“Do you know anyone that lives in a home worth over a million dollars and if so, how are they able to afford it?”

IMG_0054

“Dear PoPville,

Because I am genuinely curious, the Friday question would be:

Do you know anyone that lives in a home worth over a million dollars and if so, how are they able to afford it (if you know):

a) inherited wealth
b) great paying job
c) made enough profit selling previous houses
d) are in a ton of debt”

IMG_0193

I got this question on Monday and on Wednesday WAMU happened to have a report on exactly this question:

“While lawyers and business executives do make up a large percentage of the million-dollar homeowners, Pitingolo’s data show it’s less than half of the total. “You might be led to think that people who live in million dollar homes are all lawyers and they’re all CEOs,” Pitingolo said. “And that just isn’t the case. I think that speaks to the fact that there was a time in history when you could work in a more modest occupation and afford to buy a home that would today be worth more than a million dollars.”

But it’d still be interesting to know how and who are the people buying $1,000,000+ homes today. My home was not a million dollars but it was still a shit ton of money and my story also confirms the WAMU report. My wife and I were able to do it because I bought my Petworth house in 2003 and it appreciated significantly by the time I sold in 2015. Otherwise it would’ve been impossible for us. Do you guys know anyone who’s bought a million dollar house recently?

352 Comment

  • Our modest rowhouse in Mt. Pleasant is supposedly worth well over a million dollars. We were lucky enough to buy in 2000, before real estate prices went out of control (and have also put a fair amount of money into renovations). I don’t know how anybody can afford to buy a house in our neighborhood these days.

    • I am going with this. While my house is not worth $1 million I bought on the Hill for $136,000 and it is worth over $600,000 which is pretty much completely due to the market and not because I did some massive renovation or paid that much.

  • Bought 7 years ago. It appreciated. It takes time. You have to put your millenial ‘i want it and i want it right now’ urges on hold. This is in NE.

    • justinbc

      +1, “worth a million” and “purchased for a million” are very different things.

      • Amen to “‘worth a million’ and ‘purchased for a million’ are very different things.”
        .
        To me, “_worth_ a million” isn’t necessarily surprising, considering how much certain D.C. neighborhoods have risen in value. “_Purchased_ for a million” is a different affair altogether, and that’s the one I’d be curious about.

        • +1. And I would think appreciation is a pretty common answer to the question (though most of the options are not mutually exclusive). I always wonder about the people who move into the new high rises, which seem to be more expensive and a much worse investment than neighboring homes.

    • Maybe you should put your baby boomer ‘I want to talk down to millenials even though my generation hasn’t done anything special’ urges to the side yourself.

        • I can see the gloating from here 😉

        • Great comeback!! I think we (Gen X) got it right. We work our asses off, drink our faces off and managed to escape the vitriol spat between the two other groups. I thank the 80’s for sucking and Kurt Cobain and Pearl Jam for being awesome if that makes any sense.

          • lol @ anyone who says “the 80s sucked” with regards to music.

            Can name dozens of bands that were great, and if they didn’t do their thing Pearl Jam and Kurt Cobain wouldn’t have done their thing either.

          • Yeah, but we have to spend our entire lives sandwiched between the two Worst Generations. Neither of them is ever going to shut up about themselves. Think about it.

          • X had a fair amount of vitriol directed at them in the ’90s when they were beginning to enter into adulthood. Millenials will get to where X ended up too. The only true whining I hear from them is their student loans and lack of job opportunity to pay the loans, which I think is totally understandable given the situation they got dumped into by their parents. I’m excited to see this generation grow up and make an impact on the world- they are incredibly hard working, compassionate, and visionary (on the whole, of course every group has its outliers).

          • I’m with you, Anon. I’m a Gen Xer, and I’m sick of the generation wars. The Millennials have good reasons to complain–college costs 4-5 times what it did for us. I worked my way through college with part-time jobs and two summer jobs, and that’s basically impossible now.

            I also look forward to the changes the Millennials will make, and I also have great hope for Gen Z (or whatever they are being called). The really young kids today have great direction and kindness. It gives me a lot of hope.

      • Maybe he should, but it doesn’t make it untrue.

        -Reasonable Gen X’er not responsible for any of society’s problems b/c we keep to ourselves.

        • Anonomnom

          This got pretty obnoxious pretty quickly… I see the war between Boomers and Millennials everywhere, but I had no idea about the sanctimony that comes from Gen Xers. Thanks for enlightening me.

      • Gex-X developed the Internet and mobile apps. You can thanks us for that.

      • I’m not a boomer(not even close) but thanks for playing.

    • I’m sure your random, unprovoked, irrational dismissal of about 76 million people signals that you’re a super-likable and tolerant person with a wide social circle! Congrats on your expensive house!

    • LOL. How is this a “millenial” problem? Stick to what you are good at: gentrifying areas. Leave the millennial talk to people who know what they are talking about.

  • Like John B., timing was the key for us. We bought a fairly large, but dilapidated place just off of H Street in 1999 for a flat 100 K. We did a full renovation on the house and the neighborhood has undergone huge transformation. Current estimate on the house is around $900,000. Most people I know around Capitol Hill that own million dollar homes bought low in the late nineties and early aughts.

    • Same here. Bought in Logan Circle in 2000. Row house for $400,000 in bad shape. Worth ~1.6 million now and still in bad shape. We could move to a “better” house in a “better” neighborhood but we like where we are.

    • At the time, (a) prices were already going up and we thought we were buying at the peak of the market, (b) we bought a house that was a little above our comfortable price range, and (c) the house was more of a fixer-upper than we had been looking for. But taking a chance on a house that needed work, in a good neighborhood that we liked (and location is everything!) really paid off in the long run.

      I should also add that our porch roof blew off in the wind storm Sunday night or Monday morning, so home ownership isn’t all joy and bliss!

  • I bought my town house in NoVa in my mid 20s for <150K. Sold that and bought a condo downtown DC. Sold that and bought a row house near U st. Sold that and finally bought million dollar single family home in NW DC. It took me almost 20 yrs, but if you start early and buy in up and coming neighborhoods, you can build equity enough equity over time.

    • I guess that’s technically still possible, but you generally have to live much farther from job centers in the area to find similarly-priced starter properties to what you bought about 20 years ago. The market is a lot different than it was even 15 years ago…

    • How is that possible now?

      NoVa is super expensive. The only area one can buy such a place now is in very shady areas. Not sure most 20 year olds would want to do that.

      • “very shady areas”

        That is essentially the upper-middle class definition of up and coming neighborhoods imo.

        • Very Shady Areas = great opportunity for investment. In other words, if you find a very shady area, buy, buy, buy…..

        • Mt. Pleasant was sorta in that category when we bought there in 1993 ($158,000 for a rowhouse on Kenyon). This was right after the 1993 Shotgun Stalker (James Swann) and two years after the riots.

      • You do realize that those of us who bought and traded up had bought when it was really F-ing shady. That’s why the prices were low. Then we sold when it wasn’t so shady.
        See: Dupont Circle 20-25 years ago, Columbia Heights 15-20 years ago (although that’s still shady IMO), Shaw 5-10 years ago, etc…

        • Yeah, but Dupont and Shaw were walkable to jobs even then — the edge of Ivy City, for instance, is not. A lot of that opportunity is gone… prices in those areas probably aren’t going to repeat the appreciation we saw in closer-in neighborhoods that allowed a lot of the commenters here to “trade up” to nicer digs.

  • This is the question of my life. I’m pretty convinced most people either fall into categories A or D.

    • Also I would add that I am taking the question as “purchased a home over a million dollars,” rather than “bought a home three decades ago that has increased in value” because of course homes were cheaper back then.

    • That may be true for the young couples buying million+ homes, but if you read the WAMU piece, you’d see that’s not likely the case for the majority of m+ owners. If you bought a house in DC prior to 2000, it’s likely worth a million today.

      • Right. Obviously people who bought early either have homes that have appreciated in value or have sold those houses and bought more expensive houses. BUT the very last sentence in PoP’s post says: “Do you guys know anyone who’s bought a million dollar house recently?” So for the purpose of the post I am not counting those people (as I said above. I think you may need to work on *your* reading comprehension…)

        • The answer to how someone is able to afford a million dollar house today is extremely straight-forward: with a lot of money. There really isn’t much else to it, eh?

        • why wouldn’t you count someone who sold a home and re-bought? they bought a million dollar house recently, and they got the money for it from appreciation on a previous property. seems like a pretty common sense answer.

  • I know someone who has purchased a million + dollar home. They both have high paying jobs (prob combined take-home pay of 400k+) and do have kids.

  • Two people earning $300k+ should be able to do it. There are a lot of jobs paying $75k+ in DC and then one of you needs to be a big earner… and there are plenty of chances to be one of those in DC as well.

    Or don’t have kids – that frees up a bunch of cash.

    • Agreed. If you have a dual income that gets you into the 300s, then the monthly mortgage payments are not too bad. The down payment is the tricky part, it is still hard to save up that cash. Having no kids helps.

      • I’d think you could get by with 10% down which would leave you with something around a $4500-5000/mo. mortgage, which is more than I would be willing to pay, but as you note, if you’re combined clearing $300k, that’s about $15k/mo. after taxes/savings/etc., and that puts that well within range.

        As someone else in this thread said, the simple answer is the right one – make a lot of money.

        • You’d be surprised. You can buy homes today for 5% down with a mortgage plus HELOC without having to pay PMI. When I was shopping for a home, I was surprised by what I qualified for and that I could buy it with 5% down and a lender would actually do that. For as much as we think that industry is highly regulated, I’m not convinced they aren’t still handing out mortgages like candy.

          I qualified for a million dollar and I’m single and earn ~$300K/year. I wouldn’t pay that much for a house at that salary, but I was surprised they’d let me do it with $50K down and no PMI. I do already own a home though and my credit is excellent so not sure everyone could, but it just sounded “too good to be true.” But yeah, there are people around who can buy million dollar homes who are not people who would ever consider themselves rich.

          • “But yeah, there are people around who can buy million dollar homes who are not people who would ever consider themselves rich.”
            .
            If you are a single person making ~$300,000/year, you are rich. You might not _consider_ yourself to be rich*, but you’re rich.
            .
            * As was the case with PoPville poster PPercy.

          • I guess that’s all relative. I don’t feel rich in DC. Obviously I would feel rich in, say, Bowling Green KY making $300K/year. But who makes that there? Especially after the massacre.

            I also have a great deal of student loan debt. So yeah, I make a lot, but I had to borrow a lot to get a job to make that much. Presumably it pays itself off down the road, but I assure you, I’m not rich by DC standards.

          • I think I expressed an opinion on how I would consider my own financial status, something I probably know a little more about than you do, and I don’t know who percy is and don’t really care. You of all people have some gall in talking about how one comes across considering your frequent commentary here.

          • justinbc

            What you’re describing is a piggy-back loan situation, and that is not available to most borrowers, especially those without optimal credit (LTV and good credit standing are the two biggest weights in determining PMI). At $1M purchase price you’re also in jumbo loan territory anyway so discussing PMI is frankly kind of irrelevant.

          • Back off of textdoc, please. She’s a member of this community and gave you a valuable bit of advice based on her experience here, with citations, even. And she was pleasant about it. I get that rich people like you might not like receiving advice from the poors, but attacking her for trying is bad manners.

          • Value of advice is also relative, I’d say.

          • And unlike Percy, I’m not here trying to justify how I characterize my wealth really. I simply said I don’t feel rich by DC standards. That’s it. If it makes textdoc or wdc feel better to think I’m Marie Antoinette or Ivanka Trump rich and therefore my opinions are easily dismissed (since apparently I’m not part of this community), by all means.

            ¯\_(ツ)_/¯

          • Oh man. I miss PPercy!

          • justinbc

            I don’t really agree with Shawnnnn’s classification, but the perception of wealth and the actual accumulation of wealth can in fact be very different things. You can make a #$%^ ton of money and own virtually nothing due to debt or other obligations, or just your spending habits. Some would argue that’s still wealthy (to have that problem), some would argue otherwise. Per the Cap Gemini/RBC Wealth Management 2015 World Wealth Report the first “tier” of rich is classified as “Those with US$1 million to US$5 million of investable assets – not including the primary residence and other hard assets like cars or jewelry.” Frankly I think it’s kind of silly not to include primary residence, since for many that may be the single biggest asset, but it can also be hard to cash out (in some markets, not so much in DC).

          • Not sure what the beef is here. It’s certainly possible for someone to have a high income and high non-discretionary expenses – like student loans or other obligations – that combine to create a situation where the person isn’t “rich” in terms of having a large pool of excess cash to spend.
            One of the constant refrains in these posts is “yeah, my house is worth $1million plus now, but I couldn’t afford to buy it today.” Arguably, if you have an asset worth $1million, you’re rich – at least compared to lots of other people.

          • For what it’s worth… in 2012, 7% of PoPville poll participants said they had a household income of more than $250K:
            http://www.popville.com/2012/06/friday-question-of-the-day-how-much-do-you-make-vs-how-much-debt-do-you-have/
            .
            Note that that’s household income, not individual income.

          • For what its worth, in 2012, I didn’t have a household income over $250K either.

            And I agree with above you count primary residence to extent you have any equity, but if you “own” a million dollar house with a $900K mortgage balance, you don’t have a million dollars. You have $100K. I might have a $600K house, but I really only have $50K in equity in it at the moment and if I were to sell it, a real estate agent would take that so I’d say it makes little sense to count that as an asset contributing to my richness.

  • I’m going to throw a wildly divergent alternative out there – “e. live within their their means, save aggressively, and have no debt.” My husband and I (low 30s, DINK couple) fall into this category and likely will buy a million plus home in the next few years if we stay in DC when we have kids. We both work for the government, so no massive salaries there, but we paid off our student loans early, save and invest a ridiculous percentage of our salaries, and have kept lifestyle inflation to a minimum. It can be done! I’ll admit though, a big help has been the dual income – would be tougher on one’s own.

