California Homebuying Insanity

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Shallowpockets
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Re: California Homebuying Insanity

Post by Shallowpockets »

Easy money availability. Low interest rates. Those with money have mad even more money this last year. They are flush with cash and looking to spend it. Look at NFTs.
You should rent.
If you buy now you will pay more, a premium just for the craziness in this home buying frenzy.
What will happen is that inflation may occur and the fed will raise rates and the buyers will tone it way down. And you will be stuck with the expensive home that now will not keep pace
When people,are offering such dollars above the asking price, what do you think of that? Does it seem not real, unsustainable. A huge bubble.
Take a breath.
Starfish
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Re: California Homebuying Insanity

Post by Starfish »

willthrill81 wrote: Thu May 06, 2021 1:33 pm I strongly urge you to look at renting a home similar to what you consider buying. In VHCOL areas, renting is nearly always financially superior to owning.
Prices almost doubled in the last 10 years in my area. Rents went up too, at least with inflation. Interest rates dropped so mortgage payments are down. Property taxes increased but much less than the prices.
Over long term is hard to see the appeal of renting.
Californiastate
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Re: California Homebuying Insanity

Post by Californiastate »

Starfish wrote: Sat May 08, 2021 5:53 pm
willthrill81 wrote: Thu May 06, 2021 1:33 pm I strongly urge you to look at renting a home similar to what you consider buying. In VHCOL areas, renting is nearly always financially superior to owning.
Prices almost doubled in the last 10 years in my area. Rents went up too, at least with inflation. Interest rates dropped so mortgage payments are down. Property taxes increased but much less than the prices.
Over long term is hard to see the appeal of renting.
This
Big Dog
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Re: California Homebuying Insanity

Post by Big Dog »

quantAndHold wrote: Sat May 08, 2021 8:14 am
Cheez-It Guy wrote: Sat May 08, 2021 7:48 am As someone who lives in a rural area in a county that's had shrinking population for four consecutive decades, these threads are almost comically unrelatable. It's like a totally different world. Especially the unspoken suggestion that there are no other viable options. I don't take joy in anyone else's plight, but making $600,000 with expected increases and apparently not being able to purchase a house is so outlandish. Seems like the only way this stops is if enough people get fed up and stop supporting this system as if it's normal. As long as people keep paying the prices asked, they are justifying them.
The issue is not OP’s income, it’s that there is, actually, a housing shortage. Remember the toilet paper shortage? It’s like that. There’s maybe one house for sale in a zip code, and scores of people with pots of money they made in the stock market or from selling another house, all racing around trying to buy a new house before interest rates go up. OP’s big problem is that they don’t have the 40 or 50% down payment they need to comfortably waive the financing contingency and compete.
Disagree. OP could get pre-approved for a $1xx million dollar loan and present that with their no-contingency offer.

As Trustee, I just sold my parent's home that way. The buyer came in with an offer over listing, 30-day close, no contingency, $50k earnest money deposit, and mortgage. The buyer presented the letter of pre-approval from a local lender -- which my broker called to confirm it was legit -- and a copy of a bank statement to demonstrate that they had the cash to cover the down payment -- broker also called and confirmed that. As they were no-contingency, buyer would have lost the earnest money deposit if the loan did not come thru. I accepted with the idea that I'd have an extra $50k in the Trust in ~2 weeks if their loan was gonna crater.

But yes, OP puts teh earnest money deposit at risk, so teh question becomes how comfortable is OP with the lender's pre-approval?
quantAndHold
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Re: California Homebuying Insanity

Post by quantAndHold »

Big Dog wrote: Sat May 08, 2021 6:31 pm
quantAndHold wrote: Sat May 08, 2021 8:14 am
Cheez-It Guy wrote: Sat May 08, 2021 7:48 am As someone who lives in a rural area in a county that's had shrinking population for four consecutive decades, these threads are almost comically unrelatable. It's like a totally different world. Especially the unspoken suggestion that there are no other viable options. I don't take joy in anyone else's plight, but making $600,000 with expected increases and apparently not being able to purchase a house is so outlandish. Seems like the only way this stops is if enough people get fed up and stop supporting this system as if it's normal. As long as people keep paying the prices asked, they are justifying them.
The issue is not OP’s income, it’s that there is, actually, a housing shortage. Remember the toilet paper shortage? It’s like that. There’s maybe one house for sale in a zip code, and scores of people with pots of money they made in the stock market or from selling another house, all racing around trying to buy a new house before interest rates go up. OP’s big problem is that they don’t have the 40 or 50% down payment they need to comfortably waive the financing contingency and compete.
Disagree. OP could get pre-approved for a $1xx million dollar loan and present that with their no-contingency offer.

As Trustee, I just sold my parent's home that way. The buyer came in with an offer over listing, 30-day close, no contingency, $50k earnest money deposit, and mortgage. The buyer presented the letter of pre-approval from a local lender -- which my broker called to confirm it was legit -- and a copy of a bank statement to demonstrate that they had the cash to cover the down payment -- broker also called and confirmed that. As they were no-contingency, buyer would have lost the earnest money deposit if the loan did not come thru. I accepted with the idea that I'd have an extra $50k in the Trust in ~2 weeks if their loan was gonna crater.


Agree, when we sold our last house, we had six offers, all with 30-50% down, all with large deposits and no financing contingency. But the context for that statement was that someone suggested they should be looking in the $2m range, and OP stated they only had $400k for a down payment. I agree if they have 30-40% down, then yeah, make an offer without a financing contingency. But with only 20% down, if the place appraises low, they’re losing their deposit.
Yes, I’m really that pedantic.
Big Dog
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Re: California Homebuying Insanity

Post by Big Dog »

quantAndHold wrote: Sat May 08, 2021 6:37 pm
Big Dog wrote: Sat May 08, 2021 6:31 pm
quantAndHold wrote: Sat May 08, 2021 8:14 am
Cheez-It Guy wrote: Sat May 08, 2021 7:48 am As someone who lives in a rural area in a county that's had shrinking population for four consecutive decades, these threads are almost comically unrelatable. It's like a totally different world. Especially the unspoken suggestion that there are no other viable options. I don't take joy in anyone else's plight, but making $600,000 with expected increases and apparently not being able to purchase a house is so outlandish. Seems like the only way this stops is if enough people get fed up and stop supporting this system as if it's normal. As long as people keep paying the prices asked, they are justifying them.
The issue is not OP’s income, it’s that there is, actually, a housing shortage. Remember the toilet paper shortage? It’s like that. There’s maybe one house for sale in a zip code, and scores of people with pots of money they made in the stock market or from selling another house, all racing around trying to buy a new house before interest rates go up. OP’s big problem is that they don’t have the 40 or 50% down payment they need to comfortably waive the financing contingency and compete.
Disagree. OP could get pre-approved for a $1xx million dollar loan and present that with their no-contingency offer.

As Trustee, I just sold my parent's home that way. The buyer came in with an offer over listing, 30-day close, no contingency, $50k earnest money deposit, and mortgage. The buyer presented the letter of pre-approval from a local lender -- which my broker called to confirm it was legit -- and a copy of a bank statement to demonstrate that they had the cash to cover the down payment -- broker also called and confirmed that. As they were no-contingency, buyer would have lost the earnest money deposit if the loan did not come thru. I accepted with the idea that I'd have an extra $50k in the Trust in ~2 weeks if their loan was gonna crater.


