Who Can Afford to Buy a House in Los Angeles?
A friend of mine posted this on Facebook today:
"Curious (not at all intended to be snarky): if homes in modest, formerly middle-class neighborhoods are now selling for $1.2 million and up, and you need to make at least a bit more than $200K per year to afford the mortgage payments (according to a conversation I saw elsewhere this morning), who is buying these houses? Who (what professions?) makes more than $200K per year?"
Do you have to have an annual household income of more than $200K to be able to afford to buy? Bankrate.com tells us that if you want to buy a $1.2 million home and can put 20% down, the mortgage will run you $55,000 per year. Add property taxes of $15,000 and you're looking at laying out more than 1/3rd of your gross income to buy. But you're suddenly only paying income tax on $130,000 of your $200,000 income so Uncle Sam and Governor Moonbeam are eating a big chunk of your annual housing cost in tax breaks. Is it doable? Sure. But it's all about priorities.
Lots of families are more focused on putting kids into private schools and that's an expense that can really make buying a house in L.A. difficult, if not impossible, to afford unless you have a really strong income. Do you eat out, or economize by eating at home? Are you driving a new car every year or every other year? Or do you drive your car until it dies somewhere on the freeway?
Last year I was privileged to look at the incomes of my clients and that's more than 250 residents of this area. And I can't share a single bit of that data because of my responsibility to client confidentiality. But I can tell you that most of our preconceived notions about what professions and skills are currently paying are way off-base.
The Bureau of Labor Statistics tells us that the mean annual wage for an attorney working 2,000 hours in L. A. County was $127,000 in 2014. I know lawyers who aren't my clients who do much worse, and others who do much better. According to the City of Santa Monica's pay scale, the lowest annual salary for a City Attorney in S.M. is $245,000. Close to double the mean salary in the county. On the other hand, a Deputy Los Angeles County Counsel working in Child Support services starts out with an annual salary of $77,184.
Maybe the key to being able to afford to buy one of these homes is to go into education in the private university sector. I was going to include an image of the list of most highly compensated employees at USC and their FY2014 salaries but I couldn't make it readable for you. So I'll choose a few.
Former USC president Steven Sample is at $1.3 million, just edging out the current president C. L. Nikias at $1.2 million. Strange, since Mr. Semple left the university back in 2010 according to multiple sources. He is supposedly teaching a course, but that's a lot of money to pay a professor who isn't teaching in the medical school. Many USC med school professors earn more than $1 million from the university.
But I've digressed a bit. The truth is, lawyers, doctors, many people in the entertainment industry and so on earn more than enough to buy a home. Especially if they're willing to cut back on other lifestyle choice expenses. Lots of people are homeowners because they inherited homes, or because they were the recipient of generosity provided by family or friends.
The bottom line, one I try to make all of my clients understand is that it is best if you can buy. After ten years of renting an apartment, you have nothing to show for it but ten years of having had a roof over your head and a stack of 120 rent receipts. Own a home for the same period and you have ten years of equity and large tax breaks.
Who can buy these homes? Maybe you can.
"Curious (not at all intended to be snarky): if homes in modest, formerly middle-class neighborhoods are now selling for $1.2 million and up, and you need to make at least a bit more than $200K per year to afford the mortgage payments (according to a conversation I saw elsewhere this morning), who is buying these houses? Who (what professions?) makes more than $200K per year?"
Do you have to have an annual household income of more than $200K to be able to afford to buy? Bankrate.com tells us that if you want to buy a $1.2 million home and can put 20% down, the mortgage will run you $55,000 per year. Add property taxes of $15,000 and you're looking at laying out more than 1/3rd of your gross income to buy. But you're suddenly only paying income tax on $130,000 of your $200,000 income so Uncle Sam and Governor Moonbeam are eating a big chunk of your annual housing cost in tax breaks. Is it doable? Sure. But it's all about priorities.
Lots of families are more focused on putting kids into private schools and that's an expense that can really make buying a house in L.A. difficult, if not impossible, to afford unless you have a really strong income. Do you eat out, or economize by eating at home? Are you driving a new car every year or every other year? Or do you drive your car until it dies somewhere on the freeway?
Last year I was privileged to look at the incomes of my clients and that's more than 250 residents of this area. And I can't share a single bit of that data because of my responsibility to client confidentiality. But I can tell you that most of our preconceived notions about what professions and skills are currently paying are way off-base.
The Bureau of Labor Statistics tells us that the mean annual wage for an attorney working 2,000 hours in L. A. County was $127,000 in 2014. I know lawyers who aren't my clients who do much worse, and others who do much better. According to the City of Santa Monica's pay scale, the lowest annual salary for a City Attorney in S.M. is $245,000. Close to double the mean salary in the county. On the other hand, a Deputy Los Angeles County Counsel working in Child Support services starts out with an annual salary of $77,184.
Maybe the key to being able to afford to buy one of these homes is to go into education in the private university sector. I was going to include an image of the list of most highly compensated employees at USC and their FY2014 salaries but I couldn't make it readable for you. So I'll choose a few.
Former USC president Steven Sample is at $1.3 million, just edging out the current president C. L. Nikias at $1.2 million. Strange, since Mr. Semple left the university back in 2010 according to multiple sources. He is supposedly teaching a course, but that's a lot of money to pay a professor who isn't teaching in the medical school. Many USC med school professors earn more than $1 million from the university.
But I've digressed a bit. The truth is, lawyers, doctors, many people in the entertainment industry and so on earn more than enough to buy a home. Especially if they're willing to cut back on other lifestyle choice expenses. Lots of people are homeowners because they inherited homes, or because they were the recipient of generosity provided by family or friends.
The bottom line, one I try to make all of my clients understand is that it is best if you can buy. After ten years of renting an apartment, you have nothing to show for it but ten years of having had a roof over your head and a stack of 120 rent receipts. Own a home for the same period and you have ten years of equity and large tax breaks.
Who can buy these homes? Maybe you can.
posted by me at 4:22 PM
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