patrick.net

edvard2 says

As far as political stuff well there are people of every political stripe that live everywhere.

Really good point edvard2, I have great friends who live deep in the Ozarks and in spite of the average political opinion there, they have a community of great friends with rational political beliefs.

Bellingham Bob says

If you've got the cash for the 25% DP, this house:

http://www.redfin.com/CA/Kensington/88-Norwood-Ave-94707/home/1685368

comes with an average monthly cost of ownership of $2100/mo for the first 30 years (and $1140/mo after).

I saw that one, seems like a beautiful house (although it would pretty dramatically increase my commute) but my big concern is that it's a lot of money to buy and looks like a real money pit. Lots of long deferred maintenance on that one.

^ yeah, I wasn't counting maintenance and improvements on that.

Consider it an investment, LOL.

The lot is probably the best you're going to get in the entire bay area. $1M alone for that is a deal IMO.

I lived down in the flats below this place in the 1970s. The hills looked so nice at night, and when we'd drive up to Arlington Park I loved how everything was so green. Kensington is a special place.

$3000 for SF is not alot of money. I pay $2000 to live in Culver City.

I just moved from LA to Claremont CA this weekend from 3 Bed 2 bath Apt. 1600Sqft to 3 Bed 2 Bath House newly rehabed 1800sqft. Total moving cost $2130. So yes moving my family of 4 cost thousands - unless you do it yourself. Its worth it not to have the back pain.

tclement,
It sucks that your LL would hit you with that now though, but you'll find a better spot.

tclement says

I have great friends who live deep in the Ozarks and in spite of the average political opinion there, they have a community of great friends with rational political beliefs.

People with acreage tend to be more conservative. That's understandable.

There's only about an acre of cropland per capita, so we all don't get to be farmers on the dell, tho.

tclement says

Really good point edvard2, I have great friends who live deep in the Ozarks and in spite of the average political opinion there, they have a community of great friends with rational political beliefs.

I Wasn't trying to pick on you and yes- I've more or less hijacked the thread... But as someone who grew up in a rural conservative area I do hear an awful lot coming from people ( not implicating you specifically) who claim they couldn't live in such-and-such place because of the area's political leanings or notoriety. My take is that if using general terms this is more of a city versus country thing. I have a relative who lives in Memphis. The next door neighbors are a lesbian couple and close friends of hers. The whole street is pretty artsy-fartsy in fact. Its not a city renown for being liberal. Yet there are pretty liberal hot-spots within it. This goes for most cities across the country. On the other hand- yes rural areas tend to be more conservative. But that doesn't mean everyone that lives in those areas are conservative either.

Using less general terms I can say that yes- there were most definitely pretty conservative people that lived around me and my parents. But its not like we hung out over the fence and chatted up politics. I don't do that now even though I know all my neighbors ( Save for a few older folks down the street) are pretty liberal. On the other hand most of the people that we associated with back home were like-minded with us. We had conservative friends too. Generally speaking things were not all that different from the way I interact with people here. I guess what I'm trying to say here is that if the decision ever comes in regards to moving, don't let a state or area's political leanings get in the way. You'll hear noise from people everywhere and besides- the evening news is full of it anyway.

Getting back to your dilemma... have you thought about sharing a house with another couple? I know that probably doesn't sound appealing. We share a house with one other person and as a result our rent is drastically less. The housemate is seldom home and has his own room and bathroom so it works out great. We don't have kids though so perhaps this is not as easy of a decision. It means making a few compromises and perhaps having a tad less privacy. But we've done this for 10 years and its worked out pretty well. Either way, best of luck to your situation.

CA is rent controlled. I don't think she can legally raise it just like that without major improvements.

http://www.dca.ca.gov/publications/landlordbook/appendix2.shtml - Oakland is there.

Am I wrong here?

FortWayne says

CA is rent controlled

LOL

FortWayne says

CA is rent controlled.

