SF BayArea - Buy Home or not

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benus217
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SF BayArea - Buy Home or not

Post by benus217 »

Hello Everyone,

I started my home search 4 months ago and have been outbid all the time by investors and cash buyers. I know that a lot of first time home buyers are facing this issue. I attended a open house last weekend and it was a 919 sft condo in a good neighbourhood that has good schools ( Ardenwood area) . To have a chance , i have to bid atleast $425000 for this condo . I am really not sure if i would be paying high price if the offer gets accepted and if i should wait a couple more years to see if this craziness in bay area would subside. I would appreciate your help in navigating through this situation. Some of my stats below that should help assess my situation.

For down payment, i would have to take $10000 distribution from my Roth IRA. So, i will be spending all my savings + Roth IRA for down payment and can show funds in my IRA account as funds for first two months mortgage payment.

I am currently paying $1300 for rent in the same neighbourhood for 1 bedroom apartment.

Age : 33
Status : Married
Wife : Not working & no kids
Salary : $120000
Savings : $90000 ( Saved for down payment)
Emergency Savings : $15000
Roth IRA : $10000
IRA : $43000


Thanks,
Ben
hicabob
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Re: SF BayArea - Buy Home or not

Post by hicabob »

I sympathize - My kid has been looking at 4-plexes in Santa Clara - they seem to go within a week or so if desirable - it's like deja-vu all over again.
SF Bay Area real estate has been volatile for the many decades I have lived here but like stocks, it's hard to market time until after the fact when it all makes sense. :(
The upmarkets do seem to last a few years though fwiw (which is probably not much :) )
gerrym51
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Re: SF BayArea - Buy Home or not

Post by gerrym51 »

If buying a home was always just dollars and sense its an easy call. but its not. owning a home is an emotional cost both ways. it can't always be quantified :mrgreen:
expat
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Re: SF BayArea - Buy Home or not

Post by expat »

Don't tie yourself down to a property unless you have long-term clarity on your employment and family situations.

In the meantime, be glad your apartment's maintenance is not your responsibility.
jysharma
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Re: SF BayArea - Buy Home or not

Post by jysharma »

We have been in the same boat. We started looking in early 2012 and were caught in the dramatic increase in spring 2012. I would bid on houses that would sell for 5% more per sqft than the house that sold 2 weeks ago in the same neighborhood, same size. The supply is historically minimal right now. So we stopped looking a few months ago. Since you also might not be in a hurry (no kids) keep saving and the jump at the right opportunity.
cheapskate
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Re: SF BayArea - Buy Home or not

Post by cheapskate »

Ben

The real estate market in the SF Bay Area is totally insane right now. Especially in areas with better schools 20-50 offers seems to be the norm. In the South Bay cities with good schools, homes routinely sell for 15-30% over list. In bubble towns like Palo Alto, things have spiralled totally out of control.

I helped a good friend buy a home in Ardenwood a few months ago (right before the market turned insane). I am NOT a realtor, just helping out a good friend. The home was listed for 650K and he had to bid 688K to get it. He got a (relatively) good deal, I think. This is a 3BR/2BA 1750sf SFH with 1 shared wall. I think he closed in January of this year.

1) I think it is not a bad idea to take a step back and look at things, and just wait for the madness to subside.
2) In your situation, you say that will have to drain out all your savings (and dip into retirement account) for the downpayment. I would personally not recommend that. That is not a good situation to be in. Things are going great for the valley economy right now. What if there is a downturn and job growth goes into reverse ? I think you should have at least 6 months of living expenses in CASH to deal with that eventuality. Do not deplete your savings completely to buy a home right now.
3) If you are absolutely compelled to buy, you could look a bit further south (or in an area where the schools aren't top rated). North San Jose/Milpitas, Evergreen (San Jose) or other areas of Fremont or Union City/Newark. You might be able to get better values here. But again, not sure how values here will hold up in a downturn though, if you are forced to sell in an adverse market. But again, renting and waiting for this insanity to subside seems the right call for you.
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benus217
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Re: SF BayArea - Buy Home or not

