patrick.net

peninsulabuyer says

With $2100 rent, buying sure looks like a great option

How so? Even if you put 20% down, your PITI would be around $3400 for a $700,000 purchase, wouldn't it? That's a lot more than you're paying for rent.

I spent about 4 years househunting before I found something.

In the SFBA, if you like something chances are, 20 other families will like it and put a bid on it as well, Except for 2007-2011 It has always been this way and it will get worst as more people come into the mix as essentially no new SFH to be built.

The small area between San Francisco and Silicon Valley, will be coveted. It's basically three miles east/west and 25 miles north/south, that's it! It's just a tremendous location between two economic powerful region in the world.

Which means the buyer has to be aggressive. As E-man advised elsewhere in these forums, you're probably better off waiting until next year and see what happens. (more inventory)

Peninsulabuyer, the realtors and shills are back in bubble mode trying to get you to buy overpriced crap because "they're not making any more land".

Don't listen to it. The recession of 2012 will soon be confirmed. And deleveraging in housing is nowhere near finished:

http://www.ritholtz.com/blog/2012/07/us-housing-inventory-requiring-deleveraging-30-million-units/

"Ghost Supply" in that view is a farce. I invite you to go ahead and plan your financial future assuming those conditions, however, as it seems a useful way to weed out those unable to separate meaningful data from wishful thinking.

@peninsulabuyer

It is possible to buy in Silicon Valley, but you have to be very aggressive. We've been in the SFBA since the early 90s and are now on our 4th move and buy/sell. We've managed to buy every home for less than asking, without multiple bids and we've also managed to sell every home for more than we paid.

They key is not anything magic. It's being simultaneously both incredibly patient and ultra aggressive.

Remember that sellers aren't all idiots, debt isn't inherently evil, and most bubble-faithful blog posters are akin to cultist true believers. They are the inverse self-interested bias of the RE shills.

Buying a house is a negotiation, not commodity purchase. Supply & Demand are only generalized models which only impact RE in the macro, not on a unit-by-unit basis. That's good news for you because it means that striking a deal really just comes down to finding a situation where something valuable to the seller overlaps something valuable to the buyer. And many sellers value more than just $. The reason I've been able to buy below asking in this crazy area is because I put a tremendous amount of energy into finding what else is motivating the seller and meeting them on those terms wherever possible. And the two top motivations are no secret: time and risk. Many sellers will relax 5%-10% of their asking in order to have a sure thing and/or a quick-close.

peninsulabuyer says

I put $25,000 over the asking price for this one, still got overbid!!!

I am not familiar with BA market but this is coming back on market and eventually sell at lower then your offer price - you would think so,how did the POS sell below your asking price? but RE is heavily rigged and corrupt right now. You know,what I mean?

Wait till november. Prices aren't going to move in any direction until election, after that it will be more clear. If you got time, whoever waits in this market will make out like a bandit later.

RE has always been rigged and corrupt. It's actually more open right now than pretty much any time in modern history because of the ability to access MLS and the widely available, searchable county records data.

Do you math. Yes. While you're at it, do your research.

We bid and won our house several months ago. That said, its in the East Bay which is a different market but still aggressive and weird these days. Don't take this as advice, but as far as what I determined, from reading various forums and looking at recent sales, it seemed to me that a lot of people mentioned the whole " We offered 20k over asking" thing. So I figured if a lot of people were mentioning this, then probably most people bidding were throwing out a 20k over asking bid generically and losing because that was a given and others knew it. So we bid around 40k over. In the long term that's not really adding much to the monthly payment because ( at least for us) got a very low interest rate. Even at that bid we barely won it. Only reason we did is because we offered a sizable down-payment in addition.

I know the market sucks. I too really hated the whole situation. I'm glad its over. Good luck to you. In the end you've got to do what's best for you financiallu and to do what makes you feel comfortable so just go with your instinct.

Buy a short sale on first day of listing, let listing agent double dip.

PockyClipsNow says

let listing agent double dip.

This.

peninsulabuyer says

I have lost 1 whole year of my weekends house hunting and still in a crappy apt paying insane rent.

I know the feeling but you have to learn to play by the new set of rules that have emerged in this post bubble - low inventory era.

peninsulabuyer says

I put $25,000 over the asking price for this one, still got overbid!!!

This is a neophyte real-estate mentality. Asking price means nothing. Don't allow yourself to be a puppet to a realtor's low introductory price scheme meant to create buyer frenzy. $25K above asking price means nothing, absolutely nothing. $25K above 6 month comparables does mean something. To be completely fair to you, I looked up the comps in that neighborhood and there really isn't much unfortunately. This is a situation where it is hard to assess value of property.

peninsulabuyer says

I put $25,000 over the asking price for this one, still got overbid!!!

