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Ask Adam: What Does a $250K Income Buy You in Arlington?

by ARLnow.com — November 27, 2012 at 12:45 pm 8,568 110 Comments

This periodic sponsored Q&A column is written by Adam Gallegos of Arlington-based real estate firm Arbour Realty. Please submit follow-up questions in the comments section or via email.

Question: A certain politician has been using $250,000 in income as the benchmark for rich families in America.  In an expensive area like Arlington, I’m wondering how much home an income like this can afford you? 

That’s an interesting question. I don’t want to touch the political aspect of it with a 10 foot pole, but I’ll do my best to describe what a typical family could purchase with that income.

It is a good idea to start with a debt-to-income ratio. In an area like Arlington where the cost of living is nearly 50% higher than the national average, I think we should use a conservative debt-to-income ratio of 28%. Meaning that your total debt will not exceed 28% of your gross income.

(In this case, “debt” refers to obligations including mortgage, car loans, child support and alimony, credit card bills, student loans and association fees.)

In order to calculate how much house they can afford, we need to make some assumptions:

  • They have $1,750 a month in car loans, credit card bills and student loans.
  • They want a house and many houses in Arlington are not part of a home owners association (HOA). It is safe to assume they will not have any HOA fees.
  • They have saved up enough money for a 20% down-payment so we don’t need to worry about private mortgage insurance (PMI).
  • Their interest rate is 4% on a 30 year fixed rate mortgage.

According to the online calculator I used, they will qualify for a mortgage of $705,258. If they are putting 20% down, they should be able to purchase a home up to $846,310.

At the time I am writing this, there are 15 houses available in Arlington with at least 3 bedrooms and 2 baths, within the $750,000 to $850,000 price range.

Again, this is a conservative example for a fictitious loan program. There are financing alternatives that offer different interest rates, terms and down payment options that could allow such a family to purchase a more expensive home. If you have questions about what you could qualify for, it’s best to discuss your specific situation and preferences with someone who can address your individual situation.

The views and opinions expressed in the column are those of the author and do not necessarily reflect the views of ARLnow.com.

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  • Bob Bobby

    FIRSTIES!!!

    • Captain_Obvious

      got anything to add ?

      • NeedMoMoney

        I’ll contribute..

        Do any of you have kids? if you have kids in preschool, you are paying a fortune. I pay total for both kids $2,200 a month .. that’s gone down now that i was able to get out of a nanny share and put them in preschool and a home care. That’s cheap. people in DC are paying even more, 1500 – 1800 a kid for daycare.

        How the heck do you save 20% down payment?? We are stuck in a 2bd/2bath condo for now or face commute hell to move further out. we’re shy of 200k household income and it’s getting real rough.

        Right now our only option is a 100% Navy FCU loan with a high settlement cost to get a hoopty shack for 500k, or move out of Arlingto into Falls Church between lee highway and rt50, which now forces me to buy a car and pay for all that, so more money spent for a beater home..

        end rant.

        • BriBri

          This is definitely a rough area to buy your first house. If you have 2 kids you’re going to struggle even in the higher income brackets. Like everything else it’s a compromise. You chose to have kids and stay in a condo. To have kids and a house you have to sacrifice something or make more money at a 200k level. You could have waited to have kids while you saved for a house. My opinion of condos is very low. Around here the prices make it better to rent usually as they don’t appreciate all that much and with monthly dues it can sometimes be a wash compared to renting and costs to sell it.

          • CW

            I agree 100%. Condo fees + taxes + mortgage interest + insurance and other “throwaway” costs can add up to almost as much as renting. I’ve run the numbers several times but it just comes back to not being a financially sound decision in my mind given the risk.

    • SandraFromEFC

      This is why people can’t afford houses – Idiotic use of land and greed. These McMansions get put up wherever a little old house exists.

      Case in point right by the East FC metro, 3 parcels sold, they build 3 horrendous cookie cutter McMansions on them, barely a yard on them and a glorious view of a power station humming all day. They have been on the market for a year cause no wise millionaire would buy a cheaply made generic suburban home in front of a power station with barely a yard.

      The developer thought the appeal was location by the metro. WRONG. Folks with 1.2 million most likely drive their cars to work. A year on the market shows this was a dumb use of this land.

