patrick.net

Anyone who pays more than $200k for a house is signing up for voluntary serfdom. Unless they can afford to pay cash.

If you absolutely must stay in the Bay Area, choose the cheaper of the following options:

1) rent the house
2) rent the money to "buy" a house (i.e. have a mortgage).

Don't forget to add property taxes, insurance, and maintainance when considering option 2.

Yes, they're agricultural labourers at the mercy of their feudal lords as distinct from people borrowing money in order to buy something they couldn't otherwise afford.

Ok, so it may not be agricultural work specifically...

sheltielover1 says

What happens when the inevitable inflation hits? We bought the house for 1/2 the price of what it was at the top. Don't believe these idiots on the board who tell you prices are going to go down to $200k for a large family home in desirable locals. They are just angry at the world and want you to suffer too...

Well... at the peak the prices had doubled or even tripled in just a few short years. As in from 2003-2005 prices doubled. So paying half price isn't actually "that" dramatic because by 2003 we were already in a bubble. But if you can afford it- great. We all have a notion of what is acceptable price-wise.

PS: We've been renting for over 10 years so far.

If it weren't for the government propping up house prices, you wouldn't be faced with this problem at all. But they are (stock prices too). Who knows what the real value of anything is with them meddling in everything.

One good gage of value has been the average house in a particular area should cost about three times the average paid worker's annual income in that area.

Another gage of value is, could you rent out the property you buy and cover your ownership costs with 80% of the rent income?

I think any price paid over these gages and you may be being manipulated and are certainly paying the seller a premium.

Wait it out. Rent and enjoy the freedom of not being tied down. You'll probably regret being stuck in a $400K dump down the road.

hrhjuliet,

I've got 3 kids myself and am renting right now.

If I were you, I would be considering how old my kids are and where, eventually, I want to live.

Home prices will keep falling, but probably at the same, painfully-slow pace of the last couple of years. If your dream is to live in a place like Concord, you could probably buy a pace for under $400,000 that you could stay in for a decade or more and be happy. If your goal is to live in a nicer area, like Danville or Lafayette, then you are definitely better off renting for a few more years.

There is a lot in this post that you might find helpful: http://bayarearealestatetrends.com/2012/01/11/sound-real-estate-advice-for-2012/

sheltielover1 says

Even Warren Buffett is buying homes now -

Were you kidding or did you not read the article? The article, as pointed out, says he's not buying homes. It finishes by saying his predictions last year about the housing market were 'dead wrong.'

Why would a smart guy like Buffutt buy an investment that pays negative dividends (i.e. property taxes, insurance, and maintainence)? Is he planning on living in these houses? Is he planning on becoming a landlord?

gregpfielding says

There is a lot in this post that you might find helpful: http://bayarearealestatetrends.com/2012/01/11/sound-real-estate-advice-for-2012/

I clicked on one of your links yesterday and found that the site had that entrapment feature where the back button didn't work in my browser. I double clicked. I triple clicked. Nothing. Powerful stuff. I recommend eliminating that dynamic of the site.

hrhjuliet says

Of course I don't like the Bay Area, lots of people don't, but a lot of people are stuck here for the very reasons I gave.

I've had 2 different friends who moved to Raleigh & Austin respectively for similar reasons ... both were back in the Bay Area within 1 yr. I seem to remember their reasons were "Rednecks in Raleigh" and "Way lower wages in Austin"

It is a difficult decision to make; if you have 200K money and invest, what is the probability of losing the money or earning almost no interest?. It depends on how you invest and the risk you will take. Buying a house is a risky move and you may lose money; IMHO, you can rule out appreciation; with some luck may get back the money when you sell

TMAC54 says

Who sets prices ? (supply & demand

Not for housing unfortunately. I wish it did. When you have trillions of dollars being injected into an industry, you are actually trying to stop the supply/demand from working properly. It happened on the way up (corruption from the realtors all the way up to Fanny/Freddie), and it is happening on the way down. The last time we had a supply/demand market for housing was when the realtor was the few beers you had during the negotiations. Add realtors, who obviously have a one sided view on if the transaction should happen or not, and you manipulate the supply/demand relationship. Force realtors back into the workforce and we will be much healthier IMHO. Our unemployment rate would rise, but they have tricks to stop that from happening (more manipulation). ;)

Jimbo in SF says

I've had 2 different friends who moved to Raleigh & Austin respectively for similar reasons ... both were back in the Bay Area within 1 yr. I seem to remember their reasons were "Rednecks in Raleigh" and "Way lower wages in Austin"

I sort of find stuff like that funny. The Bay Area is supposed to welcome people of different types and backgrounds and claims to be open-minded. Yet over and over again I read stories of people from here or other large metros moving to places like Raleigh and moving back " because of the rednecks".

