To buy or not in the SF Bay Area (yes another one)

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Lynx310650
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To buy or not in the SF Bay Area (yes another one)

Post by Lynx310650 »

Our current living situation is a 1 bedroom condo rental. Our landlord is terrific, uses a management company that handles all our issues within 24-48 hours. Our rent is kept about 5-10% below what surrounding "market" rent would be. The best thing is my spouse and I both are within walking distance to work. There is always a risk our landlord would sell and we'd be forced to move. But he insists this is a long-term investment property for him (he lives outside the state), and even if we were forced to move there are plenty of rentals in this area.

But we do keep hearing the siren call of buying. We've approached a RE agent and have looked at some places. A combination of not needed much space and affordability calculations means we are looking at 1-2 bedroom condos at the very least about a 30 minute commute away (even if we were to take public transit). Up to an hour. We can't really afford anything closer to work, and don't want to move to a cheaper and/or larger place that would be further out than an hour commute.

It's a tough decision. We do think we'll be in the Bay Area at least another 10 years or so. Children are not really on our radar. And our rental situation is pretty good right now. But we are concerned about the continuing rise in prices...
adamthesmythe
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Re: To buy or not in the SF Bay Area (yes another one)

Post by adamthesmythe »

Walking to work is huge, and the savings on a car (cars) should allow you to put aside some savings for a possible future purchase/ move.

Things will change, especially in the bay area. Odds are good that you will have to move within a 10 year time frame.
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Smorgasbord
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Re: To buy or not in the SF Bay Area (yes another one)

Post by Smorgasbord »

The way I read this is that both you are considering trading away up to ten hours of free time a week to protect against the possibility that rent might go up. No way would I make that trade.
meercatter
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Re: To buy or not in the SF Bay Area (yes another one)

Post by meercatter »

I'd say if you are optimizing for investment returns, renting is probably the better option. Like you said bay area housing prices are out of control and property taxes will hurt a lot (and could get worse under the new tax plan).

However, I'd say that bay area house prices are highly corellated with the strength of the tech sector. This is because many tech workers receive equity compensation. So if you believe the tech sector will continue to grow, it may be an investment worth pursuing.

My wife and I were in the same boat a couple years ago. We decided to buy a house in the SF Bay area. At that time the down payment was approximately 80% of our net worth. It was a painful decision to make. Ultimately we are happy with our decision, though. We now have a 6 month old son who has his own room and we also have a guest room for visitors. We unfortunately got unucky and the house required some unexpected repairs. Overall, though, the house seems to have maintained it's value. I think financially we'd have been better off continuing to rent, though.
ThatGuy
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Re: To buy or not in the SF Bay Area (yes another one)

Post by ThatGuy »

Short commutes, in particular being able to walk/bike to work, is life changing. I would not give that up without a significant increase in another part of life.

Do you have family in the area? Without ties to the area I would suggest ignoring the siren call to buy. My block appears to have more than doubled since 2010. I don't know that we'll ever see 2008-2010 prices again; even if we get a recession next year it may not knock the prices down to what they were even 5 years ago.

However, without needing the "stability" for kids, or being sure you'll always be here because of mom/dad/sister/etc. I'd look to other areas that are almost as great with much more realistic prices for a few years down the road.

Just because prices are rising does not mean you need to buy.
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randomizer
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Re: To buy or not in the SF Bay Area (yes another one)

Post by randomizer »

I'd never buy in the Bay Area.
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KlangFool
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Re: To buy or not in the SF Bay Area (yes another one)

Post by KlangFool »

OP,

Why would you spend more money on housing expense in order to get a lower quality of life?

Rent.

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inittowinit
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Re: To buy or not in the SF Bay Area (yes another one)

Post by inittowinit »

Lynx310650 wrote: Wed Dec 13, 2017 11:38 am But we do keep hearing the siren call of buying.
What is it that makes buying attractive to you?

I live in SFBA and have never entertained the notion of buying a house because the rent/buy calculations in this area clearly favor renting (IMO).
JFKtoSFO
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Re: To buy or not in the SF Bay Area (yes another one)

Post by JFKtoSFO »

I bought in the Bay Area a few years ago, and I'm happy I did... but the whole reason was to NOT wind up with a 30-60 min commute to work. (And let's be honest, it will probably be closer to 60min) If you're starting out with that, I don't see the point.
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jabberwockOG
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Re: To buy or not in the SF Bay Area (yes another one)

Post by jabberwockOG »

The primary purpose of buying a house is to lower the overall cost of living in the long run. Houses in desirable areas in the bay area no longer do that. This is a key indicator that the RE there is in another significant bubble.

