Is home ownership completely out of reach? (San Jose, Santa Clara: apartment, rental)

[nightlysparrow]

Get married and commit to being child-free DINKS. No problem

[joliefrijole71]

I'm one of the few that will never be a homeowner. I grew up in NYC in an apartment, and the whole "white house and picket fence" never appealed to me. I've been okay with renting throughout my life. I'm fortunate to have landed a small one bedroom in-law for 1500 per month all utilities and free laundry included, and at that bargain basement deal, I'm not moving out any time soon.

[sonarrat]

As long as I live in the Bay Area, I will not own a home here. The reason is climate change. The entire area, indeed the entire coast is overpriced - considering the changes that scientists project are coming to the Silicon Valley and Central Valley in my lifetime, I don't feel safe investing such a large portion of my future earnings into a piece of real estate here. I can, and do, use the money better. Including investing in other parts of the country.

[Jane M]

Originally Posted by sonarrat

As long as I live in the Bay Area, I will not own a home here. The reason is climate change. The entire area, indeed the entire coast is overpriced - considering the changes that scientists project are coming to the Silicon Valley and Central Valley in my lifetime, I don't feel safe investing such a large portion of my future earnings into a piece of real estate here. I can, and do, use the money better. Including investing in other parts of the country.

What are your views about the future climate here?

[fortunatus]

Originally Posted by gsilver

Is home ownership completely out of reach? (San Jose, Sunnyvale: fit in, real estate)

Rather completely.

Always wanted a house, never was able to afford one in SJ or the suburbs as a single earner w/kids (even on a senior SW engineer salary), and never considered bedroom towns like Tracy because the drop in the quality of life due to the commute is not justifiable. Was able to attain the American dream by moving up North to Oregon.

[NoMoreSnowForMe]

I'm in my early 60's and I've witnessed several market crashes. They're cyclical. If you really did want to buy here, renting a room and saving up for a downpayment would be smart. And if you never ended up buying here, having a nice savings account wouldn't hurt.

I have also seem people lose their investment/retirement savings during many stock market crashes, as well, so I would advise very secure investments. If you put that money into something safe, it will still be there down the road. I find the stock market to be a form of gambling. I really have seen people lose everything, even by just investing in money market options that were a little aggressive. I completely disagree that in the long term, investing in stocks is a sure thing. I've seen people ready to retire who all of a sudden lost all of their retirement. So, if this happens when you're ready to cash out - who cares about the long-term and waiting for it to build back up?

Anyway, saving in something safe is a sure bet. And as far as the market crashes I have personally lived through:

1978 - the real estate market was going crazy in 1976/1977, so I went to school and got my real estate salesperson license just as the market completely tanked, so I never ended up selling real estate. That was also when Prop 13 happened, by the way. I happened to be in WA state, but the real estate slump was nation-wide. The mortgage interest rates were through the roof.

1995 I was able to buy a condo in Davis when the market crashed so bad that I was able to get an owner contract, and with pretty bad credit and a brand new job (a bank would not have given me a mortgage), because the owner couldn't find a buyer. I bought it for around $65,000, as I recall, and paid just a little higher interest than the banks were requiring - and I paid 10% interest. The banks were asking around 9.75% interest. Interest rates were really high, and people made the stupid mistake of going for an adjustable mortgage and many lost their homes because they couldn't make the payments. I sold the condo in 1999 and cleared $10,000 after paying all seller costs. Should have kept it, but, point being the market came back pretty quickly.

2008 - the crash you are well aware of. Tons of empty, foreclosed homes all over the SF Bay Area. Again, about 5 years later, the market was booming again.

So, what's the average here? About every 15 years or so, there has been a real estate slump/crash. If this holds true, the next one would be due around 2023. The key is to be ready when it happens. So, start saving in a smart way, and worst case scenario, you have money to buy somewhere else, if not here. Watch for when the interest rates start rising. I can't remember interest rates ever being as low as they have been recently. If things go like I've seen several times, interest rates go way up, the market slows way down and then there's a crash - they like to call it a "correction" ha ha. If you're the one losing your property value, it feels more like a crash.

