patrick.net

Yes, I agree. Prices here are disproportionately high compared to rents.

Prices here are disproportionately high compared to rents.

I don't think so. Here's a random house I picked off redfin's map:

http://www.redfin.com/CA/San-Jose/3478-Parkland-Ave-95117/home/711396

$780,000. With a 3.25% FHA loan that's $3000/mo PITI less the P.

Over 30 years the TCO averages $2000/mo.

MUCH cheaper than renting!

Now, the question is, Dirty Ben has forgotten how many QE bullets he's fired. Are you going to go for it? Do you feel lucky, punk?

I remember when I was looking for places in 2000 that $800,000 was the price level in near Apple.

Now it's ~$1.4M.

http://www.redfin.com/CA/Sunnyvale/631-Dunholme-Way-94087/home/758980

Interest rates have fallen from 8% to 3% over that time, and Apple is a different place in the S&P500 than it was then.

Interest rates can still go to 2%, btw. That would knock $500 off the monthly PITI.

Bellingham Bill says

$780,000. With a 3.25% FHA loan that's $3000/mo PITI less the P.

You forgot the 'P', which many people can't afford in SF.

Bellingham Bill says

I remember when I was looking for places in 2000 that $800,000 was the price level in near Apple.

Now it's ~$1.4M.

Bill, that has more to do with politics in Communist China than anything else.

there goes the victim mentality again.....

I was thinking that San Francisco area was the most overpriced in the country, not just California?

Most overpriced? Could be.

Most stuck-up? No doubt about that.

So we went to see a property in Santa Clara. 3/2.5 bath. Built in 1992. Townhome.
Close to Lafayette avenue and Great America pkwy, not the best part of Santa Clara. Listed for $450,000. I work, my wife is a student. And price seemed reasonable for us.

The real estate agent, stuck up as usual, drove a nice nice car; her name was Mei Ling told us during the open house that offers were due by Wednesday.

I checked back a week later. 40 offers. $528,888. Sold for cash. The "888" implies probably a chinese buyer paying cash. $78,888 over listing price....

What are we supposed to do? Just stay in a dump apartment where they jack up our rent 200 to 300 every year. $1650 to $1900 to $2100....

Very very disheartening.

This is the house i was talking about in the above post

http://www.redfin.com/CA/Santa-Clara/2309-Gianera-St-95054/home/990589

ZoabKhan, there is not much you can do. If you want to stay in the Bay Area your options are limited to, "put up and shut up" and, "leverage yourself into the money-spending contest." Rents only started going nuts in the summer of 2011. Prior to that I was negotiating rent decreases almost every year. I can't see rents increasing 15% per year for too many more years. I mean, they could and everyone would just have to deal with it, so who knows. This place is a psychotic salt lick for people with more money than brains, and we are steaming straight into bubble 2.0 here. It really pissess me off because I was born and raised here and I would like to live in peace near my family. I won't sell my financial security for an overvalued wooden box, though. The new normal here is now a surreal situation where making money to achieve arbitrary status symbols is more important than life. Plan accordingly.

bmwman91 says

we are steaming straight into bubble 2.0 here

If the Bay Area is steaming anywhere, it's back to the Stone Age, or at least the 3rd world country status. And, it's steaming there a lot faster than the rest of the country. Here are just some of my recent observations of the BA regression into the abyss:

1. Street lighting has
been getting worse and worse. I've recently visited the Taiga region of Russia, which had better street lighting than the Bay Area.
2. Road conditions are horiffic. There are huge pot holes on all the highways, and even the toll bridges are not exempt. Higher toll fees do not mean better road conditions, around the Bay Area.
3. The entire South Bay Area region is infested with Rats and Roaches, because, San Jose is saving money on sewer treatment. These critters act as if they own the place, burying themselves deep inside the crevices of your house.
4. Termites has always been a common issue in the Bay Area, but even that has been getting worse.

So, people who say that the Bay Area deserves a special place under the sun, are only saying that, because they are desperately trying to justify their purchase of an overpriced real estate.

