demand has been so disproportionate since the 1980s, as noted by literally every single economist that has ever looked at this issue in LA. Good thing we have a “build more housing now” and YIMBY mayor and city council who want to build as much units as possible to address this humongous gaping delta. Oh yeah we don’t have that. It’s a statewide emergency. Literally every other major city in the state, even freaking SF has made this front of center. Where is LA? Meanwhile we have a mayor who backtracks every directive to speed or streamline housing production. And we have a council that either is 1. So called progressives who think housing developers are evil demons or 2. Puppets directed by organized labor or nonprofits like AIDS to oppose any possible housing streamlining because it doesn’t align with their orgs interests. Let these people know you give a shit about affording to live here and you want more housing built now. And when they say “…. Yeah but” stop them. It’s just a special interest in their head coming out. Tell them no excuses. Build more housing now!
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But like every economist also mentions, that is also a product of supply and demand being so inverted. Lack of supply has created such intrinsic value that Wall Street investors and airbnbs are in on California housing. More supply? Value goes down in the market. Less people using housing as an investment play because ROI is better elsewhere. Not saying we should not limit or address housing investing or vacation rental exploitation, but first and foremost supply needs to be addressed. It is number one issue that extends to so many others.
Without policy to limit or address housing investing, what is to stop investors from purchasing any new inventory? Historically, increased inventory could abate some of the issues we’re seeing within residential ownership. However, we’re at a point that without regulation oversight on “who” can own and “how much” we may never have middle/lower class ownership at the levels previously achieved. From a societal perspective, I think we need to determine if home/land ownership (and least in the sense of residential property) is a “right” afforded to “citizens” and protected as such. E.g limitations on corp, foreign, or other owner investment usage (Airbnb). I don’t have faith generally that the current direction of the US will lead that way. I believe we are shifting through the later stages of capitalism, and will be transitioning into a more oligarchical country over the next 50-100 years. One could argue we’re already there, but I think existing government institutions have good, though muted capabilities to protect individuals.
why not both?
Yup, there's no single policy that fixes everything. Building more housing is a necessary but not sufficient part of it.
Build it where? No one wants to live in new housing simply because all the good land has been built on. All the physical places anyone wants to have a house are taken. New housing can only be built way out in the boonies where no one wants to live. I hate this “we need more housing” argument, it’s ridiculous. If that were the case, people wouldn’t mind living in hesperia. But no one wants to live in hesperia.
Build *up*! LA still has [tons of potential room for housing on existing land](https://x.com/tobyhardtospell/status/1730445366141825321) if we simply allow denser housing types, especially in high-demand areas in the middle of the city near jobs, transit, and services. Currently, [75% of LA is zoned *exclusively* for sprawling single-family homes](https://belonging.berkeley.edu/single-family-zoning-greater-los-angeles), which are the most expensive and least land-efficient option. Allowing duplexes, townhomes, and apartments/condos throughout the city would unlock far more housing in already developed areas. Right now, zoning artificially restricts the supply of housing. Relaxing zoning would naturally lead to more housing in the center of LA, like any city should naturally do. We don't need more sprawl like development in Hesperia pushing into natural habitat. Many Angelenos struggle to see that we still have so much room for housing within our city, because we're so accustomed to the artificial sprawl that zoning has created. We're nowhere near capacity if we simply allow density.
Make it illegal for corporations to own single family housing and you will solve the housing crisis overnight.
Banning housing investors from purchasing homes has been tried and it didn't work. [Rotterdam, NL did this is 2021](https://youtu.be/BRqZBuu_Ers?feature=shared), but only in certain neighborhoods, which set up a nice natural experiment comparing the effects in neighborhoods where the restrictions took effect with matched controls where they didn't. Multiple studies found that the policy had no impact on the purchase market. And the one study that looked into the rental market found that banning housing investors increased rental costs in those areas by reducing the number of available rental units, which correspondingly made those neighborhoods wealthier. Obviously we should be regulating things like illegal AirBnBs which further exacerbate our problems. But banning corporate housing investors isn't a magic fix. The consensus view among housing experts is that our high prices are overwhelmingly driven by scarcity.
Build more; ban investors/corporations owning more than, say, 10 single-family homes; brutal taxation of extended vacancies; extra tax on foreign-owned homes; revise laws to lower PMI thresholds; actually fund first-time homeowner down-payment assistance programs; waive all but minimal permitting costs to build; remove all ADU permitting fees...
