patrick.net

Go for it. Almaden was made for you.

Paying $800,000 with $200,000 down I see a monthly cost-of-ownership of $3000/mo, $3300/mo with the lost interest on the DP.

PITI is $4600 but you'll get $1300 off in tax bennies. Check for the AMT to verify that!

The average cost of the 30 year life of the loan will be $2200/mo. After the loan is paid off your monthly housing expense will be ~$1000/mo. Try to get there as soon as you can, unless we get massive inflation such that $1000 is pocket change.

What your income is now, is only relevant for the loan application.

What you confidently expect your income to be for the duration of the time that you plan to pay that mortgage, and those property taxes, that is what will matter. Maybe that consideration will help you to answer your question.

what does a comparably house rent for? lets call it $4000 heck $5000 a month $5000x12 x15=
$900,000, I say buy it and figure out the Taxes and HOA and maint costs later.

You're making 230K combined? Let me ask, have the two of you, ALWAYS managed a yearly combined 230K salary, or is this new manna?
If the later is true, it would be foolish to plot the rest of your life on the best you've ever done wages, especially if the best you've ever done is recent times. Life is a never ending Curve ball.

I carry about half that as the sole bread winner in the house. My wife does not work.
We get by on about 70K of that, and try to save the rest. We still have disposible income to keep our kids happy, when they want THINGS, or when we buy stuff for the house.
Even though I could afford more in accommodations, I try to stay under my abilities so that if life gets sticky, it wont put me in the Toilet and upside down after three months.

My point is, that 230K combined income, you should not take for granted.
If I had a household income of 230K, I'd make damn sure I saved up at least 150K a year.
Then in this market, I'd just watch, save and wait. If I were the type that needed upscale gated communities(i.e. "Nice Part") I'd go to town with 400-600K in cash. That equates to at least 800K - 1million in cash. In Any market, even when Real Estate isn't in the tank. With the right motivated seller.

But really, if it were me and I had 200K saved up. I'd buy a 400K+ house for that 200K cash.
That's easy enough in THIS market.

@Sybrib
Of course I cannot be confident that our income will stay as is. I may lose my job, my husband may lose his - who knows what will happen? But we are both in our early 30s so it's safe to expect that our income will rise over time.

@Katy
I need to look into this. COuldn't find any properties renting on craigslist. need to call a few agencies to find out what these omes rent for. The partocular house we like is ~2300 sq feet, 4/2, huge yeard, nice, neat street. I'd assume a home like that would rent for at least 4.5K, but I am really guessing - no data to support my opinion at all.
No HOA, btw.

@Ten...
We haven't always been makign this much, of course. The income has been raising. We have just been lucky, I suppose been able to get promoted and keep jobs. I staretd 3 years ago at a company which stock tripled (pure luck on my part) so most of the down payment would come from my options.

Which brings me to the point that yes, you're right. For some reason we ar enot saving much money at all. We put 15% each towards ESPP, then 401 K, I put $500/month towards health-savings and dependant-saving plans. I put $300 a month towards daughter's college fund....it's crazy. We eat out only 2 times a month, I buy clothes at Gap and Old Navy, we drive modest cars. I guess vacationing every year is wht costs, but that makes us happy.

We should be saving money, though I am not sure we could save 150K as you suggest.

Also, I can buy a house in SJ for 400K, but not in a good part. Meaning, not in a part where I'd let my kid go to a public school or even play in the local park.
800K in SJ does not put you in an upscale community with gated homes. For that you need 1MM+.

I expect Patrick like other bears will eventually be proven wrong.

Housing prices in nicer areas will never be in line with rent so it comes down to lifestyle and
what makes you happy (sort of like those yearly vacations)

If I were you I'd be looking to buy.