Post by benus217 »

Thanks for all people who replied. I am also under the impression that it would be a bad idea to deplete all savings ( even though i will not touch my emergency savings account ) for down payment, but with all the free money being floated by FED, i am concerned that i might be losing the value of my money sitting in 0.75 % interest savings accounts.
central nj
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Re: SF BayArea - Buy Home or not

Post by central nj »

Keep in mind that prop 13 is the law of the land in CA, and perhaps unfortunately it won't be repealed. You are stuck with a new higher rate (compared to the seller), but the rate of increase is capped. You might be very happy in 20-30 years.
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bertilak
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Re: SF BayArea - Buy Home or not

Post by bertilak »

benus217 wrote:I am really not sure if i would be paying high price if the offer gets accepted and if i should wait a couple more years to see if this craziness in bay area would subside.
I moved to the Bay area in 1973 (!) and had the same concern at the time -- housing prices were through the roof! I thought this bubble HAD to burst so ended up renting. Well I was right. The real estate market did crash. But, it didn't crash until AFTER I moved out. In the three years I was there housing prices nearly doubled.

This is the same issue as trying to time the stock market -- the market can stay irrational longer than you can stay solvent.

I still think I did the right thing as the risk was very high and I left the area still solvent.

My advice is don't push it. Buy something WELL within your means.
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Calm Man
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Re: SF BayArea - Buy Home or not

Post by Calm Man »

Ben, with that rent there is not even a question here for me. Even if the rent was doubled. You cannot deplete yourself of everything to put a down payment on a house. I notice you are a single earner in a married couple. One layoff and you are "dead". And maybe a good thing would be to get the wife working (whether you have kids or not but I see you don't.) Unless maybe she is permanently disabled or handicapped in which case I of course understand and sympathize.
kmok
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Re: SF BayArea - Buy Home or not

Post by kmok »

Do you have a strong preference (other than financial aspect) to want to buy rather than rent? If you don't, then I would suggest you to should consider buying a house in a few years when you have save enough for down payment without using your retirement accounts.

If you have a strong preference to buy, then I can't advice you not to buy right now since I cannot say in a few years where would home prices be.
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Re: SF BayArea - Buy Home or not

Post by roymeo »

There's a joke in town about the guy who said the same thing back in the mid 1970's and he's still waiting for the prices to settle down.

The market it tight right now (low inventory) so there's a lot of competition, but I don't think prices are really bubbling, yet.

roymeo
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Topic Author
benus217
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Re: SF BayArea - Buy Home or not

Post by benus217 »

@calmman - My wife has already started working , but since just started working i didnt take her earnings in to the picture.
billern
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Re: SF BayArea - Buy Home or not

Post by billern »

I'm in a similar boat in the north bay. The low supply of houses on the market and high demand make me think now is not a good time to buy. It is too speculative.

If you are willing to wait at least a few years to see where things go, I think that is the wise choice. If you feel you have a need to own a house soon, it is certainly possible that prices will increase over the next few years.
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Re: SF BayArea - Buy Home or not

Post by Honobob »

benus217
Public records show this property sold in 2005 for $490,000. Bay Area real estate has been very good to me. There's no reason this won't be selling for $600,000+ in a couple of years. Freeze your Prop 13 taxes now added to low mortgage rates. I don't know any one that has not made money on Bay area real estate long term.
It's slowly dawned on me that we won the real estate lottery!
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benus217
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Re: SF BayArea - Buy Home or not

Post by benus217 »

@ Honobob - Which property are you referring to ?? and where did you check the 2005 price..
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celia
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Re: SF BayArea - Buy Home or not

Post by celia »

The fast increase in house prices in the Bay area could be the result of facebook going public last year. All of a sudden, many employees there have been able to cash out their company stock and probably want to get into a home. If this is what is causing the fast rise, I imagine the housing market will settle down in a year or two.

