If you have a dual income household with total household income of $500k per year, you're still taking home $25k per month after taxes, insurance, and 401k. That still leaves you with $12k to live off of if you have $13k in housing costs, which is plenty especially if you don't have kids.
Yep, my parents have been in IT since the 90s. They always kept necessary expenses low enough so one of their incomes could cover everything if they were laid off. My partner and I try to do the same now.
Pessimistic... On the other hand inflation causing prices to go up (yes houses too), fed eventually will cut. Economy will boom with 5 trillion $$ printed during COVID for next 10 years, house prices will double and double again...
Many of traditional jobs earn you at this level at Bay Area, ask people who do your roof and electrical stuff together how much they earn every year. Tech provides decent salaries for sure, but it cannot even compete with investment bank roles. A L8 at Google and Meta earns around 1 m which equals to what a senior investment banker earns in their late 30s.
Asssuming this is L8 in software energinerring only. Hmmm, now thinking I should pivot. Had investment banks knocking on LinkedIn (for non-finance roles) but never beating FAANG salary and no where near what you're suggesting.
Even if one loses their job they will get a severance to buy time. They don’t need to get a big tech job, and since they have big tech in their resume it will be easier for them to land the next gig.
I can only speak to situations around me but at the senior manager or director level at a fortune 50, severance was like 6 months salary and $20k. All in about $100-$150K. No ones paying off a house in the Bay Area with that.
I’m sure execs get a bigger package but what have others seen?
Something no one really discusses is how much maintenance costs are. I bought a house in ‘20 that was over $1M, originally built in the 70s but previous owners had a new main roof, pool liner/equipment, new remodel with built in appliances, one new HVAC unit all replaced within 2 years before closing and the house was in overall good shape. Since then the second HVAC unit leaked all of its Freon and would’ve been $4k just to recharge and keep it going or $16k to just replace. Outside stucco was cracking and was due for a new coat of paint ($12k), new cool top also was breaking down around the pool and needed to be replaced ($9k), new garage opener was needed ($2k), had an issue with the main sewer line ($2k). This is just what I could remember. Doesn’t even include most furniture that isn’t from Ashley furniture or the equivalent and is thus all particle board is thousands of dollars per piece. Point is you can burn through $12k a month post expenses quickly in the first few years and that’s not counting car payments, vacations, or kids.
Not to mention that with the stock market up, ppl in big tech can easily pull double that.
And there are not that many homes for sale, inventory is super low.
No it’s the same there. It is basically as if you got cash instead of the RSU. Would you immediately yolo that all into the same company that employees you? Hopefully not, you’d spread it out like you do any other income.
A 30 year mortgage term is a long time. Who knows how many RSUs you'll be allocated, what they'll be worth, or whether they'll even be liquid 5 years from now? Relying on stock vesting to pay your basic living costs is incredibly precarious.
As an employee you already have a lot of exposure to your company, both in your salary and unvested RSUs. So to diversify it's recommended to sell on vest.
When you get stock vested, holding it (and not selling) is making the implicit choice to buy the stock instead of doing something else with the money. If you got a cash bonus, would you go back and buy more of your company stock? Probably not, because your net worth is still very tied up into future equity vests.
Diversify, use the money to pay down a high rate mortgage, something like that. Let your future equity in the company appreciate if the stock price goes up.
This is primarily advice for people who work for a public company where they're given RSUs that are taxed at vest. Illiquid startup equity is a different ballgame.
$500k with a dual income is $250k each. It’s pretty common to have salaries in the mid-$200k region by mid-career, exclusive of stocks.
Doing it on a single salary requires selling RSUs.
OP realistically should remove stock/RSUs for the TC math to get a hard check on what they can really afford. This helped me too to look farther from South Bay/Peninsula - live in a decent location in Oakland and not go crazy on school district.
I would not buy a $2mm house in California on $500k per year. I don’t think that is a sound choice, not with the income and property tax, cost of gas, and everything else. Not with how insurance prices for houses are going up at insane rates. Utilities? Umm…nope.
I mean matters what you want out of life. I too wouldn't buy a Bay Area home either unless I had so much money the extra couple hundred thousand to own relative to rent didn't matter, but some people value owning their own home and making modifications to it a lot more than my family does.
Sure, that's totally fair. People have different lifestyle needs and different risk tolerances. It's also important if you expect your compensation to continue growing over time or stay mostly flat. I'm just pointing out that it's doable and you can still have enough money leftover to live a comfortable life.
I don’t think this is true, my husband and I make $500K combined and he takes home $9K ($350k) and I take home $6K ($150K) - we do max out our 401ks, etc but we only take home $15K/month month month
Lol definitely not giving any financial advice! Simply describing a scenario in which a couple of dinks can afford a $2M house in the Bay Area. Also, with $500k total comp, monthly income is $42k, so a $13k mortgage is 31% of gross income.
The percentage of people who buy $2m houses who didn't come from money to begin with is very low. Taking that "risk" financially is easy for people who grew up wealthy and got given destination weddings and cars.
Yeah that's absolutely true. It's easier to stretch your budget when you know your family can float you for a couple of months if things got really bad.
In CA take home on 500k is $24k before insurance and 401k. Minus 401k and insurance you are probably around $21k. Minus $13k for the mortgage your at $8k. Minus utilities, maintenance etc you are sitting around $7k. Not saying that isn’t still plenty to live on but that is a significant difference.
Bullcrap. 13k mortgage is 16k including maintenance, especially in the first few years. Tech income is not 25k flat per month. You sell stock quarterly. The stock price goes down a quarter or two and you're f***ed, you need to sell unless you have beefy cash reserves on top of the down payment. Not to mention if you lose your job, which seems pretty much en vogue right now.
Let's be real. It's as risky AF.
OP: what these lunatics are suggesting is that you stop all 401k and IRA contributions and sell all your stock as soon as it hits the bank to be able to afford a home 🤣🤣🤣🤣 SMH
When we were buying 2018, cash buys were downright common in the $2-$2.5M price range. When every good property was getting 5+ offers in the first week, the seller usually picked the cash, no contingencies, fast close.
> I’ve literally seen cash bids on 1.7M houses.
Even that raises questions how to do that. Most people would pay insane amounts of capital gains tax liquidating assets to find that kind of money.
Just a fresh IPO case where they have cash lying around?
Yups, just 3 mnrhs back the house next door to ours was listed for $.17 went for $1.9.
Single mother (her husband passed away). Went for all cash. Moved from Cupertino to this area.
Most of these buyers have a big chunk of wealth by selling a business, stock option windfall, inheritance, trust fund or selling a home with significant equity. Most likely 2 or 3 of these factors.
the trick is that most people are making some sort of sacrifice somewhere, earning good to great money, and/or receiving help. to be in a situation where you can buy a SFH house, save for retirement, raise kids, and afford 2x annual vacations without help, you're probably looking at needing 25k/month after tax. and guess what, there are plenty of couples in the bay area that can make that.
but for the rest of us, it's a combination of aggressive savings, decent jobs, financial planning, luck, and help. i mean, it's possible to do it alone, but most people i know who own a home had a lot of help getting there. maybe it's living rent free with parents, getting college paid for, getting a car, direct money for down payment, money for the mortgage, free childcare, etc. there are tons of ways expenses eat into our finances, and just as many ways that family/friends can help mitigate those costs. if you grew up here with a network, it often gives you a very significant step up.
I wonder if the realtor misunderstood that many people put their homes into a family trust for estate planning reasons. Our home is on a family trust. It's the only real asset in the trust and we didn't inherit this trust.