    • If you care to share, what is a “ridiculous” percentage? Are you exclusively in TSP or are you also doing Roth and traditional IRAs in addition to the TSP? I think I’m at 10% for TSP and maxing out my Roth every year, but I’m thinking of going more aggressive- maybe opening up a traditional IRA with lower fees than TSP…

      • You hope to find a traditional IRA with lower fees than the TSP? Good luck with that.

        • My personal IRA has zero fees outside off $8.95 a trade. Pick your own stocks.

          • In case anyone reads this, this is bad advice. Stock picking is a fools game. Also, TSP has super-low fees and offers the only free lunch out there in the form of diversification through broad market funds.

          • To clarify, many 401k type plans such as TSP offer diversified options at very low expense. If outside a retirement account cheap broad-market ETF like VTI or SCHB will do for the US stock portion of your portfolio. Again, no need to pick your own stocks.

      • Is your TSP maxed out? Unless you are a GS15 or SES, 10% of your salary isn’t maxing out your TSP contribution. So do that first.

        • Yes, this. You can set aside 18k a year for retirement.

          You can also backdoor a Roth IRA but funding a traditional IRA (up to $5,500 per year) and then converting it into a Roth almost instantaneously. (This really only applies once you reach the income phase-out limits.

      • You’re not asking me, but the person to which you’re applying sounds a lot like me.

        My spouse and I max out our retirement work options. With matching, that amounts to saving about 20% of our salaries. This is sufficient for retirement savings.

        If you’re at 10% for TSP, that means your employer is matching 5%. If you’re adding in $5,500 for a Roth IRA each year, you’re close to 20% and doing fine. (Since you’re a fed, you also have FERS. (This benefit doesn’t provide much income — basically 33% of your highest 3 years after you work 30 years — but being a defined benefit plan, the cost to purchase this on the market is very expensive. For example, buying a 50k a year annuity taking effect upon retirement would cost about $850k on the open market. An annuity providing 12k a year would cost about 200k. (There is a lot that goes into these calculations, but they’re accurate in broad brush-strokes terms.)))

        • Thanks, everyone, for your input. I opened my Roth IRA when I was 17 and have been pretty careful in saving since then. Always open to hearing about how others are saving, especially if there are things I could be doing to improve my own level of preparedness. As someone in her 30s, I know Social Security is not a sure thing, so we have to be ready!

      • Over the years we’ve both contributed 5-10% to TSP (and get the 5% match) and put at least 50% of take-home pay into a brokerage account. We follow the low-fee, index fund route and have found great sustainable growth there (thank you, compound interest!) Agreed with Anon 9:26 below – a lot of this comes down to personal responsibility and a little luck. We live a pretty frugal lifestyle, splurging on things we truly enjoy (travel and Chinese food!) and not pouring money into keeping up with the Jones. Will see how it goes when there are children in the picture… not looking forward to daycare costs in DC.

        • This is insane. There’s virtually no retail investment lower cost than a TSP account. And that’s not even factoring in the tax advantaged status of a TSP account vs a brokerage account. You could be pissing away $1000s per year by not filling your tax advantaged accounts.

          • Agreed that if you have the money to spare, you are crazy to not max out TSP contributions. But there are low-fee index funds available at every commercial brokerage firm which mirror the TSP funds. So you can easily duplicate your TSP allocation but with money that is available to you as savings if you need it, as opposed to TSP funds for which a penalty will apply if they are withdrawn.

          • For us, it’s not all about how much money we can make (ha, we are in government after all) – we also factor in when we’ll need that money. As federal workers, our golden years are set – we’ll have TSP in addition to our FERS pension annuity and Social Security (yes, it will still be there!) However, if we lock away all our savings in those areas, we will have to keep working until at least 57 to access them without costly penalties. The FERS minimum retirement age is 57, and the minimum distribution age for TSP is 59 and a half – but we don’t want to wait that long! We’re building our non-tax-advantaged savings so we can bridge the gap between leaving our full-time jobs and traditional retirement age.

          • Do you not consider paying income tax on that money NOW to be a costly penalty?

          • PoppyG, google Roth conversion ladder. I agree with Margrave that you’re making a mistake in how you’re prioritizing your savings buckets, but at least you’re saving a lot.

        • But don’t forget the magic of the TSP loan, if you need to get some of that money out. Incredibly low rates and they don’t count against your credit score because you’re “borrowing it” from yourself!

          (Now I will step down from the advice giving because I bought a $375k condo by myself by borrowing far more money than anyone on here would ever approve of and am decidedly not a role model.)

          • Yeah this was part of how we funded the purchase of our not-quite-a-million dollar house. TSP loans can be used for down payments because as DC_KT notes, they’re not actually loans.

      • You didn’t ask me, but I am 100% in the camp of “live BELOW your means”. Personally, I saved over 68% of my income last year. And I wasn’t uber-frugal about it either. High income helps, but I also made some lifestyle choices and I brought my lunch to work every.single.day. I also bought a crock pot and make huge batches of food for freezing and for lunch meals. I really wanted a fence for my house, and decided not to get it — both to save the cost this year as well as every subsequent year’s maintenance for the rest of the time I’m in the house. That adds up! I have to have a car, but I do not have to run errands in it. So all of my errands are on foot, by bike, or by metro. Choices, choices, choices and all the little pieces add up to big savings!

    • I somewhat fall into this category. I bought my current home for around $700k. I’m a single guy, 30, make around $160-a bit more depending on the year. I could afford a $1mm+ with another moderate income (even under $100k).

      Obviously I’m very fortunate to make decent money, but I also save aggressively and started in my early 20s. I can appreciate that circumstances make saving easier for some, but it’s also not uncommon to see people complaining about not being able to get ahead as they sign the check for their fourth $50+ dinner of the week.

      Like nearly everything, this isn’t a black and white answer. The are elements of luck and personal responsibility.

      • You are 30 and making 160k a year? What do you do?

        • Could be engineering or law. I know a few people who have gotten engineering degrees with no student loans and are making a hefty sum.

        • Smart money’s on law.

        • Consulting, non-government related.

    • Most houses in my area are easily $1M+ and a lot of neighbors are retired and bought in the 1990’s or, if younger, are dual incomes with one being sizable. When I talk with the younger people, they’ve been buying and selling for 10+ years and worked up to this. So while they bought for $1M they have a much smaller loan.

      I’m in a similar boat, but on one income. The big surprise , I bought the cheapest place in the area and with low interest and the IRS interest subsidy, I’m paying way less than renting, or comparing what my neighbor is renting an identical place. I’m saving $500/month after expenses including saving or spending 2% of the value annually for repairs. It also helped that I refinanced to remove the $120 PMI after one year.

  • I know lots of people with homes worth well over a mil. All have kids and fall into category b). I work in law though and know a lot of dual-lawyer families.

  • Some combination of the below:

    (a) a combined spouse income of around $300k at least. Not impossible for the plethora of lawyers and government contractors in this town, even if one spouse’s salary is much lower than the others.

    (b) Do not have student loan debt, either because your salaries are high and you’ve paid it off through sweat, or your parents sprung for your grad school or paid off your loans.

    (c) Do not have kids until you have sustained the salary in (a) for enough years to pay off debt and put down payment. Childcare is murder on your bank account.

    (d) As others have alluded, buy low and sell high on another house. Not sure those opportunities really exist any more in DC, at least not ones with eye popping ROI..

    (e) Just have mom and dad bankroll you. There are more people in this category than you think, and (irritatingly for me, who does not come from money) tend to be the ones railing against capitalism and the wealthy.

  • My wife and I bought a single family house for $1.4M in NW. It took a combination of (b) my job as a partner in a law firm, (c) more debt than we are comfortable with ($800K), and (e) historically low interest rates. Our HHI is around $600K. Housing prices here are crazy, but that is true in other big coastal cities with strong regional economies too. It is a shame that housing close to the city and with good public schools is unaffordable. I grew up here, and virtually all of my friends moved away from the DC region once they had kids. I fantasize about moving somewhere more affordable and with a slower pace of life….

    • binntp

      Just out of curiosity, do you plan to live in your home for a long time? Not that I could afford a $1M home, but if I did and bought one, I’d want to live there for some time to feel like it was worth the investment and not have to worry about potentially losing out on re-selling if it didn’t have time to appreciate.

      • Yes, we love the house and bought it intending to raise a family in it and also expecting it not to be a good investment (comparatively) after all of the fees are taken into account. It fit our envisioned future, but I did not and do not expect it to appreciate quickly or much. I personally do not see how housing prices in the region can go much higher. And if we choose to move, well, I’ve made bad investments before and am still standing.

  • All the ones I know who have done it are families where both individuals are attorneys at large law firms and each take in at least 250k per year.

  • HaileUnlikely

    Of the two that I know personally, one was among the top political operatives for the Democratic party for a period of about 15 years right after college (graduated around 2000 or so) and was among the first people to use the Internet to organize people for political purposes in a big way, and the other was one of the first ~10 employees of the company whose software you likely use if you log into your work computer remotely from home or elsewhere. They both became very wealthy through the confluence of circumstances that led them to have certain skills and ideas that, while still quite valuable today, were more valuable than you can likely imagine back then when those skills and ideas were brand new.
    .
    Besides them, I know a couple of people who, like others here, bought homes a long time ago for <$200K that are worth more than $1M today, but I get the idea that that wasn't the intent of the question.

    • Re the intent of the question — I agree. Perhaps it was poorly phrased in the title. I read the post as “how do people afford to BUY homes that are 1+ million?” but everyone seems to be answering along the lines of “how people own homes that are worth 1+ million,” which is a different question.
      .
      Unless I’m misunderstanding.

      • Tsar of Truxton

        Yeah, but someone who bought a home that appreciated significantly would fit into the category of people who could easily buy a million+ home if they wanted, so they fit into category (c). If they were to sell the appreciated home, they would have hundreds of thousands in equity, which they can easily put towards a huge down payment and afford something in the million+ range on the open market, especially with low interest rates. I bought a house (<600k) 2.5 years ago, and it is already worth 150k more than I paid for it. If it keeps appreciating, I will easily be able to sell it and buy something more expensive. That equity is nontaxable up to 250k (500k, if married). That tax break is a huge windfall (unless of course, someone in the WH changes things).

  • I just bought one slightly under 1M about 6 months ago. I’m a single person with no kids, salary in the 200k range, lots of debt, and came into a small inheritance which helped with the down payment… so A, B, and D. I’ve been saving pretty seriously for a down payment since I started my first job, and have been lucky enough to not have college debt or other loans to pay off so was able to sock it away pretty quickly (about 8 years).

    • Honest question – are you super frugal in every other aspect of your life? My husband and I combined make close to $200k and I couldn’t imagine paying a $5k mortgage (assuming you put a $100k down, maybe you did more).

      • That’s my question, too. Because of prior real estate investments, I could afford a 20% down payment on a million dollar home, but there’s no way I could afford the mortgage payments (not to mention the upkeep). I’ve loved DC for 10+ years, but I’m cashing out this month. I looked at the numbers, and by moving to a place with housing costs that eat up less of my earnings, I should be able to retire several years earlier.

      • I put down 20%, so almost 200k plus fees, and have a 700k mortgage at 3.6% so pay around 4k per month with insurance and taxes. That leaves me with about 5k for other expenses per month. I’ve certainly been saving way less than I used to, but I was saving towards a down payment so am ok with that. I’m not super frugal, but I also don’t have kids.

        • As others noted elsewhere in this thread, not having kids is a HUGE factor in helping folks afford 1m+ properties. There are many such folks in DC/close-in ‘burbs.

      • And don’t forget the mortgage interest deduction gives you back a decent chunk of change of that payment at the end of the year. So $4,000/month isn’t really $4,000 month with the deduction.

        • so around $3,500 counting the deduction?

          • I guess that largely depends on your income and the amount of interest you paid, but yeah, probably saves $500-750/month.

          • And if you think about it, you can pay $3500 in rent pretty easily on just a two bedroom condo in Dupont or Logan.

          • Oh, for sure. If you can swing the necessary downpayment and have relative job/income stability, it’s actually cheaper to buy a given property than rent it in most of DC.

        • That used to be the case for me, but the past couple of years I’ve fallen into the AMT bucket which negated the deduction

        • That’s not really true for most people.
          The mortgage interest deduction reduces your taxable income by the amount of your mortgage interest, and the personal income tax STANDARD deduction for a single person is $6300. So you subtract $6300 (more if Married, filing jointly) from the amount of your mortgage interest. Only the difference should be counted as the benefit from the mortgage interest deduction. The vast majority of homeowners do not pay enough in mortgage interest to make itemizing deductions worthwhile, so they simply take the standard deduction.

          When you’re doing your taxes next month, be sure to pay attention to the part where Turbotax tells you “you haven’t earned enough deductions, so we’ll just use the standard deduction” If that’s the case, then the argument about mortgage interest being a benefit is not true at all. It’s also easy to see from this example how the mortgage interest deduction VASTLY benefits the wealthy (people who buy expensive homes, in HCOL areas, and who use mortgage debt to leverage their wealth).

          • I’ve done my taxes. And yes, I itemize my deductions (for a multitude of reasons that isn’t just because of the mortgage interest amount).

  • I bought a two family home in Bloomingdale in 2005 for $495k–which seemed like a lot at the time. I rented every room in my unit and the basement for five years, and then gradually removed roommates as I made more money and later got married.

    I solid it in 2016 for 910k and separately walked with another 70k as a result of investing from all the rental income. I moved to 1.01 million dollar house in Arlington.

