Rent or Buy in Bay Area? (San Francisco, Oakland: real estate, renter, buying a house)

[Blitz2014]

Ok, so I posted on here couple months ago about wanting to move to Bay Area.

I've narrowed it down to

- Fremont
- WC
- Albany/Alameda

These areas check off most of our boxes.

So we are hoping to move to Bay Area Fall 2022, roughly just under 2.5 years to go

Obviously buying a house requires $, thats why I'm starting to look, scout areas, and I will need about 2-3 years to save up for 20% down payment. Our budget for a starter home/townhouse is around 1 million.

The age old rent vs. buy dilemma has come up for me. I've also scanned this forum, and it appears 50/50 in consensus.

When I first move to Bay Area, we will obviously rent, as that seems to be the unanimous consensus, for at least 6 months, until we are stable.

Question is, what about after?


I'm struggling between renting for life or buying, with regards to financial investment.

Average stock market return (S&P 500) over past 50 years is around 7-8% (with inflation, 10-11% without inflation factored).

So basically I've decided that it is only worth buying if appreciation for the next 10-20 years is roughly AT LEAST 7% annually.

I've found a couple websites:

https://www.noradarealestate.com/blo...estate-market/

- Oakland appreciation is 6.93% last 10 years


Moderator cut: link removed, competitor site

- Oakland appreciation is 8.39% last 10 years


So, my follow-up questions:

1. Since you are all locals, does 7-8% appreciation in Oakland for past 10 years seem accurate?

2. Would WC/Fremont/Albany fall into that category of 7-8% appreciation in the past 10 years?

3. Is it only worth buying if you stay in house for at least 5 years? I mean, we may decide after 5 years, to "trade up", so in that case, should we just rent instead?

4. Any thoughts on what the market outlook is like for the next 10 years? Would you, in my shoes, buy in East Bay?


Don't expect anyone to have a crystal ball, but would appreciate any thoughts, opinions, input.

Thanks!

[Ruth4Truth]

Just something to consider with regards to renting; rent hikes are a regular thing, and can be high, depending on location, and to some extent--on whether you're renting a house or an apt. So if you rent, you should allow plenty of leeway in your budget for future rent hikes, so you don't end up having to move.

I'm not sure there is any outlook into the future, of any duration, what with diseases upending the economy, fires, and heaven knows what else. But maybe 10 years is a short enough duration, that it could work out ok for you, if you buy.

I'm looking forward to seeing what others advise.

[llowllevellowll]

I'm in the camp that you're looking at instability in the current Bay Area housing market. I think it's a bubble and that the current events might give the situation more clarity in the coming 12-18 months. If it were me, I'd rent now, which doubles as time that you can get to know neighborhoods better, and you can then potentially save some money and purchase. I am one, and I know many others, who opted for 'greener' pastures during COVID and many intend on not returning. It will also be interesting to see how many people will be allowed to remote work after this which could allow for more departures following the current events. And just genuinely, on a national and regional scale, you're probably witnessing a recess from rising housing and stock prices as the working classes slowly work their way back. It's important to know that the Coronavirus itself is a trigger. It's not the reason for the economic collapse, but it's a significant (and in this cases, ultra-significant) trigger that set it in motion, but economically, we were on awkward footing even before we stopped working en masse, ballooned our already massive debt in order to line the pockets of the wealthy with these criminal stimulus packages, and the powers that be want you to tie in a coming 5-10 years of poor performance on a potentially one-in-a-lifetime pandemic. We'll have to see if any of the stimulus packages trickle down at all, but I fear that we've seen this movie before to know what's next.

TL;DR: I personally wouldn't buy now under any circumstances.

Edit: I see you're asking for similar advice in OC, Philly, and Detroit. I'm glad you're using this as a resource, but I hope you're not just trolling everyone and having us go down rabbit holes with you by giving you advice.

[Blitz2014]

Originally Posted by llowllevellowll

I'm in the camp that you're looking at instability in the current Bay Area housing market. I think it's a bubble and that the current events might give the situation more clarity in the coming 12-18 months. If it were me, I'd rent now, which doubles as time that you can get to know neighborhoods better, and you can then potentially save some money and purchase. I am one, and I know many others, who opted for 'greener' pastures during COVID and many intend on not returning. It will also be interesting to see how many people will be allowed to remote work after this which could allow for more departures following the current events. And just genuinely, on a national and regional scale, you're probably witnessing a recess from rising housing and stock prices as the working classes slowly work their way back. It's important to know that the Coronavirus itself is a trigger. It's not the reason for the economic collapse, but it's a significant (and in this cases, ultra-significant) trigger that set it in motion, but economically, we were on awkward footing even before we stopped working en masse, ballooned our already massive debt in order to line the pockets of the wealthy with these criminal stimulus packages, and the powers that be want you to tie in a coming 5-10 years of poor performance on a potentially one-in-a-lifetime pandemic. We'll have to see if any of the stimulus packages trickle down at all, but I fear that we've seen this movie before to know what's next.

TL;DR: I personally wouldn't buy now under any circumstances.