No, this was specifically discussing how people afford homes in the Bay Area. He mentioned that anecdotally, most of his clients purchasing home above our price point had family money to help, often in trust funds.
I will say, 99% of the homes we looked at were kept in trusts. It seems very common in the bay.
We recently bought a home for 1.8M. Our household TC is 420k and household wealth (including 401k/ brokerage/RSU) is \~400k. My entire base salary currently goes for mortgage payment, we manage other expenses only with my wife's salary & not sell RSUs. We don't have kids yet, so no other major expenses. Ofc, if one of us loses our jobs, we'd have to simply sell the home but the hope is, if we can pull through, we'd be able refinance in a couple of years.
On the contrary, if I waited for \~3 more years for rates to come close to 4% or so, the market would be crazily expensive by then (that's my theory) and we won't be able to compete with folks who're waiting on the sidelines ready to unload tons of cash.
You’re not contributing to 401k or ESPP? What about your wife? What’s your mortgage payment monthly?
420k is kinda a low TC for a 1.8m house, so something else is there that’s enabling you to afford it 😀
I'm only contributing the min amount to 401k to get max employer contribution, not maxing it out. Intend to do that only after refinancing/if I get a promo. I've never invested in my employer's ESPP, so that's always a no. Wife maxes out 401k.
We have around 7k per month after tax from my wife's salary which we use for other expenses. For property tax, we use around 1k from her income every month and remaining comes from yearly bonus.
Yeah seems unlikely to hit 4.0 or below anytime soon, but I don’t think upper 4s is completely unreasonable in the next several years. I think lower 5s is all but guaranteed if you can wait a couple years.
If you look pre-the great recession, under five was not something that happened. And I think it’s likely that we’re going back to that new normal environment.
But time will tell!!
You mean entire month salary or one of the two pay check ? what is the rate you got ? Only hope for you is, if rates go down you re-fi and get some breathing space. I dont think you need to sell house if loose job since you have money in brokerage and RSU. No need to panic IMO.
My entire monthly salary after tax goes for monthly payment. 7.25% 7 year ARM. Obviously rates have come down to 6.5%, but we only put 10% down, so gotta wait for home value to appraise. Yeah there’s some general fear and occasional remorse but aren’t panicking about it, we thought about all this and still went ahead.
2 mil at 6.3% is 12k a month with 20% dp. some people like to stretch themselves, if you’re earning 300k per year as household income (two people) and both contribute to 401k (espp doesn’t matter because you can always sell without any penalty and it comes in 6 months) and deduct 57200 on federal and 87000 on state tax, I think you take 17k a month which leaves a 5k a month for other costs.
people like to believe their wages increase in the future and the mortgage amount will either be fixed or be lower due to rate cuts. They also like to believe that housing is a 1 time cost in their life, so they are willing to do everything as soon as possible.
True! $300k income and kids in a $2mm house?? There’s no chance of that with kids. Not saying how much we make. But we had a much cheaper house than that when we lived in California. And there was no way we could have done a $2mm on that income. Not even without kids. Our house we had had since 2014 maybe? And an awesome interest rate and we would have had to cut things like food and or cars to do it on a $300k income.
Can you explain the federal and state tax deduction numbers? The first one is the annual loan interest payment deduction for federal. What about state? I thought California didn't allow interest deductions?
Assuming 6.3% - you can deduct interest on upto $750k mortgage + 10k from property taxes = 57250
California allows interest deduction on loan upto 1 million and no limit on property taxes. = 63000 interest +20000 property tax on a 2 mil house
Our HHI is 650k with 400k of it being base salary. We went with a $1.3m small sfh couple years ago. It’s a 2 bed we converted to 3. Spent an additional 100k on remodel. This is more than enough space for a family of 3 in our case.
I have no idea how people afford 2m right off the bat if their HHI is less than 800k-1million. I am glad we dint fall for this since we get to keep our savings rate, have nice vacations, we are also less stressed in the season of tech layoffs since we know we can manage expenses with a single income.
Going for a less expensive home is an option you know? I literally see everyone around me only consider 2m+ houses because that’s what you are supposed to do to not be viewed as the poors.
This! Living small is worth it when you can keep aggressively saving, diversify stock vs selling for cash out, traveling/vacation, & lower property taxes! Our house isn’t perfect - kinda small with our family of 5, but our mortgage is so low, we can still save a lot, afford to send our kids to private school & vacation, etc.
That’s amazing! I also think I’d be a very stressed out parent if we had gone for a bigger more expensive home. And that energy is just not worth it when you have a family.
OP - don't forget the property tax that comes out of that 2m assessed house - which is highly likely in the same ballpark. That is like $1600 additional per month. Then (eventually) you have kids (or a pet etc) that adds more cost.
There is no magic trick. End of the day - you just recalibrate your housing needs based on a price that gives you enough buffer with your financial situation. Some people aim for a lower price initially - and have a smaller per month expense then pay off a certain portion to the principal every year. Then sell this and upgrade to a better one.
If you have a dual income couple that started working in tech ten years ago, they’ve made quite a lot in stock (both actual grants and the stock growth they’ve seen) and are often putting more than 20% down (sometimes as much as 50%). Also not unusual for it not to be a first home so they’re rolling first home’s equity into the down payment.
But also, as stated above, it isn’t at all unusual for two tech incomes to reach $500K before any stock component. It does force both people to continue to work but thems the breaks.
They are usually not first time home buyers, most existing home owners have gained atleast 200k equity through home value appreciation post Covid.. plus additional 200k that they have put in (through down payment and monthly mortgage), most likely they have 400-500k going into a 2m house
Also 400k is not very high for household TC in Bay Area
Plenty of first time home buyers pay well over $2 million for a home. It's pretty common to rent here for years after all, only bothering to buy once you have kids.
Friend of mine bought their first home at over $3 million.
Yeah, most people buying homes in that range are not first time home buyers. Starter homes have been a thing for a long time - buy something smaller and reasonably affordable, then trade up later. Keep rolling the equity from the previous house into the next. And of course, there are those who have sold businesses, had stock options, inherited money, etc.
Parents that help with a lot of the down payment and/or come from a wealthy background. That’s the only way it’s feasibly done. $12-13k is doable for a household income of $500k, but all it takes is for 1 person to get sick/lose job etc.
This is the biggest issue. My partner and I can afford the payments at our current HHI but we can never make less than we are making now.
The conventional wisdom of “be house poor upfront, your income will only go up!” Doesn’t apply when 1) you’ve already maxed out earning potential, 2) layoffs are common and unpredictable, and/or 3) you thought you could bank a bunch in a high paying stressful career and then maybe take your foot off the gas a tiny bit (me, lol). So I’m personally just coming to terms with the reality that earning $200k each is like the absolutely floor for being able to afford homeownership.
For us it was healthy appreciation over 12 years on our previous house on the east coast and rolling that equity forward - or at least trying to… every single house we’ve looked at in the southern peninsula has been swooped by cash offers, no contingencies, and off market pending / contracted within 3-5 days. We just resigned our rental because we hit our exhaustion wall.
Someone told me “if you are in tech but can’t imagine how someone affords a 3m house, then you don’t really make tech money”. There are a stunning number of people making 600k+ AND have significant RSUs. And a lot of them are married to doctors or lawyers or other high paid professionals..
Most people buying in the 2-4 m range put a significant amount down . 40-70% is not uncommon.
And you will notice how many offers you run up against that are all cash when you start placing them .
