Is home ownership completely out of reach? (San Jose: buy, income)

[80skeys]

Originally Posted by neutrino78x

Still...the mortgage would supposedly be 3800/month...which would be under 30% of your income if you made at least $150k, right?

Sounds like you think it's a good idea to take out $700,000+ in debt to buy a home. Not a good idea in my opinion.

[Jane M]

Originally Posted by neutrino78x

Still...the mortgage would supposedly be 3800/month...which would be under 30% of your income if you made at least $150k, right? So, presumably, people are working in the industry for 10-15 years first, then buying a home/condo.

Don't forget to add on property tax and general upkeep of a house to that monthly cost. Could end up being $5,000/mo.

Originally Posted by neutrino78x

I pay 1/3 of my income for rent, which works out to 800/month. I'm paying that for 1/4 of a 1 bedroom apartment (and the whole rent here is about 1500), but at least I get to live in Silicon Valley and afford it.

Two questions for you:

You share a 1 bedroom domicile with three other people? Not judging, but most people would not desire that living situation. Especially if you are talking about an older person (30+) or those with family.

Where in Silicon Valley did you find a 1 bedroom for $1500/mo? McLaughlin and Story? Seven Trees maybe?

[DKM]

Originally Posted by neutrino78x

Well, they'd still be making about five times what I make. So, still quite a bit. Middle class here is 100k (since it is the median income), rather than 50k elsewhere.

Yeah but then you'd have to live in that place, which is most likely a redneck flyover state lol.

I might go back to what I said in the past about how owning a home is upper class here in the Bay Area (as opposed to being middle class elsewhere). hmm.

Still...the mortgage would supposedly be 3800/month...which would be under 30% of your income if you made at least $150k, right? So, presumably, people are working in the industry for 10-15 years first, then buying a home/condo.

I pay 1/3 of my income for rent, which works out to 800/month. I'm paying that for 1/4 of a 1 bedroom apartment (and the whole rent here is about 1500), but at least I get to live in Silicon Valley and afford it.

Why is it that the forum is adding additional blank lines in all my posts? I keep having to go back and delete the extra lines. I didn't have to do that before, several months ago when I last posted regularly.

I can give you some #'s that work here on a similar income. Bought a house for 950. 250 down, leaving 700 mortgage. The 250 down was from 13 years of paying down a mortgage on a starter home sold for 500. Mortgage is 3300 a month, taxes another 900. I'm rounding but you get the point. That's about 1/3 of income, but what people don't get which really swings the numbers to your advantage:

1) each month you are paying yourself equity. In my case a $1000 a month to start and it goes up.
2) The interest is deductible for taxes. You'll already hit the 10k cap for federal tax but the total deduction for interest and taxes is around 37k for federal and state. So you are in a sense subsidizing the cost of the house.
3) inflation protection. Rents almost always rise and so will salaries over time, your mortgage won't.
4) House price appreciation. The icing on the cake. Not guaranteed in the short term but in the long run they do go up.

Another thing to consider is the % of income isn't absolute. You need x amount of money to pay for food, car, insurance etc. But this amount doesn't have to go up just because you make more money. So 35% of income is easier to swing on 150k than 30% of income on 100k.

[80skeys]

The equity thing doesn't hold water. Years ago I did a calculation comparing renting for your whole life versus owning a home, taking into account interest deductions, property taxes, and everything else. It turns out that there's no difference whatsoever to your financial net worth. You end up with the same amount of assets in both cases - either cash in the bank if you rent, or cash + home equity if you bought a home.

[Jane M]

Originally Posted by 80skeys

The equity thing doesn't hold water. Years ago I did a calculation comparing renting for your whole life versus owning a home, taking into account interest deductions, property taxes, and everything else. It turns out that there's no difference whatsoever to your financial net worth. You end up with the same amount of assets in both cases - either cash in the bank if you rent, or cash + home equity if you bought a home.

I think you're right on the money. However, for some people timing the market can be very advantageous.