From: http://www.dca.ca.gov/publications/landlordbook/when-rent.shtml

Some kinds of property cannot be subject to local rent control. For example, property that was issued a certificate of occupancy after February 1995 is exempt from rent control. Beginning January 1, 1999, tenancies in single family homes and condos are exempt from rent control if the tenancy began after January 1, 1996.

edvard2 says

I Wasn't trying to pick on you

Naw, I didn't feel picked on. Actually, I agree with you. The bigger issues are my work, my wife's well established local consulting business and my son's school.

my goodness, you can spend $3100 just to pay for housing. You definitely can afford a mortgage of a very decent house. You will not catch a falling knife, if you are waiting for the housing price bottom.

FortWayne says

Am I wrong here?

rent control is by the locality, only covers pre-1979 stock, and sucks anyway.

San Jose limits raises to 8% pa. This would take a $1300/mo rent to $1900/mo in 5 years. Some "control".

LA has been historically better, with 3% limits (now it's 4%).

I was paying $700/mo in 1991, I should have stayed there maybe.

By now the rent would be $1250, about $300 under market.

tclement says

FortWayne says

CA is rent controlled.

From: http://www.dca.ca.gov/publications/landlordbook/when-rent.shtml

Some kinds of property cannot be subject to local rent control. For example, property that was issued a certificate of occupancy after February 1995 is exempt from rent control. Beginning January 1, 1999, tenancies in single family homes and condos are exempt from rent control if the tenancy began after January 1, 1996.

dang, did not know that.

I suppose you are probably better off finding a rent controlled place. Sounds like that lady is trying to racket some more money out of you.

And what are you doing paying someone $3100 in rent? My god, that's more than twice higher than my business loan payments.

FortWayne says

My god, that's more than twice higher than my business loan payments.

Guess it depends on where you want to live. Find me a place in 94602 that's as nice as where we're now for less, and I'll buy you a beer :).

Hmm, searching places with 3 bathrooms I see the supply is constrained. . . 14 results.

http://www.redfin.com/CA/Oakland/2575-Charleston-St-94602/home/1962717

Looks nice. Inlaw for your junior-high kid.

$700,000 with 20% down has an average monthly cost of $1600/mo over the life of the loan.

Actual outgo (PITI etc) is $200 less than your current rent, or $150 more counting the 3% opportunity cost on the DP.

Not counting principal repayment, the cost starts out at $2100/mo, and after the loan is repaid will be ~$900/mo.

Looks like your locked into the area so you might as well buy and get on with life.

Bellingham Bob says

I called someone on Craigslist and it cost me $140 to move. Plus some cokes.

Coke party at Troys!

Bellingham Bob says

$700,000 with 20% down has an average monthly cost of $1600/mo over the life of the loan.

How do you figure? Even with a 20% down the bare minimum you'd be paying would be more like $2,200-$2,400 not including insurance, taxes, and so forth. That said- its still a bit better than paying $3,000 a month to rent the same house. Sounds to me like a barely break-even tradeoff

edvard2 says

How do you figure?

With a spreadsheet : )

the bare minimum you'd be paying would be more like $2,200-$2,400 not including insurance, taxes

PITI is $3500, yes. But the I and T in that are deductible at 35% for higher-income California people. That reduces PITI to effectively $2600/mo starting out.

And as principal is paid down, more of that $3500 PITI goes to P, which is a form of savings, so over the 30 year loan the average monthly expense -- interest, taxes, maintenance, insurance -- is $1600.

Here's my 30 year analysis:

Asset Cost 700000.00
Total Interest 402469.24
Prop Tax 262500.00
Other 147750.00

Subtotal 812719.24
Tax credit 234,069.17

Net cost 578650.06

Over 360 months: $1607.36

This approach is bogus since it doesn't count investment gains on NOT paying a mortgage, but with a $3100/mo rent that's kinda minimal LOL.

I'm not a big fan of applying financial engineering assuming that the buyer's financial situation will remain static forever. I'm considerably more conservative and thus I think your $1,600 a month is a bit misleading given that you seem to be doing some serious engineering to arrive at that number. Not saying it can't be done nor that its bad advice. The true cost is probably in the middle for average people.

