Owning my own little house someday is one of my long-term goals. For much of the country, home ownership is the norm at about 66% based on the 2010 US Census. However, in California (my home state) it’s slightly lower at 60%. I’m going to postulate that the lower rate is directly correlated with higher home prices; the primary reason I’m still a renter and not a home owner. Since I’ve become fairly money-savvy, I want to stick to the age-old rule of purchasing a house no more than 3-times my income. Using this rule, I can afford a $225,000 home. But herein lies my dilemma: there aren’t any single-family homes in this price range in my zip code.
So what could I get for $225,000 or less? A townhouse or condo not far from where I currently live.
For comparison, I checked three other areas in the nation (south, mid-west, and east coast). Here is what $225,000 can get me if I lived in another state:
I’ve fairly familiar with Overland Park and Lenexa, Kansas so I searched that area of the mid-west. For $215,000 I could purchase a beautiful 4-bedroom, 3-bath two-story home. (The weird thing is I’m familiar with this street! My cousins lived not far from here many years ago.)
I’m not very familiar with the south. However, I’ve heard that Charleston, SC is a very nice city (I’m selecting this as my “south” choice). I was confused finding the “down town” area of Charleston using Zillow since there were so many rivers cutting through the area. So, I picked a house that was described as a “down town fixer upper.” I can only assume this house must be near down town. For $225,000 I could purchase an adorable 3-bedroom, 2-bath 1,500 sq. foot house that needs a little renovation (mostly the wood floors.)
For the east coast, I could have selected New York but I knew my price range would be much too low. Instead I selected Boston, MA. Again, not being familiar with this area, I stayed near Harvard and Cambridge; they just sound posh. Similar to where I live, the most $225,000 would get me in the city would be a condo. However, just slightly north of Cambridge, MA is Somerville. For $215,000 I could purchase a multi-family dwelling. Of course, I have no idea if this area is decent, or in the ‘hood.
Obviously, I could get the most for my money, and stay within the 3-times my income rule, if I lived in the mid-west or the south. Both coasts, the east and west, seem terribly overpriced compared to the rest of the nation. Even if I accounted for a reduced salary, I found lower-priced properties in both Charleston, SC and Lenexa/Overland Park, KS that would keep me within a 3-times my income price range.
And, when I compare mortgage rates, which are still incredibly low at 5% or less, $225,000 would cost me less per month than my current rental rate. Oh, the west coast is so pricey!
Now if only I could convince my other half that Charleston isn’t too cold in the winter or hot in the summer. 😉
Are you thinking of purchasing a house soon and using the 3-times your income rule? What does that get you where you live?
24 Comments
It is a good rule to stick to! I also don’t want more ‘house’ than I really need!
@MoneyCone -I’d have to agree. I cringe at the thought of having to clean a huge house. 😉
Seems like a good rule to stick by. Personally I don’t think I will ever end up spending over $200k on a house. I’m starting to learn that it’s not so much about the size if youu have few possessions.
-Ravi Gupta
@Ravi Gupta – Under $200K also means more money to save towards retirement. If you are really into small houses, check out the Tumbleweed Tiny Homes; that’s the ultimate efficient home. I love their designs, but I’m not sure I’m willing to commit to such a tiny space.
Somerville, MA. My cousin bought a single family home in late 1990s for $55,000. He sold it for $300,000 after living there for six years. Those days Cambridge and Somerville were the fastest growing (in housing market) communities in MA.
However, if you can live with the weather in winter, it might not be bad place to live and invest.
@Doable Finance -Whoa! That’s a huge increase. Also thanks for the perspective on that area. I just happened to come across it using Zillow to find homes within my budget price. I don’t think I’d be able to handle their winters, and I know for sure my husband would say “no way!” to the snow. Thanks for sharing this info.
When I bought my townhouse in 1997 (downsized), it was less than 3 times our income! This was not easy in Los Angeles!
@Krantcents – No, it’s not easy finding a home under 3-times your income in LA as I’m finding out! One reason I decided to do a cross comparison of other areas in the nation; it’s always good to compare and contrast to get an idea from different perspectives. Of course, it just makes me a little disheartened to know I’m living in the wrong zip code! 😉
They used to call Somerville, Slumerville, but it has gentrified quite a bit. It’s a nice place to live, with a fun downtown area but in general, anyplace right outside of Boston is VERY expensive. I would guess this place is a gut job on the inside based on the price.
