Buying in the Bay Area - What Can I Afford? (San Francisco: for sale, house)

[sliverbox]

First of all, I wouldn't be getting financial advice from a forum. So before I continue, keep in mind that these are my opinions and it would probably be best to talk to a few mortgage brokers, bankers, financial advisors and so forth.

We bought a year ago. We make a little less than you do. The house we bought was about 530k and at that level I would not personally feel comfortable paying much more. We also had a significant amount of cash saved up, not only for a over 20% down payment, but also enough leftover to use as an emergency fund, which meant enough to pay the mortgage for a long time period in a worse case scenario. This took over 12 years of saving to do so. So it was a long-term savings plan that gave us the leverage we needed. That said, I am extremely financially conservative. Again this is my opinion.

I've heard the market has more or less gone nuts lately. So I'm not sure what that means as far as bidding and buying. But do some research and come up with a limit to what you are willing to spend maximum and take your time. What has been true about the Bay Area is that there is a seemingly non-stop cycle of booms and busts. So worse comes down to worse- it might take years, but probably another bust will occur at some point.

Good luck!

[Ceece]

Our income was more than yours when we had a $350K mortgage with a single digit interst rate. I wouldn't have wanted more debt, especially when we factored in the cost of the kids, pets, cars, etc. You may not have those things now but you may in a couple years. Don't overextend yourselves, most people don't need as much house as they think they do. Extra rooms and fancy this-n-that never feel as good a big chunk of money in the bank

[sliverbox]

Our income was more than yours when we had a $350K mortgage with a single digit interst rate.

Agreed. After our down payment the amount wound up being around 400k owed. Even at this seemingly "small" amount with a low interest rate, the monthly nut still works out to around $1,750. That's not including taxes. So just keep that in mind because if one person loses a job, suddenly the ability to pay the mortgage gets cut in half. Hence the total monthly nut in my opinion needs to be considered as if only one person had a job.

[BayAreaHillbilly]

The real estate curve here as been a generally upward sawtooth. The downturns generally don't exceed the previous upturn. It's simple supply and demand - lack of close in buildable land coupled with draconian growth and zoning controls - there you have it.

Caveat - when the population in advanced countries levels off then starts its decline (and this will happen before the global inflection point, possibly well before), all bets are off. But when that happens, other markets will be hammered even worse than us.

[gone down south]

If you have $90k in cash, you can afford a $450,000 house, since lenders are being strict about 20pct down.
Actually, taking closing costs and incidentals into account, probably closer to $420 k

[sliverbox]

I've lived here for 13 years and I've seen this "sawtooth" pattern several times already. I also have friends who have lived here longer and from what I've seen and what they told me the "window of opportunity" in which someone can generally buy a house without the craziness is amazingly small. I remember last year when we bought it had been really quite for about 2 years, then suddenly things really took off almost instantly.

The Bay Area seems to thrive on irrational exuberance and panicky consumers. Its just amazing that we're barely even out of the largest housing bubble in history and yet people seem to have totally forgot that and have gone right back to being nutty about houses and paying out the nose too.

[ambient]

Originally Posted by Ceece

Our income was more than yours when we had a $350K mortgage with a single digit interst rate.

Can you get this on the peninsula, though? If so, where?

[wave9x]

Originally Posted by ambient

Can you get this on the peninsula, though? If so, where?

Only way you can get a house with a 350k mortgage on the Peninsula is if you have piles of cash laying around to put towards a massive down payment. That was true even before things started going up recently.

[sonarrat]

Originally Posted by sliverbox

I've lived here for 13 years and I've seen this "sawtooth" pattern several times already. I also have friends who have lived here longer and from what I've seen and what they told me the "window of opportunity" in which someone can generally buy a house without the craziness is amazingly small. I remember last year when we bought it had been really quite for about 2 years, then suddenly things really took off almost instantly.

The Bay Area seems to thrive on irrational exuberance and panicky consumers. Its just amazing that we're barely even out of the largest housing bubble in history and yet people seem to have totally forgot that and have gone right back to being nutty about houses and paying out the nose too.

It's the "gold rush." It existed long before us, long before the dot-com stock option millionaires and will be a California pattern probably forever. Both the Bay Area and Los Angeles count among the very few places where you get both fantastic weather and good access to high-paying jobs. Objectively, that makes them two of the most desirable places in the whole country. But, they're not perfect, and at the prices some people are gulled into paying to live here, you would think it was.

[Calinewyorker]

Originally Posted by gone down south

If you have $90k in cash, you can afford a $450,000 house, since lenders are being strict about 20pct down.
Actually, taking closing costs and incidentals into account, probably closer to $420 k

You can buy why? Why not buy a 300K house and save yourself a larger monthly payment? Buy something that needs a little work and put your personal touch on it.