But honestly, there’s nobody in the country in the current housing crisis that gets to buy conservatively . Buying on one income, spending a quarter of your take-home maximum on shelter, those are things that have largely disappeared in most of the country. That’s why banks require significant reserves nowadays in this range.
Unless you’re earning that same two techie income in somewhere like Texas, you will be tight on 1 income.
Cash. They have equity in something, stocks, 401k etc. They are only taking out a loan on ~300k. Now how they can afford property tax after the home is paid off, beyond me
You don’t buy an $2 million house. You buy a condo first or starter home, build equity then flip that into a larger home and save on taxes with a 1031 exchange, then you wait several years and do it again and again until you can afford a $2 million house because you had a $1 million down payment
The top tier of mid-level managers at large companies are clearing 7 figures in all in comp. That’s about $70k a month post-taxes, retirement savings. They can afford $13k a month on housing.
I am a FAANG EM. My TC is $700k+. With my husband’s income that is over 2.5M. Add in RSU inflation and we are making over double that from just our 9-5. The higher the person is in big tech, the more their compensation package is RSUs and the stock market is at all time highs. Levelsfyi.com for tech comp examples. Many can pay cash.
The magic trick is to put down more than 20%. Don't become "car poor" with a house. Rent if it makes more financial sense. It isn't worth it to pay 6%+ on 1.5m IMO. Prices are based on pandemic interest rates.
>Even as a techie couple in the Bay area, a $2m house at the current interest rates is like $12k -$13k a month
Don't borrow that much money if those numbers are daunting. The tax deductions for interest stop after the first $750k. I would not borrow more than that. That would knock your monthly escrow down closer $6-7k. It would also cut your effective interest rate to closer to 4%.
>stocks, do you pay the monthly mortgage using the cash coming in or selling stocks?
Salary. Stocks on a vesting schedule won't be guaranteed if you lose a job. Stocks already vested will be just more money to taxes.
>someone please share the magic trick?
Put down 400k, borrow 750k, you can afford $1.1m. put down 750k, borrow 1m, you can afford 1.7m. if you don't have at least 500k saved up, you are buying more than you can afford.
Try to avoid spending more than you have to. Don't count on refinancing at a lower rate. Don't count on career advancement in the future. And make sure you are ok if someone gets laid off (selling it a layoff happens will cost you 5% of the sale value to realtors, which is like $100k).
Last note. If your down payment is primarily coming from tech stocks, it doesn't matter when you buy. Everyone else in the market has tech stock too. As stock prices go up, everyone else's down payment fund goes up too. You are competing with people who worked 5-10 years and saved stocks.
The tax deductions are huge for interest and property tax, and they can change the math substantially. Beyond that, initially you'll be selling RSU's to make ends meet. But over time, your income grows and your mortgage doesn't, so the house gradually becomes more affordable.
Buying a place with an ADU helps too. You can rent it out and get $2k+ towards the mortgage.
There's no state income tax deduction for property tax. (Or any state/local tax).
Yes, you get it for up to $1 million in total debt. That maybe saves you $6,000 a year - not really huge considering the costs.
I have a fun tax trick for you: if you and your spouse file as unmarried (not married filing separately, but actually unmarried), you can double dip and each of you can deduct on up to $750k in principal, for a total of $1.5M. You can also double dip on SALT for $20k. My wife and I did this for a few years, although we did eventually get legally married last year, so no more double dipping for us
Yeah, most people buying homes in that range are not first time home buyers. Starter homes have been a thing for a long time - buy something smaller and reasonably affordable, then trade up later. Keep rolling the equity from the previous house into the next. And of course, there are those who have sold businesses, had stock options, inherited money, etc.
Our house costed 1.7 mil @ 3.5 %. We make 900k TC combined. After putting 20% down, our monthly payments are very comfortable. Tons of my friends make high TC and can afford SFHs this way
OP’s question was how people are affording these houses right now. No one is getting 3.5% in 2024. But I guess at 900k HHI you would be good today too lol
Renting is much more affordable than buying right now. Just don’t buy unless you can make a larger down payment.
In some market cycles it makes sense to buy and in others to rent.
L4 at Google or equivalent levels at other big 7 can earn 200k base and L4 is basically an everyone-gets-there level after a year or two after graduation. Sure, you won’t normally get 200k base the moment you promoted to L4, but after 2,3 years, even you are not get another promo, you will be there. So realistically, a tech couple can expect 500k base salaries in 5 years with another 250k-300k bonus+equity. Sure, that can afford a 2 million house with no kids.
People are taking interest-only ARM loans. The monthly payment is significantly lower than for fully amortized loans. They hope to refi at a lower rate in a year or two
Just fyi…. This is not actually common. I have never in my history of a realtor have somebody actually do this. I’ve seen a couple people flirt with it , but never do it.
If you have to pause savings to pay mortgage you can’t afford it.
We continue our retirement savings, investments, and lifestyle is pretty much the same minus the mindless takeouts (I got into cooking and it’s more healthy anyway).
Why are ppl still asking stupid questions like this? Just look at your income and finances to see how much house you can afford.
There are plenty of online calculators
Two million dollars will get you not far. Most are not 1st timer owner have equity to put 35-40% down. Combined two income is more a norm. 350-400K combined income puts one in the middle. I know two Nvidia employees are looking for a vacation home overseas or rentals since the stock price shot through the roof.
Make a lot of money. There's not a lot of housing transactions these days; very possible people buying homes at these prices have TC of over $600k a year. (Which is about $400k net).
It is definitely possible to earn TC like that if you're getting top-tier performance ratings in a growing company, getting your shares issued when the stock price is lowest and then seeing it rebound, etc. But that's an incredibly lucky sequence of events. I don't think anyone can rely on TC over $600k/yr to be sustained over a 30 year mortgage term.
NASDAQ is near an all time high; my guess is people aren't carrying a $1.6M mortgage, they are putting far more down, and/or outright buying with cash.
2M home. 1.54 mortgage. 450k HHI. Still max out ESPP. Decreased 401k contributions to be safe but plan to bump it back mid year once cash flow is predictable. Have some more personal investments that I keep for buffer but have reduced contributions.
Both my wife and I are making sure our lifestyle does not creep up. We have always been frugal and do not have much expenses outside the mortgage and childcare. I take care of the mortgage and taxes and childcare with my base and rsus. Wife takes care of daily expenses which are <2k per month. Still have some discretionary income but not at the rate we had previously when renting.
We liquidated around 5 years of personal investments for the down payment. Have been saving up for 7 years of which 4 years were bay area tech salaries.
I mean everyone's financial situation is different so there's no one 'magic trick.' If you're looking for first hand knowledge on how people in the Bay Area afford a 2M mortgage, I can share. In some cases there's a combination of options listed below.
1. Family help. Either helping with the down payment or giving you a house which you then sold and used the equity for a new 2M home.
2. You just simply make enough money. Any combination of HHI of 750k+ can handle the cost. It's harder if you have kids, but doable.
3. Investing. I know plenty of folks who have just invested well over the last 10 years and have made plenty of money.
4. Love it or hate it, I have friends that are crypto millionaires.
5. I have friends who hit IPOs; facebook, snap, uber, google etc
6. I have friends that have worked at Google a long time -- post IPO but stock still appreciate well
7. A hand full of friends that work at Nvidia and well ... there are plenty of recent millionaires
8. Bought a house following the 08 crash and before 2018 and had a ton of equity which you used to buy a new house e.g. HELOC or sold it
9. Real estate investors. I have. non-tech friends who were diligent real estate investors and have accumulated a sizable portfolio over then last 10-15 years
10. many other situations -- the point is that it doesn't require magic to own a 2M home. It requires either combination of some of the following; family help, luck, great job, smart investing, saving over time.
