patrick.net

elliemae;

Thanks for the advice. I have 1 loan 400k pre-approved. While I know I will be cutting it close my parents can help me out right now with bills and other things until they retire (2 or 3 years). by then I should be in a marriage? and making more money in my career. But you are correct.

Theo.

I think you're doing better than most guys in your age. But not prepared enough to afford 500K home. Your income can not support 400K loan. Even if you can get it anyway, your monthly mortgage will be close to 2000/mo. After that and other cost like utilities, insurances and taxes, your entire income goes to house. Of course, your parents can help you buy home, but how long do you think they can help you after retirement? That's your house and it is you to pay the mortgage. You need to earn at least 5000/mo net to afford a house like that. Period. Till then, keep saving.

“It still makes me laugh that you have to pay half a million dollars for some piece of shit home here in the Peninsula.”

You definitely don’t make decent money (it's decent for your age perhaps), that is a starting salary or secretary salary, which will not get it done in the peninsula. You can make whatever claim you want when you can buy a SFH without parental assistance and roommate chipping in and the responsibility of saving/paying living expense not under the parent’s roof. As far as I’m concerned, you’re just living off your parents (parents covered your downpayments, parent helped you qualified for loan, and parents covered your expenses thus far) and not qualified to make such brash comments.

Theo says

While I know I will be cutting it close my parents can help me out right now with bills and other things until they retire (2 or 3 years). by then I should be in a marriage? and making more money in my career.

Buy what you can afford on your salary alone, now. Parents are great - and if they are willing & able to help you out forever, that's cool - but assuming you'll be married in a few years (and that he/she will be able to make sufficient $ to pay his/her bills and contribute to the house payment) is a stretch. What if you marry someone who doesn't like the house - could you rent it for enough to cover the payment? You don't know what you'll be making in three years, either - it might be the same, or less, as you're making now.

According to http://www.mortgagecalculator.org/, a 30 year fixed at 4.5% of $400k is $2547 per month, not including insurance and assuming taxes are 1.25% and assuming no HOA fees. I don't know the tax rate there... But your net income of $2800 can't support this.

You've asked our opinion - we don't think it's a smart decision to buy.

If you’ve got $110,000 at age 26 you should have double that at age 30, no?

How can he save another $110k on a take-home pay of $2800 in just four years? Even living with his parents and having all his expenses covered, that would require a level of pauperism that wouldn't be worth enduring.

Theo, I have to say I recommend staying in your parents' house for a little while longer. You're looking at houses that cost many years' salary, and it's not like you're throwing money away renting while you look for a house. Keep living cheaply until housing gets cheaper.

elliemae says

But your net income of $2800 can’t support this.

I show a total outgo of $2436/mo on this. One roomie paying $1000/mo makes it eminently doable.

The problem is there's nothing for $500,000 I'd want to buy. $500k is enough to get you into EPA, no more.

My god, you're insane if you buy a house.

For a $500k house, you need to be making $150k a year or else you're seriously stretching yourself.

Not to mention, if housing prices go down 20% in that area (which I think there's a good chance), you're out your entire down payment.

How much can you rent that $500k house for? If it's $3000 a month or less, you should definitely rent...and that's more than you make a month after tax!

Not to sound like a dickhead or anything, but it sounds like buying that house may be the worst mistake of your life...a mistake many people have already made.

Ptipking222 says

but it sounds like buying that house may be the worst mistake of your life…a mistake many people have already made

I kinda disagree. You have to look at the future on this and not just react to recent events.

4.5% interest rate is pretty low, and there's every chance that it will go even lower. With $100,000 DP refing down in this case would be pretty easy and allow you to convert a 30-year mortgage to 15-year for the same monthly payment. Not bad!

Prices are high because rents are high. Paying $500K for a house that rents for $3000 would be an cash-positive deal at these interest rates.

And if gasoline prices go up, the fortress areas will be price-protected somewhat as the periphery gets slaughtered.

But there is an element of gambling involved. Should the state and/or local economy head south again, say goodbye to $100,000. Dude's only 26, so it's not much of a life savings, really.

