patrick.net

We are still renting.
Our interest to buy has waned.
I still like lobsters.
I still think there has been a housing bubble and that prices may correct.
Soft landing is a real possibility for certain areas.

I occasionally have wonderful waking dreams in which the remainder of the correction occurs in a single day, and I’m suddenly BBQing in the back yard, all my Patrick.net friends over drinking beer and consuming various charred flesh, surfer-x demonstrating his cannon ball dive into the pool … oh wait, that’s another dream.

Will there be toro?

And plenty of Ikura and sake.

And plenty of Ikura and sake.

That day will come. That day must come. :-P

To eburbed who thinks 100k can buy a 500k house. NO way, unless you get some wierd mortgage.

My calculation was for a single person. Families? I've heard of those - they're what keep employees from being at work late.

austingal,

While house 5X annual salary is on the high side, it's not unreasonably so (though it should be!), especially if there is a big down payment. I don't think many BA $500,000 dwellings would be suitable for 4 person families, so eburbed was probably thinking of one or two person households.

eburbed currently rents in a terrible apartment complex where the elevator is scary the halls smell bad, and heated arguments happen in the laundry rooms. The rent is about $1200 a month and its a fairly large 1br - and most importantly it has AC. I love AC. I can't stand being warm.

eburbed -must- to move near Redwood City later this summer, and is currently trying to figure out what to do.

Oh yes, eburbed is also in this weird situation where 80% of his friends either live at home with mom/dad (include one person who is 35) or owns a place. Leaving him the only person who rents.

We continue to rent, we couldn't afford a house (in a decent area) four years ago, looked into buying two years ago - still couldn't afford a house in a decent area and could only get a crazy loan for twice the rent we pay in a not so good area (decided not to go for it).

Today - we still can't afford a house in an area we want to be in, so we continue to rent the same house we've been in for the last four years and our rent has only gone up $150 a month and that only happened last August. So it is still much cheaper to rent at the minute.

I would like to buy, maybe one and a half to two years from now. However, I don't know if everyone else is noticing this, but wages are not going up much, barely above inflation, no bonuses etc - but expenses are going up.

So maybe we will have to move in order ot get another better paying job and cheaper housing.

Well, if BA real prices don't go down dramatically, middle class people are stuck with two choices - stay BA single/DINKs or move elsewhere to have children.

Astrid - or rent

In the BA, there was 2 huge run up in RE prices, one started in 98 and the other around 04. We bubble sit for a while and then bought in late 2003 before the second run up. We are quite happy with our 2300 sq. ft. McMansion. We were fortunate that our down payment is substantial and our PITI is less than 25% of our gross income. Even then, with 2 small kids, it gets very expensive here, we max out both 401ks but save nothing on top of that. I just think the loose credit is bad for everyone and will eventually translate into a deep recession which hurts J6P the most.

My (if you can call it) advice is that people should run a retirement planner before you buy that house. Historically, retirement planner calls for not factoring the sale of your home to be conservative, but that is very difficult to do in CA.

The other issue that we don't talk about much is how stable your income is. If you are good at what you do (in my field it is very easy to spot, one would get recruiting calls from your friends at startups), then you can probably be able to take a bigger risk. If you are afraid of losing your job, then it does not make sense to be very leveraged.

I'm renting... in Redwood Shores! Sooo boring there, but I was sure it would be a 'safe' place to rent sight unseen. My wife and I started looking around for a place to buy after we got settled into our jobs and aquired a serious case of sticker shock.

We figured out we COULD buy if we HAD to, with 20% down and a DINK techie household we could... but kids could knock us out of being able to afford the house.

Still renting, still hoping to find a house and in the meantime saving up cash for larger downpayments while maxxing 401(k) and IRA contributions.

However, I don’t know if everyone else is noticing this, but wages are not going up much, barely above inflation, no bonuses etc - but expenses are going up.

One shocker was the sandwich that I always buy at my local Subway's went from $6.59 aftertax to $7.05 aftertax. Whoa.

That said though, in my circle of tech friends, most people saw a raise of 3-6% last year.

Claire,

Yeah, I was being mildly sarcastic, though a few people here do think "owning" and kids must go hand in hand. Though even without rent, raising kids in the BA is an expensive undertaking.

Though even without rent, raising kids in the BA is an expensive undertaking.

