Average income for $1 million home?

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zigzag_IHB

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I'm a long time lurker here and I have a question that is going to sound nosy, but it really is genuine interest ...



I see many people in these forums talking about buying this or that house at a given price, even at what I consider very high dollar values.



<strong>My question is, for those buying in the $1 million dollar area, what is your income??</strong>



I have not worked the numbers recently, but last time I did it seemed like by time you add together interest*, taxes, insurance, utilities, and maintenance, the cost of ownership for a $1 million house was around $7,000-7,500 a month.



*Interest here represents either mortgage interest paid if purchase is with a low down payment, or the investment income forfeited with a large down payment that cannot be otherwise invested.
 
Just check out the blog posts here, each home featured has an "income requirement". A $1M home probably has a min income of about $250K with $200k as a down payment.
 
Agree. 250K household yearly income will render somewhere around 12-3K (after taxes, retirement contribution, healthcare premiums, etc). 12-3K less 7K for the scenerio you described above (assumes a 20% down) leaves 5-6K per month for car, food, gas, child care, misc... and this doesn't take into account the tax deduction benefit of that Jumbo mortgage...



The real issue is, how many households in Irvine have that 250K income? Statistics would suggest few... after all, nationaly, 250K puts you in the top 2-3%... and I think that Irvine's averages are somewhere around 90K per household...



So what we may have here, is many overseas ("I fleeced my nation and ran") buyers, a number of ("I already made a ton of equity off of all you knife catchers") people, and then a very few... I'm new to the market but make a bank roll of cash people.
 
I believe some have sold houses in the past for a profit, therefore allowing them to have a substantial down payment as well. One may not be able to get a mortgage for 1 million, but the payment would be manageable with a sizeable downpayment.



Edited: Plus, the more we rent, the more money we can save towards our downpayment. :cheese: We aren't paying a landscaper, HOA, home maintenance, pest control, property taxes, etc. I almost feel like the landlord is paying me to live in his house. :coolsmirk:
 
To clarify or tweak my question a bit ...



I am interested in what the actual people who post here discussing houses in the $1 million price range -- who have recently bought or plan to buy or are looking to buy at that level - there are several such discussions/posters. I am interested in the actual deals - what income and down payment are involved?



The theoretical mathematical calculations I understand.



Thanks!
 
IMO, income level is rather moot, you either qualify and are able to get a loan or you can't. Income level isn't the sole qualification for a mortgage level as other assets and net worth can come into play. Let's not put "affordability" into this mix, because as we've seen there are lots of people with loans they cannot afford.



Best bet is to check out IrvineRealtor's spreadsheet of all the MLS listed home that has closed since 1/1/08 and their details. You won't find income on there, but you will find down payment amounts and other details.



<a href="http://www.irvinehousingblog.com/forums/viewthread/2171/">Irvine Realtor's Thread</a>
 
A quick sort of IR2's spreadsheet, homes in irvine which have sold from 950k to 1.05M had an average down payment of 58% and not surprisingly more than half have a mortgage loan of $417,000 or below.
 
[quote author="zigzag" date=1211085037]To clarify or tweak my question a bit ...



I am interested in what the actual people who post here discussing houses in the $1 million price range -- who have recently bought or plan to buy or are looking to buy at that level - there are several such discussions/posters. I am interested in the actual deals - what income and down payment are involved?



The theoretical mathematical calculations I understand.



Thanks!</blockquote>


Generically, I believe that nobody is getting away with less then 20% down Lenders just won't give super-jumbo mortgages with less than 20% down. If you look at the spreadsheets in the "what's going into escrow" thread, you will see sizeable down payments.



But I see that you are "interested in the actual deals." Where are you going with this? Are you focusing on a particular builder? Did you recently buy and wonder if you got a good deal? Are you an IAC marketing person seeking to become an IHB advertiser and better trying to understand the IHB demographics?
 
Yeah, 250k a year and 200k down.



I'm not sure where you are going with this as well. If you are looking for a no doc, 0% down, option 2/28 loan...then lol! You made my day.
 
I'm buying a house in the near future (Sometime between November of this year and February of next year) My income is between 200-275k a year. Depending on the year. I have about 265K liquid right now and plan on having around 325-350K liquid by the end of the year. I have 200K in a 401K. I have no debt. I'm planning on putting 20-25% down depending on the purchase price. I would like to buy for around 1 million but am willing to go as high as 1.2 if we really like. I'm very convinced that homes that are priced around 1.3-1.6 million right now will be around 1m-1.2 million by late this year. I know I may not be buying at the ultimate bottom but I believe this winter will be a pretty good time to buy. I realize I'm not the norm with my income and zero debt situation. When I start making offers 10%-15% below recent comps on houses if the seller is not willing to negotiate than I will move on. Irvine in my opinion still has 20-25% to fall before the bottom. This is a huge buyers market and if sellers don't realize that I will not deal with them.
 
[quote author="zigzag" date=1211085037]To clarify or tweak my question a bit ...



I am interested in what the actual people who post here discussing houses in the $1 million price range -- who have recently bought or plan to buy or are looking to buy at that level - there are several such discussions/posters. I am interested in the actual deals - what income and down payment are involved?



The theoretical mathematical calculations I understand.



Thanks!</blockquote>


I am one of those posting here and looking at that range. My household income is in the low $200K range. If we were to buy today, we'd be willing to swing a purchase price up to $1M. To do that, we would purchase with $250K cash down, and then sell our condo for $575K or so and extract the $150K of remaining equity we have in it.



A $600K loan at 6% today (Penfed with only .125 points) would be $3600 per month payment. We would not purchase in a high mello roo area such as VoC or Woodbury for $1M. Monthly property taxes + MRs of $1K or so, HOA and insurance of perhaps $225-250/month, + a couple of hundred for maintenance reserves would put the total pre-tax monthly around spend around $5K. Even at $200K , that would be a 30% DTI. We shooting to stay at 28% or under...