But I don't think rents are going to head much more lower. The PTB simply have got to "turn the machines back on" ie inflate inflate inflate. Chances are buying now will work out.

Theo:

Whoa. Let's take a step back for a second. Here's some quotes from your own posts:

"I’m 26 years old"

"I’m not in a rush" (Could have fooled me)

While I know I will be cutting it close my parents can help me out right now with bills and other things until they retire (2 or 3 years). by then I should be in a marriage?

________

Dude, dude... my advice to you is go have a beer and relax a little. No, wait... relax A LOT.

You asked so I'll give my 2 cents: screw getting a piece of shit on the peninsula or anywhere else right now, and stop uber-grand-master planning your life at age 26!! Go travel to awesome places, and chase your job opportunities/any girls you get enamored with. BTW, the girl of your dreams may well hate the house you wind up getting. And all YOU will be able to do then is put $ into fixing the POS to keep it operable. No fun. And she'll dump you.

If your parents are so supportive that they will cash in their own securities (down to their freaking life insurance policy) to help you buy a $500K home that even YOU think will drop by at least 10%, (that's HALF of your saved/life insurance cash-in down-payment).... then God bless you and kiss the ground: Cherish your wonderfully supportive parents that not many folks get to enjoy, and tell them to NOT DO THAT. Relish your flexibility and lack of a financial burden around your neck.

I doubt any this will make any difference, you seem pretty set and who the hell am I, but whatever. But please do think about this - from my somewhat older perspective, it is excellent advice:

"Life is what happens to you while you're busy making other plans." - John Lennon

SF ace says

As far as I’m concerned, you’re just living off your parents (parents covered your downpayments, parent helped you qualified for loan, and parents covered your expenses thus far) and not qualified to make such brash comments.

So unless you have the income to buy a $500k+ house without assistance, you're not qualified to comment on the housing market? I don't get it. The guy's been upfront about his situation. If you want to bag on someone who thinks they're the shit because they can't separate parental assistance from their own sense of accomplishment then go right ahead, but personally I think the fact that you can't have a midlevel job and own a house on the peninsula says something in and of itself.

To the original poster, I don't think it matters that you can come to the table with a hefty down payment. The debt load you're looking at taking on just sounds too high relative to your income. Since you've been living with your parents your whole life and no doubt saving a bundle, move out. Find some roommates on Craigslist. Get used to what it feels like to pay for rent, utilities, food, etc. every month. Then decide how much debt you really feel comfortable taking on, and whether you're comfortable with needing to take on a roommate in order to cover the mortgage.

This isn't a knock against you, but I've stayed with my parents on occasion (summers, shortly after college etc.) and know a few people who stayed at home after college to save up, and your opinion of what constitutes a reasonable cashflow changes dramatically when you're dishing out for rent, utilities, food, etc.

Troy says

I show a total outgo of $2436/mo on this. One roomie paying $1000/mo makes it eminently doable.

As long as the roomie stays put, is a happy addition to the household, and there's no car payment, upkeep or remodel issues, and there are no other bills. And as long as the roomie pays on time. IMHO it's not a good fit.

These parents sound wonderful and, if it's not too much trouble, I'd like them to adopt me.

Theo, you bring home just about as much as I do. I am buying a house here in the Inland Empire (Sounds grand eh?) for $165,000. 180K was my max that I wanted to spend simply because I don't want to spend every penny I make on a house when I would rather use it to live a great life. My payments are 1,089 a month for everything. Just 100 bucks more than my single bedroom apartment and 200 less than what a comparable house rents for. The only reason I bought now was because I could comfortable afford the mortgage while still enjoying life.

I realize you want to stay put but there is nothing that says you have to buy now. Nothing says that you will be unhappy renting a place on your own either. No one here can tell you what the market will do with any degree of accuracy but we can tell you that to us, you are not financially set up to buy a house on the peninsula.

