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Your numbers are way off. There's no way you can afford a $4500 mortgage payment on a $150k income while still being able to cover your other expenses (including house maintenance, property tax, etc) and save for retirement.
As a general rule of thumb, prudent lenders will not approve a mortgage if the PITI payment (principal, interest, tax, and insurance combined) exceeds 28% of your gross income, which would be $3500/month. This translates to a maximum loan of approximately $575k assuming a 30-year fixed mortgage at 3.5%, purchase price of $718k (20% downpayment), and property tax at 1.25%, or $9k/year, and insurance of approximately $1500/year.
You might find a lender which will give you a slightly larger mortgage than this, but not much larger, because the days of funny-money interest-only option ARMs are over.
Actually, I wouldn't be surprised if there aren't banks out there still doing stupid lending. The two words "prudent" and "lender" don't belong in the same sentence, unfortunately.
Why is the cost of living in the particular area so high, is there something I'm not seeing? seeing this makes me happy I own a home in NJ/NY but I really want to get out of here. I bought a beach house last year in Newport Beach for the family for the winter months and considering the area I got a pretty good deal on it. I was actually thinking of leaving NJ/NY and making a switch to the San Jose/surrounding areas and staying in California for good just because my job gives me the leverage of coming and going as I please but I guess I'll just stick to visiting. In another note, does anyone recommend any good lofts and or condos in the downtown area?
It's a classic supply/demand problem. The area is mostly built out. There is tons of red tape involved in building housing in CA. Because of Prop 13, which limits property taxes, cities say that the tax revenue from new housing doesn't cover the expense of servicing new residents. All of these things limit the supply of housing and the red tape adds to the cost of building. Add in people who want to live here who are willing to pay rip off prices...and you get sky high housing prices and rents.
Why is the cost of living in the particular area so high, is there something I'm not seeing? seeing this makes me happy I own a home in NJ/NY but I really want to get out of here. I bought a beach house last year in Newport Beach for the family for the winter months and considering the area I got a pretty good deal on it. I was actually thinking of leaving NJ/NY and making a switch to the San Jose/surrounding areas and staying in California for good just because my job gives me the leverage of coming and going as I please but I guess I'll just stick to visiting. In another note, does anyone recommend any good lofts and or condos in the downtown area?
The cost to build continue to rise... it's just not things like California's new 1% lumber tax.
Just to get approval, reviews, utilities, etc can run well over a 100k.. in some communities it can be double that.
A friend had to pay to upgrade a fire hydrant and the utility charge for the "Engineering and Install" was 55k
Nothing inexpensive about building in the Bay Area...
As cost escalates it raises the price of existing inventory.
The cost to build continue to rise... it's just not things like California's new 1% lumber tax.
Just to get approval, reviews, utilities, etc can run well over a 100k.. in some communities it can be double that.
A friend had to pay to upgrade a fire hydrant and the utility charge for the "Engineering and Install" was 55k
Nothing inexpensive about building in the Bay Area...
As cost escalates it raises the price of existing inventory.
You are right, but as you know it is so much more than that. In addition to fees that would make any mafioso blush ( to pay for my father in law's pension and health insurance, he is retired City of San Jose administrator), the restraint on the local supply of work force housing by rampant NIMBYism that has locked up thousands of acres of land in the surrounding foothills from ever being developed and the effects of Prop 13 ( Ultrarunner is quite fond of this proposition) that allows retired folks like my mother and mother in law ( and I love both of them) to stay in their homes for essentially nothing, contributes to the restraint in supply of workforce housing. There are so many high income and high net worth individuals in the Bay Area that there is great competition for the desirable housing that is in short supply that it drives up the price of housing, compared to other regions of the country. Some of these factors are real, some are artificially induced , and contribute to the wealth of the members of the landed aristocracy that has been created by prop 13. This includes Ultrarunner and myself as although I currently do not own Bay Area real estate I will eventually inherit such property and such benefits will accrue to me.
Last edited by WeakandDizzy; 01-28-2013 at 02:28 PM..
Reason: clarification
You are right, but as you know it is so much more than that. In addition to fees that would make any mafioso blush ( to pay for my father in law's pension and health insurance, he is retired City of San Jose administrator), the restraint on the local supply of work force housing by rampant NIMBYism that has locked up thousands of acres of land in the surrounding foothills from ever being developed and the effects of Prop 13 ( Ultrarunner is quite fond of this proposition) that allows retired folks like my mother and mother in law ( and I love both of them) to stay in their homes for essentially nothing, contributes to the restraint in supply of workforce housing. There are so many high income and high net worth individuals in the Bay Area that there is great competition for the desirable housing that is in short supply that it drives up the price of housing, compared to other regions of the country. Some of these factors are real, some are artificially induced , and contribute to the wealth of the members of the landed aristocracy that has been created by prop 13. This includes Ultrarunner and myself as although I currently do not own Bay Area real estate I will eventually inherit such property and such benefits will accrue to me.
Bought my current home near the peak... previous owners built the 1725 square foot rancher in 56/57 and in 2005 were paying $1200 a year Prop Tax... when I bought, the Property Tax went to $9,000.
