patrick.net

I understand many people in bay area earns $200k plus but still it doesn't justify high prices in bay area. If a couple earns $200k plus then most likely they are both working with kids. Everything is expensive in bay area day care, car payment, restaurants, insurance, utility, etc. Where is the money left for mortgage ?

Leo,

I looked at our family income as it compares to our city. We are in the top 5%. I don't fee comfortable buying a house at these prices. I am going to keep saving aggressively for retirement, emergency savings, and a down payment (in that order). We will see where me market is when I am at the point of feeling comfortable. Maybe we will buy here, maybe not.

You can look yourself up to help put it in perspective.

I think part of it is that maybe families aren't buying these houses, so maybe it helps explain why it doesn't "fit" for me. Maybe there are people out there who don't want to save for retirement.

FWIW, there are 1,200 people in Pacifica with an income over 200k. Are they all buying houses?

http://www.city-data.com/income/income-Pacifica-California.html

BG

Oh, that was weird. Sorry! I usually just go off the homepage. I had wandered into looking Leo up for some old comment of his.

BG

leo9 says

It's absolutely a financial suicide to buy a house now. Prices are highly inflated. There is VERY BIG bubble forming again.

lol

I'd just like to chime in a very simple point that

IN 20 YEARS, FOSTER CITY WILL BE UNDERWATER.

Facebooksux says

IN 20 YEARS, FOSTER CITY WILL BE UNDERWATER.

I'm fairly certain many homeowners will be, but you were talking literally right?

Heraclitusstudent says

Facebooksux says

IN 20 YEARS, FOSTER CITY WILL BE UNDERWATER.

I'm fairly certain many homeowners will be, but you were talking literally right?

Yes, literally.

bmwman91 says

Lots of people argue that affordability is low because prices are really high. Well, you can borrow a lot of money, and given the income distribution in the SFBA, the mortgage + tax + insurance probably falls pretty easily below 33% of gross income.

Well what people do not seem to understand is that... higher prices mean higher real estate taxes which cannot be mortgaged out. In year 2000 a house in Boston area that cost $120K had real estate tax of maybe $1500/year, now the same house costs $600K with a tax of $7000. This is money out of the pockets of the middle class.

It is wonderful to see your only asset in this world go up in value, but what about the expenses associated to it? I can afford to buy, and if I get a mortgage I probably can buy a $1MM home easy, but I do not want to spend all my savings plus a good portion of my income into keeping a house. Americans have gone crazy, that's all I can say. They are manipulated into buying things they cannot afford to buy and keep, future seems scary.

It seem market has slowed a little recently our may be I am hallucinating

Dsdf4 says

Wait, are you really saying that if mortgage rates went to 8%, home prices would go up?

the ride between 3.25% to 8% wil take housing to another level.

Interest rates rise due to market condittions (slow inflation which is always house/rent inflation). by the time you see 8% interest, (which is not possible in the short/medium term anyway), housing price will be a lot higher than today. Then it will be a shitty time to buy.

High interest rates are always the shittest time to buy. Think (cycle) peaks of 2008, 2000 and 1990. Prices zoomed in 2003-2008, 1997-2000 and again 1987-1990. If you are waiting for high interest rate, you will be devastated.

leo9 says

It seem market has slowed a little recently our may be I am hallucinating

How long do you think it will take for this property to drop back down to $650k? What dynamic do you see that would make this house drop back to that price? How likely do you think that will happen?

E-man says

leo9 says

It seem market has slowed a little recently our may be I am hallucinating

How long do you think it will take for this property to drop back down to $650k? What dynamic do you see that would make this house drop back to that price? How likely do you think that will happen?

How long do you think it will take for this property go to 1 million ? What dynamic do you see that would make this house raise to that price? How likely do you think that will happen?