IMHO don't do it yet. Even with a roomate you would only have about 1300 a month for all the bills and fun. One night out chasing ladies you will easily drop $200. Living on your own costs $ (especially in your 20s), and the cash goes fast.

I suggest you don't buy yet. What you can afford in the area where you wanna live (nicer parts of Peninsula) is crap, so wait. Why rush? Why must you buy now?

Tell your parents prices will go further down. That's for sure.

With all due respect to your parents, there is an interesting contrast between their wishes for your life, and your own:

About your parents:

parents help accumulated about 110,000 for a down payment

My parents are under the assumption that we should get a house right now due to the 4.5% rate.

My parents own property and helped me pre-approve for a loan. So that is not the issue.

my parents have a lot of property they own and have been running a restaurant for 30 years. So they have helped me out with the loans. I’m already pre-approved.

But they are about 60 years old and nearing retirement. They cashed out their life insurance so they can help me with a down payment. Their logic is that the housing market has bottomed out and that rates are low so now is “the time to buy” they say.

You:

I have been looking at houses priced around 500k right now. My only problem is these houses are not the best.

I really believe the houses will dip another 10%.

in the next few years I do want to move out and get my life going.

I still feel that houses around here aren’t worth half a million dollars. It still makes me laugh that you have to pay half a million dollars for some piece of shit home here in the Peninsula

So in short, you are considering overpaying for something that you don't really like just to please your parents, who are bending over backwards to try to help you get a home, since they feel that it is best for you.

Not that it matters in the grand scheme of things - but I would be interested in knowing your racial heritage. Certainly the traditions and values that your family holds, within the broader context of your cultural heritage, are at play here. Your issues is about family dynamics between a parents and their son, more so than it is about buying a house.

One final thought. Lets say you decide to wait, and prices do fall another 10%, but rates go up to 6%.

Using the mortgage calculator EllieMae refereed to earlier, the payment if you wait would be

2,536 ($450k purchase price, $100k down at 6%)

vs. 2547 if you buy now.

So based on the math, waiting is better, even if rates do rise from these historic lows.

Tell this to your parents, and see what they say.

My advise is to put the 110k in a savings account, and keep your eyes on prices in your area.
Patience is a virtue.

your parents sound like they know what they're talking about. I would buy now too if I were in a position to buy
anything.

prices may fall 10% but what if they go up 10% and interest rates go up too? Very possible since as soon as high tech companies start hiring again there will likely a surge in home sales in the bay area.

also at the entry level price point on the peninsula you're competing with investors, flippers, move down buyers. Everyone wants to buy in that price range.

Not that it matters in the grand scheme of things - but I would be interested in knowing your racial heritage. Certainly the traditions and values that your family holds, within the broader context of your cultural heritage, are at play here.

Wow. First off I just want to thank everyone for their input. This is really good advice and I'm so happy I found this forum. Clearly, I'm young and confused and I know it's a big decision.

I'm 100% Greek, my parents are immigrants from Greece who came here in the 70's and saved up to buy a small restaurant. The Greek community tends to live with their parents. All my cousins still live at home (some of them are 29, 30). We do this because Greeks save every penny they have and view rent as just throwing money away.

What I have gathered from a lot of the comments on here is that I should wait another year or two. It doesn't hurt to look now but the housing market isnt going to explode in a year so it doesn't hurt to just sit tight.

I feel like I am trying to appease my parents more than myself. From day 1 I've said financially, I can't afford it unless I get married. My parents are of the mindset that this is like a "once in a lifetime" opportunity. I guess they just need to settle down as well.

I'm an Accountant/Financial Analyst making about 50k, I'm 26 have about 3 years experience now. I really want to transition into a higher paying job now that I'm past the entry-level but in this economy I guess I'm just happy to have a job.

I'm sorry if I've come off as spoiled but in our community the parents immigrated to this country to do this for their kids. While I have it a little easier in life, I do work hard and I did educate myself and I do save my money.

I don't want to move out because that's automatically about 1200 bucks that just goes to nothing just so I can live on my own.

Thanks for the advice and more comments/suggestions are appreciated. I read every one of them and really do think a lot about what is offered up by different people.

