patrick.net

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.

Buying a house is scary as hell, even if you were to do it all cash.

It sounds like you two are reasonably prudent with your cash flow. Buying a house would make me feel 'house poor' even if I wasn't paying any more than you would have on rent because you can't ever LOWER the amount you pay by downsizing without a massive effort.

I'm guessing that the rentals for a house are going to be around 3k-3.5k, and your monthly costs for buying at 750k right now will work out to around $4200-$4500. $3300 for the mortgage, $800ish for taxes, and a couple hundred for your home owners insurance.

That's a huge jump from 2k a month, so it's going to be crazy sticker shock when you do it. If you decide to wait, rebudget as if you were making a 4500 monthly payment to see how much of a pinch it is. If you don't wait, brace yourself.

It does look like you're bit overwhelmed and quite exited about the idea of buying home. I guess you already did your math, and I assume you knew what you're getting into. Now, ask yourself, ask your husband about few things.

What do we want the most by buying home?
Why do we need X beds, Y baths and Z sqft backyard?
Are we sure this is the location we want?
Do we know all the hidden costs and fees related to the home?
Can we still afford it when one of us lose the job?
If we buy this, are we living in it or are we babysitting it?

In most cases, "I buy because I can" is not enough when it come to home buying decision. You'd better have practical answers on them. Go for it when you think you got pretty good answers on them.

If I were you, I'd go for 550~600K home. Why? To be safe and not to be one like someone I knew. The goal is to keep housing cost under 30% of current net income, and to make sure I am buying the right sized home that I can handle myself. Sure, I think you can afford 800K home as long as nothing bad happens to you guys, but I want you to make sure you guys are not pushing it over your comfort zone of any sort because it's you that are responsible whatever happens to it. Regarding that someone I knew part... it's not that they're in trouble or anything. They're doing alright. The only thing I chuckled about is the fact they got beautiful backyard. The husband is spending whole sunday afternoon mowing the lawn while the wife is going to "couple meeting" alone. The reason they bought the house w/ huge yard is their kids. Now, they are making the kids doing it whenever they get back to home from the college. lol.

If you really want to live in Almaden and you like your kid to go to school there, then before you buy you should be confident that you can pay it off quickly, say, within 10 years.

I know of a friend who held off buying for a long, long, long ... time, 15 years. Then in May 2000 she bought with 25% down. In Aug 2003 she paid off the mortgage. After that she didnt care if the whole CA blew up, or more accurately spiral down the drain.

MoneySheep says

If you really want to live in Almaden and you like your kid to go to school there, then before you buy you should be confident that you can pay it off quickly, say, within 10 years.
I know of a friend who held off buying for a long, long, long … time, 15 years. Then in May 2000 she bought with 25% down. In Aug 2003 she paid off the mortgage. After that she didnt care if the whole CA blew up, or more accurately spiral down the drain.

Well said...completely agree. So completely different from the typical US consumer. Very smart.

I know most of you think it’s not a good time, but here it is.

Both husband and I work, we make about 230K combined and have about 200K to put down towards a house.

Same here except that in 2008 when we bought our house, our combined income was $340K due to certain one time financial situations. Since then our income has hoovered around $270K - Maybe a little higher this year.

Currently we rent a 2/2 condo in downtown SJ, in not a great area to raise a child. We used to rent a 2/2 apartment in Sunnyvale with a rent of Our kid is 1 1/2 and I’d like to move to greener pastures, meaning areas where she can play in parks, less traffic, quieter…in addition, in 3 or so years we will have to look into schools. We pay 2K a month (it’s one of those newer, nicer condos, granite, 1300 sq feet, big bathrooms, blah…blah).

Similar situation again except that we didn't have kids at the time and we lived much more frugally than you do ($1,300 2/2 apartment with bad management next to caltrain tracks and outside laundry + only one car between me and wife). On weekends however, we only ate out + took a small vacation each year. Otherwise, we saved everything we could.

I am nervous. The rates are good and that makes me want to buy now. We are looking to stay in the home for 10+ years, until our child is done with at least middle, if not high school.

