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Halfway thinking of buying a house in the bay area...
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2011 Nov 15, 12:58am 24,770 views 70 comments
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SJ
2011 Nov 25, 12:26am
My game plan is to rent and save over the next few years then to move to a cheaper state like Florida, Texas or Arizona and buy a nice home for half the cost of bay area. I can work as a traveling consulting engineer so that will allow me to be mobile and do this. Right now, I work a job in bay area that requires me to live here and I make a good income but not worth paying 600k-1.5 million for a crapbox that would buy me an estate outside of California. Plus taxes are less in Florida and Texas with no state income tax and I will be closer to my desired retirement place in the Caribbean.
Katy Perry
2011 Nov 25, 1:33am
edvard are you paying below-market rent for the place you live in now? I live in san francisco and am having the same dilemma as you do. but I have kids and would like to give them a home of our own to grow up and the rent that I pay is about the same as what we would pay in mortgage (accounting for tax benefits/mortgage interest deduction) if we bought a similar home in sf. so we're looking at houses and will probably buy by the end of next year.
yes I do think housing prices will continue to go down, but my logic is that we all have to live somewhere and what's it matter if I buy a $800k house that drops to $500k if I would be paying $4k per month the whole time to somebody anyway no matter if we rent or owned. we don't "lose" any money presuming we stay in the house and don't sell.
is that terrible logic?
Yes IMHO you are using the word Own but you really mean " Loan owner." owners (those who own something that is not debt) pay 100 percent cash. Also as you are losing money on the price yearly. you are also not paying anything toward the house for nearly 5 years. You're tricking your mind into believing you really own something. when you will never actually own the house. The house and the company putting you into the loan actually owns you.
but what is the difference between throwing money out as rent or throwing it out toward a mortgage? at this point prices and interest rates have dropped so rent and mortgage payments are equivalent. after 30 years of throwing money out the window at least you have a house but in the rental case you don't have anything. when rents were 1/2 of mortgage it made no sense but now it seems to be starting to make sense.
I think buying in Bay Area right now is a risky move, because it ties up capital and saddles you with liability beyond the at-risk capital. If you were picking stocks, and someone told you that a particular stock might never provide a return, but also, it would not lose any value, and another stock might actually gain value but could also lose 100% of its value plus some more, which would you choose?
If you'd choose the 100% at risk stock, then buy a house in the Bay Area. If you chose the steady value stock, then rent.
Bigsby
2011 Nov 26, 1:50am
I think buying in Bay Area right now is a risky move, because it ties up capital and saddles you with liability beyond the at-risk capital. If you were picking stocks, and someone told you that a particular stock might never provide a return, but also, it would not lose any value, and another stock might actually gain value but could also lose 100% of its value plus some more, which would you choose?
If you'd choose the 100% at risk stock, then buy a house in the Bay Area. If you chose the steady value stock, then rent.
A rather strange and inappropriate analogy.
B.A.C.A.H.
2011 Nov 26, 6:50am
I think buying in Bay Area right now is a risky move
You bet it is.
We're overdue for The Big One, and Loma Prieta 1989 was not The Big One.
If you're uncomfortable with living in Ground Zero for The Big One, it's more than about your property values and depreciation. It's about your life.
For the most part, wealthy foreigners who keep comin' here keeping property values high, are from other places on the Rim of The Ring of Fire. No difference to them.
But if you're from Flyover Land and are not comfortable with the Risky Business of Living here, don't.
JodyChunder
2011 Nov 26, 9:38pm
I am closer to the fault line than yall and I don't sweat it. I had me a real nice house with my daughters in Carpinteria during the last one. Everyone always worrying about the big one even then. barely felt a tremor.
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I never thought I'd say this, but for the past- oh I'd say 3-4 months- I've been toying with just the notion of buying a house here. This is all extremely preliminary. Doesn't mean I'm jumping on the house buying bandwagon, but I am starting to think about it.
Some of you might recall one of my earlier posts where I was debating moving out of state to somewhere significantly cheaper, which isn't hard since about 95% of the country is way cheaper than the Bay Area. This idea is still on the table. If we really wanted to we could- at this very minute- pack bags and go to TX, NC, NC, GA, CO, or whatnot and buy a house free and clear and have money left over as well as a decent amount in retirement. We have been saving for years.
But... on the other hand its more or less the case that as far as what we do for a living, most of the work is on the coasts in costly cities. If we moved that would probably mean changing careers, perhaps even going as far as to start working at retail/low income jobs with some occasional freelance. I wouldn't be totally against that because we would have everything paid for and thus the jobs would just take care of health insurance and basic monthly expenses. Some part of me isn't totally comfortable with that possibility. I have some insite into this because I was laid off a few years ago and tried to get a job out of state and despite being highly qualified had an incredibly difficult time getting any responses from anyone in even some of the high tech alternatives like Austin and Raleigh. As of now we both have very stable, comfortable jobs that we enjoy so I am not really in any mood to move at this time.
So lately I've been taking a peek here and there at various houses around us. What I'm finding is that houses that had been say- 600k-650k in 2006 are now at around $400k-$475k today. Certainly not cheap by any means, but we 'could' afford it. That would mean putting down a sizable down payment of say- $100k-$150k. The houses themselves tend to be somewhat smallish, adequate homes. My rough math estimate is that the monthly nut would probably be somewhere around $1,700 not including taxes. So realistically- closer to $2,000 a month. What it boils down to is that I've been sitting and watching the bubble for years. My automatic reaction to any house for sale around here was the same: Overpriced crap not even worth looking at. I was so used to that notion that even looking at homes was not on the radar. But now... I am seeing some homes that are more like- well... they're still pricey but not absolutely ridiculous.
That amount is doable. But... on the other hand we're currently renting a rather large house with a nice big yard for a little more than half that amount. So while we 'could' afford to buy a smallish starter home, we would likely be paying more money for less space and probably have to also pour some money into the house because often times these are older houses that some old person lived in forever and ever without doing much in upgrades. So while I can't deny that buying a house is a cozy idea the situation we're in now has me a tad spoiled size-wise. The math to me doesn't make a whole hell of a lot of sense, even with a big down payment. Besides- that down payment would be like 8 years worth of renting.
That brings me down to the last thing. The other idea is to just keep on working, saving, renting, and in say- 5-10 years if all works out, see what our financial situation is then. By that time I'd say we would be in a position to make an easy either-or decision where we could probably buy something outright in either location and call it a day.
Sorry for the rambling. Anyone care to share their thoughts?