Agree, when we sold our last house, we had six offers, all with 30-50% down, all with large deposits and no financing contingency. But the context for that statement was that someone suggested they should be looking in the $2m range, and OP stated they only had $400k for a down payment. I agree if they have 30-40% down, then yeah, make an offer without a financing contingency. But with only 20% down, if the place appraises low, they’re losing their deposit.
Or, perhaps do the deal and get stuck with PMI.
DosCommas
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Re: California Homebuying Insanity

Post by DosCommas »

I have a different perspective on this, having 2 kids in a 2BR condo in a VHCOL market, similar income, and budget to OP. We chose something we could easily afford in a location we liked and just deal with having less space. Sometimes I curse it out (working from home right now), but we chose a location near parks / public spaces and we make use of them. We walk to the gym, restaurants, etc. We spend whatever we want, on whatever we want, because our housing is supremely affordable to us and we're not in a rush to get that big expensive house. What if you slashed your budget to 1.25m, get something smaller with less COVID appeal, and possibly even keep $100-150k aside to do a little renovation before you move in (i.e. new kitchen and bath)? With $600k income and a $1m mortgage you'll feel pretty good about expensive vacations and still see your savings and future options increase every year. We're even thinking about a vacation place to go to on weekends now rather than trading up to the bigger house and cutting back elsewhere...
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ResearchMed
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Re: California Homebuying Insanity

Post by ResearchMed »

Big Dog wrote: Sat May 08, 2021 6:31 pm
quantAndHold wrote: Sat May 08, 2021 8:14 am
Cheez-It Guy wrote: Sat May 08, 2021 7:48 am As someone who lives in a rural area in a county that's had shrinking population for four consecutive decades, these threads are almost comically unrelatable. It's like a totally different world. Especially the unspoken suggestion that there are no other viable options. I don't take joy in anyone else's plight, but making $600,000 with expected increases and apparently not being able to purchase a house is so outlandish. Seems like the only way this stops is if enough people get fed up and stop supporting this system as if it's normal. As long as people keep paying the prices asked, they are justifying them.
The issue is not OP’s income, it’s that there is, actually, a housing shortage. Remember the toilet paper shortage? It’s like that. There’s maybe one house for sale in a zip code, and scores of people with pots of money they made in the stock market or from selling another house, all racing around trying to buy a new house before interest rates go up. OP’s big problem is that they don’t have the 40 or 50% down payment they need to comfortably waive the financing contingency and compete.
Disagree. OP could get pre-approved for a $1xx million dollar loan and present that with their no-contingency offer.

As Trustee, I just sold my parent's home that way. The buyer came in with an offer over listing, 30-day close, no contingency, $50k earnest money deposit, and mortgage. The buyer presented the letter of pre-approval from a local lender -- which my broker called to confirm it was legit -- and a copy of a bank statement to demonstrate that they had the cash to cover the down payment -- broker also called and confirmed that. As they were no-contingency, buyer would have lost the earnest money deposit if the loan did not come thru. I accepted with the idea that I'd have an extra $50k in the Trust in ~2 weeks if their loan was gonna crater.

But yes, OP puts teh earnest money deposit at risk, so teh question becomes how comfortable is OP with the lender's pre-approval?
We did something like this for our current house.
We were *very* comfortable with the pre-approval. We could have put much more than 20% down if necessary, so we also figured a worst case would have been to get a much smaller mortgage, a much smaller percentage of the house value, etc.

However, given there as a very large amount of earnest money at stake (and we really did want *this* house :wink: ), once the offer was accepted, the next morning applications were put in at two other lenders. We figured, "just in case of some flavor of that proverbial bus hitting the banker" or such.

As it turned out, that ended up getting us on the good side of a mini bidding war: two of the lenders kept making a slightly better offer when they learned we were about to use a different lender. That had never occurred to us!

Yes, that meant paying a rather small extra amount for some duplication of fees, but given the earnest money at stake, it was well worth it.
We would do it again that way if we were relying upon a pre-approval with no financing contingency.
But it was that lack of any financing contingency that got us this house; we've been very happy campers since.

RM
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stan1
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Re: California Homebuying Insanity

Post by stan1 »

I think people are not correctly equating an all cash offer with removing the financing contingency and still getting a loan. Not the same, and as a seller if I was presented with two otherwise similar offers I know which one I'd pick. I might even accept a slightly lower all cash offer over an offer that had a loan with the financing contingency removed. Just higher chance of an all cash offer going through quickly.
Last edited by stan1 on Sat May 08, 2021 7:37 pm, edited 1 time in total.
protagonist
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Re: California Homebuying Insanity

Post by protagonist »

I randomly looked up real estate in zip code 90402 (Santa Monica), and yes, the prices are truly insane. https://www.realtor.com/realestateandhomes-search/90402
Check out the price of this 1/4 acre lot, with nothing on it but a studio and a 3 car garage, not on the water and with no water views (I just pulled this up at random): https://www.realtor.com/realestateandho ... 5237-56503
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Re: California Homebuying Insanity

Post by abuss368 »

Dave55 wrote: Sat May 08, 2021 9:19 am We have the same insanity with house prices here in the suburbs of Denver.

Dave
Dave -

We are in northeast (you know where we are). Home prices INSANE with mass exodus from New York New Jersey.

Tony
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TimeRunner
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Re: California Homebuying Insanity

Post by TimeRunner »

Here's a double-wide trailer park home in Coastal SoCal (south of Santa Barbara) for $449K, with a rent-controlled space rent of $490/month. Only one mile (and across the freeway) from the beach. :wink: Yeah, things are pretty insane.

https://www.zillow.com/homedetails/3950 ... 1191_zpid/
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owls
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Re: California Homebuying Insanity

Post by owls »

Exactly, there’s lots of $200k jobs in LCOL. The remote jobs, medical, finance, etc

And yes the $400k in LCOL is saving 5+ years of expenses annually. Because of their minimal housing expenses. Fastest path to financial independence (25x expenses).


Tingting1013 wrote: Fri May 07, 2021 8:42 pm
owls wrote: Fri May 07, 2021 11:58 am We can see why you didn't retype your comparison: you compared a $400k down payment in CA ($1.6m mtge on a $2m home) with a $100K down payment elsewhere ($0.4 mtge on $0.5m home). With a $400k down payment elsewhere, mtge would be only $100k, and housing expenses are much less.

And your $2m CA house has $1k insurance expense, but the $500k house elsewhere needs $5k???

How many jobs in LCOL pay $200k each? With remote work, LOTS!
Get rid of the mortgage entirely in LCOL and you only reduce expense by $20k or so. You still pay 2-3% property taxes and insurance and maintenance.

I pay $1k insurance on my $2M property in Silicon Valley. That’s an actual number right there. It has a lot to do with the fact that the house is only worth $600k, and that the policy doesn’t cover earthquake damage.

The average home insurance cost in FL and TX is $2k, and the average home cost is $200-250k. (https://insurify.com/insights/states-ex ... ance-2020/) So I just doubled that for a $500k house. Hurricanes and floods are no joke.

Remote work doesn’t mean you get to keep your salary. Every tech company of any meaningful size localizes your compensation. At my company $200k compensation in LCOL means $300k in the Bay Area. I think the math is pretty clear that $200k in LCOL means you are saving less absolute dollars at the end of the day, and absolute dollars is what counts when compounding in the market.
cogito
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Re: California Homebuying Insanity

Post by cogito »

I'm about an hour out of metro LA (Simi), and thanks to the refi thread here, did a couple rounds and got myself down to 2.5% 30 year on 700k mortgage, making my payment only slightly more for our 4/3 in a nice neighborhood than the garbage 2/2 townhome we were renting in a bad area. I only make 200kish total comp, and sleep like a baby. I kind of wish I bought a bit more and am not surprised that people are piling into mortgages with rates low and inflation on the horizon. House across the street just listed at 30% more than the Zillow value two years ago, and sold after one weekend of showings. In my neighborhood, it's boomers cashing out and young professional families like myself moving in. I expect it to continue indefinitely.
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willthrill81
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Re: California Homebuying Insanity

Post by willthrill81 »

Starfish wrote: Sat May 08, 2021 5:53 pm
willthrill81 wrote: Thu May 06, 2021 1:33 pm I strongly urge you to look at renting a home similar to what you consider buying. In VHCOL areas, renting is nearly always financially superior to owning.
Prices almost doubled in the last 10 years in my area. Rents went up too, at least with inflation. Interest rates dropped so mortgage payments are down. Property taxes increased but much less than the prices.
Over long term is hard to see the appeal of renting.
Check out the NYT rent vs. own calculator.

