Why John & Jane Smith Can't Afford To Buy A house - No, it isn't interest rates

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Don't blame everything on interest rates - It's because wages haven't kept pace

My wife and I bought our first house in Seattle in 1986 for $78,000. It was in a safe, desired neighborhood, post card view of downtown, view of Elliot bay and in the distance, Mt. Rainier. We paid the going 8% interest rate and our payment was around $700 PITI. I needed to make about $1,945 a month or $23,335 a year (okay, this was back in the ice age, but the interest rate is the same) ;-) I was well paid, making more than needed to buy the house, selling very large computers for a well known computer company. We could afford my wife always being a stay-at-home mom.

The house just sold for $1,200,000 at 8% interest and PITI about $9,330. An increase of 15 1/2 times.

So, if you use the lending industry average, 36% of your monthly income can go towards housing and you would need $25,917 a month income or make $311,000 a year to qualify.

This is particularly troublesome if you understand that 61% of people claim they are living paycheck to paycheck. There is no relief in sight for the average household.