    And honestly, given everything I had to go through to get here, I absolutely resent when people assume I inherited money or had to have some kind of outside help to accomplish what I accomplished.

    • HaileUnlikely

      I take your point in your last sentence, and as somebody who saved every penny for a decade to be able to afford a starter home in 2012 that cost about half what yours did in 2005 I empathize, but please also realize that even the stated starting point of being able to buy a house for 495k is mind-bogglingly far out of reach for a lot of people, both because $495k is itself a lot of money, and because a $495k house today isn’t going to be a house that can generate a lot of rental income (and in the unlikely event that such a house does come on the market today, it will likely be swooped up by an all-cash buyer).

      • +1 to HaileUnlikely’s “please also realize that even the stated starting point of being able to buy a house for 495k is mind-bogglingly far out of reach for a lot of people, both because $495k is itself a lot of money, and because a $495k house today isn’t going to be a house that can generate a lot of rental income [. . .].”

      • It’s mostly out of reach because what house in DC can you buy for $495K these days?

        • There are quite a few available. We bought our 4 bedroom house 2 years ago for less than $500k. I think a lot of people overlook the farther out neighborhoods in NE- especially if you’re willing to buy something that hasn’t been flipped you can easily still get a house for $400k there with a yard and parking.

          • Sure, I was probably being a little hyperbolic, but the number is plummeting rapidly. That said, short of Michigan Park/Woodridge/and south of RI Ave in that direction, it’s hard to find houses under $500K this side of the Anacostia. At least ones that don’t need significant work.

            Definitely possible, but it’s been shocking how quickly that inventory has evaporated in a few years.

          • “short of Michigan Park/Woodridge/and south of RI Ave in that direction”

            You mean short of like 10% of the city’s landmass? That’s a lot of city left to buy in. If you’re envious about the people with the foresight to have bought well in Bloomingdale 5 years ago, consider buying in Michigan Park/Woodridge/Langdon today. While they may be on an edge of the city, they’re a) a lot closer in than many areas of the city closer to the diamond points or EOTR, and b) closer in than a lot of walkable neighborhoods outside the District line in that direction (Mt. Rainier, Hyattsville, University Park, College Park).

          • For whatever it’s worth, I just computed the region you referred to as 2.84 square miles, so about 5% of the city’s landmass. Apologies for the hyperbole.

    • I agree… I bought my first place for $80K ten years ago (two units for $40K each, sold together), using extra bat-tending tips to make the down payment and fix the place up. Through sweat-equity/flipping up, then adding the significant salary of my significant other, we now have 3 three properties (about to be 2 – selling one for renovations) with combined purchase prices of $1.2M and assessed values of $2.1M. While we mostly did this all on our own, we did get $25K from family along the way.

  • I have to take issue with the woman featured in the WAMU story (actually I hate this whole series on WAMU). Who, in their right mind, thinks that they can buy a first home in Cleveland Park, particularly on the block where she’s looking (Macomb that backs up to RCP/Treagaron). She couldn’t have done that 25 years ago either. Like the real estate agent featured in the article said, you can’t expect your first job out of college to be the CEO of a company, you work up to that. Just like you can’t expect your first house to be a $1M+ in Upper Northwest.

  • They bought when the neighborhood was so sketchy and the houses so run down that they got a really great deal. Now the neighborhood (NE Cap Hill near H) has done basically a 180, they’ve done extensive refinishing to the house, so the house is worth just above $1M I believe.

  • I think the key is having a dual income household with at least two modest salaries. I bought my first home as a single person for $500k with a salary below $100k. It was tight, but definitely possible. Double the income, and you can qualify for $1m house. Also, you don’t have to put 20 percent down- just be sure you can afford the payment and the PMI. If I had waited until I saved 20 percent, I would have missed out on years of living in a nice house and a significant amount of appreciation. Plus I wouldn’t have been able to afford living in my neighborhood even without the PMI if I had waited.

    • My guess is that most 1m+ transactions require 20% down.

      • as a member of a duel income household of around 200k with perfect credit scores and little debt, we could not qualify for a million dollar mortgage. I think the most we qualified for was 650k.

        • mellodcd

          check out a jumbo loan… this is how we were able to swing it with only 10% down.

        • Ummm, you might need a second opinion, or you have more debt than you’re letting on. Just a simple calculation- take your monthly gross income and multiply by 35 percent (conservative estimate, you could qualify for higher). With great credit you could easily qualify for a total monthly payment of $5800. That could get you close to a $1m house with 10 percent down and PMI.

      • I have a friend who just purchased a home with 15% down. They need to pay PMI.

      • Jumbos will get you there. Wells Fargo does a 10% down with no PMI

    • The original question asker is my wife and we both make over $100k. We could probably swing a $1M+ house, but we wouldn’t be able to save a dime otherwise, so it’s just not feasible. And we don’t have kids and don’t plan to, so that’s a tremendous money saver. We just can’t fathom how so many people afford to live in this high rent area (we’re in Alexandria) with multiple kids and a couple fancy cars in the driveway.

      • Don’t envy those people, because many of them are living above their means. Either their salaries will catch up (if they’re lucky and work really really hard), or they will find themselves in financial trouble in a few years. This sounds pretty obvious but it’s amazing how many people don’t seem to realize it: if you can’t afford a million dollar house, then don’t buy a million dollar house. Settle for a small townhouse or condo for a few years (or even rent if you have to) in an area you can afford. My husband and I rented an “English basement” for 3 years, then lived in a condo for 7 years, didn’t buy a new car for 15 years, and were nearly 40 before we bought our (now million dollar) house in Mt. Pleasant 15 years ago. Live well within your means and start saving aggressively while you’re young because believe me, you’ll need that money when you’re older.

    • This. Lots of dual earners in DC each with very solid salaries so that they have $250k+ HHI. Interest rates are also critical — one’s buying power is a lot higher at 3.5% than 4.5%. These may be lawyers, government officials, etc. Many may have had family help with undergrad and grad school so they have the nice income but without much debt. Even for young high earners without significant debt, the down payment can be a challenge, but it can help if someone had previously owned a condo or townhouse that appreciated.

      In our case, our home will probably be worth a $1M after some additional improvements based on how our neighborhood continues to appreciate and the improvements we’ve already done. Before this house, we had a townhouse for two years that we sold for $150k more than we purchased it for a couple years before (we also had done some improvements in that house). That helped give us the down payment for a more expensive house, even taking account of some of the transaction costs.

      Also, to schmoo — I’m a little surprised you only qualified for 650k, but keep in mind that a $1M home does not necessarily mean a $1M mortgage. If you’re putting down 20% (which, granted, for a $1M home is a huge chunk of change), the mortgage you need is $800k — so you’re not really that far off from that in terms of what the monthly payment would look like.

      In a separate conversation, what has always surprised me about this area is just how many people are able to by homes that are worth $2, $3, $4M and more.

    • I saved about 25% of my net income for years and used investments and could not get anywhere close to a $500k place as a single person in the same income bracket. And that’s with extremely modest student loans and a great credit score.
      Good for you, the appreciation will pay off much more quickly than for me.
      A lot of this is just like income gains, if you start lower you’re never going to catch up. I have a friend who makes bank, so he bought a place he could afford that was way more than what I could buy, so his appreciation was greater than mine, so he moved up to an even nicer place and sold that for a huge payoff and continued to move up. Even if I sold my place, I couldn’t afford what he paid for his first place.

  • Only people I know are my parents. Condo in Dupont. They put a ton of work into it tho. It was kind of a dump prior to them moving in.

    I also think the family from the first part of that article are insane. Why can’t they have what other people have? Serisoulsy? Cus you don’t make/have enough money. Also probably doesn’t help that they purchased their first condo in woodley park where appreciation margins are probably not nearly as great as other parts of the city. It’s pretty simple. It’s not worth it to chase these things. Its a marathon, not a foot race. If appreciation to bump up into a better neighborhood/bigger house is your game, you need to put the time in and build equity as the article said. Or you could inherit a ton of cash which would also be awesome.

  • Speaking personally: purchased home in 2013 for over a million. One of us works for the government, though not on GS scale (that’s important); the other for an international organization. 20% down from saving up during working years before grad school. Bought when combined income was a little below 300 but with knowledge that it would soon be 350. Mortgage has risen from 4700 to 4950 in three years (thanks assessor…). Two kids that are soon to be no longer in daycare, which is going to be glorious.

  • I think the usual guidance about how much of your income you can spend on housing is absurd – but I think it leads a lot of people who could spend less to overspend on housing. I know a lot of people who have purchased and can afford a very expensive house. Many double income earners in mid career jobs in D.C. can afford a very expensive house. Lawyers, lobbyists, senior PR and association execs, GS14+, academics, doctors… we have thousands of them here. But being able to “afford” it doesn’t necessarily make it a good idea.

    • Totally agree with this – I certainly *could* afford to pay more per month for a mortgage, but I don’t *want* to. I’ve lived in my place for 20 years, so during that time my salary has almost quadrupled, but my mortgage payment is still under $1,000. That extra money has gone into retirement savings, as well as paying extra towards the principle of the loan. Of course, my discretionary spending has increased as well, and I have no additional debt. It really just depends on what you are comfortable with – I’m single and don’t want to have to worry about how I would survive should I lose my job, have a health crises, etc.

      • HaileUnlikely

        Agreed. I grew up living with a single parent in a subsidized apartment and answering the phone and door for bill collectors. That has likely shaped my attitude toward money, debt, and risk generally. The house that I now own was likewise previously owned by a single mom who paid way too much for it during the bubble, had rather dim prospects of ever being able to pay her mortgage, and eventually lost it to foreclosure. The risks that I see people take with their money here baffle me. In fairness, as many many other comments here illustrate, those risks often–albeit demonstrably not always–work out well and pay off big.

        • Haile: there are many similarities in our upbringings.

          Be careful not to make foolish decisions in the other direction (too conservative) in light of this background. I was not raised in a house with knowledge/understanding of finances. The rule was, basically, don’t spend (largely out of necessity) and work to save up for what you want.

          I am now very knowledgeable about finance (writ large). Proper use of financial products is a much sounder strategy for wealth accumulation than just “save and don’t spend.” Leverage is far from your enemy.

          Much of the advice and guidance I was given — and that I see here and especially on DCUM — is poor. The guidance provides a path for not becoming poor, but in doing so it shuts off most pasts to upper-middle-class wealth. (Yes, I work in finance, but on the other side than most of the high-earners.)

          Two GS-15s (so, 150k each), can afford a million-dollar home. It will be tight when they’re paying for daycare for two kids and the mortgage, but that crest eventually subsides. Between maxing out employer-provided retirement and equity accumulation of their home, they’ll be fine for retirement. *Yes, adequately planning for college takes some finesse, but it can be slotted in after daycare costs vanish.

          • My wife and I believe we come from lower income immigrant families (they were probably a little more stable than we remember) and were really thrifty (40% of net) and risk averse until we got to our 40’s and realized that we had to take on risk or we’d be left behind by our non-jonesy friends.

            You can’t save your way to having money – you have to invest and take advantage of government subsidies for the rich. We got leverage through loans and received the insane gov subsidy on mortgages. I got a NACA loan (0% down, 0 closing costs, interest about 1% below market and max loan $ in 400’s and lots of rules and counseling) and after 10 years of regular payments and appreciation had a big chunk of equity. We close on a row house in a couple weeks at 700 and will put 200 in cash in to rehab which should end up basically being us buying a million house for 900 (and sadly 30% down).

            There are so many stories on how people get to buy million dollar houses though among my friend group, the three couples that bought above $1mil almost all come from having HHI in the $400+ range.

          • justinbc

            Just as a point of clarification, GS-15 doesn’t start at 150K/yr, it’s currently 131K. You hit that point after 6 to 8 years in the role (or if you transferred in from another field and they’ve matched your salary).

        • Regarding your point about risk, you have to keep in mind that the DC area “lucked out” big time. Same can’t be said for many areas in the mid-west and south. Lot’s of people there who took large risks likely lost a lot of money. (To say nothing about the local folks who lost big around here, as you pointed out.)

          • HaileUnlikely

            Yeah, my mom and stepfather (married later) bought a house in mid 1990’s in suburban/rural upstate NY for $120K at like 13.5% APR, still owe most of that (you don’t pay off principal very rapidly when your APR is 13.5%), and the value of the house is probably *lower* today than it was when they bought it. They didn’t buy it as an investment, just as a home, but still, the game we play here is a game that does not exist in a lot of places.

        • HaileUnlikely

          n=1 – thanks for the tip. I am aware of that on the level of knowing that it is factually true. I am fully aware that mine is not a path to building wealth, and wouldn’t pretend otherwise. I guess what I’ve been saying is that I’ve found avoidance of being poor to be more motivating than building wealth in the sense under discussion here. In any event, I now own a house, worth nowhere near $1M and never will be. I bought it not as an investment vehicle but rather as a hedge against being priced out of the city when values continued to outpace my income by a large amount and the supply of cheap run-down houses was all gone. (I was single at the time; married now; but it suffices to say that mine is not a household of two GS-15’s or the $$$ equivalent).

  • bought in the 70s…. now worth 1.5 mil.

  • mellodcd

    We bought our house in Bloomingdale last year, and it’s now valued over $1 million. We’re living the DINK lifestyle (dual income, no kids) right now, but we also took on A LOT of debt. Neither of us make ton, but we both have good credit and stable jobs.

  • Reading some of these examples, there is hope

    • maxwell smart

      Ha! I walked away with the exact opposite reaction. Not that I was in the market for a million dollar home (let alone any mortgage) – and this just reaffirms that as long as I live in DC, I will remain in my basement apartment in the quiet and uncool area of town with fixed rent. As a single person, making less than 6 figures, with a +$900/month student loan payment, home ownership isn’t exactly in my grasp.

