How Much Income Does It Take To Buy A $9 Million Home?
California Governor Gavin Newsom just bought a $9 million home in Marin County, CA. Social media was of course replete with derision.
The silliest comments went something like this: “It turns out it only takes $234,000 (Gavin’s governor’s salary) of income to qualify for a $9 million home…”
Interestingly, the property taxes alone will be in the $11,000 per month range. And I suspect insurance could easily top $2,500 per month too.
So, Gavin would need more than $350,000 of income just to qualify for taxes and insurance – before a mortgage is even considered.
But, as most of us in the industry know, the comments are ridiculous, as there are dozens of factors that go into qualifying for a purchase.
Did he even get a mortgage?
If so, how much did he put down (30% down vs 60% down would increase the income requirement by $500,000 per year)?
How much income does he have from interests outside of his governorship?
Did he even need to show income, or did he just use his assets to qualify?
Did his private banker just give him an excellent home loan based on his deposits, assets, and banking relationship (most likely scenario)?
How much income would he need if he put down 30% and got an old-fashioned jumbo mortgage with full income documentation?
He would need about $850,000 to $900,000 (I am assuming the rate would be in the mid 6% range, and that the total monthly housing payment would be in the $31,000 range).
Gavin has significant business interests including a winery, hotels, and restaurants. I would be shocked if he did not make many multiples of what the necessary income is to qualify. Gavin’s governor’s salary is pretty much chump change for him.
Final Point: He’s buying in Kentfield, CA in Marin County – and that entire region is enchanting with nearby mountains, endless open space, excellent mountain biking trails, hiking, huge coastal redwood trees, wineries, beaches, oyster farms, tule elk, clam digging, incredibly cute towns, and pure Northern California charm. The weather is almost perfect too. I highly recommend visiting – no matter where you’re from.
Record Number of Sellers Opting to Rent Instead of Buying
Well, this is alarming. Almost 36% of survey respondents said they’d opt to rent instead of buying again – if they sold their homes. Please see the chart below.
This is a near-record-high percentage and even higher than the percentage we saw in 2011.
Biggest Problem In Real Estate
This is once again why I often say that the biggest problem in real estate is getting nervous buyers off the sidelines.
This is also why I am again encouraging agents to access our Homebuyer Presentation Slide Deck – with dozens of reasons to buy real estate (and why the “crash bros” are wrong).
We recently added two more slides.
The first includes this quote from Warren Buffett:
“If I knew where I was going to want to live the next five or 10 years, I would buy a home, and I’d finance it with a 30-year mortgage and it’s a terrific deal. If you’re handy, consider buying a couple of homes.”
The second is another reminder that buying residential real estate is one of the best hedges against an inevitable continued currency debasement (inflation), as I explain in this blog: The Biggest Threat to Americans That Very Few Know About.
