patrick.net

thomas.wong1986 says

B.A.C.A.H. says

Maybe not propping up forever, but just as long as more of them keep comin', and keep bringing their API-centric attitude with them

Self fulfilling-feeding Ponzi scheeme. LOL! Someone is gonna go belly up.

Thomas-you seem to be applying macro theories to a micro environment. I know nothing about Cupertino. But I do know that some areas of the US will rise faster than inflation, and some areas will rise slower (or decline).

Take Detroit, for example. Home prices there have most certainly lagged inflation over the last 20 years. My guess is by a lot. So that means prices somewhere else have probably beaten inflation. As (wealthy) people have moved around, prices in individual cities have deviated from the long term trend because demand has increased/decreased with the movements of people.

Just because some of the BA has increased faster than inflation doesn't necessarily mean it is overpriced.

RentingForHalfTheCost says

You got 100K saved from stocks/options/RSUs and double income then you will qualify for a 1million home.

What? The percentage of lenders who would give you a 10% down jumbo loan on a $1 million home is about 0.0000000000000000001%.

This isn't 2006. Your scenario seems highly unlikely, and unrealistic.

Here are some realistic numbers for today's credit market:

At 25% down, for a $750,000 mortgage, 1% tax rate, $300 HOA, and $1200 in insurance, and a pristine 30 year jumbo rate of 4.25% you're PITI would be around $5,000 a month.

Required income: $212,000

The person with $250,000 in liquid cash, who could afford a $5000(PITI) is loaded, plain and simple.

Honestly Goran, that describes a LOT of DINK couples in the SV. A 212k+ gross household income is fairly common (with respect to the number of properties that become available in a place like Cupertino) here. The real test is saving $250k, which I don't think too many can do, but there are probably enough to soak up Cupertino properties. Now, anyone wise enough to save that much cash (one would hope) would see that it is a lame value proposition. Buuuut, something about having kids makes people think that it is OK to toss common sense out the window if it is "good for the children." Darn near everything we do is driven by our reproductive urge, and housing is indelibly intertwined with that, making it very easy to convince people to make poor decisions by exploiting their fears about raising happy, successful children. Lots of DINKs plan on having kids in the near future, and realtors know damn well how to exploit all of the related unknowns that DINKs face there.

bmwman91 says

Darn near everything we do is driven by our reproductive urge, and housing is indelibly intertwined with that, making it very easy to convince people to make poor decisions by exploiting their fears about raising happy, successful children.

Isn't that the truth.

I had a realtor tell me that my child will have better memories by buying in a particular Orange County neighborhood.

Almost gag inducing.

bmwman91 says

Honestly Goran, that describes a LOT of DINK couples in the SV. A 212k+ gross household income is fairly common (with respect to the number of properties that become available in a place like Cupertino) here. The real test is saving $250k, which I don't think too many can do, but there are probably enough to soak up Cupertino properties. Now, anyone wise enough to save that much cash (one would hope) would see that it is a lame value proposition. Buuuut, something about having kids makes people think that it is OK to toss common sense out the window if it is "good for the children."

I think you made the exact right point. Fear sells better than anything else.

Couples that have worked for around 4years can save up that much taking into account sign-on packages. Many also take loans from their own 401ks for the downpayment. If you max out 401k, the company match can be worth close to 30K for each person over 4 years.

Many also use FHA loans and dont need high downpayment.

Most of this is about irrational emotion based decision making at this point. Not so much about getting rich by flipping. Also we have to remember that the vast majority of tech immigrants are chinese/indians. In their home countries, the only hedge against inflation was housing and if you didnt buy in 10-12 years ago the prices are way too high now. So there is some of that conditioning at play here as well atleast in those buyers.

Goran_K says

RentingForHalfTheCost says

You got 100K saved from stocks/options/RSUs and double income then you will qualify for a 1million home.

What? The percentage of lenders who would give you a 10% down jumbo loan on a $1 million home is about 0.0000000000000000001%.

This isn't 2006. Your scenario seems highly unlikely, and unrealistic.

Perfect credit, long-standing bank relationship and the proper appraisal and they will. For the sake of argument, however, move it up to 20-25% dp then. Just means the couple needs to have more savings, probably from an equity sale or bank of parents. Seen all types and classes.

Don't get me wrong, I don't think it is smart, but when your playing with family money you haven't really earned yourself it seems okay to most. I earned every friggin dollar in my savings, and under no terms is anyone getting a red cent for free from me. I'll fight you until my last dying breath to protect my own savings. Not everyone feels the same, because as they say YMMV.