We were finalizing our home purchase when the financial crisis hit in Sept. 2008. That was the height of nervousness with people predicting end of western financial system. Since it was a short sale it took a while to materialize, but literally the level of nervousness was so high that no one was buying a house at that point. We were able to negotiate hard and ultimately it cost us $1M and is in a good school district in one of the so-called "fortress" peninsula areas.

Any advice is welcome!

There is definitely an increased standard of living and mental peace that comes with living in your own house and I guess the key question for us was how long we were willing to wait for the housing market to get done crashing while living in a shitty place and while being able to easily afford a better place to live - we waited four years (2005 to 2009) accumulating around 100K each year if not more.

We gave 25% down payment on our $1M house and have since paid off another 15% and now have 40% equity in the house. All of it our own hard earned money (no soft loans from family, friends, or relatives, etc). Our total mortage payment right now is $3,200 and this house would rent for $3000 if we put it on market tomorrow. We are told (by educated opinion) that our house has not declined in value since we bought it, but really I wouldn't care even if it did decline by 10% or so. 10% loss in house value seems very acceptable to me against tugging two heavy loads of laundry from my apartment to the apartment laundromat (a few hundred yards distance) every week :-) or listening to the caltrain and goods train passing by that train track that was literally 50 yards away from my apartment.

Menya,
Good luck. One thing though, If you are comparing $/sqft then compare same size homes. For example, a 2000+ sqft home in bad san jose location, you can have for $500K whereas in good location, same size house would cost 700K+ for sure. Smaller houses have higher price per sqft as compared to bigger houses.

Alraaz - I was. the homes were similar in size.

You know the market is cockeyed and buyers and sellers are jaded when people earning 230K a year are even having this discussion... about San Jose.

I just saw that the price is $800,000.

Is that house built out of gold with diamond windows? That sounds like financial suicide, leading straight into indentured servitude and years of regret down the line.

Considering this is a 2,000sf (4/2) and not a mansion with lots of land, this would be like paying $100,000 for an entry level honda civic.

I find it almost unbelievable how expensive homes are in SJ. I grew up in the Bay Area, but work in Davis at the moment. The wife and I just bought a place in Vacaville, CA. Closed on Dec 10.

To give you some perspective, it's a 1973 ranch style house, 3/2, 7900 sq/ft lot, 1560 sq/ft house with a pool. The house has been improved significantly and has no major issues. Cost us $285k. It's pretty much move-in ready. Our monthly payment is comparable to rents in the area.

How is SJ so much nicer than Vacaville? I just don't see it. Are all the salaries there so much inflated that everyone can afford to overpay? It just seems crazy.

a4adam says

Are all the salaries there so much inflated that everyone can afford to overpay? It just seems crazy.

house prices just take a long time to drop. there will continue to be price drops in SJ in the coming years.

75th% apr06@$1.1M-dec10@$660k. 56mnth. avg of $8k decrease/month; $96k/yr
50th% apr06@$740k-dec10@$445k. 56mnth. avg of $5k decrease/month; $60k/yr
25th% apr06@$600k-dec10@$300k. 56mnth. avg of $5k decrease/month; $60k/yr

it'd be interesting to plot a linear trend line against the data to see how the actual prices fluctuate around the trend line.

http://www.housingtracker.net/asking-prices/san-jose-california/
Month SFH+Condo Inventory 25th Percentile Median 75th Percentile
Dec 2010 7,109 $299,450 $444,975 $659,000
Apr 2006 4,426 $599,966 $739,333 $1,098,833

Adam, you really don't see much of a difference between SJ and Vacaville? I don't mean to pick on Vacaville, but for the most part, it is in the middle of nowhere. You have so many more job opportunities in SJ. The pay is probably a little higher in SJ, but not really enough to justify alone the higher cost. Almaden Valley of SJ is a lot nicer than Vacaville; we're not talking the sketchy parts of SJ. I'm guessing the schools are a lot better too. There is simply a much higher concentration of people in SJ causing prices to stay high. Vacaville doesn't have that issue. I'm pretty sure the weather in AV is better than Vacaville too. It can get hot there, but it's not as bad as Vacaville. Whether all of the perks of AV make it worth 2x or 3x the price of Vacaville is certainly debatable, but the two towns/cities are not even close to comparable.

ch_tah says

Adam, you really don’t see much of a difference between SJ and Vacaville?

