patrick.net

1 or 3, mainly because a 2 hour drive each way to work would make me go crazy. I think the bay area job market will remain strong for at least another 3 years and that will drive prices up even more.

Buying costs half what renting does now if you do it smart.

Put 20 percent down which allows you to get an intrest only arm at say 2.875 from union bank. Rate fixed for 5 yrs or 7 watever u want.

Im paying 1800 a month total after paying prop tax and figuring the tax write off on a 677k loan. Avoid a 30 yr fixed or any loan with principal payments. People think they are safe, opposite is true. If you had bought in 06 with a standard 30 yr fixed and made say 65k in principal pmts all that cash woulda been flushed/still under water. Of course there is always down payment at risk- but why pay principal down? With IO loan i can still choose to pay principal if i want ir not. And my small pmts dont blow up DTI ratio for more loans.

I bought in the East Bay, which is about 1/2 the cost or more of the "RBA" and my commute is around 40-50 minutes each way. Not great, but better than paying a million bucks for a starter home in the RBA.

Long commute will ruin your life long term IMO. Imagine instead you work out 2 hours a day vs 2 hours in traffic? You could be fit and healthy and happy vs fat stressed out and wore out car.

Pocky, I'm not quite following your line of thought. What is the ultimate goal in your situation? It basically sounds like a way to do what is effectively renting, for a lot less than what an actual rental would cost, and with little/no equity you can walk if/when that time comes. It actually has some appeal now that I think about it. "Equity" always smelled like bullshit to me since you have to sell & move to actually get it back.

If you are paying this much for a 1 BD I sincerely hope that it's in a luxury apartment complex. Paying this match for some dump builit in the 50s or 60s with no central air/heat, washer dryer in unit and built in microwave is nothing short of grand theft larceny on the part of your landlord.

bmwman91 says

Pocky, I'm not quite following your line of thought. What is the ultimate goal in your situation? It basically sounds like a way to do what is effectively renting, for a lot less than what an actual rental would cost, and with little/no equity you can walk if/when that time comes. It actually has some appeal now that I think about it. "Equity" always smelled like bullshit to me since you have to sell & move to actually get it back.

my ultimate goal is build equity while living cheap in nice home.
I never care about paying off the house there is no way i will live here very long. I work in IT so the 'same job forever' is hopeless goal. When job moves i move. I will NOT commute long term. the house gets paid off when i sell it and pocket the profit if any.

PockyClipsNow says

Long commute will ruin your life long term IMO. Imagine instead you work out 2 hours a day vs 2 hours in traffic? You could be fit and healthy and happy vs fat stressed out and wore out car.

Been there, done that, it sucked ass!

Indeed the best thing where I live now is a 10 minute commute only 7 miles to work :)

I know tons of folks who suffer from the hellish commute from East Bay to Santa Clara since they bought cheaper homes there a while back. What I may do long term is find a job that lets me commute most of the time and only require once a week in the office for meetings so that I can not spend all my cash on a home.

SJ says

Currently in good job for past 2 years

Based on this alone RENT.

Ok so when I have a few million bucks in the bank than it is ok time to buy?
I am getting killed on my taxes!

SJ says

Ok so when I have a few million bucks in the bank than it is ok time to buy?
I am getting killed on my taxes!

You are going to pay cash for your house?

If you can explain how paying a banker $1 of interest so you can save .33 cents in taxes is a good deal go for it.......

PockyClipsNow says

bmwman91 says

Pocky, I'm not quite following your line of thought. What is the ultimate goal in your situation? It basically sounds like a way to do what is effectively renting, for a lot less than what an actual rental would cost, and with little/no equity you can walk if/when that time comes. It actually has some appeal now that I think about it. "Equity" always smelled like bullshit to me since you have to sell & move to actually get it back.

my ultimate goal is build equity while living cheap in nice home.

I never care about paying off the house there is no way i will live here very long. I work in IT so the 'same job forever' is hopeless goal. When job moves i move. I will NOT commute long term. the house gets paid off when i sell it and pocket the profit if any.

You should rent close to your job if this is your goal. Flipping a house in 3 years is a huge gamble and has a significant opportunity cost.

Buy at 50% or less of asking price(your decision). Do not give a damn about the seller, agent or bank. They don't give a damn about you.

Definitely not number 2. It's all about your quality of life. I've known people that thought they could handle similar commutes and were hating life within a year. It also increases transportation expenses that could approach 1K per month when you consider gasoline and auto maintenance. It sound to me that you are doing well.

