patrick.net

"I may be naive but I was told tenure position at UCSF is pretty safe."
Are you on a tenure track or just starting? While it is true according to AAUP that only 2% of tenured professors are terminated annually 25% of those that apply for tenure don't make it.

I'd also check the actual union contract. Just because you have tenure does NOT mean that a given pay level is assured, it just means that you cannot get terminated. I've met professors that make variations of pay depending on course load. There's a floor and then you go up from that

Without getting into a political discourse chances are academia has a target on its back with tenure. What's happening with Wisconsin can easily spill over. The other thing to remember is if private colleges/universities gut tenure then the voters will eventually question why it exists in the public sector.

Don't get me wrong it can be a good thing naturally if you can't get terminated it's a job. But that also makes it much harder to find something else if unemployment spikes up.
You have a great deal on that 10% down is 3% rate..but I think 850K is just too high. Maybe you could save a bit more (15% on something lower) and go for a 15 year at just a slightly higher rate.

klarek says

Feelings? You think someone should make the biggest purchase of their life based in large part by their emotions? That’s NAR speak.

Seriously? Can you stop picking out one little snippet, actually in this case one word, from all of my postings and say that is NAR speak. When I said feelings, I meant how he feels about his job security, his desire to stay in the area, etc. Read the rest of my post and you get the gist of what I was saying. Why don't you address the poster's question instead of trying to antagonize me and take over another thread? Everyone of your posts lately shows how petty and pathetic you are; always trying to pick a fight for no reason.

Sybrib says

ChrisLA says

Sybrib says

ChrisLA says

If I had his income I’d be seriously investing into other businesses right now.

It’s not a business, it’s a residence. Not too many people think of their housing cost as owner’s equivalent rent.

I can’t really consider a house an investment, it doesn’t make anything.

Chris I agree with you but did not say it explicitly: he says he’s thinking about it as an investment, but his post belies a reality it’s more about consumption. Oh well maybe it’s a psyche-ic investment.

I figured thats what you meant. Consumption is not investment.

ChrisLA says

I figured thats what you meant. Consumption is not investment.

And a house is not consumption--unless you are planning on consuming it (tearing it down?)

ch_tah says

Can you stop picking out one little snippet, actually in this case one word, from all of my postings and say that is NAR speak.

It wasn't a snippet, and it wasn't a single word. It was your abstract. The guy laid out his entire financial situation above, and your response is that he should base his decision ENTIRELY on goals and feelings. Your words, not mine. You even threw in the "nobody can time the market" b.s. at the end, to boot.

That is absolutely 100% unmitigated NAR horse shit.

ch_tah says

Why don’t you address the poster’s question instead of trying to antagonize me and take over another thread?

I wasn't trying to antagonize you. A remark like that deserves to be called out. I would have responded the exact same way were it Patrick himself saying it.

ch_tah says

Everyone of your posts lately shows how petty and pathetic you are; always trying to pick a fight for no reason.

I'm just trying to dispel the NAR horse shit which euphoric new homeowners repeat to other potential homeowners. Stupid, irrational, baseless, and potentially harmful advice needs to be called out. Don't take it personally.

klarek says

The guy laid out his entire financial situation above, and your response is that he should base his decision ENTIRELY on goals and feelings. Your words, not mine. You even threw in the “nobody can time the market” b.s. at the end, to boot.

Yes, because he didn't say this earlier in the thread:

ch_tah says

Have you used any calculators to analyze this yourself? You have provided very little information. Particularly, if you have 20% to put down, how much are you left with? Are you sure your wife will go back to work after 1 year? Have you looked at how much daycare is if she does go back to work? Do you have other big expenses?

Good try though. You're the white knight fighting the NAR, huh? A modern day McCarthy fighting the good fight!

Klarek, you are full of crap, and you (should) know it. You don't because you are so full of yourself.
I said based on his numbers, he should be able to afford his house. The ultimate decision once you can afford the house is whether you want to own or not based on your personal situation. I seriously am starting to think you have a reading problem.