Theo, another question.

Not that I am disrespectable or anything, but do greeks expected to live in son's house when they get old and retired? Some asians and arabs still do. If so, that's something for you to take into consideration when you buy a home, I guess.

As a child, with supportive parents, you still can live in thier home and save. Once you got promoted or find another job that pays well, or you got married and the combined income is enough to support the home you want, you can pull the string without worrying too much.

Median home price in my area, the fairfax county VA, is about 650K. Home under 500K is plain old and kinda shitty. We do earn enough to afford descent house though, we're looking for smaller home. We choose staying in smaller home, enjoying the life with whatever left with us to dispose, rather than staying in bigger home worrying about the cost.

There is NO WAY you should even be looking at a piece of property for your low end figure of 550K let alone your high end of 700K. You can't afford it, even if you could get a loan, or your parents are foolish enough to co-sign for this nightmare waiting to happen. You're only taking home a little over 33K net per year, so you need to at least double your income. If you go through with this, it will be a curse and not a blessing. With only 110K down (lets use your low end 550K) you're going to have to get a jumbo loan and they are more expensive than a conventional loan of 417K and less. Even if you were able to get a conventional loan at 4.25% for 30 years fixed, your principal and interest payment would be 2,051.00 per month and that hasn't factored in taxes or maintainence.
Even with all the "perfect" scenarios, ie; the best conventional loan and lowest price home of 550K, that only leaves $750.00 a month for the taxes, maintenance, food, lights, a night out and just living life........you will be more than house poor, you'll be broke. Don't forget, life happens with all sorts of bad things........job loss, sickness, accident, divorce, and on and on and on. I never do anything without a plan A, B and C for contingent and that is why I believe that I have always been happy and have never had sleepless nights worrying about money. Make sure you have a year or at least 8 months of emergency fund and that will help you..... the more the better.
I don't know anyone that started out with their first home being a "dream home" or a place they wanted to stay 30 years. You have to work your way up the ladder making money the way your grandfather did.........slowly, the old fashioned way.
I hope you and your folks will reconsider this plan. I love real estate and think it's a great way to build weath. I bought my first house when I was 24 (without any help from anyone because my parents were poor) and retired when I was 40 years old, so I am all for making money, but it's the slow and steady way. Buy a house you can afford, live in it, enjoy it, be proud of it, work double hard to pay it off early, don't use it as an ATM, get a fixed rate 15 or 30 year loan and repeat the process using the last one as a rental property and slowly accumulating property. Don't be a flipper, hold on to it and you'll probably be ok.
I have never once lost money in California real estate but the shortest amount of time I have ever kept property is 10 years and the next shortest time is 17 years. Pay off the rentals as you go and you won't be kept up at night wondering if the tenant is going to pay or if you want to wait an extra month for the best tenant.......it doesn't matter, you have options and when you have options and are not desperate, you get the best tenents. Never, ever box yourself in to a corner and ALWAYS have options in life. Money = options.
Good luck and live life.......be happy and make wise decisions. When I was a kid and in my 20s and 30s when I would run into sucessful (not necesarily rich) people I would sit down with them and ask how they became sucessful. People will be more than happy to give young people good, sound advice, just don't take financial advice from broke people.

Theo says

I don’t want to move out because that’s automatically about 1200 bucks that just goes to nothing just so I can live on my own.

If you're happy living with the parental units, stay and save your money. If you feel that you should move out to "begin your life," become someone's roommate. And, no... you don't sound spoiled. Many people have parents who are willing and able to help out - but it's your life.

One bit of advice, tho. You've said that you can't afford to buy unless you get married... what if the wife doesn't make professional wages - or at the time that you start a family she wants to stay at home to raise the kid(s)? I'd plan on buying based on your financial situation at the time as well as potential situation. If you buy a place that can accomodate a family, but that you can afford on your salary alone, marrying someone won't be a financial consideration.

It'd be cool if, when you do get married, your spouse's income is extra and can either go toward saving for your future or paying off the house at a super-accelerated rate.

