Your site helped my husband and I make a very good decision a couple of years ago. My husband purchased a 1 bed 1 bath condo in 2006 and paid way too much (it wasn't about the payments for us, it was about being stuck in such small quarters and not being able to afford renting it out). We were able to short sale in 2010, and as a result we are renting a 3 bedroom and 2 1/2 bath townhouse with much more space. I'm asking for advice because I'm afraid we are about to make a mistake like my husband did in 2006. We want to buy a single family home in a good neighborhood, with good schools (santa clara, campbell, parts of san jose west, sunnyvale, etc.). We have 20% down to buy a home at 600k. The problem is that there is very little inventory at that price in those areas, which aren't even my favorite areas. 600k is a pretty conservative number for us considering our income, but I don't plan to work as soon as we have children... at least for the first couple of years of their lives. The other issues are that for our price range the schools are good until high school, the properties are very small square footage wise and still need work. Our real estate agent said we would have to pay at least $750k for good schools all the way through... which we can afford, but would be a stretch. I used to think that renting was fine in this area, but rents are going up and up. We are lucky because we are renting our townhouse for a pretty reasonable price; however I'm afraid that our landlord will up the rent as the townhouses around us are going for much more and to rent a single family home will be about the same as purchasing one. If we buy at 600k our payments will be around $3000 plus we will be getting a tax right off, which will make our payments more like $2500. I'm also worried that home prices are going to get more expensive, as our real estate agent has told us most properties have over 15 offers on them now and some are all cash. I'm also concerned about all of the IPOS in the silicon valley and all of the wealth that gets pumped through this area. Please let me know your thoughts.
Another what to do question
By Condohelp Follow Mon, 16 Apr 2012, 4:31pm 6,781 views 79 comments
In Santa Clara CA 95051
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Santa Cruz, CA
My first thought is I feel sorry for your husband.
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Mountain View, CA
bmwman91's website
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You are in direct competition with every other couple with a kid that is willing to go to almost any length to "ensure the best for their child." For whatever reason, people insist that the school has more to do with their kids' success than their own involvement as parents, and thus, areas with high standardized test scores are all faced with throngs of anxious parents trying to buy into them. You are one of very many identical people, and the only way to compete in that setting is to out-spend the other participants. Rents are going up in all of these areas since landlords are cluing-into these facts and finding that people will tolerate rent-seeking practices to get at schools & short commutes. It sucks. As someone that rents in Mountain View, and has for 4+ years, it is really disappointing to have had my rent increase 30% last year, and it will probably go up again this year. I don't have kids (yet), but I rent here to maintain a 15 minute walk to work (commute).
Honestly, you just have to suck it up. The BA is teeming with demand and people that aren't really doing much with themselves other than "making money." Combine that with various widespread notions about being a "good parent" and you will find the already high cost of living going up.
It sucks, and as someone that has been hoping for meaningful affordability improvements in single family houses for years, the current market sort of disgusts me. My fiancee and I have both been saving for a long time, but the area just seems to be falling back into the grip of unreality. I want a house because I want a garage (woodshop, car workshop) and a yard. Shared walls also suck, being that speaker building is a hobby lol. The cost benefit analysis on it all doesn't work out though...so we keep waiting/saving.
Anyway, good luck. Do not make ANY decisions based on emotion, and above all, fear. Fear is what the whole RE market is predicated upon: fear of being "unhappy" / "missing out" on something good. It is a powerful emotion, and you would be wise to maintain tight control over it. Sometimes buying a property makes sense, sometimes it doesn't. If you are a middle class / upper middle class family in the Bay Area, most areas don't make much sense to buy in. Renting, sadly, is becoming less and less sensible as rent-seeking prevails. The ultimate conclusion is that the Bay Area as a whole makes less and less sense for middle class people to stay in. That's coming from a Bay Area native BTW. I love the place for many reasons, but the reasons NOT to love it are continually growing.
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clambo says
+1
dump this loser.
marry a richer guy who can afford the best schools.
