Real Estate Costs- Very Curious (San Jose: sales, rentals, condo)

[beachbum061]

I live in Florida where the average wage is around $ 38,000 and the average home is about $ 130,000. My question that I have always wanted to ask: How is the average wage in some parts of CA around $ 50,000 but the average house is $ 700,000 + . Normal mortgages are given for up to 2 1/2 timesa household income so how do people own a home in parts of CA? I am just curious because there is no way with a household income of around $ 92000 (Mountain, View), that a family could ever hope to own a house. Is the whole area a bunch of rentals?/ I am confused. Appreciate any explanation.

[hsw]

Average/median are often misleading and generally useless stats esp when area's distribution curve is skewed heavily by the highest (and often younger) achievers who upwardly ramp from penniless college kids (from all over US and RoW) to the ranks of the wealthy while in their 20s-30s...and lots of chronically poors/illegals/slums in many parts of PaloAlto, Menlo...let alone other highly populated suburbs along 101 corridor

Need to know what are tax return incomes (not useless census or casual self-reported data) in specific suburbs nr PaloAlto (socio-economics of SV decline markedly much outside PaloAlto region as lots of wastelands in/nr SJ or SF)

Much of wealth in SiliconValley (like in Manhattan) is derived from lumpy incomes...not one's salary but rather one's capital gains, often from sales of stock/options (large blocks of any major tech co. or start-up or hedge fund or investment bank are owned by employees, for whom it is major part of compensation)...and many >$3MM houses are purchased for cash, w/no need for mtg

Also, in SV, many young engineers rent for several yrs and work 100hrs/wk until first serious cash-out from some company....can then work a few less hrs/wk; ponder desire to buy/build a house or condo in PaloAlto area or SF; figure out whether to ever marry or have kids, etc...very difft lifestyle choices/trajectory than rest of US, aside from Manhattan, which has similar dynamics among the young hedge fund crowd

Interestingly, if one analyzes land costs and building costs in most elite suburbs around PaloAlto, they are no different than (and often lower than) those of elite suburbs ard LA, NYC, Dall, Hou or Chic....despite arguably far greater wealth and new wealth creation in PaloAlto area than anywhere on planet today

[AllenSJC]

Originally Posted by hsw

Average/median are often misleading and generally useless stats esp when area's distribution curve is skewed heavily by the highest (and often younger) achievers who upwardly ramp from penniless college kids (from all over US and RoW) to the ranks of the wealthy while in their 20s-30s...and lots of chronically poors/illegals/slums in many parts of PaloAlto, Menlo...let alone other highly populated suburbs along 101 corridor

Need to know what are tax return incomes (not useless census or casual self-reported data) in specific suburbs nr PaloAlto (socio-economics of SV decline markedly much outside PaloAlto region as lots of wastelands in/nr SJ or SF)

Much of wealth in SiliconValley (like in Manhattan) is derived from lumpy incomes...not one's salary but rather one's capital gains, often from sales of stock/options (large blocks of any major tech co. or start-up or hedge fund or investment bank are owned by employees, for whom it is major part of compensation)...and many >$3MM houses are purchased for cash, w/no need for mtg

Also, in SV, many young engineers rent for several yrs and work 100hrs/wk until first serious cash-out from some company....can then work a few less hrs/wk; ponder desire to buy/build a house or condo in PaloAlto area or SF; figure out whether to ever marry or have kids, etc...very difft lifestyle choices/trajectory than rest of US, aside from Manhattan, which has similar dynamics among the young hedge fund crowd

Interestingly, if one analyzes land costs and building costs in most elite suburbs around PaloAlto, they are no different than (and often lower than) those of elite suburbs ard LA, NYC, Dall, Hou or Chic....despite arguably far greater wealth and new wealth creation in PaloAlto area than anywhere on planet today

This, plus if you look at the areas with $700,000 median cost of homes closely you'll find that the median income is often in excess of $100,000.

