Another bay area housing thread..

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zazzoo195
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Re: Another bay area housing thread..

Post by zazzoo195 » Tue Jul 25, 2017 2:22 am

I've lived in the South Bay my entire life. The last recession was the only time I've ever seen housing prices drop here. That's not to say it can't happen again, just that "sit and wait for a better market" may mean having to wait a long time. The norm over my lifetime is housing prices that continue to inspire shock and awe year after year after year.

I'd also add that you can find plenty of houses in nice areas with good schools for much less than $1.7M. Maybe not in Palo Alto, but certainly in San Jose, which isn't that far of a commmute depending on where you work. I think you're right to balk at paying that much for a modest home. While 1-1.2M is still a lot of money, it's a lot less than 1.7, and will fit into your budget better.

Finally, you probably shouldn't value your RSUs at all in your budgeting. Your lender generally won't, either. They're in no way guaranteed income, and can largely vanish with a new manager or a stock market dip.

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Watty
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Re: Another bay area housing thread..

Post by Watty » Tue Jul 25, 2017 8:08 am

Hyperborea wrote:
FloRidaRocky wrote:Personally, I'd take the down payment and move to another part of the country and buy a nice house with cash and live a stress free life.
Sure, two folks with grad degrees likely in CS are going to move to a small city and work for something like the Applebee's headquarters writing software for tracking store sales and average number of ribs eaten by bearded men. The money is just not worth it and the job satisfaction is likely minimal to non-existent. Plus, if they lose that job there isn't much else in town.
It always amazes me that people only think that there are good tech jobs in Silicon Valley.

I have a Computer Science Degree, it was years ago but I worked in Silicon Valley early in my career. My son who is in his late 20's also has a Computer Science Degree and works as a Software Engineer here in Atlanta. (My Dad also did some programming with his work in Aerospace so there must be something in the genes :D )

My son and his CS classmates have no problem finding well paying ($100K+) jobs in interesting companies here which works out very well since in the suburbs a basic starter house or condo can be bought for well less than $200K and a VERY nice house is easy to find for around $300K. All of his classmates were easily able to afford to buy their first house when they were just a few years out of college.

In your joking example of Applebees's , tracking customer sales and data mining the information is actually a HUGE high tech business. That is one of the points of companies having apps, the store loyalty cards, or when they ask you for your zip code when you buy something with a credit card. I just checked and Applebee's has an App that likely feeds a back end data mining operation. I would suspect that is run by a third party but that could be a great place for a couple of CS graduates to work.

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watchnerd
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Re: Another bay area housing thread..

Post by watchnerd » Tue Jul 25, 2017 8:32 am

Watty wrote:
In your joking example of Applebees's , tracking customer sales and data mining the information is actually a HUGE high tech business. That is one of the points of companies having apps, the store loyalty cards, or when they ask you for your zip code when you buy something with a credit card. I just checked and Applebee's has an App that likely feeds a back end data mining operation. I would suspect that is run by a third party but that could be a great place for a couple of CS graduates to work.
Rib-tracking app vs self-driving car....

Which would I rather say I worked on?
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ofckrupke
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Re: Another bay area housing thread..

Post by ofckrupke » Tue Jul 25, 2017 9:17 am

watchnerd wrote: Rib-tracking app vs self-driving car....

Which would I rather say I worked on?
We can't all be lion tamers...

runner540
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Re: Another bay area housing thread..

Post by runner540 » Tue Jul 25, 2017 9:32 am

watchnerd wrote:
Watty wrote:
In your joking example of Applebees's , tracking customer sales and data mining the information is actually a HUGE high tech business. That is one of the points of companies having apps, the store loyalty cards, or when they ask you for your zip code when you buy something with a credit card. I just checked and Applebee's has an App that likely feeds a back end data mining operation. I would suspect that is run by a third party but that could be a great place for a couple of CS graduates to work.
Rib-tracking app vs self-driving car....

Which would I rather say I worked on?
There are a lot of jobs put there that need to get done; many aren't fun or glamorous. Many people would love to have a salaried office job sitting in A/C writing code for Applebee's. Let's not denigrate any jobs, and stay focused on the OP's question.

Bungo
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Re: Another bay area housing thread..

Post by Bungo » Tue Jul 25, 2017 9:55 am

watchnerd wrote:
Watty wrote:
In your joking example of Applebees's , tracking customer sales and data mining the information is actually a HUGE high tech business. That is one of the points of companies having apps, the store loyalty cards, or when they ask you for your zip code when you buy something with a credit card. I just checked and Applebee's has an App that likely feeds a back end data mining operation. I would suspect that is run by a third party but that could be a great place for a couple of CS graduates to work.
Rib-tracking app vs self-driving car....

Which would I rather say I worked on?
Amusing cherry-pick (insert joke about comparing Apple to Applebee's), but as I'm sure you recognize, there are plenty of tech jobs in Silicon Valley, probably even the majority, that are about as uninteresting as rib tracking.

cheapskate
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Re: Another bay area housing thread..

Post by cheapskate » Tue Jul 25, 2017 9:56 am

To get back to the OPs situation. How much of your RSUs are currently vested ?

One way to play this is to put all of your savings (400K) + all your vested RSUs in as a downpayment. If you can put in something like 700K-800K down towards the house, and then pledge that you will sell all your RSUs going forward as they vest, then you might be in a decent position to carry the house, even in the event of one spouse losing their job. The total value of your RSUs currently (post tax) is 480K. 400K (savings) + 480K RSUs ~= 900K. You'd be left with a 800K mortgage, which is manageable in your situation. You will wipe out your savings entirely, but you should be able to build that up at your combined salary levels. This is similar to how I played it - my argument was that cashing in my RSUs for something tangible (house) was a good thing.

