Anyone Else Thinking of Moving Out of Bay Area? (San Jose: mortgage, houses)

[neutrino78x]

Median household income for San Jose is 100k:

San Jose, CA - Forbes

San Jose California Household Income | Department of Numbers

So yeah, people can afford the houses here.

[MediocreButArrogant]

Originally Posted by wsugrad03

That's accurate, but is mostly because of established home owners that bought years ago, and distribution of lower income people renting. If you look at the median income of people who are actually buying homes in Santa Clara Country, it's likely closer to 200k. When people generally refer to the income people need to live here, they're implying the income needed to afford to buy a home....the whole American dream thing.

From Some housing affordability improvement in Bay Area

Santa Clara, San Francisco and Alameda counties saw the greatest quarter-to-quarter improvement in housing affordability, primarily due to lower price growth. Santa Clara County was at 21 percent, up from 19 percent in second-quarter 2014. Santa Clara County home buyers needed to earn a minimum annual income of $174,620 to qualify for the purchase of an $860,000 statewide median-priced, existing single-family home in the third quarter of 2014. The monthly payment, including taxes and insurance on a 30-year, fixed-rate loan, would be $4,370, assuming a 20 percent down payment and an effective composite interest rate of 4.23 percent.

[neutrino78x]

I would like to see some statistics on what percentage of people who live in Silicon Valley own a home as opposed to renting, or owning a condo. I would expect that the majority of us aren't interested in buying one. Those who do generally are the ones who are advanced in their career and are making far above the median. That or they married someone who makes about the same amount of money and went into it together.

Like I said, personally, owning a single family home is definitely not something that I need. Unfortunately I will probably never have a wife and I'm not interested in kids anymore. And if I had wife and kids, a condo would suffice.

[RecentGrad1]

Originally Posted by neutrino78x

I would like to see some statistics on what percentage of people who live in Silicon Valley own a home as opposed to renting, or owning a condo. I would expect that the majority of us aren't interested in buying one. Those who do generally are the ones who are advanced in their career and are making far above the median. That or they married someone who makes about the same amount of money and went into it together.

Like I said, personally, owning a single family home is definitely not something that I need. Unfortunately I will probably never have a wife and I'm not interested in kids anymore. And if I had wife and kids, a condo would suffice.

That's because a condo is generally pretty horrible to own. Insane HOA fees, and the market crashes far harder than a SFH when there is a downturn. You also lose the flexibility of the apartment in that you can move when you change jobs to stay close to work (particularly due to the fact that condos are so hard to sell).

I intend to stay in the Bay Area for another 8-10 years. I've priced out a condo vs. continuing to rent, and my current apartment comes out cheaper at the end of that period.

[MediocreButArrogant]

Originally Posted by RecentGrad1

That's because a condo is generally pretty horrible to own. Insane HOA fees, and the market crashes far harder than a SFH when there is a downturn. You also lose the flexibility of the apartment in that you can move when you change jobs to stay close to work (particularly due to the fact that condos are so hard to sell).

That's generally true, but that hard crash means they appreciate more when things recover (though they do tend to lag in recovery by several months). They're also a lower entry point for the investor. In most other markets they'd be a risky investment, but in Silicon Valley, you're all but guaranteed prices will eventually recover. I bought a couple 1br condos in Santa Clara after the market crashed in 2008. I sold them both in 2013 for over double what I paid and cleared almost $450k. IIRC, they sold new for around $250-275k, they could be easily purchased for $150k when things crashed, and by 2013 you could get $375k for them.

I intend to stay in the Bay Area for another 8-10 years. I've priced out a condo vs. continuing to rent, and my current apartment comes out cheaper at the end of that period.

You won't be participating in any price increases. Then again, you won't be participating in any price decreases either.

[kdog]

We moved away from San Jose 11 years ago -- and moved back 3 years ago. We were in NY and AZ. The weather, the parks, the geography (mountains and coast), the schools and resources for kids in general make the bay area perfect for us at this point in our lives. Maybe some day we'll move on again. But for now, we wouldn't be anywhere else.

[Azmordean]

Originally Posted by RecentGrad1

That's because a condo is generally pretty horrible to own. Insane HOA fees, and the market crashes far harder than a SFH when there is a downturn. You also lose the flexibility of the apartment in that you can move when you change jobs to stay close to work (particularly due to the fact that condos are so hard to sell).

I intend to stay in the Bay Area for another 8-10 years. I've priced out a condo vs. continuing to rent, and my current apartment comes out cheaper at the end of that period.

Are you including rent increases of at least 10% per year in your calculation? And the substantial tax break of home ownership? Even looking at just monthly cash flow you might come out ahead before long, and that doesn't even include the possibility of building equity.

Buying isn't for everyone, but I can't imagine renting for 10 years.