You could ask the selling realtors if the winning bidders work at facebook to confirm or contradict this idea.
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Re: SF BayArea - Buy Home or not

Post by hicabob »

benus217 wrote:@ Honobob - Which property are you referring to ?? and where did you check the 2005 price..

Not Hono here - but is it this one? (Zillow is quite the database!)

http://www.zillow.com/homedetails/4937- ... 7289_zpid/
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HomerJ
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Re: SF BayArea - Buy Home or not

Post by HomerJ »

Honobob wrote:Public records show this property sold in 2005 for $490,000. Bay Area real estate has been very good to me. There's no reason this won't be selling for $600,000+ in a couple of years.
Simple math is a reason... Home prices cannot go up faster than salaries indefinitely.
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benus217
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Re: SF BayArea - Buy Home or not

Post by benus217 »

Yes, thats right ...but i dont see where it says that this property is sold for $495000 in 2005.
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Re: SF BayArea - Buy Home or not

Post by hicabob »

benus217 wrote:Yes, thats right ...but i dont see where it says that this property is sold for $495000 in 2005.
I think there were a couple others in the development - Zillow shows previous sales prices, it's worth learning - lots of data from the Bay Area
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mmmodem
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Re: SF BayArea - Buy Home or not

Post by mmmodem »

I am the same age as you. 4 years ago, when my wife was working we made $150k a year and we were looking for a home in the Ardenwood area. The prices were outrageous then as it is now. Ardenwood schools keep home prices in this area high. I am a firm believer of mortgage cannot equal more than 3x your salary. This mean our home could not exceed $450k.

We purchased an 800 sqft $230k fixer upper 5 minutes from Ardenwood Elementary. My wife pouted the whole time but agreed to do it because the school was good. We sold the house 2 years later for more than we paid. And moved to our current 3 bed home after our 1st child was born. We didn't make any money from the sale due to realtor fees but we made enough to have basically live rent free for 2 years. This meant we had a large enough downpayment that my wife can stay at home and I can comfortably afford the mortgage on my salary alone.

That would be my advice to you. Buy the starter home first
dimdum
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Re: SF BayArea - Buy Home or not

Post by dimdum »

Looking at fundamental, not recommended. But again Bay area market not always follow fundamental.

Edit: House price should be 3-4X of of your salary. You fall in this range.
Rent to buy should be under 25 (Price/Rent). Its 30+ in this case.

Plus your are pulling $$ from Retirement. Where the market go no one can predict but it can't go on for ever.
For San Fransisco, I read that the ratio of median price of SFH compared to average salary is about 11X. In normal market it should be 6-7X.
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Re: SF BayArea - Buy Home or not

Post by LadyGeek »

FYI - I removed a duplicate thread by the OP (kmok's post was moved into here).

This thread was originally in the Investing - Help with Personal Investments, which is now moved into the Personal Finance (Not Investing) forum (should I buy a home?).
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Re: SF BayArea - Buy Home or not

Post by indexfundfan »

I am not commenting on whether you should buy the house or not. But if you should decide to proceed, I suggest the following

1) Get a buyer's agent who will rebate back part of the commission he/she receives.

2) Use your emergency savings instead of taking a distribution from your Roth. Once you take the distribution from the Roth, you can't put it back. Just keep the investments in the Roth liquid until you have the chance to rebuild your emergency savings.
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Watty
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Re: SF BayArea - Buy Home or not

Post by Watty »

It can no doubt be done but raising kids in a 919 square foot condo would be a significant tradeoff especially as the kids got older or if you have more than one kid.

If you are planning on having kids then you will need to be brutally realistic about just how important the good schools and locking in your property taxes will be to you since you might not live there when your kids are older and in school.

There are many nice area of the country where you can still buy a nice starter house for cash for your $90,000 down payment or a very nice house for $200K. At some point moving may make sense so it would be good to check out housing in other parts of the country for a reality check when you are on vacation or on business trips.