ZoabKhan says

This is the house i was talking about in the above post

http://www.redfin.com/CA/Santa-Clara/2309-Gianera-St-95054/home/990589

That's a lot of money for that property, especially considering what it went for in 2003.

Bigsby says

That's a lot of money for that property, especially considering what it went for in 2003.

Yes, the bubble is alive and still kicking, even in the raunchy parts of the Bay Area.

Bigsby, houses ALWAYS double in value every 10 years.

dunnross says

people who say that the Bay Area deserves a special place under the sun, are only saying that, because they are desperately trying to justify their purchase of an overpriced real estate.

Yep. But what you get, for what you pay, is Bargain Prices compared to what you get, for what you pay, in Shanghai. Or Hong Kong. Or Singapore. Or Taipei. Or Mumbai. Or Bangalore.

dunnross says

I can tell you that the Bay Area is not a bargain compared to Bangalore

Friend, no price in Bangalore can buy you into Cupertino Union School District.

Bargain Prices.

B.A.C.A.H. says

Friend, no price in Bangalore can buy you into Cupertino Union School District.

The schools are better in Bangalore. This is why Bay Area has more engineers from Bangalore than from the Cupertino school district.

You can get into the top luxury in Bangalore for about $100/sq ft, today. Same thing in San Jose costs over $500/sq ft:

http://www.99acres.com/Residential-Apartment-Flat-in-KR-Road-Bangalore%20South-2-Bedroom-bhk-for-Sale-spid-V8044715&pos=SEARCH

In NYC, top luxury means almost $10000/sqft.

Yes, so, as you can see, the whole myth about housing in places like Mumbai and Bangalore being more expensive than the Bay Area is a complete bogus, perpetrated by people who want to keep house prices high, over here. Now, Hong Kong and Tokyo is a different story, but you cannot compare a city like Hong Kong or Tokyo to 99% of the Bay Area, because these are cities, and the Bay Area is just a notch above rural.

Bigsby says

ZoabKhan says

This is the house i was talking about in the above post

http://www.redfin.com/CA/Santa-Clara/2309-Gianera-St-95054/home/990589

That's a lot of money for that property, especially considering what it went for in 2003.

Not in that part of the bay area. Back when I still lived in the BA and only had two kids I would have been willing to bid on that house at that price, no doubt.

That house would cost under $2000 a month if you put 20% down. My rent on a tiny town house in sunnyvale was over $2500.

Just because numbers are big doesn't make them unreasonable. The Chinese family that bought that house most likely has an income north of $150k/year, and probably a large amount of cash contributed by the husband's parents (who will live with the family at least part time). That house is a very reasonable for that couple.

Kevin says

The Chinese family that bought that house most likely has an income north of $150k/year, and probably a large amount of cash contributed by the husband's parents (who will live with the family at least part time). That house is a very reasonable for that couple.

But the average household income for that area is only $70K, and this is just a townhouse, so not even a median priced house. Since I know that a majority of people who live there are house owners, what you're telling me is that most people who live in the area cannot afford to buy a house over there. Doesn't that make for much more foreclosures down the road?

dunnross says

Yes, so, as you can see, the whole myth about housing in places like Mumbai and Bangalore being more expensive than the Bay Area is a complete bogus, perpetrated by people who want to keep house prices high, over here. Now, Hong Kong and Tokyo is a different story, but you cannot compare a city like Hong Kong or Tokyo to 99% of the Bay Area, because these are cities, and the Bay Area is just a notch above rural.

South Mumbai is over $500/sqft. Other parts are cheaper, but still run over $200/sqft. Considering the per capita income is about $3000 in Mumbai...

dunnross says

But the average household income for that area is only $70K,

Average household income is not the same thing as average buyer income.

dunnross says

this is just a townhouse, so not even a median priced house.

I'm not so sure about that. A *lot* of the housing stock in Santa Clara is town houses. They don't let anybody build apartments so it's the highest density option there is. If you're on a 3000 sf lot anyway, a townhouse is a better use of space than a SFH with some bizarre little alley in between houses. The median home in SC being a townhouse would not surprise me one bit.

