How do people afford to buy a house on the peninsula? (Daly City: to rent, mortgage)

[clongirl]

Originally Posted by loloroj

Big inheritance. And the fact that public schools are closing in The City because families simply can't live in the area should tell you how out of control RE prices are. Also driving the price is out of state/foreign money trying to find some landing spot.....

I'm not exactly sure what you mean by public schools closing. I only know of one that closed. It was in Hunter's Point and the test scores were very low which is the reason why it was forced to close--not because of people moving out (although a lot of families do move out, no doubt).

I've also never heard of anyone gaining any major inheritance (with the exception of my 60 something retired neighbors that managed to have a gorgeous kitchen remodel because her father died).

Sorry, but most of your posts I've read aren't based in reality, but pure speculation. I don't know of one person in all my life (and let's just say I'm over 40) that's inherited a load of money.

[CAVA1990]

If you're making $150K you should easily be able to afford a $700K home with 20% down. At current interest rates your payment should be within the recommended 28% of gross monthly income.

[ambient]

Originally Posted by jnish

My wife and I are starting a family and have our sights on establishing permanent residence in the bay area (we currently live with family in Daly City). I'm finally finished with grad school and am looking to work/live in the peninsula. We will have to save up for several years before we can think about buying, but I'm just probing the area. I'm from the South and one could easily buy a house in the $150k range. Here, that's how much you have to put down for a down payment.

I'm flabbergasted at how any middle class family can afford to buy a house on the peninsula. Looking around, a 4BR place easily goes for $750k+. Doing some calculations with a mortgage I could get today (very low rates) with an income of around $150k (very generous), I'd have to contribute 35% of my income towards a 30yr, $750K mortgage. 15yr mortgages are practically impossible unless I was earning $250k+.

So, with that in mind, do people around here just earn a ton of money or just put everything they earn into housing? Typically I've heard to budget 30% towards housing. Seems like it's more like 40-50% around here. I can't see how one can save while putting that much into a mortgage.

Other questions:
How much should I really expect to pay for a 4 bedroom single-family home? Looking at San Carlos, there's none recently sold for under $800k.
How much do I need to earn to afford to buy a place like this?
Do people just save forever in order to make a down payment?

I guess I just don't know anyone that actually owns a home in the bay area, so I'm interested to hear how you go about buying a house and how much you need to earn to afford it.

It's really very simple: they have lots and lots of money. Whole boatloads of it.

Make no mistake about it... this is one of the wealthiest little spots of land you will find anywhere on the entire planet. This has been the epicenter of the modern technology movement for decades. So many people here have massive hundreds of thousands and millions that they can tap for a home purchase, and they get it not through salary, but through equity and bonus plans. And on top of it, the market is now recovering well from the housing downturn..inventory is extremely tight, and you have all these rich people ready to take advantage of historically low interest rates.

If you want to be in mid peninsula in a good school district, consider being able to bid at least $1M and have ability to put 25-30% down so that you can waive your financing and appraisal contingencies. And be willing to go up to the mid to upper 30%s of your net income for PITI. That's how rough it is right now. And we're not talking about mansions, obviously...it will be a starter home.

We happen to be house hunting (or trying to), and our realtor says that in her entire long career here, she has never seen it worse for a buyer than it is now.

[ambient]

...what the heck, let me give you all a personal example.

Just this week, my wife and I bid in excess of $1.1M for a ~1600 sqft 1950s house in a nice part of Redwood City - Roy Cloud school district. That was a nice 14% premium to asking price. We brough 20% cash down, full pre-approval. No property contingencies, but we did have financing and appraisal contingencies. We even specified that we'd guarantee another $20K in case the appraisal turned up short of our bid.

...and we lost.

TEN other bidders, THREE of whom came in high and had NO contingencies at all. You can only do that if you have big bags of cash that enable you to put down 30%, 40% - heck, 100% down. 20% down payment does not cut it here.

That's what the competition looks like in the desirable parts of mid peninsula today. We're a manager in software tech and a sr. manager in biotech, both in our 30s. We make over six figures and clear 33% marginal tax bracket. We can obviously bring a good $250K in cash to the party. We are doing well, and we feel very fortunate...and yet we're just not even competitive against these people. I have serious doubts about our ability to settle down anywhere on the peninsula near where we work. We may be able to swing a condo.

[wooliemonster]

Haha, yeah, my wife and I are adjusting to this reality if we move. To be honest, not sure we'd ever be able to buy in the Bay Area. For comparison, we bought our townhouse near downtown Houston in 2008 for a price in the low 200s; my wife had just finished her masters and I was in grad school (down payment requirements were softer back then). An OK two bedroom condo in SF would probably run 800+k, or 3-4x the current value of our house. We could probably be able to afford the mortgage payments, but it would take us a while to come up with enough cash for a new down payment. So, lots of fun playing budget projections Perhaps new construction will help take some pressure off prices in the future. If not, we'd probably stay for X years then move on to the next stage of our lives in a slightly less expensive area.