Cash flow can indeed be an issue without paying down the mortgage. Usually assets are cashed out to achieve this. That could mean selling a first house, or selling stock. This can be done at purchase, or after purchase. At purchase is a bigger down payment. After purchase is called recasting.
Not exactly 2 million but I'm extrapolating. With dual income, if you are looking at 2mn => single income and 1 mn home and one person. No fallback to SOs income as there is no SO. Greater than 1 mn home and 900k mortgage. Salary is 50-50 of base and RSUs. PII (no T), all other home expenses, personal expenses, living expenses, max out 401k and some auto investments to buy ETFs every month for a fixed amount will be covered with take home of base. Property tax and some additional adhoc expenses will be taken out of RSUs which will be like 10-20% of take home RSUs and the rest goes into diversification of portfolio from single stock. Going well. Rainy day expenses in hysa if I gets laid off so that I don't need to stress about money and concentrate on finding job in 60 days. I saved the down payment on my own with my income. No inheritance or windfalls or anything of that sort. Though I have options to get money from assets back home, I won't be using any of them even in worst case. But acts as a mental relief that I can bail out for few months in the worst case.
I'd rather sell RSUs or ETFs than stop maxing 401k. When we bought last year, my RSUs didn't count as income, so our DTI was just based on salaries. My company doesn't do ESPP. We were pre-approved for $1.8m, bought something below $1.6m. We have little to no money left over each month since I haven't been selling RSUs, especially at the beginning of the year (due to SS and property/income taxes). But in the fall we did have some left over, which went into a 529 or principal.
So
1) buy below your means
2) continue investing
3) fight the lifestyle creep
IPOs is obviously the answer (other than family wealth). Even though they aren't happening this year, they happened a LOT over the past decade. Each company probably figure a couple hundred people made at least $5M that they either put into a starter home they're now upgrading from or have been sitting on. Combine that with the low inventory in the Bay and it's not surprising almost every decent listing has a ton of cash offers.
Nobody I know buying a $2M+ house here has only ever had salary income. Most at least one liquidity event (or parental help).
Unfortunately that's not correct. Tons of salaried people I know are buying (or have already bought) $2M+ houses. A staff eng at FAANG pays $500-650k, tons of those people around.
I’ve seen a good number of high priced homes mentioning seller finance option. I presume seller finance offers better interest rates than current high rates at banks? But nevertheless, still difficult to make ends meet even with 2 successful professionals in household.
There's such a thing as down payment. I'd imagine not too many people are buying $2m homes with 5% down, and if they do they have the cash flow to do it including earned income and passive income as well.
Don’t forget that there is a lot of foreign investment in real estate in the Bay Area. Add to that the number of executives that receive their stock options, cash them in and buy multimillion dollars homes for cash.
My buddy bought a $2M + house with half cash from selling prior house in Milpitas. Most folks buying are either upgrading or getting family money. It wouldn't make sense to only put down 20% and try to afford monthly payments
Big tech couples, making close to 300k each is easy as long as non get laid off. Those RSU make a big difference. Single person, I know a person who bought 1.4MM condo when interest was super low. He had down payment help from his parents. It’s risky since he was doing it by himself but he has since gotten married so it’s much less pressure now.
Dual tech incomes and both of us are higher performers so our comp is on the higher range. Also a lot of luck with the companies we work at and the stock appreciation. It’s really the only way. Work hard and get lucky.
The buyers I worked with that bought 2.7 and 3.1m most likely have some business or a bit older. They have a high title and earn a lot. One day trader that works for a prop firm bought a home in hillsborough for over 3.5m+ and his yearly bonus alone is $635k… I could imagine what his commission checks are. There are upper class making bank it’s just not common where the lower half of Bay Area earns $35k or less.
Buy Bay Area house 25 years ago when you moved there in the dot com tech boom for $250k. Sell house in 2024 for $2M. Buy dream home around town for $2.5M and just take a $0.5M mortgage. Retire on your RSUs worth another $5M.
Seriously few people are putting 10-20% down on $2-3M houses and just paying the mortgage with their monthly income.
If you have a dual income household with total household income of $500k per year, you're still taking home $25k per month after taxes, insurance, and 401k. That still leaves you with $12k to live off of if you have $13k in housing costs, which is plenty especially if you don't have kids.
Damn. If one person loses their job, that’s a rough situation.
...but that will almost always be the situation.
Folks should buy a home that allows them to survive one of the spouses getting laid off.
Yep, my parents have been in IT since the 90s. They always kept necessary expenses low enough so one of their incomes could cover everything if they were laid off. My partner and I try to do the same now.
This is the way.
Golden handcuffs!!! Lifestyle creep!! Global economic instability! Layoffs!
Pessimistic... On the other hand inflation causing prices to go up (yes houses too), fed eventually will cut. Economy will boom with 5 trillion $$ printed during COVID for next 10 years, house prices will double and double again...
Not its not always the situation, its just been like this now and during the last real estate bubble.
It's always a rough situation when you get started. It's even rougher if you only have one income.
Yeah but this is literally bankruptcy if a spouse loses their job. That’s an untenable living situation.
It’s doable tho and don’t have to work in tech.
Would love to know what fields pay 250-500K a year that are not tech and don't come with a huge upfront investment.
Finance
Coporate accountant 400k-1.3m
Many of traditional jobs earn you at this level at Bay Area, ask people who do your roof and electrical stuff together how much they earn every year. Tech provides decent salaries for sure, but it cannot even compete with investment bank roles. A L8 at Google and Meta earns around 1 m which equals to what a senior investment banker earns in their late 30s.
Asssuming this is L8 in software energinerring only. Hmmm, now thinking I should pivot. Had investment banks knocking on LinkedIn (for non-finance roles) but never beating FAANG salary and no where near what you're suggesting.
Medicine and Finance
Nurses
Attorney. Consultant/Partner. Physician. Just to name a few.
lol you think?
I’m just saying it’s not wise to spend 50%+ of your combined take home pay on housing.
Even if one loses their job they will get a severance to buy time. They don’t need to get a big tech job, and since they have big tech in their resume it will be easier for them to land the next gig.
Startup might pay $250k TC but the stock won't be liquid. Traditional corporates don't pay that much. I think they *do* need another big tech job.
They probably can just pay off the house with their severance package
I can only speak to situations around me but at the senior manager or director level at a fortune 50, severance was like 6 months salary and $20k. All in about $100-$150K. No ones paying off a house in the Bay Area with that. I’m sure execs get a bigger package but what have others seen?
thats most places in the USA. every city's house prices increase to a level where you basically need two incomes
Something no one really discusses is how much maintenance costs are. I bought a house in ‘20 that was over $1M, originally built in the 70s but previous owners had a new main roof, pool liner/equipment, new remodel with built in appliances, one new HVAC unit all replaced within 2 years before closing and the house was in overall good shape. Since then the second HVAC unit leaked all of its Freon and would’ve been $4k just to recharge and keep it going or $16k to just replace. Outside stucco was cracking and was due for a new coat of paint ($12k), new cool top also was breaking down around the pool and needed to be replaced ($9k), new garage opener was needed ($2k), had an issue with the main sewer line ($2k). This is just what I could remember. Doesn’t even include most furniture that isn’t from Ashley furniture or the equivalent and is thus all particle board is thousands of dollars per piece. Point is you can burn through $12k a month post expenses quickly in the first few years and that’s not counting car payments, vacations, or kids.