      • Whew, that student loan payment is pretty hefty

        • maxwell smart

          and it’s just from grad school!

          • are your loans federal? if so, you should look into the REPAYE program. it caps your payment at 10% of discretionary income. I make just over 100K and my monthly payment went from $850/month on IBR to $650/month on REPAYE. if you are not making 6 figures and your loans are federal government loans you are definitely paying too much. (now you may not want lower payments if you’re trying to pay your loans off, but if you are in PSLF or something a lower payment is definitely achievable.)

          • maxwell smart

            Is that different than the ICR plan? That’s what I’ve been on

          • Be careful with REPAYE if you expect your income to grow substantially. There is no maximum payment, and your payments will be adjusted so that you pay off the entire loan if your income can sustain it. If you expect that you will never (or not in the next 25 years) make more than low 6 figures, it’s probably a good option, given what you’ve said about your current payment amounts.

          • maxwell smart

            I think it’s highly unlikely I will ever make 6 figures in my lifetime.

          • Do REPAYE! ICR is the worst of the income-based programs. IBR a little better but still very high. REPAYE = Much, much lower payment. As an example, my payment under ICR would be around $1700 a month? I think?, under IBR it was around $1200, and under REPAYE it’s $890. It’s true that there is no cap, and if you get married you have to count your spouse’s income which could lead to a skyrocketing payment. But at that point you could switch to the standard repayment so you would never have to pay higher than that.

          • Agreed about REPAYE. My loans (without any income adjustment) would be $800+/month but my REPAYE payment is only $300/month. I’m also doing PSLF so I expect it will save me a LOT in the long run since my income won’t be close to six figures by the time my 10 years service is up.

          • You can change plans at every recertification, so no reason not to pay as little as possible now. Do any plans have a maximum payment amount? I thought it was the % which if true makes rpaye the best option since it’s the lowest at 10%.

          • AnonSpock – you can actually change plans whenever you want , it doesn’t have to be when you recertify your income. I switched my plan in August of last year, but I usually do my recertification in January.

          • and yea Maxwell – ICR is the “worst” option in terms of the cost of your monthly payment. IBR is slightly better, and REPAYE is better still. if you expect the loans to be forgiven because of PLSF then you should be in REPAYE.

          • I believe that the original PAYE (available only to people who graduated 2007 or later) has a cap. The new REPAYE that extended the 10% payment to everyone (even us olds who graduated before ’07) has no cap, and they include married income even if you file separately. I think they were calling PAYE “new IBR” for a while as well, or maybe still are. They certainly strive to make the system as confusing as possible but fortunately I have a pretty strong motivation to figure it out so I’ve spent a lot of time on the subject.

          • Also, the student loan servicers will bungle your attempts to switch programs to the max, so you have to stay on top of them if/when you switch. Oftentimes you’ll submit paperwork and they just won’t ever do anything with it, and later will claim they didn’t get pages of it, etc., meanwhile they plunge your account into forbearance and it sits there gathering interest, OR even worse, they’ll bump you up to the standard repayment plan while they figure it out. It’s not for the faint of heart.

          • Most plans limit your payment to the level-term repayment option of the same length. So if you’d pay $500/month for 10 years if you did level term, you’ll never pay more than that. REPAYE is unique in that your payment is only capped at 10% of discretionary income, no matter what the level-term payment would be.
            .
            My student loans are old, I never qualified for income-based reductions because there were few options when I wasn’t making a lot, and I just got rid of them, so I wasn’t aware that you could switch between plans so easily (I actually had a private consolidation, since that was the only consolidation option when I finished school, and I would have had to re-consolidate into the newer federal programs and push the term out again to apply for anything, and by then I was making too much to qualify for even the newer, more generous, programs…it made better sense to do some other financial maneuvering and just pay them off).
            .
            I’ve looked at the options, though, for friends who want advice. I’ll add “you can change plans at any time” to my advice. That certainly makes REPAYE more attractive unless you have wildly variable income (like commissions or bonuses that make up the bulk of your salary).

          • How do you guys have this much student loan debt? Are you doctors and lawyers? I took out loans while working in college. When I graduated, I chose the maximum repayment term I could because I wasn’t making a lot of money. I still paid them off in full at the 10 year mark. Am I missing something?

          • How old are you and where did you go to school, James? While I went to a state school, a good while ago, the cost of attendance was $11,000 (first year undergrad) to $20,000 (last year grad). Today it’s $29,000 for undergrads. Per year. And the minimum wage in that state is just shy of $9/hour. You can work until you drop, but you’re not going to earn enough to pay for anything but books and discretionary expenses under those circumstances. Tuition alone is around $12,000 per year. AT A STATE SCHOOL. At $9/hour, paying only FICA, local, and state taxes (so I’m assuming no federal taxes, which is a bad assumption if you are an independent adult, and a *terrible* assumption if your parents are claiming you as a dependent), you’d have to work ~38 hours a week year-round to pay only the tuition. And since it’s a residential college, you’d then be borrowing at least another $12-15K/year for rent/food (or room/board, but everyone but full-rides moves out of the dorms as soon as they can because they’re 3-5x more expensive than an off-campus apartment), books, etc. Times 6 years for a Master’s, that’s $48-60K. Again…state school and working nearly full-time in school to pay as much as you can on your own.
            .
            I had just shy of $80K in student loans when I finished my Master’s, despite a 3/4 tuition scholarship for my first year, 1/4 tuition for the rest of my undergrad, and working 20 hours per week (back when the minimum wage was barely over $5/hour). I got *lucky* (heh…read on) that half of those were in my dad’s name (PLUS loans) and he died 3 months after I finished my Master’s. That is a sorry state of affairs…I would have been drowning in debt unless my dad *literally* died (while he took the loans, he expected me to pay them…and I did until his death). My dad paid for his own undergrad, out of pocket, working part-time at a gas station, at the same state school in the ’60’s.

          • Also, I have to put a point of clarification here. “You *say* you’re in your 30’s, but your dad went to *college* in the ’60’s…” Yes, my parents were on the older side. Many people complain about their “Boomer” parents. My mom is (barely) a Boomer, but my dad was actually of “the Silent Generation.” Both my mom’s and dad’s parents *also* had kids later than “normal.” Even my sister and brother didn’t have kids until their 30’s (common here, not so much in the “heartland”). It’s a family tradition to be “waity.” 😉

      • Thanks so much for this info, DC_KT and JoDa! I too, was feeling much like maxwell smart in feeling doomed to remain a lowly renter. I still feel doomed to remain a lowly renter, but I’m going to look into the REPAYE vs. ICR stuff to make sure I’m on the best path. I, like FridayGirl, am doing the PSLF program and thank the gods have ICR – otherwise, my loan payment would rocket up to about $1600/month. Oy. This is all still very depressing…..Ok, going to leave this comment section again, it’s making me feel suicidal if I stay and read for too long…..

        • (actually, I can’t remember if it’s IBR or ICR that I’m on, but either way, it’s hugely helpful, but I’m still going to investigate that REPAYE thing…)

          • just to add to what JoDa said above – yes it’s a risk if you expect your income to increase – but if you, like me, work for the federal government or are otherwise I PLSF then it’s in your best interest to pay as little as possible because the balance will get forgiven at the end of ten years.
            .
            one other important note about REPAYE. if you plan to get married, even if you file your taxes married filing separately, you have to count your spouse’s income to determine your income for your monthly payment. That is DIFFERENT from IBR – with IBR you can file separately and only your income will be counted. But you can always switch to REPAYE now and then switch back to IBR if/when you get married.

  • I can’t afford a million dollar home, but could easily imagine doing so with a partner. Though I ended up going with a home that was less than my budget, when I was shopping for homes a couple years ago, my budget was up to around $575K. The mortgage would have been very do-able on my GS-15 salary (which isn’t low by any means, but is also not at all unacheivable for someone in their late 30s with a law degree in the DC area). Saving for the down payment was harder. Here are the three things that I think made a difference: (1) I had no undergrad debt. I recognize that this in itself is a form of “help from family,” and I am extraordinarily grateful. It gave me a huge head start that I know not everyone has. (2) My law school debt burden was greatly reduced because I received forgiveness for most of my federal loans in exchange for government service. (3) I spent over a decade living well below my means in terms of rent and other more discretionary spending so that I could pay off the rest of my law school loans and save up for the downpayment. And when I say “below my means,” I mean to a somewhat miserly level.
    So, if I met someone who had a similar or better salary/savings/debt situation, I think a million dollar plus home could be on the table. But I don’t know if it would work if we had kids, though. The cost of childcare is just astronomical.

  • My house isn’t $1M, but it is well more than the average Fed can afford. I received a modest amount when my great-grandmother died. I lived like a hermit for awhile and was able to leverage the inheritance and savings into my first condo, which was nice enough, but didn’t have all the luxuries – the kitchen was just plain with laminate, same with the baths, etc. The mortgage was well within my budget, so I was able to continue to save. And it appreciated a fair amount. I used the $ from that condo to buy another condo. Again, saved a lot over the years I owned that one and it appreciated a lot more. So that enabled me to buy a house that would seem to be well over my price range, but still keep my mortgage comfortably within my salary. And I’ll still be able to save something like 20% of my salary, not including retirement accounts. That said, I likely couldn’t have done any of it if I hadn’t had that small inheritance from my great-grandmother to begin with because I would not have had the down payment for my first condo and would have been in more expensive rentals for longer

    • Oh, and importantly, I was able to pay off my modest student loan debt early thanks to my agency’s student loan repayment program and I have no kids/parents/other dependents that I need to take care of.

      So, to summarize: small inheritance, good saving habits, and a LOT of right place right time.

  • I work for a luxury home builders based in Arlington – we build houses ($1.5M-$5M) mostly in McLean, Arlington, DC and Bethesda. Our buyers are a mixed bag of professionals, wealthy immigrants and some inherited wealth, but not much. I would say the vast majority are well paid government employees, consultants, Entrepreneurs and wealthy immigrants. There has been A LOT of foreign money coming into the DC real estate market within the past few years. Most of the population growth is due to immigration as well, as opposed to domestic migration.

    • justinbc

      Yeah, from my observation it seems the majority of people I hear assuming that all these houses are being bought with inherited wealth are too young to have really accumulated any yet themselves. When you’re 25-30 you shouldn’t be expecting to purchase million dollar homes, unless you’re very fortunate/lucky. Wait a while, save and invest intelligently, and then reap the rewards later in life. I see too many friends buy an overpriced condo with an insane monthly fee just to have something and complain about how they’ll never be able to afford something better because all their money is tied up already. Childcare costs in this area also seem to quash a lot of friends’ aspirations of purchasing, because they’re basically spending a down payment every year supporting the kid.

  • We got lucky in terms of timing–bought our house in 2009 when houses weren’t moving as quickly and prices had stagnated a bit. Interest rates were low (and we refinanced once to push it lower). The main thing, though, was being super lucky with inheritance money to cover the down payment as I was just finishing grad school & preparing to start working when we bought. Our house was nowhere near 1M then, though it may well be that or greater now.

  • justinbc

    Have 3 properties in DC area “worth” appx $2.2M (950K in Capitol Hill, 750K in Old Town, 500K in Ivy City), all acquired just prior to major neighborhood changes in their immediate areas that has pumped the value up somewhere between 500-600K over the purchase price. Also bought all three during record low interest rate periods, and refinanced two of them when it resulted in net gains towards ending balance. We have no kids, that helps a lot, and made wise investments in the stock market along with having very good paying jobs and no other debt (credit cards, cars, college, etc). I’m not sure there’s a single answer to the question as posed, for most people it’s probably some combination of all the above. Unless you’re rolling in with a leather bag full of stacks of cash it’s kind of impossible to buy a million dollar home and not have “a ton of debt”, but as long as you can pay your mortgage and still save that debt is working for you, not against you.

    • Similar story. Double income, no kids, bought with low interest rates near H Street right before the market popped. Neither of us had family money, and both of us saved a lot because we rented/had lots of roommates during our 20s and early 30s, when we married. In fact, we both work at non-profits. The house we bought at 600K now about $1M and climbing. Our friends who are about 5-7 years older than us (late 40s) are even doing better because they bought when houses were < $500K. Since we're in it for the long-haul, we aren't overly concerned with what the house is worth. Yes, there's some luck involved, but being very frugal when we were younger enabled us to save money. There were many days I went without fancy drinks/fancy clothes/fancy vacations to save $$.

  • I have been a government employee for 10 years and make low six figures. I am on the market now for a home between 1-1.2 million. I bought my first condo in 2010. It was a 600 square foot one bedroom and I took out an FHA loan. Within three years the neighborhood exploded with new development and my condo appreciated close to 100K. I sold it and bought a larger condo in another “up and coming” neighborhood in NE. I’ve owned this new condo for close to four years and it has appreciated close to 125K. With that profit and savings throughout the years, I can afford a fairly substantial downpayment and manageable payments on a $1 million home on my own. It just takes time and a little bit of luck.

  • No big cash reserve for a down payment, but had VA loan, which allowed very little down for our $700k house in 2010. It’s just at $1mil, per Zillow (so take that for what it’s worth.)
    .
    We still owe $550k or so on the loan, but aren’t too worried about that.

  • The only ones I know are my parents who bought their house in Chevy Chase, MD in the 1970s for less than 50K (can’t remember exact price)… unrenovated homes of similar size are selling for close to 1 million on their street. Developers tear down the old ones then sell the new ones for 2 million, it’s ridiculous. So basically my parents just got lucky.

    • HaileUnlikely

      $50K was significant money in the 1970’s. Depending on the year, that’d be equivalent to something in the $200K-$350K range today.

