patrick.net

Bought a duplex at the outer edge of Noe Valley in early 2003 with my girlfriend (now wife). Back then our PITI was 38% of gross. I tried to buy as a single guy back in 2000, but couldn't get what I wanted on a single salary so I tried again with her in 2003. Got outbid on a bunch of places in Rockridge in Oakland (where she wanted to live) before we got this place (where I wanted to live).

Both of us have been doing pretty well careerwise, so now our PITI is more like 21%. Our tenants are old roommates of my wife, who we have dinner with a couple of times a month and have the keys to our place. We both lived in the Berkeley Co-Ops, and so did our tenants, so it is nice having people you like and trust living with you.

We had a baby a year ago and the extra cost has eaten up a fair bit of our raises and promotions, but she is well worth it. We are still maxing out our 401(k)s, but not putting aside too much more than that. We don't own a car, or spend money travelling or buying stuff, but eat good food and drink good wine and feel okay with that. We usually entertain in our home. With a one year old, it is really the only way.

PITI minus rental income from the bottom unit is more than what it would cost to rent a place similar to what we have, so I guess we are doing okay with that. We have spent a fair bit fixing it up the way we like, with central heating and double pained windows and new paint and all.

I am not sure what we are going to do when Ava turns five: my wife is convinced that SF public schools are not good enough for her. I think she is wrong and kind of snobby about this, but will probably roll over to keep the family peace. If prices stay in the Bay Area the way they have, we may end up renting this place out and renting another place in a good school district on The Peninsula. Either that, or possibly send her to a private school.

If prices come down, we would probably buy a single family home in a suburb that has good schools, probably Berkeley or Piedmont or Palo Alto. We will keep this place as I plan on retiring here. We are only a block from the Senior Citizen's Center on 30th Street and close to transit.

As to the driver thing, I hire one every day: it is called Muni! I hate driving in the Bay Area and really appreciate that I can pay $45/month to get someone else to do it for me.

51yo single JBR some distance away from most on this blog (Canberra, Australia).

Sold 2 investment properties in 1991 ($A100K proceeds - paid off mortgage and kept the rest in cash for several years; BAD move). Advised several work associates to buy here 1997/98/99; and a couple of them even remember with gratitude. :shock:

Sold own home mid-2004, and now rent half of it back with separate utilities. In effect, a very run-down 1500sf 3/1 apartment plus 30x10 lockup garage. OK for an untidy IT slob like me, especially at $A700/month.

Local house prices stayed flat for 2 years after I sold and now, I regret to say, have probably risen 5-10%. Buy/rent cost ratio on a normal rent is about 2/1, and on my rent about 3/1.

I am overall probably a little bit in front since selling, despite a recent government-induced (change to tax laws) 6-figure hit to my direct share portfolio. I expect to get back over the next year provided the companies involved can maintain their dividends (which they should unless they've been seriously lying ;)).

If I sold up completely I could just buy a reasonable ($A500K approx.) local SFH for cash, but I don't intend to do so as long as my current rent stays close to current levels. One reason for this, as I have posted before, is that I am likely to in 2010, for rather arcane pension reasons. (The really curious can Google "CSS Superannuation 54 11"; I am one of the people that will get a bigger pension at 55 than 65 unless the overall market absolutely craters. :))

The double quotes indicated the Google search terms, not a specific phrase.

*lurks*

On-topic:

Year 2 in our "owned" house in Toronto...thanks to sticking to a strict price limit and with a pay increase our purchase price is now LESS than 3X annual combined income. Yay! Of course, that was deliberately cautious because people lose their job all their time...can you still get by on just one income? We can...though it is very hard to *save* unless *both* of us work. (We are saving like mad before another layoff or a kid comes!)

Referring to Eric's post way back yeah, I like being able to fix up, paint, and maintain the place PROPERLY instead of waiting for the landlord to do so...but other times it is a pain (like when my bathroom sink plugged up this weekend) and I think "dang, I feel like selling and renting downtown!"
Someone laid out the plumbing poorly when they renovated the basement into an apartment and eventually I must address it.....

There are still people who can buy crappy 100 y.o. downtown Toronto houses for $400K, $500K (yeah, cheap by Bay Area standards) and I don't know how they find another $100K or $200K to do a proper renovation. I just don't know. Our 50 y.o. midtown house is in good shape but it still has problems!