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Mountain View, CA
bmwman91's website
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Hysteresis says
LOL
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Santa Clara, CA
Thanks bmwman91. I think this area is out of control and I don't understand how the average person can afford to live here without dipping into savings/retirement. I'm feeling like purchasing a house will be a stretch and I'm uncomfortable with being house poor. I would love to move to San Diego or even out of state, where I know we can get much more for our money and have a decent quality of life. Unfortunately, moving out of the area is not an option for us at this point since my husband is employed here and his job security is very high. Since tech is here that's where we will be for a while.
I'm starting to wonder if we are heading into another housing bubble in the bay area.
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Menlo Park, CA
clambo says
Mexicans? I like Mexicans. Seriously. At the risk of stereotyping them, they are hardworking cheerful people who take care of their families.
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Denver, CO
I believe that I know this neighborhood, or a few like it.
Is your Realtor卐 named Suzanne?
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Santa Clara, CA
Hydrocarbon why do you have swastika in realtors? No the name is not Suzanne?
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Pleasanton, CA
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So, you are in fear of your rent going up even though it hasn't. Then you live in fear of your realtor telling you of a fictitious bidding war games going on, even though it isn't. Add to it your fear of IPOs exploding the house prices in your area, which is will not. Sounds like you are making a big financial decision all based on fear. Why not make it because you want the house? Maybe because you don't.
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HydroCabron says
You know nazis will be very offended at being associated with Realtor® vermin.
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Condohelp says
I hate to break the news to you, but I have lived in the SF bay area my entire life and I have heard this same thing in the 60s, 70s, 80's, 90's all the way up until now. The Bay Area has always been "expensive" so you need to decide if you're going to buy or simply move away. People on this board will be saying the same thing 10 years from now too. Several of those decades when people were predicting doom and gloom and that the Bay Area was too expensive I bought property and it's been a very good move even in the current environment. They said the same thing about SoCal coastal areas too and I bought there as well. Most properties are paid for and I just wish I had more money when people were saying how expensive things were.....I would have bought more of them, but I don't like to be leveraged. I buy a few pay them off and start over again with a few more and pay them off even. There is nothing like massive, passive rental income and it worked out better than I could have ever dreamed when everyone else was predicting doom and glooom :-)
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Sunnyvale, CA
Condohelp says
I would (did) buy a mobile home in a nice park for around $100K in 2011 because rents got out of hand and single family stick built house prices were unstable and out-of-line with both historic norms and incomes. Same Sunnyvale location and schools as the nearby $500K 1950s ranches/$650K town homes/$2100-$2900 per month 2-bedroom apartments in the same location. No shared walls. A shed for power tools and bikes. Small yard for gardening. $925 slot rent with 3% annual increases typical, $400/year property taxes and dropping, if you get a mortgage to conserve cash with 20% down you can be looking at $1500/month total cash flow before the small tax break (an 800 credit score with 20% down nets a 7% rate on a chattel loan).
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Sunnyvale, CA
bmwman91 says
1. It's amazing what you can do with mobile bases for your table saw and drill press, folding legs under your router table, and a small garage or shed to keep the rain of things which should not get wet.
2. You can rent time on machines you use infrequently (14" bandsaw for resawing, 22" thickness sander, big Sawstop table saw, etc.) at the Sunnyvale Sawdust shop by the hour and Menlo Park/San Jose Techshops (12" jointer/planer, 22" thickness sander, vertical mill for metal, CNC router) by the month.
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Ross, CA
Buy a modest house in the best neighborhood/school district you can afford. When it comes time to sell, you will do okay. A house can be a decent investment if you choose wisely.
BTW, clambo is a moron, but you probably already figured that out.
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Denver, CO
clambo says
I don't have a lot of experience with Mexicans, but most of the experience is of the Patrick variety. Particularly on the hard work end of it -- consistently the hardest working people I encounter are Mexicans.
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Sebastopol, CA
Don't buy stuff you can not afford. I am a Broker in Sonoma County and our prices have corrected substantially, your area has a different economic base. Will it correct in real terms? Certainly, the question is when and to what degree. Anyone who tells you they know the answer to those questions is blowing smoke. My advice? Don't stretch. Be patient. If renting is a lot cheaper than buying, rent until you can genuinely afford what is right for you in the long term. And whenever the lottery prize hits $100MM buy one ticket.