As for timing the market, even one of the housing gods himself just said he doesn't know what is going to happen next.
http://finance.yahoo.com/blogs/daily-ticker/shiller-housing-could-fall-another-25-harder-predict-112122844.html

Also, make sure you listen closely to the 5 or 10 seconds starting at the 2:20 mark. I never knew Shiller was such as shill for the NAR.

merlino says

I do also feel that our combined monthly income may be tight but we are pretty disciplined. I work at UCSF. The loan program was designed to help/attract “young talents” buy their first residence near campus.

Well, this makes a lot of differences:
"Near campus" Looks like it's about buying in SF itself. In this case you definitely better plan for private schools for your kids. On the other hand property in the city of SF will have a lot of value for international buyers even if prices in other places collapse. In this sense it's much different from the rest of Bay area. It still does not make this an investment but may be some kind of hedge against falling dollar.
Do you actually hold a tenure or it is a tenure track position. It makes a lot of differences. Remeber, UC system is bankrupt together with the whole state. Turning tenure track into tenure may take decades or may never materialize.
What is your field of research? Is it recession proof? Looks like you salaried, means you do not depend on grants. However, such a position may be prone to general budget cuts.

ch_tah says

I said based on his numbers, he should be able to afford his house. The ultimate decision once you can afford the house is whether you want to own or not based on your personal situation.

I had no issue with your first post (again, I'm not picking on you, so stop whining when your dumber remarks are challenged). You said it should be based entirely on goals and feelings. That was an incredibly irresponsible recommendation, the kind of thing that helped usher millions of families into financial peril.

ch_tah says

As for timing the market, even one of the housing gods himself just said he doesn’t know what is going to happen next.

The "nobody can time the market" line is b.s., because it's part and parcel of what every realtor has been saying since the bubble's peak. If you told them you want to wait because housing prices were tanking, they'd tell you that nobody can time it. It has nothing to do with the obvious which is that nobody knows for sure where the market will bottom, or when it will bottom. It's that such a no-brainer remark insinuates that it's a bad idea to wait. If you can't time it, then don't, right? What else could you possibly have meant?

Again, I don't blame you, you've just bought into the NAR b.s. If you repeat their harmful propaganda, expect to be called out on it. If you try to deny it, expect other NAR-like comments you make to become highlighted to reinforce the point. You could take moments like these to edify yourself rather than getting all feisty about it.

tatupu70 says

You’re the white knight fighting the NAR, huh? A modern day McCarthy fighting the good fight!

Like many people, I have very little tolerance for the b.s. NAR puts out, or what their minion agents say. I absolutely loathe it when someone who isn't part of their cartel repeats their b.s. It's worse than free advertising, it's a costless perpetuation of bullshit.

Klarek, I'll just chalk this up to your inability to read and comprehend. Hopefully, others don't have such deficiencies. Or if they do, they'll read all of your posts above that answer their questions.
And yes, I'll just let the fact go that Shiller said he has no way of confidently predicting the market and that owning a home pays a dividend of not having to ask your landlord for permission to do something and homeownership provides a sense of participation.

There was nothing wrong with what Shiller said. He was absolutely correct. It can't be known with certainty when and where the market will bottom. I just told you, this is a very obvious point. The only reason you would say such a thing to somebody who is hesitant about buying in a declining market is to remove any trepidations they have, and to urge them to go for it (or as you said, base it entirely on goals and emotions). These are NAR talking points. I'm trying to help you. Don't be so combative.

Don't help me, I don't need your help. If your point was to help the poster who asked the question, then answer his question. What you did is attack what I said instead. That's pretty much textbook combative. And now you are trying to pull your same crap again of you said it this way, so it's wrong, but I'm going to say it this way, so it's right. If you can't predict the market, then it is not a factor in your decision. If you feel you can, then it is. I couldn't care less if this guy bought. And again, if you read and comprehend, I told the first poster who asked a similar question not to buy. But in your combative nature, you picked the small point that you disagree with, took it out of context and attacked it. It is pathetic, and I can only imagine you do it to because you feel it bulks up your Internet muscles. I can assure you, you have the largest Internet muscles on this site. You don't need to build them up anymore.

Banks are still insolvent unless you presume money printing will continue ad infitum.

Just about every last penny of QE2 went to non-US banks. The bailout continues, but it's the European banks getting the printed money.