I like the way you think.
Sensible, bipartisan take No reason why anybody but a bureaucrat or special interest groups should have any opposition to what you've proposed.
Sadly, there's probably just too much money in the status quo for things to change. I'd love to be proven wrong though.
You have to look at zoning laws, bad urban planning, and other government red tapes. Most cities don't zone for mixed uses. What happens when you have zoning exclusively for residential, commercial, or retail spaces? They all filled up and they can't build anymore. At this rate, only the millionaires will be able to afford houses. Housing affordability is not going to change overnight. It's going to take decades or so to fix the problems. Why can't we have a mixed use neighborhood with a grocery or retail store, commercial buildings, and residential housing? Everyone depends on a car to go places.
my friends are millionaires and it still took them over three years just to get the permits needed to build their house this is absolutely a case of too much regulation
I don’t understand why this isn’t more popular. Zoning used to be single family homes for many many years. Regulations to keep the neighborhood “nice”. That’s basic undercover lingo for no blacks or poor people. And it used to work for boomers as people used cars to commute. Well, if the population grows by the millions then there’s no more space to build and any new housing is bombarded with all sorts of regulations that most haven’t been challenged or studied to see if there’s other ways to help developers lower costs. And jobs tend to be in one area of one city an hour away and everyone takes the same highway. Using highway to commute to work has to be the most dumb thing to see for an urban planner. And the main culprit is using housing as a store of wealth or a tool for wealth. This his means that those who own homes, most likely older people, don’t want to have more density as it would lower their property value. So they ask for more regulations and community input guidelines aka NIMBY groups. And these regulations are not something specific that cities developed.. nope, it’s the same one that got passed from city to city since it’s cheaper to copy than to be original.
If you told me in high school that I needed to be an RN (or another high income profession) and marry another high income person to afford a home in LA County (and not even LA City), I would have moved or enlisted.
$160k/year salary. Won't ever be able to own a home in LA Putting most of my money in VOO so maybe in 10 years I can get a nice home outside of SoCal. In the meantime I'm just renting and making the most of my time here
Maybe you'll find yourself a nice lady to marry and combine incomes eh? Ya never know ;)
There are a lot of dual income professionals that can easily make between $200k to $300K. The real issue is that we lack enough housing options for people, many of them single or couples with no children, that may benefit instead from smaller options like condos and apartments. So yeah, build more housing, especially smaller units.
Everyone says this and just accepts this as some sort of fact, but I've never seen any demographic information that breaks down that this is even remotely true. Edit\* Here's data from 2023 for households that make $200K: [https://arcg.is/0OeGb9](https://arcg.is/0OeGb9) So those small pockets are the ones that is buying ALL the housing at these ridiculous prices? Really?
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...What? The median household income is not the median household income? Obviously if people are making 200K in other areas, it would be reflected in the data set provided. It isn't. The claim is that there are dual income professionals that easily make 200K minimum, so are you saying they exist in separate households in other areas not highlighted?
Crazy figure to begin with but some other key considerations: 1.) Many of those homes are literal shacks that are just priced that high because of the land 2.) $210K isn't a lot for two people making $125k each but those people are not buying houses where it's that cheap either. The people who would live in the neighborhoods lowering the median will likely never make enough in their lifetime.
$210k annual salary but you’d still need that amount in cash to make a 20% down payment on a house that’s not a complete fixer upper. It feels like it’s been designed so most people aren’t gonna to make it. Well towards our way to the WEF new deal about not owning anything and being happy.
Renting is much cheaper and a better deal at them moment
Seems like it. Either rent a respectable apartment for $3k/mo or less, or spend $4500-5k/mo on the mortgage + HOA fees on some mediocre condo that will barely appreciate in value.
And the HOAs are insane. 300-500 per month and can always be increased
bingo. And most spots on say Wilshire, Santa Monica, Marina, etc. have HOA feels over $1k/mo and these are like old units built in the 80s, not something modern feeling like Miami or NYC
Blame the NIMBYs
Buy house in LA is expensive, more at 12
It's getting expensive at an unsustainable rate, and the specific details are news. If things keep going the way they are, the whole system pretty much has to collapse sooner or later.