You can't ignore the opportunity cost and risks of buying. Yes, if real estate prices go up faster than something like stocks, owning will be superior, but betting on that kind of appreciation is speculation, at best. Real estate cannot significantly outpace inflation forever. And if prices start going down, the leverage of a mortgage will quickly erode your home equity.
Last edited by willthrill81 on Sat May 08, 2021 10:08 pm, edited 1 time in total.
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Tingting1013
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Re: California Homebuying Insanity

Post by Tingting1013 »

owls wrote: Sat May 08, 2021 9:08 pm Exactly, there’s lots of $200k jobs in LCOL. The remote jobs, medical, finance, etc

And yes the $400k in LCOL is saving 5+ years of expenses annually. Because of their minimal housing expenses. Fastest path to financial independence (25x expenses).


Tingting1013 wrote: Fri May 07, 2021 8:42 pm
owls wrote: Fri May 07, 2021 11:58 am We can see why you didn't retype your comparison: you compared a $400k down payment in CA ($1.6m mtge on a $2m home) with a $100K down payment elsewhere ($0.4 mtge on $0.5m home). With a $400k down payment elsewhere, mtge would be only $100k, and housing expenses are much less.

And your $2m CA house has $1k insurance expense, but the $500k house elsewhere needs $5k???

How many jobs in LCOL pay $200k each? With remote work, LOTS!
Get rid of the mortgage entirely in LCOL and you only reduce expense by $20k or so. You still pay 2-3% property taxes and insurance and maintenance.

I pay $1k insurance on my $2M property in Silicon Valley. That’s an actual number right there. It has a lot to do with the fact that the house is only worth $600k, and that the policy doesn’t cover earthquake damage.

The average home insurance cost in FL and TX is $2k, and the average home cost is $200-250k. (https://insurify.com/insights/states-ex ... ance-2020/) So I just doubled that for a $500k house. Hurricanes and floods are no joke.

Remote work doesn’t mean you get to keep your salary. Every tech company of any meaningful size localizes your compensation. At my company $200k compensation in LCOL means $300k in the Bay Area. I think the math is pretty clear that $200k in LCOL means you are saving less absolute dollars at the end of the day, and absolute dollars is what counts when compounding in the market.
20 years of saving in VHCOL lets you FI anywhere you want.

20 years of saving in LCOL lets you FI in...LCOL.

And I think you way overestimate how many $200k jobs there are in LCOL (outside of medicine).
make_a_better_world
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Re: California Homebuying Insanity

Post by make_a_better_world »

I have also been looking in SoCal for more than 8 months in the 3-5M range and it's the exact same thing. I am being patient, continuing to look, and will wait until I find the right one that's not a complete ripoff. It's an absolute seller's market right now. It's happened with so many things- today a friend interested in a yacht told me that yacht sales were 20% higher in 2020 and theres no inventory. There's no way to predict when as with everything else, but when the incredible demand wanes and evictions/foreclosures/loan forbearance all normalize you should be in a good spot as a buyer. And you might find something reasonable even in all this madness. The prices cannot go up this fast indefinitely because the population simply cannot afford to buy at a certain threshold (the affordability index). Prices will adjust as far as they can before reversal, which is inevitable.
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Watty
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Re: California Homebuying Insanity

Post by Watty »

Tingting1013 wrote: Sat May 08, 2021 10:07 pm And I think you way overestimate how many $200k jobs there are in LCOL (outside of medicine).
It is also easy to overestimate how many $200K+ jobs there are in a high cost of living area.

If you google "Median income (your city) (your state)" the median household income might be a lot less than you would expect even in very high cost of living areas.
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willthrill81
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Re: California Homebuying Insanity

Post by willthrill81 »

Watty wrote: Sat May 08, 2021 10:46 pm
Tingting1013 wrote: Sat May 08, 2021 10:07 pm And I think you way overestimate how many $200k jobs there are in LCOL (outside of medicine).
It is also easy to overestimate how many $200K+ jobs there are in a high cost of living area.

If you google "Median income (your city) (your state)" the median household income might be a lot less than you would expect even in very high cost of living areas.
In San Francisco in 2020, $200k of household income was at the 73rd percentile. But considering that the median house price there is $1.7 million, $200k isn't nearly enough to be able to afford such a home.

Incomes are not created equal in all places, due primarily to the differences in cost-of-living and taxes.
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Tingting1013
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Re: California Homebuying Insanity

Post by Tingting1013 »

Watty wrote: Sat May 08, 2021 10:46 pm
Tingting1013 wrote: Sat May 08, 2021 10:07 pm And I think you way overestimate how many $200k jobs there are in LCOL (outside of medicine).
It is also easy to overestimate how many $200K+ jobs there are in a high cost of living area.

If you google "Median income (your city) (your state)" the median household income might be a lot less than you would expect even in very high cost of living areas.
What does median income have to do with the prevalence of high income jobs?
manatee2005
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Re: California Homebuying Insanity

Post by manatee2005 »

Tingting1013 wrote: Sat May 08, 2021 10:07 pm
owls wrote: Sat May 08, 2021 9:08 pm Exactly, there’s lots of $200k jobs in LCOL. The remote jobs, medical, finance, etc

And yes the $400k in LCOL is saving 5+ years of expenses annually. Because of their minimal housing expenses. Fastest path to financial independence (25x expenses).


Tingting1013 wrote: Fri May 07, 2021 8:42 pm
owls wrote: Fri May 07, 2021 11:58 am We can see why you didn't retype your comparison: you compared a $400k down payment in CA ($1.6m mtge on a $2m home) with a $100K down payment elsewhere ($0.4 mtge on $0.5m home). With a $400k down payment elsewhere, mtge would be only $100k, and housing expenses are much less.

And your $2m CA house has $1k insurance expense, but the $500k house elsewhere needs $5k???

How many jobs in LCOL pay $200k each? With remote work, LOTS!
Get rid of the mortgage entirely in LCOL and you only reduce expense by $20k or so. You still pay 2-3% property taxes and insurance and maintenance.

I pay $1k insurance on my $2M property in Silicon Valley. That’s an actual number right there. It has a lot to do with the fact that the house is only worth $600k, and that the policy doesn’t cover earthquake damage.

The average home insurance cost in FL and TX is $2k, and the average home cost is $200-250k. (https://insurify.com/insights/states-ex ... ance-2020/) So I just doubled that for a $500k house. Hurricanes and floods are no joke.

Remote work doesn’t mean you get to keep your salary. Every tech company of any meaningful size localizes your compensation. At my company $200k compensation in LCOL means $300k in the Bay Area. I think the math is pretty clear that $200k in LCOL means you are saving less absolute dollars at the end of the day, and absolute dollars is what counts when compounding in the market.
20 years of saving in VHCOL lets you FI anywhere you want.

20 years of saving in LCOL lets you FI in...LCOL.

And I think you way overestimate how many $200k jobs there are in LCOL (outside of medicine).
I get what you're saying but after 20 years of living in VHCOL it doesn't mean you can retire anywhere you want, for reasons other than money. I am looking at this now and it's tough to leave VHCOL after decades of living there because your friends are there, and not just that, but all the memories of raising kids there, etc. Basically your whole life is in a VHCOL. As far as giving that up to live in a LCOL, I mean it's a LCOL area for a reason. I don't think you can realize how difficult it is unless you've lived for 20 years in VHCOL and then toured some LCOL areas. It's not really doable.
socialforums2019
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Re: California Homebuying Insanity

Post by socialforums2019 »

The insanity is real and I feel like it will only get worse because of people like me. Just saw a house yesterday, had my agent call the agent to see if they'd be interested in doing a deal before the house had disclosures, inspections, etc. $100K over ask and comp that sold last month, free rent back, no contingencies. If you want the house, you're going to need to pay a premium these days. There is no logic anymore in this market, just who is more desperate. People are frustrated, fed up and the media continues to scare people into paying absurd amounts of money. With that said, I'm one of those people and I hope I get this house...
Dave55
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Re: California Homebuying Insanity

Post by Dave55 »

abuss368 wrote: Sat May 08, 2021 7:32 pm
Dave55 wrote: Sat May 08, 2021 9:19 am We have the same insanity with house prices here in the suburbs of Denver.

Dave
Dave -

We are in northeast (you know where we are). Home prices INSANE with mass exodus from New York New Jersey.