      Both the developer and the county should of agreed to put middle class housing by the metro, row of townhomes that would sell for 600 to 750k range. (see townhomes down road by The Westlee). They would of made as much money if not more, both developer and county revenue. All gone on presale.

      http://www.homesdatabase.com/homes-for-sale/VA/ARLINGTON/22205/6614-19TH-RD-N-72624532

      http://www.homesdatabase.com/homes-for-sale/VA/ARLINGTON/22205/6610-19TH-RD-N-73238775

      http://www.homesdatabase.com/homes-for-sale/VA/ARLINGTON/22205/1910-TUCKAHOE-ST-82131782

      (the lots are subdivided differently now)

      • CW

        I agree 100%. I posed this same exact point a couple months ago and got shot down by a bunch of “Oh but the ZONING won’t allow it!” naysayers. 3 McMansions @ 1.5M each = $4.5M. 9 townhouses @ $600k each = $5.4M. That’s 9 more entry-level homeowners buying into the County, and $900k more for the developer. This is exactly the sort of development that I believe the County should encourage. And don’t tell me the County couldn’t do this if it wanted to…you know the County gets what it wants…

  • South Awwlington

    Adam,

    As you are real estate professional, could you please provide us with some information, off-topic, yet related.

    We are a very divided community when it comes to Affordable Housing. How much to provide, affects on surrounding communities, why provide it all, etc.

    What are the true costs (if any) to a neighborhood when an Affordable Housing program moves in or expands.

    What is the logic behind pushing someone into a property (via local govt loans) which they can not afford and will default on later? We all get it if there is a work or live requirement to apply, but Arlington has no such rule. Such programs are not only aimed at County employees (whom no one would challenge).

    What are the benefits?
    What are the costs?

    A loyal reader and conflicted on housing.

  • NoVapologist

    Thanks for this column. I couldn’t help but laugh last night at NBC news flashed images of $15,000,000 homes (and a Pagani Zonda – which runs you about $700,000) while doing their story on raising taxes on households making at least $250k..

    • CW

      The Zonda is way out in outer space, I agree, but $850k in most of the country buys you what would cost probably $4M here, so the images of the $15M homes (in your expert appraisal), may or may not be far off based on what local bias you have in your mind.

      • choogirl

        DC is actually the cheapest city I’ve lived in. NYC, Berlin, and London all have prices twice that of DC. As for 850K buying a lot in other areas of the US, how many people in those areas make 250K? I’m pretty sure if you look at jobs in those areas, they are largely blue collar, menial labor, and retail. I mean, when the only two job options you have are factory or Walmart, is the 850K mansion really applicable? Now, in places like DC and NYC where most of the residents are well educated and have professional jobs, the 850k house is an option and sought after. Therefore, prices reflect that.

        • CW

          Good for you. You don’t sound like an elitist at all. I think I’ll just jet over to Berlin and set up shop myself.

          Actually, there are plenty of ways, believe it or not, that the teeming masses out there in “those areas” can do well for themselves. Contractors (outside of DC, that means construction), car dealership owners, engineers/managers in factories, doctors/dentists, lawyers – all can do just fine. The pay for white collar jobs does not fall off at the same rate as housing prices – roughly 3-4X – when you move to “those areas”.

          • jules

            I’ll give him NYC and London….but BERLIN is DIRT cheap compared to here. I know. I lived there in one of the trendiest neighborhoods for about 5 years.

        • Karl Marx

          *head in hands*

          Oy vey.

        • MrMeow

          Unless berlin has changed a lot since 1997, I don’t see how you can be right, plus don’t forget you have larger areas you can choose from if you want a “Safe” area, plus the public transit is better so you can live further out and have cheaper rent. Problem with US cities is that there are only small portions of actual cities that have safe and desirable locations to live, hence why they cost so much.

          • CW

            This is extremely true. That’s the problem here in Arlington most certainly. So much of the housing stock is early 1900′s or immediately post-war (3 cars and picket fence). Even the “dense” parts are not dense by European standards. And our transit system is not as comprehensive, not even close.

          • Berlin

            I remember searching for the perfect words
            I was hoping you might change your mind
            I remember a soldier sleeping next to me
            Riding on the Metro

        • Sam

          Wow. Just wow.

  • MrMeow

    How about single people? Use $200k instead because that’s “rich” for single people. $250k is for families.

  • CW

    I’ve given up on even thinking about prices around here and what the rest of the world pays to own.

    That said, 4025 20th looks really great, unless there is some major detractor that I’m missing. I guess the pool probably drops it a bit in a lot of people’s books.

  • Andy

    Part of the trouble (I believe) with our economy was people needing to have the biggest house they could as early as possible. We chose to get a small house to begin with and then upgrade (we chose to build on rather than move) when we could. No way we could afford that kind of mortgage but we have a house at that price range.
    If you make $250,000 you are rich enough. If you want a big house more than you want to live in Arlington, move.

