patrick.net

merlino says

I may be naive but I was told tenure position at UCSF is pretty safe.

I think he was saying that you are fine if tenured, but if not you should worry.

JamesDean says

I have the same problem. I want to buy a house but I’m also “chicken.” I just don’t know when is the right time. At the end of the day you have to go with your gut and live with your decision.

My wife and I are renting right now $1400 a month and are thinking about purchasing a home for $450,000. We are putting $150,000 down and going for a 15 year mortgage at 3.65% 3.81APR We have a combine salary of $180,000. After closing we should have about $30,000 left in our bank accounts. Does it make sense to buy or continue to rent?

Everyone is scared when they first buy. It's a big purchase. As long as you don't have any other major expenses, you should not have a problem paying for a house in that price range with that salary. Whether you should buy or not should be entirely based on your personal goals and feelings. Are you going to stay there a long time? Kids/schools? Accepting the responsibility of maintaining a house? Etc. By the way, no one knows when is the right time in terms of which way housing will go. If they had that ability, they wouldn't be on this message board.

My 2 cents is this: Why is all of your money in CD's? That makes zero sense to me because all its doing is languishing away. I think you need to sit down with a financial planner and do some planning. The general saying is that you should always diversify your money. All cash is not the best way to go about things, and trust me- I am extremely financially conservative.

For example, I too also have a fairly significant amount of cash- enough to buy a house ( out of state) or enough to put a chunky down payment on some house in the Bay Area. The cash is all in CD's but for the last few years that has been useless. We're talking like what? a few hundred buxs a year?

The rest of my money is in investments ranging from Roth IRA's, two mutual funds, bonds, a 401k, and a couple of other smaller investments. I'll just say that the old mantra that stocks generally go up on average 7% a year over the long term has some truth in it. In 2010 my stocks were down about 40% from 2007 levels. Now they are all the way back to their previous value plus around another 5% appreciation on top of that. I haven't lost anything and actually gained some in perhaps the worst recession in 70+ years.

To me the financial priorities in life are in this order:

A: Retirement. They say that the average American today will need to have 1 million dollars in retirement by the age of 60. Double that if you life in a bubblicious city, and perhaps more if in a mega-bubble city like the Bay Area. This amount doesn't include the house you live in. That is for one person. At a million dollars, assuming you live to the ripe ole' age of 100- which isn't out the the question- that gives you $40,000 a year. In other words- barely scrapin' by in a place like the Bay Area, hence the required savings would probably be more like 2 million dollars.

B: A house, even though I personally don't put as much on an emphasis on it because in my opinion a house you pay for no longer automatically equals security and stability. Like I said- I no longer trust the job market- and that goes for any profession- to provide me with stable work. I was laid off 2 years ago and it was a huge wakeup call. The game has most definitely changed and its no longer a matter of just picking up a new job. It took A LOT of effort on my part to land a new one. Definitely an eye opener for me.

These are just my thoughts and honestly, I'm just some guy on a forum. Might want to look into discussing this with someone more qualified- like a financial planner.

Good luck with whatever you all decide to do.

learn to live with less, learn to want less,.. stash your cash. don't let you money own you. don't let others manage your money. things are going to get much worse, welcome the change.

take a yoga class
connect with life beyond finances.
learn to not be afraid.
seems like you've earned it.
;-)

I have same question. All home experts please reply. My wife and I have combined salary of $175k. My wife is taking a break for a year as we are having a baby, so we are left with single salary of $110k for about a year. We really like a house for $640k and we want to buy it but not sure if we should go for it. Our rent is going to increase to $2300/ month. We have down payment of about 20 percent.

Is it me or does it seem a tad funny that there are people still throwing around ideas of spending 500k+ on a house? I thought that line of thinking had disappeared. I guess not.

edvard2 says

Is it me or does it seem a tad funny that there are people still throwing around ideas of spending 500k+ on a house? I thought that line of thinking had disappeared. I guess not.

Well, when you are talking about Marin County or Cupertino or Palo Alto, do you honestly think you will ever be talking about less than $500k for a house?

ch_tah says

Well, when you are talking about Marin County or Cupertino or Palo Alto, do you honestly think you will ever be talking about less than $500k for a house?

Of course not. I'm just sayin'. I've lived here for 12 years and came from somewhere where houses are still 150k. People always tell me its naturally more expensive in the Bay Area. But 600,700,800k? For a house? I mean-seriously. Yeah yeah yeah we all know... But honestly? No freakin' way will the thought of paying that kind of money- for a house- ever cross my mind.