Wish you luck, btw.

Theo says

I’m an Accountant/Financial Analyst making about 50k, I’m 26 have about 3 years experience now. I really want to transition into a higher paying job now that I’m past the entry-level but in this economy I guess I’m just happy to have a job.

Thats exactly what people said in SV back in 1989 to 1993... glad to have a job.

Like I said, focus on your career. Im a controller and cpa currently in a tech company. I strongly suggest you get your CPA asap while you have a job. Companies currently are only looking for candidates who passed CPA for Acctng/FPA or worked for big 4.. and yes I think sucks! But you gotta do it. Study up on IFRS as well. If you can get your lic. you will be more secure in the future. If you can try to get into the big 4 or one of the smaller ones for 2-4 years. After which you will be able to get a manager spot public or private. Else your career will langish!

Second, network like crazy, get LinkedIn and start pluggin in from mgmt/coworkers at work to auditors and headhunters external. You will need it!
Hold off until a few years down the road until your 30+.

Theo, Thomas' analysis is spot on.

Unfortunately based on your profile (from Years of experience and salary), it appears that you are not in the client service industry, which puts you signifcantly behind your competition. You may not know it now, but every desirable position will be secured by people who had the client service background. Controller's like Thomas are tightly knit and they all have one thing in common, they all came from client service background and they all will look for the same thing. It has gotten a lot tougher and more competitive than when I started. Like Thomas' said, you'll have to help yourself as your career may languish.

If you truly care about moving up, start to get a master degree after work, expecially if it is on company dime. Look for work with progressing level of responsibility and challenge. The way I see it is if you are already good at something, move on and do something you aren't and out of your comfort zone. Look at prospective jobs @ VISA, Oracle, Salesforce, etc. and take a look at what they require and imagine if you can get that target job in 5 years, if not, you need to steer your career course toward that.

Regarding networking, it is not being connected, it is being connected in a meaningful way. Because most of the boss came from a big 4 or big 8 background, they will have plenty of connections built in already. Most of the higher paying job you desire is usally connected people who knows you professional and establish a reputation. The resume is just a formality.

Being happy with a job is a loser's attitude, you should think that the employer is lucky to have me. The fact of the matter is company's like Thomas' have a certain level of responsbibility they have to fulfill, and it takes a certain amount of budget to achieve it. If you're a problem solver, the companies will happily pay you, albeit what they think is market value and your margin for error and efficiency is lower now. They do have a problem for paying for non-performance. If you're in client service, if you can meet revenue goals, you'll get that raise you want on the meeting, albeit you're setting up yourself for a higher revenue goal next year as well.

and btw, you cannot afford that house you mentioned, invest in your career a little more. I find it funny you mentioned that you worked hard all your life. I graduated at UC Irvine @21, joined an accounting firm doing M&A work promptly, worked 8am to 10pm for 8 months a year and within that 8am to 12am for about 2 months. The rest, I spent getting a master's degree. My goals went from doing backend spreasdsheet and support work (prepared the deliverable) to teaching other's how to do it, to managing clients expectations to switching gears from M&A industry to finanicial industry and actually gaining my own books which went from 500K to 800K to 1.1M, 1.3M to 1.5M. So what happens during an economic downturn, they want 15% escalation instead of 25%. That was on the backs of two kids with my spouse's similar career path as well. I also took the opportunity to learn about the tax code and combine investment advice to tax advice as it related to investment, property, and estate planning, a pretty lucrative side business 3X more valuable than H&R block. Over the years, I also looked into selling property and casualty, life insurance to boost om the side to boost income even more. I don't even consider myself hardworking, that's just what it took to progress as you desired. (ultimately I was a little angry that you called a SFH in a pennisula a piece of shit home when obviosously you have no idea how to earn it)

I feel like I am trying to appease my parents more than myself.

I had that sense, based on your prior comments. Thankfully it sounds that your parents (like most) are loving, and want what's best for you, they just don't realize that traditional paths to wealth that woked well twenty, ten, or even five years ago, are much harder roads in the current economic environment.