Sadly most of these threads devolve into non-Bay Area bashing. A lot of close friends and relatives have moved away (to Dallas/Austin/Twin Cities/Research Triangle Park) and are leading happy lives with good careers. They chose to not deal with 1.5M+ mortgages, the rat race, the overt age bias (it is good to be a young rat here), the crushing traffic, the stressful/highly competitive work environments and felt that midwestern weather (or Texas heat) and living among conservatives (gasp !), was a worthwhile tradeoff. It has worked out well for them. The Bay Area lifestyle does not fit everyone.

RoadHouseFan
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Re: Another bay area housing thread..

Post by RoadHouseFan » Tue Jul 25, 2017 10:38 am

Highly recommend the Mississippi or Alabama Bay Area.

hoops777
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Re: Another bay area housing thread..

Post by hoops777 » Tue Jul 25, 2017 11:47 am

Something I have not seen mentioned is that you can RENT out of the area,commute and live in a much nicer rental in a nicer area for less money.
You really do not sound ready to buy a house for 1.7 M and why put so much at risk and it will still be a mediocre house unless you commute.
K.I.S.S........so easy to say so difficult to do.

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Hyperborea
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Re: Another bay area housing thread..

Post by Hyperborea » Tue Jul 25, 2017 1:17 pm

hoops777 wrote:Something I have not seen mentioned is that you can RENT out of the area,commute and live in a much nicer rental in a nicer area for less money.
You really do not sound ready to buy a house for 1.7 M and why put so much at risk and it will still be a mediocre house unless you commute.
Any examples of these nicer and cheaper out of the area places that don't require really long commutes?
cheapskate wrote:Sadly most of these threads devolve into non-Bay Area bashing.
Actually, it usually seems that here and on other forums that these devolve into folks starting with the Bay Area bashing and suggestions to move from the Bay to nowheres-ville where you can buy 10 houses for that money. The OP didn't ask about how to cash out of the Bay Area and move to somewhere he could get a 9 to 5 IT job but lots of responders sure seem to suggest it. If the OP wants to do that then more power to him. If he wants to stay in the Bay Area then he wants to know how to make home buying work for him and that's what he seemed to post, at least to me.

I am prepping to cash out and leave but I retired last year. I could afford to stay here in retirement but there are other places I want to go. The Bay Area has been very good to me for the over 20 years that I've been here and had the opportunity to work with some truly outstanding people and have a hand in some major pieces of technology. It's a difficult place to live in some ways but incredibly awesome for your career. Sure, there are some other places in the US to go for technology careers now but they still don't offer as broad and deep career options. If you are willing to live with those limitations then that's potentially a good choice for you.

thepicard1
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Re: Another bay area housing thread..

Post by thepicard1 » Tue Jul 25, 2017 3:26 pm

cheapskate wrote:To get back to the OPs situation. How much of your RSUs are currently vested ?

One way to play this is to put all of your savings (400K) + all your vested RSUs in as a downpayment. If you can put in something like 700K-800K down towards the house, and then pledge that you will sell all your RSUs going forward as they vest, then you might be in a decent position to carry the house, even in the event of one spouse losing their job. The total value of your RSUs currently (post tax) is 480K. 400K (savings) + 480K RSUs ~= 900K. You'd be left with a 800K mortgage, which is manageable in your situation. You will wipe out your savings entirely, but you should be able to build that up at your combined salary levels. This is similar to how I played it - my argument was that cashing in my RSUs for something tangible (house) was a good thing.

Sadly most of these threads devolve into non-Bay Area bashing. A lot of close friends and relatives have moved away (to Dallas/Austin/Twin Cities/Research Triangle Park) and are leading happy lives with good careers. They chose to not deal with 1.5M+ mortgages, the rat race, the overt age bias (it is good to be a young rat here), the crushing traffic, the stressful/highly competitive work environments and felt that midwestern weather (or Texas heat) and living among conservatives (gasp !), was a worthwhile tradeoff. It has worked out well for them. The Bay Area lifestyle does not fit everyone.
RSUs vest quarterly and we sell 100% upon vesting. So far all of this has been banked and moved into savings in prep for a down payment, however, future RSU vesting would be sold then moved into some a brokerage account with a more diversified asset allocation.

random_walker_77
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Re: Another bay area housing thread..

Post by random_walker_77 » Tue Jul 25, 2017 4:11 pm

FloRidaRocky wrote:I know of a few people that bought right at the peak of the last housing bubble in 2007 or so. They bought modest single family ranch homes for $800k-900k. They lost 30-40% value when the housing bubble busted. They were upside down for 10 years and just recently regained value so they are back in the black again. Their only options were to sit put and wait on for the underwater house anchor value to recover, or walk away from it, lose the down payment and deal with foreclosure and credit score getting obliterated.
It's actually worse than that. They're in the black only if you discount a decade of inflation...

Stretching to buy has the downside that your risks are correlated. The job market, house prices, the ease of selling a house, value of rsu's all go down during a recession

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InKirkWeTrust
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Re: Another bay area housing thread..

Post by InKirkWeTrust » Tue Jul 25, 2017 4:44 pm

cheapskate wrote:Sadly most of these threads devolve into non-Bay Area bashing. A lot of close friends and relatives have moved away (to Dallas/Austin/Twin Cities/Research Triangle Park) and are leading happy lives with good careers. They chose to not deal with 1.5M+ mortgages, the rat race, the overt age bias (it is good to be a young rat here), the crushing traffic, the stressful/highly competitive work environments and felt that midwestern weather (or Texas heat) and living among conservatives (gasp !), was a worthwhile tradeoff. It has worked out well for them. The Bay Area lifestyle does not fit everyone.
+1
Control the controllables

Dottie57
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Re: Another bay area housing thread..