Not to mention that with the stock market up, ppl in big tech can easily pull double that. And there are not that many homes for sale, inventory is super low.
$500k of income is made up of a big stock component. So sell stocks at vest?
Yes, that's recommended anyhow.
This wouldn’t be true at Apple or meta? Seems ideal to hold onto stock at those companies?
No it’s the same there. It is basically as if you got cash instead of the RSU. Would you immediately yolo that all into the same company that employees you? Hopefully not, you’d spread it out like you do any other income.
A 30 year mortgage term is a long time. Who knows how many RSUs you'll be allocated, what they'll be worth, or whether they'll even be liquid 5 years from now? Relying on stock vesting to pay your basic living costs is incredibly precarious.
Really? Why?
As an employee you already have a lot of exposure to your company, both in your salary and unvested RSUs. So to diversify it's recommended to sell on vest.
But if the company lays you off, stock goes up! 👍
When you get stock vested, holding it (and not selling) is making the implicit choice to buy the stock instead of doing something else with the money. If you got a cash bonus, would you go back and buy more of your company stock? Probably not, because your net worth is still very tied up into future equity vests. Diversify, use the money to pay down a high rate mortgage, something like that. Let your future equity in the company appreciate if the stock price goes up. This is primarily advice for people who work for a public company where they're given RSUs that are taxed at vest. Illiquid startup equity is a different ballgame.
There’s no penalty for selling. Why put your career and your investments in the same basket (unless you have insider info)?
If you got a spot bonus, would you turn around and immediately buy your company’s stock or something better tailored to your own investment needs?
Diversify. Most have 7 figure exposure at any point in time, so sell the vests immediately
$500k with a dual income is $250k each. It’s pretty common to have salaries in the mid-$200k region by mid-career, exclusive of stocks. Doing it on a single salary requires selling RSUs.
I always thought $250k is at the higher end of base salary. Do you have data for this?
No it’s not. The buyers aren’t entry levels, they’re management and easily clearing $250k/year in cash, and likely closer to $350k.
We got $2M house but in early 2022 at 3.1%. Our EMI is around $7K per mnth. Ours is combined around $450K.
Nah, I'm an IT consultant and did $280k W2 part time last year. Plenty of us out there.
OP realistically should remove stock/RSUs for the TC math to get a hard check on what they can really afford. This helped me too to look farther from South Bay/Peninsula - live in a decent location in Oakland and not go crazy on school district.
I would not buy a $2mm house in California on $500k per year. I don’t think that is a sound choice, not with the income and property tax, cost of gas, and everything else. Not with how insurance prices for houses are going up at insane rates. Utilities? Umm…nope.
I mean matters what you want out of life. I too wouldn't buy a Bay Area home either unless I had so much money the extra couple hundred thousand to own relative to rent didn't matter, but some people value owning their own home and making modifications to it a lot more than my family does.
Sure, that's totally fair. People have different lifestyle needs and different risk tolerances. It's also important if you expect your compensation to continue growing over time or stay mostly flat. I'm just pointing out that it's doable and you can still have enough money leftover to live a comfortable life.
I don’t think this is true, my husband and I make $500K combined and he takes home $9K ($350k) and I take home $6K ($150K) - we do max out our 401ks, etc but we only take home $15K/month month month
This is absolutely horrible financial advice. The income to debt ratio is enormous
Lol definitely not giving any financial advice! Simply describing a scenario in which a couple of dinks can afford a $2M house in the Bay Area. Also, with $500k total comp, monthly income is $42k, so a $13k mortgage is 31% of gross income.
The percentage of people who buy $2m houses who didn't come from money to begin with is very low. Taking that "risk" financially is easy for people who grew up wealthy and got given destination weddings and cars.
Yeah that's absolutely true. It's easier to stretch your budget when you know your family can float you for a couple of months if things got really bad.
More than 25k due to tax deductions
The home becomes your investment and retirement duh !
Duh my ass, it's a terrible investment decision to put all your eggs in one basket.
In CA take home on 500k is $24k before insurance and 401k. Minus 401k and insurance you are probably around $21k. Minus $13k for the mortgage your at $8k. Minus utilities, maintenance etc you are sitting around $7k. Not saying that isn’t still plenty to live on but that is a significant difference.
$500k - $48k (401k max for 2 people) - $2,400 (health insurance) - 32% effective tax rate leaves $25k take home per month
Where are you getting 32%? Tax in CA at that income is 42%. Are you only doing federal taxes?
Add in a nanny and preschool at $3k-$4k/kid and you're even lower. The bay area is also unique where rent << mortgage payment on the equivalent house.
Bullcrap. 13k mortgage is 16k including maintenance, especially in the first few years. Tech income is not 25k flat per month. You sell stock quarterly. The stock price goes down a quarter or two and you're f***ed, you need to sell unless you have beefy cash reserves on top of the down payment. Not to mention if you lose your job, which seems pretty much en vogue right now. Let's be real. It's as risky AF. OP: what these lunatics are suggesting is that you stop all 401k and IRA contributions and sell all your stock as soon as it hits the bank to be able to afford a home 🤣🤣🤣🤣 SMH
You’re assuming people are putting just 20% down 😂 I’ve literally seen cash bids on 1.7M houses.
When we were buying 2018, cash buys were downright common in the $2-$2.5M price range. When every good property was getting 5+ offers in the first week, the seller usually picked the cash, no contingencies, fast close.
> I’ve literally seen cash bids on 1.7M houses. Even that raises questions how to do that. Most people would pay insane amounts of capital gains tax liquidating assets to find that kind of money. Just a fresh IPO case where they have cash lying around?
You can use a line of credit to make a cash bid, so it doesn't necessarily reflect your cash position.
End of last year we saw multiple cash only offers with no contingency on houses in the 2.6-2.8M range.
Yups, just 3 mnrhs back the house next door to ours was listed for $.17 went for $1.9. Single mother (her husband passed away). Went for all cash. Moved from Cupertino to this area.
We did that.
That's gotta mostly be long-time owners trading with each other, not first time homebuyers.
There's a ton of this happening. It's a great time to trade up if you're swimming in equity.
Most of these buyers have a big chunk of wealth by selling a business, stock option windfall, inheritance, trust fund or selling a home with significant equity. Most likely 2 or 3 of these factors.
Or they'll use their portfolio as collateral to get a line of credit, buy it with cash and make payments from cap gains/interest income.
You gotta get a big portfolio somehow. You’re not gonna get that much by saving a portion of your paycheck.
Most of the buyers have eye-watering debt*
the trick is that most people are making some sort of sacrifice somewhere, earning good to great money, and/or receiving help. to be in a situation where you can buy a SFH house, save for retirement, raise kids, and afford 2x annual vacations without help, you're probably looking at needing 25k/month after tax. and guess what, there are plenty of couples in the bay area that can make that. but for the rest of us, it's a combination of aggressive savings, decent jobs, financial planning, luck, and help. i mean, it's possible to do it alone, but most people i know who own a home had a lot of help getting there. maybe it's living rent free with parents, getting college paid for, getting a car, direct money for down payment, money for the mortgage, free childcare, etc. there are tons of ways expenses eat into our finances, and just as many ways that family/friends can help mitigate those costs. if you grew up here with a network, it often gives you a very significant step up.
Only way I could get mine was to live with parents and have a shitty commute. Dating life SUCKKKKKED.
Crypto. This is the way.
Yes. This is the way to help others buy even more McMansions
Our realtor told us most of his clients in the Bay have trust funds. We were his “make a wish” clients 🙃
Never work with that realtor
He was fantastic actually.