I do see it, but not enough to justify housing costs that are effectively 2x to 3x

ch_tah says

Adam, you really don’t see much of a difference between SJ and Vacaville? I don’t mean to pick on Vacaville, but for the most part, it is in the middle of nowhere. You have so many more job opportunities in SJ. The pay is probably a little higher in SJ, but not really enough to justify alone the higher cost. Almaden Valley of SJ is a lot nicer than Vacaville; we’re not talking the sketchy parts of SJ. I’m guessing the schools are a lot better too. There is simply a much higher concentration of people in SJ causing prices to stay high. Vacaville doesn’t have that issue. I’m pretty sure the weather in AV is better than Vacaville too. It can get hot there, but it’s not as bad as Vacaville. Whether all of the perks of AV make it worth 2x or 3x the price of Vacaville is certainly debatable, but the two towns/cities are not even close to comparable.

But will your average job in SJ pay you $300,000 a year because thats the income needed for that kind of average house? I live in Los Angeles, salaries are similar here to SJ, they are probably averaging 40 to 60,000... not 300,000 though.

Chris_In_LosAngeles says

But will your average job in SJ pay you $300,000 a year because thats the income needed for that kind of average house? I live in Los Angeles, salaries are similar here to SJ, they are probably averaging 40 to 60,000… not 300,000 though.

A couple where both work in the High Tech field, not even in management positions, just as let's say senior software engineers or senior analysts will make over 200k+ combined income in SJ.

I know for a fact that I pay my senior software engineers more than a "VP" at a banking or entertainment industry client would make in L.A. The high-tech industry does pay a lot more than the general jobs you have in the L.A. area, and there's a lot of those jobs in Silicon Valley.

That being said, they all want to live in the more coveted parts of SJ like Willow Glenn, or Almaden (thus the basic principles or Supply vs. Demand take over). They all know they can commute just 30 minutes more to the Santa Teresa part of SJ and live in nice cookie-cutter tract homes for half the price, but aren't willing to settle because:

A. They don't want to live next to people who make less than 100k per year combined.
B. They don't want their kids to attend the inferior schools in the Santa Teresa neighborhood.

Please note that Santa Teresa isn't an extreme comparison...East San Jose would be an extreme comparison. Santa Teresa is a perfectly fine, live-able community, but a couple who makes 150k+ won't want to set their roots there if they can pull off Almaden or Willow Glenn.

People with "average salaries" in SJ or LA will either rent in these neighborhoods if possible, or not even consider these neighborhoods because they're so far off the DTI that their income level can support.

In L.A. we have the top 2 school districts in the state of CA in similarly coveted, expensive communities (San Marino & La Canada). A well-to-do couple with two kids can save around $1 million in total K-12 private school tuition by purchasing a home there and sending their kids to public school. So, that's why people are willing to pay a $300k to $400k more in those communities for the same home in a surrounding city...when their kids are done attending K-12, they can sell the home and get back that premium (pass the torch on to another couple)...something they couldn't have done with the private school tuition.

In the City of San Marino, there aren't even any apartments permitted, so you end up having to rent a 3-4 bedroom home for $3500 to $4500 at a minimum if you want to have your kids attend the schools there without purchasing a home. That all adds up to home values being kept high there compared to other areas with bad schools.

Mr.Fantastic says

If you want to get technical, I wouldn’t pay near $300,000 for a home in Vacaville either. It’s not in a huge bubble like San Jose, but that’s still very bubbly.

Perhaps. But prices are down over 40 to 50% since peak here. Same house sold for $335k in 2003, a crazy $490 in 2005. You can find houses for less, but anything under $250k that we looked at needed considerable work or was in a not-so-great area. Prices aside, we were ready to buy, have been for some time but the market was too inflated.

Sure prices may drop a bit more but we can live with that. Vacaville made sense for us since it's technically out of the Valley, close to work, close to the Bay Area, still retains some small town flavor, has low crime rate, and is affordable for us on just one salary. We have no kids so that's not a consideration for us. Davis is still too expensive. Finally, prices are now more in line with rents.

Bottom line, you can't make all your life decisions based on market conditions.