    • SomeGuy

      Thank you for imposing your universal definition of “rich enough” on the rest of us, nevermind that $250,000 in Wichita, KS is not the same as $250,000 in New York, NY. I’m also fond of the “if you don’t like it, move” attitude. Great way to foster civilized discussion.

      • Josh S

        There is no realistic way to vary tax rates based on zip code.
        $250K places a household in the top few percentages of incomes for the nation. Consequently, it’s rich.

        • Just a thought

          One approach would be to do a “cost of living” analysis similar to what as is done for military assignments. Military members are giving a housing allowance (Cost of Living Allowance, “COLA”) that accompanies their base pay which is based on the location of their assignment (and on their rank of course). The housing allowance in the DC area is obviously a lot higher than say Dayton, OH. The government could use this same approach to figure out what is considered well off in Wichita, KS vs. New York City instead of applying a blanket number to the entire country. I’m not arguing that this is a perfect solution, but it is a start.

        • SomeGuy

          Really, Josh S.? I didn’t say anything about ZIP code granularity, but it seems to me like every county is able to charge a different tax rate just fine. Why don’t you think that’s possible? Is it more more complicated than that?

          • Josh S

            How many counties in the US?
            How often is the IRS supposed to recalibrate based on changing economic conditions? Yearly? Monthly?
            What if you live part of the year in one county and part in another?
            What if you live in one county and work in another?
            What kind of whacko incentives would be introduced by having income tax rates that varied by county?
            What, exactly, would the varied tax rates be based on? Number of Starbucks per county? Number of BMW dealerships? Cost of a loaf of bread in the county?
            Also, to what degree do the prices of luxury goods vary by county? Is it cheaper to fly to Paris if you live in Jackson Co, Oregon versus Loudon Co, VA? What if you live in the middle of knowhere, South Dakota? Shit, there’s hardly anything to buy, so even $50K would be pretty good, wouldn’t it?
            What about the possibility of buying goods on the internet? In that case, how does the price of living truly vary from county to county?
            . . . .
            Actually, on second thought, I’m sure it’s really simple. Those lazy scums at the IRS are just cheating us for no good reason.

          • SomeGuy

            Based on the tone of your post, I think you want to be correct in saying it’s not realistic.

            But it’s realistic. As another poster commented, this is done for locality pay for DOD/military personnel. The GSA publishes per diem rates, which are based on a similar locale-based differential. So those are two federal agencies who are able to do that kind of math. Maybe the IRS could utilize a method similar to those.

            Cost of living calculators abound, and they’re nearly all based on government endorsed data gathering. I.e., the government has this info, and I don’t think we’d even need to rely on your asinine red herring suggestions of using Starbucks and BMW dealerships.

            Are you opposed to a system that takes cost of living into account? If so, why?

          • Josh S

            I think there is a marked difference in figuring out how to vary per diem rates and the like based on MSAs and figuring out and implementing different tax rates for all 150 million plus taxpayers. I just don’t see how it’s a reasonable suggestion.

          • SomeGuy

            Josh S, all you’re saying is “there’s a difference” and now you don’t think it’s “reasonable.” Initially you were adamant that there’s “no realistic way.” I just told you why I think it’s realistic, and I pointed to two instances that show the data are available and government agencies are applying the data in nearly the exact way that the IRS could.

            Tell me why it’s “unrealistic” to implement the tax code in such a way that it’s variable based on cost of living. Are other government agencies defying reality? Or is your argument based on hyperbole?

            And assuming it doesn’t defy reality (suspend your disbelief for a moment), why do you oppose such a system?

      • Andy

        Sorry, but when the median household income in the US is $50,054 it’s really not debateable that $250,000 is a relatively rich income because it just is. And of course Arlington is expensive. Many of my friends have made the decision they value real estate size and live further out, again not sure it’s that big a deal – it’s a personal decision. I’m not saying emigrate, but further out you will get more for your money. Some people want that, others don’t. Each to their own.

        • SomeGuy

          I’m seeing stats that median household income in Arlington in 2009 was $96,218– nearly double that of the national median. The point I made originally is that $250k in a major city is not the same as $250k in a small town. I think you and the data are agreeing with me.

          Feel free to think such an income buys champagne wishes and caviar dreams. But rich people can usually afford to buy luxury homes where they live, and as this article illustrates, very few single family homes are possible on $250k/year. Therefore, $250k/year in Arlington is nothing to scoff at, but in my opinion, it’s not “rich.”

          • Josh S

            Yeah, only the richest of the rich would admit that they are rich.

            It’s just a word.

