Is it better for a middle class citizen to rent or own? (Oakland: 2014, credit card)

[aramax666]

The way I look at it is this... I like to sleep 8 hours... Basic overheads 2 hours. 14 hours left.. 8-9 hour work day. 5 precious hours left... You guys are throwing out 75-90 minute commutes as if you had 40 hours in the day...

I personally don't think its that cool for me to be spending 2-3 hours in a car... I actually fled a "third world" country for that reason.

Maybe SF has it easier, but in SV, to achieve:
1) A nice house
2) Good School
3) Low Crime
4) 30 minute commute.

No way you get those in less than a million.

[sav858]

Originally Posted by LoriBee62

Contrary to popular belief, not every good paying job is in San Francisco. I mean, really. Think about the statement you're attempting to make. You knew someone from Stockton who commuted to Redwood City. So are we supposed to then believe that everyone who lives in Stockton has a 2-hour commute?

Where I live 75% of the people who commute down 101 only go to Marin (I learned that through the SMART train statistics, which supports my own observations). The vast majority of people I know through my kids school, my job, my neighborhood, most families live and work right in Sonoma County. Very few commute all the way to Oakland or San Francisco, and the ones who do usually tire of it and ultimately find a job closer to home.

Sure, I hear horror stories about people in high tech jobs down in Silicone Valley having to live in their cars, but given the exaggerations I see on these forums, I'm beginning to question whether that's even true. But lets accept for the sake of argument that if you work for Google, you can't buy anything within two hours of the facility. Okay fine. But the Bay Area is much bigger than just Silicone Valley (which technically isn't even the bay area), and not everyone in Northern California works for Google. MOST people who live and work in the Bay Area are not commuting 3 hours a day to get to their jobs.

This is actually a good point, the majority of workers commute to a job within the same county they live in. Obviously SF and SV are the regions largest job centers but some people on this forum put a bit too much emphasis on that is where everyone has to or will work.

[justinbro2002]

How are the unskilled laborers and service industry people surviving here? Multigenerational households? Multifamily households?

[bentobox34]

Originally Posted by LoriBee62

A good percentage of residents on the 101 corridor of Sonoma County commute to San Francisco.

83% of workers who live in Sonoma County work in Sonoma County. Only 2.8% work in San Francisco. A larger percentage (7.7%) commute to Marin County.

Source

[bentobox34]

This question cannot be answered for everyone. That said, for my own situation in Silicon Valley, renting is a clear winner right now. I'm currently paying $2700 for a duplex unit. On a recent walk through the neighborhood I noticed a house for sale with the same bed/bath count, slightly lower square footage and slightly less outdoor space (not sure that exactly balances since it was freestanding single family, but seems roughly comparable to me). Asking $799k. From a Bankrate caculator, assuming I could put down 20%, my monthly PITI would be $3,955. That does not include maintenance. If you add 1% of home value/year for maintenance we're up to $4600/month. It would take 6 years of sustained 10% annual rent increases (which has never happened) for my rent to reach that high, during which time I would have saved over $80,000 in lower housing payments.

It's no wonder so many rentals are being built right now, and rent keeps going up. As awful as renting is around here, buying is even worse.

The above example assumes I could actually come up with $160,000 for a down payment. But that's not going to happen any time soon. High monthly expenses, not the least of which being rent, leave relatively little left over for savings each month, and I also have to think about other savings priorities such as retirement, college savings, etc. I'd estimate it would take over 10 years to come up with that down payment, but by then houses will be more expensive.

It becomes clearer to me every day that I will eventually leave the Bay Area.

[Bisaro TMF]

Originally Posted by shooting4life

All those places are at least 1.5hrs each way if not two hours each way to SF.

I knew someone that commuted from Stockton to redwood city every day. Just because someone can do it doesn't make it reasonable.

How is Richmond or Concord 1.5 hours each way to SF? In light traffic a drive from Concord to SF is about 30-45 minutes. Bart is 1 hour with all the stops. Richmond is even closer.

[BayAreaHillbilly]

Here in the Bay Area the median earner has no choice unless in possession of an inheritance, previously earned assets from a past period of higher income, a very large amount of equity from a home in another area, or, is willing to live in a challenged area / distant exurb / closet.

[BayAreaHillbilly]

Originally Posted by justinbro2002

How are the unskilled laborers and service industry people surviving here? Multigenerational households? Multifamily households?

Multifamily in rentals in bad areas, or, commuting from the outskirts of Yosemite.

[BayAreaHillbilly]

Originally Posted by LoriBee62

Sorry to burst your assumptions, but I'm living in the 4th house we've owned in the Bay Area over the last 20 years. And I'm not sharing my household income but suffice to say, we fall within your definition of middle class. Last month, a house on my court sold to a couple who just bought their first house. Husband is a college professor, the wife is a secretary. They are within walking distance of the school where they both work, and they are nowhere near millionnaires.

And as far as listening to what people on these forums are saying, I am listening. And what I'm hearing is that people need to spend less time complaining about home prices, and more time looking for jobs in affordable areas. Like I said before, all the jobs in the bay area aren't in San Francisco. Believe it or not, it IS possible finding work outside the city.

You gambled and won using leverage. Some win, some lose, when gambling.

[aramax666]

Lets change a few parameters in your e.g.

.... 800K home borrowing 640K... @ 7/1 ARM @ 3.1%
Monthly: $3,566.24

First year principle paid: $16.5K = monthly back into your pocket = 1,300.

Itemized tax deductible = 24K Interest + 10K Property tax = 34K... assume 25% marginal tax.

Actual interest/prop tax paid. = (1-0.25)*34K = 25K

So your ACTUAL COST TO BORROW is just over 2K. The rest is equity. You are losing 700 dollars a month to rent.

You may want to factor in opportunity cost of the 20% you put down.

Originally Posted by bentobox34

This question cannot be answered for everyone. That said, for my own situation in Silicon Valley, renting is a clear winner right now. I'm currently paying $2700 for a duplex unit. On a recent walk through the neighborhood I noticed a house for sale with the same bed/bath count, slightly lower square footage and slightly less outdoor space (not sure that exactly balances since it was freestanding single family, but seems roughly comparable to me). Asking $799k. From a Bankrate caculator, assuming I could put down 20%, my monthly PITI would be $3,955. That does not include maintenance. If you add 1% of home value/year for maintenance we're up to $4600/month. It would take 6 years of sustained 10% annual rent increases (which has never happened) for my rent to reach that high, during which time I would have saved over $80,000 in lower housing payments.

It's no wonder so many rentals are being built right now, and rent keeps going up. As awful as renting is around here, buying is even worse.

The above example assumes I could actually come up with $160,000 for a down payment. But that's not going to happen any time soon. High monthly expenses, not the least of which being rent, leave relatively little left over for savings each month, and I also have to think about other savings priorities such as retirement, college savings, etc. I'd estimate it would take over 10 years to come up with that down payment, but by then houses will be more expensive.

It becomes clearer to me every day that I will eventually leave the Bay Area.