Rates usually go up during periods of high inflation. Under high inflation, houses become a more attractive place to put money as property has intrinsic value that rises with inflation. Also, high rates discourage those locked into a low fixed rate mortgage from selling.

wave9x says

Rates usually go up during periods of high inflation. Under high inflation, houses become a more attractive place to put money as property has intrinsic value that rises with inflation. Also, high rates discourage those locked into a low fixed rate mortgage from selling.

It's valid point and it's true only if economy in general is doing well and people have jobs.

leo9 says

It's valid point and it's true only if economy in general is doing well and people have jobs.

It is pretty unlikely to have stagflation. In the 70's, it was a unique combination of events that caused it (oil embargo combined with the fall of the gold standard). If the economy remains sluggish, rates probably won't go up much.

Wow he thought Bay Area prices were in a bubble in 2012? I hope he didn't slit his wrists.

Leo,

I believe this house has a very good chance of going up to $900k - $950k in the next 3 to 4 years. It might have to wait until the next cycle before hitting $1M+. If you are in tech and you don't see the dynamic to drive prices higher, I'm not sure what to say. There are still a lot of multi-billion dollar companies in the Bay Area that haven't gone public yet.

Well, you missed it at $550k, at $650k, and now it's about $800k. That was an opportunity once in a lifetime. However, you're not the only one missing it so you're in good company. What I keep on hearing from people is that "the housing market in the Bay Area never stop amazes me" so you're not alone.

Good luck.

E-man says

Leo,

I believe this house has a very good chance of going up to $900k - $950k in the next 3 to 4 years. It might have to wait until the next cycle before hitting $1M+. If you are in tech and you don't see the dynamic to drive prices higher, I'm not sure what to say. There are still a lot of multi-billion dollar companies in the Bay Area that haven't gone public yet.

Well, you missed it at $550k, at $650k, and now it's about $800k. That was an opportunity once in a lifetime. However, you're not the only one missing it so you're in good company. What I keep on hearing from people is that "the housing market in the Bay Area never stop amazes me" so you're not alone.

Good luck.

You may be right. We will see how future unfolds.

Tim Aurora says

thunderlips11 says

I'm not so sure that prices will recover - see Japan.

You are forgetting the dividend aka equivalent rent

Right, but you gotta be a property owner beyond your own place to collect rent, which has to be a well less than half of the population.

Tim Aurora says

I said equivalent rent. So if you rented the property you own, and if the property would rent for X dollars, then count it as equivalent rent,

About 40% of American households aren't homeowners, either.

Japan has the aging problem, but it didn't end up creating jobs or increased wages. Instead Japanese companies outsourced and automated more aggressively, as well as employing more "Flexible" workers - ie Temps.

I hear that hundreds of thousands of young Japanese basically live in internet cafes.

thunderlips11 says

The Great Stagflation was an inflationary cycle, and gold and silver soared.

It didn't exactly soar until the very end.

When the Nixon closed the window, Gold went from $35/oz to $190/oz, from '71 till mid-'78. That was the majority of Gold's bullishness. Basically, it was an inflation tracker for much of the decade, with peaks/valleys.

And then ... suddenly, it went parabolic, from $190/oz to $850/oz by '80. Afterwards, came the crash, however, gold never touched $190/oz, ever again, despite the multi-decade bear market which followed.

leo9 says

I understand many people in bay area earns $200k plus but still it doesn't justify high prices in bay area. If a couple earns $200k plus then most likely they are both working with kids. Everything is expensive in bay area day care, car payment, restaurants, insurance, utility, etc. Where is the money left for mortgage ?

Actually, including RSUs and bonus, more like $500k per year, for folks with 15+ years (those late 30s/ early 40s).

leo9 says

It seem market has slowed a little recently our may be I am hallucinating

True but didn't show up in statistics yet. Foot traffic is considerably less, asking prices are not so aggressive and not as many over-bidding.

E-man says

Well, you missed it at $550k, at $650k, and now it's about $800k. That was an opportunity once in a lifetime.

If you are right, E-man, maybe it is true what realtors say. Maybe I have been priced out forever.