Tony
A few days ago a news article from ABC News but also reported elsewhere: California leaving: State population declines for first time
California's population declined in 2020 for the first time since state officials have been measuring it
California’s population fell by more than 182,000 last year, the first yearly loss ever recorded for the nation’s most populous state that halted a growth streak dating to its founding in 1850 on the heels of a gold rush that prompted a flood of people to seek their fortune in the West.

This is a driver in the Denver metro for housing demand.

Dave
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investingfan
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Re: California Homebuying Insanity

Post by investingfan »

manatee2005 wrote: Fri May 07, 2021 11:31 pm
investingfan wrote: Thu May 06, 2021 3:10 pm
Somethingwitty92912 wrote: Thu May 06, 2021 2:26 pm
poppy42 wrote: Thu May 06, 2021 1:15 pm Hello everyone,

I'm trying to buy a house in a VHCOL area of Southern California, and I'm trying to figure out how I can do this while still respecting Boglehead principles. Everything in this market feels like a ripoff.

The market here is INSANE right now. We're looking at homes in the $1M - $1.6M range, and these homes are routinely going for $100-600K over asking. We were in escrow on a home previously, but pulled out during inspection due to unforeseen major issues (the house ended up getting torn down). Since then, we have been outbid on several homes, mostly by all-cash bidders. There's also very little inventory. Looking in other areas that are cheaper and farther away are not an option with our jobs - we are already considering a wide swath of our metro area of up to a 1-hour commute.

Under usual circumstances, I would wait to buy. However, we have a young child who will be starting kindergarten next year, so getting settled soon is a priority. We rent a place that is inexpensive by CA standards, but it's super small with no yard, we've really grown out of it, and we are eager to move. We also don't want to switch schools (and we can't afford to buy in the area where we currently rent - decent houses run about $2M here).

We have $400K in savings dedicated towards down payment, closing, and making up an appraisal shortfall (you pretty much have to waive appraisal contingency to compete in this market). We make $600K a year combined.

It seems freaking ridiculous that a couple making $600K cannot buy a house, but that's been the situation so far. I also fear we will be majorly overpaying for whatever we buy, which will just be disappointing. Is there a way of looking at this that I haven't considered? I'm so frustrated and sad.
Hello! After reading your post an majority of the responses, here is what I am thinking. Consider shopping around your resume out of state.

I know this is brutal to even consider for a lot of people, but in my own personal journey of wealth acquisition, I can’t tel you how much better my life got when I choose to bow out of this sort of location based thinking.

The reality is 9/10 times you can find the same amenities, weather, living conditions, an more often than not better ones— with little effort when you become willing to move.

Better schools, smaller communities, more fresh air, less food deserts…the living becomes more sustainable. Seriously the list goes on an on.

Disconnect yourself from the location an watch the opportunity open up for yourself. Your family seems gainfully employed, a slightly lower pay, in a medium COL area goes ALOT farther, I bet once you get over the shock of moving you’ll be happier too.
Why the advice always out of state? There are many nice towns in California where home aren't $1,000,000 or even $700,000 and schools are 10/10.
Which towns?
A lot of our neighbors moved up here for retirement after raising their kids from towns in central valley such as Rocklin, El Dorado Hills, Folsom, Roseville, Auburn or Elk Grove. Good schools and jobs were plenty affordable according to them. Beat moving out of state and keep their property tax bills.
SuzBanyan
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Re: California Homebuying Insanity

Post by SuzBanyan »

Tingting1013 wrote: Sat May 08, 2021 10:07 pm
owls wrote: Sat May 08, 2021 9:08 pm Exactly, there’s lots of $200k jobs in LCOL. The remote jobs, medical, finance, etc

And yes the $400k in LCOL is saving 5+ years of expenses annually. Because of their minimal housing expenses. Fastest path to financial independence (25x expenses).


Tingting1013 wrote: Fri May 07, 2021 8:42 pm
owls wrote: Fri May 07, 2021 11:58 am We can see why you didn't retype your comparison: you compared a $400k down payment in CA ($1.6m mtge on a $2m home) with a $100K down payment elsewhere ($0.4 mtge on $0.5m home). With a $400k down payment elsewhere, mtge would be only $100k, and housing expenses are much less.

And your $2m CA house has $1k insurance expense, but the $500k house elsewhere needs $5k???

How many jobs in LCOL pay $200k each? With remote work, LOTS!
Get rid of the mortgage entirely in LCOL and you only reduce expense by $20k or so. You still pay 2-3% property taxes and insurance and maintenance.

I pay $1k insurance on my $2M property in Silicon Valley. That’s an actual number right there. It has a lot to do with the fact that the house is only worth $600k, and that the policy doesn’t cover earthquake damage.

The average home insurance cost in FL and TX is $2k, and the average home cost is $200-250k. (https://insurify.com/insights/states-ex ... ance-2020/) So I just doubled that for a $500k house. Hurricanes and floods are no joke.

Remote work doesn’t mean you get to keep your salary. Every tech company of any meaningful size localizes your compensation. At my company $200k compensation in LCOL means $300k in the Bay Area. I think the math is pretty clear that $200k in LCOL means you are saving less absolute dollars at the end of the day, and absolute dollars is what counts when compounding in the market.
20 years of saving in VHCOL lets you FI anywhere you want.

20 years of saving in LCOL lets you FI in...LCOL.

And I think you way overestimate how many $200k jobs there are in LCOL (outside of medicine).
For a couple, moving is made even more difficult because they have to find 2 jobs that pay what they need. Having lived in a less urban area in CA for almost 3 decades, I see this difficulty all the time. Once spouse finds a great job but the other can’t find anything suitable. A former co-worker commuted weekly to her old job in Minnesota from Coastal CA for more than a year.
Leesbro63
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Re: California Homebuying Insanity

Post by Leesbro63 »

For what it's worth, I can remember having a conversation with a California relative back in 1989. The house they bought in 1979 had soared in value. I told the relative it's probably a bubble. And I was right! Prices went down. Then soared again and again. And I was wrong! Long term I was wrong.

All of that being said, I'd be scared to invest in a high end California home now. But don't go by me!
socialforums2019
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Re: California Homebuying Insanity

Post by socialforums2019 »

Leesbro63 wrote: Sun May 09, 2021 8:31 am For what it's worth, I can remember having a conversation with a California relative back in 1989. The house they bought in 1979 had soared in value. I told the relative it's probably a bubble. And I was right! Prices went down. Then soared again and again. And I was wrong! Long term I was wrong.

All of that being said, I'd be scared to invest in a high end California home now. But don't go by me!
Another perspective is, while you want any asset to appreciate, one is buying a home to enjoy, live in and make memories with family. You have to love and want to be in the house regardless of what happens in the market. If you're only buying a house for the best value/appreciation projection, then agreed, you shouldn't buy in this kind of market because you aren't going to "find a deal"
Somethingwitty92912
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Re: California Homebuying Insanity

Post by Somethingwitty92912 »

poppy42 wrote: Fri May 07, 2021 10:26 pm :sharebeer
ram wrote: Fri May 07, 2021 9:10 pm
poppy42 wrote: Thu May 06, 2021 1:15 pm Hello everyone,
Under usual circumstances, I would wait to buy. However, we have a young child who will be starting kindergarten next year, so getting settled soon is a priority. We rent a place that is inexpensive by CA standards, but it's super small with no yard, we've really grown out of it, and we are eager to move. We also don't want to switch schools (and we can't afford to buy in the area where we currently rent - decent houses run about $2M here).
Most kids handle school change quite well. Our daughter was the state AP scholar and son had a perfect score of 36 on ACT. We moved 4 times and they attended 5 schools in 3 different countries by the time they reached high school.
OP again. I moved around as a kid and hated it. Don’t want to do it to my kid. I might be the exception as I didn’t handle school change particularly well :(
Your not your kid. Maybe ask them?
Leesbro63
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Re: California Homebuying Insanity

Post by Leesbro63 »

socialforums2019 wrote: Sun May 09, 2021 8:54 am
Leesbro63 wrote: Sun May 09, 2021 8:31 am For what it's worth, I can remember having a conversation with a California relative back in 1989. The house they bought in 1979 had soared in value. I told the relative it's probably a bubble. And I was right! Prices went down. Then soared again and again. And I was wrong! Long term I was wrong.