I think that's great, and I'm glad you're a big saver.

Back to the topic though, no one is going to mortgage a Cupertino home with 10% down, and pretending they have money. They have to have money, and lots of it in this credit environment whether it's from parents, siblings, or IPO stock.

Goran_K says

I think that's great, and I'm glad you're a big saver.

Back to the topic though, no one is going to mortgage a Cupertino home with 10% down, and pretending they have money. They have to have money, and lots of it in this credit environment whether it's from parents, siblings, or IPO stock.

Then these brokers are talking out of their asses I guess.

http://sf-re.com/WordPress/2011/05/11/jumboloans90ltv/

More documentation on 10% down up to 1.1million jumbo loan options. I know a few couples that have done this recently in places such as San Mateo, Menlo Park, San Francisco, etc. Without this almost criminal program they would still be renting.

http://www.ijumboloan.com/articles/can-i-get-a-jumbo-loan-with-10-percent-down.htm

About the 10% dp, you are making the point that Goran and I have been trying to make: of course people like that are loaded.

Because, if it takes a high household income to pay interest (and taxes) on a 20% loan at Cupertino prices, it takes an even higher one to pay interest (and taxes) on a 90% loan at Cupertino prices.

So, like I said; like you related in your post, those (mainly immigrant) buyers in Cupertino are quite affluent by any standard of what is normal in the USA, in California and even in the Bay Area.

If, it's a lot of smoke and mirrors or an unstable income that they cannot sustain, (hopefully not) after they drain the other wealth in their retirement accounts or from rich family "back home", they will just sell (probably at higher prices) to the next ones who come along who can afford it.

RentingForHalfTheCost says

ertino prices, it takes an even higher one to pay interest (and taxes) on a 90% loan at Cupertino prices.

So, like I said; like you related in your post, those (mainly immigrant) buyers in Cupertino are quite affluent by any standard of what is normal in the USA, in California and even in the Bay Area.

If, it's a lot of smoke and mirrors or an unstable income that they cannot sustain, (hopefully not) after they drain the other wealth in their retirement accounts or from rich family "back home", they will just sell (probably at higher prices) to the next ones who come along who can afford it.

From your own link that you posted:

"Before you can get an approval for a jumbo loan you must have satisfied the following requirements:

» Making a minimum down payment of 20 percent of the loan you are seeking.

» A full record of your income for the last 2 years

» Your monthly mortgage payments will be 38 percent of your income before taxes.

» Your Credit Score needs to be above 720 (some lenders will allow 680)"

Someone has to have $200,000 in liquid cash, and prove for 2 years in income statements that they can afford an $800,000 mortgage.

That's what you call wealthy.

Also from your other link:

Minimum FICO score of 760. No exceptions.
10% down must be borrower’s own money, gift funds allowed to supplement this 10% downpayment (for closing costs, etc).
5/1 ARM, 7/1 ARM, and 10/1 ARM periods available; all based on LIBOR. No 30 year fixed available for this loan.
Mortgage insurance required.

No 30 year fixed, has to be a 10/1 ARM. You know what kind of income you need to qualify for that especially on a $1 million house?

B.A.C.A.H. says

Because it's their kids who are the students. Kids like Harvard alum Jeremy Lin. Dunross, it sounds like you don't spend much time in local public K-12.

I bet the teachers at these schools are letting the chineese students cheat on the english standardized tests, just to prop up the API for their school.

We are single income family with 200K savings with 7 and 4 year old kids. We are in big dilema whether to go for a house or not. Rents here are insane (2500 for 2 bed/2bath). What do you guys suggest? Should we go for a house so that kids can have a bigger place or continue in the apartment?

Excuse me?

2500/mo is an insane rent amount?

How on earth do you save $200K, but you consider $2500/mo an "insane rent amount"?

I would take a stab at the notion that $2500/mo rent is fairly standard for a family of four with a household income of around $100K....and it might take 15-20 years for the same family to save $200K.

dodgerfanjohn says

would take a stab at the notion that $2500/mo rent is fairly standard for a family of four with a household income of around $100K....

You don't work very hard for your $$$ then.

meetyaks says

We are single income family with 200K savings with 7 and 4 year old kids. We are in big dilema whether to go for a house or not. Rents here are insane (2500 for 2 bed/2bath). What do you guys suggest? Should we go for a house so that kids can have a bigger place or continue in the apartment?