For example, I have a friend who purchased a decent home in San Mateo merely 6 years ago at 600,000. It is now worth 1.2 million. The better news is, he will not have to put a single dime into renovations since the lot he owns is so desirable. Hell, he could burn the house down and still request a cool mill.

The problem is, although the housing market consistently rises upward (even with some down turns), location always dictates how much and how fast it will rise. You can't always predict which locations will take off. A second problem is: most people can't afford to buy during market down turns and sell during market increases. For most individuals, buying a home is a huge expense that they can't just abandon or acquire on a moments notice.

That's why generally, purchasing real estate only makes the already rich, richer. (except for my friend who will be making bank on his home).

[neutrino78x]

Originally Posted by 80skeys

Sounds like you think it's a good idea to take out $700,000+ in debt to buy a home. Not a good idea in my opinion.

Well...its proportional to your income, dude. If you lived in a place where the median income was 50k, you'd be going into debt 250k+ to own a home. Owning a home/condo necessarily involves going into debt, unless you're rich and can pay cash in lump sum.

[neutrino78x]

Originally Posted by Jane M

Don't forget to add on property tax and general upkeep of a house to that monthly cost. Could end up being $5,000/mo.

Right, so if you make 15k a month that's like 180k a year or something like that. Not an unheard of salary in Silicon Valley (hence the home prices). Probably, there are many families where both parents are senior engineers.

Two questions for you:

You share a 1 bedroom domicile with three other people?

No, just one person. It isn't much, but it is more space than I had on submarines. These bunkrooms hold 9 people (there are females on US Navy submarines now):


https://i.pinimg.com/736x/53/0c/36/530c368e2995c13e8ce8628384efae9f.jpg

(everyone is required to take a psychological test for submarine duty, and part of that is being mentally able to live in a confined space with 120 other people for long periods of time. The Navy classifies it as "arduous duty" and gives us "submarine pay" (less than $100/month extra lol) in addition to "sea pay" (also less than $100/month). I personally have been underwater for 87 days without coming to the surface or coming into port.)

Where in Silicon Valley did you find a 1 bedroom for $1500/mo? McLaughlin and Story? Seven Trees maybe?

I don't want to say exactly where I live.

[gizmo980]

Originally Posted by neutrino78x

No, just one person. It isn't much, but it is more space than I had on submarines. These bunkrooms hold 9 people (there are females on US Navy submarines now)

You said you have 1/4 of a 1-bedroom apartment... if you're only sharing it with one person, doesn't that mean you (technically) have 1/2 of the place?

And no offense, but I don't think anyone else is using Navy sub bunkrooms as their baseline standard. LOL

[neutrino78x]

Originally Posted by gizmo980

You said you have 1/4 of a 1-bedroom apartment... if you're only sharing it with one person, doesn't that mean you (technically) have 1/2 of the place?

Not really. I have a chair that I sit in and my desktop PC, and a closet with my other stuff. lol.

And no offense, but I don't think anyone else is using Navy sub bunkrooms as their baseline standard. LOL

Well, that's because they didn't serve on submarines. I did. I've had that experience and I have more room now than back then.

What's your point though? My own point is that, while I don't have the most comfortable living arrangement, I can afford to live here, and therefore I'm not sure why others who make five times my income would complain about it. I do plan on moving back into downtown San Jose as soon as I can afford it, but I don't plan to move to some flyover state just so I can buy a house. (I wouldn't be able to, anyway, on my income.)

[Perma Bear]

Originally Posted by neutrino78x

Not really. I have a chair that I sit in and my desktop PC, and a closet with my other stuff. lol.


Well, that's because they didn't serve on submarines. I did. I've had that experience and I have more room now than back then.

What's your point though? My own point is that, while I don't have the most comfortable living arrangement, I can afford to live here, and therefore I'm not sure why others who make five times my income would complain about it. I do plan on moving back into downtown San Jose as soon as I can afford it, but I don't plan to move to some flyover state just so I can buy a house. (I wouldn't be able to, anyway, on my income.)

How’s your poverty lifestyle experiment going?