Off topic: There was a discussion about Erlend Oye about 2 threads ago. If you like Erlend Oye, or you're just curious about more Norwegian music you must check out Royksopp. It's electronic music, to be sure, but warmer and more original than any other electronica I've heard. Royksopp is huge in Europe but practically unknown in North America. Astrid in particular if you haven't got their two CDs it is highly recommended...and while you're surfing the net for Royksopp, drop me an email because I want to ask about amending my crappy garden soil.

Even more off-topic: Surfer-X (or anyone) will there be another blog party maybe late in the year? I have a planeload of points and want to go to LA....maybe with a sidetrip to the Bay Area. Besides visiting my best friend I think a driving-tour of BubbleHoods is in order.

*Relurks!*

10-year renter never owned. DINK. 230K saved. Today will serve to keep all you fence-sitters firmly rooted. Stock market bloodshed begins just in time to pre-empt any spring bounces. Moved 100K in 401K funds to money market on Friday in anticipation of the big drops ahead. Your patience will be rewarded.

PAR,

There do seem to be more minor quakes. From what I've read though we have been in a very seismically quiet period since 1906. There used to be constant earthquakes felt throughout the Bay Area in Victorian times.

Did you get the hail last night? We had about 2" of hail on our street (It was pea sized, so didn't damage anything).

Hope nobody lives close to the landslide in SF......everybody OK?

RE: the latest earthquakes (PAR),

I felt 3 or the last 4 that the USGS reported on (or very close) to the Hayward fault. Mag has been in the mid-3.x (3.4 - 3.75). It has been my experience that even though the scientific community knows a lot, it is just the tip of the tip of the ice berg. Go back to the stories of the Paso Robles (aka, Paso Rubbles). That one completely caught them off guard...at least it appeared that way when the scientest were interviewed.

There's a lot of hoopla about activity (or lack of) on the Hayward fault. The truth is they just don't know. It could blow big tomorrow, or it could continue with a number of 3.x jolts. They just don't know. Kinda like the dreaded 2006 hurricane season. (I was living on the Gulf of Mexico, up till the end of 2005). The new media (in typical fashion) tried to hyped everyone up and nothing happened.

While not a BA resident I suppose our situation most closely resembles Randy H's. Although we have the aging parents issues our children are well.... actually adults themselves. We too are in our third year of renting after many years of owning and while we are ramping up our retirement accounts to the max we are not in the market for a chauffeur. :(

Moved to cash but really just short term. It's frustrating as a bubble observer b/c the whole subprime issue is something we should have addressed in 2005, 2006 at the latest. Now that we're on the verge of unhitching RE as the primary growth engine they are doing their best to put a turd in the punchbowl. Go away little man.

A refugee from So Cal who thought the run up in housing prices was long term and I had no hope of every owning there. Add to that six years ago a bad divorce where I was left with half the income and I was single. Came out with a little money enough for maybe 10% down but I decided to save it in CD's and a MM. Being single I thought it prudent to have reserves so I didn't rush into buying a condo or invest in the market too risky...

I took a job in the south fall of 05 and hate it here. These folks are behind the times by about twenty years and they don't like non- southerners. My cost of living is low here I have a new 1350 sq. ft. condo in a decent area for $695 a month and most things are cheap. There is not much here to do and nothing like the great amenities I was use to in L.A. I am currently in active job search looking to return to So Cal. This was a bad experiment and I know it will cost me about 5k to return but I really don't care. I also miss my family and friends who live there.

I hope the market will return to reasonable levels in Southern California it may or may not. I plan on being back by this Spring job offer or not thank god I didn't buy and am able to afford to move back. I learned that despite all of it's drawbacks, high cost of living, home prices, gas, traffic, illegals ect. it's where I feel comfortable. The whole time I've been here it's that fish out of water feeling. I know one thing owning or not owning does not define my life. I will live to enjoy life, friends, good dining, and always survive no matter what the economy says. I've always lived below my means especially since my divorce. My credit is great and I have a little money in the bank and I don't overextend.

http://www.lifamilies.com/chat/topic-130627-1.html

We've been thinking of selling our townhouse and buying a house, but we haven't really gotten serious yet. Anyway, we went to an open house and fell in love with a house. It's absolutely perfect for us! The thing is we haven't put our townhouse on the market yet. We could probably manage a down payment and closing costs without the sale of our townhouse, but I don't think we could swing 2 mortgage payments. The sellers have already moved out and have even lowered their asking price so I know they're eager to close ASAP. WWYD?