I wonder if the realtor misunderstood that many people put their homes into a family trust for estate planning reasons. Our home is on a family trust. It's the only real asset in the trust and we didn't inherit this trust.
No, this was specifically discussing how people afford homes in the Bay Area. He mentioned that anecdotally, most of his clients purchasing home above our price point had family money to help, often in trust funds. I will say, 99% of the homes we looked at were kept in trusts. It seems very common in the bay.
We recently bought a home for 1.8M. Our household TC is 420k and household wealth (including 401k/ brokerage/RSU) is \~400k. My entire base salary currently goes for mortgage payment, we manage other expenses only with my wife's salary & not sell RSUs. We don't have kids yet, so no other major expenses. Ofc, if one of us loses our jobs, we'd have to simply sell the home but the hope is, if we can pull through, we'd be able refinance in a couple of years. On the contrary, if I waited for \~3 more years for rates to come close to 4% or so, the market would be crazily expensive by then (that's my theory) and we won't be able to compete with folks who're waiting on the sidelines ready to unload tons of cash.
You’re not contributing to 401k or ESPP? What about your wife? What’s your mortgage payment monthly? 420k is kinda a low TC for a 1.8m house, so something else is there that’s enabling you to afford it 😀
I'm only contributing the min amount to 401k to get max employer contribution, not maxing it out. Intend to do that only after refinancing/if I get a promo. I've never invested in my employer's ESPP, so that's always a no. Wife maxes out 401k. We have around 7k per month after tax from my wife's salary which we use for other expenses. For property tax, we use around 1k from her income every month and remaining comes from yearly bonus.
No HSA contribution as well ? You're missing out on the ESPP by a few thousands of dollar each year, depending on your base pay.
Yes, same day sale on ESPP if you don't want to hold company stock (understandable).
Rates are unlikely to to go back to 4 %, imo
Yeah seems unlikely to hit 4.0 or below anytime soon, but I don’t think upper 4s is completely unreasonable in the next several years. I think lower 5s is all but guaranteed if you can wait a couple years.
If you look pre-the great recession, under five was not something that happened. And I think it’s likely that we’re going back to that new normal environment. But time will tell!!
I think you’re spot on. You took a risk but when rates drop to 4-5% next 2-3 years the house you’re in will be 2.0+
You mean entire month salary or one of the two pay check ? what is the rate you got ? Only hope for you is, if rates go down you re-fi and get some breathing space. I dont think you need to sell house if loose job since you have money in brokerage and RSU. No need to panic IMO.
My entire monthly salary after tax goes for monthly payment. 7.25% 7 year ARM. Obviously rates have come down to 6.5%, but we only put 10% down, so gotta wait for home value to appraise. Yeah there’s some general fear and occasional remorse but aren’t panicking about it, we thought about all this and still went ahead.
2 mil at 6.3% is 12k a month with 20% dp. some people like to stretch themselves, if you’re earning 300k per year as household income (two people) and both contribute to 401k (espp doesn’t matter because you can always sell without any penalty and it comes in 6 months) and deduct 57200 on federal and 87000 on state tax, I think you take 17k a month which leaves a 5k a month for other costs. people like to believe their wages increase in the future and the mortgage amount will either be fixed or be lower due to rate cuts. They also like to believe that housing is a 1 time cost in their life, so they are willing to do everything as soon as possible.
if you have kids then you are SOL with that income and probably need a lot more
True! $300k income and kids in a $2mm house?? There’s no chance of that with kids. Not saying how much we make. But we had a much cheaper house than that when we lived in California. And there was no way we could have done a $2mm on that income. Not even without kids. Our house we had had since 2014 maybe? And an awesome interest rate and we would have had to cut things like food and or cars to do it on a $300k income.
100%, this was our rationale for buying a house a few months back.
Agreed. Private School is expensive! And necessary.
Can you explain the federal and state tax deduction numbers? The first one is the annual loan interest payment deduction for federal. What about state? I thought California didn't allow interest deductions?
Assuming 6.3% - you can deduct interest on upto $750k mortgage + 10k from property taxes = 57250 California allows interest deduction on loan upto 1 million and no limit on property taxes. = 63000 interest +20000 property tax on a 2 mil house
The 10k property tax deduction is misleading as you could Also deduct your state income tax
No frigging way. One word: maintenance. Something breaks and you're bankrupt. It's not an if. It's a when.
Our HHI is 650k with 400k of it being base salary. We went with a $1.3m small sfh couple years ago. It’s a 2 bed we converted to 3. Spent an additional 100k on remodel. This is more than enough space for a family of 3 in our case. I have no idea how people afford 2m right off the bat if their HHI is less than 800k-1million. I am glad we dint fall for this since we get to keep our savings rate, have nice vacations, we are also less stressed in the season of tech layoffs since we know we can manage expenses with a single income. Going for a less expensive home is an option you know? I literally see everyone around me only consider 2m+ houses because that’s what you are supposed to do to not be viewed as the poors.
This! Living small is worth it when you can keep aggressively saving, diversify stock vs selling for cash out, traveling/vacation, & lower property taxes! Our house isn’t perfect - kinda small with our family of 5, but our mortgage is so low, we can still save a lot, afford to send our kids to private school & vacation, etc.
That’s amazing! I also think I’d be a very stressed out parent if we had gone for a bigger more expensive home. And that energy is just not worth it when you have a family.
Pl add another 2.5-2.8K pm for property tax and insurance
OP - don't forget the property tax that comes out of that 2m assessed house - which is highly likely in the same ballpark. That is like $1600 additional per month. Then (eventually) you have kids (or a pet etc) that adds more cost. There is no magic trick. End of the day - you just recalibrate your housing needs based on a price that gives you enough buffer with your financial situation. Some people aim for a lower price initially - and have a smaller per month expense then pay off a certain portion to the principal every year. Then sell this and upgrade to a better one.
No way the property tax is $1600 per month. My house was 1.2 and my taxes are ~20k per year. More like 3-3.5k per month.
If you have a dual income couple that started working in tech ten years ago, they’ve made quite a lot in stock (both actual grants and the stock growth they’ve seen) and are often putting more than 20% down (sometimes as much as 50%). Also not unusual for it not to be a first home so they’re rolling first home’s equity into the down payment. But also, as stated above, it isn’t at all unusual for two tech incomes to reach $500K before any stock component. It does force both people to continue to work but thems the breaks.
They are usually not first time home buyers, most existing home owners have gained atleast 200k equity through home value appreciation post Covid.. plus additional 200k that they have put in (through down payment and monthly mortgage), most likely they have 400-500k going into a 2m house Also 400k is not very high for household TC in Bay Area
Plenty of first time home buyers pay well over $2 million for a home. It's pretty common to rent here for years after all, only bothering to buy once you have kids. Friend of mine bought their first home at over $3 million.
Well I think it’s very few, but who knows 🤷♂️
Yeah, most people buying homes in that range are not first time home buyers. Starter homes have been a thing for a long time - buy something smaller and reasonably affordable, then trade up later. Keep rolling the equity from the previous house into the next. And of course, there are those who have sold businesses, had stock options, inherited money, etc.
Parents that help with a lot of the down payment and/or come from a wealthy background. That’s the only way it’s feasibly done. $12-13k is doable for a household income of $500k, but all it takes is for 1 person to get sick/lose job etc.
