Am I missing something, here in Shelby County and the Mid-South?

Asked by Andy, 38016 Fri Mar 7, 2008

I have always been told that your house expenses should be about 1/4th of your take home monthly pay (House Note, T&I, Utilities, Cable, Phone, etc.)...and with a joint income of our household of approx. $250,000/yr...we are right on target with that thinking. The question is - are there that many near millionaires in this county to justify the new home prices of $600,000 and up? It seems in Germantown, Collierville and Fayette county, alot of the new stuff is easily approaching $850,000 to over $1,000,000...for simply 4500 sq.ft. How are others justifying these prices? We would like to move to one of these areas...but new house prices seem to warrant an income of $700,000 plus...and quite frankly, with 20% down - we would be scared to death with some of these proposed house notes. Is everyone tetering on bankruptcy, or have I lost my mind and simply don't understand the process...what am I missing? (By the way - my credit is excellent and my debt is paid every 30 - 60 days.)

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Dena Parker…, , Tennessee
Sun Mar 9, 2008
The great thing about your situation is YOU decide how much you want to spend on a house and what is comfortable for you. It sounds as if you'd qualify for a lot more than you'd like to spend. I applaud your conservative approach. It is a huge financial investment and your long-term investment potential for the house is determined primarily when you "buy" the home. So it is especially important that you not overpay for the home. A realtor should be able to pull up the comparable home sales within the last few months as well as do some in depth research and negotiating for you to get you the best possible deal. Even in Germantown and Collierville, which are highly desirable, you should be able to find homes under market value for that specific area.

As to the millionaire status, keep in mind that there are several large corporations headquartered in Memphis, and many executives live in some of these areas. That's not to say everyone can afford their mcmansions because foreclosures have been higher than average in the Memphis area in general. It is also worth mentioning that the Memphis area has historically had some of the most affordable real estate for many years when compared to other parts of the country and had seen some appreciation before the credit crunch really hit. For the savvy homeowner in the Memphis area, it has not been difficult to protect that investment, build equity and later trade up to the higher priced homes.

The best thing for you to do is find a great deal with a mortgage you are comfortable. You can certainly take extra money you would pay in your mortgage and continue to invest it and be better off in the long run. At some point, you may want to further invest in real estate in the area in addition to the home you dwell. I highly recommend it as part of your long-term financial planning goals.
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1 vote
Megan Manly, Agent, Nashville, TN
Sat Mar 8, 2008
Germantown is the #5 wealthiest city in Tennessee, while Collierville is #13.
1 vote
Sherry Wheel…, , Knoxville, TN
Fri Mar 7, 2008
If you'll notice, when you look at the pics of the insides of some of these homes there's none or very little furniture. I think it was 60 Minutes that did a piece on a lot of these people eating beans because all they could afford was the house payment!
1 vote
martha bailey, Agent, germantown, TN
Wed Apr 17, 2013
You may want to consider a short sale. Some of these luxurious homes go for much less in a short sale. Also, you might want to consider buying land and building your own home.

Price wise, for a normal home, really depends on the location.

Martha Bailey
Clearpoint Realtors
Germantown, TN
0 votes
John, Home Buyer, 38119
Thu Jul 31, 2008
Wait, a year. They'll be half the price.
0 votes
Patty Everitt, Agent, Collierville, TN
Tue Jul 22, 2008
I will be placing my homebuilder's hat on, I happen to be married to one, These past few years especially since the Katrina hurricane all things have gone up in price, now in 2008 we are seeing all thing s-lumber, trim pieces, windows, doorknobs, I mean everything in building going up to the builder an increase of about 40% , we could actually build a home for less years ago. Now we can"t , gas prices, has forced it on us as well . We have several homes in the above 700,000 range and are ready to talk , paying the note ourselves and in this slow market will give you and the builder of your choice new discussions!!
Take care, call if questions or if you need help
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0 votes
Joyce Medlin, Agent, Bartlett, TN
Sat Mar 15, 2008
A jumbo loan (in the range to which you refer) typically great credit and full document loan will allow you to borrow to about a 40% debt to income ratio based upon gross income. So one can actually borrow more than you are referring here. Thus at 5% with typical taxes etc. a $700K loan would push about $5K a month. As long as income was a $11K or $12K. We handle these transactions often, so if you have any more questions, visit our website or call our office.
0 votes
Jo Shaner, , Memphis, TN
Sun Mar 9, 2008
Simple rule of how to figure how much how house a person can afford without getting into their finances is: What is the general household combined income (with normal bills-whatever that is), multiply by 2 and in most cases, that is what house a person with good credit should be looking at.

This does have a margin of error - some areas where the tax base is very high and of course those with heavy debt burden. It is just a quick qualifier and you should always get approved through a qualified lender.

About the McMansions though, I see a lot of people coming into this area from other parts that sometimes put down well over 20%. I am working with a couple right now that are doing a trade with someone in Chicago. My clients are only coming to the table with $65K on a $750K house. It's a win-win and everybody culdn't be more thrilled.

Jo Shaner
0 votes
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