$150K for family of 3 in Daly City: Adequate? (Los Angeles, San Mateo: sale, to rent)

[ndfmnlf]

A friend of mine has been offered a job in Daly City for $150K. He has a wife and 10 yo old child. Since I am from CA (Los Angeles) originally, he asked me whether this is an adequate wage for the area. Would he be able to buy a house/condo? His wife might be able to pull in another $50 to $70K if she has to, but would rather not work in the meantime they are adjusting to the new locale. Both of them are in health care (the guy is a doctor, wife is a medical technologist). Since I have never lived in the bay area (much less lived in CA for at least 10 years), I have no clue. Any ideas? Thanks.

[iTsLiKeAnEgG]

I think its very do able and he wouldn't have to live in the junky areas along mission or geneva either.

[molliesue]

I think that is a very decent income to support three in that area. Now would also be a great time for them to buy an affordable peice of property.

[jbunniii]

Median sale price in Daly City for 3+ bedroom houses over the past three months was about $500k, so buying is feasible with $150k income assuming he has good credit and ample downpayment. Prices will likely fall for the next few years, though, so better deals are likely if he rents for a while.

[ImRandy]

You can certainly afford to rent. I don't see how buying a $500 or $600K house could be considered "feasible" on a $150K income.

[ndfmnlf]

Originally Posted by ImRandy

You can certainly afford to rent. I don't see how buying a $500 or $600K house could be considered "feasible" on a $150K income.

I agree, although $150K is starting salary. The median income of his specialty (internal medicine) is $200K.

[humboldtrat]

Originally Posted by ImRandy

You can certainly afford to rent. I don't see how buying a $500 or $600K house could be considered "feasible" on a $150K income.

It's not like the OP has to pay the full price upfront. A house is feasible with a 15 or 30 year mortgage. And the OP can buy into a better area such as Burlingame or San Mateo instead of Daly City with a $150K income.

[aklein]

I don't think you can afford Burlingame, but Millbrae, and San Mateo are definitely doable and much better options than Daly City.

[jbunniii]

Originally Posted by ImRandy

You can certainly afford to rent. I don't see how buying a $500 or $600K house could be considered "feasible" on a $150K income.

$500k house, 20% downpayment is $100k, leaving a mortgage of $400k, which is 2.66 times his annual income. Let's assume a 30-year fixed mortgage at 5.75%. The monthly mortgage payment would be $2334, or 18.6% of gross income.

$600k house, 20% downpayment is $120k, leaving a mortgage of $480k, which is 3.2 times his annual income. A bit of a stretch, but not even slightly out of the ordinary for the Bay Area. Same mortgage rate assumption yields a monthly payment of $2801, or 22% of gross income.

I'm not including property tax or the deductibility of mortgage interest. Rough rule of thumb is that these cancel each other out.

These numbers don't seem out of line to me, and I'm pretty conservative when it comes to finances.

I wouldn't buy a house at these prices. However, that is not because I think it's unaffordable given the $150k income, but because I think prices will drop significantly over the next 2-3 years. The OP will be able to buy a nicer house and/or in a nicer area for the same money if he waits. Meanwhile, it's cheaper to rent a house than to make the mortgage payments on a comparable property.

[jrb724]

I'd rent first and find the area you'd like to buy in. There is no sense in rushing a long term purchase like a home. You don't want to say a year later " I like my home but wow, if I knew about x area, I would've bought here instead." It will also give you more time to accumulate a downpayment.