Stick you your guns, focus on your career, and with a little luck and continued hard work, it will all work out in the end. Believe me, most of us here are in the same place... hard working, diligently saving, and frustrated as heck that housing prices in many areas still exceed what historical norms and underling incomes would suggest.

Just a little last minute perspective. When my wife and I started shopping for a house in January, we were surprised to find that we were also pre-approved for a loan up to $430k. We both earn professional salaries (she more than I) but even so our salaries are modest, combined they come to about $125k a year. We both work for UC here in CA.

At first we were looking at houses under $400k. Then we got a little dose of common sense and decided it would be best to look at places we could afford on one salary alone. So we set our max range to about $300k or so, trying to keep it under that figure. This way, one of us can change careers (or even get laid off) and we'd have no trouble paying the mortgage and other expenses.

I've always lived below my means and saved more than the average Joe. I'm not a huge saver but I try to put away about 15% of my income. Some of that goes directly into pre-tax retirement accounts a little I save for a rainy day.

Why am I not suprized that a Greek would want to get into more debt than they can handle?

@ zzyzzx:

hahaha. That actually made me laugh.

The thing about immigrants in the 1970's from other countries was that; that was when the American dream actually existed. You could work your butt off; get a small business and afford a decent house to live in.

Fast forward to today; I can't even afford to live in East Palo Alto if I was on my own or with a spouse. The middle class is dead because unless you make 200k you can't afford to live in California. It worries me because I don't want to leave this state.

I did have a talk with my parents; while I told them I will keep looking at houses (just to make them happy...lol). In my mind I will keep saving all my money for another year or two.

They are just so fixated on "4.5% rate" haha It's hard to explain to them; I even printed out the article on the main page of this website.

I just feel there is such a discrepancy between house prices and income here. All evidence points to another 10-15% decline in prices. Every day I see news (not positive) about the economy and foreclosures.

Theo, I am completely in the same situation as you. I'm also in San Francisco, age 29, and have about the same income as you. Troy is right. I had about $110k at age 26. I have close to $250k now.

What I've been doing is slowly shopping for homes. You should make low ball offers on short sales and hope for a bank to allow it. I am offering in the 400k range. Even 500k is okay as long as the home is 2 stories. We will renovate an in-law unit that will cover more than half the mortgage. Just be patient and do not rush it. I will also bring my folks with me once I get my property. The existing house we live in can be rented out for additional income that will help me in case I want to retire at age 30 ;)

I'm 27 and I wouldn't do it. My husband and I pull in what I consider to be a lot of money combined, and I would not buy a house in this area. We made that mistake by buying 4 years ago and have learned from it. We are faced with the idea of foreclosure, deed in lieu, or renting at an 18k loss every month with no write offs all because we bought in the wrong market and the home we purchased was way to small for our needs. I will never buy a home until it meets Patrick's rules of buying listed on his blog. It also must be an ideal home where I would want to live for a minimum of 15 years. That to me means it needs to be large enough for a family, the schools need to be good, and the home must be in a nice community. At 500k you probably won't find much unless you look in parts of San Jose, and I'm doubtful that home would meet my rule. Don't let your parents push you into anything you are uncomfortable with. They are older and housing was not this wacky when they bought (I'm assuming they did in the 80s). I think it's very admirable of your parents to want to help you buy, but they will also be potentially hurt if you buy in this market. Think about this... if young people can't afford to buy homes for their families without parental support, than home prices will have to come down. I only know a few people who are so fortunate where their parents are helping with a hefty down payment. Don't move to the east bay either, very hot and long commutes.

Good luck! I hope you rent for a while :).

Theo,

I also wanted to add one more thing. You aren't married yet. If you do plan on marriage your wife may not like where you live, and if you can't move she may be stuck their too. Wait until you make more money, home prices drop significantly, and if you do plan on marriage (and I know you can't predict the future) wait until you meet her to buy. She will also most likely help afford a bigger home, unless as others have mentioned she plans to be a stay at home mother.