Stay where you are and close to work in a desirable area and pay the affordable rent on your condo. Save your money and keep your power dry for the next downside event. Over the next 10 years I am certain there will be one or more major buying opportunities in that area for those that can actually stomach the silly HCOL, crowds, and horrendous traffic.
bloom2708
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Re: To buy or not in the SF Bay Area (yes another one)

Post by bloom2708 »

Keep renting and walking/biking. Ignore the noise. It's all noise.

Treasure the extra 10 hours and built in exercise.
mrgeeze
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Re: To buy or not in the SF Bay Area (yes another one)

Post by mrgeeze »

randomizer wrote: Wed Dec 13, 2017 12:12 pm I'd never buy in the Bay Area.

The recent devastation by fires in Santa Rosa/Napa/Sonoma have forced hundreds perhaps thousands of additional homeowners back on the market. Rebuilding times are already measured in years. The price of property in Santa Rosa has risen by 30% since the fire.
A percentage of these commute daily to San Fran.
This can only help fuel (sorry pun) the overheated market for property in this area

Now is the time to sell property in Northern California, not buy.
squirm
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Re: To buy or not in the SF Bay Area (yes another one)

Post by squirm »

Something has to give, you can't have rising prices year after year after year. The old saying is the higher the prices climb, the harder they'll fall.
Thesaints
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Re: To buy or not in the SF Bay Area (yes another one)

Post by Thesaints »

In the Bay it was the lower prices that fell harder in 2008, though...
Derby
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Re: To buy or not in the SF Bay Area (yes another one)

Post by Derby »

KlangFool wrote: Wed Dec 13, 2017 12:15 pm OP,

Why would you spend more money on housing expense in order to get a lower quality of life?

Rent.

KlangFool
As usual, KlangFool cuts right to the chase.

You don't state the reasons why you want to buy a house. A lot of people get sucked into it because they feel it's something you're supposed to do, rather than something they want to do. It sounds like you have a great deal right where you are, on a number of different levels. Save your money, and when the time is right, you'll know.
Carpe Diem.
MrJones
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Re: To buy or not in the SF Bay Area (yes another one)

Post by MrJones »

I can empathize. I'm guessing the the siren call comes from (perceived?) upside risk (OP?).

Friends who bought even 2-3 years ago for less than $1M seemingly have $100k increases on their property value every year. Most of this comes because of the leverage provided by the mortgage, which renting+investing cannot match.

What is one to do in this situation if they plan to remain in the area for 10 years or more?
hoops777
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Re: To buy or not in the SF Bay Area (yes another one)

Post by hoops777 »

You never said what rent you are paying or what city
K.I.S.S........so easy to say so difficult to do.
Maita
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Re: To buy or not in the SF Bay Area (yes another one)

Post by Maita »

Lynx310650 wrote: Wed Dec 13, 2017 11:38 am Our current living situation is a 1 bedroom condo rental. Our landlord is terrific, uses a management company that handles all our issues within 24-48 hours. Our rent is kept about 5-10% below what surrounding "market" rent would be. The best thing is my spouse and I both are within walking distance to work. There is always a risk our landlord would sell and we'd be forced to move. But he insists this is a long-term investment property for him (he lives outside the state), and even if we were forced to move there are plenty of rentals in this area.

But we do keep hearing the siren call of buying. We've approached a RE agent and have looked at some places. A combination of not needed much space and affordability calculations means we are looking at 1-2 bedroom condos at the very least about a 30 minute commute away (even if we were to take public transit). Up to an hour. We can't really afford anything closer to work, and don't want to move to a cheaper and/or larger place that would be further out than an hour commute.

It's a tough decision. We do think we'll be in the Bay Area at least another 10 years or so. Children are not really on our radar. And our rental situation is pretty good right now. But we are concerned about the continuing rise in prices...
I'm in the Bay Area. At first, we planned to live here for less than 5 years and I made sure that the property we would purchase has a great school district, not because of kids since we didn't have any at the time but because it drives the price of properties in the Bay Area by ~$100,000. When I was in the market to buy a home, I made a pros and cons list such as great school district, must be able to walk or bike to work, easy access to public transportation, close to other life conveniences.

Now, ten years later, we thought about purchasing a larger home and although our property has appreciated more than twice, we couldn't afford a home in our neighborhood. One option is to live farther to be able to have a larger home. Honestly, I don't see any reason why I would move farther to have a larger home if it'll be less convenient. I am quite comfortable where I'm at. You've stated that you're landlord is terrific, the rent is 5-10% less than the market, and you and your wife walk to work. Like Klangfool stated,
KlangFool wrote: Wed Dec 13, 2017 12:15 pm OP,

Why would you spend more money on housing expense in order to get a lower quality of life?