Post by Dottie57 » Tue Jul 25, 2017 4:55 pm

Pay off student loans. You have the money so improve your cash flow.

That leaves your rsu's plus 250k left.

Personally I would rent a better place for a year and save more and see what you have at end of year.

Galun
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Re: Another bay area housing thread..

Post by Galun » Tue Jul 25, 2017 5:19 pm

Have you gotten these RSUs in the past two years? If so, a lot of banks count it toward your income. Some may count 70% of it, some may count all. You should count it if you think you will continue to get it.

How long have people been saying Bay Area is expensive now? The latest CAR report shows median prices up 8% yoy and inventory (measured in days inventory) down 20% yoy in June.

Things to think about
- You can afford it, so try to remove the emotional aspect of the absolute price. Nobody can time the market perfectly. Mentally attach your purchase decision to a life event. Perhaps you two feel comfortable enough to raise a family in the Bay Area. Perhaps you two will have a child. Whatever. The market may cool or it may continue to run. If it's your primary residence, it really doens't matter, as you had decided that you want to live here in the long term. Mentally it will help in a downturn.
- Buy the cheapest property in the best location you can afford. The value is in the land, school district, etc. It will be more resilient in a downturn. Don't buy a turnkey / new property, buy a fixer upper and improve it yourself to your liking and on your schedule. This is one way to create additional value. You don't have kids yet and you are used to delayed gratification, so you can probably pull this off.
- Just start looking. You are unlikely to get the first house you want. You will likely still be competing against cash buyers and multiple bids. You need to be prepared for disappointment.
- Start thinking about premier banking relationships. I assume with your asset level you can qualify for most. Having this relationship will often qualify you for better mortgages, or having a point person to deal with your loan. You might need immediate help in fierce bidding situations.

Good luck.

hoops777
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Re: Another bay area housing thread..

Post by hoops777 » Tue Jul 25, 2017 5:31 pm

Hyperborea wrote:
hoops777 wrote:Something I have not seen mentioned is that you can RENT out of the area,commute and live in a much nicer rental in a nicer area for less money.
You really do not sound ready to buy a house for 1.7 M and why put so much at risk and it will still be a mediocre house unless you commute.
Any examples of these nicer and cheaper out of the area places that don't require really long commutes?
cheapskate wrote:Sadly most of these threads devolve into non-Bay Area bashing.
Actually, it usually seems that here and on other forums that these devolve into folks starting with the Bay Area bashing and suggestions to move from the Bay to nowheres-ville where you can buy 10 houses for that money. The OP didn't ask about how to cash out of the Bay Area and move to somewhere he could get a 9 to 5 IT job but lots of responders sure seem to suggest it. If the OP wants to do that then more power to him. If he wants to stay in the Bay Area then he wants to know how to make home buying work for him and that's what he seemed to post, at least to me.

I am prepping to cash out and leave but I retired last year. I could afford to stay here in retirement but there are other places I want to go. The Bay Area has been very good to me for the over 20 years that I've been here and had the opportunity to work with some truly outstanding people and have a hand in some major pieces of technology. It's a difficult place to live in some ways but incredibly awesome for your career. Sure, there are some other places in the US to go for technology careers now but they still don't offer as broad and deep career options. If you are willing to live with those limitations then that's potentially a good choice for you.
Pleasanton is very nice.Lots of parks and trees.Quaint downtown and good schools.Not cheap but a bargain compared to SV.About 35 miles or so.
K.I.S.S........so easy to say so difficult to do.

Boglebum
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Re: Another bay area housing thread..

Post by Boglebum » Tue Jul 25, 2017 5:48 pm

Pleasanton is very nice.Lots of parks and trees.Quaint downtown and good schools.Not cheap but a bargain compared to SV.About 35 miles or so.
Shhhh. Don't give away our secret. :)

hoops777
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Re: Another bay area housing thread..

Post by hoops777 » Tue Jul 25, 2017 6:30 pm

Boglebum wrote:
Pleasanton is very nice.Lots of parks and trees.Quaint downtown and good schools.Not cheap but a bargain compared to SV.About 35 miles or so.
Shhhh. Don't give away our secret. :)
Sorry...I forgot to mention the hurricanes and tornadoes :D
K.I.S.S........so easy to say so difficult to do.

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watchnerd
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Re: Another bay area housing thread..

Post by watchnerd » Tue Jul 25, 2017 6:40 pm

hoops777 wrote:
Boglebum wrote:
Pleasanton is very nice.Lots of parks and trees.Quaint downtown and good schools.Not cheap but a bargain compared to SV.About 35 miles or so.
Shhhh. Don't give away our secret. :)
Sorry...I forgot to mention the hurricanes and tornadoes :D
Pleasanton has vampires and werewolves.
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Hyperborea
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Re: Another bay area housing thread..

Post by Hyperborea » Tue Jul 25, 2017 8:00 pm

hoops777 wrote:
Hyperborea wrote:
hoops777 wrote:Something I have not seen mentioned is that you can RENT out of the area,commute and live in a much nicer rental in a nicer area for less money.
You really do not sound ready to buy a house for 1.7 M and why put so much at risk and it will still be a mediocre house unless you commute.
Any examples of these nicer and cheaper out of the area places that don't require really long commutes?
Pleasanton is very nice.Lots of parks and trees.Quaint downtown and good schools.Not cheap but a bargain compared to SV.About 35 miles or so.
I had an ex-coworker who lived in Pleasanton. The commute to San Jose, not to anywhere up the peninsula, took them nearly an hour each way. This was in 2010 in a hybrid with stickers for the car pool lane. It's got to be worse now. I would rather buy smaller and closer in to the core of the valley. Might be ok if you got a company bus but then you're in trouble when you change jobs to a non-bus providing company. So, a nice community but a horrible commute.