I lived in the South Bay in the 1980's and moved when I was ready to buy a house and I have no regrets since the only house I could have afforded there would have been a tiny dumpy place. That place might be selling for a lot more now but I would have had to have lived in it for 30 years to get that money.
You would need to run the numbers but if you moved to a place where you could buy an inexpensive house for cash or with a small mortgage you could be much better off financially even if you took a significant pay cut.

With your wife starting to work now staying there a few more years saving a lot then moving could allow you to save up enough to pay cash for your dream house in low cost area in a few years. In 90%+ of the country $400K will buy a heck of a house. Here is an example of what $400K would buy you in the outer suburbs here in Atlanta;

http://www.realtor.com/realestateandhom ... source=web

Note: the 4,698 square feet is referring to the size of the house, not the lot.

A house like that would cost a lot more closer to downtown so it is not typical of the entire housing market here but lots of houses like this are available in the outer suburbs.
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Re: SF BayArea - Buy Home or not

Post by Honobob »

http://www.realtor.com/realestateandhom ... 7142?row=1

I was a little dyslexic on the sf. This one sold for $490,000 in 2005 per the Alameda County assessor website.
It's slowly dawned on me that we won the real estate lottery!
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Re: SF BayArea - Buy Home or not

Post by Honobob »

HomerJ wrote:
Honobob wrote:Public records show this property sold in 2005 for $490,000. Bay Area real estate has been very good to me. There's no reason this won't be selling for $600,000+ in a couple of years.
Simple math is a reason... Home prices cannot go up faster than salaries indefinitely.
Actually they can. Most move up buyers have $100,000's of equity to put down on these properties. Double digit appreciation has been so predictable that people from other states and foreign countries invest here.
It's slowly dawned on me that we won the real estate lottery!
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Re: SF BayArea - Buy Home or not

Post by cheapskate »

Honobob wrote: Actually they can. Most move up buyers have $100,000's of equity to put down on these properties. Double digit appreciation has been so predictable that people from other states and foreign countries invest here.
I hear this here all the time - "in the Bay Area, double digit YoY appreciation is a shoo-in". If this hypothesis is true, the average Bay Area home will be worth 16x its current price in 28 years. (Rule of 72, doubing in 7 years, 2^4=16 in 28 years). The average $1M bay Area home today will be worth 16M in the year 2041. It should also be true that average/median salaries will be at least 16x that of today in 2041. Most of us will be making multi-million dollar yearly salaries in 2041.

Buying a home in the SF Bay Area as an investment is a suckers bet. If you buy here, it has to be for lifestyle reasons. Before you buy, make sure that you can weather events like loss of a job, steep market drops, earthquakes (forcing lots of $ to be spent on fixing up home) and so on.

FWIW, I own a home in the South Bay (in the Cupertino area - heavily favored by Asians). I would be happy if my home appreciates in line with inflation over the next 30 years. That is NOT a given. I bought my home only for lifestyle reasons.
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Re: SF BayArea - Buy Home or not

Post by Honobob »

cheapskate wrote:
Honobob wrote: Actually they can. Most move up buyers have $100,000's of equity to put down on these properties. Double digit appreciation has been so predictable that people from other states and foreign countries invest here.
I hear this here all the time - "in the Bay Area, double digit YoY appreciation is a shoo-in". If this hypothesis is true, the average Bay Area home will be worth 16x its current price in 28 years. (Rule of 72, doubing in 7 years, 2^4=16 in 28 years). The average $1M bay Area home today will be worth 16M in the year 2041. It should also be true that average/median salaries will be at least 16x that of today in 2041. Most of us will be making multi-million dollar yearly salaries in 2041.

Buying a home in the SF Bay Area as an investment is a suckers bet. If you buy here, it has to be for lifestyle reasons. Before you buy, make sure that you can weather events like loss of a job, steep market drops, earthquakes (forcing lots of $ to be spent on fixing up home) and so on.