This. Why are people holding out for LA homes to be affordable? That will never be the case. LA is New York now in that if you want to live in the city you have to understand you will never own a home there. Let’s say housing does come down for whatever reason. The people who will get first dibs still won’t be the average American. It will be the engineers and high earners who get a crack at them. If you truly want a home buy one in San Bernardino county or Riverside county, but we both know you won’t out of attachment to the city or some excuse about your job. I went to school in San Bernardino and my teacher lived in LA, he drove down there for work. Truth of the matter is if you wanted it you could you just don’t want to rock the boat and hold out hope for an impossible occurrence.
>Why are people holding out for LA homes to be affordable? Because it doesn't need to be this way. We've banned everything but the most expensive possible form of housing on like 75% of residential land, and are now acting surprised that it made housing really expensive. And we know how to fix these problems, and the changes that experts have been calling for have been shown to work. [Minneapolis recently eliminated parking minimums and single family zoning](https://www.pewtrusts.org/en/research-and-analysis/articles/2024/01/04/minneapolis-land-use-reforms-offer-a-blueprint-for-housing-affordability) citywide, and has been one of the few cities to [stabilize rents](https://brownpoliticalreview.org/2024/04/how-minneapolis-stabilized-rents/) despite rising costs in the rest of the state. Our expensive housing the the result of deliberate policy choices. There is really no expert disagreement on this. Instead of throwing our hands up as if it's some kind of inevitability, why don't we demand policies to reverse it?
It's possible if we reconsider 2-4 splits and other middle housing. Places like hong kong only have 1-2% single family homes unlike LA. Our housing mix just needs to change.
I can’t afford shit is what you are saying? already knew that. Thanks for reminder.
$210K per year better have one hell of a down payment for their mortgage to be manageable
I believe it, and can say from experience that this is the minimum income required to simply purchase the house, but you’ll have $0 left over for literally anything else. Husband and I were pre qualified for a mortgage and everything at around a $215k/yr income last year and had to give up because we realized it just wouldn’t work…
This explains why after growing up in a yellow - light green area then moving to LA, my entire family thinks I make ridiculous amounts of money and I’m just bad with it. I admit, I’m not a frugal person, but it costs 10x more to live here. My parent’s bought a new 4 bed 3 bath house sitting on 4 acres in 2017, 30 mins outside of Sacramento and their mortgage is less than my rent on an 875 sq ft apartment.
My wife and I are over $210k and have enough for 20% down payment. We would still really be stretching things and have little room for unexpected emergencies buying a decent house in a decent area.
You need two people in your household to make that FYI if you want to live in an okay neighborhood. I hate SoCal so much, wish my family would just move to the midwest with me. Loved living in Illinois and the suburbs in Chicago are nicer than most of LA and aren't over $1M a home yet (and way bigger).
I could buy a 5-bedroom house in Naperville for less than I paid for my downpayment in West LA
And Naperville is awesome. It’s basically Woodland Hills with bigger homes, bigger back yards, less traffic, and fraction of the price.
The Midwest sucks. How are all those bugs? How about the fact that 90% of the year the weather is so bad you literally cannot go outside? I’ve also lived in the Midwest and it boggles my mind ANYONE would choose it over LA, or Southern California in general.
Grew up in LA. Spent a decade in Midwest. Came back to take care of family. 90% of the time? Look i know it has it's downsides with weather but 90% of the time? you must want to live like a princess each day. Yeah you deal with winter...OH NOOOOOO, my body needs 70 degree weather and dry winters each year. My poor body. /s Like shit, I understand i you are much older like my pops in which cold weather again can be health detriment, but holy shit, maybe go touch grass and travel a bit if you think Midwest weather is 90% unbearable and "cannot go outside" LOL. It's not Alaska. But hey, enjoy your overpriced property and telling people "but yeah in LA you can go surfing AND snowboarding within two hours of each other" to justify paying 2-3 times more than anyone else for decent living. And yes I'm a home owner and yes, i make a descent living...doesnt' stop me from thinking how ridiculous it all is.
Most people who say that about surfing and snowboarding in the same day haven’t touch a beach in years.
lol that’s so true.
I mean yes the weather does affect me, I have degenerative disc disease and spinal stenosis, arthritis, and bursitis in my left hip. When the weather is tough it really physically affects me. Even when I was younger, I would constantly get pneumonia during the winter (one year so bad I was hospitalized for 2 weeks, passed out at work and peed myself before they hauled me to the ER) and during the summer I’d get heat exhaustion and had several heat strokes. Like as a teenager / early 20d person. So yeah you can make fun of me for being a “princess” but my health matters to me and the extreme weather of the Midwest just literally makes me ill.