One other thing. Do you want to stay in Ca for the rest of your life? I would love to live here forever, but fear the state is doomed. My husband and I may move away when we have children that are school aged.

Oh man. Don't do it. Many of my in-laws have the same immigrant mentality and are getting burned left and right because "rent is throwing money away" while it is a point of pride to own a house. They still think it's a good time to trade up to more expensive houses while keeping the underwater one to rent for a loss, because the prices have to come back up, no?

If it doesn't tick off your parents too much, get out of the house and live with a roommate for a few years - live a little and focus on your career, fun, and dating. Living with your parents in your twenties would make anyone want to buy a house.

Theo -- At 26, you've only recently become conscious on certain levels. You're still developing as a person in the most basic sense. I would strongly suggest moving out and spreading your wings a little rather than seeking out a giant pit to throw your money into so early on. If that cash is really burning a hole in your jeans, then at least do something more interesting with it. There are so many other vastly more interesting wastes of your time and money of which you could be availing yourself than a big chubby mortgage.

That said, everyone's different, and if a house in the peninsula is truly the pièce de résistance in your pursuit of happiness then my advice would be to do it right and continue to save. You seem quite disciplined in that department, which is rare at any age. I don't know what your lifestyle consists of, but try living beneath your means for a while -- I mean, live as spartan as you can possibly stand for at least another year, but ideally longer.

It's a small enough sacrifice, all things considered, and your savings will grow dramatically combined with whatever salary raises you might enjoy in the meantime. Adding to your purchase power is the likelihood that interest rates will have also risen during this time, which is what you want to see in order for prices to actually resume correcting in your area. Troy makes an interesting argument in some of his posts for the Fed taking rates even lower, but the Fed has hiked rates sharply in the past, and there's a lot more room for them to go in that direction than there is in the opposite. Whatever happens, and however you choose to go, being in a hurry seems unnecessary at best.

Your parents clearly want what is best for you, but don't be a proxy for your parent's ambitions. Check out Elia Kazan's the Arrangement to see the direction that can go in.

Wow...Theo....I was just trying to make my requisite 3 comments in order to post my newbie questions when I stumbled on this post. While I agree with the advice offered to you (although I must disclose I did not read it all), I am now fearful to post my own inquiry. Blunt is an understatement.

@ condo

"One other thing. Do you want to stay in Ca for the rest of your life? I would love to live here forever, but fear the state is doomed."

The sad thing is I cannot picture leaving the state even though I wish I never grew up here (that way I would never have all these connections; It kills me when I look at house prices around the country I could have a 800 mortgage for a mansion). All my friends, family, and soul is in California. I will eventually make more money; I am very ambitious and will start studying for my CFA. I am making entry-level money. Also yeah I expect home prices to go down a little but I cannot see homes on the Peninsula ever selling for under 500k unless we go into a total depression. People make too much money, the weather is too nice, and the neighborhoods are nice; no matter what Real Estate rules say this part of the bay area won't follow them (at least I believe so).

@Dicky

Yeah, I agree it is a little motivating to get out of here; however my parents work 7 days a week (they own a restaurant in San Francisco) and they really have no rules for me. They are really relaxed and treat me like an adult and most of the time I am just home by myself. I do want to save a year or two more worth of salary before considering either buying or renting (haha I don't want to be a 30 year old living at home eww turn off? lol)

@Austin

Yeah basically your post summed up the conclusions I have come to. I do want to live in the Peninsula I love the neighborhood I was raised here and resided here my whole life. The houses are nice and the area is nice. The thinking is that this area will never be this low again (there isn't any property in the Peninsula under 450k even after this 30ish% decrease and a 4.5% and low property taxes make my parents (and me in some ways) think that this opportunity might not come by any time soon (even though reading through basically all these threads and comments and forums and blogs that the Real Estate market isn't going anywhere soon).

