The day of the closing on our first house, we had enough money to order a washer and dryer…and that was the end of our savings….well, we had about $50 left.
Our goal was to meet a certain monthly payment and that is what drove our housing price choice. Same with our kid who just bought a year ago. He wanted a certain monthly payment…and that drove his search. Of course this payment related to his income.
With 8 kids, I don’t think it will be feasible for us to help them each with a home. We are leaning more toward the idea of 2nd home that a kid could use if struggling for a season.
Our goals are to:
We know how difficult it is to help elderly parents while also raising a family. We don’t want our kids to have to do that, so they’ll have to wait until we’re gone to spend whatever is left.
Another way to look at it is that the average starting salary in my profession is now 4x what it was then. So the average starter house price might be 4x what it was then.
But they’re not, at least not where I live.
Don’t follow what you are saying , @Youdon_tsay. What happened to the old thinking that a mortgage should be 1/4 to 1/3 of your monthly salary.
Most folks my age, and ditto for my kids and their friends, rented apartments for several years after starting their first job and saved up for the down payment for a house. So with today’s salaries, perhaps kids can save up a bigger down payment for that starter home and with a 2 income household can afford a starter home of 250k+. The example cited above referenced a hypothetical 75k income. If that is the single wage earner, they can easily rent an apt and save up for a house. If that’s a combined income, they should have a tough time affording a house.
We must be reading past each other. What I understood the other poster as saying is that our salaries back in the day were more in line with the cost of housing. In 1990, say, a couple might be making $50k/year and could easily find and likely afford a $150k-$200k house. But in lots of markets, a couple now making $100k can’t find a house for $300k-$400k, which is still that 1/4-1/3 ratio. Does that make sense?
So is the issue that the housing prices have jumped too high and there aren’t houses in that range (there are where I live, but not where my kids live) ? it looks like the real estate market is correcting, so some May be able to get into a starter home (if they can afford the rising mortgages).
Exactly.
I just looked up our median salary and housing price – $75k and $640k. When we bought our house, dh and I made about 70k combined, and we paid $78k. Salaries have just not kept pace with the rising home prices.
I just looked up the first and second homes we purchased. The first was a TH and its current value is listed as about 4x what I paid. The next house we lived in (for 10 years) just sold this summer, and from the description it sounds like they added a bedroom and bath and kitchenette to the terrace level, but it sold for 4x what we paid. There is no way our current house is worth 4x what we paid. Maybe 2.5x what we paid. Maybe
Our first house we sold in 1999 is now 6x what we paid for it a few years prior to that sale. 
We managed to come out with close to $50k from that sale and felt so rich… that lasted just a few days… until we closed on the next house. Mortgage rates were about 7 percent so close to what they are now. Our current combined income is NOT 6x of what we made back then when we bought that house, and we are established professionals.
Another way for parents to help children is to pay for the education for the grandchildren.
I have a friend who has 3 kids and her brother has 3, and 3 of those 6 kids were in the same grade as my kids. Both families lived very frugally. The grandparents were very wealthy. The grandparents paid the tuition and costs of schooling, from Pre-3 through college. This was a cost the parents (my friends) didn’t have to worry about so they could devote more to their mortgages, more to incidentals for their kids (sports lessons, camps, school trips). All 6 went to the same grade school (and the grandparents donated a ton to that school too, like a computer lab, a scholarship, bought big at the fund raising auction), the twins in our grade picked a very expensive high school while the cousin picked one that was about half the price. Didn’t matter, grandparents paid. Same with college - didn’t matter where they went or how much it cost, grandparents paid. Each grandchild got the education he/she wanted, and could go anywhere and didn’t have to worry about the cost.
A very nice gift to the parents not to have to worry about it for the 20 years they were establishing careers, buying houses, hauling kids to soccer and skating and basketball.
Another friend received large gifts from parents and inlaws so while they lived on their salaries, they always knew there was a cushion if they needed it (and they did, several times). They also always knew there would be a large inheritance. That changed how much they had to save in 401k accounts, vacation decisions, even college decisions. Parents paid for some of the events most of us had to save for - bar/bat mitzvahs, weddings, big family vacations, a down payment on a car needed after an accident. The inheritances are coming in now, so the college expenses can be paid.
So for all of us who won’t be able to give a big gift for a down payment, it’s possible to still be a big help in getting the children established. I’ll be very happy to help with the educational expenses for the grandchild. Please, I just want grandchildren!!
I live in the Bay Area and in our town, the median price of a house is $1.5M with the average price being $1.25M. These are more like starter homes. Without outside/family help, it is really hard to come up with a 20% down payment. Our salaries are higher but have not kept pace with housing prices for sure.
Plan A, to pay via income. Plan B, with job loss or no income then having enough $ to still cover it. Plan B is the backstop.
That only works IF you have grandchildren. I also want to see my grands (if and when they come along) have a decent and affordable roof over their heads.
It’s very common at private schools and boarding schools for the grandparents to pay. . I think it’s a great idea to gift to the next generation. Seems like the very wealthy have figured out that intergenerational wealth is passed on in many ways. I didn’t grow up with parents who could gift our kids anything. But I’ve seen this intergenerational gifting and my kids have even learned about it in history class.
^this
My ds would need a down payment that is around 4x times what the entire purchase price of our starter home was! His total purchase price would be at least 20x of what ours was.
Our first house, a 4 bedroom 2 1/2 bath colonial, was $145K. In our current town that would run around $1 million. Yes our D will be making substantially more money than we were combined, but not enough to make up that kind of housing increase.
I think everyone understands intergenerational wealth, but only the very wealthy have the flexibility to put the plans in motion.
Yes, but some do have a lump sum and how it gets spent now or later is a real issue. It might be either or as in I can give my kid $ for a house or have them figure it out and give the money to my grandkids.
It’s another topic, but I think a lot of the issue with downpayment lies with people have large student loans and don’t want/aren’t willing to move to places with more affordable housing. They want to live in San Fran and own a place. The smart ones are moving to less populated states even if just to get started (in the housing market).