Menya says

I put $300 a month towards daughter’s college fund…

super awsome! I was waiting for that statement fom someone. that's the best thing I've heard on this site in a long while!
IMO
If you really want it all, Give everything up. (easy to say when you don't make much)

have you ever thought about downsizing? get rent down 20%, save more a month. learn to live with less. One car only. One kid only. and even One income only. There is a life out there that has nothing to do with granite counter tops IMO.

Sure but Cash is king.

A little cash talks louder than a big mortgage.

But it will take leg work on your part, LOTS OF IT, and you'll have to be in the know.
But 400K CASH can buy up to 1mil that would otherwise have to be financed. And more so now than ever, as the seller would have to wait until Banks thaw out enough to loan out 1mil or find people with enough credit worthiness to get a 1mil loan.

By then the property would be foreclosed then you get the property for 400K cash, that's if you're in the "Special interests Investors Club" that is in every major market in America.

NORMALLY it should be IMPOSSIBLE to achieve what I'm suggesting. But remember this market is on it's Arse. This is Mamby Pamby land, and stories like this is the norm. For the rest of us cretins, we have to take our luck with the banks, and pay as much super retail as possible.

But Cash players...

Dear Menya,

Long time reader, first time poster. Your note got me to register. Feel for your situation, understand with kid and all wanting to plant some roots, it's in the genes. I do suggest before you buy just go to Trulia and punch in Willow Glen, CA or other areas you are interested in, and look at homes for sale by price level, and look at your 700 to 800K level. You will see a disturbing amount of foreclosures and pre-foreclosures. And things are just getting going. That, together with Zillow and Standard and Poors predicting serious down market would make me think more than twice about buying now.
I wish your family well no matter your decision.

http://www.redfin.com/CA/San-Jose/6212-Solomon-Ct-95123/home/990081

Perhaps something like this would work for you, but not more than 500K, leaving you only 300K in debt which would be managable with one salary. I would certainly question anything over 500K for 2K sq ft home.

Property History for 6212 SOLOMON Ct
Date Event Price Appreciation Source
Jul 18, 2010 Relisted -- -- MLSListings #81014471
May 06, 2010 Pending -- -- MLSListings #81014471
Apr 27, 2010 Relisted -- -- MLSListings #81014471
Apr 03, 2010 Pending -- -- MLSListings #81014471
Mar 26, 2010 Listed $599,000 -- MLSListings #81014471
Mar 02, 2004 Sold (Public Records) $615,000 6.4%/yr Public Records
Oct 27, 2000 Sold (Public Records) $500,000 53.2%/yr Public Records
Jan 27, 1999 Sold (Public Records) $237,000 0.6%/yr Public Records
Nov 24, 1993 Sold (Public Records) $230,000 -- Public Records

toothfairy says

I expect Patrick like other bears will eventually be proven wrong.
Housing prices in nicer areas will never be in line with rent so it comes down to lifestyle and

what makes you happy (sort of like those yearly vacations)
If I were you I’d be looking to buy.

Tenouncetrout says

My point is, that 230K combined income, you should not take for granted.
If I had a household income of 230K, I’d make damn sure I saved up at least 150K a year.

Tot:
You're forgetting that you live in an area (Florida) where housing has crashed to the point that a very liveable house can be purchased for less than $100k. In NoCal, it's possible that the same house would cost $600k.

Menya - IMHO you should look around and see if there's a place that you can afford that you honestly want to live in badly enough that if you become upside down you won't be pissed that you bought when you did. They (you know "they") say that we're heading for part II of a crash. They could be wrong, but I'm not betting on that. I'd hold off unless you find the exact place you want - and if you could afford it on one salary in case something happens.

Good luck.

Menya says

@Sybrib
Of course I cannot be confident that our income will stay as is. I may lose my job, my husband may lose his - who knows what will happen? But we are both in our early 30s so it’s safe to expect that our income will rise over time.

Sounds like you got it all figured out. Go for it!

Menya, here is my observation about your situation.

Family, at your stage in your family career, it is natural to think whether you want a second child, than third child, you should consider that a factor for your future housing need. Quality housing is expensive so there is no need to have a 4 bedroom house for a one child family. It's inefficient use of resource.