Zillow (data isn't great, but it's the best I can find) says that median for that zip is $767,000. So this is a relatively cheap house in that zip.

dunnross says

Since I know that a majority of people who live there are house owners, what you're telling me is that most people who live in the area cannot afford to buy a house over there.

city-data (only source I can find) says that santa clara as a whole is about evenly split between renters and owner-occupied (55/45).

If we assume that the upper half of incomes are the ones buying and the lower half are renting, the median household income is probably over $100k amongst buyers.

Furthermore, someone making $70k absolutely could afford this home, if they put 20% down. We're talking 33% of income (~$1950/mo mortgage) -- a high, but not ridiculous ratio. $1950 is much less than rent in SC. A 1 bedroom apartment in that city costs over $1500; a 3 bedroom will go for north of $2000. A home equivalent to this one will be $2500-3000 easily.

Yes, this home is unaffordable to a first-time buyer trying to use FHA. Those people would need to look elsewhere if they want to buy; either keep renting, or buy a condo instead.

dunnross says

Doesn't that make for much more foreclosures down the road?

As long as people can comfortably afford their mortgage payments there won't be foreclosures.

The people who simply borrowed way more than they could afford have already been swept out of the system.

Barring a major amount of job loss in that area, there's no reason why existing buyers should have any trouble making payments.

Bigsby says

outh Mumbai is over $500/sqft. Other parts are cheaper, but still run over $200/sqft. Considering the per capita income is about $3000 in Mumbai...

The average home size is also a 250sf apartment. And that's among the relatively small portion of the population that buys homes. Most well-to-do people rent. About a third of the residents pay little to nothing for housing, because they live in slums. $5/mo or less (i.e. free) is common. This is for what amounts to a dry spot in the corner of a room.

The average legitimate rent in mumbai is around $300/mo. The average household income is around $8000/year (per capita income is a bullshit figure, never use it), so this is expensive but within reason.

The average person living in Mumbai is poor, unemployed, and possibly illiterate. Like most third-world cities, there's a small nugget of the place where the wealthy people who are disproportionately compensated live and they're surrounded by hordes of the poor. That kind of wealth inequality doesn't last for long, fortunately.

Bigsby says

Considering the per capita income is about $3000 in Mumbai...

If these people are so poor, why are they buying houses in the Bay Area?

dunnross says

Bigsby says

Considering the per capita income is about $3000 in Mumbai...

If these people are so poor, why are they buying houses in the Bay Area?

I didn't say they were ALL poor.

Bigsby says

South Mumbai is over $500/sqft. Other parts are cheaper, but still run over $200/sqft. Considering the per capita income is about $3000 in Mumbai...

I don't know where you're getting those numbers from? Here is one for $80/sq ft:

http://www.99acres.com/Residential-Apartment-Flat-in-new-panvel-Mumbai%20Navi-1-Bedroom-bhk-for-Sale-spid-H6772561&pos=SEARCH

dunnross says

Bigsby says

South Mumbai is over $500/sqft. Other parts are cheaper, but still run over $200/sqft. Considering the per capita income is about $3000 in Mumbai...

I don't know where you're getting those numbers from? Here is one for $80/sq ft:

http://www.99acres.com/Residential-Apartment-Flat-in-new-panvel-Mumbai%20Navi-1-Bedroom-bhk-for-Sale-spid-H6772561&pos=SEARCH

Google the figures rather than a specific example.

Bigsby says

dunnross says

Bigsby says

South Mumbai is over $500/sqft. Other parts are cheaper, but still run over $200/sqft. Considering the per capita income is about $3000 in Mumbai...

I don't know where you're getting those numbers from? Here is one for $80/sq ft:

http://www.99acres.com/Residential-Apartment-Flat-in-new-panvel-Mumbai%20Navi-1-Bedroom-bhk-for-Sale-spid-H6772561&pos=SEARCH

Google the figures rather than a specific example.

Yup that is a suburb. Not Mumbai proper. Try getting an apt in Mumbai proper for less than 150k USD.