All of that being said, I'd be scared to invest in a high end California home now. But don't go by me!
Another perspective is, while you want any asset to appreciate, one is buying a home to enjoy, live in and make memories with family. You have to love and want to be in the house regardless of what happens in the market. If you're only buying a house for the best value/appreciation projection, then agreed, you shouldn't buy in this kind of market because you aren't going to "find a deal"
The problem is, for people who have to live in HCOL areas, your house is such a big financial commitment that bad timing can be disastrous. Here in Pittsburgh, your house is just a use asset that will probably about hold its value with inflation, no more, no less.
PowderDay9
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Re: California Homebuying Insanity

Post by PowderDay9 »

SuzBanyan wrote: Sun May 09, 2021 8:28 am
For a couple, moving is made even more difficult because they have to find 2 jobs that pay what they need. Having lived in a less urban area in CA for almost 3 decades, I see this difficulty all the time. Once spouse finds a great job but the other can’t find anything suitable. A former co-worker commuted weekly to her old job in Minnesota from Coastal CA for more than a year.
Work from home is much more prevalent now. It's more likely that that you won't have to move to find a similar paying job.
rage_phish
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Re: California Homebuying Insanity

Post by rage_phish »

manatee2005 wrote: Sun May 09, 2021 2:50 am
Tingting1013 wrote: Sat May 08, 2021 10:07 pm
owls wrote: Sat May 08, 2021 9:08 pm Exactly, there’s lots of $200k jobs in LCOL. The remote jobs, medical, finance, etc

And yes the $400k in LCOL is saving 5+ years of expenses annually. Because of their minimal housing expenses. Fastest path to financial independence (25x expenses).


Tingting1013 wrote: Fri May 07, 2021 8:42 pm
owls wrote: Fri May 07, 2021 11:58 am We can see why you didn't retype your comparison: you compared a $400k down payment in CA ($1.6m mtge on a $2m home) with a $100K down payment elsewhere ($0.4 mtge on $0.5m home). With a $400k down payment elsewhere, mtge would be only $100k, and housing expenses are much less.

And your $2m CA house has $1k insurance expense, but the $500k house elsewhere needs $5k???

How many jobs in LCOL pay $200k each? With remote work, LOTS!
Get rid of the mortgage entirely in LCOL and you only reduce expense by $20k or so. You still pay 2-3% property taxes and insurance and maintenance.

I pay $1k insurance on my $2M property in Silicon Valley. That’s an actual number right there. It has a lot to do with the fact that the house is only worth $600k, and that the policy doesn’t cover earthquake damage.

The average home insurance cost in FL and TX is $2k, and the average home cost is $200-250k. (https://insurify.com/insights/states-ex ... ance-2020/) So I just doubled that for a $500k house. Hurricanes and floods are no joke.

Remote work doesn’t mean you get to keep your salary. Every tech company of any meaningful size localizes your compensation. At my company $200k compensation in LCOL means $300k in the Bay Area. I think the math is pretty clear that $200k in LCOL means you are saving less absolute dollars at the end of the day, and absolute dollars is what counts when compounding in the market.
20 years of saving in VHCOL lets you FI anywhere you want.

20 years of saving in LCOL lets you FI in...LCOL.

And I think you way overestimate how many $200k jobs there are in LCOL (outside of medicine).
I get what you're saying but after 20 years of living in VHCOL it doesn't mean you can retire anywhere you want, for reasons other than money. I am looking at this now and it's tough to leave VHCOL after decades of living there because your friends are there, and not just that, but all the memories of raising kids there, etc. Basically your whole life is in a VHCOL. As far as giving that up to live in a LCOL, I mean it's a LCOL area for a reason. I don't think you can realize how difficult it is unless you've lived for 20 years in VHCOL and then toured some LCOL areas. It's not really doable.

As someone who was born and raised in the Bay Area (as is my wife) I can’t see how we could ever leave here. For many reasons
kir_royale
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Re: California Homebuying Insanity

Post by kir_royale »

Afty wrote: Thu May 06, 2021 10:42 pm We’ve lived in CA for 10 years, and real estate has been crazy expensive the entire time. If you’re planning to stay long term, it makes sense to hold your nose and take a leap. You can mitigate some risk by putting the bare minimum as a down payment and relying on the fact that CA mortgages are non-recourse, i.e., you can walk away from the house and the bank can’t come after your assets.
I've been in CA for 45 years and agree. But, not now, for the reasons mentioned above about the prices are at an all-time high and kids are resilient and will be fine to move during elementary years. I would gamble that prices over the next six years (K-5) will drop at some point. Hold your nose and buy then.

My kids are in junior high and elementary and lots of kids move in and have no problem picking up lots of new friends. Especially in a small, affluent area, new faces are exciting!
Tingting1013
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Re: California Homebuying Insanity

Post by Tingting1013 »

manatee2005 wrote: Sun May 09, 2021 2:50 am
Tingting1013 wrote: Sat May 08, 2021 10:07 pm
owls wrote: Sat May 08, 2021 9:08 pm Exactly, there’s lots of $200k jobs in LCOL. The remote jobs, medical, finance, etc

And yes the $400k in LCOL is saving 5+ years of expenses annually. Because of their minimal housing expenses. Fastest path to financial independence (25x expenses).


Tingting1013 wrote: Fri May 07, 2021 8:42 pm
owls wrote: Fri May 07, 2021 11:58 am We can see why you didn't retype your comparison: you compared a $400k down payment in CA ($1.6m mtge on a $2m home) with a $100K down payment elsewhere ($0.4 mtge on $0.5m home). With a $400k down payment elsewhere, mtge would be only $100k, and housing expenses are much less.

And your $2m CA house has $1k insurance expense, but the $500k house elsewhere needs $5k???

How many jobs in LCOL pay $200k each? With remote work, LOTS!
Get rid of the mortgage entirely in LCOL and you only reduce expense by $20k or so. You still pay 2-3% property taxes and insurance and maintenance.

I pay $1k insurance on my $2M property in Silicon Valley. That’s an actual number right there. It has a lot to do with the fact that the house is only worth $600k, and that the policy doesn’t cover earthquake damage.

The average home insurance cost in FL and TX is $2k, and the average home cost is $200-250k. (https://insurify.com/insights/states-ex ... ance-2020/) So I just doubled that for a $500k house. Hurricanes and floods are no joke.

Remote work doesn’t mean you get to keep your salary. Every tech company of any meaningful size localizes your compensation. At my company $200k compensation in LCOL means $300k in the Bay Area. I think the math is pretty clear that $200k in LCOL means you are saving less absolute dollars at the end of the day, and absolute dollars is what counts when compounding in the market.
20 years of saving in VHCOL lets you FI anywhere you want.

20 years of saving in LCOL lets you FI in...LCOL.

And I think you way overestimate how many $200k jobs there are in LCOL (outside of medicine).
I get what you're saying but after 20 years of living in VHCOL it doesn't mean you can retire anywhere you want, for reasons other than money. I am looking at this now and it's tough to leave VHCOL after decades of living there because your friends are there, and not just that, but all the memories of raising kids there, etc. Basically your whole life is in a VHCOL. As far as giving that up to live in a LCOL, I mean it's a LCOL area for a reason. I don't think you can realize how difficult it is unless you've lived for 20 years in VHCOL and then toured some LCOL areas. It's not really doable.
I was referring only to the financial element.

My wife is one of four sisters who all grew up in the Midwest. They all ended up making the journey to CA. Their parents are unable to follow because they do not have the wherewithal to buy a home in CA. We may have to buy one for them.

If my kids choose to make their lives in VHCOL I want to have the option of following them. Exactly the opposite of what Watty preaches every day around here that parents should pick a place that their kids can afford to live in...
New Providence
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Re: California Homebuying Insanity

Post by New Providence »

vitaflo wrote: Thu May 06, 2021 5:31 pm Life is a series of choices and you need to decide what your priorities are and what you want the most. Is it a good school for the kid? Is it to live in the same city/state you are now? Is it to build equity and not "throw away" money by renting? Is it to keep your current job?