Career, ar 230K combined, you're rigth underneath the executive level in the company. Don't be satasified with that amount and work to take your boss job either at your company or in another. If you can make that amount is three years and save that amount via stock option, I think your education base is really strong. Let 200K individually be your next target. The second benefit is your boss is going home earlier than you and work less overall so more time for the family. The bottom line is you are working for your kids as well so the more you make, the more resource you can provide for them to succeed and set a good example for them to observe. Net worth starts with making $$. Given a choice, wouldyou rather save $$ by making more or spending less. I rather try to make more.\ A 10% raise and subsequent bonus and ESPP, 401K match is more valuable which is tied to your base for you is 10 years worth of raise for many other.

Based on how you save and spend, you're definitely responsible about $$. Make sure to take advantage of all the pre-tax programs and divirsify out of your company ESPP. Saving money is nice, but having $$ be the third breadwinner is even better.

You are right in the level that the morgage interest deduction is the most valuable so buying makes tremendous sense with a 600K mortgage, your housing cost is around 2K less tax benefit and principle paydown. A 700-800K house is cheaper than renting and you can still save as usual, if not more, especially if the home is within the school district that you can bypass private schools.

I know a bunch of people like you. You can buy at Old Navy and have modest car, but you will never live and go to school in the same neigborhood as the sub 100-K folks. That's the social science most people here don't understand. That's why it is always a safe bet to buy location and get just enough size needed. Those will always be in demand, especially to others like yourself. Don't bother looking at anything under 600K, those are not for you will regret it and trade up anyway. There are thousands of family that is deparate to move-up but can't due to being stuck in their townhouse/condo lesser neigborhood.

I use greatschools.org to grade out school district. The only true measure of a great school district is how high the scores are for the high schools. This is because they take more student from a broader area and is an accumulation effect from elementary, middle, and high school. My point is don't look at just the elementary school scores and conclude that is a good school district. From that perspective, why limit your area to just San Jose?

hope that helps.

SF ace says

I think your education base is really strong. Let 200K individually be your next target.

Tech feeder jobs are $115K or so now but $200K is WAAY up the org chart.

In 2000 my hiring manager at a tech company joked in my interview that peoples' salary demands were higher than his salary.

You have received a lot of sound advice. I, for one, would urge you to continue to hold off just a tad longer before making a purchase.

I really do believe the higher end market is trying to find its stable point. There aren't as many move up buyers out there....many are stuck where they are. You now need actual INCOME, which you have, to purchase homes in your price point. If you haven't forgotten, buyers were previously selling entry level homes high & rolling that gain into the type of home you are looking at. The higher end market doesn't have as many qualified buyers...therefore, I think prices will slide more.

As SF Ace says, you won't be happy down the line in a mediorce home....especially as your income grows. You want the best home you can get in the best school district. The greatschools.org is excellent - use it! If you wait a year to make the leap, you will have a larger down payment....and...what IF the higher end stuff does adjust downward? A 5% dip in a $800K home is a nice chunk of change. I say wait but you also have to look at what that your stock holdings are doing since this is funding your downpayment. My advice is based on their value staying stable.

Finally, I will say something to you mother to mother. Your 1.5 yr old feels safe because her parents are there to meet her needs and nuture her with love. The traffic, noise and lack of nearby green spaces doesn't enter her focus. She won't have memories of your rental. In fact, for several more years, her world will only be centered around YOU. I understand the urge to set up a nest. But, I promise you that you can make her life wonderful whether you have to DRIVE her to a park or whether you can simply walk with her to a nearby park. Try not to worry that the move needs to be done immediately because of your daughter. Whatever you decide, you are responsible with money, have savings for a downpayment, etc so certainly you will survive even IF you bought today and you lose a little equity. Good luck to you!

artistsoul says

Your 1.5 yr old feels safe because her parents are there to meet her needs and nuture her with love. The traffic, noise and lack of nearby green spaces doesn’t enter her focus. She won’t have memories of your rental. In fact, for several more years, her world will only be centered around YOU.