Edit: I see you're asking for similar advice in OC, Philly, and Detroit. I'm glad you're using this as a resource, but I hope you're not just trolling everyone and having us go down rabbit holes with you by giving you advice.

Appreciate your input!

Nope, not trolling.

Wife lives in Philly, so I have to move there first (2021), before she finishes her contract (2022) and we move to Cali (and debating between Bay Area vs. LA, leaning towards BA).

So really appreciate this forum helping me make financial, real estate decisions next couple years..

[evening sun]

I am not so sure that the rapid appreciation in real estate equity is going to continue, at least at the frantic pace of the past decades. Also, if you have never lived here before, you may not like it. I loved living in San Francisco, but I also knew many people who moved there & couldn't wait to leave. So I would recommend renting first.

[doggz]

From my perspective as a 23 year resident in the Bay Area (Marin County), there are two principal considerations that should govern this decision:

First, the Federal Reserve’s most recent Survey of Consumer Finances (in 2016), revealed that the median net worth of homeowners was $231,400. Renters had a net worth of just $5,000. I have seen dozens of analyses purporting to show that renters do better if they play the market. If so, why this persistent difference in net worth? Ask yourself: what makes you so special that you will buck this trend?

Second, the cost of renting almost always fails to consider the cost of what I like to call the "landlord's put." In short, the landlord has the right to put you out of your home. Now, rent control schemes attempt to transfer some of the cost of this put from tenant's to landlords but in the final analysis, even in rent control country, a motivated landlord can make you move against your will. This is a cost that should figure into your calculation.

[Blitz2014]

Originally Posted by doggz

From my perspective as a 23 year resident in the Bay Area (Marin County), there are two principal considerations that should govern this decision:

First, the Federal Reserve’s most recent Survey of Consumer Finances (in 2016), revealed that the median net worth of homeowners was $231,400. Renters had a net worth of just $5,000. I have seen dozens of analyses purporting to show that renters do better if they play the market. If so, why this persistent difference in net worth? Ask yourself: what makes you so special that you will buck this trend?

Second, the cost of renting almost always fails to consider the cost of what I like to call the "landlord's put." In short, the landlord has the right to put you out of your home. Now, rent control schemes attempt to transfer some of the cost of this put from tenant's to landlords but in the final analysis, even in rent control country, a motivated landlord can make you move against your will. This is a cost that should figure into your calculation.

Points well taken, thanks.

I'm 35, and have rented all my life, in various cities. So "owning" property does appeal to me. Just want to make sure it is the right move financially.

With regards to landlord kicking me out, does this happen commonly in Bay Area? I personally have never had an issues renting with landlords...but I've also never lived in Bay Area.

[llowllevellowll]

Originally Posted by doggz

First, the Federal Reserve’s most recent Survey of Consumer Finances (in 2016), revealed that the median net worth of homeowners was $231,400. Renters had a net worth of just $5,000. I have seen dozens of analyses purporting to show that renters do better if they play the market. If so, why this persistent difference in net worth? Ask yourself: what makes you so special that you will buck this trend?

You're stumbling upon a fantastic statistic that should be talked about way more than it is because it exemplifies the severe inequality in this country, however, its relation to home ownership versus renting is not at all the lead. Of course the disparity is tremendous. The lower and lower middle class in this country have essentially nothing with few prospects of upward mobility. And in many cases, they can not afford to purchase real estate and will forever be indebted to their overlords. But they are not relegated to this class because they rent, they are instead forced to rent because they are so relegated.

The OP and his wife appear gainfully employed. They will not lose net worth or the ability to own simply by renting in a new region for a year or two. But, put them in a situation where they end up purchasing at the height of a bubble -- in a recession, no less -- and you create a recipe where, if for any reason either one of them loses their jobs, it's entirely possible that they lose their ass on an investment to own.

Otherwise, in almost any other situation, I would vote 'own' too.

[Bonezman765]

I would honestly rent first to get to know the Bay Area better and know which neighborhoods you like. However, Ruth mentioned, rent in a place that gives you leeway for rent hikes and to save money for a down payment.

[Ruth4Truth]

Originally Posted by doggz

From my perspective as a 23 year resident in the Bay Area (Marin County), there are two principal considerations that should govern this decision:

First, the Federal Reserve’s most recent Survey of Consumer Finances (in 2016), revealed that the median net worth of homeowners was $231,400. Renters had a net worth of just $5,000. I have seen dozens of analyses purporting to show that renters do better if they play the market. If so, why this persistent difference in net worth? Ask yourself: what makes you so special that you will buck this trend?

That's an easy one to answer. The stat on renter net worth includes a LOT of people barely scraping by; low-income people. This is not the demographic the OP belongs to, though. This is what makes the difference between those who are in a position to buck the trend, and those that aren't, and end up weighing down the statistic. If the OP doesn't mind being in a 1-br. apt. or 1-br. + office, in a modest older building, say, he could come out far ahead of that statistic. In fact, just going into it, he's probably already in a completely different socio-economic group, already ahead.