Sorry for stating the obvious. I guess I haven't been conditioned yet.

edvard2 says

Of course not. I’m just sayin’. I’ve lived here for 12 years and came from somewhere where houses are still 150k. People always tell me its naturally more expensive in the Bay Area. But 600,700,800k? For a house? I mean-seriously. Yeah yeah yeah we all know… But honestly? No freakin’ way will the thought of paying that kind of money- for a house- ever cross my mind.

Sorry for stating the obvious. I guess I haven’t been conditioned yet.

I completely agree with you. I've lived here about the same amount of time and came from somewhere where waterfront properties on half acre plots don't cost half as much as a tiny POS in Palo Alto. Until things crash, which I personally don't see happening, you have to pay what the going rate is or move. And I don't fault those who move.

I think we got side tracked. Could you all please go back to original question ?

I have same question. All home experts please reply. My wife and I have combined salary of $175k. My wife is taking a break for a year as we are having a baby, so we are left with single salary of $110k for about a year. We really like a house for $640k and we want to buy it but not sure if we should go for it. Our rent is going to increase to $2300/ month. We have down payment of about 20 percent.

leo9 says

I think we got side tracked. Could you all please go back to original question ?
I have same question. All home experts please reply. My wife and I have combined salary of $175k. My wife is taking a break for a year as we are having a baby, so we are left with single salary of $110k for about a year. We really like a house for $640k and we want to buy it but not sure if we should go for it. Our rent is going to increase to $2300/ month. We have down payment of about 20 percent.

I'm not sure what a home expert is, but here's a response. Have you used any calculators to analyze this yourself? You have provided very little information. Particularly, if you have 20% to put down, how much are you left with? Are you sure your wife will go back to work after 1 year? Have you looked at how much daycare is if she does go back to work? Do you have other big expenses?

This is very good point. After putting 20% we are not left with much money. Say $40K at the most. My wife will go back to work for sure after an year. Our salary will be back to normal which is $175k. Day care expense runs around $1500 in bay area.

leo9 says

This is very good point. After putting 20% we are not left with much money. Say $40K at the most. My wife will go back to work for sure after an year. Our salary will be back to normal which is $175k. Day care expense runs around $1500 in bay area.

Ok. Yeah, $1500 is a fair estimate. How about doing a spreadsheet with all of your expenses and income? We just used the past few months of bank statements and figured out how much went to food, gas, utils, house payment, etc. It can be very eyeopening and is truly a much better gauge than even people as knowledgeable about housing as E-man telling you, yes or no. Use an online calculator to figure out housing costs and then add everything else in there. Try to think ahead too. Daycare is $1500, but don't forget diapers cost about $45/month, formula if you need it is pretty pricey, etc. Toys - at least a few hundred $ a month. ;) That baby adds up quickly. Also try to guesstimate maintenance costs too.

I have little to add to this discussion, not being a Bay Area resident or having much info on what homes there are worth, but it never ceases to amaze me how high all of your salaries are.

If you have the education, skills, and work ethic to be making six figures (and have spouses who can too!), how can you be so worried about the future?

For comparison, I make about $40-50k per year in one of the world's most expensive cities, saved my money diligently straight out of college, and in my 11th year in the working world paid all cash for my $140k condo, leaving me house-rich and very, very cash-poor. My future wife only went to high school and will never make a high salary.

I wasn't nervous at all about that decision. I was much more nervous about what would happen to my hard-earned cash if inflation robbed me of its value. Buying the shelter that I would need anyway was a no-brainer. Now I've got money saved again and am again worrying about what will happen to my cash.

All of you, stop worrying. Just buy a modest home that costs three or four years' salary and relax.

I do not believe that buying a house will be a losing proposition if you stay there for a long time.
You always will have the option of reverse-mortgage in your retirement. Your kids won't like it but you can get some of the money back from all of your house payments.
Inflation is not very high these days, but the inflation, dropping dollar and so forth make holding cash in dollars eventually a losing proposition. But, it won't go down to zero either.
Vanguard has some bond funds that are not going to suffer a big drop of NAV probably. I own Vanguard Total Bond Index. But, my time horizon for the fund is very long.
Since you cannot borrow for your retirement, I would max out the IRAs if possible, Roth is preferred.
There is a "tax managed" vanguard group of funds which are good at not producing 1099 div income to you each year, which is like a retirement account also for tax purposes, but more flexible.
I think that I would try to keep some of that nest egg invested for retirement even if I bought a house. You can borrow for children's college, they can get part time jobs, etc.

