Instructions to my son on how to buy a house in the SF Bay Area (San Francisco: hotel, neighborhood)
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Instructions to son: Make a lot of money, win the lottery or marry a woman who has lots of money. Period. If you try to find a place here without it, you are most likely going to live from paycheck to paycheck because of paying high rent or the amount of money you're paying as a down payment on a home.
I'm mystified as to how the OP could be controversial, so much so that the thread is heading towards 20 pages now. He's acknowledging it's very difficult to buy in the Bay Area, and has been at least since the 70's. He's saying that if you don't have a professional salary, you'll have to a) pick up a 2nd job, part-time, b) wait until you're married to someone earning more or less the same as you, and c) live with your parents as a couple until you can save enough for a solid downpayment. And d) dial back the lifestyle expectations, because your home purchase IS your lifestyle. That's all you get, until you move up in your profession and your salary increases. Brownbag lunches, no eating out, staycations or camping trips, at best. Keep your eyes on the homeownership prize, no distractions.
This is very realistic. I've known people who have done that, though they didn't need extra jobs, because they were university faculty starting out, techies starting out, and the like. One couple was able to save enough (the key is living with the parents as newlyweds) that when the wife got a job offer in Canada, they were able to pay cash for a house there, and live mortgage-free. This is how it's done, and this is how it's been done since people started trying to get ahead and get a toehold on home ownership. Make compromises, get a fixer-upper and fix it up, or a foreclosed property, or buy farther out if that's acceptable, or buy a condo instead of a house. Adjust your expectations.
I don't get it; what could possibly be wrong with this advice? People are reading into it that the OP is saying "buy now", which he never said. How could 70's/early 80's mortgage rates be controversial? They're a historical fact. I know people who paid 14% AND who assumed the seller's old loan. People had 2 mortgages in those days, unless they could make a big enough downpayment, like double or more the 20% convention of the time, that they didn't need a loan at the double-digit rate. Some people had renters, they did whatever they had to do to pay down that 14% loan ahead of schedule, or refinance it when the opportunity arose.
A lot of what's going on on this thread sounds like arguing for the sake of argumentativeness.
Last edited by Ruth4Truth; 03-02-2016 at 12:09 PM..
Instructions to son: Make a lot of money, win the lottery or marry a woman who has lots of money. Period. If you try to find a place here without it, you are most likely going to live from paycheck to paycheck because of paying high rent or the amount of money you're paying as a down payment on a home.
People did live paycheck to paycheck in bygone eras. They did that knowing they'd climb the ladder professionally, and that eventually, they'd no longer be living paycheck to paycheck. That was, and still is, normal for getting into homeownership in the Bay Area and other high-demand areas (Seattle, for example). Is that a radical concept? Is that what's generating all the controversy on this thread? If so, where did the idea come from that it should be any different? Are people angry at the OP for giving them a reality check, is that what this is about?
I'm mystified as to how the OP could be controversial, so much so that the thread is heading towards 20 pages now. He's acknowledging it's very difficult to buy in the Bay Area, and has been at least since the 70's. He's saying that if you don't have a professional salary, you'll have to a) pick up a 2nd job, part-time, b) wait until you're married to someone earning more or less the same as you, and c) live with your parents as a couple until you can save enough for a solid downpayment. And d) dial back the lifestyle expectations, because your home purchase IS your lifestyle. That's all you get, until you move up in your profession and your salary increases. Brownbag lunches, no eating out, staycations or camping trips, at best. Keep your eyes on the homeownership prize, no distractions.
This is very realistic. I've know people who have done that, though they didn't need extra jobs, because they were university faculty starting out, techies starting out, and the like. One couple was able to save enough (the key is living with the parents as newlyweds) that when the wife got a job offer in Canada, they were able to pay cash for a house there, and live mortgage-free. This is how it's done, and this is how it's been done since people started trying to get ahead and get a toehold on home ownership. Make compromises, get a fixer-upper and fix it up, or a foreclosed property, or buy farther out if that's acceptable, or buy a condo instead of a house. Adjust your expectations.
I don't get it; what could possibly be wrong with this advice? People are reading into it that the OP is saying "buy now", which he never said. How could 70's/early 80's mortgage rates be controversial? They're a historical fact. I know people who paid 14% AND who assumed the seller's old loan. People had 2 mortgages in those days, unless they could make a big enough downpayment, like double or more the 20% convention of the time, that they didn't need a loan at the double-digit rate. People took in renters, they did whatever they had to do to pay down that 14% loan ahead of schedule, or refinance it when the opportunity arose.
A lot of what's going on on this thread sounds like arguing for the sake of argumentativeness.
For me, it is a legacy of his previous thread where he claimed that "sf is changing, rude techies are replacing artsy types... but surely it has nothing to do with housing and rental prices". It was utterly bizarre, and like this thread, went on and on for pages with him continually ignoring intelligent replies, calling people trolls if they disagree with him, and complaining that people arent getting banned for disagreeing with him.
Also, if this advice is in the context of getting his kid to stop whining about the cost of housing, then, hey, i kind of agree with him! Suck it up if you want to stay in the bay, heres what your facing. But judging by his advice in previous threads, it doesnt match up? If he actually thinks his kid SHOULD skimp on things like heallth insurance because living in the bay is just so fantastic, then that is just horrible parental advice. Also note that he is just casually tossing out scammy arm products here and there, without actually researching them.