            What matters is that $250K places you in the top whatever percent of all households in America. Someone with that income is richER than all but a few citizens. Including people living in Arlington, New York, San Francisco, etc. That’s all. And the line has to be drawn somewhere. I think it makes far more sense to draw the line at the top whatever percent of households and establish the higher tax rates there. Whether it’s $250K or $100K or $15K, it makes no difference. So, in America, in 2012, the point corresponds to roughly $250K.

          • SomeGuy

            So, per your suggestion, everyone earning over $15k/yr pays the same rates? That works for me. Not exactly how I’d structure it, but I can compromise.

    • drax

      It’s hard to find a cheap starter home in Arlington these days, unless it’s a condo.

  • Sam the Cat

    Adam: the 250k plus income buys you a ticket into the 1% club – the bane of all America – as depicted by democrat talking points.

    However – a Zonda would go well with my R8.

    • SomeGuy

      Actually, $250k is not a top 1% income in this area.

      • JamesE

        Still pretty damn good

      • Abe Froman

        An article ran a few months ago. You need $473k in household income to be in the top 5% of households in the DC metro area. And that area includes some pretty far out and undesirable areas from a commuting stand point.

    • choogirl

      Actually, 250k a year puts you in the top 4%. Again, whoever was marketing the 1% concept failed miserably. The point was to get America to understand that the majority of wealth is in the 1% and they make so much money, the 99% could never even touch it. http://blogs.wsj.com/economics/2011/10/19/what-percent-are-you/

    • 3Sigma

      Only a bane until you get in. Sounds like common jealousy no?
      For anyone who earns that kind of money, my hat is off to you.

      • James Baldwin

        *Shakes head in sadness*

      • Douglas Parker

        Do you think they give a s–t what you think?

  • Juanita de Talmas

    A certain politician has been using $250,000 in income as the benchmark for rich families in America.

    Which it most certainly is. When you are in the top 5 percent of households, you are by anybody’s definition “rich”.

    • are you kidding

      In no way does 250k make you in any way rich. It makes you well off and less worried about some of the curve balls life throws you like a broken transmission, blown furnace or the like. But, you still stress about bills and the like.

      If you lose your job – say a midlevel associate attorney at a big law firm – and can’t find another job or get one that pays significantly less, like many attorneys did a few years ago, you can be sure life style is going to change.

      For some one rich, that situation would have little impact.

      Someone at 250k also is restricted by phaseouts and losses out on a number of credits.

      • no she’s not

        Oh, boo hoo. Try that argument on someone who gets by on $30,000 a year.

        • SomeGuy

          I agree. “Try that argument on someone who gets by on $30,000 a year.” And if that someone can’t follow the logic in that “argument,” perhaps we’ve identified why he/she is stuck earning $30k/year.

          Such a person might not sympathize, but the logic is mostly sound.

      • dk (not DK)

        What planet are you living on? When you make $250,000 you are rich–yes, RICH–relative to the 95% of Americans who make less than you do.

        Maybe we’ve tapped into the problem here: Have we become so blinded by the lifestyles of the rich and famous we see on TV that we think we are slumming unless we can afford 10,000 square feet and a yacht? That we aren’t well-off unless we’ve got our rainy-day stash socked away in the Caymans?

        • Josh S

          Human nature.
          I would guess that until you get into the $5 million or more per year range, you likely would continue to protest that you are not rich. Oh the bills, the expenses, the uncertainty, etc.
          I agree with you, though, it’s absurd. And really, irrelevant to the discussion about where the higher taxes should fall. Especially since we’re talking about marginal rates.

        • BriBri

          I don’t know… at $350k combined household income I don’t feel very “rich”. Don’t get me wrong, I feel very lucky, but definitely not rich. We don’t worry about money as much as some, but we also bought a house well within our means and don’t have kids. We contribute the max to our investment funds and we pay a butt load in taxes (thanks AMT). We also work a lot – a lot more than the average American. We can take vacations, but they’re short because of work and we tend to go during holidays which are the most expensive times. There are pros and cons to everything in life. Better job, more money -> more taxes, more expenses – bigger house -> higher cost of living, etc.

          • time to reevaluate

            Isn’t the point that perhaps those of us in upper incomes (and I count myself among them although my family income is half that of your family’s) need to get our heads out of our collective bottoms and realize that no matter how we “feel,” we really are rich relative to our fellow Americans.

            Also, better job and more money might mean more taxes, but it doesn’t in any way have to equate to a bigger house or a higher cost of living. Those are choices.