Even so... I don't begrudge them or any of my neighbors... no one forced me to buy and they are the reason the neighborhood is a nice place...
Out of all of them... it was one child per family... guess those buying homes from that generation didn't believe in big families... they have not had a child in the school system for 40 or 50 years... and schools are a huge part of property tax.
They also paid for the road and the utilities for are street... I got to come in 50 years later and didn't have to pay a dime for the road they built or for the fire hydrants they paid for...
I guess anyone that owns a home is part of the Landed Aristocracy?
Without Prop 13, many people, especially seniors on fixed incomes would be taxed out of their homes. That is much worse than home buyers having to pay a higher tax because they have a choice to buy or not buy.
Bought my current home near the peak... previous owners built the 1725 square foot rancher in 56/57 and in 2005 were paying $1200 a year Prop Tax... when I bought, the Property Tax went to $9,000.
Even so... I don't begrudge them or any of my neighbors... no one forced me to buy and they are the reason the neighborhood is a nice place...
Out of all of them... it was one child per family... guess those buying homes from that generation didn't believe in big families... they have not had a child in the school system for 40 or 50 years... and schools are a huge part of property tax.
They also paid for the road and the utilities for are street... I got to come in 50 years later and didn't have to pay a dime for the road they built or for the fire hydrants they paid for...
I guess anyone that owns a home is part of the Landed Aristocracy?
Oh... I was born in San Jose...
Yes,
Anyone who owns a home in California under Prop 13 ( including corporations) is part of the landed aristocracy. The longer you own there, the larger your benefit. I currently don't live in California. My property tax rate is the same as anyone else in my neighborhood. We all pay the same rate. We all receive the same services. I did not pay for the roads in my community that were built 30 years ago, but I pay the same rate as my neighbors to build new roads, new schools and to maintain the current infrastructure. When I lived in California my property taxes were about $ 1400/yr and my next door neighbor was paying about $250/yr. I did not receive 5.6 times the services he received. Look, I'm glad my parents and in laws have the benefit of Prop 13. It has allowed them to live in their homes in one of the most beautiful places on earth. But it is not fair ( as my mother told me " life is not fair, get over it") that one group of citizens is singled out for benefits that others are not entitled to receive. As far as your neighbors go, I am sure they are all nice old people, but perhaps if they had to move out ( like all the old people in Long Island who move to Florida when they retire, because they can't afford the property taxes and they get a weather upgrade) you would have a bunch of younger neighbors with kids ( to play with yours if you have any) and you would all pay $4000-$5000/yr in property tax, instead of you paying $ 9000/yr and all of the old people paying $ 1200/yr. We all benefit from children, even those without them, who else to grow up, get jobs and pay for our social security? And, Oh... I also was born in San Jose.
Last edited by WeakandDizzy; 01-28-2013 at 04:27 PM..
Reason: grammar
Without Prop 13, many people, especially seniors on fixed incomes would be taxed out of their homes. That is much worse than home buyers having to pay a higher tax because they have a choice to buy or not buy.
I am not a tax expert or an economist, but I think the goal of taxation is to pay for the services we as a society feel are needed and that private business cannot provide in a more efficient manner. Certainly tax policies can be used for other goals, like keeping retired people in their homes, but there may be other consequences to society, such as the artificial restraint on workforce housing supply ( ie. why don't all of you old people move to Palm Springs/Las Vegas and golf so the young families have someplace to live close to Apple/Google, etc.). On the east coast when people retire they are usually taxed out of their homes in the Northeast, so they move to the Southeast ( Fla, Ga, NC, SC) where the cost of living, housing and property taxes included, is cheaper. Of course they also usually get a weather upgrade. If you live in Coastal California there is no other place to go to get a weather upgrade, so passing a law to fix your property tax at a below market rate is the only solution needed to stay in the good weather zone. Again, I'm no expert, just my opinion on the matter , having lived on both coasts.
Without Prop 13, many people, especially seniors on fixed incomes would be taxed out of their homes. That is much worse than home buyers having to pay a higher tax because they have a choice to buy or not buy.
You say that, but other states seem to do fine without a Prop 13. Also, I've often heard that property values have increased partially as a result to Prop 13. So, your property taxes would be higher, but your mortgage payment may be lower.
You say that, but other states seem to do fine without a Prop 13. Also, I've often heard that property values have increased partially as a result to Prop 13. So, your property taxes would be higher, but your mortgage payment may be lower.
You are correct. Again, I am no real estate or tax expert, or an economist but any measure that serves to restrict supply should increase price. If you eliminated Prop 13 tomorrow and the taxing authorities re appraised properties to current market value, thousands of old people would be facing huge property tax bills that they could not afford. My mother in law's tax bill would rise from somewhere around $1700/yr to around $12,000/yr. She has sufficient resources that she could hang on for a while, but many would throw in the towel and put the place up for sale and move. This would suddenly open up thousands of additional housing units on the market in the Bay Area for young families with children. Housing would not become cheap, but it would certainly serve as a serious check on price. Is this going to happen? I don't think so, at least not in my lifetime.
Last edited by WeakandDizzy; 01-28-2013 at 05:11 PM..
Reason: duplicate words placed in error
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