Chris_In_LosAngeles says

But will your average job in SJ pay you $300,000 a year because thats the income needed for that kind of average house? I live in Los Angeles, salaries are similar here to SJ, they are probably averaging 40 to 60,000… not 300,000 though.

Mark_LA pretty much nailed the point. You can't use all of SJ for data when talking about one of the most expensive parts of SJ. I'm sure there are pockets of LA that are well outside of the average $40k-$60k salary range. People buying in AV nowadays are probably making $200k+ (kind of like the person who started this thread - imagine that), or they purchased a long time ago and have the ability to move up.

Mark_LA says

Chris_In_LosAngeles says

But will your average job in SJ pay you $300,000 a year because thats the income needed for that kind of average house? I live in Los Angeles, salaries are similar here to SJ, they are probably averaging 40 to 60,000… not 300,000 though.

A couple where both work in the High Tech field, not even in management positions, just as let’s say senior software engineers or senior analysts will make over 200k+ combined income in SJ.
I know for a fact that I pay my senior software engineers more than a “VP” at a banking or entertainment industry client would make in L.A. The high-tech industry does pay a lot more than the general jobs you have in the L.A. area, and there’s a lot of those jobs in Silicon Valley....

Combined 200 which is incredibly high, is still not 300. And from google maps that looks like a VERY average neighborhood. I doubt very much that a lot of people there make that kind of money. Besides they still can't afford it since house is 800 and requires them to make 300 annually to be sustainable. Not to mention if one of them loses a job which is possible with all the outsourcing they will be foreclosing within a few month since they are giving all savings away as down payment.

I just don't think the salaries there support the prices, prices which I think are still ballooned.

LA isn't very different, I see the slow fall of prices here as well. It takes a while to let people go of their balloons that popped. It took a few years during the tulip bubble, this won't be different this time IMO.

anon says

a4adam says

Are all the salaries there so much inflated that everyone can afford to overpay? It just seems crazy.

house prices just take a long time to drop. there will continue to be price drops in SJ in the coming years.
75th% apr06@$1.1M-dec10@$660k. 56mnth. avg of $8k decrease/month; $96k/yr

50th% apr06@$740k-dec10@$445k. 56mnth. avg of $5k decrease/month; $60k/yr

25th% apr06@$600k-dec10@$300k. 56mnth. avg of $5k decrease/month; $60k/yr
it’d be interesting to plot a linear trend line against the data to see how the actual prices fluctuate around the trend line.
http://www.housingtracker.net/asking-prices/san-jose-california/

Month SFH+Condo Inventory 25th Percentile Median 75th Percentile

Dec 2010 7,109 $299,450 $444,975 $659,000

Apr 2006 4,426 $599,966 $739,333 $1,098,833

Price change year over year.

date 25% median 75% | 25%chg 50%chg 75%chg
------------------------------------------------------------------------------------
Dec-10 $299,450 $444,975 $659,000 | $33,050 $48,375 $111,972
Dec-09 $332,500 $493,350 $770,972 | $12,961 $11,555 ($3,437)
Dec-08 $345,461 $504,905 $767,535 | $155,929 $114,842 $14,665
Dec-07 $501,390 $619,747 $782,200 | $78,334 $75,628 $131,744
Dec-06 $579,724 $695,375 $913,944 | $20,242 $43,958 $184,889
Apr-06 $599,966 $739,333 $1,098,833 |


25% and 50% shows $100k+ decline in 08.
75% shows $100k+ declines in 06, 07 and 2010.

2009 shows the smallest declines and even a price increase for the 75% category.
i would attribute this mostly to the tax credits during that year.

these are just declines in median price; not actual home values.

Menya, I would suggest looking in Cambrian, covered by Union School District and Leigh High. API scores are pretty good and it's less of a pressure cooker than Cupertino.

The farther west you go, towards Los Gatos, the better. For example, west of Camden Ave, around Blossom Hill Road or Los Gatos-Almaden road. Actually, the far east of Los Gatos and the far west of Cambrian/SJ are pretty much indistinguishable; same schools, houses look the same. You don't get to LG school district unless you are near LG Blvd, and then there's a price premium; a 4/2 would be 1.2 or more.

You can get a 4/2 for around 700k. The lots are usually a little smaller than Alamden though, around 6k sq ft. But it's a better commute to most jobs.

