— Seattle’s soaring home prices drove renters
Kathryn Jacoby and Jeff Whitehill to a sobering
conclusion last summer: If they didn’t buy a house
before prices rose higher, they could never afford to
own a home in the city.
the young couple lined up financing, raised a down
payment and started house hunting. In July they bought a
72-year-old house for $550,000.
things got even more interesting.
monthly expenses now included a $2,478 mortgage bill.
Jacoby wasn’t sure how to pay back a $30,000 loan from
her parents for buying the house. And Whitehill’s
repayments on his $60,000 student loan are expected to
reset this year, jumping from about $100 a month to
between $500 and $600.
were so many things to think about," Jacoby said.
"It was overwhelming."
and Whitehill are among the members of the millennial
generation who are wrestling with such big-ticket items
as costly housing and student loans before they have
reached their peak earning years.
the Seattle area, home prices have jumped 59 percent
since 2012, when the market hit bottom during the
about 57 percent of Washington state’s college seniors
graduated with student-loan debt in 2015, according to
The Institute for College Access and Success. Their
average student debt that year was $24,600. Graduate
students typically accumulate even more debt.
Twight, a Seattle financial planner who volunteered to
help Jacoby and Whitehill, said the couple "have a
common problem, a problem that many millennials
couples like them are between a rock and a hard
unmarried couple decided to start their careers in the
area after they earned graduate degrees from the
University of Washington.
30, earns about $45,000 a year as an operations
coordinator for Imagine Housing, a developer of
32, makes about $65,000 a year as a research associate
at The BERC Group, an education research and consulting
combined pretax earnings of about $110,000 is above
Seattle’s median household income of $80,349 in 2015.
Still, Twight noted that $100,000 doesn’t go as far as
it used to because of such costly items as housing.
and Whitehill lack an emergency fund, although they have
about $19,000 in savings and an additional $7,900 in
of them are using their employers’ 401(k) plans to
save for retirement. Jacoby has about $1,500 in her
retirement account, while Whitehill has about $14,000.
of their cars are paid for, and they pay off their
credit cards every month.
household’s big bill is the mortgage. Jacoby and
Whitehill owe about $437,900 at a favorable interest
rate of 3.625 percent. The home’s estimated market
value is $604,600, according to Zillow, giving the
couple about $166,700 in equity.
and Whitehill reached out for help when they realized
they needed more savvy with money management, budgeting
and planning ahead.
Financial Planning Association of Puget Sound connected
the couple with Twight, who advised them for free.
said Jacoby and Whitehill are in better shape than they
realize. The couple made a smart move, Twight said, when
they decided to boost their income by renting a room.
first Jacoby and Whitehill rented the room to travelers
through online rental site Airbnb. The experiment ended
two months later.
turned out to be a lot more work than we
anticipated," Whitehill said. The monthly income
— about $200 — wasn’t worth the trouble.
the couple instead rented the room to a steady tenant
for $800 a month. The predictable revenue stream
"makes things feel more doable," Jacoby said.
in part to their rental income, Jacoby and Whitehill are
sufficiently in the black to continue making monthly
contributions to their workplace retirement plans
despite their costly mortgage.
they are saving enough for retirement is another matter,
got the couple’s attention when her projections showed
that they would run out of money in retirement at their
current savings rate.
side by side, Jacoby and Whitehill looked at Twight’s
projection on a laptop at their kitchen table. The
projected red ink appears in their early 70s and
pretty eye-opening," Whitehill said.
options are to work into their 70s, cut their annual
retirement spending by as much as $30,000 a year or save
an additional $11,000 a year for retirement.
probably going to increase our savings," Whitehill
urged the couple to establish an emergency fund so that
if one of them is thrown out of work, the couple has
enough money to stay current on their house payments.
Jacoby and Whitehill have about $27,000 in checking and
savings accounts, some of that money is already
earmarked for monthly expenses and home improvement.
Jacoby also may tap those accounts to help pay back the
loan from her parents.
couple also like the idea of establishing an emergency
fund that they would use only in emergencies, such as
for major home repairs, a job loss or a health crisis.
urged the couple to establish such a fund and to do so
before paying back the $30,000 loan from Jacoby’s
suggested an emergency fund large enough to cover three
mortgage payments, or a little more than $7,400. That
way, if one of them is thrown out of work, the couple
have enough money to stay current on their house
and Whitehill were pleasantly surprised by Twight’s
focus on the long view. It’s critical, Jacoby said,
"but something that I never had the energy to think
asked what advice they would give to other young
couples, Whitehill quipped: "Get engaged to a
saver." Jacoby let out a hearty laugh.
advice was different. She urged young adults to push
back against the high cost of housing and college by
telling public officials to address the problems.
totally unfair that young people are in the positions
they are in," she said.