      • Agreed. In the early-70s, 50K was considered top-dollar for a house. The 40-50K range got your new all-brick construction in Oakton, Vienna, or Fort Washington (interesting that back then, a comparable new house in Fairfax and PG cost about the same…not so much anymore). I know that in the late 80s, houses in Edgemoor (Bethesda) were still in the 300s, which was still considered expensive money back then. In the late 90s, you could still get a great house in the older parts Bethesda or North Arlington for about 300K since most people were buying new homes in the exurbs and nobody really valued close-in locations like they do now. Anybody who bought before 2000 is laughing all the way to the bank.

    • My parents love to tell me how their first house cost $35k, while exhibiting genteel shock at restaurant prices.
      Yeah, folks, that was a one-bathroom house, in an industrial/agricultural town of 10k, in the midwest, in 1975. Not so relevant to the nation’s capital in 2017.

      • haha! my parents paid the same for their one bedroom place in the midwest, exhibit the same shock, and live in a town with the same population.

  • The answer to how people can afford a $1 million+ house is simple: you save up by living in a crappy English basement apartment and don’t buy the latest iPhone. It’s called living within your means until such time as your means improve and you have saved up to finance that dream home.

    There is no shortcut to the American dream.

    • “There is no shortcut to the American dream.”
      .
      Uh, yea there is… 😉

    • Yea right – Everyone that owns a $1M home has been handed everything in life one way or the other. The people that actually save money aren’t dumb enough to buy $1M homes.

      • This kind of thinking won’t help you achieve success in life.

      • That’s your opinion. However real estate is one of the best places to store wealth. It is usually impervious to being lost. Even if you file bankruptcy, as long as your $1 million+ home is your homestead, you probably won’t have it taken away from you.

        Stocks, bonds, or any other source of “savings” can disappear if the stock market goes south. Real estate is a safe bet in all but the most extreme cases. So smart people that save money will eventually use it to buy real estate like $1 million+ homes.

        More expensive homes also increase rapidly in equity. Even a 3% increase in value year over year beats renting or buying a cheap house.

        And when you reach a certain level, you can even borrow against the equity in your million dollar home and purchase another home using that equity. Then you have a $1 million home and a second home that you paid cash.

        That’s how smart people get ahead.

        • The only reason home prices have gone up over the past 30 years is because we have been in a declining interest rate environment. Home prices will not appreciate with rising interest rates and a $1M home is going to become a massive liability.

        • Over time the stock market outpaces real estate. Hell, there is evidence suggesting that overtime the housing market barely keeps up with inflation. The NYT has a great article on renting vs buying that outlines the details. Over the last 126 years home prices have rises .37% adjusted for inflation. Of course, you can’t live in the stock market and there are a lot of other benefits of home ownership.

          • justinbc

            Renting vs buying also depends heavily on your market. In DC it’s anywhere from 20-30% more expensive to rent the same place as it is to buy it, all things considered (according to Trulia’s pretty extensive annual market survey). There’s also the benefit that once you fully pay off your mortgage you no longer have housing costs, which frees up thousands of dollars to spend elsewhere, or you can rent out your home for retirement income.

          • This is only true if you pay for a home all cash. Most people are leveraged with a mortgage, so the rate of return should be comparable to stock market.

          • I think you missed my point about real estate being “safe” compared to other forms of wealth. You can lose everything in the stock market in a matter or minutes. But once purchased, real estate, especially a homestead, is very difficult to lose. We have very clear laws protecting a homestead (primary residence) in this country. Even in the case of a judgment against you, the best case the winner can get is a lean against the property. But only under a select few circumstances can the property be forced into a sale. I know someone that has a lean on their property that is going on 20+ years.

            Property is a safe place to store wealth. There will always be people from this country or from other countries (China, Germany, etc.) that purchase property to “stash” income. Even non-profits in this country do this. Look at the $150 million property on New York Avenue that the American Association for the Advanced of Science owns. They had $50 million to purchase the land and build the building and now it remains a foundation of their wealth.

            Also anyone that was around during the “.com bomb” would never say stocks are wealth. Companies continued to issue shares and purchase shares of other startups until ultimately all companies involved crashed. Anyone remember JDS Uniphase? Their stock went from $153 to $2 in record time. Or Microsoft. It’s stock was once in the $400-$500 a share range. Now it barely holds on to $64.\

            So stocks are risky. Real Estate is generally a safer bet for holding on to your wealth.

          • This may be true, but the problem I’ve always had is that I don’t have any extra sums lying around to put into stock investments. My mortgage is paid with the money that otherwise would have been paying my rent. But with renting, you move out and get nothing back (usually end up paying a premium to leave with at least one extra month because the timing never works out right, losing security deposits, etc.) Plus your rent goes up every year. With owning, even if my place doesn’t appreciate at all (unlikely), when I move out I’ll get back the amount I’ve paid down in equity, minus costs for selling obviously. Even if I net $500 , I’m ahead of where I would be renting.

            In DC, renting costs as much or more than owning unless you are willing to make serious sacrifices with regard to location/distance or amenities, or you find a rent stabilized place and stay there for your entire life. In other markets, there is a different analysis, but here it’s very hard to find an affordable rental that you can stay in for any length of time.

          • Mouse – you are missing a lot of points including: what a lien on your house means (hint, it means, at least assuming a lien of a substantial size your increased property values are no longer building wealth for you); the difference between individual stocks (i agree, bad investment) and the stock market (think vanguard index funds); the years 2006-2009 (speaking of the .com bubble), the reasons people are looking to store $150 million+ vs the reasons you are I might look to store our “wealth” (hint: they are not the same reasons). I am of course, ignoring the uniqueness of the DC market that Justin pointed out but I am purely talking about it from an investment point of view, so I am assuming you have money to invest.

    • maxwell smart

      Woohoo! I look forward to finally being able to purchase a home when I am retiring.

  • Short answer for average people: Two incomes, planning, and timing.

    • This summary is critically under-highlighted. Is that a thing POP can do here. Add bold, and flashing sirens around this comment.

    • Easily true. My girlfriend and I are in our mid 30s, both GS-14s who each own a home we purchased ~5 years ago or so, and we’re planning to buy a house together soon. Our max budget is $1.3 million, and we’ll likely borrow ~$900k after proceeds from sale of our current houses. That works out to a payment of about $5000/month, which is easily doable given our $12000/month combined take home pay. The payments are pretty affordable, even though I have $50k of student debt and we’re planning to have kids. We just don’t live all that lavishly (although we’re by no means cheap, we do buy our wine at Costco) and are happy to spend our income on having a great house where we can entertain ourselves and others.

  • northeazy

    I mean, is this any secret? Two young people who have their parents foot the bill for college (no student loan debt) get lucky and land federal govt jobs. In just a few short years they each earn over $90K. They are somewhat responsible with their savings plus mom and dad gives them money for the down payment and first few mortgage payments. A few years pass, a viola, million dollar home. At this point, they work 8-3pm, 4 days a week, and live a fantastic life supported by the US taxpayer.

    • justinbc

      Pretty much every major university in America offers scholarships, you don’t have to be entirely dependent on mom and dad to make something of yourself.

      • The super-top-tier schools (Ivies) do not offer merit-based scholarships, and many households are in the position of having too much in terms of income/assets/etc. to qualify for need-based financial aid, but not having enough to really be able to afford 4 years of tuition, room, and board — especially at a private college, and perhaps even at an out-of-state public college.
        .
        Merit-based scholarships are certainly out there, but they’re pretty selective.
        .
        (I say this as someone who went to a top-25 school on a full-ride merit-based scholarship.)

        • HaileUnlikely

          Yeah, the Ivies are great for people whose families are really rich, and for those whose families are really poor (and still manage to get in), because they’re very generous with need-based aid for applicants who they accept (I know this firsthand). For people in the middle (e.g., a family of 4 with a household income of say $150K) it’s a different ballgame, as they’ll qualify for little-to-no need-based aid yet let’s be serious somebody with an come of $150K and 2 kids can’t plausibly afford to spend >$50K/year on school.

          • There’s also many other public and private schools where you can get financial aid and a pretty good education, and where most of America goes. You can go on to lead a successful life coming out of any of those, and 5 years out, nobody but you Harvard classmates is still going to be talking about where they went to undergrad or even law school. Maybe try one of those.

          • dc_kt, I think you’re missing HaileUnlikely’s larger point, which is there is a big pool of households who aren’t poor enough to qualify for need-based financial aid. And that matters no matter what kind of public or private college you go to.

          • justinbc

            Not sure why people are focused on the 12 (?) Ivy League schools when there are a couple thousand other options, along with the option of doing 2 years of community college and transferring to a more notable school, which many people do. It may not sound as sexy, but it will get you there all the same.

          • I agree with Justin here. Look, I know I am in the minority here, but I really don’t understand why people are willing to go so far into debt for a piece of paper that may or may not land you a lucrative career. I know so many people in the DC area with exorbitant student loan debt that is crippling them financially. Why people? I have an associate’s degree that I paid cash for. My student loan that I am still paying comes from some wonderful misadventures with a European undergrad degree that I walked away from. But my student loan payment is $76 a month. I make good money, better than some (most?) of the folks with Master’s working non-profits make. Getting an advanced degree absolutely does not always mean more money, but it usually does mean way more debt. Is it really worth it?

          • Totally agree with you. $150K-$250K in DC is a lower-middle class lifestyle by national standards.

          • “For people in the middle (e.g., a family of 4 with a household income of say $150K)”

            Median household income in the US is 50K–150K is three times the middle.

          • HaileUnlikely

            No disagreement there dc_kt or MadMax, and the point of my post absolutely was not to bemoan my own situation. I was one of those absurdly lucky ones who had a basically full need-based ride. What I meant but didn’t really articulate well was just that I think it’s generally tougher for those in the middle (I was not in the middle), basically wherever they go, especially if they aren’t quite full-merit-scholarship material (and let’s be honest, a lot of good worthy human beings aren’t, and that is OK). It’s easy to look back from nearly age 40 and criticize somebody for the school they chose when they were 17 or 18 years old, but I don’t think that’s really fair; most 17- and 18-year-olds have no ability to conceptualize the long-term implications of a loan of that size, many were sold a bill of goods that “it would all be worth it in the end,” and a lot of them (at least those I encountered at my school anyway) faced pressures from their upper-middle-class parents that I am very grateful I did not.

          • HaileUnlikely

            from the middle – That’s completely fair. I meant in the context of the student body at a major university in the US, but I did not make that clear, and you are completely right.

          • HaileUnlikely I agree with everything you said and as a student loan debtor myself I fully feel the reality/idiocy of letting a 17 year old decide where to go/how much debt to take on for school. I just meant that if you want a full merit scholarship, for example, many private institutions will give you that. They won’t be ivy league probably, but there are literally hundreds of them, and you can also get full merit scholarships at public schools. Personally, my parents didn’t make very much at all so I got a combination of both but still ended up with some loans anyway. (not anything compared to what I took on for grad school which was my real problem). Just this illusion that upper middle class kids are in some kind of “donut hole” where they can’t get any money for college is what I object to. There are plenty of options for financing school.

      • I have worked for the government for 15 years, and I’d like one of those 4 day a week, 8-3pm jobs. You can pm me with the details. Thanks!

        • HAHA…yup. I got home at 7:30 last night. And that’s not because I rolled in at Noon. No, I don’t work as many hours as my friends with similar private-sector jobs, but I know what they make and it’s a whole lot more than me. This isn’t a sob story – it’s 100% an intentional choice, since I have been recruited for those same jobs. I happen to value my free time highly, and just don’t want to work more than 50 hours a week on a regular basis. I make enough that I can live a reasonable middle-class life even in this expensive market, and that’s enough for me. I use some of that free time generating passive and portfolio income. 🙂

      • The US military also offers a variety of ways to get school paid for. I was a good student in high school and got a full ride + books + stipend to any engineering school I could get into via ROTC scholarship. Was able to get the school to kick in for housing fees, so I walked away with no student loan debt. After a few years in the military, I jumped over to private industry and accelerated way beyond where I probably could have gone jobwise without that experience.

        So – it’s not all about privilege.

    • Hahaha at the idea that government employees are working 28-hour weeks. Seriously??
      .
      Also LOL at the idea that “in a few short years” a college graduate in the federal government will earn “over $90K.” To make over $90K in the D.C. area, a federal employee on the GS scale has to be either a GS-13 or a GS-12 step 5, and a lot of career ladders max out at GS-12 — to get to GS-13, often you have to become a supervisor.
      .
      Even in the best-case scenario — someone starts as a GS-7 in a job that actually goes up to GS-13 — it would still take 5 years to get there, and that’s assuming that the employee gets promoted every single year. (I used to think that this was routine, until a friend told me that her office kept people at GS-11 for YEARS despite the career ladder maxing out at GS-13..)
      .
      Much more plausible is that after getting a graduate degree — which takes time (opportunity cost) and often $$ — someone enters the federal government as a GS-9 in a job that maxes out as GS-12 or GS-13.

  • All of the above for us. We inherited $120K which we used as a downpayment on a $600K home that appreciated $250K over the past 6 years. Our parents paid for our college so we have no student debt. Our combined salaries are low ($225K), but our net worth is close to $1M. The earnings on our stock portfolio pretty much cover all of our expenses. But yes, you either need to inherit money or earn $500K a year to live in a DC at this point. Doesn’t sound very sustainable especially given how horrible the schools are throughout the entire city.

    • I haven’t inherited a dime nor do I earn anywhere close to 500k, yet I’m in a position to purchase a 1m home. There are many like me in the DC area. No need for the hyperbole.

    • Only in DC would someone say “Our combined salaries are low ($225K)”. FYI only 7% of the DC metro market (DC and the close in surrounding counties) make $250k+ a year.

      • Since I’m a stats person I want to clarify my post. It should read: Only 7% of the DC metro market population have a household income of $250k+ a year. For further context, only 22% of the metro market population has a household income of $150k+ a year. Reading this post it sounds like a lot of commenters need to be reminded that their “low” income is actually very high- even by DC standards.