I don't really know much about bridge loans. Do you have to have a lot of equity in your home to get a bridge loan? We only bought our townhouse a little over 2 years ago so it hasn't gone up in value too much and we only put 5% down when we bought.

This couple wants to buy a house BEFORE selling their townhouse which they bought in or around 2005 with only 5% down! Don't they have at least a clue that it may very well be underwater and NOT able to sell it?

WOW guys! A market meltdown today. The shrills on CNBC can't even fake the optimism today... I guess the indicators of recession are becoming apparent to the MSM and the cheerleading is quiet today. I guess What Greenspan said the other day plus this sell off in China's SM is spooking everyone. Isn't amazing how the market ignores what is clearly in front of them until it's right in their face. I have this theory about Greed clouding visual perception.... Goldilocks has wrinkles.

BigDogSS,

Yeah, I was stationed in LB at the time and everything was so overpriced it kind of spelled the end to my naval career. We used to go see the ChiSox, BoSox and Yankees at Anaheim. I have a client in Whittier that bought around the same time and he only has a few years left on his mortgage. But why would you feel compelled to do ANYTHING?

Hell, I'd just go ahead and have a pool put in? It's snowing here in OR, great time for that pool party fantasy 'eh? :)

It is a fallicy Southerners don't like Non Southerners.......

Southerners don't like arrogant, self righteous Non Southerners.

Let's not forget this little gem today. The screws are tightening on lending. Freddie Mac says it isn't buying pure crap anymore, which means people trying to LEND crap have fewer options on getting rid of that crap and a much higher chance of being stuck holding the crap with no money to left to lend.

Addendum... I think it's a shame they put a deadline on the "No liar loans and you have to qualify for the non-teaser rate part of the ARM" in September. Leaving wiggle room like that will just encourage a flurry of crap mortgages. Cold Turkey is what the lending industry needs.

Doug H,

Nah, southerners don't like non-southerners. Just as northerners don't like Southerners. Hell, I spent 4 years in California deploring the airheaded and insubstantial locals. We all like people who enforce our prejudices and dislike people who irk our sensibility.

Long time reader, infrequent poster.

We're currently renting and big-time DINKS

Our story:
My wife and I bought a 1000 sqft starter home in 2002. At the time I thought we might be in a bubble. Little did I know that the ride was just beginning!

In the summer of 2005 we started looking for the "trade-up" house. We found several houses we liked but it just didn't feel right. I started doing research on sites like this one and realized that housing was severely overpriced.

We sold our starter home in January 2007 for about a 100% gain. We have always been good savers and now have several hundred thousand dollars in FDIC insured CD's paying 5.50%. We max our 401k's at $15,000 a year per person. Our rent is $2300 per month for a 1400 sqft home in a nice neighborhood. The landlord bought the home in September 2006 for $625,000. The math reveals we are saving roughly $1900 per month by renting versus the PITI on a 625k loan.

Although our houshold income is nearly $300,000 per year I would be very uncomfortable buying something in this market. We are hoping that prices come back down to the trendline.

**Gentleman, start your engines**

I won't be buying in BA anytime soon, if ever. I can't afford it right now and if I could afford it, I'd prefer to rent and put the money into a weekend home. On weekdays, a home is just a place to microwave food, hang cloth, sleep, and eat on the sofa while watching TV/surfing - usually simultaneously because there's not that much free time on a weekday.

"I'm happy spending 6% of my gross on rent"

Well I must say, you've got me beat there! I'm a solid 33% above that!

OT (but only slightly) Poor Nigel is laboring under the delusion that "the re-set" will translate into instant profitability for him! Wrong. Major lenders are already offering "NO FEE RE-FI's" to clean up their own mess!