At the end of the day 700k, for a house- any house- is a LOT of mon-nay. Anyway you cut it.

edvard2 says

At the end of the day 700k, for a house- any house- is a LOT of mon-nay. Anyway you cut it.

Even at 0% interest rates?

The fuzzy math here is dividing the total cost of owning the first 30 years by 360 months.

The interest and property taxes to be paid over this horizon is totally fixed and is not fuzzy at all (Prop 13 limits the appraisal to $1.25M by 2040, but that comes with appreciation so is a win for the buy case).

This doesn't factor in NPV crap and interest rate moves, but the future is unknowable so I'm just assuming everything is static from here on out.

If things inflate, chances are rents and home prices will inflate too, making buying now a good deal.

The only risk is that rates go up and incomes don't. This is possible but hasn't happened since the Fed has been running things AFAIK.

Well, another risk is losing the MID. That would suck, wrt high-end price levels, big time.

tclement says

Guess it depends on where you want to live. Find me a place in 94602 that's as nice as where we're now for less, and I'll buy you a beer :).

Try using http://www.padmapper.com for your apartment search. This home, http://sfbay.craigslist.org/eby/apa/2582869572.html, might meet your challenge.

Bellingham Bob says

Even at 0% interest rates?

Yes. Even at 0%. Like I said- I could pick up and move just about anywhere and buy a pretty nice place for 150-200k cash and call it a day. One of the reasons a lot of us are on this site is because property prices in places like the bay area are atrocious. I make a 6 figure income and there is no way I will ever pay anything close to 700k for a house. Perhaps others are conditioned to accept this. I'm not and perhaps its again- because I came from somewhere where home prices are a fraction of the cost.

Everyone's going to have a different idea of what value is. Anyway, we're goin' off in the weeds again. I am not familiar with Oakland hills rents. But $3,000 sounds rather steep. Thus I can understand why the OP is asking this rent versus buy question because if I were in that situation and had no plans to move, I too would be weighing options in regards to buying.

edvard2 says

One of the reasons a lot of us are on this site is because property prices in places like the bay area are atrocious

Incomes are "atrocious" too. Plus not everyone living here has to pay $700,000. Plenty of people living here paid $70,000 30 years ago and have enjoyed the 8% pa appreciation ride.

I make a 6 figure income

Making that outside of an expensive area to live is not something more than 1-2% of the population can realize from their labor alone.

because I came from somewhere where home prices are a fraction of the cost.

As you say, the bottom line is rent vs. buy. What prices are in flyover country has all the relevance to the price of tea in china for the Bay Area.

Rents are high because household incomes are high, quality supply is low, and demand for quality greatly exceeds supply. This is basic economics.

Bellingham Bob says

Incomes are "atrocious" too. Plus not everyone living here has to pay $700,000. Plenty of people living here paid $70,000 30 years ago and have enjoyed the inflation ride.

That's not really relevant to the conversation or general. There's old people that live up the street from me who could never afford the houses they live in now if they did what they do or did for a living. They also didn't shell out every penny they owned paying for their houses. At some point the cost of housing in the Bay Area was in lock-step with the rest of the country. For the last 10+ years it has been very seriously out of whack. The fact that even the people making 100k a year are having trouble buying a crappy fixer-upper in the area tells you this.

Bellingham Bob says

Making that outside of an expensive area to live is not something more than 1-2% of the population can realize from their labor alone.

Its not like a 6 figure income is common even in the Bay Area either. Last time I looked the average income was around 65-70k here. That compared to Austin TX where the median is around 63-65k... but with an under 200k median home price compared to the 700k+ you'll have to pay these days in SF. In reality the overall income strata is much, much tighter nationwide than most people know. But even so, let's say my salary was cut in half and I made 50k a year. Assume my wife made close to the same. So 100k total. That income will go about 3 and 4 times further in "Flyoverland" or whatever. I know because my parents and friends of mine who stayed make less then that yet comparatively speaking they're doing a lot better than we are- and yes- their kids go to good schools and they own nice homes. One in a cool old historical neighborhood in a larger house they paid $131k for. A 6-figure income in the Bay Area is about the same as 40-50k elsewhere. I'm not saying I don't appreciate it. I was making $8 an hour when I first moved here. I'm the most miserly cheap bastard you'll ever meet too. Its just that its shocking at how much it costs to live in the Bay Area- to buy a house, drive, etc etc. Its like its NEVER enough. You have to be phenomenally wealthy to do decently here. I find that highly irritating and nonsensical.