This brings up an interesting point. The OP should probably test out some commutes from any potential area they want to buy. You can use Google Maps to get an idea of the commute but they should also try them out. I did this when I was buying - there was no Google Maps then so it was all test driving. I turned down a few locations we considered based on commute times to my existing job and the general vicinity of other likely future companies.

SeaToTheBay
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Re: Another bay area housing thread..

Post by SeaToTheBay » Tue Jul 25, 2017 8:16 pm

I've mentioned this in another thread, but we bought in Milpitas. Halfway decent commute to many tech jobs (wife is 45-50min to Mountain View, I'm 20min to downtown SJ), good schools, low crime. Can get a decent SFH for $1M or a very nice new townhouse, and the BART station will be up and running in December for trips up the East Bay to SF (Milpitas to SF in under an hour).

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yukonjack
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Re: Another bay area housing thread..

Post by yukonjack » Tue Jul 25, 2017 8:27 pm

watchnerd wrote:
hoops777 wrote:
Boglebum wrote:
Pleasanton is very nice.Lots of parks and trees.Quaint downtown and good schools.Not cheap but a bargain compared to SV.About 35 miles or so.
Shhhh. Don't give away our secret. :)
Sorry...I forgot to mention the hurricanes and tornadoes :D
Pleasanton has vampires and werewolves.
And the great John Madden!

Ron Ronnerson
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Re: Another bay area housing thread..

Post by Ron Ronnerson » Tue Jul 25, 2017 8:50 pm

Hyperborea wrote:
hoops777 wrote:
Hyperborea wrote:
hoops777 wrote:Something I have not seen mentioned is that you can RENT out of the area,commute and live in a much nicer rental in a nicer area for less money.
You really do not sound ready to buy a house for 1.7 M and why put so much at risk and it will still be a mediocre house unless you commute.
Any examples of these nicer and cheaper out of the area places that don't require really long commutes?
Pleasanton is very nice.Lots of parks and trees.Quaint downtown and good schools.Not cheap but a bargain compared to SV.About 35 miles or so.
I had an ex-coworker who lived in Pleasanton. The commute to San Jose, not to anywhere up the peninsula, took them nearly an hour each way. This was in 2010 in a hybrid with stickers for the car pool lane. It's got to be worse now. I would rather buy smaller and closer in to the core of the valley. Might be ok if you got a company bus but then you're in trouble when you change jobs to a non-bus providing company. So, a nice community but a horrible commute.

This brings up an interesting point. The OP should probably test out some commutes from any potential area they want to buy. You can use Google Maps to get an idea of the commute but they should also try them out. I did this when I was buying - there was no Google Maps then so it was all test driving. I turned down a few locations we considered based on commute times to my existing job and the general vicinity of other likely future companies.
The traffic to/from Pleasanton is definitely worse than it was in 2010. I live in the vicinity and my commute time has gone up from 35 minutes back then to 50 minutes (on average) now. I work on the borderline of South Bay/East Bay. My commute times are 7:10-8:00 in the mornings and 3:10-4:00 in the afternoons.

In 2010, I wasn’t a parent. Now that I am, the commute is really a drag. OP mentioned that their plan is to have both spouses work and that schools are important to them. Even though homes are less expensive in the East Bay and the neighborhoods and schools can be excellent in certain areas, time will be a bigger constraint once kids are in the picture. I’d focus on areas with good schools closer to the South Bay.

Traffic could, of course, improve over time. However, to be prudent, expect it to only get worse. Milpitas and perhaps Fremont may be doable, but I think going up the Sunol Grade will take too much of a toll if doing it every day.

I'd save and just buy in a location that wasn't too far from work. It may take an extra couple of years to do this, but I think that may be better than adding an extra hour of commuting in each direction until retirement.

mrsbetsy
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Re: Another bay area housing thread..

Post by mrsbetsy » Tue Jul 25, 2017 8:58 pm

Yes, we live in the east bay as well. When my husband was commuting to the south bay for work, he would take the ACE train. We had a beater car parked at Great America. He would drive to the ACE station, take the train, hop in the beater, and drive the rest of the way to work.

Glad those days are behind us...it was TOUGH with little kids at home, but we were not at all interested in living in the south bay and preferred the burbs up here for the quality of life and easier suburban pace.

There really isn't a one-size-fits-all answer.

random_walker_77
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Re: Another bay area housing thread..

Post by random_walker_77 » Tue Jul 25, 2017 9:18 pm

So, a question I've got to ask... where's the shame in renting a house? With the income levels we're talking about, and with kids on the distant horizon, why not just rent in someplace central like Sunnyvale and pay for a quality private school when the time comes? Zillow implies that a typical house is about 4-5K/month for homes that are ~1.8M. Interest and taxes on 1.8M is 7.5K/month, which makes renting seem like a steal...

The problem with buying a house is that it locks you down to a specific location. Then later you find that you want a different layout, or want to live 20min further north, or want to live closer to a specific school, etc. With the incomes we're talking about here, why not just rent the lifestyle (i.e. house) you want instead of chaining yourself w/ 4x leverage on a specific property?

Unless... you're worried that if you don't buy now, you'll be forever priced out? If so, then that's worth discussing further, especially at your income level.

psychoslowmatic
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Re: Another bay area housing thread..

Post by psychoslowmatic » Tue Jul 25, 2017 10:08 pm

Dottie57 wrote:Pay off student loans. You have the money so improve your cash flow.

That leaves your rsu's plus 250k left.

Personally I would rent a better place for a year and save more and see what you have at end of year.
This sounds like a reasonable plan to me. I promise kids don't lose IQ points or emotional intelligence if they spend the first couple years of their life in a rental, so having kids and buying a house don't have to go together. Especially if the rental is a couple grand per month less than the mortgage. Also you don't have to spend time fixing anything.