        • And sometimes even by PoPville standards.
          .
          In 2012, about 7% of PoPville poll participants said they had a household income of between $200K-$250K, and only 7% of PoPville poll participants said they had a household income of more than $250K:
          http://www.popville.com/2012/06/friday-question-of-the-day-how-much-do-you-make-vs-how-much-debt-do-you-have/
          .
          (I’m not sure if there’s been a PoPville poll on individual income — if there has been, I can’t find it.)

        • I’d be curious to see what the median income for white, college-educated families of 4 in DC proper is. I bet median income in that demographic is closer to $225K-$250K.

          • You might be able to build this data on the Bureau of Labor Statistics but it needs Java and my computer at work isn’t enabled…

          • Looking at white, college educated households in the metro market with at least one child you’re correct that household income is higher but still only 16% make $250k+. My dataset is a bit limited in income categories but the median would fall into the $150-249k range. It’s worth noting that 45% of this group has a household income less than $150k.

        • “Reading this post it sounds like a lot of commenters need to be reminded that their “low” income is actually very high- even by DC standards.”
          .
          Seriously.

    • >Doesn’t sound very sustainable especially given how horrible the schools are throughout the entire city.<
      I suppose that is a personal judgement call, but I think that many would disagree that, in the past 10 years, DC schools are horrible throughout the city. DCPS and Charters have made great strides, and I think that many folks who could move out to the 'burbs have elected not to, in part because the schools now make it worthwhile to remain.

      • DC has one of the worst performing school systems in the entire country. You can’t refute that.

        • Sure, but look at the enormous achievement gaps. I’d guess parental involvement makes a huge difference.

        • I can infer from your statement that you don’t actually have knowledge of what’s going on in DCPS, nor would you be able to accurately advise someone considering buying a home in the DC area.
          You would, however, make for a good news pundit. (not a compliment)

    • A combined household income of $225K is not low. In fact, you’re making money that puts you solidly in the top few percentile of earners in America. Get a grip, people!

    • “given how horrible the schools are throughout the entire city.”

      The schools aren’t horrible throughout the city. In fact, in the richest areas, they’re some of the highest performing nationally. In the poorest areas there are some low performing schools. And in transitional areas, the schools are in between, but certainly not horrible.
      My kids in DCPS are doing quite well and we’re not in upper NW.

      • DC public schools are not in the national rankings at all. I don’t know where you are getting your data. We moved out of the district when we started comparing the schools on a national level.

    • This may be a rookie question, especially on this thread, but how did you go about investing such that your stock earnings cover your expenses? My husband and I are looking to start investing outside of 401k/IRA and have no idea where to start.

      • First, figure out much you spend annually.

        Assume a total US market index fund (VTI) will generate a 7% annualized rate of return long term. You can safely withdraw 4% of your portfolio each year and maintain your portfolio value after inflation.

        If Annual Expenses / Portfolio Value = 4%, then all of your expenses are covered by investment earnings.

      • kharr89,
        jp is describing the 4% rule, which you can google. jp is completely right when she describes the first step as determining how much you spend. (most retirement calculators are based on income and assume that people spend as much as they earn!)
        If you think about a savings rate, if you can save 50% of your income, that means that you’re living on half of what you earn…so every year of working means one year of living off what you’ve already saved. Add investment earnings and compounding, and you can get there in 17 years. Save more (65%) and you can get there in 10 years. Another rule of thumb is to multiply your annual spending times 25.

        • Thanks to you both – interesting info. I guess I was more interested in understanding how to go about getting started in investing (did you get a financial planner? use a robo-trader? etc.), at what point in your life should you be looking at investing a portion of your savings in stocks (we are 27 and 28, newly married, own a condo, but don’t seem to be saving much), and things like that. I am more interested in ways to save up a safety net, save for big vacations, etc. I suppose I might need to consult a professional.

          • 1) Get rid of one or both of your cars and walk or ride a bike to work.
            2) Cut your cable bill, cell phone bill.
            3) Stop eating meat and going to groceries stores.
            4) Shop at Costco. Buy vegetables and fruit with a long shelf life. We spend $300 per month on groceries.
            5) Don’t eat out unless you are going to hang out with dear friends.
            6) Don’t go on vacations that require airplane travel.
            7) Cut your own hair
            8) Don’t buy clothes. nobody important to you cares what you look like and you’re married now.

  • Total luck and timing. We bought a townhouse in 2008 in one of the last “affordable” NW ‘hoods at the time for just under 400K. We could sell it tomorrow for a 100%+ profit, no problem, based on recent comps. Of course with kids in the intervening years we are way more stretched on budget than when we first bought. DC being what it is we can’t afford to “move up” to a place in a better school boundary that better fits our current family even with that equity, so are sticking it out for the time being and living in relatively cramped conditions.

  • I think the two income aspect is the most important. If you can hit the 20% down, then your looking at an 800k mortgage, which is about ~$4,200 per month (per google). Given the number of single people in this town paying more than $2,100 for a one bedroom on their own, that’s doable for many people if they don’t have significant other debt. Obviously you have other monthly costs on top of that, and everyone’s tolerance for fixed monthly expenses is different.
    .
    Getting to the down payment is the hardest part in my opinion. But I also know a number of people who have taken advantage of specials local banks have offered where you get a primary mortgage up to the 80% value and then a second mortgage to cover the remainder you need for the down payment. This allowed them to avoid the PMI, and while the interest rate on the second mortgage was higher, they still saved money (this was for houses much cheaper than the $1m mark).
    .
    I also think there are a lot of people in DC who deployed to Iraq or Afghanistan for a year or even a few months with DOD, State, USAID or other agencies, which let them pocket a ton of money (usually about $8-10k per month on top of their normal salary) for the down payment.

  • We are currently looking for a 1m house. Our combined income is just under 250k. We’ve been saving like crazy and paid off law school debt three years ago. Combined monthly salary of ~12k means we can afford a 5k mortgage. We should be fine with 250k for a dp. It is possible but we eat at home and pack out lunches everyday. Don’t buy new clothes or take lavish trips.

    • Just don’t have kids. Child care and diapers for two kids will cost you about $5K in this city.

      • I love my kids to death, but you’re right that having children is outrageously expensive. I have two kids in daycare. That alone is about $3600/month, which is most of the payment on a $1 million home. I can’t wait until PK-3!

  • Not in DC, but, My SO’s ex’s family is quite well-off and owns a few multi-million dollar estates. The uncle and aunt are the really well-off ones. He made his money through hard work and great investments. He both both estates when they were in foreclosure and turned them around. If I understand correctly, the revenues from both pay the mortgage. They are two of the most unassuming people you would ever meet and are absolutely wonderful. They do a hell of a lot of fundraising for Mae A Wish foundation and a few breast cancer charities. He works still too. She came from a comfortable background, and he came from nothing. I would consider them the self-made types.
    .
    The people who I know in DC with million dollar homes did not buy them as million dollar homes. Thoe homes just appreciated in value over course of ownership.

  • My family is federal lawyer and a partner at a law firm in our late-30s with one kid. We purchased a home 6 months ago for $1.5 with less than 20% down, no PMI at 3.5%. Banks will give high earners with solid net worth mortgages like this.

    Our income is about $400K/year. We have no other debt, and we have a pretty large mortgage. However, we can afford our monthly mortgage payments (a little over $6,000/month). We max out our work retirement plans, and we have sufficient income leftover for other savings, spending, etc.

    It’s not particularly complicated. We are fortunate to have solid incomes, have been and continue to be responsible with spending and saving, and carry a large mortgage that we can afford. Our down payment was less than 20%, so it’s not a massive amount of money. We had it by saving for the past decade or so and making some money on our last house, which we owned for about five years.

  • Literally half the people posting on here are saying their house is valued at $1M. This doesnt answer the question since you are not buying a house at $1M.

    • “Do you know anyone that lives in a home worth over a million dollars and if so, how are they able to afford it (if you know):”
      .
      There are at least TWO questions in the original post, and the very first one is about “anyone that lives in a home worth over a million dollars”.

    • justinbc

      Literally 100% of this poster didn’t read the whole post.

  • Interesting how neither the words “bubble” nor “on paper” have been used at all in this thread. I don’t know if we’re in another bubble, but prices have gone up so much that any shock to the system (perhaps rising interest rates, rising mortgage delinquencies, or lower federal spending in the DC area) may stifle growth very quickly. And I think that many people forget that home value is on paper until you decide to cash out. Granted, equity gets you access to more credit, and ultimately owning your residence should be better than renting, but I think it’s important to note that owning a million dollar house doesn’t mean much if you’re buried in debt and are banking on housing prices to stay on a steep ascent. The feeding frenzy in the housing market is reminiscent of the 2003-2007 timeframe.

    • We are absolutely in a bubble. Somebody just told me a household earning $225K put me near the 90th percentile. We can barely afford the median house price of $535K. 90% of households can’t afford a median priced house. If interest rates rise, the housing market will implode as DC sits with one of the highest mortgage balance rates per capita.

      • Do you have massive debts, student or otherwise? I ran the numbers and I’m struggling to figure out how you can “barely” afford a house that’s not even 2x your annual income.

      • JP, I bet you can afford it. I’m in a household earning about 190k (we were at about 180k when we bought 2 years ago). I thought about 550k was all we could reasonably afford, but I really undervalued the benefit of the mortgage interest deduction. It’s massive. We bought at 650k after all the 550k houses were getting bid up that high anyway, and are now more financially comfortable than when we were paying rent. We’re itemizing deductions to the tune of almost 40k a year.
        .
        Now, to your broader point–you may not want to do that anyway, dependent on your level of risk tolerance. I don’t think DC is in a dangerous spot because we’ve basically just equalized back to where things were before the 2008 crash, and that was a long overdue correction for a city that was undervalued and underdeveloped for decades. But if you do want to buy, you likely have more purchasing power than you think, without even drifting into being irresponsible.

        • I did actually buy a $600K house six years ago and that’s how I know I can barely afford it. Before kids, we could max out our 401K and still net $5K per month in liquid savings. After the second child, we are now only able to generate about $1K per month in free cash flow. If we made any less, we would need to cut into our 401K contributions just to cover the bills.

          Bad news for you. After the second child you will probably be dipping into 401K contributions just to cover the bills and you still have that $500K mortgage to worry about. Good luck raising a family in this city on $190K per year.

    • Ya. This is all crazy. I get how leverage and appreciation can make you a fortune on real estate. But how can anyone with this kind of equity carry over 500k in mortgage. Is the rowhouse lifestyle worth all that?

      My wife own two condos-living in one and renting the other. We got here thanks to family help (including the insurance payout from my father dying too young). Being blessed with equity, I am scared to ever have a mortgage on the house my family lives in. For the 20% down on a 1mm property in DC you could put 50% down on a nice 3/2 farther out.

      • If you are buying a house to live in for a while and not just as an investment, you shouldn’t worry about having a mortgage. It is one of the “best” debts you can carry because of the absurd tax deductions that come with it. You can also wait out housing value cycles the same way an investor who keeps money in funds for a decade outlasts bad markets.

        • But why take on so much debt if you can live in a less trendy neighborhood for considerably less debt? Some posters would rather have a 800k mortgage to live in Cap Hill, than a 300k mortgage in Falls Church? I think the difference is I am too close to the boat and believe all debt is shame, whereas many here see this as leverage and the chance to make big money on property appreciation.

          • You aren’t factoring in transportation costs and time lost. Commuting to Capitol Hill is going to cost $5K per year in direct costs and probably another $10K in lost time. Add that $15K on to a mortgage payment and you are probably breaking even with a considerable gain in happiness for not having to sit in traffic for two hours per day.

      • You are right. This is called a bubble and this feeling of euphoria is going to end very badly for a ton of paper rich people.

  • Surprised to see very few listed in defense industry; entrepreneur; or business on this list. Inheritance and being able to buy at the right time are pretty fortunate. If you can’t do that all other roads lead to B) with hard work, networking, and marketable corporate skills (unless you want to take on mountains of debt and be house poor). After down payment net income per month has to be around 12k-15k minimum to clear 4.5k-5k mortgage after down payment. Two GS’ers can hit the 250k but the biggest hurdle is the time to save for down payment.

  • I’m a non-supervisory fed, so my salary (while nothing to sneeze at) isn’t wild. But most know I could do C and walk away with a pretty penny. I am also an aggressive saver/cost minimizer, like others below (I pay only $200 more for housing than I did for my first apartment in DC over 10 years ago, even though I make over twice as much now). If I were with someone in a similar situation (salary in the low 6 figures, made money on something (stocks, property, etc.), lived frugally to save), we could probably swing a million dollar property on a fairly moderate combined salary for the area.
    .
    I’m personally looking to buy something in the $500-600K range in the next handful of years, on my own. Yes, that will mean my housing costs will go up to a more “normal” percentage of income (~30%) from the rock-bottom they’re at now, but I’ll have retired all other debt and have a nice nest egg from years of young, aggressive saving. It works out a little better for me in finding something because the tiny 2-bedroom homes everyone scoffs at when featured on GDoN would be perfect for me.
    .
    Property appreciation and saving discipline are the keys. I bought my first home with an FHA loan…because it cost less than renting all in, it was worth it. So it’s possible to do this even today, but not in “hot” neighborhoods with lots of amenities. Remember, the neighborhoods you *want* to live in didn’t have those things when we were buying in them. When I bought my first home, the nearest sit-down restaurant was almost 2 miles away and the most entertaining thing that was likely to happen was drunk/high neighbors getting into a fight (at least there were rarely weapons beyond your handy beer bottle/rock/etc.). Delivery guys wouldn’t get out of their cars! Even just a few years ago, I had a service company tell me they wouldn’t work on a property because it was in a “bad” neighborhood.