When there doesn't seem to be any perfect outcome, make a list of what you prioritize most and then grin and bear what comes with it. Fact is, you're not going to get everything you want, so focus on what you want most, and don't worry about the rest. It is what it is. Just be honest with yourself.
I fully agree with this. What's the purpose, in the philosophical sense, of the $600k salary if you aren't willing to use it to buy a house?

Certainly one must never be wasteful but, as choices go, a house could be the best investment you can make. "Investment" in terms of well-being for your family.
MarkRoulo
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Re: California Homebuying Insanity

Post by MarkRoulo »

manatee2005 wrote: Sun May 09, 2021 2:50 am ... snip ...

I get what you're saying but after 20 years of living in VHCOL it doesn't mean you can retire anywhere you want, for reasons other than money. I am looking at this now and it's tough to leave VHCOL after decades of living there because your friends are there, and not just that, but all the memories of raising kids there, etc. Basically your whole life is in a VHCOL. As far as giving that up to live in a LCOL, I mean it's a LCOL area for a reason. I don't think you can realize how difficult it is unless you've lived for 20 years in VHCOL and then toured some LCOL areas. It's not really doable.
Could you elaborate on this? I live in a VHCOL on the west coast and it SEEMS that Urbana-Champaigne, Illinois qualifies a LCOL. I've toured it. I liked it. The big downside was that they get snow. Is weather what makes this "not really doable"? Or something else? Or is Urbana-Champaigne not a LCOL area?

What would make moving to Urbana-Champaigne more difficult than, say, moving to New York City? Or Boston Or Chicago?
m@ver1ck
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Re: California Homebuying Insanity

Post by m@ver1ck »

Tingting1013 wrote: Thu May 06, 2021 4:26 pm
anoop wrote: Thu May 06, 2021 4:05 pm
Tingting1013 wrote: Thu May 06, 2021 2:53 pm
poppy42 wrote: Thu May 06, 2021 1:15 pm We also don't want to switch schools (and we can't afford to buy in the area where we currently rent - decent houses run about $2M here).

We have $400K in savings dedicated towards down payment, closing, and making up an appraisal shortfall (you pretty much have to waive appraisal contingency to compete in this market). We make $600K a year combined.
If you make $600k you can afford a $2M house
I strongly disagree. My max comfort level would be around $1.5M and that too only if that income was VERY secure.
$1.6M mortgage costs $80k/year (and don’t forget a portion of that increases your net worth)
Property taxes are $22k
Insurance is $1k
Maintenance is $5k
Tax benefits are -$5k

Total annual cost is $103k (and again a portion of this is principal pay down). Excluding principal the true cost is only $71k.

How is that not affordable on $600k income?
I’m in a similar situation. My concern - 600K is still a lot of money - and who knows how long the good times last.
Kookaburra
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Re: California Homebuying Insanity

Post by Kookaburra »

ResearchMed wrote: Sat May 08, 2021 7:09 pm
Big Dog wrote: Sat May 08, 2021 6:31 pm
quantAndHold wrote: Sat May 08, 2021 8:14 am
Cheez-It Guy wrote: Sat May 08, 2021 7:48 am As someone who lives in a rural area in a county that's had shrinking population for four consecutive decades, these threads are almost comically unrelatable. It's like a totally different world. Especially the unspoken suggestion that there are no other viable options. I don't take joy in anyone else's plight, but making $600,000 with expected increases and apparently not being able to purchase a house is so outlandish. Seems like the only way this stops is if enough people get fed up and stop supporting this system as if it's normal. As long as people keep paying the prices asked, they are justifying them.
The issue is not OP’s income, it’s that there is, actually, a housing shortage. Remember the toilet paper shortage? It’s like that. There’s maybe one house for sale in a zip code, and scores of people with pots of money they made in the stock market or from selling another house, all racing around trying to buy a new house before interest rates go up. OP’s big problem is that they don’t have the 40 or 50% down payment they need to comfortably waive the financing contingency and compete.
Disagree. OP could get pre-approved for a $1xx million dollar loan and present that with their no-contingency offer.

As Trustee, I just sold my parent's home that way. The buyer came in with an offer over listing, 30-day close, no contingency, $50k earnest money deposit, and mortgage. The buyer presented the letter of pre-approval from a local lender -- which my broker called to confirm it was legit -- and a copy of a bank statement to demonstrate that they had the cash to cover the down payment -- broker also called and confirmed that. As they were no-contingency, buyer would have lost the earnest money deposit if the loan did not come thru. I accepted with the idea that I'd have an extra $50k in the Trust in ~2 weeks if their loan was gonna crater.

But yes, OP puts teh earnest money deposit at risk, so teh question becomes how comfortable is OP with the lender's pre-approval?
We did something like this for our current house.
We were *very* comfortable with the pre-approval. We could have put much more than 20% down if necessary, so we also figured a worst case would have been to get a much smaller mortgage, a much smaller percentage of the house value, etc.

However, given there as a very large amount of earnest money at stake (and we really did want *this* house :wink: ), once the offer was accepted, the next morning applications were put in at two other lenders. We figured, "just in case of some flavor of that proverbial bus hitting the banker" or such.

As it turned out, that ended up getting us on the good side of a mini bidding war: two of the lenders kept making a slightly better offer when they learned we were about to use a different lender. That had never occurred to us!

Yes, that meant paying a rather small extra amount for some duplication of fees, but given the earnest money at stake, it was well worth it.
We would do it again that way if we were relying upon a pre-approval with no financing contingency.
But it was that lack of any financing contingency that got us this house; we've been very happy campers since.

RM
How far do you take the 2 or more lenders deep into the process vs. selecting one? Reason I ask is b/c without a finance contingency your earnest deposit is at risk until you close.

After the initial lender “bidding war”, do you select one and tell them? Or do you not say anything and just string them all along?

They’re going to need to start underwriting at some point. Do you just pick one for the appraisal, and then share the appraisal results with all and have them all underwrite? And then on closing day day “thanks but no thanks to all but one”?
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unclescrooge
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Re: California Homebuying Insanity

Post by unclescrooge »

On my previous home purchase in 2014, we were really stretching the limits of what we could afford on one salary.

I paid for two appraisals and basically ran two lenders against each other(without telling them).
I signed with the first lender that provided loan docs. They were both delayed 10 days past the estimated close date. The second one was super pissed, but his rates weren't even competitive so I didn't feel bad.
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ResearchMed
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Re: California Homebuying Insanity

Post by ResearchMed »

Kookaburra wrote: Sun May 09, 2021 12:50 pm
ResearchMed wrote: Sat May 08, 2021 7:09 pm
Big Dog wrote: Sat May 08, 2021 6:31 pm
quantAndHold wrote: Sat May 08, 2021 8:14 am
Cheez-It Guy wrote: Sat May 08, 2021 7:48 am As someone who lives in a rural area in a county that's had shrinking population for four consecutive decades, these threads are almost comically unrelatable. It's like a totally different world. Especially the unspoken suggestion that there are no other viable options. I don't take joy in anyone else's plight, but making $600,000 with expected increases and apparently not being able to purchase a house is so outlandish. Seems like the only way this stops is if enough people get fed up and stop supporting this system as if it's normal. As long as people keep paying the prices asked, they are justifying them.
The issue is not OP’s income, it’s that there is, actually, a housing shortage. Remember the toilet paper shortage? It’s like that. There’s maybe one house for sale in a zip code, and scores of people with pots of money they made in the stock market or from selling another house, all racing around trying to buy a new house before interest rates go up. OP’s big problem is that they don’t have the 40 or 50% down payment they need to comfortably waive the financing contingency and compete.
Disagree. OP could get pre-approved for a $1xx million dollar loan and present that with their no-contingency offer.

As Trustee, I just sold my parent's home that way. The buyer came in with an offer over listing, 30-day close, no contingency, $50k earnest money deposit, and mortgage. The buyer presented the letter of pre-approval from a local lender -- which my broker called to confirm it was legit -- and a copy of a bank statement to demonstrate that they had the cash to cover the down payment -- broker also called and confirmed that. As they were no-contingency, buyer would have lost the earnest money deposit if the loan did not come thru. I accepted with the idea that I'd have an extra $50k in the Trust in ~2 weeks if their loan was gonna crater.