Bigbonds
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Re: Another bay area housing thread..

Post by Bigbonds » Tue Jul 25, 2017 11:51 pm

One word: Texas :mrgreen:

ryman554
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Re: Another bay area housing thread..

Post by ryman554 » Wed Jul 26, 2017 9:55 am

Bungo wrote:If you're OK with buying into a market at all-time high prices at the limit of your affordability, then go for it. Otherwise, continue to rentdon't invest in the stock market, save aggressively, and wait for the next crash. That's what I did in the mid-late 2000searly-mid 2010's (bought in 2012), no regrets. and haven't bought in yet. Lots of regrets
Unfortunately, you are proposing market-timing.

Good thing if you guess right. Otherwise you end up like my father.

Bungo
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Re: Another bay area housing thread..

Post by Bungo » Wed Jul 26, 2017 11:56 am

ryman554 wrote:
Bungo wrote:If you're OK with buying into a market at all-time high prices at the limit of your affordability, then go for it. Otherwise, continue to rentdon't invest in the stock market, save aggressively, and wait for the next crash. That's what I did in the mid-late 2000searly-mid 2010's (bought in 2012), no regrets. and haven't bought in yet. Lots of regrets
Unfortunately, you are proposing market-timing.

Good thing if you guess right. Otherwise you end up like my father.
Apples and oranges. Real estate markets don't behave like the stock market:
  • Presumably you're not buying a house (primarily) as an invesment, but rather to live in it.
  • Renting is a viable alternative. You can achieve financial goals, e.g. retirement, without owning a house. Not so much without stock.
  • Prices are highly variable by geography. If you get priced out of one market, you can probably move elsewhere and afford a comparable house.
Do you have any evidence that real estate markets can't be timed? They move at a glacial pace compared with stock markets, tending to rise (or fall) for multiple consecutive years. Local rents provide an objective measure of whether current prices are reasonable: e.g., can you buy a house and rent it to tenants for a profit, or not? Incidentally, by this measure, Bay Area houses were reasonably priced as recently as five years ago, and there's no reason to expect that they won't be again in the not too distant future. The U.S. doesn't usually go much longer than a decade without a recession, and it's been eight years since the last one...

ryman554
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Re: Another bay area housing thread..

Post by ryman554 » Thu Jul 27, 2017 9:31 am

Bungo wrote: Apples and oranges. Real estate markets don't behave like the stock market:
  • Presumably you're not buying a house (primarily) as an invesment, but rather to live in it.
  • Renting is a viable alternative. You can achieve financial goals, e.g. retirement, without owning a house. Not so much without stock.
  • Prices are highly variable by geography. If you get priced out of one market, you can probably move elsewhere and afford a comparable house.
Do you have any evidence that real estate markets can't be timed? They move at a glacial pace compared with stock markets, tending to rise (or fall) for multiple consecutive years. Local rents provide an objective measure of whether current prices are reasonable: e.g., can you buy a house and rent it to tenants for a profit, or not? Incidentally, by this measure, Bay Area houses were reasonably priced as recently as five years ago, and there's no reason to expect that they won't be again in the not too distant future. The U.S. doesn't usually go much longer than a decade without a recession, and it's been eight years since the last one...
Can you hear yourself market timing in the last sentence? If you are willing to act on it for housing, why not equities as well?

Do you have any evidence that you *can* time the real estate market? If so, then you would have been rich following the 2008 meltdown because you knew when it would rebound and would have sold before the crash and rented.

I have no confidence that *any* market can be effectively timed; otherwise these bubbles would not grow so big.

Renting is an opportunity cost -- it is extremely difficult to rent in an equivalent house while at the same time saving up to buy and save longer-term for retirement. Sure, you can wait, but you are "giving money" to your landlord instead of "earning imputed rent" (and "giving money" to the bank in terms of interest). Your net worth is slowly being eroded while you wait for the correction that might not come. Like folks have done in the bay area since 2012. Five years of steadily rising rents later and lots of folks are further away now than they ever have been in getting on the housing ladder. I was extremely lucky to buy in 2012. I couldn't have afforded it in 2013+, and would still not likely be able to afford it today.

Note also, that, by waiting and renting, presumably you don't get as much "time in house", which is the goal of having a house for personal reasons, anyhow.

Moving elsewhere is also not an option for many.

Look, I can give you many reasons why the house prices in the bay area will continue upward, stay the same, or crater over the next 3-5 years. Nobody knows. What I can tell you is "just because housing market is at all-time high" is NOT a reason NOT to buy. Just like equities, it will be at all time highs more often than it isn't. It wasn't a good reason in the 70's. Or the 80's. Or the 90's. Or the 00's. And likely not to be in the 10's.

If you buy a house you like, can afford, with the income an emergency funds and contingency funds to back it up, then do so. In this sentence, we both agree that a house is not an investment vehicle, it's a lifestyle choice. Buy when you're ready to buy. You will be more ready when housing prices are cheaper, but if you're ready, go for it.

hoops777
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Re: Another bay area housing thread..

Post by hoops777 » Thu Jul 27, 2017 10:14 am

In an article in the local paper today,new all time highs again.One couple in Mountain View bought a 2000 sq ft house for 960,000 in 2010,listed if for 1.5 M,had 21 offers and recently sold it for 1.9 M.
There are states where you can buy 10 nice 2000 sq ft houses for 1.9 M.
K.I.S.S........so easy to say so difficult to do.

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Re: Another bay area housing thread..

Post by watchnerd » Thu Jul 27, 2017 10:20 am

Pet re-locators packed up my cats on Monday of this week, movers packed up my house yesterday, and me, the dog, and the wife are on the road driving to the new job in Seattle.