  • I bought a $1M++ house in Georgetown recently on a law firm staff salary of about $140K and my partner’s (very) modest salary as a public school teacher. Used the proceeds from the sale of a condo purchased in 1992, which appreciated from 100K to 500K. We live modestly and within our means (share one ancient car), with the exception of regular splurges on travel. Also, the house has an english basement that we rent out, which covers a good chunk of the mortgage.

    Formula is pretty simple: (1) live small, (2) buy what you can (3) in the best LOCATION possible, (4) be patient, and (5) don’t buy the nicest home on the block — rather, improve your property one project at a time until it becomes the nicest home on the block.

    • …. 1-5 are crucial, but you have to add (6) buy something that will appreciate 400%, which will probably be hard to do without a time machine.

      • There are still gentrifying neighborhoods that have the potential to see significant increases. They’re just not always pleasant places to live at the moment.

      • At the time I bought my condo, I was making $30K per year. The same job is now paying about four times that. Shit changes with time.

        • Median salary has not tracked home prices increases in the DMV — I don’t understand your point.

          • No, you’re right, median salary has about doubled while home prices have increased four-fold. I’m just saying that things change with time, so buy what you CAN afford, hang on to it for a while, and be patient. My first condo was a 600sf, third floor walk-up. Would I have preferred a $1M+ house then? Of course. But that didn’t keep me out of the real estate market. Seems to me that a lot of people on this thread feel like they’ve been priced out of the market altogether, while in reality they’re just priced out of beautiful, million-dollar homes.

          • You actually make quite a point there, Chilly. It was *far* easier for me to buy the condos I did 7, 8-ish years ago. But, while I would make a pretty penny on resale, the price I could fetch isn’t *insane.* People in the buildings I own in are selling 1-bedrooms for around $250K and 2-bedrooms for about $300K. With 5% down, .5% PMI, and 4.5% interest (you can get lower, even with a low down payment, if you have great credit), that’ll run you $1800-2100/month including the condo fees. As we’ve amply seen from the daily rentals on this site, that’s less than rent in many, many buildings. Those places will probably appreciate reliably, even in a downturn, since they’re accessible to much more of the market, major development projects are in progress around them, and they’re WOTR and close-ish to transit.

  • It would be interesting to know how many homes sell for over $1M in any given year in the District. To qualify for the top 1% of earners you need to bring in ~$500k in DC. Unless you inherited or were able to trade up and roll over equity throughout the years you’re either taking on huge debt or, quite simply, make a lot of money for yourself or joint.

    • Being able to trade up is a big thing for people who were ok living in transitional neighborhoods to start with. I lived with friends in group houses in Columbia Heights and Shaw (10 years ago Shaw), and am now on my second DC home. Trading up made a ton. My friends / coworkers who lived in apartments in Arlington are now living farther out in VA because they can’t afford $600k+.

    • Totally agree with you. It doesn’t add up. My guess is that it is a combo of inheritance and people that got lucky purchasing 5-30 years ago. With rising interest rates and flat home price appreciation, we are going to run out of people that can buy $1M homes pretty quickly.

    • Here’s an article from 2015: bizjournals.com/washington/breaking_ground/2015/07/d-c-and-the-rise-of-the-1-million-home.html
      .
      “In May [2015], 20.1 percent of all single-family home sales topped the $1 million mark, according to a report by the D.C. Office of Revenue Analysis.” and “Million-dollar condos sales have also increased, but slower, with 5.4 percent of condo sales in May above $1 million.”
      .
      I imagine that’s only risen over the past two years.

  • My house (where i rent) was just sold for 1.75 mil to a nice couple. Both feds who left service when truno came in and now are making private sector $$. I believe they both were at DOJ. But i still can’t figure out how they are paying a $10 K mortgage. Good for them i guess!

  • I’m surprised there aren’t more answers here that include “airbnb.” or “rent rooms/basement.”

    We bought a million dollar house last summer. We got the down payment by selling our first house and making good money, plus a family gift. but the way we make that big monthly mortgage payment is by renting out the basement of our million dollar house. that is HUGE for us. it means that our monthly portion of our mortgage is just as low as it was in our first house because now we have someone else paying us $1800/mo!

  • damn i should have married a lawyer. my partner and i both make modest incomes, have 2 kids, and managed to purchase a $500K only with the help of a family inheritance. it’s appreciated a lot since we bought it, but it’s still tight making the mortgage payment.

  • I understand it’s all relative but I’m curious what a “Small Inheritance” or family help is for people who used it for a down payment.

    • I am curious too (from someone who will inherit literally nothing from family — no assets or money). I think people greatly underestimate how much difference even a few thousand dollars can make.

    • We received $120K (small). We know people who had enough to purchase $750K condos all cash.

      • This kind of boggles my mind. If I said I won a “small” lottery of $120k, would that be an accurate characterization? I guess so, if you’re comparing it to a “large” lottery winning of $750k. I’m the first to admit that I’m terrible at money stuff, budgeting, being frugal, etc., and I am trying to be better and learn, so I want to hear people’s tricks and practices on that. But I wonder how many of the people smugly talking about how frugal they are had a windfall like this (or free college due to their wise choice of parents) funding them in the past. That can make such a huge difference that many people don’t account for.

        • I received 300k as a life insurance beneficiary, 200k as a family gift, and no student debt. Small compared to some people I know, but incomprehensible to the most people. When my grandfather died, my father only got debt collectors at the door, which family does not inherit. We were grateful they were just trying to trick us into paying and didn’t bring baseball bats. DC_KT is right…it is far easier to lecture others about frugality when you are born into capital.

        • I would recommend dating somebody who is smart and comes from a good family. Never marry somebody that is in debt or doesn’t have decent earning potential. Live as close to work as you can, live in a cheap apartment with roommates or significant other, and never eat out. Imagine yourself becoming wealthy and act like you deserve it.

      • holy smokes, this thread has certainly been illuminating to how many in DC view their wealth. I couldn’t imagine thinking receiving $120,000 was a small inheritance. That would be a life changing amount of money for me, and I already consider myself very fortunate.

        I hope everyone takes out a few moments every day to feel thankful about what they have.

  • Wow – this got a lot of responses! I now own two million dollar homes in shaw, dc. Bought the first one little over ten years ago, lived in it for 7 years, then bought second house a few blocks away and turned the first one into a rental. At the time i bought these, the neighborhood was changing but still a bit rough, so I did not pay through the nose. Plus, I also bought when the housing market was weak – so low rates, and no crazy bidding wars. First one cost low $400K, second one mid $600k. Neighborhood has changed rapidly since then, as I expected, and both homes have appreciated considerably (both are large renovated properties , i.e. 1800+ sf with osp, located near metros). I financed the buys with my regular corporate job earnings and savings – no dual income, no inheritance or family money, no kids, no crazy debts. I am a big believer in living within your means, if not under, when possible, and being financially conservative – taking on a massive mortgage for a million dollar home on my own would have made me very nervous.

    • “I am a big believer in living within your means, if not under, when possible, and being financially conservative – taking on a massive mortgage for a million dollar home on my own would have made me very nervous.”

      Agreed that that’s important, but you also seem to have benefited from price appreciation, which is exactly why it will be harder for someone younger to do the same thing you were able to.

      • justinbc

        Why on Earth shouldn’t it be harder for someone younger than this person to do exactly as they’ve done? This concept that everything is supposed to be a level playing field at all times regardless of age, experience, or time spent earning, investing, and / or saving is the mentality that forces people into bad home buying decisions. It’s the single biggest purchase of most people’s lives, not youth league soccer where everyone gets a prize for showing up.

        • You’re really stretching what I was saying, which is just that a lot of people who bought in DC before a historic boom in housing prices have advice that doesn’t necessarily translate to younger residents here. We can’t expect the same market dynamics to make building equity as easy. That’s reality, not expecting “a prize for showing up.”

        • HaileUnlikely

          I agree with your conclusion, but I I think you misconstrued the main point there. Of course it is harder for a 23 year old to buy a house than for a 43 year old to buy the same house; I don’t think that was the intended point, though. There was once a time when it was feasible for a 24-year-old with a job and minimal/no debt to get on the proverbial ladder and then benefit from price appreciation a few years later. Now, because of that same price appreciation that we have enjoyed, it is vastly more difficult for an otherwise-identical 24-year-old (e.g., same pay, same minimal/no debt) to get on the ladder today, because we sort of picked it up behind us.

          • I don’t know that I necessarily agree with all that. Sure, you can’t get on the ladder in Shaw or Bloomingdale, but opportunities still exist to buy in DC for under 500k in still-gentrifying neighborhoods. Edgewood, Woodridge, Langdon, Anacostia. Sure, there may not be much there now, but that was also the case with Shaw, etc when many people bought there 15+ years ago.
            .
            All of this excludes the notion that jobs are likely harder to come-by for said 24yo today than they were 20 years ago. I’m merely talking about housing availability.

          • HaileUnlikely

            You’re inadvertently confirming my point. 15-20 years ago, you didn’t have to have to be able to afford $500K (or even half of that) to get on the ladder back then; you could buy an unrenovated but perfectly nice and livable home in a lot of neighborhoods, including Shaw and Bloomingdale, for less than $300K and in some places for less than $200K. Needing to be able to afford $500K for one’s first home is veerrry different from needing to be able to afford $200K for one’s first home — it’s not as if wages have increased by 150% in that time.
            .
            For context, I’m not one to fixate on shiny objects. I rented in Brightwood for 10 years and then bought a foreclosure in Takoma. I was delighted to buy in a nice working-class neighborhood and hoped my friends would be able to follow in a few years. In hindsight I think mine might have been the last <$300K sale (excluding private transactions) the neighborhood has seen since then.

          • HaileUnlikely

            p.s. See below. “Contrarian” bought his or her house in Shaw for $150K in 1997. I had a college friend 2 years ahead of me who bought around the corner from where I rented in Brightwood for <$200K in 2001.

          • You’re absolutely right that median wage growth hasn’t kept up with the rapidly rising housing costs in DC. I’d still wager that there are properties in undesirable DC neighborhoods where prices are (relatively) modest – though perhaps that’s all mostly east of the river now where your only amenity at the moment is (relative) proximity to downtown (with a whole lot of downsides). I’ll grant you that what I view as “affordable” is also awfully skewed from living here for so long.

      • Def some appreciation – but it was not a fluke. I deliberately bought in a neighborhood, that i knew was going to benefit from hundreds of millions of dollars in redevelopment projects within 3-5 years (go read the city’s development plans, if you want to identify good hoods for future appreciation). I also put in at least $150K+ so far in renovations in the second house, which is now probably worth may be $1.1 mil – so it has appreciated about 300K over my cost basis. But housing market is cyclical – booms and busts come and go, so there will plenty more of that in the future. But I don’t really see why a typical 24 year old would attempt to buy a million dollar home anyway. Most people start with something at a comfortable price point, depending on their financial circumstances, and then over time upgrade to something else, as opportunities present themselves and lifestyle needs change. I was not looking for “million dollar homes” either time i was looking – that was never a requirement of some sort.

  • Well, my ex-boyfriend bought a house about 3 years ago in an exclusive NW DC neighborhood that was about $900K (I know, it’s not exactly $1 million). He really wanted to live in this particular neighborhood. He has 2 kids, and makes under six figures, but had zero debt, perfect credit. He bought by cleaning out his pension for the down payment, and borrowing as much as he could. It took him a while to find a lender. But he pulled it off. The mortgage payments are tough, and there’s absolutely no margin for error financially (e.g. even short-term unemployment is not an option). Yet, somehow, he’s doing it. It’s a challenge, but he got his dream house in his dream neighborhood. He can’t live extravagantly, but manages to enjoy a nice social life, can take vacations here and there, etc.

    • Ouch, that is a very risky move. It sounds as if he’s one paycheck away from total disaster. And cleaning out a pension is just borrowing from your future to pay for something that you really cannot afford.

      I’m curious (actually worried for people who do this), how will he repay his retirement accounts? How long until he can retire? If he’s 30, it’s probably no big deal, but if he’s in his 40s and cleaned out his pension, whelp!

      • I work for a retirement plan advisor and it’s astounding the amount of people who don’t think twice about draining their 401(k) or other retirement account to buy a home, or even stupidly enough, something like a boat, even when they’re in their 50s or 60s. Also, if you ask if they have any emergency savings if something happens to the house, the answer is usually no..

        Of course, it’s kind of understandable that there’s a high number of people who make decisions like this since financial literacy is only required to graduate high school in 6 states.

  • This is how I did it:

    Graduated from law school at 25. Worked in biglaw until 32, making between $180k and $400k each year (depending on bonus). Bought a condo on U Street. Banked all the tax deductions, waited a few years. Sold at a substantial profit. Bought a $1.3mm house in upper NW with 30% down. Got out of law to do something else.

  • We’re on track to have a budget of $1.1 in three years for a “family” house–three or four bedrooms. We are smart and do our best to make what we call “ninja” money moves but a lot of it is luck. First we pulled off affording a $500k rowhouse in Shaw in 2013 due to our savings through our 20s as we got through grad school, non profit jobs, and bartending. That was just discipline. At the time our HHI was (very newly) about $150 and we had 15% to put down at ages 29 and 34. Our comps are going for about $700k right now and in the meantime I managed to parlay a new masters degree and global development job into a finance career (financial inclusion) and it basically tripled my salary. We’re now at $250 HHI but have a baby. I think if Shaw stays hot and we continue staying on top of our debt (just refinanced my student loans into a five year plan and dropped it two percentage points) we’ll be able to pull of a million dollar home in three years. If we hadn’t bought this house I don’t know how we could do it.