What makes you think you got over-bid? When this house closes, you will find out what the home sold for (this will give you a good idea if you got over-bid or not, but that's not to say that the inspection won't find something that will lead to a closing price that is lower than the initial offer price of the winning bidder). They call it "highest and best" for a reason. Credit, down-payment amount, track record, relationship to listing agent or seller will all play a roll.

It's truly a despicable ball-game right now. It's the most unethical and dishonest that seem to be prevailing. The lower the inventory, the more dishonesty and fraud we will see. Very sad state of affairs.

SFace says

Except for 2007-2011 It has always been this way and it will get worst as more people come into the mix as essentially no new SFH to be built.

Inventory is not the problem. Inventory available on the market today is.

BayArea says

It's truly a despicable ball-game right now. It's the most unethical and dishonest that seem to be prevailing. The lower the inventory, the more dishonesty and fraud we will see. Very sad state of affairs.

Can't put it better then this.

peninsulabuyer says

I am out of my wit. I have lost 1 whole year of my weekends house hunting and still in a crappy apt paying insane rent.

Have you considered not wanting to buy and moving into a not-crappy rental?

Have you tried dealing directly with the listing agent and doing a dual agent relationship (or working with one of their 'buds')? Not that agent's are unscrupulous mind you, *snicker*, but when they are poised to get double commission on a sale, they might be able to tacitly advise you when your offer is enough. Just keep in mind they can't 'tell you' what other's bid, but most would answer the question, "Is my offer a strong offer?". So far we have encountered a selling agent who wouldn't give us any pricing advice only once.

To the OP:

The easy solution is to move somewhere with a less volitile housing market. You'll sleep better at night too!

FunTime says

Have you considered not wanting to buy and moving into a not-crappy rental?

I am curious to know what a "crappy rental apartment" is exactly. Many would probably consider mine "crappy" since the interior is dated, faces north/south and never gets much natural lighting and has an electric stove. Then again, it costs 2-3x less than a "high end" complex where you can attain "baller renter status" and have little money left over for anything else. Peninsulabuyer, what makes your place so crappy?

Keeping the unit clean, decorating a little and putting conscious effort into the layout of the furniture goes a long way. I think that a lot of renters refuse to put that much effort in because, "it is a rental and I will not rent forever" and they have "more important" things to do like watch TV. Well, yeah, put no effort in and of course it feels like a disheveled bachelor pad.

675k for a townhouse?, yikes! HOA $270! TV not included!, lol, wonder when they'll start throwing TV's in again.

everything says

675k for a townhouse?, yikes! HOA $270! TV not included!, lol, wonder when they'll start throwing TV's in again.

Seriously. $675k for a townhouse in Foster City? A coworker of mine bought a 2400SF, 2 story 4/3 house that was built in 2006, in a nice part of Kirkland, for $600k in 2009. Yeah yeah, it isn't the SFBA, but it is a very nice area and damn close to the high tech job center in the greater Seattle Area, and I'd call it an analog for Foster City in a lot of ways.

No wonder housing is ridiculous here. People think that $675k for shared walls along a major approach path to an international airport makes some sort of sense.

Tech has been booming again, just like it did before it crashed out about 12 years ago.

Isn't Foster City built on old landfill? Wonder what a good shaking would to do that overpriced townhouse.

Want a townhouse at a more reasonable price?

http://www.homezonemedia.com/etour.html/TOURID/47393

everything says

675k for a townhouse?, yikes! HOA $270! TV not included!, lol, wonder when they'll start throwing TV's in again.

This. That townhome is a POS. Foster City is nothing special - except proximity to tech companies, I guess.

I understand that the current market will support $675K for a POS (thanks largely to continued strength in tech and all the other reasons people talk about here). I further understand that my refusal to accept this seemingly irrational pricing doesn't make it any less real (after all, a market can remain irrational for a lot longer than I can remain without a roof over my head).

OTOH, the OP should srsly consider another locale, even within the Bay Area. You could get a lot more for $675K in safe, lovely parts of the East Bay with do-able commute times to the Peninsula. The OP should be thankful he didn't get this POS in a POS area.

How can tech companies remain in the Bay Area and stay competitive? How long can they afford to pay entry-level folks $100k/year just so they can afford a POS townhouse?

wthrfrk80 says

How can tech companies remain in the Bay Area and stay competitive?

You stay competitive by building higher value-add. For example, a handful of employees was able to build instagram in a matter of months and sell to Facebook for $billion+. From that perspective, a 100K salary is chump change for the value created. Spend millions for billions.