But yes, OP puts teh earnest money deposit at risk, so teh question becomes how comfortable is OP with the lender's pre-approval?
We did something like this for our current house.
We were *very* comfortable with the pre-approval. We could have put much more than 20% down if necessary, so we also figured a worst case would have been to get a much smaller mortgage, a much smaller percentage of the house value, etc.

However, given there as a very large amount of earnest money at stake (and we really did want *this* house :wink: ), once the offer was accepted, the next morning applications were put in at two other lenders. We figured, "just in case of some flavor of that proverbial bus hitting the banker" or such.

As it turned out, that ended up getting us on the good side of a mini bidding war: two of the lenders kept making a slightly better offer when they learned we were about to use a different lender. That had never occurred to us!

Yes, that meant paying a rather small extra amount for some duplication of fees, but given the earnest money at stake, it was well worth it.
We would do it again that way if we were relying upon a pre-approval with no financing contingency.
But it was that lack of any financing contingency that got us this house; we've been very happy campers since.

RM
How far do you take the 2 or more lenders deep into the process vs. selecting one? Reason I ask is b/c without a finance contingency your earnest deposit is at risk until you close.

After the initial lender “bidding war”, do you select one and tell them? Or do you not say anything and just string them all along?

They’re going to need to start underwriting at some point. Do you just pick one for the appraisal, and then share the appraisal results with all and have them all underwrite? And then on closing day day “thanks but no thanks to all but one”?
First, we couldn't "share the appraisal'. Each lender selects their own appraiser, at least in part to be sure there is no hidden agenda. (Or at least that's how it works in our area.)

Keep in mind that we were paying all of the regular application/appraisal/etc., fees for each.
And they pretty quickly knew exactly what was happening. At first, we simply notified one lender that we had better terms elsewhere. We hadn't even considered the possibility of this type of 'bidding war', not at all.
So as the processes moved along with each lender, we were mentioning any "better terms" that had started to be offered. After the first few, there wasn't so much, until near the end when B called out of the blue to tell us that she had "found" a 1/8 th percent better rate for us. We ended up with that lender. No other could match that. On a jumbo, it mattered.
Point is, they each knew there was at least one other application. I don't remember if we mentioned there were 2 others vs 1; I doubt that really would have been relevant.

In this case, the closing was scheduled at the seller's request (demand, sort of, which we were happy to meet; we didn't need to sell a house to complete this purchase) for just over 4 weeks.
So we rushed the inspections, with a 7 day window for those, rather than the more common 10 days. It was the inspection contingency that was really critical to us; the house was almost 100 years old (part of the charm, but also possibly part of any non-obvious problems).

And yes, we were *acutely* aware of that substantial earnest money at risk. Our area is one where earnest money tends to be a nice percentage of the sales price. We've since found out in another purchase across country that the earnest money is usually $10k no matter the price of the house. :shock: That wouldn't be too hard to walk away from, not that we'd want to do that. But with a $$$ house and at least 10% earnest money, it's a very different situation. Hence more than one mortgage application the morning after the offer was accepted!

RM
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manatee2005
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Re: California Homebuying Insanity

Post by manatee2005 »

MarkRoulo wrote: Sun May 09, 2021 12:34 pm
manatee2005 wrote: Sun May 09, 2021 2:50 am ... snip ...

I get what you're saying but after 20 years of living in VHCOL it doesn't mean you can retire anywhere you want, for reasons other than money. I am looking at this now and it's tough to leave VHCOL after decades of living there because your friends are there, and not just that, but all the memories of raising kids there, etc. Basically your whole life is in a VHCOL. As far as giving that up to live in a LCOL, I mean it's a LCOL area for a reason. I don't think you can realize how difficult it is unless you've lived for 20 years in VHCOL and then toured some LCOL areas. It's not really doable.
Could you elaborate on this? I live in a VHCOL on the west coast and it SEEMS that Urbana-Champaigne, Illinois qualifies a LCOL. I've toured it. I liked it. The big downside was that they get snow. Is weather what makes this "not really doable"? Or something else? Or is Urbana-Champaigne not a LCOL area?

What would make moving to Urbana-Champaigne more difficult than, say, moving to New York City? Or Boston Or Chicago?
Don't take my previous comment personally, but I also toured Urbana-Champaigne Illinois and I didn't like it. Can you imagine a Californian giving up the Pacific beaches to live in Urbana-Champaigne? No thanks. Same goes for Ann Arbor for example. There is no way a Californian would move to a place with snow in retirement, unless they have a ton of family there they like for example.

I also wouldn't live in NYC or Boston or Chicago so I can't really defend them.

I'm speaking as a Californian living in VHCOL, somebody who lives in NYC would have a different view on places with snow in retirement, even though a lot of New yorkers go to florida and arizona.
MarkRoulo
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Re: California Homebuying Insanity

Post by MarkRoulo »

manatee2005 wrote: Sun May 09, 2021 7:13 pm
MarkRoulo wrote: Sun May 09, 2021 12:34 pm
manatee2005 wrote: Sun May 09, 2021 2:50 am ... snip ...

I get what you're saying but after 20 years of living in VHCOL it doesn't mean you can retire anywhere you want, for reasons other than money. I am looking at this now and it's tough to leave VHCOL after decades of living there because your friends are there, and not just that, but all the memories of raising kids there, etc. Basically your whole life is in a VHCOL. As far as giving that up to live in a LCOL, I mean it's a LCOL area for a reason. I don't think you can realize how difficult it is unless you've lived for 20 years in VHCOL and then toured some LCOL areas. It's not really doable.
Could you elaborate on this? I live in a VHCOL on the west coast and it SEEMS that Urbana-Champaigne, Illinois qualifies a LCOL. I've toured it. I liked it. The big downside was that they get snow. Is weather what makes this "not really doable"? Or something else? Or is Urbana-Champaigne not a LCOL area?

What would make moving to Urbana-Champaigne more difficult than, say, moving to New York City? Or Boston Or Chicago?
Don't take my previous comment personally, but I also toured Urbana-Champaigne Illinois and I didn't like it. Can you imagine a Californian giving up the Pacific beaches to live in Urbana-Champaigne? No thanks. Same goes for Ann Arbor for example. There is no way a Californian would move to a place with snow in retirement, unless they have a ton of family there they like for example.

I also wouldn't live in NYC or Boston or Chicago so I can't really defend them.

I'm speaking as a Californian living in VHCOL, somebody who lives in NYC would have a different view on places with snow in retirement, even though a lot of New yorkers go to florida and arizona.
I didn't take your previous comment personally at all. And thanks for elaborating. Weather is certainly something that makes leaving coastal California difficult. As nearly as I can tell, coastal California weather only exists outside California in Portugal :-)
stoptothink
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Re: California Homebuying Insanity

Post by stoptothink »

manatee2005 wrote: Sun May 09, 2021 7:13 pm There is no way a Californian would move to a place with snow in retirement, unless they have a ton of family there they like for example.
I know several handfuls of couples that have done exactly this, many without family in the area. My childhood best friend's parents are literally doing it right now, moving from LA to Lehi, Utah this coming week. As far as I know the only person they know anywhere close is me and they are not religious. Don't assume everybody shares your priorities or likes what you do.
fortunefavored
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Re: California Homebuying Insanity

Post by fortunefavored »

stoptothink wrote: Sun May 09, 2021 7:38 pm
manatee2005 wrote: Sun May 09, 2021 7:13 pm There is no way a Californian would move to a place with snow in retirement, unless they have a ton of family there they like for example.
I know several handfuls of couples that have done exactly this, many without family in the area. My childhood best friend's parents are literally doing it right now, moving from LA to Lehi, Utah this coming week. As far as I know the only person they know anywhere close is me and they are not religious. Don't assume everybody shares your priorities or likes what you do.
It will be interesting if they move back. As I indicated upthread, I know a bunch of people who moved and then moved back. Not having family connections + weather were the #1 reasons for returning.
tj
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Re: California Homebuying Insanity