Even raising cats in the BA is not cheap! Groomers are charging so much.

If you plan on having kids, all the more reason to load up on tax sheltered retirement accounts now. The school can touch your house "equity" but they can't touch your retirement accounts.

Before I realized I didn't have to have kids, I had this plan of hording my income in retirement funds and taking a sabbatical when the kids reach college age.

Before I realized I didn’t have to have kids, I had this plan of hording my income in retirement funds and taking a sabbatical when the kids reach college age.

I also do not think having kids is important to me. Perhaps I should think about that when the World is better. Which is Never.

Astrid - rasing kids in BA expensive - tell me about it - especially when there are parents that are obviously pulling in a lot more money spending left right and center on everything their kid could possibly want to do - ballet classes, singing classes, acting classes, horse riding, ice skating, gymnastics all at once! Every Summer Class that is going!

Don't get me wrong, mine get to do a fair bit, but only one activity at a time!

My wife pretty much thinks "owning" and "kids" go hand in hand.

CB, if I could get into a situation where I was happy with the house and location and had a reasonable chance of keeping the PITI to under 33% of the income (25% is awesome!) I wouldn't care if I overpaid right now. Down the road, overpaying would eventually sort itself out. I'm hoping the bubble will deflate enough soon enough for me to overpay for a house I can manage with a reasonable payment. Right now, I can't find one. And my wife thinks I'm a little neurotic worrying about one of us not being able to work and have to stay home with the kids full time. "If we both have to work, we both have to work!" Since the houses we're finding that we'd be willing to stay in come up to about 50% PITI, we'd both definately have to work. Even if we managed a 40% PITI, if one of us had to stop working for a few years, we'd be as screwed as if we were 50% PITI. (Or 75% PITI, for that matter.) 33% and one of us having to quit would still suck (Jumps to 66% PITA!), but with the savings and reserves we have, we could swing it for several years. 80-100% PITA if one of us has to quit working is completely undoable for more than a very short term.

We are still renting. My landlord has informed me that he is looking for "long term" tenants and thus has been most kind with his rental charge. We are DINK (no plans to ever have children), and we do not have pets (husband has terrible allergies to all furry creatures, unfortunately). We are good candidates for renting since there really is no pressure for a great school district, or pet friendly environment, plus the rent is so very reasonable for us.

At this point, I am just a fascinated spectator. Also, after saving a large down payment I don't want to part with it so easily. Of course there is still the occasional questioning from friends about why we have not bought. I just tell them we are happy renting. I don't think they understand. But that is okay, I still get to drink my Insignia and go on nice vacations :)

SFBubbleBuyer

I feel for your situation, we put down a deposit for a house in Santa Clar (with Cupertino schools) before our first kid, but it needed 100K worth of work so we backed out. Our first kid was born in the townhouse I bought long time ago and the pressure to get a SFH was there from the time we got married.

I was very conservative and was only try to buy something that don't need my wife's income, needless to say, there's not much to look at. I finally relented and bought something 100K more than what I budgeted for.

The bubble will pop, my brother lives in Hong Kong, he has seen his place lose 30% of its value and just now 12 years after he bought the prices came back to around what he paid for, but that means he has no nominal increase for 12 years. All that because his wife wanted to live on the hills (they are not even half way up the hills), my brother is not dumb, he's got an MBA and is a VP of finance of all discipline :)

Peter P sez: "Even raising cats in the BA is not cheap! Groomers are charging so much."

Who grooms a CAT?!?......and is that even possible, without a transfusion to replace the blood.

CB :

Yah... I wouldn't mind mild overpaying if I was sure I could carry it in pretty much all eventualities... because it would make my wife happy to own a home for kids. We could definately get a 'starter home' right now no problems, but to me buying a starter home near what looks like the top of a bubble is begging for trouble. It almost completely wipes out your ability to 'trade up' when you want more bedrooms/better schools/less crime.

I've talked her into waiting for awhile. Hopefully the market will soften enough and we'll save enough extra down payment to get us into a house we want instead of a house we'll settle for, and one we can definately keep.

Who grooms a CAT?!?……and is that even possible, without a transfusion to replace the blood.

Huh?

Our cats require grooming at least once every few months. Otherwise, the hair will get too long and/or tangled.