You could also look at West San Jose serviced by Cupertino schools. This is the peninsula jutting west from the rest of SJ. It is more expensive though. The neighborhood looks about the same as the west of Cambrian, except for more immigrants, which you may or may not like. The schools are the big draw. Higher API, higher expectations on students, but it can be high stress.

If you are concerned about schools, I would not look at Willow Glen. Some elems are fine, but the high school is not. The people that I know who live in WG like the area, but also send their kids to private school.

Good luck. If you do buy, make sure you plan to stay for at least 7 and preferably 10 years. Selling is costly (realtor fee, work to prep the house, etc). If you like moving more often then renting is definitely better.

Mr.Fantastic says

The amount of 200k earners is going to be very small,

thing is, the software industry has thrown off hundreds of billions of dollars of rewards to the worker bees, ~1985-now.

Thanks to Prop 13, these ex- or semi- worker bees can afford to STAY in the valley, reducing supply.

There's really not that much supply here, in the primo nabes.

Speaking of neighborhoods, check out this link from the New York Times, which uses census bureau data and allows you to drill down based on income, education, etc:
http://projects.nytimes.com/census/2010/explorer
The median income for Willow Glen (compared to neighboring census tracts) is revealing.

Mr.Fantastic says

Did Mark_LA even have a point?

The point I was making (in a very long-winded, semi-narcissistic way, I admit it):

1. Schools matter.
2. People like to live next to their peers.
3. It doesn't matter what the average income earner makes, those people aren't bidding on homes in these communities, only the top 10% of earners are.

Mr.Fantastic says

If Mark’s point were true, we wouldn’t be seeing massive 40% drops in places like Newport Coast, or Beverly Hills because everyone and their mother wants to live in “90210″.

It's true for the $800k to $1.3 million price range (which well-paid dual-income worker bees can afford). People who can afford $2+ million dollar homes (in Beverly Hills or Newport Coast) are most likely still sending their kids to private school even if the public schools in the neighborhood are great.

It doesn't matter if the very average 2,000 square foot home you buy for $1 million in La Canada drops $300k in 5 years, if you're planning to stay there for 15 years until your small children finish K-12. In 15 years, it'll be back to the price you paid for it at the minimum. In those 15 years, you saved $1 million in private school tuition & would've thrown a lot more money down the drain renting.

Even if the home never recovers the $300k that you lose, then you still saved a net of $700k in private school tuition.

You live in Irvine, so you should know very well that you're paying a $200-$300k premium there vs the same place in Santa Ana nearby due to the better schools & better neighbors.

anon says

anon says

a4adam says

Are all the salaries there so much inflated that everyone can afford to overpay? It just seems crazy.

house prices just take a long time to drop. there will continue to be price drops in SJ in the coming years.

75th% apr06@$1.1M-dec10@$660k. 56mnth. avg of $8k decrease/month; $96k/yr
50th% apr06@$740k-dec10@$445k. 56mnth. avg of $5k decrease/month; $60k/yr
25th% apr06@$600k-dec10@$300k. 56mnth. avg of $5k decrease/month; $60k/yr

it’d be interesting to plot a linear trend line against the data to see how the actual prices fluctuate around the trend line.

http://www.housingtracker.net/asking-prices/san-jose-california/
Month SFH+Condo Inventory 25th Percentile Median 75th Percentile
Dec 2010 7,109 $299,450 $444,975 $659,000
Apr 2006 4,426 $599,966 $739,333 $1,098,833

Price change year over year.

date 25% median 75% | 25%chg 50%chg 75%chg

------------------------------------------------------------------------------------

Dec-10 $299,450 $444,975 $659,000 | $33,050 $48,375 $111,972

Dec-09 $332,500 $493,350 $770,972 | $12,961 $11,555 ($3,437)

Dec-08 $345,461 $504,905 $767,535 | $155,929 $114,842 $14,665

Dec-07 $501,390 $619,747 $782,200 | $78,334 $75,628 $131,744

Dec-06 $579,724 $695,375 $913,944 | $20,242 $43,958 $184,889

Apr-06 $599,966 $739,333 $1,098,833 |

25% and 50% shows $100k+ decline in 08.

