Picking up Nickels

Thursday, November 09, 2006

Money Magazine says I can't afford a median priced home in MA

I was reading the 25 Rules to Grow Rich By pullout feature in my November 2006 copy of Money Magazine, and had to chuckle when I read Rule #3:

Spend no more than 2 1/2 times your income on a home. For a down payment, it's best to come up with at least 20%.

So let's see... According to this Boston Globe article, the Massachusetts Association of Realtors reported the median selling price for a single-family house in Massachusetts was $360,000 in September. Using the 2 1/2 times income criteria from Money Magazine, you would have to make at least $144,000 per year to purchase a median-priced home in Massachusetts.

That seems to be quite a disconnect from the $50,502 median income as reported by the Washington Post. Applying the handy dandy 2 1/2 times income rule once again determines that a median income family in Massachusetts should spend no more than $126,255 on a home. Let's just say that amount of money would have bought you a decent starter home in Massachusetts TEN YEARS AGO.

While I am picking on Money Magazine a bit here, there are plenty of attention grabbing Ten Mutual Funds to Buy Now! type articles out there. You just have to be sure to separate the wheat from the chaff.


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