You are going to need at minimum ten thousand square feet and at least four bathrooms or four and half bathrooms with all them kids as they grow. I can probably find you something close to that out here whereabouts I am. Wouldn't be 2500 dollars a month! cheaper

meetyaks says

We are single income family with 200K savings with 7 and 4 year old kids. We are in big dilema whether to go for a house or not. Rents here are insane (2500 for 2 bed/2bath). What do you guys suggest? Should we go for a house so that kids can have a bigger place or continue in the apartment?

Are you looking to buy in Cupertino? $200,000 is a good down payment, but what type of home are you looking to get? Your standard 3/2 cost about $850,000 to $950,000 in Cupertino. That would give you a mortgage of at least $650,000. Based on that, I think renting would be best for you if you need to live in Cupertino.

JodyChunder says

dodgerfanjohn says

would take a stab at the notion that $2500/mo rent is fairly standard for a family of four with a household income of around $100K....

You don't work very hard for your $$$ then.

Exactly the opposite. You either rent money or rent a house. Right now, $2500/mth is the cheapest way to provide shelter. Renting 600K and risking your 200K in this environment means you are feeling lucky IMHO. Luck has run out for many around here, so I'd be hesitant to join the fray. If you doubt the strength of the housing market, then renting is the obvious choice. Shit, rent a nice McMansion for 4k/mth and enjoy the backyard pool as well. They will even throw in yard and pool maintenance many time. You got a problem, call the landlord from the hot tub and complain. You won't even have to put down your Mai Tai. ;)

Goran_K says

meetyaks says

We are single income family with 200K savings with 7 and 4 year old kids. We are in big dilema whether to go for a house or not. Rents here are insane (2500 for 2 bed/2bath). What do you guys suggest? Should we go for a house so that kids can have a bigger place or continue in the apartment?

Are you looking to buy in Cupertino? $200,000 is a good down payment, but what type of home are you looking to get? Your standard 3/2 cost about $850,000 to $950,000 in Cupertino. That would give you a mortgage of at least $650,000. Based on that, I think renting would be best for you if you need to live in Cupertino.

Thanks guys for your suggestions. Cupertino is an option (because of schools). Other option we are considering is San ramon which adds 30min of commute each way.

Goran_K says

Are you looking to buy in Cupertino? $200,000 is a good down payment, but what type of home are you looking to get? Your standard 3/2 cost about $850,000 to $950,000 in Cupertino. That would give you a mortgage of at least $650,000. Based on that, I think renting would be best for you if you need to live in Cupertino.

This is a great site, I'm damn glad my brother put me onto it. I'm in a similar position as "meetyaks". Need to find a home for me and my family (wife plus three small kids) somewhere in silicon valley. New job is in Cupertino. Looking for properties further out which means a potentially long commute. Moving from Texas and I realize going from here to there is not the normal pattern. And I also realize we will take a big hit in size of property compared to what we have now. Looks like inventories are relatively low which means poorer selection which equals unhappy wife. Currently trying to scrape together ~200k cash to allow purchase of ~$1,000,000 property with a 30 year fixed. At the same time I'm considering rental properties but honestly I don't see a whole lot on the market there either, maybe I'm looking in the wrong places. What rental property sites are good for that area? The rent vs. buy question is a hotly debated topic especially for silicon valley. At this moment in space-time, right..........NOW, where do you guys stand on rent/buy?

dunnross says

I bet the teachers at these schools are letting the chineese students cheat on the english standardized tests, just to prop up the API for their school.

API is a "grading" of the school, not the students. So, there's only an indirect benefit to the students to do well on that assessment. I doubt that all those students would jeopardize admission to an Ivy or elite UC campus to inflate the API of their teachers and administrators. Too little reward for the risk.

jynnyrttn,

You are not going to like it here. You are accustomed to Living Large in Texas. In order to Live Large here, unless you are swimming in money you will commute so far that your quality of life will suck.

Consider keeping your family in Texas and continue looking for a job in Texas while for the time being you earn your paycheck here .

B.A.C.A.H. says

jynnyrttn,

You are not going to like it here. You are accustomed to Living Large in Texas. In order to Live Large here, unless you are swimming in money you will commute so far that your quality of life will suck.

Consider keeping your family in Texas and continue looking for a job in Texas while for the time being you earn your paycheck here .

You're not with the tourism board are you?

meetyaks says

Thanks guys for your suggestions. Cupertino is an option (because of schools). Other option we are considering is San ramon which adds 30min of commute each way.