            As for whether you work ” a lot more” than the average American: care to quantify that? What’s the median household income, $50,000? Do you think you and your partner work **7 times** more than the average American? Come on.

            Relatively wealthy people are healthier on virtually every measure than poor people, and live longer too. Can we really continue to tell ourselves that we work so much harder?

  • internet tourettes

    Adam,

    Could you please do the same story for those who are at the Arlington 2011 Median Household Income level of $103,900? I think that although two laywer households are interesting housing for those at the median income level is more revelant.

    http://www.arlingtonva.us/departments/CPHD/planning/data_maps/profile/file81520.pdf

    • CW

      Why would he waste his time with that? The answer is that there isn’t anything, unless you’re willing to go all-in on hugely leveraging yourself.

      • internet tourettes

        I think for the same reason why a person with a 250K income would be willing to take on enough debt so that they would have the disposable cash flow of some one earning 100K. There is something to be said for living well with in your means but with the stupid money being spent here for real estate that’s pretty much impossible here in Arlington.

        • CW

          Right but even if the $100k got leveraged up to $600k or so, that’s still barely entry level around here. I’m just saying the realtors have bigger fish to fry – the number of two-lawyer households seems to be readily exceeding housing supply as it is.

    • NeedMoMoney

      Do you have kids? if not, then get ready, you will not survive in arlington on that salary we’re a little shy of double that, cut back on a lot of stuff and 2 kids in arlingotn is rough… Say hello to the suburbs.

      • drax

        You’re saying you are having trouble surviving with 2 kids with $200,000 in household income? Just want to be sure I read that right.

        • Major Pup McPuppo Jr.

          lol

    • Brian K

      Yes. I would like to see that. I wonder if Arlington has a lot 250 and over, and a lot 70 and under, but not too much in between.

  • Loocy

    I think the assumptions on debt-to-income ratio as well as existing debt are off for this area. Most people I know have lower existing debt and higher tolerance for debt to income ratio, at least by the time they are in a position to purchase an $850,000 home.

    • CW

      Idk, lots of grads of not-cheap colleges around here, many with advanced degrees. And plenty of leased German cars. I think it’s spot on.

      The Feds certainly will have a higher debt tolerance due to their job security, but they’ve all but completely been priced out of this area.

      • JamesE

        two step 1 GS-12′s living together is $160k combined income, not exactly priced out.

        • JamesE

          correction, $150k, still not bad

          • CW

            Yeah, with a higher debt/income ratio they could get pretty close to the figures he used in this article.

        • sue

          most Feds living
          in Arlington are GS-14 or higher.

          Two GS-14 feds at my agency make $300k combined.

          • JamesE

            I know a total of zero GS-14′s, every govie I know is a 12 or 13.

          • Josh S

            Heck, when I moved here I was a GS9.

            “most”, indeed. I agree with James (gulp), it’s 12 or 13 for “most.”

          • sr

            Are you sure about that? GS 14 step 10 makes $136k and change.

  • butchballston

    Question – does the “credit card bills” include what you put on the credit card on a monthly basis? For example if I put all my normal everyday charges on the credit card (gas, groceries, meals, utilities, etc) is that “debt”? If so, $1750 is ridiculously low.

    • JamesE

      I don’t believe so, because I do the same. Need my points. Beer and wings probably accounts for $1000 of my monthly bill.

      • Tyler Durden

        “Need my points.”

        *Shakes head in sadness / disgust*

        • points are great

          If you pay off your credit card balance every month shouldn’t you think about the points.

          If you don’t pay it off than no matter the points are worthless because of accuring interest.

          • lovesmesomepoints

            true…my points take me to the carribean every winter.

          • Agreed

            We pay off our bill at the end of each month and then use the points accrued for two tickets to Europe every two years. Good vacation for cheap.

          • CW

            “If you pay off your credit card balance every month shouldn’t you think about the points.”

            Are you trying to state that people who don’t carry a balance don’t earn points? If so, you need to find a new card ASAP. Unless that just came out wrong.

    • Loocy

      Butchballston, that would be a no. Those are expenses. He means outstanding credit on the credit cards, not ongoing bills. It implies debts being paid off, in the same category as car loans.

    • drax

      The answer is no, it doesn’t count in your calculations. However, it will count when the mortgage company looks up your debt, so make sure you’ve paid your bill at the right time when applying for a mortgage.

  • 3Sigma

    If it’s Moran, forget it. He couldn’t get approved
    for a double wide with his credit history.