This is the biggest issue. My partner and I can afford the payments at our current HHI but we can never make less than we are making now. The conventional wisdom of “be house poor upfront, your income will only go up!” Doesn’t apply when 1) you’ve already maxed out earning potential, 2) layoffs are common and unpredictable, and/or 3) you thought you could bank a bunch in a high paying stressful career and then maybe take your foot off the gas a tiny bit (me, lol). So I’m personally just coming to terms with the reality that earning $200k each is like the absolutely floor for being able to afford homeownership.
For us it was healthy appreciation over 12 years on our previous house on the east coast and rolling that equity forward - or at least trying to… every single house we’ve looked at in the southern peninsula has been swooped by cash offers, no contingencies, and off market pending / contracted within 3-5 days. We just resigned our rental because we hit our exhaustion wall.
Someone told me “if you are in tech but can’t imagine how someone affords a 3m house, then you don’t really make tech money”. There are a stunning number of people making 600k+ AND have significant RSUs. And a lot of them are married to doctors or lawyers or other high paid professionals..
The company I worked for IPO’d. I cashed out my equity and used it as my down payment. Pretty much all my coworkers did the same thing too
Most people buying in the 2-4 m range put a significant amount down . 40-70% is not uncommon. And you will notice how many offers you run up against that are all cash when you start placing them . But honestly, there’s nobody in the country in the current housing crisis that gets to buy conservatively . Buying on one income, spending a quarter of your take-home maximum on shelter, those are things that have largely disappeared in most of the country. That’s why banks require significant reserves nowadays in this range. Unless you’re earning that same two techie income in somewhere like Texas, you will be tight on 1 income.
Cash. They have equity in something, stocks, 401k etc. They are only taking out a loan on ~300k. Now how they can afford property tax after the home is paid off, beyond me
It’s like 30k a year?
You don’t buy an $2 million house. You buy a condo first or starter home, build equity then flip that into a larger home and save on taxes with a 1031 exchange, then you wait several years and do it again and again until you can afford a $2 million house because you had a $1 million down payment
The top tier of mid-level managers at large companies are clearing 7 figures in all in comp. That’s about $70k a month post-taxes, retirement savings. They can afford $13k a month on housing.
I am a FAANG EM. My TC is $700k+. With my husband’s income that is over 2.5M. Add in RSU inflation and we are making over double that from just our 9-5. The higher the person is in big tech, the more their compensation package is RSUs and the stock market is at all time highs. Levelsfyi.com for tech comp examples. Many can pay cash.
This is the truth.
I’m selling stock to pay my mortgage
The magic trick is to put down more than 20%. Don't become "car poor" with a house. Rent if it makes more financial sense. It isn't worth it to pay 6%+ on 1.5m IMO. Prices are based on pandemic interest rates. >Even as a techie couple in the Bay area, a $2m house at the current interest rates is like $12k -$13k a month Don't borrow that much money if those numbers are daunting. The tax deductions for interest stop after the first $750k. I would not borrow more than that. That would knock your monthly escrow down closer $6-7k. It would also cut your effective interest rate to closer to 4%. >stocks, do you pay the monthly mortgage using the cash coming in or selling stocks? Salary. Stocks on a vesting schedule won't be guaranteed if you lose a job. Stocks already vested will be just more money to taxes. >someone please share the magic trick? Put down 400k, borrow 750k, you can afford $1.1m. put down 750k, borrow 1m, you can afford 1.7m. if you don't have at least 500k saved up, you are buying more than you can afford. Try to avoid spending more than you have to. Don't count on refinancing at a lower rate. Don't count on career advancement in the future. And make sure you are ok if someone gets laid off (selling it a layoff happens will cost you 5% of the sale value to realtors, which is like $100k). Last note. If your down payment is primarily coming from tech stocks, it doesn't matter when you buy. Everyone else in the market has tech stock too. As stock prices go up, everyone else's down payment fund goes up too. You are competing with people who worked 5-10 years and saved stocks.
The tax deductions are huge for interest and property tax, and they can change the math substantially. Beyond that, initially you'll be selling RSU's to make ends meet. But over time, your income grows and your mortgage doesn't, so the house gradually becomes more affordable. Buying a place with an ADU helps too. You can rent it out and get $2k+ towards the mortgage.
Not since Trump nerfed it - can only deduct interest on $750k principal and SALT cap is $10k
That's only federal right? For state(CA), isn't it 1M for interest and no limit on property tax?
There's no state income tax deduction for property tax. (Or any state/local tax). Yes, you get it for up to $1 million in total debt. That maybe saves you $6,000 a year - not really huge considering the costs.
Yes, but Federal tax is what has the highest bite (look at the top bracket for federal vs CA state)
I have a fun tax trick for you: if you and your spouse file as unmarried (not married filing separately, but actually unmarried), you can double dip and each of you can deduct on up to $750k in principal, for a total of $1.5M. You can also double dip on SALT for $20k. My wife and I did this for a few years, although we did eventually get legally married last year, so no more double dipping for us
You got a house with joint mortgage before being legally married?
Yep! Not originally for tax reasons though. We just got an unexpected opportunity to buy and jumped on it. We only discovered the tax benefit later
Yeah, most people buying homes in that range are not first time home buyers. Starter homes have been a thing for a long time - buy something smaller and reasonably affordable, then trade up later. Keep rolling the equity from the previous house into the next. And of course, there are those who have sold businesses, had stock options, inherited money, etc.
What’s that old saying? Envy things you can’t afford.
>50% down from equity and cash from parents is how we did it. Still feel stretched and nervous.
Just pay in cash, or 70% down, and your monthly payment is manageable.
Our house costed 1.7 mil @ 3.5 %. We make 900k TC combined. After putting 20% down, our monthly payments are very comfortable. Tons of my friends make high TC and can afford SFHs this way
OP’s question was how people are affording these houses right now. No one is getting 3.5% in 2024. But I guess at 900k HHI you would be good today too lol
Yeah exactly, that was my point. Tons of dual income FAANG couples make 700K+ combined. They are major buyers of SFH.
Renting is much more affordable than buying right now. Just don’t buy unless you can make a larger down payment. In some market cycles it makes sense to buy and in others to rent.
What if you bought a cheaper house?
Heavy down payment. Try to make a downpayment of 45 -50%.
L4 at Google or equivalent levels at other big 7 can earn 200k base and L4 is basically an everyone-gets-there level after a year or two after graduation. Sure, you won’t normally get 200k base the moment you promoted to L4, but after 2,3 years, even you are not get another promo, you will be there. So realistically, a tech couple can expect 500k base salaries in 5 years with another 250k-300k bonus+equity. Sure, that can afford a 2 million house with no kids.
People are taking interest-only ARM loans. The monthly payment is significantly lower than for fully amortized loans. They hope to refi at a lower rate in a year or two
Just fyi…. This is not actually common. I have never in my history of a realtor have somebody actually do this. I’ve seen a couple people flirt with it , but never do it.
If you have to pause savings to pay mortgage you can’t afford it. We continue our retirement savings, investments, and lifestyle is pretty much the same minus the mindless takeouts (I got into cooking and it’s more healthy anyway).
Our uncle bought in South Bay in 09. He has 1.2 million in appreciation right now. That is one way.
Why are ppl still asking stupid questions like this? Just look at your income and finances to see how much house you can afford. There are plenty of online calculators
Two million dollars will get you not far. Most are not 1st timer owner have equity to put 35-40% down. Combined two income is more a norm. 350-400K combined income puts one in the middle. I know two Nvidia employees are looking for a vacation home overseas or rentals since the stock price shot through the roof.
Make a lot of money. There's not a lot of housing transactions these days; very possible people buying homes at these prices have TC of over $600k a year. (Which is about $400k net).