FWIW, I own a home in the South Bay (in the Cupertino area - heavily favored by Asians). I would be happy if my home appreciates in line with inflation over the next 30 years. That is NOT a given. I bought my home only for lifestyle reasons.
Well, not every property doubles in value every ten years. That's why is is important to look at every purchase as an investment. Usually you can make the lifestyle "fit" the investment. Doing it the backwards way is costing you hundreds of thousands of dollars. Is your lifestyle worth it? Although investing out 30 years does have some challenges (I've been successful here for almost thirty) real estate value, over time, moves relatively slow so you can make changes to the plan (if you had an investment plan for your real estate) pretty easily.

You do realize that Prop 13 wasn't voted in because of home inflating at the rate of inflation?
It's slowly dawned on me that we won the real estate lottery!
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benus217
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Re: SF BayArea - Buy Home or not

Post by benus217 »

@indexfundfan -

When you say " Get buyers agent" , are you suggesting to deal directly with listing agent instead of going through the buyer agent/realtor ??

Thanks,
Ben
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benus217
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Re: SF BayArea - Buy Home or not

Post by benus217 »

mmmodem wrote: We purchased an 800 sqft $230k fixer upper 5 minutes from Ardenwood Elementary. My wife pouted the whole time but agreed to do it because the school was good. We sold the house 2 years later for more than we paid. And moved to our current 3 bed home after our 1st child was born. We didn't make any money from the sale due to realtor fees but we made enough to have basically live rent free for 2 years. This meant we had a large enough downpayment that my wife can stay at home and I can comfortably afford the mortgage on my salary alone.

That would be my advice to you. Buy the starter home first
I would love to purchase a starter home in $200-$250k range, but i cannot find anything in that range these days.
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Re: SF BayArea - Buy Home or not

Post by indexfundfan »

benus217 wrote:@indexfundfan -

When you say " Get buyers agent" , are you suggesting to deal directly with listing agent instead of going through the buyer agent/realtor ??

Thanks,
Ben
No, I don't mean buying from the listing agent.

Ask around for agents who acts as your buyer agent and will rebate back the commission they receive. Redfin does this, so does many other agents. But you will also get blank stares from agents who will tell you that they don't do it. When I bought my first house, I received 50% back, credited at the closing.
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roymeo
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Re: SF BayArea - Buy Home or not

Post by roymeo »

A buyer's agent specializes in only representing buyers and do not ever work at selling houses. Selling agents can sometimes have conflict of interest when they or the company they work for is on both the selling and buying side of the transaction.

Whenever we get into making an offer our agent (SF, CA) has a disclosure form which explains what her role is which also makes that sort of thing clear (which may not be required in other places).

roymeo
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Re: SF BayArea - Buy Home or not

Post by DiscoBunny1979 »

central nj wrote:Keep in mind that prop 13 is the law of the land in CA, and perhaps unfortunately it won't be repealed. You are stuck with a new higher rate (compared to the seller), but the rate of increase is capped. You might be very happy in 20-30 years.
Just had to reply - [prop 13 response (political comments) removed by admin LadyGeek]

I believe that the cost of homes in the bay area are high because there are people willing and able to spend. But that doesn't make it a good value, just because everyone else is bidding. It just means that fools are easily parted with their money.

I also suggest that most folks that work in silicon valley, don't retire there. They work there for a few years, and decide to move to less expensive areas around the country because some work environments can be very cut throat even if some are as casual as google. I don't think home ownership in bay area is a necessity, but many might feel more comfortable in saying they are 'home owners' rather than renters especially when they socialize at the Capital Club.

So, my advice would be to buy what if you need to be a home owner. That to me means that you have a need for a house because maybe you have a hobby that requires a certain amount of space, or you have a need to have a certain layout in which can only be had by renovating your own place. Don't buy a place because interest rates are low, because other people are doing it, or because prices are going higher.
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Re: SF BayArea - Buy Home or not

Post by Pacific »

Wow. 991 sq. ft. on 7.6 acres!!! And, on a "Quite complex"!!