Another competitive tool is adding value by doing more. Silicon Valley is fast-paced, a 6 months project for a Kansas City programming team is a 3 month project in San Francisco. (demand more ability and hours) The money is well worth the incremental cost.

SFace says

Silicon Valley is fast-paced, a 6 months project for a Kansas City programming team is a 3 month project in San Francisco.

Total nonsense.

There's talented (and talentless) engineering teams all over the country.

I've known some incredible engineers (including early Google and Facebook) and one of the best engineering teams I've had the pleasure of working with is actually based out of Minnesota.

CrazyMan says

SFace says

Silicon Valley is fast-paced, a 6 months project for a Kansas City programming team is a 3 month project in San Francisco.

Total nonsense.

There's talented (and talentless) engineering teams all over the country.

I've known some incredible engineers (including early Google and Facebook) and one of the best engineering teams I've had the pleasure of working with is actually based out of Minnesota.

I don't doubt your experience, but in general terms, you cannot deny that silicon valley is the tech capital of the world and the salaries and opportunities available here it will attract the best and brightest talent out there, generally speaking of course.

No sense in even attemting to argue against this, just no sense.

Of course, I wouldn't argue that at all.

The statement SFace made concerning 6 months vs. 3 months because one team is in KC just isn't accurate. A talented KC team can do a project in the same time a talented SV team can. No question.

You could argue that talented teams are just more plentiful here, but that's not what he was trying to say.

Regardless, it's a minor point that doesn't influence the topic in any real discernible way.

wthrfrk80 says

How can tech companies remain in the Bay Area and stay competitive? How long can they afford to pay entry-level folks $100k/year just so they can afford a POS townhouse?

they don't pay entry level folks 100k/year and they outsource like crazy.

omgbacon says

they don't pay entry level folks 100k/year and they outsource like crazy.

Then who can afford to buy these crappy houses for 600k? Rich Chinese?

entry level people aren't buying houses.

both parents work.

they don't save any money.

Not saying house prices will go up, but SF prices are quite low compared to the rest of the world. This only illustrate the size and scope of the housing bubble. Well, we all know it is a debt bubble anyway, no matter if money comes from tech or China.

Peter P says

Not saying house prices will go up, but SF prices are quite low compared to the rest of the world.

Maybe compared to London, Tokyo, Paris and other major cultural centers.

well, it is a major cultural center, so that would make sense.

another thing about SF that people don't always think about is that it's 7 miles wide, 7 miles long, and surrounded by water on three sides. they stopped making land in SF 100 years ago and what land they did make isn't stable during earthquakes.

if SF ever got around to making its school system friendly to people with kids prices would probably be higher.

peninsulabuyer says

I put $25,000 over the asking price for this one, still got overbid!!!

Well over half a million for that piece of shit? You're lucky you got overbid. You'd have buyer's regret if you didn't.

wthrfrk80 says

Peter P says

Not saying house prices will go up, but SF prices are quite low compared to the rest of the world.

Maybe compared to London, Tokyo, Paris and other major cultural centers.

Nope. I would say Peter P. is correct.

http://www.creditsesame.com/blog/americas-top-cities-cheapest-real-estate-in-the-world/?refresh=none

omgbacon says

well, it is a major cultural center, so that would make sense.

another thing about SF that people don't always think about is that it's 7 miles wide, 7 miles long, and surrounded by water on three sides. they stopped making land in SF 100 years ago and what land they did make isn't stable during earthquakes.

That makes sense, yes. But people still need to get the money from somewhere, right? Where is the money coming from...that's what I want to know. ;-)

Maybe all those homeless folks are investment bankers making six figures...they just can't afford a place. ;-)

Homeboy says

peninsulabuyer says

With $2100 rent, buying sure looks like a great option

How so? Even if you put 20% down, your PITI would be around $3400 for a $700,000 purchase, wouldn't it? That's a lot more than you're paying for rent.

I spent about 4 years househunting before I found something.

Wow you sound like me back in 2007.

* Holy crap, prices went up ANOTHER 20% YoY
* We are getting nothing for our $1600/mo of rent
* I want to be an OWNER - F@# renting
* Wow this KoolAid is DELICIOUS! Where do is sign?

So we bought. How'd it work out? Well my handle says it all.

Is 2012 like 2006? Yes, a bit.
Will 2013 turn out like 2007? I'll let you know in 18 months
Will 2014 bring about a financial crash worse than 2008?
Will home prices bottom in 2015 like they did in 2009?

Pappa Bear ain't telling.

New renter says

* I want to be an OWNER - F@# renting

Translation: "I want to RENT MONEY from a bank, not rent a dwelling-place from a landlord!"