[loloroj]

Originally Posted by clongirl

I'm not exactly sure what you mean by public schools closing. I only know of one that closed. It was in Hunter's Point and the test scores were very low which is the reason why it was forced to close--not because of people moving out (although a lot of families do move out, no doubt).

I've also never heard of anyone gaining any major inheritance (with the exception of my 60 something retired neighbors that managed to have a gorgeous kitchen remodel because her father died).

Sorry, but most of your posts I've read aren't based in reality, but pure speculation. I don't know of one person in all my life (and let's just say I'm over 40) that's inherited a load of money.

Trust fund babies and I knew quite a few of them....sorry maybe we didn't run in the same circles.

[Ruth4Truth]

Originally Posted by jnish

My wife and I are starting a family and have our sights on establishing permanent residence in the bay area (we currently live with family in Daly City). I'm finally finished with grad school and am looking to work/live in the peninsula. We will have to save up for several years before we can think about buying, but I'm just probing the area. I'm from the South and one could easily buy a house in the $150k range. Here, that's how much you have to put down for a down payment.

I'm flabbergasted at how any middle class family can afford to buy a house on the peninsula. Looking around, a 4BR place easily goes for $750k+. Doing some calculations with a mortgage I could get today (very low rates) with an income of around $150k (very generous), I'd have to contribute 35% of my income towards a 30yr, $750K mortgage. 15yr mortgages are practically impossible unless I was earning $250k+.

So, with that in mind, do people around here just earn a ton of money or just put everything they earn into housing? Typically I've heard to budget 30% towards housing. Seems like it's more like 40-50% around here. I can't see how one can save while putting that much into a mortgage.

Other questions:
How much should I really expect to pay for a 4 bedroom single-family home? Looking at San Carlos, there's none recently sold for under $800k.
How much do I need to earn to afford to buy a place like this?
Do people just save forever in order to make a down payment?

I guess I just don't know anyone that actually owns a home in the bay area, so I'm interested to hear how you go about buying a house and how much you need to earn to afford it.

One way they afford it is with parental money. But those places are mainly for couples where both are high-earning professionals, or one of them has made piles of money in the tech sector, or they were born into money. It's always been known as an area for the privileged.

[Larry Siegel]

The answer is basically that a lot of people have serious money. I think I'm pretty well off, but I don't live in the Bay Area because I can't afford it.

About a decade ago I was offered a job with a base of $125,000 and a potential bonus of more than that, with the senior people in the company all making seven figures. A house equivalent to what I live in now was going for around $1.3 million (the Inner Richmond being the right kind of neighborhood for me and my family). I also had to factor in private school costs. I took this story, including the bonus potentially bigger than the base, to the mortgage company and they said "What are you smoking?"

I stayed put, got a couple of promotions, saved a huge fraction of my income because I was not putting it into my house, and am now retired.

[Jasmine658]

Plan to be job hopping for some time, perhaps indefinitely in the bay area as that is the norm for many, especially if in high tech. Traffic has been getting increasingly bad in the almost 2 decades I have been here now. Highway 280 used to be free & clear rush hour old days, went 80 mph - but that is no more, now pile ups & parking lots at major junctions now, so plan to live closer to where you need to work & that can mean moving time & time again. See our friends going through this all the time.

I would suggest to rent a home, but not a "highly desirable" location home as those are more often pulled out from under you with landlord move back in's or home put on back on market for sale by landlord. Our friends that live close to CalTrain tracks in Burlingame, commercial auto row, or a somewhat busy street are less likely to go back on market or have landlord move back in. Renting has a bunch of advantages, wish we had done more of that as we had to move for better school districts a few times, endured a landlord move-in, have upside down home we own, etc. Houses are not assets anyway - they are often money losers, high maintenance items. I have bought and sold homes in the bay area for years, some wins, some major loses.

Belmont, Burlingame & Pacifica all have good schools, others are more patchwork quilt & SF is abysmal, we tried for years there.

Buying a home & having to sell it a few years later often means loses, even if market improves some. I always calculate 10% gross sales price is lost to real estate brokers, moving costs, etc. We now have our homes rented out and we live in rentals, works out better for us.

But 175k is pretty much the minimum these days to buy with the 20% down for a normal home of $750-$950K cost. There are a number of on-line calculators to help figure this out like here:
http://www.vlender.com/cgi-bin/calc/qualify.cgi

[kcimos]

"upper middle class lifestyle on the desirable parts of the penisula you need to make $450,000+"

$380,000/yr household income is in the top 1%
so I guess those that make more than it takes to be a one percenter are only middle class. sure.