Rent.

KlangFool
It seems that you're concerned about the unknown such as that your landlord might sell their property and/or the that prices of homes will rise. Prices will continue to rise, even in the Bay Area. If it does go down, just be sure that you'll be in the position where you can purchase where you want to live. That's what I'll do.
Last edited by Maita on Thu Dec 14, 2017 1:54 am, edited 3 times in total.
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msk
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Re: To buy or not in the SF Bay Area (yes another one)

Post by msk »

Can you find something that does not lower your quality of life (including commuting) and still costs < 2.5x combined income? If YES consider buying, if NO just keep on saving and investing. Emotional attachment to buying a home is quite a normal human frailty (except with BHs). Feelings that you are missing the boat with house price inflation are also normal. It's never quite black or white, so you need some yardstick to point out at what stage buying becomes too irrational. I think 2.5x combined income is a good sobering-up point. And please, always remember that your house purchase is extremely unlikely to become your forever home, hence it never makes sense to stretch your finances to a silly stretched-rubber-band state.
DrGoogle2017
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Re: To buy or not in the SF Bay Area (yes another one)

Post by DrGoogle2017 »

I wouldn’t buy yet unless you are planning to have kids. Good rental situation is key.
jks1985
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Re: To buy or not in the SF Bay Area (yes another one)

Post by jks1985 »

So you basically want to pay more to have a lower quality of life?

Keep renting! You sound like you are in a great situation right now.

Obviously you "keep hearing the siren call of buying", that's what banks, RE companies, society, etc. wants you to do!
hoops777
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Re: To buy or not in the SF Bay Area (yes another one)

Post by hoops777 »

inittowinit wrote: Wed Dec 13, 2017 12:23 pm
Lynx310650 wrote: Wed Dec 13, 2017 11:38 am But we do keep hearing the siren call of buying.
What is it that makes buying attractive to you?

I live in SFBA and have never entertained the notion of buying a house because the rent/buy calculations in this area clearly favor renting (IMO).
In the op’s case this is probably true,but to make that statement for all people over the last 10 years,20 years whatever,not true at all.You never referenced how long you were talking about.
K.I.S.S........so easy to say so difficult to do.
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inittowinit
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Re: To buy or not in the SF Bay Area (yes another one)

Post by inittowinit »

hoops777 wrote: Thu Dec 14, 2017 4:53 pm
inittowinit wrote: Wed Dec 13, 2017 12:23 pm
Lynx310650 wrote: Wed Dec 13, 2017 11:38 am But we do keep hearing the siren call of buying.
What is it that makes buying attractive to you?

I live in SFBA and have never entertained the notion of buying a house because the rent/buy calculations in this area clearly favor renting (IMO).
In the op’s case this is probably true,but to make that statement for all people over the last 10 years,20 years whatever,not true at all.You never referenced how long you were talking about.
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lightheir
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Re: To buy or not in the SF Bay Area (yes another one)

Post by lightheir »

I would advise to rent BUT (!!) -

I bought, and literally everyone I knew who bought and stayed for more than 3 years, did great. THe housing prices here are always nuts - they've been saying how nuts it is for decades now and there is no relief in sight. I would however only buy if you are not sacrificing a lot for financial security and stability; it probably makes more sense to really decide how big you can go 'all-in' and wait until that great-but-realistic house buying situation comes up since you're in a very good rental situation.

It's hard though - I can say for sure that if I asked this question when I bought in 2010, I would have got 5x the "NOOOOOs!!!!!!" that are typical for BH advice for buying expensive real estate, and that would have been a monster-big mistake compared to buying in retrospect (of course, the retrospectoscope is always right!)
TheAncientOne
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Re: To buy or not in the SF Bay Area (yes another one)

Post by TheAncientOne »

Two additional points that I don't believe have been covered here. First, the growing congestion combined with the geography of jobs can put you at a severe disadvantage if you want/need to look for a new position. The last thing you want to do is to buy a home convenient to your job in Cupertino only to find that you want to apply for a position in San Francisco. Renting makes it much simpler to relocate within the Bay Area.

Second, the decision to rent long term needs to be combined with the discipline to be extra diligent in saving, both in retirement and taxable accounts. A home purchase is an inefficient way to save, and should not be done for that reason, but it does serve as a way for many to force themselves to create equity for their later years. If the money saved by renting goes to dinners and shows in the City and trips to Hawaii, the long term benefit of renting will dissipate from the perspective of financial planning.
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