Buying real estate now is still a very poor choice.

edvard2 says

A: Retirement. They say that the average American today will need to have 1 million dollars in retirement by the age of 60. Double that if you life in a bubblicious city, and perhaps more if in a mega-bubble city like the Bay Area. This amount doesn’t include the house you live in. That is for one person. At a million dollars, assuming you live to the ripe ole’ age of 100- which isn’t out the the question- that gives you $40,000 a year. In other words- barely scrapin’ by in a place like the Bay Area, hence the required savings would probably be more like 2 million dollars.

I've wondered about retirement advice like this -- if, in retirement, you own your own home, what are you spending $40k/year/person on? If you have money saved up so you don't have to pay taxes on it as income, and you own your home, what are your big expenses? Property tax and basic living expenses shouldn't eat up that much. Sure, you should have extra saved up for emergencies, and hopefully you'll have money to spend on things you enjoy in retirement, but that still seems high.

ch_tah says

Don’t help me, I don’t need your help.

If you are use or believe NAR talking points and flip out when somebody points it out, you need help

If your point was to help the poster who asked the question, then answer his question. What you did is attack what I said instead. That’s pretty much textbook combative.

There have been plenty of good answers above. I don't have anything to add which hasn't been said. I just hope for all the good answers, nobody reads the NAR point you made above and acts on it.

And now you are trying to pull your same crap again of you said it this way, so it’s wrong, but I’m going to say it this way, so it’s right.

When saying "nobody can time the market" during a downward market correction, the impetus you're trying to create is to buy now and not wait out a correcting market. That's how I read it, and I've explained it above, and you aren't denying this.

If you can’t predict the market, then it is not a factor in your decision. If you feel you can, then it is.

If you think that the market is overpriced, then it most definitely becomes a factor. You're talking about the inability to predict exactly when and where the market bottoms, and that one's inability to perfectly predict this is a reason to dismiss a likely market downturn. This is very obvious, very basic stuff. I've already explained it above. I pointed out how Shiller is correct, and how your use of "you can't time it" is a very insidious way of telling a future buyer to not wait. Don't accuse me of poor reading comprehension if you can't pick up those points.

I couldn’t care less if this guy bought. And again, if you read and comprehend, I told the first poster who asked a similar question not to buy. But in your combative nature, you picked the small point that you disagree with, took it out of context and attacked it.

Wrong. Out of context would be like if you said "don't listen to realtors who say you should buy based entirely on your personal feelings" and I accused you of saying they should buy based on personal feelings. I responded to the abstract of your argument, and it was entirely not taken out of context. My response wasn't even combative, you are just ridiculously oversensitive.

It is pathetic, and I can only imagine you do it to because you feel it bulks up your Internet muscles. I can assure you, you have the largest Internet muscles on this site. You don’t need to build them up anymore.

I don't care about internet muscles. I care about people repeating bullshit propaganda they've been spoon-fed by NAR. It is going to be called out whether you like it or not. I was offering to help you because I think you can make some positive contributions like the one way upthread, but they're overshadowed by stuff like this.

jgebis says

I’ve wondered about retirement advice like this — if, in retirement, you own your own home, what are you spending $40k/year/person on? If you have money saved up so you don’t have to pay taxes on it as income, and you own your home, what are your big expenses? Property tax and basic living expenses shouldn’t eat up that much. Sure, you should have extra saved up for emergencies, and hopefully you’ll have money to spend on things you enjoy in retirement, but that still seems high.

You've got to remember that these are projections for today's employees. $40k today is so-so. 40k thirty years ago was great. 40k now is so-so. 40k in 20-30 years will be diddly squat. I think people need to also think about the realistic possibility that you will not only probably have to pay for your own healthcare, which as we've seen is going up a breakneck speed, but that you'll also probably not be getting any Social Security.

The bottom line is that in the future owning your house is really just a tiny piece of the whole equation. Its also true that a lot of people in the Bay Area buy their first house pretty late in the game- as in 35-45 age bracket- or about the time they start having babies. I assume most of them have spent most of their wad on the house and give retirement plans a 2nd thought. I can't tell you how many people I know who did exactly that and are counting on the house to somehow take care of their retirement.