Michinaga says

I have little to add to this discussion, not being a Bay Area resident or having much info on what homes there are worth, but it never ceases to amaze me how high all of your salaries are.

If you have the education, skills, and work ethic to be making six figures (and have spouses who can too!), how can you be so worried about the future?

Well for one, salaries are pretty inflated here in the Bay Area. My husband works part time (30-35 hours a week) as a mechanic and makes about 65k a year or more. I work as a senior sysadmin and make 100k. If we were to leave he would be lucky to make 35-45k and most out of state job offers are closer to the 75-85k range for sysadmin.

For me, I worry about the future because I don't think in today's world one can bank on having both people work, and assume you will always be making as much or more than you are right now. The Bay Area has areas close to job centers with lovely people where you can buy a decent to very nice home for $250k-400k easily.

I am with you, we live in a modest home in a modest area and can survive given the worst case scenario, and we live like this on purpose. One can live like this just about everywhere. But in the Bay Area, everybody "needs" to live in certain zip codes to feel like they have any self worth. It's sad.

merlino says

I may be naive but I was told tenure position at UCSF is pretty safe. I say 150k$ combined salary because my wife takes care of the kids at home and we only use daycare twice a week. She plans to get back to her small business in a couple years.
We know that we would be pretty tight in the next few years but assuming that we give a good 200k$ in downpayment, then I think we would be able to survive without work (with some help) for at least 8 months to sell the home.
Again, we are not actively trying to buy. We are looking at what to do with 250k$. It is currently sitting in a CD which is ridicules.
Thanks for the comments.
merlino

interested in being an angel investor?

Great, another "young talent" brought to the bay area to drive up an inflated housing market. How about learning to live with a little less and giving something back to the community (and no, being a doctor or whatever you are doesn't count because you are well compensated for it)?

Tude says

in the Bay Area, everybody “needs” to live in certain zip codes to feel like they have any self wort

Not everybody.

Just everybody who has those kinds of values.

Sikit says

Great, another “young talent” brought to the bay area to drive up an inflated housing market. How about learning to live with a little less and giving something back to the community

Yep.

Sikit, scroll back to my remark # 743990 that one of Our Bay Area Brethern took "no offense" to.

If I had his income I'd be seriously investing into other businesses right now.

ChrisLA says

If I had his income I’d be seriously investing into other businesses right now.

It's not a business, it's a residence. Not too many people think of their housing cost as owner's equivalent rent.

Sybrib says

ChrisLA says

If I had his income I’d be seriously investing into other businesses right now.

It’s not a business, it’s a residence. Not too many people think of their housing cost as owner’s equivalent rent.

I can't really consider a house an investment, it doesn't make anything.

edvard2 says

Of course not. I’m just sayin’. I’ve lived here for 12 years and came from somewhere where houses are still 150k. People always tell me its naturally more expensive in the Bay Area. But 600,700,800k? For a house? I mean-seriously. Yeah yeah yeah we all know… But honestly? No freakin’ way will the thought of paying that kind of money- for a house- ever cross my mind.
Sorry for stating the obvious. I guess I haven’t been conditioned yet.

Yes, expensive during the bubble years, but like so many other bubbles more of a myth. We certainly saw more economic growth in 80s and 90s, but prices didnt inflate to such a level as they have more recently. Facts may support the region peaked by year 2000, and we may not see such grand growth decades forward. So many after 2000 may have been betting we have huge growth in tech as we had before, but that may not be case.

ChrisLA says

Sybrib says

ChrisLA says

If I had his income I’d be seriously investing into other businesses right now.

It’s not a business, it’s a residence. Not too many people think of their housing cost as owner’s equivalent rent.

I can’t really consider a house an investment, it doesn’t make anything.

Chris I agree with you but did not say it explicitly: he says he's thinking about it as an investment, but his post belies a reality it's more about consumption. Oh well maybe it's a psyche-ic investment.

I am in same boat. Currently, I make 180k base salary and have 140k saved up for a home. I was looking at homes under 500k in Santa Clara, Mountain View, Los Gatos, and San Jose. All were major fixer upper foreclosures that need 100k plus of repairs and year of contractor repair work done! Decent move in ready homes are still way overpriced selling for 750k and up! Bank approved me for 850k for a home but I decided to rent for a while since I am new on the job and anything can happen these days with the economy. It is sheer madness how overpriced the real estate market is in bay area!