dellman says

It is a difficult decision to make; if you have 200K money and invest, what is the probability of losing the money or earning almost no interest?. It depends on how you invest and the risk you will take. Buying a house is a risky move and you may lose money; IMHO, you can rule out appreciation; with some luck may get back the money when you sell

Stocks beat housing (not even close actually) for the last 200 years. Easy decision if you are looking long term. If you are trying to time things to benefit from swings then go for it. I am not that smart so trust the long term trends. All things eventually revert to average trends. I got time, and things are moving in my favor now, and I can wait the crap out of anyone.

p.s. when my waiting creates huge benefits to my wealth I won't be the one to gloat. I'll write a book or something just to explain how it worked for me. If it doesn't provide the benefit I expect, then I'll still write a book but no one will buy it. ;) It'll be about all the skills I learned while waiting.

RentingForHalfTheCost says

Who sets prices ? (supply & demand
Not for housing unfortunately. I wish it did.

Me too. Statistics suggest I have a pretty high income even for where I live and still can't come close to affording a house where I want to live. That suggests supply and demand is out the window. Which is where the people representing the real money step in. "Put that house on lay-away!"

wthrfrk80 says

Why would a smart guy like Buffutt buy an investment that pays negative dividends (i.e. property taxes, insurance, and maintainence)? Is he planning on living in these houses? Is he planning on becoming a landlord?

Buffet can make mistake with billions and still live with no regrets. Buffet himself will be the first to say everything has calculated risk, and he has made some serious blunders in his time. However, he is not a trader, he is a long term investor (always has been). He invests where he sees things he can pick up for cheap, add his genius and make things be valued more than before. He has done that to more things that he touches than not. However, there are things he touches that he wished he didn't.

If you really want to be like buffet, then don't assume that he is God. He can be wrong and actually admits it, unlike other people with his wealth and track record. You can bet your life that he has some form of hedge on every risky things he does. He owns a huge chunk of Bank of America, and that doesn't make me go out and buy stock. His deal with the warrant is unlike anything us standard folks can get by buying bonds or shares. When you play with his kind of money, you actually are partly the market.

The original post: "Wait out the Bay Area market a few more years? . . . . Should we buy some crap hole under $400,000 in the area, or move to a place where we could have a nice home for $200,000?"

Then later the same day: "My business, and long built stellar reputation in my field is unfortunately here in the Bay Area. The Bay Area is a crap hole where everything is priced way to high, but I can't leave my job, and we need the medical with two kids."

So hrhjuliet seems to be saying moving isn't an option, but Bay Area happiness is out of reach (crap hole, prices too high, etc.). Sounds like a Catch-22 where hrhjuliet should be asking more questions of him/her-self than opinions from others.

Where in the Bay Area must you live where you can only buy a "crap hole" for 400k?

I just don't get it, there are plenty of nice areas one could buy a perfectly nice house for less than 400k.

edvard2 says

I sort of find stuff like that funny. The Bay Area is supposed to welcome people of different types and backgrounds and claims to be open-minded. Yet over and over again I read stories of people from here or other large metros moving to places like Raleigh and moving back " because of the rednecks".

I'm just trying to remember their reason for coming back, and 'Rednecks' is a generalization. It may be just more like 'lack of culture', 'small town feeling', 'distance from large metro area' ... combined with 'lower wages' and 'harder to find work'.

sheltielover1 says

Even Warren Buffett is buying homes now -

http://realtormag.realtor.org/daily-news/2012/02/29/buffett-id-buy-up-couple-hundred-thousand-homes#.T0679EH1Cqo.email

Funny, I read the article with care this time. Buffet is not saying he IS buying homes now. Here is exactly what he said.

"Warren Buffett, the billionaire investor and Berkshire Hathaway CEO, said on CNBC's "Squawk Box" recently that he'd "buy up a couple hundred thousand" single-family homes if it was practical. "

Then he goes on to say he believes the market is good for buying. Then why the "if it was practical" catch at the end of the sentence above. Come on guys, figure this crap out. Buffett is deep into BAC! 5 billion. Even if he thinks housing is screwed the shareholders in Berkshire Hathaway would have his head if he said anything different that what was in the article. BAC has some of the highest distressed homes on their books. One bad word from Buffett about housing and no gov't/fed intervention would stop the mass selling. Figure out people motives. They are normally not yours.

http://dealbook.nytimes.com/2011/08/25/buffett-to-invest-5-billion-in-bank-of-america/

Jimbo in SF says

Rednecks in Raleigh

Were they High-Tech Rednecks?

