I've officially hit my mid 20's, so it's about time I start to figure out when I can afford to buy a home. On average, other millennials are buying their first homes at the age of 33, with a median income of $54k. Most Americans end up buying homes that cost about 2.6 times their annual pretax income. (source) At my current income of about $43.6k, that's a $113k home.
What will that buy me in my lovely city, San Diego, California (the second-most-expensive metro area in the United States)? Jack squat! According to the San Diego Union Tribune, the medium home price in San Diego County costs around $489k. The report states that a household would need to make $110,286 a year to be able to afford the $2,757 monthly mortgage, taxes, and insurance payments.
I decided to make a detailed spreadsheet, to examine more closely what and when I could afford to buy. Take a look!
The spreadsheet is based on what I alone can afford, since I like to plan for the worst and pride myself on the ability to be independent. The cells highlighted in pink show the home-related data. Based on the math, I can afford a 20% down payment for a $379k home, when I'm 35 years old. With a 30 year mortgage, I will be able to pay the home off by age 65, when I'm eligible for retirement. It's unlikely that I'll be living in the same home my entire life, but trying to add a second home into the equation adds too many unknowns.
The spreadsheet is based on a number of assumptions and factors that may change, but it's my best attempt at beginning to plan for the future. To afford a home in the San Diego area, the key things I'll have to do are:
1) Pay off my debts as quickly as possible
2) Continue to keep my expenses low despite any salary increases
3) Perform or outperform my "assumptions"
If you are interested in a clean version of my spreadsheet, click here. Click "file" and "make a copy" to be to add it to your Google Sheets and make the document editable. In cell L39, you will find a set of directions to help you enter your own data into the boxes colored green. It's a bit complex, but I'm here if you have any questions! The spreadsheet is a really useful tool for anyone looking to plan ahead. Enjoy!