I'LL BUY when MB's no longer see the buyer/owner as nothing more than sheep to be sheared at every uptick. So long as "ownership" is defined and structured to be "re-purchased" every 2 to 3 years.... I guess I'll be on the sidelines. Sorry.

I like your swipe agains the hypercompetitiveness at certain schools. Alfie Kohn wrote a book on how a competitive environment hampers children’s (and adults’) healthy growth. You may be interested in this one.

I love competitive schools because they teach other people that being competitive is the only way to survive.

Yes, yes we do, goober.

I’LL BUY when MB’s no longer see the buyer/owner as nothing more than sheep to be sheared at every uptick.

You may have a veeeery long wait, my friend ;-).

With so many upper-middle classers in the area does anyone actually think prices are going to fall very far?

Er... 300K is not upper-middle class.

HARM,

No sooner had I hit the "Submit" button than I thought about that! With so many people in the arena the pressure to "get paid on both ends of the loan" and load 'em up w/ b/c we can fees has got to be tremendous.

When the avg. American talks w/their MB more than their tax guy, something is way off kilter.

We do not make that much. No donations from us. ;)

To all $300k income households

Why are you people making so much money? $300K per annum is almost $1000 per day.

Is your company hiring? What field are you in?

How the heck am I supposed to afford to buy something when the competition makes so much dramatically more than I do.

Cripes.

How the heck am I supposed to afford to buy something when the competition makes so much dramatically more than I do.

Do you even want the same type of houses?

Do you even want the same type of houses?

Does it matter? The support is really high.

Despite a very brief stint as a JBO (Jealous Bitter Owner) due to my dad passing away, I have mostly rented since college ~15 years now. Unlike a lot of the regulars here, I did not have the Fat Stacks necessary to buy in CA with one of those old-fashioned, pre-NAAVLP amortizing thingies during the last down cycle (mid-1990s).

Wifey & I are in a much better debt/cash position now, but still earn well below a HaHa combined. So, I'm not sure we could manage a conventional mortgage on a place we really want in CA, even if/when real prices decline ~40-50% as I am expecting over the next several years (note: I said "real", as in "inflation-adjusted" prices, not nominal). We will probably end up relocating to a less expensive state with fewer arbitrary restrictions on supply (NIMBYism, UBLs, Prop. 13, etc.) and less pressure on demand (lower population density & illegal immigration/birth rate). As a Bubble-warrior, I have to remind myself that even with a full 50% real-price haircut, the median price-HH income ratio in CA is still going to be DOUBLE almost anywhere else. Instead of 10/12:1, we may end up at a more sustainable 5/6:1. This is still hardly "affordable" to a working class family of non-Googlaires.

For now, we're quite content to rent a house near Pasadena with pets/yard/garage for about 1/3 PITI carrying costs. Major Pros: calling the LL for plumbing/electrical/structural problems (I found out how big a relief this was when I needed to sell my dad's old place and had to repair item-after-item-after-item...) and being able to easily move with 30 day's notice. Major Cons: Not being able to renovate to the extent we'd be able to do as owners, and getting "the Look" from friends/family when we mention we rent.

Does it matter? The support is really high.

Just try to compete with those with 50% - 70% of your income. Then you will have an edge.

Umm... guys, having a $300K HH income not only puts you in the "Upper class", it puts you well into the top 5%. Upper-middle has a floor of only $55,331.

http://en.wikipedia.org/wiki/Household_income_in_the_United_States

No offense, but a lot of you Bay Aryans are either seriously out-of-touch with how the "other 95%" lives, or are just having fun measuring each other's dicks.

No offense, but a lot of you Bay Aryans are either seriously out-of-touch with how the “other 95%” lives, or are just having fun measuring each other’s dicks.

Bay Aryans are not out-of-touch with the reality. Bay Area is.

How about these definitions:-

Lower Class: uses labor to make money
Middle Class: uses time to make money
Upper Class: uses influence to make money

I'm not bragging or anything, but the other day, I was out shopping for a new gem-encrusted, solid-gold codpiece (just a plain, ordinary model for everyday wear, y'know), and I just couldn't believe how expensive these things are nowadays! I mean, if a man of my modest means (16,000 sft Victorian on Nob Hill, beach estate in Maui) cannot afford a SIMPLE gem-encrusted, solid-gold codpiece, then what hope is there for the rest of you hoi-polloi??