Bought my house in 2010 for a hair over $700k. It should go on the market next week. We'll see how we do.
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Re: Another bay area housing thread..

Post by Frisco Kid » Thu Jul 27, 2017 10:47 am

I don't see where the OP has mentioned what part of the Bay Area they are looking at. Depending on the city, what you get for $1.7M varies greatly. Career wise you appear to be just starting out and doing well salary wise so far. Two potential red flags for me is what modifications would the new home need? You say you want AC, many Bay Area homes do not have AC and adding it to a 60's built house is not cheap. The biggie though is are you planning on starting a family? Adding childcare costs changes your budget in a big way..................

A 15 year mortgage has been suggested. Without very high salaries (think both doctors) that just isn't typically an option.

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Hyperborea
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Re: Another bay area housing thread..

Post by Hyperborea » Thu Jul 27, 2017 11:14 am

hoops777 wrote:There are states where you can buy 10 nice 2000 sq ft houses for 1.9 M.
The reason that houses in those states are so cheap is that far fewer people actually want to live there. Just proves the old real estate adage, "location, location, location".

DVMResident
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Re: Another bay area housing thread..

Post by DVMResident » Thu Jul 27, 2017 11:41 am

ryman554 wrote:Can you hear yourself market timing in the last sentence? If you are willing to act on it for housing, why not equities as well?
Equities are relatively efficient and we peons are competing against professional PhD-level modelers, bot trading computers, etc trying to scrap every penny out of the system. Housing is not efficient and is fueled by cheap debt co-collateralized against future potential (and, often, ephemeral) income.

Very different beasts. I'm not aware of any studies on market timing in RE, but it's not clear the lessons learned from market timing in equities can be generalized to real estate.

OP, I think you can afford it, but it's difficult to justify from a fiscal stand point. This is a consumption purchase.

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Re: Another bay area housing thread..

Post by Carefreeap » Thu Jul 27, 2017 5:07 pm

watchnerd wrote:Pet re-locators packed up my cats on Monday of this week, movers packed up my house yesterday, and me, the dog, and the wife are on the road driving to the new job in Seattle.

Bought my house in 2010 for a hair over $700k. It should go on the market next week. We'll see how we do.
Oh, we have to start a poll guestimating the price! :moneybag Start a new thread!

Based on the rate of appreciation on my home and the value I guestimated when we returned in 2012 I'd say your house is worth $1.5M. Better guess would be some info about sq.ft. beds, baths, view or other special features and how updated the house is.

Let the bidding begin! :beer

cheapskate
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Re: Another bay area housing thread..

Post by cheapskate » Thu Jul 27, 2017 5:11 pm

Carefreeap wrote:
watchnerd wrote:Pet re-locators packed up my cats on Monday of this week, movers packed up my house yesterday, and me, the dog, and the wife are on the road driving to the new job in Seattle.

Bought my house in 2010 for a hair over $700k. It should go on the market next week. We'll see how we do.
Oh, we have to start a poll guestimating the price! :moneybag Start a new thread!

Based on the rate of appreciation on my home and the value I guestimated when we returned in 2012 I'd say your house is worth $1.5M. Better guess would be some info about sq.ft. beds, baths, view or other special features and how updated the house is.

Let the bidding begin! :beer
I'll up your bid. Without knowing anything about the home, just based on the fact that it sold at 700K in 2010, I'd say it sells at or over 1.7M :)

Good luck to watchnerd on the sale and the move ! Hope to see you in Seattle in a couple/3 years - after I retire (and last kid is out of house) :)

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Re: Another bay area housing thread..

Post by ryman554 » Fri Jul 28, 2017 8:35 am

cheapskate wrote: I'll up your bid. Without knowing anything about the home, just based on the fact that it sold at 700K in 2010, I'd say it sells at or over 1.7M :)

Good luck to watchnerd on the sale and the move ! Hope to see you in Seattle in a couple/3 years - after I retire (and last kid is out of house) :)
Nah, my 950k house is barely worth 1.4. Even though I'm out in the sticks, I would take the "under" on your bet modulo a remodel.

My wife would love it if I could get back to the great NW.

ryman554
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Re: Another bay area housing thread..

Post by ryman554 » Fri Jul 28, 2017 8:42 am

DVMResident wrote:
ryman554 wrote:Can you hear yourself market timing in the last sentence? If you are willing to act on it for housing, why not equities as well?
Equities are relatively efficient and we peons are competing against professional PhD-level modelers, bot trading computers, etc trying to scrap every penny out of the system. Housing is not efficient and is fueled by cheap debt co-collateralized against future potential (and, often, ephemeral) income.

Very different beasts. I'm not aware of any studies on market timing in RE, but it's not clear the lessons learned from market timing in equities can be generalized to real estate.
That's a good point.

However, I do get the sense that there are "professional" investors out there with deep pockets waiting for "alpha". Not your mom and pop flippers, but real estate investors looking to rent out. They showed up in 2009, and have likely stopped buying in, but I'm not sure if they are selling out.

It's a lot more opaque to be sure, and there is a lot of scope for the alpha to be sure. But I classify market inefficiencies as different than market timing.

Given the housing cycles are tied strongly to local cycles in employment (among other things), to the degree such things cannot be modeled -- certainly by us mere mortals -- I posit many of the macro-economic lessons can be applied, which even the PhDs always seem to be surprised at.

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watchnerd
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Re: Another bay area housing thread..

Post by watchnerd » Fri Jul 28, 2017 8:57 am

cheapskate wrote:
Carefreeap wrote:
watchnerd wrote:Pet re-locators packed up my cats on Monday of this week, movers packed up my house yesterday, and me, the dog, and the wife are on the road driving to the new job in Seattle.

