Rule of thumb is you should keep the value of house you buy around 2 1/2 times you gross income?

Question

That means average Los angeles home owner has to make $240,000 per year or $20,000 /month since average home prices over there is $600,000? What do LA residents do to make that much money? Are they all lawyers or doctors or something?

Answer 1

The rule of thumb you suggest is a good one, however there are other rules of thumb as well. Your rule wouldn't necessarily apply to someone who had previously saved up a lot of money or had just sold some other property.

I've heard that "People shouldn't spend more than 40 percent of their monthly pay on housing costs." Or in California, use 50 percent. This rule is similar to your rule.

Unfortunately for people in California, they do have to stretch to buy a home.

Answer 2

Yes, California has most number of doctors and lawyers in the country. I am a doctor myself. My brother and sister are both lawyers. My uncle is a Judge and my aunt is a presocutor.