SJ says

Currently in good job for past 2 years and have saved up plenty of cash. Bank interest and CD rates suck and maxxed out 401k. Rent is 2k a month and want a bigger place but not sure if it would be better to:

1. keep renting in bay area

2. buy house 2 hours away for half cost of RBA

work remote half the week and commute 1-2x a week for meetings

3. buy townhome in RBA

Ideas? I am in cramped 1 bedroom apartment right now

This seems like a lifestyle decision for which only you can weigh the intangibles.

You could do better than $2k/month for a cramped one bedroom apartment. If you are uncertain about buying, look for a cheaper rental and bank the savings.

If your job is telecommute friendly, look in outlying areas that are a 1-1.5 hour commute. A 4-6 hour total commute per week isn't bad.

@ducsingle5313 thanks! Thats what I will do.

Long term my job allows for at least 50% telecommute so 1-2 hours away with a fuel efficient car is possible. Even better with a pilot license and plane even easier!

PockyClipsNow says

Long commute will ruin your life long term IMO. Imagine instead you work out 2 hours a day vs 2 hours in traffic? You could be fit and healthy and happy vs fat stressed out and wore out car.

Yes. That's your opinion. My parents have done commutes their whole lives and lo and behold they are just fine. I too have done it for years and I too am also fine and dandy.

The whole commute issue is a test of wills - for example, would you drive extra 10 miles each way to save $100,000 plus whatever you have to pay in interest for it? I say yes, but many people can't handle it.

dublin hillz says

The whole commute issue is a test of wills - for example, would you drive extra 10 miles each way to save $100,000 plus whatever you have to pay in interest for it? I say yes, but many people can't handle it.

I agree. If we lived closer to work, our mortgage would be 50% higher. Even if we rented- again its about 50% higher than where we live in the east bay.

The ironic thing is that if you live in say- Palo Alto, Atherton, and so on, its not like your commute will automatically neccesarily be shorter in time. Ever driven around any of those places in the mornings or afternoons? I used to. Since the schools are supposedly perfect there, a LOT of families have kids who live there and as a result from my experience the traffic was totally messed up in and around those places.

So sure- maybe my commute takes 40-45 minutes each way. But I'd bet many who paid 50% more to live in one of the Silicon Valley enclaves are spending at least 20-30 minutes just getting through all of the morning and afternoon school traffic.

I know tons of folks who suffer from the hellish commute from East Bay to Santa Clara since they bought cheaper homes there a while back.
Is your company along the light rail or reachable by any of these commute shuttles for ACE?

Keep renting. 30 years is way too long to be in debt for a wooden structure. Save and invest your cash and buy a house with cash in 10 years. Don't believe all the hype about the current value of a home is normal. Today's home prices are grossly inflated. When the fed is not giving away cash, yours will have so much value and all the unemployed, over-educated bay area folks will be drooling over your doe. Keep it protected and safe and let it grow. Houses in the SFBA will drop further than anyone will think possible. Rent and be patient. I see cracks all over this place. They are just getting deeper as we move along.

HEY YOU says

Buy at 50% or less of asking price(your decision). Do not give a damn about the seller, agent or bank. They don't give a damn about you.

If your offer is 50% then you will beat me. ;)

SJ says

@ducsingle5313 thanks! Thats what I will do.

Long term my job allows for at least 50% telecommute so 1-2 hours away with a fuel efficient car is possible. Even better with a pilot license and plane even easier!

Another thing to consider is social opportunities in outlying areas where the ratio of white collar to blue collar workers is lower than on the Peninsula. Of course this could work to your advantage if you are a single professional and don't have hangups dating non-professional types. Not as much of an issue if you are married.

RentingForHalfTheCost says

yours will have so much value and all the unemployed, over-educated bay area
folks will be drooling over your doe. Keep it protected and safe and let it
grow. Houses in the SFBA will drop further than anyone will think possible.

Really? Care to put that in nominal terms? For example, in March 2009, Case Shiller for SFBA hit 117.71 alot of people here said to "wait" because we were nowhere near the bottom.

Today, that same index for the SFBA is 146.23

So do you really believe the SFBA is going to smash below those March 2009 lows (nominally) so as to justify further waiting? If so by how much? 110? 100? 80?

I ask because I am just curious if you really believe this, or if this is just more of the breathless hyperbole this site seems to relish.

CDon says

RentingForHalfTheCost says

yours will have so much value and all the unemployed, over-educated bay area

folks will be drooling over your doe. Keep it protected and safe and let it

grow. Houses in the SFBA will drop further than anyone will think possible.

Really? Care to put that in nominal terms? For example, in March 2009, Case Shiller for SFBA hit 117.71 alot of people here said to "wait" because we were nowhere near the bottom.

Today, that same index for the SFBA is 146.23

So do you really believe the SFBA is going to smash below those March 2009 lows (nominally) so as to justify further waiting? If so by how much? 110? 100? 80?