[80skeys]

Originally Posted by beachbum061

I live in Florida where the average wage is around $ 38,000 and the average home is about $ 130,000. My question that I have always wanted to ask: How is the average wage in some parts of CA around $ 50,000 but the average house is $ 700,000 + . Normal mortgages are given for up to 2 1/2 timesa household income so how do people own a home in parts of CA? I am just curious because there is no way with a household income of around $ 92000 (Mountain, View), that a family could ever hope to own a house. Is the whole area a bunch of rentals?/ I am confused. Appreciate any explanation.

You are absolutely correct.

1. People who are new to the Bay Area and making a normal salary don't own. They rent.
2. People whose families have been here a long time inherit their houses
3. Two-engineer income households save up their downpayment and buy their house
4. Rich people and businesses own the rest of the property

[80skeys]

Originally Posted by hsw

Much of wealth in SiliconValley (like in Manhattan) is derived from lumpy incomes...not one's salary but rather one's capital gains, often from sales of stock/options (large blocks of any major tech co. or start-up or hedge fund or investment bank are owned by employees, for whom it is major part of compensation)...and many >$3MM houses are purchased for cash, w/no need for mtg

This applies to a small percentage of people who work in Silicon Valley. Most employees have stock options that aren't worth much (or anything). The chances of experiencing any sort of major cash-out are small. Talk to engineers and IT people around this area and you'll hear a lot of things like "I know somebody whose friend is a google millionaire" but very rarely will you meet someone who themselves have had a windfall.

[BayAreaHillbilly]

Originally Posted by 80skeys

You are absolutely correct.

1. People who are new to the Bay Area and making a normal salary don't own. They rent.
2. People whose families have been here a long time inherit their houses
3. Two-engineer income households save up their downpayment and buy their house
4. Rich people and businesses own the rest of the property

5. People from overseas (or immigrants) from cultures that promote hereditary wealth (unlike the modernistic Anglo Saxon one) give their kids money to buy.

[mixxalot]

I make a good salary but since I am new on the job, will rent for at least a few years even though I have saved up a down payment and have qualified from the bank for a 800k mortgage. I really want a serious financial cushion before I commit to a huge down payment and mortgage! That's just common sense. Besides, I might have to move again after several years to another city or state. With lack of real job security these days, one can be in a place for 10 years then lose the job and have to move! One guy who used to work for us had to quit after few months because he could not sell his house in the midwest to move to the bay area. So he took a consulting gig in the midwest.

[80skeys]

Originally Posted by mixxalot

I make a good salary but since I am new on the job, will rent for at least a few years even though I have saved up a down payment and have qualified from the bank for a 800k mortgage. I really want a serious financial cushion before I commit to a huge down payment and mortgage! That's just common sense. Besides, I might have to move again after several years to another city or state. With lack of real job security these days, one can be in a place for 10 years then lose the job and have to move! One guy who used to work for us had to quit after few months because he could not sell his house in the midwest to move to the bay area. So he took a consulting gig in the midwest.

Yep. Or you can work at a place for two months and get laid off (like just happened to some folks at my friend's startup.)

In my opinion the way a person should approach buying a house should be the same whether they're buying a $100k house or a $800k house. Spend the same ratio of your income or savings in either case.

[silverkris]

Originally Posted by BayAreaHillbilly

5. People from overseas (or immigrants) from cultures that promote hereditary wealth (unlike the modernistic Anglo Saxon one) give their kids money to buy.

It's probably more accurate to describe immigrants who come here and have the families pool their savings together to buy houses. Many Vietnamese families do that here.

[RebekahOwen]

I have clients that are project managers at Cisco to teachers at community college to farmers that own a lot of land to developers that turn the land to gold.
There are so many ways to make money and all shapes and sizes to do it in.
You can get an average house in San Jose for $450K - $650K
For a $3500 payment you need about $11,000 a month income. Sometimes that's done by one worker, sometimes with more than one.