Go east of Cupertino, at this point even Los Gatos may have deals better than Cupertino.. commute via Highway 9..
I will warn you the peace of mind... will kill you...

It may surpise you the commute, Stevens Creek, to Cupertino from DT SJ isnt bad either. So SJ maybe an option...

B.A.C.A.H. says

Consider keeping your family in Texas and continue looking for a job in Texas while for the time being you earn your paycheck here .

Is this Texas Big ? 3x bigger than Cupertino...

http://www.redfin.com/CA/San-Jose/2118-Shiangzone-Ct-95121/home/972348

http://www.redfin.com/CA/San-Jose/1603-Rangewood-Pl-95138/home/700132

jynny,

I am a lifelong Bay Arean, it is the only place I have lived and it will take a lot for me to leave.

But most of my relatives live in your part of the USA. I stay in touch with them and I have spent a lot of time with them, visiting them, and sometimes they have come here to visit me. That's the personal part. On the professional part, for a long time I worked in an outfit that had half its operations in Texas, half in "Silicon Valley". I got to know the Texas people really well. Went to their facility several times over the years and got the "relocation sales pitch" from their management, who included among them former Californians who relocated there to savor the good life of Living Large in Texas.

So I think I am as well-versed in "the other side" as a lifelong Bay Arean could be.

I am telling you, you will not like it here.

Hey I appreciate the opinion.

jnnyrttn,

It's a losing battle trying to live directly in Cupertino. You're competing with so much foreign money, it's ridiculous.

As others have said, if you can stand a 30-40 minute commute, you'll get much more house, and less stress about space and mortgage payments. You might even find a carpool for cheap.

Goran_K says

jnnyrttn,

It's a losing battle trying to live directly in Cupertino. You're competing with so much foreign money, it's ridiculous.

how much is a ridiculous amount of foreign money? how do you quantify the amount? anecdotal stories?

Goran_K says

As others have said, if you can stand a 30-40 minute commute

You might even get a chance to listen to your CD collection..

thomas.wong1986 says

Goran_K says

As others have said, if you can stand a 30-40 minute commute

You might even get a chance to listen to your CD collection..

Or catch up on phone calls (if you have a good blue tooth headset).

jnnyrttn says

NOW, where do you guys stand on rent/buy?

Rent. Especially when you're just moving here and getting settled. Colleagues who work with me in San Francisco moved here and rented in places like Burlingame and San Mateo for a year or two before buying places in the same areas. They seem happy with it and purchase prices will go down while you're renting.

FunTime says

jnnyrttn says

NOW, where do you guys stand on rent/buy?

Rent. Especially when you're just moving here and getting settled. Colleagues who work with me in San Francisco moved here and rented in places like Burlingame and San Mateo for a year or two before buying places in the same areas. They seem happy with it and purchase prices will go down while you're renting.

I would be interested to hear why you think purchase prices will go down while I'm renting. Not disagreeing but it seems the consensus after reading many articles and blogs is that the market in that area is at or very near its low point. Some of those with that opinion say it is because there is available money floating around, but inventories are low due to people waiting out the economy. Now my personal take is that if all that is true.....from a price elasticity standpoint if values did continue to fall slowly, the turds that are on the market now will be irresistible to pass up for another class of buyers waiting in the wings. Of course if there is another major economic crisis all bets are off and it may be time to get off the grid and build a hovel in the hills....

.NOW, where do you guys stand on rent/buy?

If you are moving from Texas, rent for atleast one year before buying. you should be able to find a rental home in cupertino for 3-4K. One you are familiar with the area, you may decide to buy in a different place and commute daily

jnnyrttn says

I would be interested to hear why you think purchase prices will go down while I'm renting. Not disagreeing but it seems the consensus after reading many articles and blogs is that the market in that area is at or very near its low point.

Mine is just another opinion and probably not as well informed as others here. I would not summarize the consensus at patrick.net the same way as you. The consensus is prices will go down. Did you read the bloomberg articles of the last two days on the main page? Do you follow the Shiller data? Does the ratio of people's incomes to home prices make any kind of supply/demand sense to you? If you look at where prices trend historically, there's room to go down. They've gone down a lot, but there was a lot of room for them to go down. I haven't figured out what year would make sense in the Bay Area, as what really matters to me is the income/price ratio. Shiller draws a trend line where prices have been heading. I've seen such a graph on patrick.net recently, but don't remember where at this moment.

jnnyrttn says

Need to find a home for me and my family (wife plus three small kids) somewhere in silicon valley. New job is in Cupertino.