I assume they meant a quiet complex. If so, sounds like one of those Nigerian scams. :)
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Re: SF BayArea - Buy Home or not

Post by clueless_dude »

Watty wrote:There are many nice area of the country where you can still buy a nice starter house for cash for your $90,000 down payment or a very nice house for $200K. At some point moving may make sense so it would be good to check out housing in other parts of the country
I agree with Watty! It sounds like you are earning a nice salary in SF but is it worth putting yourself in such a risk when it comes to buying a house? You are going to have to take in a lot of debt in order to make this purchase. Wouldn't it be better to perhaps earn less money and move to a market where houses are still relatively cheap?

The reason I say so is because I am in a similar situation and I have been wrestling with the same question myself. Personally, I would prefer to take a pay cut and move to an area where houses are still cheap.
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Re: SF BayArea - Buy Home or not

Post by Rolyatroba »

Have you considered doing a "Net Present Value" analysis?

The link at the end of this post is to a Google spreadsheet that is a cocktail napkin NPV analysis for your situation.

Use at your own risk, and be sure to understand every cell--it certainly doesn't cover every cash flow, some of the formulas may actually be wrong (I threw this together just now), and the assumptions I made should be different than your own. There are also complications that are not well captured--such as the formula for the tax benefit (which is an approx. average of the deductible interest amounts for the entire term of the mortgage).

With that, my analysis shows a clear advantage for the alternative to continue renting, with the effect of choosing that option being the same thing as if someone gave you ~$90,000 today.

PM me if you have any questions about this.

https://docs.google.com/spreadsheet/ccc ... sp=sharing
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dmcmahon
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Re: SF BayArea - Buy Home or not

Post by dmcmahon »

That rent/buy NPV analysis looks questionable. Any such analysis is going to be very sensitive to the terminal value. It's also going to be somewhat sensitive to inflation. IMO the analysis is assuming a high rate of return on investments and then using that to discount the cash flows on an investment of considerably lower risk. I would also question the fact that inflation appears to be almost ignored, or is assumed to be unrealisticaly low.

I've lived in the Bay Area for 25 years and I don't recall any time at which prices appeared reasonable. But then, prices are set by marginal buyers and sellers, not by medians. OP, good luck in your search!
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Re: SF BayArea - Buy Home or not

Post by kramer »

With your wife starting to work now staying there a few more years saving a lot then moving could allow you to save up enough to pay cash for your dream house in low cost area in a few years.
I think this is certainly something to consider. I worked in the Bay Area for almost 12 years (single not married). But I rented the whole time and left 6 weeks after retiring early. I would have moved away, though, even if I didn't retire. I was going to look in Texas for various reasons as I really liked a city there which I encountered on several business trips. I could have taken a 10% pay cut in gross pay and gotten the same net pay as in California (no state income tax in Texas). This is independent of any other cost differences.

I honestly could not understand what seemed like an irrational premium to live in the Bay Area -- many people there thought it was the be-all-end-all and so did not consider other possibilities . . . My suggestion is to think outside the box.
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Re: SF BayArea - Buy Home or not

Post by fareastwarriors »

I lived in SF Bay Area most of my life. Still would not move out of the area for economic reasons!

What can I say? We, Californians, are an odd bunch. :oops:
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Re: SF BayArea - Buy Home or not

Post by Rolyatroba »

dmcmahon wrote:That rent/buy NPV analysis looks questionable. Any such analysis is going to be very sensitive to the terminal value. It's also going to be somewhat sensitive to inflation. IMO the analysis is assuming a high rate of return on investments and then using that to discount the cash flows on an investment of considerably lower risk. I would also question the fact that inflation appears to be almost ignored, or is assumed to be unrealisticaly low.
Precisely why I admonished to use at one's own risk, even calling out that the assumptions in the spreadsheet would be different from the OP's, and that anyone using the spreadsheet should understand each cell and check the formulas.