India is in the throes of a once in a multi generation lifetime property boom. If and when that collapses and the Chinese one too-the USA will look tame in comparision.

lostand confused says

Yup that is a suburb. Not Mumbai proper.

Then why are we comparing prices to Santa Clara? Is Santa Clara considered a Financial Capital of the country, now?

dunnross says

lostand confused says

Yup that is a suburb. Not Mumbai proper.

Then why are we comparing prices to Santa Clara? Is Santa Clara considered a Financial Capital of the country, now?

You were the one who mentioned Mumbai.

I guess San Francisco has been overpriced since the gold rush. I never understood what is so great about the area. Please bay people, don't get defensive, but instead tell me why you are willing to pay 3 plus times more to live there. I've visited pier 39, golden gate bridge, alcatraz, coit tower, dined at Earnies. Those places are nice and maybe with the weather and somewhat higher salaries a 20% price premium might be appropriate. When I think about people paying those prices, I just can't believe it.

Zakra,
You cannot beat the Yayyyyy area. Scenery, 4 seasons(none extreme), things to do, people, diversity, schools, universities, jobs......

Back to the townhome for sale. Who has all this money to buy these townhomes, Cash? Is the younger generation doomed to rent overpriced apartments in this area?

The house i listed is in the arm-pit of Santa Clara. It is next to the Amtrak rail line, "on the other side of town"

Zakrajshek says

I guess San Francisco has been overpriced since the gold rush. I never understood what is so great about the area. Please bay people, don't get defensive, but instead tell me why you are willing to pay 3 plus times more to live there. I've visited pier 39, golden gate bridge, alcatraz, coit tower, dined at Earnies. Those places are nice and maybe with the weather and somewhat higher salaries a 20% price premium might be appropriate. When I think about people paying those prices, I just can't believe it.

There is a bit more to it, in fact natives usually never hang out at Pier 39, it's fairly dirty and the food is sub-par. The climate is very stable and sunny but not hot, you can do everything form windsurfing/surfing to skiing/snowboarding fairly close by. It also has a really good diverse crowd of young(er) urban professionals and is suited to work hard and play harder without the hectic and stress of New York. And the food is diverse and superb. That being said, I agree that it is pretty overpriced and that's why I am renting close to the ocean but still in the city where you can small houses reasonable rents. I hardly participate in consumption (bike to work mostly) so I only pay too much for good food - and for my family ;) I would avoid buying a place in SF, there maybe OK deals though in other areas in the bay area which are less desirable.

It wasn't this overpriced. My colleague bought a house in 1999 in Fremont, CA -walking distance to BART and not a boxy McMansion, but a nice house with garden-for 330k+ . The economy was much better and so were the state finances.

Bigsby says

You were the one who mentioned Mumbai.

No I didn't. BACAH mentioned it, first. What I am saying is let's compare apples to apples here. If you compare Raunchy suburban Santa Clara to downtown Mumbai, then, it's not a fare comparison. Here is what I call a fare comparison:

Downtown Mumbai Luxury Appartment: $500/sq ft
Downtown San Francisco Luxury Appartment: $2000/sq ft

Raunchy Santa Clara: $500/sq ft
West Mumbai Suburbs: $75/sq ft

So, I still fail to see were foreigners from Mumbai find bargains in the Bay Area.

Bigsby says

Wouldn't that be more meaningful?

No, because, you were saying that these foreigners come here and think BA prices are a bargain. Affordability has nothing to do with it.

dunnross says

Bigsby says

Wouldn't that be more meaningful?

No, because, you were saying that these foreigners come here and think BA prices are a bargain. Affordability has nothing to do with it.

Er, no, I wasn't saying that.

Darrell In Phoenix says

Bigsby says

Why not compare affordability rather than actual sq ft prices? Wouldn't that be more meaningful?

Why would you want to avoid a price per unit measure my friend "Bigsby"?

Oh, I don't know. Maybe because when you're comparing prices in one city with those in another, and one of those cities has (apparently) a household income of $8000 and the other one has a household income more than 10 times that figure, then...