That's so true. I brought my (grown) daughter past the house we lived in from when she was six years old and she was surprised at how small it was. Children's perspectives are so different from ours, and their memories are of mostly good things like when you played hide & seek with them or took them to the park, or camping, or their friends playing with them... not that you played hide & seek because you couldn't afford to take them somewhere or to the park because you didn't have a yard - or camping because you couldn't afford a nice hotel.

They're resilient - so give yourself time and find what you want when it's right. If now is the right time, that's cool. But buy the place you really like, not just a place.

Tenouncetrout says

Even though I could afford more in accommodations, I try to stay under my abilities so that if life gets sticky, it wont put me in the Toilet and upside down after three months.
My point is, that 230K combined income, you should not take for granted.

If I had a household income of 230K, I’d make damn sure I saved up at least 150K a year.

from http://www.richcreditdebtloan.com/the-two-income-trap-by-elizabeth-warren-and-amelia-warren-tyagi/

"The Two Income Trap By Elizabeth Warren and Amelia Warren Tyagi"

The main premise of the book is that our current system of having to have two incomes to make ends meet is what is driving individual family economic meltdowns....

Warren, who is a professor of economics at Harvard, and her daughter Amelia, a business consultant, present a very strong case, backed up by numerous statistics that show.. what we’re spending that second income on that is the problem. The main case in the book is that the push to send our children to good schools has led to an incredible jump in real estate prices, especially near the best schools. In order to get into those schools, hefty tuitions must be paid. This system is perpetuating itself and creating a problem that many families cannot break away from.

... They claim that in the past, Mom was the financial “safety net,” where as now, most of her salary is going towards inflated house payments, car payments, and school tuitions, instead of into savings or investments as it should be.

If Troy's numbers are right we're talking about an extra $15k

per year to own a decent house instead of renting a condo. This is hardly going to put them in the poor house.

toothfairy says

If Troy’s numbers are right we’re talking about an extra $15k
per year to own a decent house instead of renting a condo. This is hardly going to put them in the poor house.

I know. Committing to a $2200/mo average housing cost over the next 30 years doesn't sound like a big risk to me, given the very real benefits of establishing a homestead now.

Though I do see further market damage since the state government's finances may in fact collapse next year.

There is no best-case scenario that is anything other than a major hit to the state economy. A $25B shortfall is a serious thing, but perhaps all the taxcutting in DC will give us more headroom to raise taxes here.

Menya,

My wife and are in a similar situation, although, our combined income is about $50K less than yours. I grew up in the San Jose area and know it well. Personally, I think you have to put Almaden in the number one position. Willow Glen is really nice but the middle and high school sucks. So, you probably will have to seriously consider private school. Almaden middle and high schools are great so no private school consideration.

I am concerned that you are only thinking about holding onto a house for 10 years (or there about). Based on that alone, I would say keep renting and saving. Almaden, Willow Glen, and Cambrian are all on the decline and will be for several years to come. Unless you are looking to buy and hold for 20 + years, don't bother, in my opinion.

Best of luck to you and your family.

If it were me I wouldn't want to be renting with your kid going through middle school and high school.

Why is 10 years not long enough? I realize there are some bearish people out there but You think we'll still be in a recession in 2021?

Hooch,

I learned a long time ago, the last thing the Cool and Hip Yuppies from All Over the World who came to SillyCon Valley want to listen to is the perspective of locals gleaned from their decades of living here.

I suppose they have a point. They got to where they are being so smart, and have been told so by others almost all of their life.

toothfairy says

Why is 10 years not long enough? I realize there are some bearish people out there but You think we’ll still be in a recession in 2021?

Sure. Why not? Got any ideas where growth is going to come to this economy, in the face of all the headwinds we're facing?