I just bought a condo myself back in September -- yes it was a stretch, but my rent was going up *more* than 10% and I was just sick of it. Now instead of paying $2800+ for a 2br 1ba under 900sqft, once you consider the tax breaks, I'm paying close to $3100 for a 2/2 1100 sqft, walking distance to downtown Mountain View. Way more space, much better location, much nicer place in terms of finishes, and the price increase wasn't even that much.

And, of course, I fully expect my old apartment will cost MORE than what I'm paying within a year or two.

HOA fees are much complained about, but if you amortize the costs of home maintenance (landscaping, roofing, driveways, siding, painting, most of your insurance including earthquake insurance, etc) you'll quickly find it's not as bad as it sounds. Yeah, a SFH may have "0" HOA fees, but it doesn't have 0 maintenance costs. It's 0 for a lot of months, then occasionally $10,000 plus when something goes bad. You also get pools, tennis courts, etc with a lot of condos.

You do have to be diligent when buying a condo, looking at reserves and whatnot, but HOA fees shouldn't be near the deal killer people make them out to be.

[RecentGrad1]

Originally Posted by Azmordean

Are you including rent increases of at least 10% per year in your calculation? And the substantial tax break of home ownership? Even looking at just monthly cash flow you might come out ahead before long, and that doesn't even include the possibility of building equity.

Buying isn't for everyone, but I can't imagine renting for 10 years.

I just bought a condo myself back in September -- yes it was a stretch, but my rent was going up *more* than 10% and I was just sick of it. Now instead of paying $2800+ for a 2br 1ba under 900sqft, once you consider the tax breaks, I'm paying close to $3100 for a 2/2 1100 sqft, walking distance to downtown Mountain View. Way more space, much better location, much nicer place in terms of finishes, and the price increase wasn't even that much.

And, of course, I fully expect my old apartment will cost MORE than what I'm paying within a year or two.

HOA fees are much complained about, but if you amortize the costs of home maintenance (landscaping, roofing, driveways, siding, painting, most of your insurance including earthquake insurance, etc) you'll quickly find it's not as bad as it sounds. Yeah, a SFH may have "0" HOA fees, but it doesn't have 0 maintenance costs. It's 0 for a lot of months, then occasionally $10,000 plus when something goes bad. You also get pools, tennis courts, etc with a lot of condos.

You do have to be diligent when buying a condo, looking at reserves and whatnot, but HOA fees shouldn't be near the deal killer people make them out to be.

Rent increases of 10% a year? You've GOT to be kidding me. My rent finally just increased 5% and I've been in my current apartment 2 years (first increase so far). If rent increases too much I can always move to a smaller place (or even leave the area). No such option with a condo, as they're very hard to sell and you're screwed if you need to sell in a down market.

$3100

There's your second problem. I'm paying $1K/month for my current studio in San Jose. The cheapest condo available is going to have mortgage of $2200/month + ~300 HOA fees. Then you have property taxes. Oh, and you lose your down payment. Ownership will never be cheaper for me unless cheaper condos become available.

I'm putting away a lot more money (net worth) by renting and investing the difference. The only way ownership could possible make sense is for me if I bough a SFH and rented out the rooms. But that's a major headache. As a single person ownership just doesn't make sense.

[neutrino78x]

Originally Posted by RecentGrad1

I'm putting away a lot more money (net worth) by renting and investing the difference. The only way ownership could possible make sense is for me if I bough a SFH and rented out the rooms.

This is something I plan to do, even if I can afford the mortgage on my own. I would totally go on craigslist housing wanted and offer people rooms for a while. It seems a lot of people on here can't stand the idea of shared housing, but I enjoy having roommates. As long as everybody has their own room. If you have to share rooms, that's where it starts to become undesirable. But having roommates is cool.

[RecentGrad1]

Originally Posted by neutrino78x

This is something I plan to do, even if I can afford the mortgage on my own. I would totally go on craigslist housing wanted and offer people rooms for a while. It seems a lot of people on here can't stand the idea of shared housing, but I enjoy having roommates. As long as everybody has their own room. If you have to share rooms, that's where it starts to become undesirable. But having roommates is cool.

What if your "roommate" doesn't pay and you have to evict him/her (happened to several of my co-workers who own property)? You lose out on that rent for 6+months AND have to pay legal fees. What if they do damage to your property (one co-worker had a tenant do $20K damage to their property)? What if there's a downmarket and you can't find a renter? What about the time you will have to spend finding/screening roommates, and then replacing them when they leave? Remember the typical crowd that CL attracts. You may find yourself hard pressed to find someone (like me) who's stable and responsible, who hasn't already bought a place of their own.

All these issues are why I'm renting and putting my money in index funds, even thought I could afford a down payment on a SFH and renting out the rooms. No time or energy spent and I'm making more money over the long term. And I'm also not losing my principle's potential returns to a down payment.

A house is a horrible investment, anyway.