Bought my house in 2010 for a hair over $700k. It should go on the market next week. We'll see how we do.
Oh, we have to start a poll guestimating the price! :moneybag Start a new thread!

Based on the rate of appreciation on my home and the value I guestimated when we returned in 2012 I'd say your house is worth $1.5M. Better guess would be some info about sq.ft. beds, baths, view or other special features and how updated the house is.

Let the bidding begin! :beer
I'll up your bid. Without knowing anything about the home, just based on the fact that it sold at 700K in 2010, I'd say it sells at or over 1.7M :)

Good luck to watchnerd on the sale and the move ! Hope to see you in Seattle in a couple/3 years - after I retire (and last kid is out of house) :)
Nah, high 1.2's to low 1.4's are the comps for my hood.
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hoops777
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Re: Another bay area housing thread..

Post by hoops777 » Fri Jul 28, 2017 11:47 am

watchnerd wrote:
cheapskate wrote:
Carefreeap wrote:
watchnerd wrote:Pet re-locators packed up my cats on Monday of this week, movers packed up my house yesterday, and me, the dog, and the wife are on the road driving to the new job in Seattle.

Bought my house in 2010 for a hair over $700k. It should go on the market next week. We'll see how we do.
Oh, we have to start a poll guestimating the price! :moneybag Start a new thread!

Based on the rate of appreciation on my home and the value I guestimated when we returned in 2012 I'd say your house is worth $1.5M. Better guess would be some info about sq.ft. beds, baths, view or other special features and how updated the house is.

Let the bidding begin! :beer
I'll up your bid. Without knowing anything about the home, just based on the fact that it sold at 700K in 2010, I'd say it sells at or over 1.7M :)

Good luck to watchnerd on the sale and the move ! Hope to see you in Seattle in a couple/3 years - after I retire (and last kid is out of house) :)
Nah, high 1.2's to low 1.4's are the comps for my hood.
Only 1.2 to 1.4?
Do you live next door to a gas station,with a factory behind you and across the street from the freeway? :D
Last edited by hoops777 on Fri Jul 28, 2017 4:46 pm, edited 1 time in total.
K.I.S.S........so easy to say so difficult to do.

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Re: Another bay area housing thread..

Post by favoriteagency » Fri Jul 28, 2017 4:39 pm

thepicard1 wrote:Any advice bogleheads? What have others in our situation done in the past?
I'd consider RSUs as part of your income. It depends on which company you work for, but the big ones will give you refreshers every year to maintain your expected income level. In other words, if you work for one of those companies, you can probably consider your income as roughly 550K/yr before tax. But I really don't think you need to consider RSUs in this calculation.

Do you have to live on the peninsula? You said you don't have kids -- do you have to live in an area with good schools? If you do choose to have kids in the future can you use the house savings to send them to a private school if necessary? The reason I ask is because 1.7 million seems like an awful lot.

We were in roughly the same boat when we bought last year. Our budget was 800K-1.2M and we ultimately bought for less than 1M. Have you looked around San Jose -- particularly in Willow Glen, the Rose Garden, and the Diridon area? Those are all close to Caltrain so you can quickly get anywhere on the peninsula if you need to. The big companies all have shuttles nearby. Willow Glen schools are actually getting a lot better, so by the time you have kids the public schools could be really great.

Our house is about 1500 sq feet 3/2, completely remodeled, lots of amenities (including AC), in a transitional neighborhood with great neighbors. Our mortgage + taxes + insurance is less than what we would pay to rent a similar house in the same area. We can afford the mortgage on one of our salaries (without considering RSUs). We have a nice yard for the dog. So far it's been a great decision and our quality of life has improved substantially since we stopped renting.

My advice on buying would be to pick some areas in your price range, and then be very patient. Sometimes things come up that are in really great shape but are staged poorly, or have minor cosmetic deficiencies that make them hard to sell. Believe it or not, buyers in the Bay Area (particularly San Jose) are a picky bunch -- if something doesn't look perfect during an open house, it could be the case that the place gets no offers. Also, look at buying near the end of the year, September -- December. There was a bit of a lull last year, and our real estate agents told us that happens every year.

Best of luck to you!

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Re: Another bay area housing thread..

Post by letsgobobby » Fri Jul 28, 2017 5:52 pm

I suggest renting a nicer place. But I wouldn't buy in the Bay Area at this time.

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watchnerd
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Re: Another bay area housing thread..

Post by watchnerd » Fri Jul 28, 2017 6:22 pm

hoops777 wrote:
watchnerd wrote:
cheapskate wrote:
Carefreeap wrote:
watchnerd wrote:Pet re-locators packed up my cats on Monday of this week, movers packed up my house yesterday, and me, the dog, and the wife are on the road driving to the new job in Seattle.

Bought my house in 2010 for a hair over $700k. It should go on the market next week. We'll see how we do.
Oh, we have to start a poll guestimating the price! :moneybag Start a new thread!

Based on the rate of appreciation on my home and the value I guestimated when we returned in 2012 I'd say your house is worth $1.5M. Better guess would be some info about sq.ft. beds, baths, view or other special features and how updated the house is.

Let the bidding begin! :beer
I'll up your bid. Without knowing anything about the home, just based on the fact that it sold at 700K in 2010, I'd say it sells at or over 1.7M :)

Good luck to watchnerd on the sale and the move ! Hope to see you in Seattle in a couple/3 years - after I retire (and last kid is out of house) :)
Nah, high 1.2's to low 1.4's are the comps for my hood.
Only 1.2 to 1.4?
Do you live next door to a gas station,with a factory behind you and across the street from the freeway? :D
It's a small house, 1400 sq ft, 3 BR, 2 BA.
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Re: Another bay area housing thread..