Sure, AAPLers and GOOGlers have a bright future this decade, but other than that it's pain city.

Troy says

toothfairy says

Why is 10 years not long enough? I realize there are some bearish people out there but You think we’ll still be in a recession in 2021?

Sure. Why not? Got any ideas where growth is going to come to this economy, in the face of all the headwinds we’re facing?
Sure, AAPLers and GOOGlers have a bright future this decade, but other than that it’s pain city.

It's hard to say where growth will be but at the very least I see it getting back to normal. It's not normal that tech companies shed thousands of jobs bracing for the worst recession since the Great Depression. We'll slowly come out of this.
Maybe not back to the heyday of 2007 but in the next 10 years unemployment rate below 8% shouldn't be out of the question.

Thanks all. Different opinions are very valuable indeed. I suppose I could stay in the home for 20 years, if I buy in the area where the kid can go to public middle and high school.

Troy, I am a novice when it comes to cost of ownership - please explain to me how it is I will be paying $2,200 over 30 years? I love that number, but I don't get it. Thank you.

As fas as having mroe kids, I hope that ina few years we may have one or two more. It's possible we will have two because we will have to undergo in vitro fertilization, which normally carries a 50-50 chnace of having twins. That's when 4th bedroom could become handy (if we get lucky enough to get pregnant, it was a struggle first time around)

Also, do you suggest we put down all 200K we could?

Ah, a part of me just want to stay where we are and not deal. I think this is such a big decision and I am not knowledgeable enough to make the right choice. I know so many people who got burnt, but also sveral people who just recently bought and think they had done the right thing.

Troy says

toothfairy says

Why is 10 years not long enough? I realize there are some bearish people out there but You think we’ll still be in a recession in 2021?

Sure. Why not? Got any ideas where growth is going to come to this economy, in the face of all the headwinds we’re facing?
Sure, AAPLers and GOOGlers have a bright future this decade, but other than that it’s pain city.

I'm going to agree with Troy. Where do most people expect value or growth to come from? US is in permanent decline in this global economy. Housing in US is probably 10 times more expensive than in most of the world where bubbles do not exist.

Since jobs are mainly going overseas, and salaries in US are declining so will the prices until the world will catch on. Supply and Demand. Only place where housing will go up is with inflation, and thats still a loss, not a gain, for those who actually understand what inflation is.

Bottom line, rotting wooden boxes don't produce anything which is why there is no reason to expect anything out of it.

Well, just my $.02

The chances of prices increasing in that market segment over the next couple years sits somewhere between 0 and a cold day in hell.

If you're not sure, I'd honestly wait until this same time next year and re-evaluate.

http://www.google.com/publicdata?ds=usunemployment&ctype=l&strail=false&nselm=h&met_y=unemployment_rate&scale_y=lin&ind_y=false&rdim=state&idim=state:ST060000&tstart=631152000000&tunit=M&tlen=249&hl=en&dl=en

Here's a chart of unemployment.
You can go back even further the pattern is always the same.
Employed people create demand.

My thought is that this time it's just bigger not different.

To answer original question.

Buy if it will make your life better and happier and will not overextend you financially. Consider what you will make 5, 10, 15 years from now. Will you have enough left in savings to be comfortable without work for a year?

Only you know your finances, just make sure it is a prudent decision.

as far as prices. They have to be going down. Interest rate will eventually go up, once it goes up prices will go down. You are better off with a big downpayment on a house that is worth a lot less, than someone paying a lot on a house that is upside down and you can't refinance ever because you got at at the bottom of the interest rate.

Hope this helps.

Menya says

Troy, I am a novice when it comes to cost of ownership - please explain to me how it is I will be paying $2,200 over 30 years? I love that number, but I don’t get it. Thank you.

$800,000 price, $160,000 DP, $640,000 principal @ 5.5% 30 year loan:

Total interest paid is $668,185.86 -- but you "save" $235,201.42 via the tax deduction, leaving $432,984.44 or $1202.73/mo in "average" interest costs over the 30 years.