Congrats on the new job, hope you negotiated well.

In any case, unless you are chinese/Taiwanese coming from Texas, you will hate Cupertino. I know your kids will because it will be a culture shock for them more than anything else. But you'll also love the weather year round and the working environment is unlike anywhere in this world. You have it easy.

With three small kids, you do need to be within a good school district as that seems like a minimum criteria. The area most similar to Texas will probably be the TRI-Valley area of Dublin/San Ramon/Plesanaton. Maybe others can comment what the commute will be like as I'm sure many make that trek and maybe there is a work shuttle that drops off at Bart station.

Los Gatos, Saratoga, Palo Alto is even more expensive than Cupertino. Your kids will probably appreciate it more though.

San Jose may be a choice as the school district assignment is divided by sections (Districts within districts). I heard a lot of good things about Willow Glen (or probably the west side bordering Cupertino, Campbell)

You should rent so the second question is irrelevant. The places you like will probably go up becuase everyone with the means like them as well. Not enough to overcome the fact that you need to figure out where you want to raise your family first.

Wow, so many single minded folks on this thread. I figure I'll contribute.

Worked at a law firm in Austin so I figure I can talk about living in Texas and CA with some real basis of "facts".

Let's start with Round Rock....it's a pretty crappy town with little access to anywhere interesting. In Cupertino, at least you can hoof it down to Santa Cruz, over to Half Moon Bay, etc.

Politics. Your mileage may vary. I find not talking to bible thumpers or folks who call Arabs "sand niggers" to be good for my health. When I bought my place in Austin, a neighbor came by and said I was a good gardener and asked me how much I charged. Back in college, I got pulled over near San Antonio during Spring Break and got asked if I had crossed the "River." I was like...um the "Rio Grande". Yeah, as an Asian with a tan, I got profiled as a Latino. nice....

I'll pay a premium to get away from that. I'd also pay the premium here for great weather, skiing, cycling and climbing.

Nice try Thomas, Apple stock is at $500, what's Dell stock at? The googlers I know are panicking about the facebook IPO and trying to buy now. I don't think purchase prices are going down in Burlingame when that FB IPO rolls around. Burlingame schools have a great API and a few Asian couples I know have tossed down over 1.2 million for homes there in the past year.

Maybe I'll take a bath on the place I just bought in SF. So what? It's down 30% from it's high and I can rent it out to cover. Money's not everything and I make enough that I can pay for it. Most the folks buying these homes are coming in with a big down payment so it's not like these are uneducated folks buying up real estate with 2-5% down. If they want to splurge on their home instead of taking big vacations or going into credit card debt, that's their choice.

We lived in Cupertino for about 11 years, renting 2/1 apartment across Apple head quoter for 1,400 + per months, then moved to 3/2 townhouse in MV area for 2,200 in 2006, rented a house in the same area for $2,400 in 2007-2009 before we purchased 3/2 condo with 3.5% down in Santa Clara with Cupertino schools, not the best schools in Cupertino, but anyway. Our monthly mortgage is 2,200, plus $400+ HOA. I'm sure there are plenty of condos in Santa Clara/San Jose with Cupertino schools even for less, at least in our complex. We're planning to buy a house as soon as we find the one that we like and not overpriced, we don't care anymore about good schools (one child in college now, another one is finishing HS next year) and rent this one or sell it. 3-4k is insane in my opinion for Cupertino schools, its not the schools are great but wealthy parents who pay for after school classes and test preparation...

jnnyrttn says

I would be interested to hear why you think purchase prices will go down while I'm renting. Not disagreeing but it seems the consensus after reading many articles and blogs is that the market in that area is at or very near its low point. Some of those with that opinion say it is because there is available money floating around, but inventories are low due to people waiting out the economy. Now my personal take is that if all that is true.....from a price elasticity standpoint if values did continue to fall slowly, the turds that are on the market now will be irresistible to pass up for another class of buyers waiting in the wings. Of course if there is another major economic crisis all bets are off and it may be time to get off the grid and build a hovel in the hills....

SF Bay Area has been around for a long time, as well as Cupertino and yes Apple Computers. Some just discovered both in recent years. But do you see similar pattern in the 80s. Today, we have alot of new people in Bay Area, and sadly they were misinformed about RE prices. Of course they give the same reasons for higher prices, but those same reasons have been around for a long time when we had lower reasonable prices. Thus that is why you have a bubble.
Nada! Over the long run, RE prices, adjusted for inflation, remain flat.