I ask because I am just curious if you really believe this, or if this is just more of the breathless hyperbole this site seems to relish.

Absolutely, I believe it. Prices have at best around here gone up 10-20% even though rates have been cut in half. The demand is not there. The lack of sales confirms that. Low inventory here is not a good thing. It means that many don't want to or can't sell into the prices.

Cash will be king again. Currently now it is taking a bath because what is a few more hundred billion to bail out the greedy. That money train will have to end at some point. The banks and gov't just love it when people lock into 30 years of foolishness. Screw them, keep your hard earned cash and buy when the tide goes out and then we realize who is swimming naked.

All the positive indicators you can post here are all heavily manipulated by NAR, banks and the gov't. Haven't we learned anything from the crash? How quick we forget. What? Everyone got some morals all of a sudden? B.S.

robertoaribas says

Consider if you work 8 hours, and commute 10 minutes each way, compared to working 8 hours, and commuting 60 minutes each way.

option 1: work + commute = 500 minutes a day

option 2: work + commute = 600 minutes a day.

option 3: sleep at work = 480 minutes a day + no debt. I did it in the SFBA for 2 years. Awesome commute.

RentingForHalfTheCost says

Cash will be king again. Currently now it is taking a bath because what is a
few more hundred billion to bail out the greedy. That money train will have to
end at some point. The banks and gov't just love it when people lock into 30
years of foolishness. Screw them, keep your hard earned cash and buy when the
tide goes out and then we realize who is swimming naked.

All the positive indicators you can post here are all heavily manipulated by
NAR, banks and the gov't. Haven't we learned anything from the crash? How quick
we forget.

Actually, that is the thing to remember...while all these indicators are indeed artificial, there is absolutely no hint that they will be relaxed anytime soon.

And herein lies the problem. The entity you are attempting to "wait out" has the lowest carrying costs in the world (and no, thats not hyperbole). Certain sectors have been manipulated for multiple human lifetimes - and all those who elected to "wait" are now dead.

On an unlimited timescale, yes absolutely, you will be right. However, IMHO, there is a certain arrogance to suggest you will see it all come crumbling down on your watch - and enough so that it warrants you to "wait" for it to happen.

In any event, it will be interesting how long you maintain that the March 2009 CS value of 117 was not the nominal bottom. The current value of 146 has not done it as you seem resolute as ever. Will 150 change your mind? 160?

Further, even if it does come crashing all the way back down, what of all the intervening years of rent payments? Whatever nominal value you see happening, it better smash the 2009 bottom to justify 3, 4, 5 years of rent payments that otherwise would never have happened. Put another way, if one was ready to buy in 2009, why would they pass on CS 117 only to rent for 4-5 years AND THEN buy when the index fell back down to 117 say in 2014?

Bottom line, be very careful with your advice to wait. Everyone knows the maxim - the market can remain irrational longer than one can remain solvent. The corrolary should be - the govt can play kick the can longer than one can remain alive.

Don is right. Human lifespan is short compared to an empire/currency regime.

All you can count on short term is inflation and perma zirp.

Its really shocking how they lower rates to nothing stealing retirement from all savers counting on CD or bond income. Of corse gov pensions guarantee 8% return. Slowly we turn into cuba - gov employees and welfare recipients are ever larger groups. Anyway you can still buy with low down and walk away if it crashes!

The commuter times discussion is strictly down to personal opinion. Again- I hear a lot of people whine about commuting to and from work. Many choose to live closer. If that's in the Bay Area that means you're gonna' pay more... a LOT more to do so. In other words, if commuting is a sacrifice in some people's eyes, then so too is paying a lot more money to live closer. Both are not exactly stellar outcomes.

Commuting doesn't bother me. If it does others, then that's there issue and I have no issue if they make the decision to live closer and pay more. That's not my preference.

CDon says

Bottom line, be very careful with your advice to wait. Everyone knows the maxim - the market can remain irrational longer than one can remain solvent. The corrolary should be - the govt can play kick the can longer than one can remain alive.

I hear you Don. And it very well could outlast me. However, the fear of being part of the masses that run into the fire is much greater to me than the fear of renting for life. I don't see any difference in being a renter verses and owner. Maybe it is just me, and I have been extremely lucky with landlords. Right now in the SFBA I even feel the benefit of renting verses owning financially. I sleep well at night knowing that if we do have major adjustments (which are long overdue IMHO) then I have many great choices.

1) move out of the area altogether
2) downsize to a smaller rental if rents rocket
3) wait for the correction and buy when everyone else is selling

I am one of the lucky married guys that actually have more drive to buy a house than my wife. If it was up to her, we would just rent forever if needed.