Astrid - rasing kids in BA expensive - tell me about it - especially when there are parents that are obviously pulling in a lot more money spending left right and center on everything their kid could possibly want to do - ballet classes, singing classes, acting classes, horse riding, ice skating, gymnastics all at once!

I was in Stanford Mall and Valley Fair Mall recently, and it's really come to me that people here have a lot of money. And that I'm not one of them.

Yeah yeah, we always joke around here that people are buying their hummers using MEW and HELOCs - but is that really so true? It seems to me that a lot of the MEW/HELOC crowd here are either PreProp13ers using it for groceries, or fools getting American brand SUVs.

I don't think the MEW/HELOC crowd are getting the S550's I keep seeing, or the 2 BMW Z8's I saw one day at Stanford Mall (each one was about $128k new).

I also think the median income is skewed lower via the PreProp13ers, as well as the class of people who have no chance of buying (landscapers, etc).

$200k really is the new $100k around here. I really need to find a Pre-IPO company to join.

How depressing.

Having been in a few pre IPOs... you can't count on them to buy you a house. You can just be pleasantly suprised if they do.

I'm kicking myself for turning Google down before they'd launched. "No way can you beat AltaVista for searches!"

Astrid - rasing kids in BA expensive - tell me about it - especially when there are parents that are obviously pulling in a lot more money spending left right and center on everything their kid could possibly want to do - ballet classes, singing classes, acting classes, horse riding, ice skating, gymnastics all at once!

Kids lessons are big businesses, 2 of my friends in Canada said their boys have to go to skating school, they were both on the high school hockey team, I asked them whatever happened to letting your kids skate in the neighborhood rink and they said, times are different now, how weird.

I don’t think the MEW/HELOC crowd are getting the S550’s I keep seeing, or the 2 BMW Z8’s I saw one day at Stanford Mall (each one was about $128k new).

When the Z8 first came out, it had a 40K markup, I remember in the SF car show they kept it behind the ropes on the platter, and I told my wife that I can probably sit in one because there is one in our work, when the Z-8 drives up the garage, it will set off all the other car's alarms.

I don’t think the MEW/HELOC crowd are getting the S550’s I keep seeing, or the 2 BMW Z8’s I saw one day at Stanford Mall (each one was about $128k new).

But the Bay Area does not seem to have many RRs. I wonder why. S550's are probably considered low-class in Asia.

Rolles Royces are chauffeur cars. They're not very attractive or practical unless you have a chauffeur or two.

Rolles Royces are chauffeur cars. They’re not very attractive or practical unless you have a chauffeur or two.

I also wonder why the rich people in the Bay Area do not hire chauffeurs. Driving can be quite dangerous. (Think potential vehicular manslaughter charges and MEGA civil suits).

Girlfriend and I bought a 180 square foot studio on the Upper West in 2004 for what it would take to rent one.

Did you mean 1800 sqft?

Venture capital/IPO $ in BA has a highly inflationary effect on BA housing. It's kind of like living in 1650 Spain. All that cash doesn't increase living standards, it just makes the previously middle class feel poor.

180 sq ft studio is not unheard of.

I also wonder why the rich people in the Bay Area do not hire chauffeurs. Driving can be quite dangerous. (Think potential vehicular manslaughter charges and MEGA civil suits).

Not just the Bay Area - but speaking of civil suits why was Brandy driving herself? Why do Paris/Britney/etc drive themselves?

Not just the Bay Area - but speaking of civil suits why was Brandy driving herself? Why do Paris/Britney/etc drive themselves?

No idea. The moment I can reasonably afford a chauffeur, I will get one.

180 sq ft studio is not unheard of.

Is an East Coast sqft the same as a California sqft?

I've seen a lot of Gawker pictures and I don't think Paris/Britney drives that much, especially after clubbing. But generally, chauffeurs are expensive in America, particularly good chauffeurs who are discreet and good drivers. Chauffeurs are more common in Asia because good chauffeurs are cheap relative to decent cars.

Chauffeurs are more common in Asia because good chauffeurs are cheap relative to decent cars.

True. But rich people here should be able to afford even the best chauffeurs with carry permits.

Peter P,

As far as I know, feet does not expand as you cross the Rockies or the Mississippi. Though I've never actually seen a sub 300 sq. ft. studio or a sub 1000 sq. ft. SFH. I just read about them online.