    • NoVapologist

      Moran doesn’t rely on his credit history to get a mortgage:

      Moran’s support for harsher bankruptcy law provisions and sponsorship of stricter bankruptcy legislation brought allegations in 2002 that his support came in return for financial favors by financial institutions which could benefit from such laws. In January 1998, one month before he introduced the legislation, credit card bank MBNA advocated that it would restrict the ability of consumer debtors to declare bankruptcy. Moran received a favorable debt consolidation loan from the bank that allowed him to avoid personal bankruptcy arising from credit card and stock market losses. The $447,000 loan at a favorable interest rate was the largest loan to an individual MBNA issued in 1998. Its belated disclosure triggered a Federal Elections Commission investigation into whether or not it constituted an improper contribution.

      The Lieutenant Governor of Virginia at the time, Tim Kaine, joined Republican lawmakers in calling for a House Ethics Committee investigation into the loan, saying that Moran had made “an error in judgment” by accepting it. In his own defense, Moran said that the timing of the legislation’s introduction was coincidental and had nothing to do with the loan. MBNA spokesman Brian Dalphon said that the bank had offered the mortgage package not knowing that Moran was a member of Congress, and that the loan “made good business sense” because with the mortgage loan, “we improved our position by getting security for an unsecured loan…. He had credit cards with us, he was having financial difficulties; this put him in a better position to be able to pay us back from a cash-flow standpoint.”

  • Joshua Tucker
  • craig

    Arlington- “where a million dollars does not even get you a master bathroom or a garage.”

    Relatives have no idea they just spent Thanksgiving week in a $1.1 million house. I had to keep hearing about Joe-Shmoes McMansion in Trampa, Florida that was 5 bedrooms and a pool for $250k.

    • Major Pup McPuppo Jr.

      boo hoo

  • dluciano

    Housing prices are a function of after tax wages, so where after tax wages are lower, housing prices are lower. Hence, raising taxes on upper income households in Arlington should lower Arlington house prices over time, provided that the effective tax rate increase is sustained at a fairly constant level for a long enough period. Example: increase the mean effective rates for HHs with 249,999+ annual income by 3.5% over seven years in .5% increments each year. Hold the mean effective tax rate at that level for the next ten years. In theory, inflation adjusted, quality adjusted housing prices in Arlington should come down as those selling homes in the medium-term future (10-15 years after initiating the tax increase) have come to accept that buyers cannot afford to bid as high as they could under the previous tax regime. This economic theory suggests that a sustained decrease in income taxes levied on upper income households (e.g. BUSH TAX CUTS), probably contributed to higher housing prices and may have contributed to the housing bubble. While it might be nice to empathize with those who are earning a lot but who still feel pinched, throwing more money into the housing market might only reinforce a bidding war to get into the most desirable locations. Further, such empathy says nothing about the legitimate aspirations of the rest of the population that is not nearly as affluent but who may also want to live in a desirable area. If the top rates are raised the aim should be to make the hardship a short term, not long term problem.

    Also, remember that when Obama talks about a 250,000 income, he is talking about adjusted gross incomes of 250,000 or more, not gross incomes.

    • really

      So letting Americans keep more of the money they earned caused a housing bubble? Banks giving out mortgages like candy with very little down payment required had nothing to do with it? By the way, there was a big increase in housing prices during the nineties too.

      • dluciano

        1) Obviously the tax cuts did not directly lead to changed underwriting standards.
        2) Most bubbles start with an initial period of rapid price growth. That initial rapid price growth encourages speculative investment as people want to get in on a hot market. As price growth encourages people to invest in housing, increased participation in the housing market fuels strong demand for homeowner units, and this heightened demand reinforces and sustains rapid price growth.
        3) Investors buy into the market solely for speculative purposes. Homeowners bid higher than they otherwise would, expecting future price gains make it worthwhile to pay more. Some owners try to cash out equity created by the rising market conditions.
        4) Think about it: Bush argued the beneficiaries of his tax cuts would invest in small businesses of various kinds. Most people don’t own businesses, but a lot of well healed people own or want to buy houses. Perhaps tax cuts helped some people bid up housing prices? Perhaps that could have contributed to the rapid price gains in 2004-5-6 since people invested savings from tax cuts in the housing market.
        5)
        Basic economics says, “savings equals investment,” but investment here means creating firms. That is, the surplus (or savings) of an economy allows that economy to make supply side investments, resulting in new productivity and future growth (provided ample demand exists). But the people getting the Bush tax cut money mostly were not business owners. The biggest tax cuts went to the well healed, but 97% of US small businesses are not well healed (are not part of the 250,000 or more group). Perhaps people getting tax cuts invested less in creating firms within the US, and they instead focused on investing in other assets, like housing. Anyway, why invest in a business when housing was apparently so profitable?