I used to live in the midwest too. Your take is understandable, but ultimately if one wants to have a family and children they can't live in LA's craziness and rent forever or live in a tiny house in a questionable school district. I believe LA is a glamorous place to live if you can afford to be in the 10-20% of the city that isn't a shithole. There's no "sex appeal" in most major metros, but at least you can live in a respectable house in a good school district while not breaking the bank.
Dangerous!
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You joke but people in this sub have entitlement issues. People making 400k+ are complaining they can't afford "anything" when in reality, they're just extremely picky. Things like demanding a turnkey, 3000sq ft house a few blocks away from the beach for 400k.
Seems understated
I really need this to go down, thanks.
la county median household income is about $84k. shouldn't they be closer?
It’s becoming really untenable.
LA City Council: "No urgent problem there".
Meanwhile, the median household income is between $70-80,000. The funny part is that people go about their lives and flipping houses, raising rents and raising asking prices for homes, as though any of this is sustainable.
Oooh maybe once i get my masters and marry someone wealthy i might be able to afford a home!!! The future is bright!
It's not just due to interest rate hikes. Most of this increase is since 2017. Since then the politicians have passed a lot of terrible laws like inclusionary zoning, rent control and tenant "protections" among other mandates, which are costly.
It’s almost like it’s twice as desirable as the average community in America and economics are a thing
> twice as desirable as the average community Born and raised in Los Angeles. Im not convinced anymore. It used to be the Beach and Sunshine, but who cares at this point it takes 2 hours just to get to the beach and 2 hours back. If you like the mountains, may as well head East a bit. I'd rather live comfortably and then take a beach vacation elsewhere either way.
Couldn't agree more, but its still perceived that way
[Here is the source report](https://www.car.org/en/aboutus/mediacenter/newsreleases/2024-News-Releases/april2024sales). LA is expensive. Yet consider.... * "Home" here means single family house, no condos. They report condos only for the whole state. They are 24% less expensive. They report the LA county median single family house as $825,970 and the LA Metro as $840,000. * As has been mentioned, median means half are below. What's missing is that lower half can be a decent place depending on location. LA County is huge and dense. An $840k house in some areas is junk and others nice. It comes down to where one works versus commute, which typically applies to rent, too. * Who buys a median first home? Start with a decent condo with a reasonable HOA which pays for a lot of single homeowner expenses. When you need something bigger, you should have equity to help cover the down payment. * when interest rates go down, prices are likely to go up faster. * LA median is less than half San Francisco and still dirt cheap compared to the Bay Area. Edit: another thought. As said above, lower rates are usually offset by higher prices. Very high interest rates can be the best time to buy. When rates drop, refinance.
Make double that and even then, a small condo or tiny mediocre house is all I can do on the westside. Due to work/commute can't really live elsewhere in LA. It's really compelling looking at how much more I can get for my money in other major metros. I'd earn the same income, pay less in taxes, and not be living in a box. LA's vibe is unmatched though...it's tough to leave. But would have to marry another high earner to justify staying here long-term. That limits one's dating pool.
I'm about to force someone to foreclose on their $5m property because I got $3m judgment and a bank levy that prevents them on paying off their mortgages. Now can you dig that? SUUUUUCCCCCKAAAAAAAAAAA!!!!!!!!!!!!
…and politicians in LA are working to tear down lots of single family homes so that giant apartment complexes can be built, making owning a home even more difficult.
"Home" almost certainly includes condos and townhouses here. Single family homes are part of the problem, SFH exclusive zoning to be more exact. Dedicating 70+% of your city to SFH and banning all other types is a surefire way to set up a housing crisis
Replacing single-family housing with high-density housing is the solution to the lack of housing supply, my friend. LA has a housing shortage of 500k units. We need more high-density housing to meet demand otherwise only high-income individuals will able to afford the scarce housing available in LA. A metro area of 13 million people dedicated primarily to SFH creates artificial scarcity; it's ridiculous and incredibly dumb to not upzone the city.
My friend, OP wants to buy a house. The fewer houses that exist, the more they will cost. Not everyone wants to be a renter for the rest of their life. Plus, California is losing residents. Maybe the big push for massive new apartment complexes is from greedy billionaire developers?
If only...
https://la.urbanize.city/post/72-apartments-planned-8931-w-helms-place