Anyway, good luck to you. My daughter was ready to move out of CA around 2006. She had been saving, had been bidding on houses and not getting any of them, prices were rising and rising. The banks told her she could afford a $500,000 house and she said no way, that was insane. Then, all of a sudden, it seemed, prices started coming down, and she was able to buy a little house for $190K in Salinas (she was working in Monterey). A few years later, she was able to buy in Oakland when she got a job in the Bay Area, and a few years later, sold that one and bought a nicer one in another city. She made nice profits on all of them. And she did it all on her own, without any financial help from anyone. And during these years she was making $80K - $110K. So, not a huge salary for the area, either.

So, save and be patient.

[80skeys]

Originally Posted by gsilver

I've been thinking of my next career move, and however much I'd like to return to New Mexico, that just doesn't seem practical as long as I need to keep working.

Correct, unless you can qualify for a security clearance. Then it wouldn't be too difficult to work for defense contractors or the labs.

So, I've been looking at the job markets, and Silicon Valley still has a strong one.

Still going strong and will continue to go strong as world markets - particularly in developing countries - continue to open up.

However, the costs of living just seem completely out of whack.

Correct.

I'm still completely priced out of that neighboorhood, as well as every other one. I'd basically be back to renting rooms for my entire stay.

Correct.

It's kind of funny that "tech companies" is the stated reason for houses to be so expensive, while I, a tech worker, see no way of affording it.

Correct. Financially the only way Silicon Valley makes sense is if you rent, and your rent is cheap enough to where your salary allows you to save substantial money each month. This is possible as long as you don't go for the ultra-fancy apartment complexes.

Though at the same time, spending another 10 years renting rooms and hopefully retiring early somewhere much cheaper doesn't sound *too* bad. I could own a house in rural New Mexico for $150k.

Correct. This would be the primary motivation to living in Silicon Valley.

[llowllevellowll]

Originally Posted by Jane M

What are your views about the future climate here?

I'm not the poster that made the comment, but I agree with his assessment pretty decently so. In Napa, for instance, vineyards are operating at roughly the highest possible temperatures that they can while still maintaining profitability. Many vineyards are being developed north in areas like Oregon and Washington where temperatures are consistently lower and the soil types are pretty similar.

In places like Napa, Sonoma, Fairfield, American Canyon, etc, it's pretty easy to see that this trend might play out to the detriment of their local economies and subsequently, their housing markets.

That's one example (and agriculture tends to be the best examples anywhere) where I think climate change will have a noticeable effect in our lifetimes.

[neutrino78x]

Well, it seems to me that the 1 million dollar median home price in Silicon Valley is actually reasonable for the salary of a tech worker who has been doing it for, say, five or ten years. This is an example of why I say that,

Your interest rate on that 30-year jumbo loan will be about 4.0%, which gives you a monthly mortgage payment of $3,800. So, if you are heeding our wise advice to limit your mortgage to 20-25% of your gross income, you can theoretically afford the house with an annual income of $182,00 to $228,000. But that’s just principal and interest on the loan.

My source is: https://blog.getwela.com/pastblogpos...ollar-mortgage



Now in my case, I would have the VA Home Loan, which is a way to purchase a home without having to give a down payment.


But I don't think 3800 is unreasonable for someone who has been working at Google, HP etc for a few years. If you make 180k, 200k before taxes, you could probably do it.


Home ownership isn't particularly important to me, especially since it is clear at this point that, sadly, I shall never raise children. But if I were making enough, sure, I'd probably buy.



I grew up here and I love Silicon Valley.

[80skeys]

Originally Posted by neutrino78x

Well, it seems to me that the 1 million dollar median home price in Silicon Valley is actually reasonable for the salary of a tech worker who has been doing it for, say, five or ten years.

Ah, were it only so! Unfortunately not. The compensation of the average high tech worker is maybe $150k (including bonuses, stocks, etc). So you're talking about an income that's 1/10th of the price of the house and, unless you're going to buy the house entirely with cash, you're going to end up going into debt several hundred thousand dollars.

I grew up here and I love Silicon Valley.

I do too.