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San Antonio, TX
jvolstad's website
Suzanne and C21 says it all....
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Ross, CA
CaptainShuddup says
California is easily the best state in the union. Does it have problems, sure. But short of falling into the ocean, there is nothing that will stop it from remaining so. Captain, where do you live? Texas, Idaho or some other god forsaken place?
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San Jose, CA
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Condohelp says
Since you asked...
If you do not have children yet I think you are jumping the gun to want to buy a house primarily for the schools. Even if you were to become pregnant tonight it would be at least almost 6 years before you'd need a public school of any kind. You would also be dependent on a static or improving school district for almost 20 years, a risky proposition in California indeed. A lot can happen in that time. Schools change, neighborhoods change, mortgage interest rates change, property values change, tax consequences of a mortgage default change, etc.
I went back to the neighborhood where I grew up a few days ago and spoke with two of our former neighbors. This is an area with many top rated schools and where the majority of houses are valued well over $750k. The first neighbor was bragging about how wonderful the local schools are there. He was telling me how people are desperate to buy into this area for these wonderful schools. His children had gone though those same schools but had moved on over 10 years ago. The second neighbor complained that his granddaughter had to be pulled out of the local middle school because of the poor behavior of the other students (including violence). Instead they had to pay to put her into private school.
The moral of this story? Buying into a "good" neighborhood does NOT guarantee good or even safe schools. I bet if you take a good hard look at even the vaunted Cupertino schools you'll find they have plenty of problems as well.
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Mountain View, CA
bmwman91's website
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For reference, my parents bought in Cambrian back in 1979 since I was in their plans a few years later. They bought there because it was safe, and less expensive than Palo Alto / Cupertino / Saratoga. I believe that they paid $103k at the time, and it was 3.1x their combined income (both in semitech back then).
After kindergarten, they moved me to the parochial school that some of my cousins were going to because the difference was (apparently) very apparent. Parochial school is a lot cheaper than "private school," although it is a form of private school. So, they bought in a less expensive area and paid for private education. From talking to parents in the "nicer" areas that they had previously avoided, it didn't sound like the schools themselves were actually much better.
When I got to college, I found that a lot of my fellow engineering students had been through various public schooling systems, and almost none were from the Bay Area. Overall, I think that upbringing had a lot more to do with kids' success than the school. Yeah, there is a limit where you can't have them watching others doing meth in the parking lot, but to think that you have to go to some "top API" school to have any success in life is stupid.
Maybe that school WILL send them on to Harvard to get a medical degree...but there is NO guarantee that they will actually be happy if they do that. Happiness, success and money just aren't correlated to the degree that so many seem think. I also think that a lot of parents project their own perceived personal failures onto their kids, which sucks for the kids. "Man, I should have been a doctor or lawyer and made tons of money. Money would solve EVERYTHING! Well, I guess I had better not let my kid make THAT mistake!"......"Uhhhh, thanks...dad..."
(my parents were definitely NOT that type, although they did say that they wouldn't support me financially if I went to college to study business or comm lol)
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Corning, NY
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rowemoore says
If you have money. Lots and lots of money.
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San Jose, CA
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wthrfrk80 says
Why, because you live there? Ask some people from Chicago what they think about California. They say, California is full of fruits and nuts, and they aren't talking about the agriculture.
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Corning, NY
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dunnross says
It's not just people from Chicago. ;-)
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Danville, CA
gregpfielding's website
Condohelp.
The markets where you are looking are incredibly tight. There is almost nothing for sale and anything with the best schools is getting snatched up quickly. This is not because demand is booming, but because there is almost no supply available. Most of the homes that would have been on the market as short sales or foreclosures are tied up in modification programs or simply part of the banks' backlog.
Point is, this is a really tough time to buy. You would probably benefit from renting another year to let more supply come to market. Prices will go up this Spring and Summer, but probably fade towards the end of the year and you should end up with more to choose from and fewer competing bids on homes in the best spots.