For me, it is a legacy of his previous thread where he claimed that "sf is changing, rude techies are replacing artsy types... but surely it has nothing to do with housing and rental prices". It was utterly bizarre, and like this thread, went on and on for pages with him continually ignoring intelligent replies, calling people trolls if they disagree with him, and complaining that people arent getting banned for disagreeing with him.
Disagreeing with facts are not intelligent replies. The list goes on and on. Someone said mortgage rates were NEVER 15%, when in reality they were above 17%. This recession is the worst. Yes, for the most part it is, but unemployment was higher in 1981 and GDP declined by almost as much in 1973-1975. Those are FACTS. Disagreeing with that is not intelligent. Women held mainly underemployed positions in the 60-70's. NEVER EVER was that true. FACT...Yes, it was. I presented a graph that portrayed such trend. Response- "Conicidentally it ends in 2008. Ok, a trend over 40 years is not all of a sudden going to reverse course drastically. Ok, you are correct all these are intelligent posts and the OP has no idea what he is talking about. He is stating facts, as a few of us are. Some just refuse to believe the facts.
Also, it's not just millenials that are living paycheck to paycheck. Plenty of people are and always have been, particularly in California's major cities. All due, to the price of living here. This transcends through many generations not just the current one that everyone seems to be so incensed with.
There are other problems that juice up people's interest. There's also not much point in these discussions without hard figures.
OP claims in other thread that you can buy a house, (in SF proper?) with a lower income - well less than 200k, and makes no mention of ongoing savings needed to responsibly run a household. Sure it's possible to make only 180k and buy a high six-figures house. It's also irresponsible when you have a family. What if someone loses their job?
OP seems to advocate spending every last dollar on housing. Which, when you have a family and need schools and need more than, say 1300 sq feet, adds up to a lot of money. He also assumes everyone is buying in their 20s, and has a long horizon of big pay increases. As if everyone's pay goes up...a lot. Small subset of cases. Now, this used to be good general advice, incomes go up - but it does not apply in today's bay area. You need to be on a trajectory to earn very big from the very start; this includes 20% down on a big number. Or, you need to have gifted cash (also very very common today). You can earn 150 to 200k and buy a 2+ bed house in SF in a non-edgy family-adequate neighborhood only if you have gifted cash or equity earnings.
I mean there are literally dozens of threads with people who support my viewpoint re: needing well over 250k at a bare minimum. 300k+ is more like it if you want over 1500sq feet and some savings headroom. And I'm not talking about top-tier, about places like Palo Alto.
He laughs at this. He is, in my opinion, stuck on a view re: necessary income that is quite incorrect. I suspect he has no idea how many households are earning that much in the Bay Area right now.
When I bought my first home I was 22 and single... I went all in and it was the single best financial decision for me... even-though friends and family couldn't see it.
It was going to be condemned... a little cottage on a Bay Area 25x100 lot... but, it was all mine.
I've never made a big salary... I've always been a super saver and frugal and debt adverse except for a first mortgage.
I've tried to make the numbers work in so many ways...what if I cut expenses, consider the hood w/ private school, longer commute.... I want a nice house, short commute, and great schools - the trifecta. Only two ways for a W2 person with no trust fund to make it happen:
1. Work way up ladder to the top 5%
2. Get to top 25% and marry a top 25.
There are other problems that juice up people's interest. There's also not much point in these discussions without hard figures.
OP claims in other thread that you can buy a house, (in SF proper?) with a lower income - well less than 200k, and makes no mention of ongoing savings needed to responsibly run a household. Sure it's possible to make only 180k and buy a high six-figures house. It's also irresponsible when you have a family. What if someone loses their job?
OP seems to advocate spending every last dollar on housing. Which, when you have a family and need schools and need more than, say 1300 sq feet, adds up to a lot of money. He also assumes everyone is buying in their 20s, and has a long horizon of big pay increases. As if everyone's pay goes up...a lot. Small subset of cases. Now, this used to be good general advice, incomes go up - but it does not apply in today's bay area. You need to be on a trajectory to earn very big from the very start; this includes 20% down on a big number. Or, you need to have gifted cash (also very very common today). You can earn 150 to 200k and buy a 2+ bed house in SF in a non-edgy family-adequate neighborhood only if you have gifted cash or equity earnings.
I mean there are literally dozens of threads with people who support my viewpoint re: needing well over 250k at a bare minimum. 300k+ is more like it if you want over 1500sq feet and some savings headroom. And I'm not talking about top-tier, about places like Palo Alto.
He laughs at this. He is, in my opinion, stuck on a view re: necessary income that is quite incorrect. I suspect he has no idea how many households are earning that much in the Bay Area right now.
Numbers, here you go. $900k house with 20% down equals PITI of $4,300/month at 3.625% interest rate. Someone making $200k grosses $16,700 per month, maybe just under $11,000 per month net. There is $6,700 left over per month to cover health insurance ($300), gas and electric ($175), cell phone ($150), gas ($100), 401k ($1,500), car payments ($600), groceries ($500), dinners out ($300), vacations ($500), kids activities ($1,000). Seems like it can be done on $200k to me. What did I miss? College tuition, sure guess that is another one. Good thing there is $1,500 left over. Haven't budgeted like this since our kids were small, but these are the ones I remember. Let me know, I'm open to suggestions if there is disagreement here as I'm done wasting my time on this.
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