An article was just released on Fox26 that said the minimum salary to be considered rich in Houston is approximately $124,000.
So, what kind of house can you afford if you're "rich"?
Using the Zillow Mortage App, Affordability feature, here's what the results were:
Income:$124,000 a year
Down payment: $50,000 (just a random number, but remember to avoid PMI you want 20%)
Monthly debt: $800 (I figured 500 for a car, 200 for student loans, and 100 for anything else)
Interest rate: 6.434
HOA dues: $0 per month
Max Debt to Income: 31%
Loan term: 30 years
Homeowners Insurance: $2,000 per year
Property taxes: 2.31%
Income taxes: 30%
Zillow thinks the house you can afford is $310,952. Or, $2,403 a month payment.
Now, I have my suspicions about this number...a Google search for "how much do I have to make to by a 300k house gives you numbers closer to $70,000 a year. But, for examples sake, we will "trust" Zillow. Pro tip though, the only real way to know how much you can spend on a house is to get a pre-approval from a lender!
OMG. That's below the median house price in Houston (which is supposedly $315,000). That monthly payment is below most house rents inside the loop of Houston. Also, in this scenario, to avoid PMI you would actually have to put down $62,190.40....or $12,000+ more than my example.
One just cannot accurately describe how big geographically Houston is...so be prepared to spend a lot of time in a car and on the road and spend a lot on gas if you're not living inside the loop.
And, there's another weird phenomenon I've been seeing with buyer clients. Usually, if you can't get what you want in the city...you just move further out and spend a little less...and then further out and spend even less...etc. But, in reality, you're going to spend pretty much a minimum on a house no matter where...which in my practice has been more in the $400ks at the bare minimum. You will spend the same, you'll just get more square footage further out.
So what will $310,000, the "median" house price, get you inside the Houston loop?
I drew a map to check out the 610 loop for anything between 300 and 310k. I got 13 matches. On the low end, the first 7 houses didn't even include photos of the interior of the homes...usually an "industry" sign that the inside is trashed or they are definitely not selling the property for the house.
And, even within the loop, there seems to be a wide gap in expected quality of house, of course lot size has a big part to play in value. There's a limited amount of land inside the loop! So usually bigger lots demand a higher market price...if it's in an area people want.
This condo was actually quite cute, rather centrally located, and also comes with a monthly maintenance fee of $647. So, add that to your monthly bill.
The most expensive house on the list was an updated 1936 house with no garage. It definitely wins a "cute" point. But a 3 bedroom in under 1,250 square feet...I would think those rooms are pretty small.
Ok...so maybe someone making 100k+ a year loves theses houses. Well, then they are in luck. But, without being too specific, most of the buyers I typically work with...all of these homes would be a bit lacking in preferences for one reason or another.
So, let's see what the rental options are if you HAVE to be inside the loop. Right off the bat, a LOT more options. In the $2,300 to $2,400 range to keep with our finance example, there are 70 active properties and then by adding ONE criteria...Pets are "allowed case by case," that went down to 48. Still a lot more options!
And the size and amenities available in the rentals vs the single family homes for sale...quite large.
Honestly, we all know that home ownership is important, but let's be real, these kinds of different options definitely illustrate why it is so hard for some people to make the leap to ownership...you just can't find something comparable for the price you'll pay in rent, even if you CAN afford it.
And, what about the rest of us? The solid, middle-class, not considered "rich." A quick Google search for "median salary in Houston, Texas" brought up a range of approximately $44k to $75K. So, if we split the difference, that's about $60k a year.
Using my same Zillow Mortage App criteria...$108,659.00 Let's see what we can buy!
And, there are some options for under 110k inside the loop! Most of them are condos, which, remember, will have additional monthly fees...but there are actually options.
So, what's the point of all this? Just to be a Debbie Downer? Not at all!
I'm a realist and one of the hardest parts of my job is to assist my clients in aligning what they "want" and "what is actually available." Sometimes, until you are in the market, there is just no way to really predict what's available and what to expect. You can't rely on your parents' advice...a LOT has changed since they bought their first house 30+ years ago. If anything, this should help illustrate how helpful an experienced and knowledgable Realtor can be in the buying process. If you've been in the industry as long as I have, you get really good at finding solutions to tough problems.