As for inflation, you could certainly use an inflation-adjusted rate for the Nest Egg ROI (formally the "discount rate" in an NPV analysis), but the analysis measures the value in today's dollars, discounting all future cash flows back to the present. By definition of the model, inflation is taken into account.

You're perfectly correct to question the inputs, as they will be somewhat different for every individual going through this exercise, but the notion that the analysis is incorrect in "assuming a high rate of return on investments and then using that to discount the cash flows on an investment of considerably lower risk", is patently wrong. The whole point of NPV in this context is to measure the present day value of the alternatives, when compared to the implicit additional alternative of deriving those flow from a portfolio designed for a similar time horizon.

If I were looking at a time horizon of 30 years, my benchmark rate is the long-term expectation of annual return for my retirement portfolio--everything must be measured against that, when talking about cash flows over a similarly long period.
cheapskate
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Re: SF BayArea - Buy Home or not

Post by cheapskate »

fareastwarriors wrote:I lived in SF Bay Area most of my life. Still would not move out of the area for economic reasons!

What can I say? We, Californians, are an odd bunch. :oops:
We love the SF Bay Area too. The economic opportunities, the recreational opportunities, cultural stuff are unparalleled, although traffic is beginning to get really sucky again :(

But one can enjoy all of these benefits as a renter too. No need to put one's financial health in jeopardy.
practice practice
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Re: SF BayArea - Buy Home or not

Post by practice practice »

A few more financial considerations:
1) Have you included the cost of HOA dues in your projections? I'm across the bay in a very modest complex and our dues are $300/mo.
2) Does the association carry earthquake insurance? As a condo owner, you can only buy interior earthquake coverage through the CEA, not on the building. After a disaster, there may be special assessments to pay the deductible or pay for repairs. Is there enough cushion in your finances to withstand a major earthquake? Do you want to take this risk?
3) Your rent is very good for a good neighborhood.

Lastly, if you've never lived in a condominium complex before, you should know that not all decisions about your home are yours to make. You need to be OK with this or you'll go crazy.
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mmmodem
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Re: SF BayArea - Buy Home or not

Post by mmmodem »

benus217 wrote:
mmmodem wrote: We purchased an 800 sqft $230k fixer upper 5 minutes from Ardenwood Elementary. My wife pouted the whole time but agreed to do it because the school was good. We sold the house 2 years later for more than we paid. And moved to our current 3 bed home after our 1st child was born. We didn't make any money from the sale due to realtor fees but we made enough to have basically live rent free for 2 years. This meant we had a large enough downpayment that my wife can stay at home and I can comfortably afford the mortgage on my salary alone.

That would be my advice to you. Buy the starter home first
I would love to purchase a starter home in $200-$250k range, but i cannot find anything in that range these days.
That's what they told me too. Truth of the matter is, you can't find anything nice for that price range. Redfin shows 11 properties under $250k in Fremont. That's the point. You buy a dump with good "bones". You put in $20k - $30k to renovate. My sister just bought a home for $600k in the Mission area of Fremont. She put in $30k for renovation. No home on her block is valued under $700k.
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benus217
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Re: SF BayArea - Buy Home or not

Post by benus217 »

I really appreciate all replies. I have decided to drop the idea of buying condo at $425000 based on the facts listed below.

1) I dont have a need for bigger place right now and not for another 2 years. Buying condo right now will add $1000 to monthly budget ( including HOA and property taxes)
2) I am renting at $1300 in the same area and thats a very good deal. ( Even if the rent increases to $1400 next year)
3) Depleting all savings + emergency funds for down payment is not a good idea and i dont like paying PMI.
4) If i find any good deal with in my current budget, i will take the plunge. ( Fixer upper homes or good places with not so excellent schools as we dont have kids yet )
5) I will keep saving as much i can so that i will be ready with down payment for a townhouse or single family in 2-3 years.( I think its better to get a townhouse or single family instead of paying $300-$400 HOA for a condo )

Thanks,
Ben
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