Post by tj »

fortunefavored wrote: Sun May 09, 2021 7:46 pm
stoptothink wrote: Sun May 09, 2021 7:38 pm
manatee2005 wrote: Sun May 09, 2021 7:13 pm There is no way a Californian would move to a place with snow in retirement, unless they have a ton of family there they like for example.
I know several handfuls of couples that have done exactly this, many without family in the area. My childhood best friend's parents are literally doing it right now, moving from LA to Lehi, Utah this coming week. As far as I know the only person they know anywhere close is me and they are not religious. Don't assume everybody shares your priorities or likes what you do.
It will be interesting if they move back. As I indicated upthread, I know a bunch of people who moved and then moved back. Not having family connections + weather were the #1 reasons for returning.
I left CA for AZ, I've recently moved back to CA and part of me regrets moving back to CA. I wouldn't be surprised if I end up back in AZ. And whenever I took vacations to CA after moving away, I loved it - that's why I moved back. I guess I could stay, but I would be saving a lot less for retirement and I don't know if I'm okay with that.
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willthrill81
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Re: California Homebuying Insanity

Post by willthrill81 »

stoptothink wrote: Sun May 09, 2021 7:38 pm
manatee2005 wrote: Sun May 09, 2021 7:13 pm There is no way a Californian would move to a place with snow in retirement, unless they have a ton of family there they like for example.
I know several handfuls of couples that have done exactly this, many without family in the area. My childhood best friend's parents are literally doing it right now, moving from LA to Lehi, Utah this coming week. As far as I know the only person they know anywhere close is me and they are not religious. Don't assume everybody shares your priorities or likes what you do.
I've lost count of the families I've met who have left CA to move to the Spokane/Coeur d'Alene area over the last several years. I would estimate that around 1/3 of the population of Coeur d'Alene is comprised of former Californians.

It's hard for some to comprehend, but not everyone likes beaches, especially so much that they will make huge sacrifices to live very close to them. Personally, I've been to every state and can honestly say that there's no other area, regardless of finances, where I would rather live than where we do right now.
“Good and ill have not changed since yesteryear; nor are they one thing among Elves and Dwarves and another among Men.” J.R.R. Tolkien, The Lord of the Rings
TPIR
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Re: California Homebuying Insanity

Post by TPIR »

OP as Willthrill said don’t view $6-$7k in rent for a similar home as a waste.

$80k a year vs...

$16k property taxes
$30k interest
$1-$4k insurance
$xx maintenance

Then lost returns on uninvested money

So overly conservative your “waste” is $25k a year - $2k a month minus those lost returns.

Buying might make sense with other considerations but make sure those considerations factor much much less than $80k a year being “wasted” on rent.
Last edited by TPIR on Sun May 09, 2021 8:20 pm, edited 2 times in total.
stoptothink
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Re: California Homebuying Insanity

Post by stoptothink »

fortunefavored wrote: Sun May 09, 2021 7:46 pm
stoptothink wrote: Sun May 09, 2021 7:38 pm
manatee2005 wrote: Sun May 09, 2021 7:13 pm There is no way a Californian would move to a place with snow in retirement, unless they have a ton of family there they like for example.
I know several handfuls of couples that have done exactly this, many without family in the area. My childhood best friend's parents are literally doing it right now, moving from LA to Lehi, Utah this coming week. As far as I know the only person they know anywhere close is me and they are not religious. Don't assume everybody shares your priorities or likes what you do.
It will be interesting if they move back. As I indicated upthread, I know a bunch of people who moved and then moved back. Not having family connections + weather were the #1 reasons for returning.
My friends parents may very well move back at some point, but like willthrill81, I've lost count of the couples/families I know that haven't. https://www.leisurevillas.com/communiti ... ant-grove/ is directly across the street from my home. I know several couples in that community that moved from California. My in-laws live in a similar 55+ community <10 miles away. They moved from the Bay Area ~5yrs ago, but their daughter (my wife) was already here (her 3 siblings have since all moved here). I know they have made friends with several other California natives in their complex. Shoot, my wife's grandfather moved from the Bay Area to Minnesota in retirement (shortly after his wife died), he had no family there but had briefly lived there in his 20's and decided he wanted to live alone and ice fish until he died (and he died there in December). I would assume family close by is absolutely the #1 priority for most when it comes to that stage in life, but don't assume that warm weather is #2 because you prioritize it.
Last edited by stoptothink on Sun May 09, 2021 8:28 pm, edited 1 time in total.
Nomar
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Re: California Homebuying Insanity

Post by Nomar »

I wish you luck in working through the various tradeoffs. I think there are numerous recommendations that make sense when you prioritize. As an EC transplant who has lived in So. California for 30+ years, I am glad I bought a house. The cost of housing is a supply-demand issue and the state and local governments have made it difficult to build housing for a generation. The property tax structure rewards staying put. In addition you are allowed to pass a house to your children and they will preserve the low tax rates. The widespread restrictive zoning artificially inflates sfr and makes the logical adaptations--intentional rezoning-- impossible politically. The Coastal Act and various other regulations also contribute to scarcity. I feel sorry for young families that are forced to make these choices but conversations with my neighbors convinces me that the political influence of the sfr owners will continue for the foreseeable future. Almost every neighbor is convinced they are an investing genius for having purchased a house rather than recognizing how our political system rewards it over time.
gblack
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Re: California Homebuying Insanity

Post by gblack »

In many VHCOL places, traffic and congestion are a major day to day issue for the folks who live there. Try driving around Santa Monica or Malibu on the weekend. No one ever mentions this when people say build more housing. If you look at SF, it wasn't designed to be NYC and to be built up and up forever. It's not all about sfh trying to juice up their real estate returns. The reason the cost of housing is so high is because of highly productive people like the OP making 600K a year. They are competing against others making similar salaries, people with generational ties to the areas, and frankly, many global elites who also want property in these areas.

I say buy a modest house if you like the area in question and want to live there for a long time. Keep an emergency fund. If you're just there because of jobs and would like to live elsewhere, then rent, make your money and then move where you want to live.

You are in a similar position to most anyone who has wanted to buy a house in California for the past 30 years, only you make a lot more money. If something terrible happens like a job loss, just sell the house. It won't be the end of the world for you.

Waiting for a "crash," I think, would be the most foolish path. Especially with millennials coming into their peak earning and family formation years. 

Good luck.
Bungo
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Re: California Homebuying Insanity

Post by Bungo »

willthrill81 wrote: Sun May 09, 2021 8:12 pm
stoptothink wrote: Sun May 09, 2021 7:38 pm
manatee2005 wrote: Sun May 09, 2021 7:13 pm There is no way a Californian would move to a place with snow in retirement, unless they have a ton of family there they like for example.
I know several handfuls of couples that have done exactly this, many without family in the area. My childhood best friend's parents are literally doing it right now, moving from LA to Lehi, Utah this coming week. As far as I know the only person they know anywhere close is me and they are not religious. Don't assume everybody shares your priorities or likes what you do.
I've lost count of the families I've met who have left CA to move to the Spokane/Coeur d'Alene area over the last several years. I would estimate that around 1/3 of the population of Coeur d'Alene is comprised of former Californians.

It's hard for some to comprehend, but not everyone likes beaches, especially so much that they will make huge sacrifices to live very close to them. Personally, I've been to every state and can honestly say that there's no other area, regardless of finances, where I would rather live than where we do right now.
Agree with all of this. The only reason I'd pay a premium to live near a beach would be to get the mild ocean climate (in SoCal) or, my preference, the foggier cooler weather (in NorCal), not because I care about the actual beach. Also, in addition to Spokane/Coeur d'Alene (and Boise), there are many Californians moving to other regions that have snowy winters: Colorado, Utah, and Montana come to mind. Not to mention Lake Tahoe and other snowy parts of California itself.

I'm personally making it a priority upon retirement to move somewhere with four seasons including real winter with snow. After 25+ years in California (both SoCal and the Bay Area), I'm kinda sick of our long, 6+ month summers which have noticeably longer heat waves, fire seasons and droughts with each passing decade.
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