More Info:

While I understand it will be hard and am no longer in a rush I will have a roomate or two. I figure my mortgage to be somewhere around 2500 (with property taxes). I make about 3000 after taxes a month. Rent cost around 800-950 here so with 2 roomates or even 1 it is very possible for me to do it. Obviously I couldn't live on my own.

This part of the Bay Area is very valuable just because new homes aren't built here. The neighborhoods are middle, upper-middle class. The weather is nice and the commute is very good. While it was effected by the bubble (which area wasn't?) The prices haven't exactly crashed.

Hi Theo,

I'm very glad that you have thought about this and will have roommates to help cover costs. I still think housing will go down even in the peninsula. People made a lot of money during the dot-com boom, but no one our age did, because they were still in college. Now young people have to work very hard, and are pulling in low salaries compared to older generations when they were in their twenties. What I am saying is that our generation will be buying more homes within the next decade, but will not be able to afford that much in a mortgage. The older baby boomers in that area will be retiring soon and will be looking to move into smaller places, which will put a lot more inventory on the market. If the young cannot afford to buy the homes, who will? Therefore, I believe that home prices will have to come down even in affluent areas.

The good thing about your situation, if you do buy now, is that even if you do take a hard loss in the next year or two, and hang onto it for at least a decade, you will probably be able to sell for at least the price you purchased it for.

I also wanted to state the hidden cost of home ownership:
1) HOA--- do not buy if you will be in an HOA. Terrible waist of money and you can't write that off.
2) If you buy an older home, you will be faced with issues such as plumbing, termites, old roofs that need to be replaced, and not to mention the cost of cosmetic repairs. Those things cost $$$. Already this year, we will be hiring someone to replace a screen window and will need to hire a plumber to fix the sink in our bathroom. As a renter you are not responsible for such items.
3) Annual property taxes, usually in the mid thousands. Also not a write off.

In addition to that I have thought about another item you may want to consider. If you decide to go back to school after your CFA you will need to find a school close to your home, limiting your options. In addition, you will need to be able to afford your home and your tuition. My husband wants to get his Masters, but can't since he needs to be able to pay the mortgage every month. Student loans will not cover the costs of home ownership.

I think that whatever decision you make will be the right one because you have considered all of the possible scenarios. You just need to realize the limitations it may cause you down the line. Good luck, whatever you decide to do.

Theo,

get roommates to help you defray the monthly cost in the early years after you've bought the place. It's how my partner and I were able to get our place when we were your age and not be stressed about making the next payment.

Theo says

How annoying are your parents? Times have changed, kids are returning home, there’s no shame in living at home,
My parents are just fine they don’t annoy me. But they are about 60 years old and nearing retirement. They cashed out their life insurance so they can help me with a down payment. Their logic is that the housing market has bottomed out and that rates are low so now is “the time to buy” they say. While I do agree with them; I still feel that houses around here aren’t worth half a million dollars. It still makes me laugh that you have to pay half a million dollars for some piece of shit home here in the Peninsula (I guess it’s even more funny that people were paying 620-640k for the same stuff 4 years ago).
I’m not in a rush I was just seeking advice for what other people think (especially people that live in the Peninsula).

There you go, just follow your instincts. The fact you called it a piece of shit and dont want to spend half a million on it tells you right there at least what NOT to do.

You are young and may need to move to where the jobs are some day. If you own, will you be able to sell, or will you be stuck like so many house owners?

Theo,

If you know where you want to live then you've got the most important piece of the puzzle. I'd keep your eye out, but prices aren't going up. Higher rates will HELP you by pushing the price lower, so don't let someone convince you otherwise.

I can see you less than excited for your options @ 500k, but be realistic when it comes to a starter house. I'm 40, and my wife's co-workers have kids in their 20s looking for the same luxury as their parent's home, and end putting off kids and job opportunities to become a slave to too much house. I hope you're not expeciting your parent's house, because you don't want to BE your parents, do you?

You said "we" in the first post. Who is the other 1/2? Is this going to be your house or "our" house? One thing I'm absolutely certain about is if its not "our" house (as in her house) it ain't gonna work. Don't waste your time on a practice house like I did, twice!