A million dollars in the Bay Area is what I would call barely scraping by in retirment. No thanks. I'll be long gone way before that.

Klarek, keep pumping those Internet muscles. I'm sure one day they will come in handy.

edvard2 says

You’ve got to remember that these are projections for today’s employees. $40k today is so-so. 40k thirty years ago was great. 40k now is so-so. 40k in 20-30 years will be diddly squat. I think people need to also think about the realistic possibility that you will not only probably have to pay for your own healthcare, which as we’ve seen is going up a breakneck speed, but that you’ll also probably not be getting any Social Security.

Good points, for sure. I'm not as concerned with healthcare and social security -- I agree that you shouldn't rely on them being as they are today, but I have no reason to think that they will completely go away.

The bottom line is that in the future owning your house is really just a tiny piece of the whole equation.

Can't argue with that.

ChrisLA says

I can’t really consider a house an investment, it doesn’t make anything.

That is a good attitude. Your own primary residence doesn't produce anything.

That's also why the used house salesman industry is also a net drag on our economy. Used house salesmen (realtors, if you will) are generally rent-seekers and don't usually produce anything. If you find the rare used house salesman who provides value, hang on to them.

tatupu70 says

And a house is not consumption–unless you are planning on consuming it (tearing it down?)

It depends. Depreciation is consumption, and structures depreciate because they have a finite lifetime without remodeling/renovation. In addition, if you pay more to buy than to rent, as is the case in some Bay Area locations, buying housing can be considered consumption.

The size/price also matters. Luxury housing is quite obviously consumption. But if you only need 3BR, and you get a 5BR house, that's a form of consumption.

corntrollio says

It depends. Depreciation is consumption, and structures depreciate because they have a finite lifetime without remodeling/renovation. In addition, if you pay more to buy than to rent, as is the case in some Bay Area locations, buying housing can be considered consumption.

Good points. I think it's safet to say that houses have elements of both consumption and investment.

ch_tah says

Klarek, keep pumping those Internet muscles.

"C'mon. Do it flabby!!!"

tatupu70 says

I think it’s safet to say that houses have elements of both consumption and investment.

Yes, although you have to be careful. Investment tends to have a particular risk-reward curve, and houses are sometimes not on the curve. Housing is an illiquid market with high transaction costs.

Truly investing in housing takes a great deal of knowledge, and most primary residence owners are not really investing, so much as engaging in forced savings.

Schizlor says

ch_tah says

Klarek, keep pumping those Internet muscles.

“C’mon. Do it flabby!!!”

Ah, I was wondering when the other Klarek would join in. Did you happen to catch the 10 seconds or so of Shiller talking about the "dividends" of homeownership?

tatupu70 says

I think it’s safet to say that houses have elements of both consumption and investment.

investment no more than cars or canned food.

michaelsch says

tatupu70 says

I think it’s safet to say that houses have elements of both consumption and investment.

investment no more than cars or canned food.

That comment is probably not even worth a response. Do you plan on reselling your canned food in the future? Will the value of your car track inflation?

Remember--when you buy a house, you buy the land too. Are you planning on consuming the land? How exactly are you going to do that?

tatupu70 says

Will the value of your car track inflation?

Neither should the value of your house in the long run. But houses and land are more overvalued than cars because of heavy subsidies and unreasonable restrictions.

michaelsch says

tatupu70 says

Will the value of your car track inflation?

Neither should the value of your house in the long run. But houses and land are more overvalued than cars because of heavy subsidies and unreasonable restrictions.

OK--I don't think there is much else to discuss. We'll have to agree to disagree.

Amen

ch_tah says

Ah, I was wondering when the other Klarek would join in. Did you happen to catch the 10 seconds or so of Shiller talking about the “dividends” of homeownership?

How much of value is that dividend premium do you want to pay for? And why didnt many in the past pay for this so called dividend premium ?

Home Ownership May Be for the Few, Not the Many

http://www.cnbc.com/id/41782186

But as the housing market redefines itself in the wake of the subprime mortgage crisis and the ensuing industry recession, a number of economists who follow the industry suggest the benefit of buying no longer applies. Others say it never did.