Property tax will be: $296,160.00, less $104,248.32 = $191,911.68 or $533.09/mo (I don't model this going up since if it's going up you'll be happy that you bought!)

"Other" expenses aren't deductible and they run about $480/mo -- $180/mo for insurance, $100 for extra HOA/utils you don't pay as a renter, $200/mo maintenance accrual.

$1203 + $533 + $480 = $2216/mo average cost of ownership over the first 30 years.

To this you should add the compounding gains you will lose from your $160,000 down payment (@ 2.8% you're losing nearly $400/mo in accruing interest from the start), and whatever investment gains you are passing up by paying PITI instead of renting still.

The mistake I made deciding not to buy in 2000-2001 was comparing the fully amortizing payment against my rent, but that distorts what buying a house really is -- a part investment and part expense.

ChrisV says

You are better off with a big downpayment on a house that is worth a lot less, than someone paying a lot on a house that is upside down and you can’t refinance ever because you got at at the bottom of the interest rate.

This is also good advice. If you can save $100,000 per year you just might find a much more affordable market later this decade and just pay cash.

toothfairy says

Here’s a chart of unemployment.
You can go back even further the pattern is always the same.
Employed people create demand.

My thought is that this time it’s just bigger not different.

toothfairy, this nation has been kicking a lot of cans down the road. California's got a $25B budget hole that might get closed quite violently next year. That's about $1000 per adult of distributed pain, whether it's tax rises or spending cuts it's going to hit the economy hard.

Pelosi losing control of the House isn't going to be good news for California.

Even if Bernanke fires up some inflation it might just be FOOD inflation and ENERGY inflation. We pulled out our orchards so the former isn't going to help us at all, and all the oil jobs are up in Richmond last I checked.

I don't know what's going to be happening here this decade, but I don't really see any good news coming. I DO see a lot of BAD NEWS coming.

toothfairy says

If it were me I wouldn’t want to be renting with your kid going through middle school and high school.
Why is 10 years not long enough? I realize there are some bearish people out there but You think we’ll still be in a recession in 2021?

I don't know if we'll be in a recession in 2021. I hope not. My point is that for the past 15-20 years (if not the past 30) have seen a mindset in home purchasing that is, for lack of a better description, a "trade up" model. One starts with a condo/townhome, buys a modest SFR in a few years, then buys a bigger SFR a few years later, culminating in the "American Dream Home" a few years after that. In my opinion, those days are gone. One cannot utilize the "trade up" model without running the risk of getting trapped on one of the lower rungs. Menya's post came across to me as if there was a bit of the "trade up" mentality and if not that then an assumption that there would be adequate market elasticity and monetary resources to move some where else. I would caution against that. In fact, with a young growing family, I would buy with the mindset of there being one purchase...the home that the family will live in until parents retire, etc. That is the way it was done 40-100 years ago. I would recommend this path for a growing family. We live in very troubling times. Nothing can be assumed. Being cautious and conservative should be the mindset.

Well I agree with that. It's good to buy a house with maximum flexibility.
when the family grows you can trade up or expand.

But i dont think you need to buy the exact house that you see yourself in for the next 30 years. In most cases you'll end up buying too much house.

I would buy if you feel comfortable with the payments, have a rainy day fund and are able to continue living how you would like to. Prices may or may not drop - no one knows. If they do, it will be a little upsetting, but as long as you can keep making your payments, it's not the end of the world. We were in a similar position as you, with a little one, renting, etc. and have been extremely happy with our decision to purchase.

As for which of the 3 locations you mentioned, we've lived in Cambrian (felt it was so-so), looked into WG (schools are crappy) and loved Almaden Valley (though ultimately too far from where we work). If it weren't so far for us, we definitely would have picked AV.