Dear Merlino --You folks in the Bay Area makes loads more than we do down here in So.Cal. Of course 25 years ago when my husband and I purchased our home for 325.000 it was A LOT of money--and interest rates were 12% at best. 20% down was required, so our payment was around 3,000.00/mo. At the time we were making combined 120,000. (just lucky entertainment gigs) Two kids.
Our wages are way lower now. And job security is GONE.
I would only caution that property taxes will kill you. Make one improvement and you are doomed. Your taxes could easily go up to 10,000/year. Be cautious. In fact, think smaller and be less stressed. You really can't predict if you might get sick, kids need something costly---I don't know.
We paid off our house 5 year ago and still worry about taxes and water and utility expenses. Please be looking at all the variables. Salaries will not be rising. IMO. And good luck!

ch_tah says

Whether you should buy or not should be entirely based on your personal goals and feelings.

Feelings? You think someone should make the biggest purchase of their life based in large part by their emotions? That's NAR speak.

"I may be naive but I was told tenure position at UCSF is pretty safe."
Are you on a tenure track or just starting? While it is true according to AAUP that only 2% of tenured professors are terminated annually 25% of those that apply for tenure don't make it.

I'd also check the actual union contract. Just because you have tenure does NOT mean that a given pay level is assured, it just means that you cannot get terminated. I've met professors that make variations of pay depending on course load. There's a floor and then you go up from that

Without getting into a political discourse chances are academia has a target on its back with tenure. What's happening with Wisconsin can easily spill over. The other thing to remember is if private colleges/universities gut tenure then the voters will eventually question why it exists in the public sector.

Don't get me wrong it can be a good thing naturally if you can't get terminated it's a job. But that also makes it much harder to find something else if unemployment spikes up.
You have a great deal on that 10% down is 3% rate..but I think 850K is just too high. Maybe you could save a bit more (15% on something lower) and go for a 15 year at just a slightly higher rate.

klarek says

Feelings? You think someone should make the biggest purchase of their life based in large part by their emotions? That’s NAR speak.

Seriously? Can you stop picking out one little snippet, actually in this case one word, from all of my postings and say that is NAR speak. When I said feelings, I meant how he feels about his job security, his desire to stay in the area, etc. Read the rest of my post and you get the gist of what I was saying. Why don't you address the poster's question instead of trying to antagonize me and take over another thread? Everyone of your posts lately shows how petty and pathetic you are; always trying to pick a fight for no reason.

Sybrib says

ChrisLA says

Sybrib says

ChrisLA says

If I had his income I’d be seriously investing into other businesses right now.

It’s not a business, it’s a residence. Not too many people think of their housing cost as owner’s equivalent rent.

I can’t really consider a house an investment, it doesn’t make anything.

Chris I agree with you but did not say it explicitly: he says he’s thinking about it as an investment, but his post belies a reality it’s more about consumption. Oh well maybe it’s a psyche-ic investment.

I figured thats what you meant. Consumption is not investment.

ChrisLA says

I figured thats what you meant. Consumption is not investment.

And a house is not consumption--unless you are planning on consuming it (tearing it down?)

ch_tah says

Can you stop picking out one little snippet, actually in this case one word, from all of my postings and say that is NAR speak.

It wasn't a snippet, and it wasn't a single word. It was your abstract. The guy laid out his entire financial situation above, and your response is that he should base his decision ENTIRELY on goals and feelings. Your words, not mine. You even threw in the "nobody can time the market" b.s. at the end, to boot.

That is absolutely 100% unmitigated NAR horse shit.

ch_tah says

Why don’t you address the poster’s question instead of trying to antagonize me and take over another thread?

I wasn't trying to antagonize you. A remark like that deserves to be called out. I would have responded the exact same way were it Patrick himself saying it.

ch_tah says

Everyone of your posts lately shows how petty and pathetic you are; always trying to pick a fight for no reason.

I'm just trying to dispel the NAR horse shit which euphoric new homeowners repeat to other potential homeowners. Stupid, irrational, baseless, and potentially harmful advice needs to be called out. Don't take it personally.

klarek says

The guy laid out his entire financial situation above, and your response is that he should base his decision ENTIRELY on goals and feelings. Your words, not mine. You even threw in the “nobody can time the market” b.s. at the end, to boot.

Yes, because he didn't say this earlier in the thread:

ch_tah says

Have you used any calculators to analyze this yourself? You have provided very little information. Particularly, if you have 20% to put down, how much are you left with? Are you sure your wife will go back to work after 1 year? Have you looked at how much daycare is if she does go back to work? Do you have other big expenses?