        I don’t know what initially triggered housing price growth, but once housing investment came to appear to be very profitable people became willing to pay more for a house in the hope of cashing in on rapid price gains. Anticipating housing price growth, home buyers are eager to buy. Eagerness creates a willingness to bid up housing or pay full asking price… There was unquestionably a kind of frenzy during 2005 when the bubble was running up….

        The effect of tax cuts may have been to either contribute to initiating the bubble or to sustaining it.

        No – tax cuts don’t cause banks to loosen lending requirements. That’s foolish.

        Yes – tax cuts potentially could have contributed to initiating the bubble or could have helped sustain it.

        CBS news published this report, makes a claim that aligns with my argument. Didn’t take desk research further than that, though, since I’m not trying to prove my theory is right, just saying it’s possible. http://www.cbsnews.com/8301-505123_162-39741024/did-the-bush-tax-cuts-lead-to-economic-growth/

  • Kemper Martin

    Just recently I read a survey of city areas that had the highest incomes for singles and Arlington was rated 4th in the nation. Most people single or family want a good life it is what your version of that is and how your parents raised you and the area you lived in and who you may compare yourself with. Arlington created on purpose an area to attract younger educated and hungry for success near the capital people. This is an area like many that tries to keep up with the joneses. Think smart with money and goals and do not worry about if you drive the latest high end car to show you can be successful. Glove up until you have a good nest egg to start a family. Happy Holidays !!

  • chrisphere

    Relax people, no one’s saying the only way to live in Arlington is buying a $900k house, whether or not you can or should be able to afford it, according to whatever ‘online calculator’ or whatever ‘COLA.’ Plenty of families still live here in single family houses their parents or grandparents bought without paying a $4k mortgage. Or they choose to cash out and buy a big house in the country. Plenty of people choose to buy cheaper houses that are older and/or not in walking distance to metro. Of course, if you feel entitled to all the McMansion amenities steps away from a metro station, you better make $250k to pay for it.

  • Great Gatsby

    Its all just supply and demand, y’all! Just like your cheerios and starbucks, but hyper-local jobs+econ driven. Spend what you can comfortably afford, don’t worry about keeping up with the Jones’. C’est la vie.

  • santosh

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    http://amanheights.co.in/flats-in-ghaziabad.html

    • malaka

      Well that’s interesting – given that it is a little under 8,000 miles from Arlington I am sure many on here had thought about commuting from there.

  • flyover_country

    We bought a SFH in Arlington 20 yrs ago because of the shorter commute and we didn’t need 2000 sq ft per person or more. Arlington was nice place to live, but Ballston was mostly used car lots, Clarendon had a crappy Sears and huge empty parking lot, and the Lee Harrison Shopping Center had the worst Rite Aid and Superfresh Grocery known to man as anchors. Point is we looked at everything inside the beltway (probably 60 homes over 2 years) and bought here when not everyone wanted to live here – we got in early. There still are places like that, just not many if any in Arlington. If you want to buy in what is now one of the hottest real estate markets in the area and have to have 6000 sq ft +, you are going to have to pay thru the nose. If you think you ought to be able to do that at age 30 with a Mercedes and a Lexus in the driveway, you need an income way above the top 1%. Learning to live within your means, and delaying your want for immediate gratification are good lessons to learn.

    • CW

      Irrelevant point, today is not 20 years ago, there are not places like that in Arlington or anywhere in the DC area for that matter. The ship has sailed. Congratulations on the luck of right place, right time.

      • drax

        I don’t agree. DC has some of those places now.

        • drax

          Oh, and I should add there are still opportunities like that in (gasp) South Arlington.

          • CW

            Where is there metro access in south arlington?

          • Vicente Fox

            The Blue and Yellow lines are in South Arlington.

          • veeta

            Word, but god forbid someone have to ride a bus or bike.

      • Exodusing_properly

        Irrelevant becuase CW wants what he/she wants now! Exactly as wanted and right now! This is usually his/her argument.

        But it’s more complicated than that…

        • CW

          I didn’t say that, and that’s never been my argument. All I said, pretty clearly, was that it was not proper to compare 20 years ago to today.

          • darsasx

            pretty clearly – you mean like after 4 beers, right ;)

  • flyover_country

    No luck involved, sacrifice perhaps, but luck – not so much. Lots of places outside the beltway that will within the next few years have metro access, that didn’t used to and are affordable. Course it depends on how you define the DC area. Have friends that bought in Stafford Co north of F/Burg and in WVA that take the MARC train each day to work and consider themselves to live in the DC area.

