Mortgages are not just leverage. They also lock in your cost of housing.
For example, people who rent in major cities have seen their rents increase by 30% or more over the past few years. Housing prices have also gone up by that much.
On the other hand, someone who bought a home a few years ago has not seen their monthly payment change -- and it will not change for 30 years if they got a fixed-rate mortgage! In the next few decades, their mortgage payment will be increasingly smaller in real terms due to inflation and will eventually be substantially lower than the rent for a similar home.
2 people earning $120k each have a monthly pre-tax income of $20k. They can easily afford a million-dollar home, and the property tax (~11-12k per year), in the San Francisco area. The problem is, a home that cost a million dollars 2 years ago now costs $1.3 million.
It still sounds insane to me, I've made an assumption anyone with a $1M home (or above) is either carrying much less via down payment or is in the $4-500k / yr range.
Most responses on an assumption that, inflation adjusted, housing prices only rise. For many areas this is not true, the bay might not be one of them, it is probably even more localized for the areas that are more protected from downturns.
From your example, a house would be around $5.5k/month before maintenance / capital costs on take home of ?12-14k?. Seems rough, especially if one of those salaries is lost or degrades.
It is all perspective though, we're used to lots of space and size. My normal is other people's insane.
For example, people who rent in major cities have seen their rents increase by 30% or more over the past few years. Housing prices have also gone up by that much.
On the other hand, someone who bought a home a few years ago has not seen their monthly payment change -- and it will not change for 30 years if they got a fixed-rate mortgage! In the next few decades, their mortgage payment will be increasingly smaller in real terms due to inflation and will eventually be substantially lower than the rent for a similar home.
2 people earning $120k each have a monthly pre-tax income of $20k. They can easily afford a million-dollar home, and the property tax (~11-12k per year), in the San Francisco area. The problem is, a home that cost a million dollars 2 years ago now costs $1.3 million.