My house is also valued in that ballpark, 3 br/2 bath in western MA. I’d have to have a pretty big salary increase to think about moving to CA.
@First Gen American – Thanks for sharing that information. I’ve only visited MA once and I was literally driving through to RI so I had a very brief experience there (but it was summer and I loved all the greenery!) Looking at Zillow, I could tell that it was pretty pricey around the Boston/Harvard area. That’s why I wondered about Somerville – a little less expensive but still near the city. There’s always a give and take!
I don’t know that you would make the same income in the South or Midwest so you might have to lower the qualifying house price.
I think you’d probably make the same or more in the East.
@Bucksome Boomer – I’d have to agree. However, I did notice that there were plenty of homes for less than my $225K limit in the south and mid-west. I even found some for under $100K (though I don’t know how big or in what condition) that made me think even with my salary reduced in half I could still afford something. However, this is pretty much wishful thinking for my husband has pretty much said we’re not leaving CA. Now I’m just focusing on less expensive cities. 😉
I suspect that these findings are common for people living in California but frustrated with the high cost of living and difficulty in “getting ahead” (or staying afloat) there. Particularly in more expensive areas, anyay.
Like many things, we get what we pay for, and in many other parts of the country the weather will be radically different. I can deal with it, as I’m totally used to being here in Chicago, but otherwise it’s something to consider.
In terms of salaries, I don’t think things are much different here in this area in terms of folks in education, maybe slightly less. However, there are a few places locally with tenured teachers making 6 figures. I thought you were in education, perhaps I’m totally wrong (sorry if so).
@Squirrelers – If you find that place where tenured teachers are making 6 figures, please let me know! Teachers cap out in our district around $90k, which is nothing to scoff at, but it takes many years to reach that salary level and not every teacher does. As for cost of living, I do get frustrated with California. But at the same time, I know I couldn’t deal with harsh winters so most of the mid-west and east coast are out for me. Until I can convince my husband to even think about looking into other states, I’m sort of stuck here. I’ll just have to make the best of it!
Somerville is a nice location– walking distance to the red line. The housing quality is … quaint. It’s amazing what we were willing to put up with living in in Boston that we wouldn’t be willing to live with where we are now. The heating systems alone…
@Nicole – I don’t think I could deal with the cold weather, either. However, I liked comparing this section of the country since I know so little about it, but heard it is an amazing city. Thanks for sharing your experience.
Our current house (if we were to buy it today) would be wayyyy under 3x our income. However, our housing market has really taken a hit. I think when we bought our house, it was 2.1 times our income. It’s funny because our income has gone up considerably since then and our housing value has dropped.
My question to you is, how much do you love your climate? If you are happy with the ‘environment’ you currently live in and you enjoy your job, then find something reasonable where you are now.
@Everyday Tips – I love our climate here, but I’m not crazy about my current city. I’ve grown up here and really need a change. Next week I’m exploring the Paso Robles/San Luis Obispo area to see if I’d like living somewhere in that vicinity. Then I can focus on finding an affordable abode. I know for sure that I would not be happy finding a place I can afford where I currently live – I’d end up in the slums! Or with a major fixer upper that would probably never get done. ;(
75K is definitely nothing to sneeze at as a teacher, I think you’re making about the same amount as a teacher at the highest union level here in Vancouver, too.
I definitely feel your pain, you can’t get anything for $225,000 here. Maybe a 600sqft condo in Surrey (which is a suburb of Vancouver).
People aren’t buying houses 3x the income here, it’s more like 5-6x (which is scary, I know).
@Young and Thrifty – You’re right, 75K isn’t bad for a teacher. But it takes a long time to get to that point, and I’m no where near that. The 75K I’m basing my house on is a combination of my income and my husband’s. So we’re roughly making about $38K each. Again, hard to find anything in my $225K income, but I’m not giving up! 😉
3x income is doable in Tulsa, OK. Less than 200K for a 2200 or 2300 sqft new construction house is not uncommon in the surrounding bedroom communities. Older homes in midtown are a little more per sqft, but have more “charm”.
@101 Centavos
The mid-west is always more affordable. Too bad my other half won’t ever live there again (he grew up in NE and TX – doesn’t like the weather!)
I think that’s a good rule to follow as a limit, just don’t say “hey, this is what i can afford up to and so I should find something that’s close to it”. I prefer small homes. Big ones are too much to clean!
@Laura – I agree that large houses require too much cleaning! Not my favorite activity. 🙂 Little houses can be just as functional with the right floor plan.