Bellingham Bob says

As you say, the bottom line is rent vs. buy. What prices are in flyover country has all the relevance to the price of tea in china for the Bay Area.

First of all, can we stop using the words " flyover country"? That's such a deragatory term. I grew up not far from the Blueridge parkway and if some of you folks only ever fly over it and consider it not worth visiting then too bad for you. There are beautiful places in all 50 states and to merely focus on a select few is silly. Secondly, no- we live in a global economy and the cost of living in one area doesn't necessarily mean its better nor with better economic opportunities. See my above statements for reference.

"First of all, can we stop using the words " flyover country"? That's such a deragatory term. I grew up not far from the Blueridge parkway and if some of you folks only ever fly over it and consider it not worth visiting then too bad for you. There are beautiful places in all 50 states and to merely focus on a select few is silly. Secondly, no- we live in a global economy and the cost of living in one area doesn't necessarily mean its better nor with better economic opportunities. See my above statements for reference."

Before I got into Law, I was a flight attendant.

The Flyover is exactly that - vast inland sectors of the nation where no one wants to go and neither is there an airport if you wanted to land.

It will always be referred to as The Flyover because that's what the Midwest is; btw, not everyone regards the "Flyover" term as an insult.

It is what it is, just like we Californians have to put up with earthquake jokes about CA falling off into the Pacific.

~Misstrial

bubblesitter says

The cost of my last move was $250. Thousands for moving? doesn't makes sense.

Yeah, if you are single and moving from 1 bedroom to 1 bedroom...

Moving a family of 4 four is definitely gonna cost $1000+ in cash minimum.. and thousands more if you value your time in dollars... Packing and cleaning alone takes days.

edvard2 says

That's not really relevant to the conversation or general.

Old people are entirely relevant since they are taking up a lot of the available SFH supply.

At some point the cost of housing in the Bay Area was in lock-step with the rest of the country.

Not in my lifetime, and I've been living in the BA since the 1970s.

For the last 10+ years it has been very seriously out of whack. The fact that even the people making 100k a year are having trouble buying a crappy fixer-upper in the area tells you this.

Prices have crashed outside the fortress, since prices outside the fortress were juiced by the suicide loans. In San Leandro prices went from $300 to $600 during the bubble, now they're back to $300. Prices in the nicest areas are being supported by incomes, 4% interest rates, and the MID.

Its not like a 6 figure income is common even in the Bay Area either.

It is at the household level, which is what matters for home prices.

but with an under 200k median home price compared to the 700k+

Texas has 166 million acres of buildable land, or will once the fires die down. The Bay Area has the Bay, which is difficult to build on unless you like houseboats, and is surrounded by Mountains, which limit density and reduce transportation access.

Texas also has much higher property taxes, which are an excellent way to limit price appreciation : )

You have to be phenomenally wealthy to do decently here. I find that highly irritating and nonsensical.

Yup, and it's been this way since the Gold Rush. Life was better when the Caudillo was handing out 100,000 acre homesteads, but that could only last so long.

http://en.wikipedia.org/wiki/Henry_George#Economic_and_political_philosophy

First of all, can we stop using the words " flyover country"?

No, we can't, because that's what it is. Just empty space with very low population density.

Bellingham Bob says

First of all, can we stop using the words " flyover country"?
No, we can't, because that's what it is. Just empty space with very low population density.

So, what exactly is flyover country? Everything outside of the coasts? I agree with Edvard that it's a pretty inaccurate term if that's the application.

tatupu70 says

Everything outside of the coasts?

everywhere were livestock outnumber people I'd think.

tatupu70 says

So, what exactly is flyover country?