Now, that is not without saying that we have two lots outside of the SFBA that we could start building at anytime. That and a few houses/condos that we rent. I am not allergic to real estate, my beef is only with the SFBA.

Also, without saying that my focus in life to make it quickly to retirement is through my investments and my job. I was fortunate to ride the tech wave with one company and now trying to do it again. These are things I can control and play a valuable part. What happens with the interest rates is at best just a guess. This could take decades I know and it won't really bother me if it does.

Everyone has their own unique situation and position when it comes to buying or renting. In the end it comes down to what makes financial sense ( for you) and not everybody. For us buying made sense because interest rates got so low and we had been saving for 12 years. For others its not the best time. Do what makes you happy.

edvard2 says

Everyone has their own unique situation and position when it comes to buying or renting. In the end it comes down to what makes financial sense ( for you) and not everybody. For us buying made sense because interest rates got so low and we had been saving for 12 years. For others its not the best time. Do what makes you happy.

Try, but in the end as history will be my witness. Many many people of my generation will overpay for a house. That realization will suck and cause a spike in depression drugs. Just saying...

RentingForHalfTheCost says

Try, but in the end as history will be my witness. Many many people of my generation will overpay for a house. That realization will suck and cause a spike in depression drugs. Just saying...

If someone can afford the payments and they are following basic economic principles then they aren't overpaying. If someone buys and can't afford the payments or stretches themselves thin, the yes- they are overpaying. I didn't buy for an investment. I bought a house to live in. If it goes down in value I don't really care. I have retirement accounts for my investments. I waited for a very long time to buy and after I did, there are definitely some nice aspects to owning. Its been great so far. It isn't for everyone. But ultimately its down to the individual because its either always a good time to buy or a bad time to buy- on an individual basis.

SJ says

1. keep renting in bay area

My advice would be never spend more than 300K on a house you can't afford to buy out right, even if you do finance it.

I think this very much depends on the nature of your commute. I commute 1 1/2 hr one way b'cos I live at Santa Clara/San Jose while working in SF. But, about 50 min of my commute is on caltrain, so it doesn't bother me. I get the time to read the morning news & stocks, and evening to relax/listening to music before reaching home. But, if I have to drive for 1 1/2 hr one-way, I would move.

An interesting thread from one year ago. Question on whether to rent or buy, RFHTC said the SFBA was going to CRASH! Wondering if he really meant that, I asked:

CDon says

Really? Care to put that in nominal terms? For example, in March 2009, Case Shiller for SFBA hit 117.71 alot of people here said to "wait" because we were nowhere near the bottom.

Today, that same index for the SFBA is 146.23

So do you really believe the SFBA is going to smash below those March 2009 lows (nominally) so as to justify further waiting?

His response:

RentingForHalfTheCost says

Absolutely, I believe it. Prices have at best around here gone up 10-20% even though rates have been cut in half. The demand is not there. The lack of sales confirms that. Low inventory here is not a good thing. It means that many don't want to or can't sell into the prices.

Cash will be king again. Currently now it is taking a bath because what is a few more hundred billion to bail out the greedy. That money train will have to end at some point. The banks and gov't just love it when people lock into 30 years of foolishness. Screw them

So to recap, per Case Shiller

1. SFBA bottomed at 117.71 in 2009
2. When RFHTC said to wait for the crash, it was at 146.23
3. Today it is at 180.19

This was pretty much my concern when I questioned the "don't buy now, 2009 was NOWHERE near the bottom" mentality... It was bad enough not buying at 146 waiting for the crash. Yet, not only did prices not retest 2009 levels they went up ANOTHER 20+%.

So the question now RFHTC is - as the years tick by - as the 2009 levels recede further and further into the horizon - do you

(a) double down on your 2013 advice and tell people to STILL rent and wait for it to smash below the 2009 levels before they buy or

(b) concede, "gee I guess that was the (nominal) bottom", and move on?

For me, BTW the answer is B. For some people, even at the bottom it never was affordable to buy in the SFBA. Yet such is life. For me, I would rather tell them to move away or embrace permanent renting as a lifestyle (like they happily do in other parts of the world). For me, it is better to accept what is going on than to give people false hope while leaving them in a perpetual state of limbo, pining away for a CRASH so as to justify their (now) 5 years of renting and waiting.

But again that is just me - so what about you RFHTC?

Don't buy a house just to buy a house. Do you have a family yet? Do you know where you want to live? House will tie you down significantly, and will cost a lot. It's a major life decision.

PockyClipsNow says

but why pay principal down?

That's what banks want to get to:
- they create the money from thin air,
- they get a rent from a building they don't own,
- they do none of the work (maintenance)
- and take basically none of the risks - since your 20% down is there to buffer them.

So why pay the principal? Because what I've just listed is a terrible deal for anyone but the bank.