If we had car payments or any debt beside mortgage, $1M wouldn't be safely doable. If we were buying into an area with $6-8K per year of mello roos, $1M wouldn't be safely doable either... If we didn't have 20+% down and some equity to layer in, $1M wouldn't be comfortably doable either.
 
IPO,



Out of curiosity which areas are you focusing on for low Mello-roos. VoC, Quail Hill, WB, Portola Springs, etc all have high mello roos. Northpark, NW Pointe, and to an extent Turtle Ridge have much cheaper mello roos than any of the communities from 2004 and later, where mello roo increased side by side with real estate prices. But they still add $3-4K a year for mello roos. Whereas the newer communities like VoC and WB are in the 6-9K range.
 
We have a household income of about 270-280K and have 20% down for a home purchase. We are looking to buy a home in the $600-800K sometime in the next one to three years - im hoping that will get us a 2500+ sq ft home with a good sized yard. We can afford to wait longer to buy a home than most people here since we both are 30 and have no kids. We can afford more but I dont like the idea spending a large chunk of our income on a home. I dont think zigzag is up to anything, i think he/she is just curious. I know i get curious regarding the details of a deal when people are buying million dollar homes, since not many people can afford these homes.
 
hbguy,

Have u lowballed anyone yet? Seems like a realtor may get pretty chapped if he/she knew u were doing that? Am I right thinking that way? Seems like it may perceived as a 'waste' of their time to do that...I dont know thats just me. Believe me, I would love to lowball everything out there to reset the baseline...just seems like a lot of work.
 
[quote author="Bubblegum" date=1211095199]IPO,



Out of curiosity which areas are you focusing on for low Mello-roos. VoC, Quail Hill, WB, Portola Springs, etc all have high mello roos. Northpark, NW Pointe, and to an extent Turtle Ridge have much cheaper mello roos than any of the communities from 2004 and later, where mello roo increased side by side with real estate prices. But they still add $3-4K a year for mello roos. Whereas the newer communities like VoC and WB are in the 6-9K range.</blockquote>


The MRs at NP, NW Pointe, and Tustin Field are probably the highest I'd want to go. Newer Tustin Ranch, since it was built out in the late 90's, has fairly low MRs as well.



We won't be buying in VoC (high MRs), QH (no Uni high), WB (high MRs), PS (high MRs), TRidge (overpriced), Oak Creek (no Uni), or UP (to old for my taste and no Uni)... Anything else is probably fair game. NP or TRanch are the focus areas for us right now.
 
You don't need a realtor to put in an offer. <a href="http://www.uslegalforms.com/realestatecontracts/california-real-estate-contracts-forms.htm">You can buy yourself some forms</a> and go to town.
 
hbguy,

Have u lowballed anyone yet? Seems like a realtor may get pretty chapped if he/she knew u were doing that? Am I right thinking that way? Seems like it may perceived as a ?waste? of their time to do that...I dont know thats just me. Believe me, I would love to lowball everything out there to reset the baseline...just seems like a lot of work.





Johnny Fever. (I love the name). I have a realtor who is great. He has my best interest at heart. You can't say that for most realtors. I tell him what I'm willing to bid and he writes up the offer. He only gives his advice if you ask. He doesn't try to counter offer me. I've submitted one bid so far at 18% below asking. The seller is pretty much trying to get what they owe on the property as opposed to what it is worth now and what it will be worth this fall or next winter. If he accepts much less than asking than it will become a short sell situation. My agent is really good if you need a good agent let me know. Send me an email and I can have him call you. As far as wasting your time or your agents time right now agents have alot of time. Not to say that you want to waste a realtors time but they are more flexible these days. If you wanted a house two years ago you needed to come in at full asking price or higher. Those days are long gone. It is not like 2005 when the California Gold Rush was in full swing. It really comes down to what are you trying to acchieve. I'm trying to buy a house for about 10% below current market. Therefore I start at 15-20% below and feel out the seller. If they are offended who cares. They better get used it. I don't think that is unreasonable for the times we are in. Right now the buyers hold all the cards. With all that being said I think that waiting until next Jan-Feb will only make things much better and the sellers will be that much more desperate. The only thing that makes unrealistic sellers come to terms with the fact that they are not getting what their neighbor Bob sold their house for a year ago is time. And I have plenty of it. Let me know if you need the name of my realtor.
 
For many homes on the market, it's not the willingness of the sellers to negotiate, it's the financial ability for the sellers to negotiate their asking prices. If they own 1M on a mortgage, any offer you put is below their mortgage is likely to be rejected or sent to the bank for a short sale. That's part of the reason I think the prices in Irvine are still elevated. Lot of sellers don't have much or any equity to negotiate any lower. The question is when will the banks will learn and start accepting offers and taking the losses.



When the bank wake up and all the foreclosure hit the market and ruin everybody's comps in the neighborhood, there will a lot of people underwater. The billion dollar question becomes, do you walk if you're underwater or suck it up and continue to make payments.
 
Zig - I think you need to change your thinking. It seems you are looking to find a general type of buyer and income level for $1Mil homes. My guess is there is no such thing. Each buyer in the $1Mil range will have a completely different set of circumstances.
 
Thanks for those who replied to my question.



My currently personal belief is that it does not necessarily make sense to put a lot of one's net worth into an expensive home. Under that belief, the only way it makes sense to buy in the $1 million range is if one's household income is very high. I also felt this was contrary to the current marketplace - high downs, but not necessarily high incomes. I was curious how others in the marketplace saw it.



My belief is guided by the fact that I do think we will see more than inflation level home price appreciation for many years here.
 
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