I liked the term "Elvis Country" as used in The Sopranos. "Anywhere where there are no Jews or Italians." :)

Misstrial says

Before I got into Law, I was a flight attendant.

The Flyover is exactly that - vast inland sectors of the nation where no one wants to go and neither is there an airport if you wanted to land.

It will always be referred to as The Flyover because that's what the Midwest is; btw, not everyone regards the "Flyover" term as an insult.

It is what it is, just like we Californians have to put up with earthquake jokes about CA falling off into the Pacific.

Then that's a rather sad statement. Perhaps the most beautiful place I've ever been in my life- and that includes places I've been such as Hawaii, California, Ireland, and the UK was Mount Le'Conte in a part of the Smokey Mountains, a part of the Appalachian chain. Its a somewhat tall mountain that has some of the most diverse plant life you'll find in the US. Its up in the clouds and its totally silent when you cross over some of the balds. Words can't describe it because its simply beautiful. But golly gee-wiz its in Tennessee which I reckon none of you will see since its "flyoverland" and all. I've driven across the country several times. Its a beautiful country. All of it.

Bellingham Bob says

Prices have crashed outside the fortress, since prices outside the fortress were juiced by the suicide loans. In San Leandro prices went from $300 to $600 during the bubble, now they're back to $300. Prices in the nicest areas are being supported by incomes, 4% interest rates, and the MID.

Realistically almost any house within a reasonable commutable distance to the main job areas in the Bay Area are still at nosebleed levels. I already have a fairly long commute. Its not like the East Bay area I live in is anything to brag about but you're still going to have to shell out 450k+ for anything decent. That's ridiculous.

Bellingham Bob says

Texas has 166 million acres of buildable land, or will once the fires die down. The Bay Area has the Bay, which is difficult to build on unless you like houseboats, and is surrounded by Mountains, which limit density and reduce transportation access.

We're not talking about TX in general. I mentioned Austin- which like the Bay Area is a high tech hub, has numerous universities, is generally considered liberal and artistic, and is also a major metro. But even so, it has more buildable land? Well in my opinion that's a good thing.... don't you think? I guess then you could add that to my last set of points which is that Austin is considerably cheaper than the Bay Area in more ways than one and even with it being a comparable city.

Bellingham Bob says

Not in my lifetime, and I've been living in the BA since the 1970s.

I think you're missing my point. I know for fact that my neighbors bought their large Victorian home back in 1980 for 70k. While that wasn't chicken feed in that time period they were able to buy it with their incomes at jobs that they still have. Jobs that now would in no way shape or fashion enable them to buy that house today. They are solidly middle class professionals. We're not talking working class people but rather the same group of people that fill jobs like HR managers, teachers, and state workers etc. So while the BA has been more expensive for decades its also drastically changed in overall affordability. It is far less affordable, even throwing in inflation- than it was in the not-so-distant past.

Bellingham Bob says

No, we can't, because that's what it is. Just empty space with very low population density.

Fine. I guess we can then call California "Fly Out of country" because so many people are leaving it.

edvard2 says

I think you're missing my point. I know for fact that my neighbors bought their large Victorian home back in 1980 for 70k. While that wasn't chicken feed in that time period they were able to buy it with their incomes at jobs that they still have.

Population has risen 50% since 1980. Land supply has risen 0%.

Interest rates were really holding down home prices in 1980 -- 30 year rates were 12-15%.

$450K is easily affordable with 4% rates. $2500/mo PITI etc and PITI less the P is $1900/mo starting out and approaches $650/mo as the loan is paid down.

Average cost of ownership over 30 years is $1300/mo. Cheap!

15% rates raises this to $3000/mo. Not so cheap!

0% rates would be $750/mo. Really cheap!

edvard2 says

it has more buildable land? Well in my opinion that's a good thing.... don't you think?

Sure. Texas is great. Gonna move there for sure. ::Eye roll::

edvard2 says

"Fly Out of country" because so many people are leaving it.