75% shows $100k+ declines in 06, 07 and 2010.
2009 shows the smallest declines and even a price increase for the 75% category.

i would attribute this mostly to the tax credits during that year.
these are just declines in median price; not actual home values.

http://www.housingtracker.net/asking-prices/san-francisco-california/
san francisco

Dec-10 $249,475 $410,000 $676,942 $30,275 $72,375 $124,121
Dec-09 $279,750 $482,375 $801,063 ($12,043) ($16,797) ($40,631)
Dec-08 $267,707 $465,578 $760,432 $131,853 $78,812 ($19,652)
Dec-07 $399,560 $544,390 $740,780 $77,890 $76,585 $78,694
Dec-06 $477,450 $620,975 $819,474 $22,533 $33,688 $71,851
Apr-06 $499,983 $654,663 $891,325


25% $500k-$250k $4.5k/month; $54k/year
50% $655k-$410k $4.4k/month; $53k/year
75% $891k-$677k $3.8/month; $42k/year

it's amazing the median price in SF is $410k.
that's almost where it should be.

Mr.Fantastic says

They could also wait 3 years and buy that same property for 25% off, and still live in the home for 15 years

In 2007, your magic crystal ball probably told you very average La Canada ~$1 million homes would drop 25% in the next 3 years. It was wrong then, and very likely wrong today. Prices have remained at ~$500/sq ft, even if the surrounding communities with inferior schools and neighbors have dropped as you expected.

Fast-forward to 2013, and you'll probably be recommending that they should wait until 2016 for that 25% price decrease.

Mr.Fantastic says

Ben Bernanke wasn’t purposefully trying to take a shit on our economic system in 2007.

If he succeeds, we should have nice inflation, while those who buy at low fixed interest rates will continue to enjoy their low fixed monthly payments for the next 30 years. The bank will assume all inflation risk.

If he succeeds extra well, the $800k home the OP buys in Almaden or Willow Glenn will certainly go up with inflation over the next 15 years to $1.6 million. The OP will still be paying relatively low income taxes thanks to prop 13.

So, let's cheer on Bernanke and hope he causes quite a bit of inflation to occurr over the next 5-10 years.

Mr.Fantastic says

There are plenty of homes in La Canada that are sinking back towards 2002-2003 levels.

Here’s one that had $150,000 chopped off the top in two months and still isn’t sold. Now it’s actually listed for below your magical $1m barrier. That’s nearly 15% in two months.
http://www.redfin.com/CA/La-Canada-Flintridge/1336-Olive-Ln-91011/home/7246160

This home sold for $750k in 2003. It's currently listed at $950k, 25% above its 2003 price, doesn't seem like any bubble is bursting in La Canada.

This home has always been sold at a discount relative to other La Canada homes because it's next to 2 hideous gigantic water tanks and a flood-control basin:

In 2007, your magic crystal ball probably told you very average La Canada ~$1 million homes would drop 25% in the next 3 years.
I normally stick to the Bay Area, but I couldn't resist checking out Fortress SocCal. The nice folks at 544 Meadowview bought for $650k in 1996. Their final 'withdrawal' was courtesy of WaMu in 2007 (anybody with paid PS access; they actually have the scanned Deeds of Trust online). Now in foreclosure and asking $1.395k as a short sale. I know, this could just be the one exception, but you folks sure know how to party down there.

Mr.Fantastic says

I’ll bet you a gentleman’s $1,000 cash

Sorry, I don't know if you're good for it & I don't have connections to Tony Soprano types to help me collect.

Bank VPs are a dime-a-dozen and make less than $100k per year, so it's easy to beat their salary. I never said bank Senior VPs, that's where that title begins to mean something salary-wise in a bank.