    Also know a couple that within the past 3 months bought a nice two bedroom house within walking distance of Lee Harrison Shopping center for $600K. Three stop commuter bus ride to Ballston. Course they’ve been looking for over a year and “settled” for less that 2000 sq ft per person.

    • CW

      Yes, there was luck involved in being in the right place at the right time – the comparisons you make to people who are bending over backwards with awful commutes is not quite the same as happening into a place right on the metro and walking distance to everything. I am not saying that the local economy should not have taken off, I’m just saying that the whole “work hard and sacrifice” argument doesn’t hold water these days. There are thousands probably of very hard working, financially-intelligent people in this area who will not have the opportunity that you had. It is not your fault, it is just how it is, but you pontificating from your ivory tower doesn’t add much.

      • Sam

        I normally agree with you but think you’re off on this one. If you want a house, you can get it. I saved for the past 15 years out of school in order to buy a house in N Arlington that I bought last year. It was tough, and I made a lot of sacrifices while I was at an unimpressive pay level, in order to save up enough to get my loan down to an affordable amount. Our house is nothing special and is pretty small but I love the area so it’s worth it to me. Expecting to buy a house in your 20′s without sacrificing some other parts of your life is just not realistic.

        • CW

          I agree that that is unrealistic. I just don’t envision a scenario where the market gets less competitive here. There are thousands of young people trying to do just what you describe, and our housing stock here in Arlington is not designed to support that. When you started saving 15 years ago, there were nowhere near as many recent college grads flocking to the area. 15 years from now, it’s going to be very, very different. What is most likely to happen is a mass exodus from the area to other metropolitan areas where the cost of living is more reasonable. The current housing stock just will not cut it when today’s crop of 20-somethings comes of age.

      • flyover_country

        Actually I was assigned here with a number of my Army friends. They chose to buy in F/Burg or WVA to have the big house and lot, I chose to suck it up and get by with less. It wasn’t by chance, it was a calculated decision that my wife and I made. We didn’t “happen into a place” we bought a beater rental and over the years fixed it up ourselves. Couldn’t get a fix on the utilities cost as the 4 renters figured beer into the monthly split. Its now worth three times what we paid for it. Most of the folks that bought down I-95 are upside down on their mortgage.

        Again, while most folks got 30 yr mortgages so as to pay less, spend more on cars and vacations, we got a 15 yr mortgage and paid more. Never owned a car with less than 50K miles on it or had a car payment. Never carried a balance on any credit card, and ate my fair share of Romen noodles so as to pay off my student loans.

        If I was buying today, I’d be looking out the silver line to Dulles near a “new” metro station, or maybe in DC along the U Street corridor (may be too late there now). Seeing the potential in something down the road and sacrificing today for tomorrow doesn’t seem to be in fashion these days, but it works and its not luck.

        • CW

          No, I agree in that regard, and appreciate your perspective. I just think that with flipping being in vogue and demand far exceeding supply, there aren’t as many options. Maybe the silver line…maybe. And yes, it’s too late for U street. Rowhouses there start at maybe $750k last I checked.

  • Major Pup McPuppo Jr.

    c y l i c a l
    a r g u m e n t s

  • Flyover_country

    Not as far along as U Street is the Barracks Row and Anacostia Waterfront redevelopment. Blue Plains is spending $2B to fix the stormwater pollution problem with the Anacostia and should come online in the next 5 years. Might be further out until things totally turn around, but another place I might consider if I was a 20 something looking to get in early. YMMV.

    http://www.nytimes.com/2011/02/16/realestate/commercial/16barracks.html

    http://dc.about.com/od/washingtondcneighborhoods/a/Anacostia.htm

    http://www.anacostiawaterfront.org/

    http://goo.gl/hi0fD

    • CW

      I agree on Barracks Row. There are still safety concerns though.

  • Flyover_country

    Absolutely. When I was working at Ft McNair in the mid 2000s, I drove even though the traffic was awful to avoid walking to the Metro at night – too many muggings. However, I’m assuming that as it redevelops down there, it should improve. Probably safer with the redevelopment out towards Dulles, but less upside for home prices. Gotta decide what is best for you. I don’t/didn’t always get it right. When the County wanted to redevelop the Sears site in Clarendon, one of the proposals was to put a Home Depot there. Since as I said, we were doing a lot of home improvements, I liked the idea of Home Depot as a better alternative to driving to Baileys X Rds to the Hechingers. County went another way, and Clarendon has been a huge success story. But when we first moved here, it was a very different Arlington with way less desirable amenities.

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