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Emeryville, CA
dunnross says
I met Jerry Brown when I moved here FROM Chicago. He asked my why I would move to Oakland, since Chicago has it going on. And he had just been elected mayor of Oakland! :)
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Oakland, CA
genesplitter's website
Another option to consider is renting or buying in a bad school district and going to private school. I went to public school and I think I ended up ok, but comparing our friends kids that go to the elite public school in Oakland - Piedmont to ours, I'm so happy my wife pushed us to do this.
Our public elementary school is Emerson (ranked bottom 7% in CA). We just missed the boundary for Chabot Elementary (ranked top 4% in CA) by 4 houses. Looking back, I'm actually grateful we are in a bad school district.
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Ross, CA
genesplitter says
When it comes time to sell, you may feel differently.
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Menlo Park, CA
rowemoore says
The school district was the same when he bought it, so that cancels out:
Bad school district = discount when you buy, discount when you sell
Good school district = premium when you buy, premium when you sell
You get exactly as much as you give, so there's no need to feel good or bad about it.
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Wheeling, WV
wthrfrk80 says
I'll second that!
You couldn't get me to live in a big city in California for triple my current salary.
I find this whole discussion sad - the national average house is about $140k (IIRC); what about the BA makes it worth 4+ times the average?
Good luck with your search - as others have said, don't make an emotional decision. I have have been fortunate to come out ahead in housing so far and I'm sure you can do.
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Belmont, CA
lurking says
Nothing quite like living on unearned income, like taking peoples hard earned just scraping by money and living off of them.
The obsession with unearned income in the US and Bay Area is killing the ability for people who do work for a living to maintain the rentier class's lavish lifestyle.
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Belmont, CA
Patrick says
Most school districts that are claimed to be good are garbage. The API score is a game. The scale is really horrible to just passing. If you want something above just passing, prepare to teach your kids or have kids that are good at teaching themselves.
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Belmont, CA
rowemoore says
I've lived all over. With kids, this is the worst state. And most homes are moldy, asbestos ridden tiny pieces of junk with garbage schools. The infrastructure is collapsing under the load and the quality of life stinks for those not in the one-percent club.
I'd rather be poor and free then be enslaved to this horrible place with the best marketing team inflating its value.
Family and friends is the most important thing. The bay area is about money. Nobody is friendly anymore, families often have 2 to 3 jobs, and the kids are all latchkey. This system sucks.
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Menlo Park, CA
Mick Russom says
If you don't approve of unlimited untaxed unearned income extracted from working class labor that means you are a SOCIALIST! At least according to the Republican Party.
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Menlo Park, CA
dunnross says
I moved from Chicago to California, and my boss's first comment when I said I was leaving was "But California isn't real. Chicago is real."
Chicago is very real. Too real for me. I still love Chicago in spring and fall, but not in winter or summer. When I'm rich I'll have an apartment there for visiting.
California is like a very beautiful but stupid woman. Kind of painful and expensive to deal with at times, but just looks so damn good that you forgive it. Can't have everything.
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San Jose, CA
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chemechie says
A lot of people say it's because there is a lot of money floating around here. Well, if that was really true, than everything else would be 4x times more expensive. But you don't see gas or food prices 4x more expensive than everywhere else. I don't pay more for medical care here, than my friends do in Chicago. Clothes isn't more expensive. Cars aren't more expensive. Its just houses are 4x times more expensive + they are 4x worse in quality than everywhere else.
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Corning, NY
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Mick Russom says
Oh come now, that's what America is all about: getting rich at someone else's expense. Ask any black guy how that works. Or any native American. Or any white guy who's ancestors worked in coal mines or steel mills in the 1800s.
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Corning, NY
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Patrick says
Well said.
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Patrick says
If both goes up by 10%, gain for the premium one is higher in absolute dollar. Just for illustration:
Price Bad school district Good school district
-----------------------------------------------
Buying $400,000 $1,000,000
Selling $440,000 $1,100,000
-------- ----------
Gain $40,000 $100,000
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dunnross says
Supply of houses are limited. Plenty of choices for cars and clothes. Law of supply and demand.
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wthrfrk80 says
The whole world knew that. Other nations are awakening and are responding accordingly.
Our way of life where we paid peanuts for other nations' labor and then sold them products at high price is fading. Going forward, our life could be a lot tougher than previous generations.