Tutt, tutt, well it's Polo time, boys, off to the Club for me...

LOL @ Harm

Bought unconventionally in 2000 (with another couple, two houses on one lot). Making ends meet with one income (live modestly, try to give generously, max the Roths and take company match money for Simple IRA). I am still amazed at how many people believe the sun rises and sets on the SFH. Jimbo, great post on the duplex (first time I have heard Berkeley call the suburbs, though) -- are you thinking about doing a condo conversion?
Many people who come to our home marvel at it and think we hit the tech jackpot or something (4bed/2 bath, ~1600 sq.ft.) No, we set a budget and decided to go a route where we could get more for our money. We tell people how we did it and most are like, we could never do that -- would rather throw their money down a sinkhole than hold hands with somone else financially (and yes, there is some risk, but a solid TIC agreement takes most of the guesswork out of it). Especially with today's loan products, so much to gain and little to lose. Converting to a condo is a fairly straight forward process (unlocks value) and breaks the financial bonds of a TIC for longer term security.
Then again, I buy used cars, so what do I know.

Uh, HARM, there aren't really any Victorian SFHs on Nob Hill. But that's OK, I'm sure you meant your chateau on Nob Hill.

Did anyone else get the email from Mercury News for

Montclair, San Jose, only $2139/month!

Then, the disclaimers on the bottom:
"All advertised loan programs may be subject to underwriting guidelines which may limit 3rd party contributions and are available to qualifying buyers for owner-occupied homes only through seller’s affiliated lender, Countrywide KB Home Loans™. Not all buyers will qualify."

It gets better:

"*[1–3] 1st-year monthly payment is for illustration only and is based on a sales price of: [1] $343,990; [2] $462,490; [3] $552,000 with (a) an 80% 3/1 fixed-period, interest-only, adjustable-rate 30-year 1st mortgage (“ARM”) with a 1st-year interest rate of : [1] 2.375%; [2–3] 3.500%, 2nd year rate of [1] 3.375%; [2–3] 4.500% and 3rd year rate of: [1] 4.375%; [2–3] 5.500%. 1st-year monthly payments and corresponding variable APRs are: [1] $545 (4.426% APR); [2] $1,079 (5.541% APR); [3] $1,288 (5.534% APR); and (b) a 20%, 25-year fixed-rate interest-only 2nd mortgage at 9.250% (9.250% APR), resulting in a monthly payment of: [1] $530; [2] $713; [3] $851 for the 1st 10 years. Reduced interest rates on the 1st and 2nd mortgage are a result of a note rate buydown paid by KB Home of up to 6 points. Both 1st and 2nd mortgage monthly payments include interest only; principal, taxes, insurance and any other fees such as HOA are extra. Rates effective 2/16/07 and are subject to change without notice. For the 1st mortgage, advertised monthly payments will increase at years 2 and 3; advertised ARM rates and monthly payments are subject to increase after the 3-year fixed period. For both the 1st and 2nd mortgage, after completion of the 10-year interest-only period, each loan will be fully amortized over the remaining term (as an adjustable-rate mortgage that adjusts annually for the 1st mortgage) and borrowers will be required to pay interest & principal on each loan, which may result in a significantly higher combined monthly payment. Interest rates and APRs may vary based on borrower’s credit score, actual closing costs and other variables. Scenario assumes the buyer has excellent credit, pays $0 down, provides full documentation, sets up a tax & insurance escrow account and pays estimated closing costs of $1,654. Closing costs estimate includes only lender costs, buyer may incur additional closing costs."

Did you catch that really good bit?

"which may result in a significantly higher combined monthly payment. "

EBGuy,

TICs are considerably less expensive in SF than condos because until very recently you had to share a loan, which many people are hesitant to do. Now a few banks are offering individual TIC loans. It is very, very difficult, nearly impossible to go condo in SF with a greater than 2 unit building, however. Our board of supervisors severely limited the number of condo conversions that can take place yearly, and there is a huge lottery each year to do that.

I still do not understand exactly what is the legal difference between a coop and a TIC. Coops tend to be in more expensive buildings here and tend to have higher down payment requirements (505 at each of the coops I looked at), but I don't understand any other difference.