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I bought a brand new home for my young family 4 years ago. I love my house and have done much to improve it. I can also easily afford my house while contributing to a 401k. When I moved in the neighborhood it was a nice middle class neighborhood with young families. But a disturbing thing began happening about 2 years ago. One of the young families moved out and a new family moved in. The new family did not take care of the yard or the home. It looks like a dump now with tall grass, unkept landscaping, garage door coming off the hinges, etc. They even started selling drugs. This then spread into the other neighboring homes. People saw what was happening to the home across the street, moved out, and the same "undesirable" types of neighbors moved in. Right now, I am surrounded by three homes with the same problem. Grass is two feet tall, landscaping out of control, homes not being maintained, etc. The neighborhood is now what I would characterize as being in constant decline and the original families keep moving out.

My question has to do with what the prevailing financial wisdom is on staying in a neighborhood like mine (one I can easily afford) versus moving into a more expensive neighborhood that would stretch me financially.

Right now I make $130k a year and am 4 years into a 30-year conventional mortgage with a 4.25% interest rate resulting in $1370/mo. mortgage payment (P+I). I have $40k in auto loan debt at 1.9% over 6 years resulting in $650/mo car payments. I have no other debt and contribute 7% to a 401k with an additional 5% matching from my employer. The house in the nicer neighborhood we're looking at is $475k and the realtor we're working with thinks we will net $168k on our current home if we sell. Current interest rate for a 30 year conventional loan is about 5.8%. I am not even sure if this is enough information to give a clear picture on my financial situation.

What is the financially wise move? Stay in the declining neighborhood we can afford or scrape by in a nicer neighborhood? Is moving financial suicide? I could really use some advice.

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    If the situation is as dire as you describe, your home's value is only going to decline, no matter how much care you put in maintaining your own property. You should probably get out while you can, but the $475k house is almost certainly not your only option.
    – chepner
    Sep 1, 2022 at 19:19
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    I have $40k in auto loan debt - the financially wise move would be to sell the vehicle(s) and, if necessary, pay cash for something much less expensive
    – yoozer8
    Sep 1, 2022 at 20:16
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    This is a personal finance site but I have to point out that there are more important things than money here. Multiple drug dealers in your neighborhood + a young family means that you have safety considerations that are way more important than money. Dilapidated houses full of drug dealers alongside small children is a recipe for disaster. We can argue about how much house you need, whether it makes sense to get rid of the car debt, etc. But moving away from people that need to resort to gunplay when they have business disagreements seems like a no brainer.
    – Justin Cave
    Sep 1, 2022 at 21:01
  • Tangential: it's a royal shame that this stuff "spreads" as there's no real good reason why it should be a problem for different kinds of people to exist in the same neighbourhood. Probably everyone else thought like you, and moved out, and that's why only the drug dealers are left!
    – user253751
    Sep 6, 2022 at 20:58

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Just doing some quick calculations:

  • 130k income - I'm not sure which state you are in, so this is just a conservative estimate, but I would guess that's around 90k after taxes (7500 a month)
  • Minus the 401(k) contribution of 7% (I'll assume that is 7% of 130k ~ 760 a month, to a ROTH 401(k))
  • Minus the car payment of 650 a month (Id recommend getting out of that too, as @yoozer8 mentioned in a comment above, but as you'll see here I think you can actually "afford" it)

We are left with 7500 - 760 - 650 = $6090 per month Pre-Mortgage

Using a Mortgage calculator from Google, assuming that you put all 168k from your house sale into a down payment you'll have a mortgage of ~ 310k @5.8%

  • Estimated monthly payment ~ $2500 (including taxes and insurance. Again, just an estimate from Google, but probably close)

Now, that's around 30% of your take-home pay, or ~23% of your gross. This is within the general guidance of <30% of your gross. and it leaves you with about $3500 - 3600 a month to cover gas, groceries, clothes and fun. That's a decent amount, and you'd be able to live a relatively comfortable lifestyle on that for sure (IMO)

All of that to say that I don't think moving is financial suicide. What could actually be dangerous, though, is living next to drug dealers. Potentially losing a bunch of money on your house as the neighborhood property values plummet due to lack of curb appeal and increasing crime. Ultimately, it's up to you, but I'd move in a heartbeat.

P.S. You could even make the financial situation better too:

  • Sell the car and buy a replacement in cash, get an extra $650 a month (assuming you aren't underwater on it)
  • Buy a cheaper home when you move. As @chepner states in their comment, there are probably other options. If you can find a good enough home for $350k? That just saved you another $1,000 a month!

Its all dependent on how serious you want to be about it, and how much you think you need to live off of. Good Luck!

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