    There are lots of ways to figure out how to live here but we are fanatical about staying in DC and since our mid 20s assumed a million dollar budget for a family home. We both come from Washingtonian families and grew up here and have thus accepted the financial reality with out much complaint. However bc of this most of our financial decisions as a married couple over the last six years have been driven by our nonnegotiable take on living in DC with a family and the price tag that comes with it. Our single mindedness has gotten us to a place where I think we will be able to make it work, but I know a lot of people would think our Western Ave line we don’t cross is silly.

  • To all the people who bought in an up-and-coming neighborhood, and were able to reap the rewards of appreciation, where would you buy today (assuming you don’t attribute your location-picking skills to pure luck)? Are there certain attributes aspiring young homeowners should look for if they are seeking to emulate your success? I’ll be honest, I think it’s flat out insane that 1bd condos are now nearly the same price in Bloomingdale and DuPont, and I’m not sure that I would even consider Bloomingdale anymore – the glory days of appreciation are probably long over. But I can’t think of a single neighborhood left that hasn’t already left the dock. It seems like young homebuyers today are caught between a rock and a hard place – because all that entry level housing stock in rapidly appreciating neighborhoods is gone. Help!

    • Location – closer to downtwon DC. I would consider across the river in Anacostia (the actual Anacostia) or nearby areas.
      Close to transit – I’d consider Ft. Totten area <1/2 mile to the metro station.
      Hyattsville maybe, but I don't know enough about it.

      Basically – areas that were artificially depressed, but ought to be worth more. What's the difference geographically between Arlington and Anacostia? Both are across the river from downtown DC, so…

      • I would say no to Hyattsville if your goal is to sell at a substantial profit. We looked there and it seemed a fine place to live but ultimately didn’t buy there because we thought there was less of a chance for appreciation given the schools in PG county and the rate of foreclosures continues to be pretty high (at least a few years ago when we were looking).

    • houseintherear

      Definitely Hyattsville/Mt. Rainier and around that area of PG County… there are some amazing bungalows in crappy condition that would be a perfect investment. I commented earlier and it didn’t show up for some reason , but basically said that I bought in Bloomingdale 8 years ago and was beyond not thrilled that it was my only option. I wanted Logan, and I wanted cute and renovated, but I didn’t have the benefit of inheritance or anything like that (only some moderate savings from a decade+ of working hard). The sh*tty little house I bought is still a work in progress but it’s worth about four times what I paid for it, and the neighborhood is great. If I were doing it again, I’d totally buy in the Mt. Rainier area- you’re not gonna go wrong doing that right now.

      • +1 to Mount Rainier, I just bought there in august and Redfin estimates (allegedly and also with a grain of salt) that my house has increased over $100k in value. Also it’s super cute and I get to work in downtown Dc in about 25 minutes literally the same amount of time it took me to get to work from Foggy Bottom when I lived there.

    • Ivy City, Ivy City, and Ivy City. Carver/Langston, Woodridge, and maybe Fort Totten after that. I wouldn’t look EOTR because I simply would hate living there. I like to walk to things. I bought in Trinidad about 5 years ago. Had been hanging out along H Street for years before then, and I could see which way the wind was blowing. Now everyone is hanging out in Ivy City, going to Big Chief and Atlas Breworks, so I think that area is next. I bought my house when I was 24 so I think I probably fall into your age cohort. Most of my friends are still renting. Don’t despair – there are areas left where you can still get in. They aren’t the glamorous ones though, and if you like to walk around you will probably get mugged at gunpoint several times like we have. Trade offs.

  • If you truly want to know how YOU can own a $1M home and not just how other people did it, I suggest checking out some of the Early Retirement websites. My favorite is Mr. Money Mustache. If you go to the forums there, not only will you learn a lot, but you can post some of your expenses and you will get personalized advice from every other member of the forum. I did this about 3 years ago, and since then have found ways to increase my tax-advantaged savings, decrease my expenses, and last year I was able to SAVE over $100K.
    It’s not for everyone, because these sites recognize that the easiest thing to change with the biggest impact is our own behavior. So the overwhelming advice is to reduce expenses. And yes, it can be done even in a HCOL area and even with student loans. It’s all about priorities, and if you balance the things you like to do in life with the things you want to pay off, then you find a way to get what you want.
    .
    Now, as for how I personally did it, it was a combination of extremely hard work (self-study every night), and volunteering for industry organizations for networking so I could change my career at the ripe old age of 40. Once I did that, my career skyrocketed and I made about 5 X what I had been earning previously. I stayed in my small condo in the burbs while I saved up a boat load of money and then I bought a (close to) $1M home which has since appreciated.
    .
    It can be done, but you have to decide what you’re willing to give up to live in a $1M home. For me, I could sell this house and retire immediately if I were willing to go back to my small condo in the burbs. But that’s not the choice I’m making for right now. I bought my house in 2012 for $850k and I’ve paid it down aggressively, while still maxing out every retirement account that is available to me. I think I can pay off my house in under 12 years total. If I stop saving at such a high rate, I could pay it off today, but that’s not the wisest financial decision.
    Good luck to the OP!

    • justinbc

      In terms of sites I’m also a big fan of BiggerPockets. It’s more catered towards investors, but still a lot of great info and resources, and a great hub to ask questions.

      • I will check this out. I love the financial blogs. They really helped me get my $hit together. I’m not financially well-off yet, but I’m pretty close. Learning at my own pace by reading other people’s comments was the right way for me to learn. Thanks for the recommendation!

      • Late to the party, but I’d add the Bogleheads forum, too.

  • Friends of mine in their mid-thirties bought a million dollar house in AU Park/Tenleytown. One founded a successful non-profit and is now a fed, and the other is the CEO of said non-profit. It was their first home purchase. A million doesn’t go far in that neighborhood…

  • Is there a way to read responses chronologically? When people post responses to an earlier post, I miss them completely. Sorry for being a comment-noob.

  • Know how to use LLC’S and trust

  • How did I do it?

    Went to lowly State college
    Started at the bottom making $22k
    Was humble and patient
    Worked hard including weekends
    Got promoted
    Kept working hard
    Got promoted
    Repeat
    UNTIL I WAS 40
    Then I could afford it.

  • I’m surprised there’s been no mention of the transaction costs of buying/selling in DC. I could probably sell my appreciated house and afford a $1M place as a DINK household, but between closing fees, commission and DC”s recordation tax, a lot of the profit from selling would be gone.

    • Of course, those of us who hold onto one appreciating home, rather than trading up, will end up with a large bill for capital gains tax (and on the DC taxes, it is treated like regular income) even after taking off the $250,000 or $500,000 exemption.

  • There are a lot of folks here who flipped a coin and are patting themselves on the back and applauding their foresight for it coming up heads.

    • I wouldn’t call purchasing property in gentrifying neighborhoods “flipping a coin”, but to each their own. DC real-estate trends have been fairly easy to predict for the past 15 or so years (greater housing market crash notwithstanding, though we’ve well since recovered in DC).

      • You’re right, it’s not flipping a coin. It’s probably more like hitting blackjack. Housing, as an asset class, does not appreciate much more than inflation. Several hundred years of housing price data bears this out; check out Robert Shiller’s work in this area. Essentially, wide swaths of DC hit the real estate lottery, and now are congratulating themselves on their incredible foresight, and chiding newly arrived residents and renters for also not hitting the same lottery they did.

        Also, your second sentence doesn’t stand up to scrutiny. DC real-estate prices have not been fairly easy to predict; if they were, then purchase prices would have already incorporated appreciation expectations. Again, it’s fairly easy to look back with the benefit of hindsight and conclude that this was obvious.

  • Here’s how I did it:

    In 1997, I bought a house in Shaw for $150k. My salary at the time was $45k. I found a bank that had been busted for red-lining and was offering generous terms in inner-city neighborhoods as part of the settlement, I got a loan with 3% down. I scraped together $5K for the down payment. My payment was around $1200, most of which was deductible so after taxes it was cheaper than renting.

    In 2003 I sold that house for $550K. I took the gains and put it into a $1.5million house in Palisades. The mortgage was $1 million, ARM, principle only. The rate has bounced around but has averaged around 2%, monthly payment is around $3000 including property tax and insurance. After taxes the net is about half of that, which is far cheaper than renting. According to Zillow the house is now worth $2.6 million.

    Have I been lucky? Incredibly. I’ve essentially lived for free for the past 20 years. I put up $5,000 of my own money and now have equity of $1.5 million.

  • I always joke that the two advantages are being old are that I saw all the good bands and I lived in DC when real estate was cheap.

  • In the right neighborhoods, an English basement rental will cover half of a $800k mortgage.

  • Long time stalker, first time poster.

    I bought my first home 13 years ago and it isn’t anywhere near a million dollar home. I guess that’s because I bought just over the line in MD. At this point it has probably appreciated around $75K over the purchase price.

    It’s funny since I distinctly remember seeing a rowhouse in Columbia Heights that I really wanted to buy just 8 months prior to our (wife and I) purchase at $120K. It was a complete rehab junker and it was just before the Target and all else was built up, so I wasn’t keen on the idea of my wife walking around by herself after a long day at work. Not to mention the fact that we were planning to make a family much sooner than later, so we passed on the rowhouse that would certainly be worth around $800K at this point. Such is life.

    If I had the luxury of complete choice, we would be living in the District today, but at the time we decided on the safety of the MoCo school system (which is slowly starting not to be a safe bet, but that’s another thread) over the “risks” and possible headaches of living in D.C.

    Do I regret my choice? No. It was the right decision at the time and to put things in perspective; I had a neighbor down the street buy her first home a few years after us. She was single at the time, but she bought just at the peak of the bubble. A couple of years later, she met a fella, got married, got a new job, moved to North Carolina but couldn’t sell the house or otherwise she would have to take almost a $100K loss. So she rented it out for a couple of years, then finally put it on the market. I think she ended up selling it for $80K less than what she paid for the house.

    The market giveth and the market fucketh thee over. Hard work played no role in these transactions.

    All of these home prices make me wonder why hasn’t these appreciation values trickled over the borders into MD and NoVa? Especially when considering that so many people want to start families once they make their first big home purchase.

    I also wonder what many of these million dollar homes will be worth in 10 years time.

  • Holy rusted metal, Batman, this is a popular post. Guess I’ll share as well, though we bought our house in the low $800s, in the CH/Petworth area. We are an early 30s dual income no kids couple, bringing in about $250k a year (not lawyers). Neither of us inherited anything significant, and we have like $20k remaining in college debt. No car. We save quite vigorously (been doing that since finishing school), and we donate a sizable chunk as well. We took advantage of the mortgage + (smallish) HELOC trick to effectively make a 15% down payment without having to pay mortgage insurance or take out a single, jumbo mortgage. It’s a sweet deal.

  • A lot of people I know that complain about not being able to afford a home in DC also buy lunch everyday, go to Happy Hours, buy new clothes a lot, etc. That’s a personal choice and I believe you should be able to spend your money as you please, but the complaints that follow really irk me. Learn to save your money. Read the frugal subreddit. Cook your own meals. Take the bus instead of Uber. Sounds like small potatoes, but it really does go a long way in helping you save for a house. Husband and I are both government employees with student loan debt. But we don’t buy newest/fanciest stuff and we manage to save a lot of our income and bought a 800k home in DC

    • I agree and your last sentence gives me hope.
      .
      I’ve been trying to save a chunk each month (while still allowing myself a couple opportunities to be social – no $50 dinners but I’ll go to lunch with coworkers once every-other-week or so). I don’t have a car, haven’t had new sneakers in 6 years (these I actually need, they’re next on my list) and was probably one of the last on the smartphone bandwagon. Maybe I *will* actually get to the buying-a-house/condo stage eventually….

  • The picture is inappropriate, as there are many townhouses in the city that sold for over $1M.

    As for affording that price point, a $900,000 30 year mortgage at 3.9% would cost $4,255 per month, or let’s say $5k after all is said and done.

    A couple who each have a $150k job would take home about $15k per month. So their housing would be 33% of their income, which is reasonable, and many of us pay more than that.

    There are many professional jobs that pay $150k that are not doctors or lawyers. Many managerial jobs at corporations, senior computer programmers, accountants and finance workers, etc.

    It would seem to me that the difficulty might be the 10% down payment more than the monthly mortgage, but even that can be overcome.

    I’m not claiming that someone who buys one of those places isn’t incredibly well off– they are by measures of average American salaries and certainly by the rest of the world. But my point is that it doesn’t require inherited money or extreme wealth to own a million-dollar home and not be “house poor”.

  • It is called working, saving, and renting until you can buy, preferably without too much debt, or moving to an area you can afford.

  • I have friends who are buying million dollar homes now, in their 30s and early 40s.

    All of them have spent significant time (many, many years) abroad, deducting huge amounts on their federal income taxes and benefitting from lower costs of living (while still receiving US scale wages)

  • My husband and I recently bought a $900k home. It’s the first property either of us have bought and we are both 36. We’ve lived in DC for 14 years as renters. We do have a combined income over $350k and have no children. We put 30% down. We were able to do this because we save for many years independently. We both kept rent low by living in SW DC for about 13 years. We realize we represent a minority of people in DC. The vast majority of our friends could not purchase a home at our price point. Frankly, we didn’t want to go as high as we did, but after 8 months of searching, multiple bidding wars, and endless stress, we upped the budget. That lessened the competition slightly. However, we have asked each other and our realtor pretty consistently who the heck is buying all of these million dollar homes. It’s just insane.

  • As a household, we made 500K + last year and we own a house that we owe little under 600K, but that’s worth around 850K. We could easily sell and buy million dollar house. But, a million dollar house, in a nice neighborhood in DC/VA/MD that’s relatively close to anything is usually a god awful fixer upper. It takes 1.2-1.5 mil to get anything that’s move in ready and up to date with enough space for a family with growing kids. So, at this time, I’ll be sticking with my “up-and-coming” hood.