Menya,

I'm in a very similar boat to you, our combined income is a little less and we don't have as much saved on the down payment. Truth be told the 20 percent down payment is the only thing stopping me from buying a house right now. I don't want to pay $500+ a month in mortgage insurance.

In the near term home prices are going to go down. A lot of people are saying that March 2009 was the bottom. On wall street there is a saying that picking tops and bottoms is the most expensive job you can ever do. Until we make a higher bottom to confirm the March 2009 low, we can still go lower.

Now in 2010 you had low interest rates and the tax credit to push home values up. Checking today's rates I see 4.90% for a 30 year fixed on yahoo finance. That is about .5% higher compared to the lowest low we hit a few months back. For every 1% percent the mortgage rate goes up home prices have to drop 10% to maintain the same affordability. So because of this quick rise in rates and it being the slow season for housing I would expect a nice 10% drop before April or May.

Based on all this why should you still buy a house? 1) you can afford it on your current income. 2) Who know how the market will look in 10 years. Might be up might be down. But that 20% down payment + 10 years of payments will mean you should be above water. 3) You will get 10+ years of enjoyment living in your home. 4) Based on your current salary of 230K, assuming a slow promotion rate and a cost of living increase of about 3%, you guys will be making around 310k a year in 2021.

PS. Anyone know if you can still get 2nd loans to cover the down payment?
PPS Menya, May I know the name of the condo complex you are renting in? I have a 1000 sq ft place and need to upgrade.

I did what you're talking about. Two incomes a little lower, but not by much. We bought on the peninsula by a good k-8 set of schools with okay high schools. We couldn't afford Palo Alto, but we didn't want to consider the south bay for commute reasons. (Not just our current jobs, but lower peninsula is a decent commute to almost any job location in the bay area.)

We bought in at 850k with a 25% down payment and a further 20% in reserves so we'd have enough for a year of us both unemployed and doing the repair work we knew we needed to do. We bought a house that hadn't been updated in decades, so we did refinish the floors, repaint, and rework a bunch of the wiring and lighting.

I'd say if you can stomach renting for another year or two, do so. Cut the vacation budget and sock it away in your house fund. If you really feel like you want to buy now, make sure you really like the things that can't be changed, like lot size, location in the bay, neighborhood, etc. Then make sure you're not buying the nicest house on the block. Look for a deal, and always bid low right now. And be prepared to walk away from any house before you even start bidding. When you buy it, start rebuilding a year's worth of living expenses since it sounds like you won't have that if you put 20% down now unless you get a smaller house. Once you have a year's living expenses saved, then you can work on a repairs emergency fund, once you have that stocked up, you can increase your vacation budget again to go to fun far away places. In the meantime, camp at Lake Shasta/etc.

We wanted a 4/2 but settled for a 3/2 because it was on a double lot, and we hope to be in a position to do a real addition/remodel in 10-12 years.

Just remember, to buy at the price level you're looking at, you need to be able to cut down on expenditures, and vacations are the most likely source. You don't have to get rid of them, just scale them down significantly.

We bought, and it wasn't the best financial decision, but it did cut down on the 'where are we going to raise our kid?' nesting anxiety, especially for my wife.

Thanks much.
I suppose it boild down to the deal I can get for my dream home. This one house we are looking at in Almaden could be had for mid to high 700s it seems which will put it at ~$340 per sq. foot.

Really questionable parts of SJ go for about $260 per sq feet. Everyone says that the bad parts have bottomed already. If bad parts bottomed at $260, then it seems to me that $340 for a GREAT (best schools in SJ) part of Almaden Valley is a good deal.

Maybe I am just going crazy being overwhelmed with this HUGE decision....

Menya says

Maybe I am just going crazy being overwhelmed with this HUGE decision….

We went through the same thing. It's not an easy thing to accept the responsibility of a $700k+ commitment. You'd be crazy not to be overwhelmed. I don't know a single person who wasn't completely scared (self included) when they purchased their first house.