Mark_LA says

Mr.Fantastic says

There are plenty of homes in La Canada that are sinking back towards 2002-2003 levels.
Here’s one that had $150,000 chopped off the top in two months and still isn’t sold. Now it’s actually listed for below your magical $1m barrier. That’s nearly 15% in two months.

http://www.redfin.com/CA/La-Canada-Flintridge/1336-Olive-Ln-91011/home/7246160

This home sold for $750k in 2003. It’s currently listed at $950k, 25% above its 2003 price, doesn’t seem like any bubble is bursting in La Canada.
This home has always been sold at a discount relative to other La Canada homes because it’s next to 2 hideous gigantic water tanks and a flood-control basin:

Mark one real estate sale does not make a market. I have friends living in La Canada Flintridge (thats the area we are talking about). I doubt houses will be selling around $775 simply because a lot of retirees live there. Their entire income is just social security. It's most likely going to drop a lot.
In many places 2003 was already in the middle of the bubble. I remember because in our neighborhood prices doubled by 2003 and of course quadrupled by 2006 and now are not quite back to 2000 levels yet...

Mark_LA says

Mr.Fantastic says

Ben Bernanke wasn’t purposefully trying to take a shit on our economic system in 2007.

If he succeeds, we should have nice inflation, while those who buy at low fixed interest rates will continue to enjoy their low fixed monthly payments for the next 30 years. The bank will assume all inflation risk.
If he succeeds extra well, the $800k home the OP buys in Almaden or Willow Glenn will certainly go up with inflation over the next 15 years to $1.6 million. The OP will still be paying relatively low income taxes thanks to prop 13.
So, let’s cheer on Bernanke and hope he causes quite a bit of inflation to occurr over the next 5-10 years.

What are your support points on the inflation(in housing) theory? Mine against inflation(n housing) are:

1) Weak job market for another 5 years(I'd like to see UE back to 6%).
2) No salary increase in sight for another 5 years.
3) No easy loans...forget about loans to finance that $1M La Canada home.
4) The last decade of house price inflation was not enough that you think more is in the making.

When market heads south there a buyers all the way to the bottom from the start of decline. How many of those who bought 2007 until now will default in 2012 an later? Lots of questions coming up. GL with your home price appreciation theory.

Mr.Fantastic says

We both send checks to Patrick.

Patrick may want a piece of the action. Does he get a commission?

Thanks for sharing info on pricing in Vacaville and LA. La is way too far and Vacaville is....well, Vacaville. :)

Seems that the majority here believes we should wait. I agree that we should still look and try to save money. Reevaluate come spring time.

Menya says

Thanks for sharing info on pricing in Vacaville and LA. La is way too far and Vacaville is….well, Vacaville.
Seems that the majority here believes we should wait. I agree that we should still look and try to save money. Reevaluate come spring time.

If I was convinced that housing prices will decline by 5% a year every year for the next 10 years, I wouldn't buy a house for next 10 years. At the same time, if I was convinced that housing prices will decline by 1% a year every year for the next 10 years, then given my financial situation I would still buy a house due to the inherent personal value and mental stratification that I attach to owning and living in a SFH with nice front and backyard. In short, I would say that my threshold of NOT buying a house would be a steady 1.5% decline in housing prices every year for the next 10 years.

So just out of curiosity, I am wondering what your threshold and that of others who plan to buy a house to live in it for say the next 20 years is? Would you wait for next 10 years to buy a house if it was reasonably well known that housing prices will continue to decline by 1% a year for the next 10 years? What about 0.5% or 0.25% decline per year for the next 10 years. Obviously if prices remain stable for the next 10 years, you and others who can would buy.

P.S: this is off course with the caveat that no one can predict the future 5 to 10 years out.

I currently rent in Almaden, and, I agree that it's no Monte Carlo or Manhattan. The reality is that this place and most other cities around here are still in a bubble and it will take at least 5 years or more + a 50% drop from current price levels, until all the dust clears. My children attended public schools in the area, and schools are worse than many of the schools in other parts of the country where houses are at least 60% cheaper. The weather is nice, but not nearly as nice as in Southern Cal where prices are also cheaper. Pay is also a little higher for tech professionals, but, as we already know only 100K of the 8M Bay Area residence are actually employed in the tech profession. Another point, is that you can not even compare prices around here to prices in other parts of the country, because quality of housing stock in this area is much inferior. Even though the weather outside is much nicer here than in Chicago, for example, I spend most of my time in the house, where heat insulation is not as good, so I actually feel much colder in the Bay Area than I did in Chicago. As far as Almaden is concerned, it doesn't even have a nice downtown area, so would not even be considered as a town, in other parts of the country, and most houses around here, are definite demolition material elsewhere.