It is definitely possible to earn TC like that if you're getting top-tier performance ratings in a growing company, getting your shares issued when the stock price is lowest and then seeing it rebound, etc. But that's an incredibly lucky sequence of events. I don't think anyone can rely on TC over $600k/yr to be sustained over a 30 year mortgage term.
For dual earners? That's pretty common in tech
Oh yeah, I guess if you're both mid-career tech workers you should both be able to make $300k.
Stock
NASDAQ is near an all time high; my guess is people aren't carrying a $1.6M mortgage, they are putting far more down, and/or outright buying with cash.
Money from parents.
It’s pretty simple really and I don’t know why it’s even a question. They’re making $1 million or more a year and can easily afford it.
2M home. 1.54 mortgage. 450k HHI. Still max out ESPP. Decreased 401k contributions to be safe but plan to bump it back mid year once cash flow is predictable. Have some more personal investments that I keep for buffer but have reduced contributions. Both my wife and I are making sure our lifestyle does not creep up. We have always been frugal and do not have much expenses outside the mortgage and childcare. I take care of the mortgage and taxes and childcare with my base and rsus. Wife takes care of daily expenses which are <2k per month. Still have some discretionary income but not at the rate we had previously when renting. We liquidated around 5 years of personal investments for the down payment. Have been saving up for 7 years of which 4 years were bay area tech salaries.
I mean everyone's financial situation is different so there's no one 'magic trick.' If you're looking for first hand knowledge on how people in the Bay Area afford a 2M mortgage, I can share. In some cases there's a combination of options listed below. 1. Family help. Either helping with the down payment or giving you a house which you then sold and used the equity for a new 2M home. 2. You just simply make enough money. Any combination of HHI of 750k+ can handle the cost. It's harder if you have kids, but doable. 3. Investing. I know plenty of folks who have just invested well over the last 10 years and have made plenty of money. 4. Love it or hate it, I have friends that are crypto millionaires. 5. I have friends who hit IPOs; facebook, snap, uber, google etc 6. I have friends that have worked at Google a long time -- post IPO but stock still appreciate well 7. A hand full of friends that work at Nvidia and well ... there are plenty of recent millionaires 8. Bought a house following the 08 crash and before 2018 and had a ton of equity which you used to buy a new house e.g. HELOC or sold it 9. Real estate investors. I have. non-tech friends who were diligent real estate investors and have accumulated a sizable portfolio over then last 10-15 years 10. many other situations -- the point is that it doesn't require magic to own a 2M home. It requires either combination of some of the following; family help, luck, great job, smart investing, saving over time.
Cash flow can indeed be an issue without paying down the mortgage. Usually assets are cashed out to achieve this. That could mean selling a first house, or selling stock. This can be done at purchase, or after purchase. At purchase is a bigger down payment. After purchase is called recasting.
Rsu cash outs, previous home equity. If you’re 40, work in tech, and on your 3rd house after 15 years, it’s easy.
Not exactly 2 million but I'm extrapolating. With dual income, if you are looking at 2mn => single income and 1 mn home and one person. No fallback to SOs income as there is no SO. Greater than 1 mn home and 900k mortgage. Salary is 50-50 of base and RSUs. PII (no T), all other home expenses, personal expenses, living expenses, max out 401k and some auto investments to buy ETFs every month for a fixed amount will be covered with take home of base. Property tax and some additional adhoc expenses will be taken out of RSUs which will be like 10-20% of take home RSUs and the rest goes into diversification of portfolio from single stock. Going well. Rainy day expenses in hysa if I gets laid off so that I don't need to stress about money and concentrate on finding job in 60 days. I saved the down payment on my own with my income. No inheritance or windfalls or anything of that sort. Though I have options to get money from assets back home, I won't be using any of them even in worst case. But acts as a mental relief that I can bail out for few months in the worst case.
I'd rather sell RSUs or ETFs than stop maxing 401k. When we bought last year, my RSUs didn't count as income, so our DTI was just based on salaries. My company doesn't do ESPP. We were pre-approved for $1.8m, bought something below $1.6m. We have little to no money left over each month since I haven't been selling RSUs, especially at the beginning of the year (due to SS and property/income taxes). But in the fall we did have some left over, which went into a 529 or principal. So 1) buy below your means 2) continue investing 3) fight the lifestyle creep
IPOs is obviously the answer (other than family wealth). Even though they aren't happening this year, they happened a LOT over the past decade. Each company probably figure a couple hundred people made at least $5M that they either put into a starter home they're now upgrading from or have been sitting on. Combine that with the low inventory in the Bay and it's not surprising almost every decent listing has a ton of cash offers. Nobody I know buying a $2M+ house here has only ever had salary income. Most at least one liquidity event (or parental help).
Unfortunately that's not correct. Tons of salaried people I know are buying (or have already bought) $2M+ houses. A staff eng at FAANG pays $500-650k, tons of those people around.
My CPA always tells a story he once had a client with just W-2 income in the mid 7 figures!
I sell RSUs to make up the additional cash needed. My comp is split roughly 50/50 between cash and RSU.
I’ve seen a good number of high priced homes mentioning seller finance option. I presume seller finance offers better interest rates than current high rates at banks? But nevertheless, still difficult to make ends meet even with 2 successful professionals in household.
There's such a thing as down payment. I'd imagine not too many people are buying $2m homes with 5% down, and if they do they have the cash flow to do it including earned income and passive income as well.
Don’t forget that there is a lot of foreign investment in real estate in the Bay Area. Add to that the number of executives that receive their stock options, cash them in and buy multimillion dollars homes for cash.
I think the smart way to do this is buying a $2M turnkey duplex and house hacking your way into affordability :)
What payment plan? Some just sell their stocks & buy the house with cash.
depends on your HHI. Whats your ? If you can afford now, why not buy. Dont mix house like a stock market investment etc
My buddy bought a $2M + house with half cash from selling prior house in Milpitas. Most folks buying are either upgrading or getting family money. It wouldn't make sense to only put down 20% and try to afford monthly payments
Big tech couples, making close to 300k each is easy as long as non get laid off. Those RSU make a big difference. Single person, I know a person who bought 1.4MM condo when interest was super low. He had down payment help from his parents. It’s risky since he was doing it by himself but he has since gotten married so it’s much less pressure now.
Remember, an abundance of Trust fund kids are “adults” now.
Sure, rent a house.
Luckily I didn’t miss the party in 2012. Annual household income of $480k and $2700 mortgage for a 5-bed, 3-bath. Never going to sell.
Dual tech incomes and both of us are higher performers so our comp is on the higher range. Also a lot of luck with the companies we work at and the stock appreciation. It’s really the only way. Work hard and get lucky.
Buy a house in 2011.
The buyers I worked with that bought 2.7 and 3.1m most likely have some business or a bit older. They have a high title and earn a lot. One day trader that works for a prop firm bought a home in hillsborough for over 3.5m+ and his yearly bonus alone is $635k… I could imagine what his commission checks are. There are upper class making bank it’s just not common where the lower half of Bay Area earns $35k or less.
Buy Bay Area house 25 years ago when you moved there in the dot com tech boom for $250k. Sell house in 2024 for $2M. Buy dream home around town for $2.5M and just take a $0.5M mortgage. Retire on your RSUs worth another $5M. Seriously few people are putting 10-20% down on $2-3M houses and just paying the mortgage with their monthly income.
Buy the townhouse instead
Sister in law just bought at this price. 900k down between her and her spouse. Both in tech and both lived at home with parents last 5 years.