RentingForHalfTheCost says

Force realtors back into the workforce and we will be much healthier IMHO. Our unemployment rate would rise

Isn't there a war in Afganistan that needs personell?

Are your kids in public or private school? and will you keep them in that? are you moving older kids? those questions could cost you more emotionally and monetarily than the amount you are pondering for housing. If your kids are older and doing well with a network of good friends you should not move rent buy whatever, prices might not even change for 10 years who knows, if your kids are babies up to first grade max much easier to move and make new foundations. I think you will find paying or saving $100,000-200,000 dollars in the next ten years of your life will mean less that the people around you and the foundation of your kids. Unless you decide to obsess on the money. If you think something works financially for your present and future and you will be happy do it. If you think it might not work financially and emotionally in present in future, don't. No one has a crystal ball and can say the stock market is going up or down or housing is going up or down. Sometimes its easier to focus on not making a bad decision than focusing on making a perfect decision. Pulling the trigger is hard. Focus on making a decision better than most and you will be fine in my opinion. Just try and factor in the human costs and if you move maybe vacation there for a month first will be invaluable.

wthrfrk80 says

Were they High-Tech Rednecks?

LOL! Good one.... No, actually I've been to Raleigh a few times and have friends that live there. If anything, I'd call Raleigh " New Jersey South" because seriously half the city was full of people from the east coast along with quite a few Californians.

But adding to this a bit further, time and again I've encountered people who made the trek to places like raleigh from expensive metros with a mission to buy a "cheap" house. It never crosses their minds that they also should consider the areas they're moving to and what its like there. Its more than just "a house". Its also about the area's culture, history, weather, geographic and natural characteristics, economy, industries, arts and music, food, and so on and so on. I find that many who move with the primary goal of just buying a house in these places wind up being disappointed because in reality they really liked wherever they came from but moved just because they couldn't afford it and at the same time somehow almost expect where they move to be at least somewhat similar to where they came from. For example a common complaint I used to see on some of the relocation forums were people from NY in Raleigh or Austin whining that there were no Bagel shops, or people from Chicago would complain about there not being any good pizza.... etc etc.

Personally I have no problem moving somewhere different. I can live just about anywhere and that probably comes from me having grown up in a very rural conservative area. I consider myself to be a liberal and so is my family and somehow things were always fine for us where we lived. It was a huge adjustment moving to Metro California. By far its a lot more difficult living here than anywhere else I've lived. So if I can live in those 2 opposite extremes I can live anywhere. ( with the exception of Maybe Ohio)

I can imagine that if I grew up in the Bay Area it would be real culture shock to move anywhere else. I'm a Rust Belt Boy that moved to Santa Rosa (North Bay) for three months for an ill-fated job. I couldn't get over the combination of sticker shock and culture shock.

Still, I love to take vacations in coastal CA. It's a great place to visit, especially during the gloomy upstate NY winters. It's just not a place I want to live permanently.

Realtors Are Liars says

What a disaster upstate is.

Definitely.

Corning is a little better thanks to Corning, Inc.

Gas Fracking might bring in some $ and jobs, but NY state has a temporary ban on the practice pending further environmental study.

hrhjuliet says

The house is a good deal in the Bay Area, but a good deal here means it's still a crap hole.

Do you really want Patnet to green light you should buy a 400K crap hole?
A crap hole is a crap hole at any price.

RE can and will go any direction it damn well pleases. But mostly based on the economic policies of the Commander in Chief.
If you see a positive out look for the economy, then by all means you should buy. Though I would try to get somewhere as close as to the house of my dreams as possible. Because you may be forced to make provisions to stay there a while. Though you already seem like someone that would "Strategic Default" if the house became only worth 300K by the year's end.

You should buy not only the house you can afford, but the house you can live with.

edvard2 says

I sort of find stuff like that funny. The Bay Area is supposed to welcome people of different types and backgrounds and claims to be open-minded. Yet over and over again I read stories of people from here or other large metros moving to places like Raleigh and moving back " because of the rednecks".

A Southern Man don't need 'em around anyhow.

wthrfrk80 says

Why would a smart guy like Buffutt buy an investment that pays negative dividends (i.e. property taxes, insurance, and maintainence)?

He's all about...

"This is what I would do, if I were YOU"

He's full opinions but he doesn't have any tips or give up his secrets.
He would do America a greater service, by teaching the poor his stock pick tips, than telling rich people they should pay more taxes than he's willing to pay.

Realtors Are Liars says

And the poor deluded souls who saw a little bit of economic hope during the bubble actually believed it was realistic and permanent. Now prices are cratering upstate. At least the Hudson valley north to plattsburgh and east to VT.