The losers are, yes.

tclement, be happy you're being told now (beginning of September) and not on December 1st as one landlord did, giving us 30 days to leave the house. Yes, we had to move over Xmas/New Year. We pushed back with an emotional appeal and we were given until January 15.

It wasn't a negotiating ploy, the landlord couldn't afford his big, shiny, new house purchase and had to move back to the crapbox rental and give up the bigger place.

In fact, being kicked out over the holidays was we bought a house, we never wanted to go through that again. And we didn't even have kids to disrupt at that time.

Bellingham Bob says

$450K is easily affordable with 4% rates. $2500/mo PITI etc and PITI less the P is $1900/mo starting out and approaches $650/mo as the loan is paid down.

Average cost of ownership over 30 years is $1300/mo. Cheap!

8% rates raises this to $2000/mo. Not so cheap!

You are never going to convince me that 450k is "cheap". Try saying that 450k is cheap to the vast majority of people who don't live crammed on the coasts. They'll think that's nutty. I don't care how many little hoops, tax shuffling or little financial investment schemes are out there that could potentially squeeze me into my own little crap shack in heaven, the prices are still seriously out of whack on principal alone.

Bellingham Bob says

The losers are, yes.

If you want to call them that then be my guest. When my folks and any of my friends come to visit us they certainly don't think of themselves as losers. More often than not they are really, really happy they don't live here because the quality of life is pretty bad compared to where they live. In fact if any of them are here long enough to see a home price tag they're absolutely floored.

Either way, I see this is not really going anywhere. I've had my fair share of conservations with people who are overly enamored with the Bay Area think the whole area is "special" as if its plated in gold or something who will pay absolutely anything to stay. I've been here for years and still see it for what it is: A large, overcrowded, sprawly metro with poor transportation and a poor infrastructure paired with overly expensive real estate and a high cost of living.

jworm said: This home, http://sfbay.craigslist.org/eby/apa/2582869572.html, might meet your challenge.
Ding, ding, ding! We have a winner. Prop 13 tax basis of $216k. They will probably pass this property on to their children and would love a diligent caretaker like you. If you have a stash of cash and like the place, offer to pay 6 months in advance. They'll know you're serious.
I know this will be disruptive to your son, but seriously, why not consider a place with better high schools (BAP, or over the hill in Lamorinda)? I think it would be even more disruptive for him to make the move when he enters HS. I know of a poster on another blog who found a Prop 13 rental for less than $3k in Piedmont; he'll probably never buy at this point.

edvard2 says

the prices are still seriously out of whack on principal alone.

LOL. What if I give you a 40 year 2% loan like what they have in Japan? Principal still too high? PITI etc is $2000/mo and the average monthly cost is $1000/mo. How much rent are you going to be paying?

Prices are driven by interest rates.

I've had my fair share of conservations with people who are overly enamored with the Bay Area think the whole area is "special" as if its plated in gold or something who will pay absolutely anything to stay

Don't get me wrong -- no way would I pay big bucks to live in the Bay Area for the next 30 years, unless it's in a fortress, and the fortresses on the Peninsula are just ridiculous if you don't have a job close by.

I wouldn't mind retiring to Kensington, since the quality of life up there would be better than a nice spread in the Santa Cruz Mountains, or out by Bellingham (where I'd also like to retire maybe).

But for people who plan on working in the BA for the next 20-odd years, today's prices are not that out of whack, as long as things don't fall apart on the macro level.

Seriously buying anything over $600,000 will cost you much more than renting at $3100? What are those people calculating. Remember $3,100 is all inclusive.

A little more color commentary would help. I almost did a spit take when I looked up your house. At least it appears that your landlord is not in foreclosure (yet?) Might I suggest as an opening to your post:
My landlord bought our rental at the peak of the market for $930k in July of 2008. We think her BofA ARM may be resetting and she wants to raise the rent....

EBGuy says

I almost did a spit take when I looked up your house

Who's house? How did you look it up? Our landlady inherited this house from her mom.

I guess that would be a different tclement. Yikes.