Reply #38: that was not my argument

[spooky3]

I was just responding to the implication in a prior post that a $100000 salary earner could not afford a $1 million home. In fact some (many?) of them can, and they are a major reason why prices are going up. People sometimes assume that buyers are all first timers or people with only 20% down, but there are many buyers in high cost markets out there who are move up buyers who have sold other houses and have a lot of cash to invest in their next house. It would be interesting to see what % of the market these people are.

to be more specific:

"no banker, not even in palo alto, is going to make a mortgage on a $1,000,000 home to someone making $100,000/yr and putting 20% down, at 6% interest, leaving him to pay about $57,000/yr on the mortgage alone on a $100,000 income."

That's true if the mortgage is for 80%, as you say. But there are many $100000/year buyers of $1 million homes who have a lot more to put down than 20%. My point is that when people are puzzling about how can it possibly be that people continue to buy houses at these prices when incomes have not kept up, is that *to an extent* they are able to do it because of profits from houses they sold. Obviously, their incomes ultimately impose limits, since they still have to pay the balance of the home's cost. There are also people out there who have inherited houses or other assets so they can afford housing well beyond what their salaries suggest they can afford.