I live in LA, the land where land costs you an arm and a leg. That’s right, the prices for living here are insane. Condos here go for as much as houses in other cities. Houses start at something crazy like $400k. And that got me thinking. What the hell do I need to make to be able to afford a house here?
Well, without doing any hard math, I decided to look at my parents’ lives as an example. They did pretty well for themselves, and owned quite a number of properties over the years. I thought about what they could afford on their income and it really put things into perspective.
My parents bought their first house here in the US 20-or-so-years ago. I don’t remember the exact figures my dad once told me, but I recall something like $120k. That’s $220k in today’s money. I have no idea what my parents made, but I know they are very cautious spenders, and I think they bought it in cash after years and years of saving in poverty.
Then, about 10 years ago, they bought their second house. I believe it was for something like $350k, which is about $440k of today’s money.
And here’s where my brain went numb in awe. At that point, my parents had no debt and bought everything, including the house and cars in cash. That isn’t typical, and even though we lived a middle class lifestyle, something tells me my parents were far better off than most of our neighbors.
And thus my chilling conclusion. How in the hell are people in LA supposed to afford a house? Granted most of them aren’t buying it in cash, but with interest and fees, a $400k loan is a hefty monthly payment (~$3000), easily dropping someone from “rich and comfy” to “college student.”
No wonder some people commute over an hour to get to work.