Here in the Southern Tier we didn't have a housing bubble. Real estate here is too depressed for that. It's part of the Rust Belt, like Binghamton, Syracuse, Buffalo, and Rochester. Not sure about the RE market elsewhere in the state.

It is purely a personal decision. No investment such as buying a house is financial decision, it is an emotional decision.

Given the current condition, rent vs buy situation. it is same for me.

With Owner club, u get:
1. more time with kids since I dont have to look for another best rent deal every year.
2. no more packing stuff that u dont want to have it in first place
3. once in a while worry about interest rate, zillow zestimate of your house
4. an equity that does build over time. Hopefully useful in retirement
5. more time spent on internet reading about home prices
6. being in home prices are going up club

With Renters club, u get:
1. no worry about home price going down pbm
2. a place you dont like necessarily as you hop from one place to other
3. no prop.tax, insurance, etc and no tax break
4. worry about going up rent

Both sides have good & bad. What you weigh is purely personal.
If you find a place you & your family love to spend next 7 years, go for it, it is a relatively good time. We did!

FunTime says

I clicked on one of your links yesterday and found that the site had that entrapment feature where the back button didn't work in my browser. I double clicked. I triple clicked. Nothing. Powerful stuff. I recommend eliminating that dynamic of the site.

Huh? it's just a basic wordpress.com blog - nothing fancy. I couldn't recreate the problem. Can you give me a little more info? It's certainly not something that is supposed to happen. Thanks!

rajeevam says

With Renters club, u get:
1. no worry about home price going down pbm
2. a place you dont like necessarily as you hop from one place to other
3. no prop.tax, insurance, etc and no tax break
4. worry about going up rent

I've been a renter in the BA for almost 15 years now. I have loved each of my rentals, they were awesome. Loved where they were, the type of accommodations, and the ability to get anything fixed asap with no out of pocket from me.

I have also never had a landlord do a rent adjustment on me. I moved only because I wanted a change and glad I did every time. Instead of looking at it like a choir, it was a great time to do spring cleaning and assess why I was holding onto some junk. :)

You missed the single biggest benefit of renting. Not being locked into a particular job and city. The world is huge, and who knows where the opportunities will take you. Mine have taken me to Canada, Switzerland, Brasil, etc. and if I had been an owner I would have had to turn each of them down. Instead I just stop renting, put stuff in storage and go for it.

Realtors Are Liars says

mmmm... ehhh... I'm a bit skeptical of that. I know for a fact Syracuse inflated by over 120% and it's still 110% overpriced.

I could be wrong, but I'm not seeing a sharp rise in prices with subsequent crash in Syracuse. At least not according to Zillow.com and city-data.com. That doesn't mean prices couldn't fall. But it doesn't "look like" a classic bubble to me.

(1) Don't buy and put the money (down payment, monthly payments minus tax benefit, etc. into an intermediate (10 year) bond fund and wait for the bottom

(2) Meanwhile check out non-coastal Oregon and/or Washington state, or Austin TX, or the outlying areas of LA that are already hooked into the LA MetroLink or soon will be.

RentingForHalfTheCost says

You missed the single biggest benefit of renting. Not being locked into a particular job and city. The world is huge, and who knows where the opportunities will take you. Mine have taken me to Canada, Switzerland, Brasil, etc. and if I had been an owner I would have had to turn each of them down. Instead I just stop renting, put stuff in storage and go for it.

Agree. Flexibility is very important in this rapidly-changing world. The term "job security" is now a punch-line.

rajeevam says

With Owner club, u get:
1. more time with kids since I dont have to look for another best rent deal every year.
2. no more packing stuff that u dont want to have it in first place
3. once in a while worry about interest rate, zillow zestimate of your house
4. an equity that does build over time. Hopefully useful in retirement
5. more time spent on internet reading about home prices
6. being in home prices are going up club

These are super-generalized assumptions. The ironic thing is that my wife and I have lived in the same house for almost 9 years, have not had our rent raised ever, and saved up more money in that time than any home around the bay area has appreciated. Secondly, homes aren't meant to be used as retirement plan. You have to live in something. Another irony is that a lot of people buy homes because they view it as some sort of permanent thing. In the Bay Area the average homeowner only stays in a house for 5 years. I think this is fairly accurate given than on our street close to half the houses that have been bought have also been sold or in some cases sold more than once in the time we've been living there as most who buy only stay for 3-4 years and then for some reason sell and move away. If that's the case, why do people buy anyway?

hrhjuliet says

my son IS learning Mandarin and I think the Mandarin is going to be more useful for self-defense when he is an adult.

Isn't that what folks used to say about learning Russian?

Realtors Are Liars says

For those who think there will be any "equity" at all in the coming decades will be stunned beyond comprehension.

So should I join the ranks of folks like Apocalypsefuck?