Yale economist Robert J. Shiller, whose book “Irrational Exuberance” accurately predicted the stock market collapse in 2000, notes that U.S. housing prices posted roughly a zero percent gain between 1890 and 1990, after adjusting for inflation.

“That’s the remarkable thing that most people don’t realize,” he says. “This is not a financial investment. It’s an investment that provides you services and you have to answer for yourself how you value that.”

The biggest dividend of real estate, says Shiller, is the lifestyle it affords. Some are willing to pay a premium for kid-friendly neighborhoods, quiet streets, a historic home or a condo close to work.

But taking the plunge today is a bigger financial gamble than it once was.

Shiller: Housing Could Fall Another 25% But Is Harder to Predict Than the Weather
http://jamesbdriscoll.wordpress.com/2011/06/16/shiller-housing-could-fall-another-25-but-is-harder-to-predict-than-the-weather/
Wed, Jun 15, 2011 7:21 AM EDT

The housing bubble of the early 2000s was “unprecedented” and the “biggest in U.S. history,” according to Yale professor Robert Shiller.

To answer the OP.

You could still invest in real estate by buying REITs, even though you don't have enough money to buy a house yet.

Don't buy an $850k house until you can afford it.

Here is my prediction.

DOW 8000 this October or Next.

ch_tah says

Ah, I was wondering when the other Klarek would join in. Did you happen to catch the 10 seconds or so of Shiller talking about the “dividends” of homeownership?

Ok, no more benefits or options. We're going with "dividends".

Schizlor says

ch_tah says

Ah, I was wondering when the other Klarek would join in. Did you happen to catch the 10 seconds or so of Shiller talking about the “dividends” of homeownership?

Ok, no more benefits or options. We’re going with “dividends”.

Right, because "dividends" and "benefits" aren't synonymous or anything... I guess being ignorant allows you and Klarek to not admit you are wrong. ;)

ch_tah says

Right, because “dividends” and “benefits” aren’t synonymous or anything… I guess being ignorant allows you and Klarek to not admit you are wrong.

I guess being ignorant allows jovial sarcasm to fly right over you head?

It's time to BUY! Look around! Don't rush for it, it's buyer's market again. Buy the right one you'll felt for it, for your family's good. Keep a backup plan is always good (worse case sell it).

There's always a way to a better way!

RonRon says

It’s time to BUY! Look around! Don’t rush for it, it’s buyer’s market again.

At the risk of igniting yet another mentally-painful estrogenal breakdown, I'd like to point out that these are tired, cliched NAR talking points.

Do the math is the key!

i would wait. the deleveraging is still taking place. i think prices will continue to fall in a bubbly area like Marin. inflation is basically zero now, so don't fret about inflation decreasing your purchasing power.

it sounds like you need to talk to a (good) financial adviser about your risk tolerance. your ability sounds high, but your willingness seems low, so you should be properly counseled to reconcile the difference. i would recommend a CFA or CFP because these credentials weed out a lot of people who know nothing (full disclosure: I am a CFA Level 3 candidate).

We had signed the purchase contract for 300 K the day Obama was elected - not by design, just happened. I was horrified by what was going on (in the economy) and weighed backing out through several sleepless nights up to the last moment driving to to the closing, but eventually signed: I have a habit of following through with whatever was planned and started pretty much no matter what. At least that was about the cheapest house we looked at - I congratulated myself on resisting the 400 K one we really liked.

We put 25% down, 15-yr. loan. I made a mental point of paying all back ASAP. In 3 months one of our cars (uninsured) was totaled. We fortunately got 10 K settlement from the other guy's company but the new one was 20 K - there goes much of the savings cushion. In a month my wife got pregnant. Just before she stopped working, we refi-d the house for 170 K at a lower rate as those dropped much over 2009 - there went the remaining savings. Then our other (old) car died. That was OK while wife was not working, but then we had to share a car for nearly a year while saving for a new one (40 K). Had to cash out some of my investment account for that. Last month as the clouds were gathering over the Wall St., I cashed most of the remaining stocks and paid off the loan balance of 95 K.

Now I drive past that 400 K house every day and regret not swinging it. Who could have thought?