Good try though. You're the white knight fighting the NAR, huh? A modern day McCarthy fighting the good fight!

Klarek, you are full of crap, and you (should) know it. You don't because you are so full of yourself.
I said based on his numbers, he should be able to afford his house. The ultimate decision once you can afford the house is whether you want to own or not based on your personal situation. I seriously am starting to think you have a reading problem.

As for timing the market, even one of the housing gods himself just said he doesn't know what is going to happen next.
http://finance.yahoo.com/blogs/daily-ticker/shiller-housing-could-fall-another-25-harder-predict-112122844.html

Also, make sure you listen closely to the 5 or 10 seconds starting at the 2:20 mark. I never knew Shiller was such as shill for the NAR.

merlino says

I do also feel that our combined monthly income may be tight but we are pretty disciplined. I work at UCSF. The loan program was designed to help/attract “young talents” buy their first residence near campus.

Well, this makes a lot of differences:
"Near campus" Looks like it's about buying in SF itself. In this case you definitely better plan for private schools for your kids. On the other hand property in the city of SF will have a lot of value for international buyers even if prices in other places collapse. In this sense it's much different from the rest of Bay area. It still does not make this an investment but may be some kind of hedge against falling dollar.
Do you actually hold a tenure or it is a tenure track position. It makes a lot of differences. Remeber, UC system is bankrupt together with the whole state. Turning tenure track into tenure may take decades or may never materialize.
What is your field of research? Is it recession proof? Looks like you salaried, means you do not depend on grants. However, such a position may be prone to general budget cuts.

ch_tah says

I said based on his numbers, he should be able to afford his house. The ultimate decision once you can afford the house is whether you want to own or not based on your personal situation.

I had no issue with your first post (again, I'm not picking on you, so stop whining when your dumber remarks are challenged). You said it should be based entirely on goals and feelings. That was an incredibly irresponsible recommendation, the kind of thing that helped usher millions of families into financial peril.

ch_tah says

As for timing the market, even one of the housing gods himself just said he doesn’t know what is going to happen next.

The "nobody can time the market" line is b.s., because it's part and parcel of what every realtor has been saying since the bubble's peak. If you told them you want to wait because housing prices were tanking, they'd tell you that nobody can time it. It has nothing to do with the obvious which is that nobody knows for sure where the market will bottom, or when it will bottom. It's that such a no-brainer remark insinuates that it's a bad idea to wait. If you can't time it, then don't, right? What else could you possibly have meant?

Again, I don't blame you, you've just bought into the NAR b.s. If you repeat their harmful propaganda, expect to be called out on it. If you try to deny it, expect other NAR-like comments you make to become highlighted to reinforce the point. You could take moments like these to edify yourself rather than getting all feisty about it.

tatupu70 says

You’re the white knight fighting the NAR, huh? A modern day McCarthy fighting the good fight!

Like many people, I have very little tolerance for the b.s. NAR puts out, or what their minion agents say. I absolutely loathe it when someone who isn't part of their cartel repeats their b.s. It's worse than free advertising, it's a costless perpetuation of bullshit.

Klarek, I'll just chalk this up to your inability to read and comprehend. Hopefully, others don't have such deficiencies. Or if they do, they'll read all of your posts above that answer their questions.
And yes, I'll just let the fact go that Shiller said he has no way of confidently predicting the market and that owning a home pays a dividend of not having to ask your landlord for permission to do something and homeownership provides a sense of participation.

There was nothing wrong with what Shiller said. He was absolutely correct. It can't be known with certainty when and where the market will bottom. I just told you, this is a very obvious point. The only reason you would say such a thing to somebody who is hesitant about buying in a declining market is to remove any trepidations they have, and to urge them to go for it (or as you said, base it entirely on goals and emotions). These are NAR talking points. I'm trying to help you. Don't be so combative.

Don't help me, I don't need your help. If your point was to help the poster who asked the question, then answer his question. What you did is attack what I said instead. That's pretty much textbook combative. And now you are trying to pull your same crap again of you said it this way, so it's wrong, but I'm going to say it this way, so it's right. If you can't predict the market, then it is not a factor in your decision. If you feel you can, then it is. I couldn't care less if this guy bought. And again, if you read and comprehend, I told the first poster who asked a similar question not to buy. But in your combative nature, you picked the small point that you disagree with, took it out of context and attacked it. It is pathetic, and I can only imagine you do it to because you feel it bulks up your Internet muscles. I can assure you, you have the largest Internet muscles on this site. You don't need to build them up anymore.