Post by Frisco Kid » Fri Jul 28, 2017 6:53 pm

Consider low cost mortgages are still available. As these become more expensive going forward, affordability goes down. Maybe the 1.7M house drops at that time and even so are you any better off? Can't say as my Magic 8 ball isn't working. Also, don't under estimate commute times ANYWHERE in the Bay Area. Several folks mentioned Pleasanton, that commute to the South Bay (Silicon Valley) is a bad dream under ideal conditions.Sure, you can try commuting off hours but we are totally in a 24/7 business environment here. Bottom line, if you plan to stay in the home for 10 years I would buy now.

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Re: Another bay area housing thread..

Post by itstoomuch » Fri Jul 28, 2017 7:05 pm

@watchnerd
understand how a 1031 work, if applicable
GL.
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Re: Another bay area housing thread..

Post by watchnerd » Fri Jul 28, 2017 7:09 pm

itstoomuch wrote:@watchnerd
understand how a 1031 work, if applicable
Not applicable.
Tweaked 3-Fund: 35% US Equities | 35% Total International | 30% Intermediate Treasuries

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Re: Another bay area housing thread..

Post by majiaknight » Fri Jul 28, 2017 8:06 pm

My wife and I are in mid-30s and both work at big companies in South Bay Area w/ similar income as yours. We bought our first house in 2014 before our kid was born. When we did the calculation, we wanted to have either of our salaries to be able to cover the 30Y fixed mortgage monthly payment so that even one of us lost job (maybe during one of the big re-orgs you'll never know) we won't be panic even though we should easily find another job in silicon valley.

Admittedly we were a little bit of conservative back then but no regret since now we could easily payoff the house early if we want and we have grown a good size of investment portfolio in the last 3 years.

BTW: I don't quite understand your complaints on renting when you consider a $1.7M house. Before 2014 My wife and I enjoyed a lot in renting one of the big apt located in the beautiful Rivermark Village area in Santa Clara. Based on your income you should increase your budget if you stick to renting. :moneybag :moneybag

thepicard1
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Re: Another bay area housing thread..

Post by thepicard1 » Fri Jul 28, 2017 11:02 pm

favoriteagency wrote:
thepicard1 wrote:Any advice bogleheads? What have others in our situation done in the past?
I'd consider RSUs as part of your income. It depends on which company you work for, but the big ones will give you refreshers every year to maintain your expected income level. In other words, if you work for one of those companies, you can probably consider your income as roughly 550K/yr before tax. But I really don't think you need to consider RSUs in this calculation.

Do you have to live on the peninsula? You said you don't have kids -- do you have to live in an area with good schools? If you do choose to have kids in the future can you use the house savings to send them to a private school if necessary? The reason I ask is because 1.7 million seems like an awful lot.

We were in roughly the same boat when we bought last year. Our budget was 800K-1.2M and we ultimately bought for less than 1M. Have you looked around San Jose -- particularly in Willow Glen, the Rose Garden, and the Diridon area? Those are all close to Caltrain so you can quickly get anywhere on the peninsula if you need to. The big companies all have shuttles nearby. Willow Glen schools are actually getting a lot better, so by the time you have kids the public schools could be really great.

Our house is about 1500 sq feet 3/2, completely remodeled, lots of amenities (including AC), in a transitional neighborhood with great neighbors. Our mortgage + taxes + insurance is less than what we would pay to rent a similar house in the same area. We can afford the mortgage on one of our salaries (without considering RSUs). We have a nice yard for the dog. So far it's been a great decision and our quality of life has improved substantially since we stopped renting.

My advice on buying would be to pick some areas in your price range, and then be very patient. Sometimes things come up that are in really great shape but are staged poorly, or have minor cosmetic deficiencies that make them hard to sell. Believe it or not, buyers in the Bay Area (particularly San Jose) are a picky bunch -- if something doesn't look perfect during an open house, it could be the case that the place gets no offers. Also, look at buying near the end of the year, September -- December. There was a bit of a lull last year, and our real estate agents told us that happens every year.

Best of luck to you!
Thank you that's helpful. We really have only been looking in the Mountain view, Sunnyvale area. San Jose homes are definitely cheaper by a few hundred thousand, which means they're in reach now. One reason for trying to stay further north is because we've heard that the prices are "stickier" should there be a downturn.

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Re: Another bay area housing thread..

Post by favoriteagency » Sat Jul 29, 2017 9:48 am

thepicard1 wrote:Thank you that's helpful. We really have only been looking in the Mountain view, Sunnyvale area. San Jose homes are definitely cheaper by a few hundred thousand, which means they're in reach now. One reason for trying to stay further north is because we've heard that the prices are "stickier" should there be a downturn.
A co-worker of mine pulled some data from the 2008 downturn, and (according to him) it showed that 'stickiness' was more correlated with price than location. In other words, he claimed that throughout the Bay Area the lower the price of the house, the more it dropped. High priced homes in San Jose dropped about the same as similarly priced homes located further north. Because of this, he ended up buying a higher priced home in San Jose.

I didn't look at the data myself, but that sort-of makes sense to me. I can't see very desirable, expensive towns that are further south than San Jose (like Los Gatos and Campbell) dropping significantly just because they aren't on the peninsula. There are employers near those locations (Netflix in Los Gatos, Ebay in Campbell), and presumably their employees will still want to live close to work. Plus, from my understanding, the schools in those areas are excellent.

As for us, we didn't let potential price stickiness come into the picture at all. On the other hand, we do know is that San Jose has largely transformed in the four years that we have lived here. Google just announced they are working with the city to build a campus that will hold over 20K (!) employees right near Diridon Station. Similarly, Adobe announced last week that they are expanding their downtown San Jose presence, and I've heard rumors that Amazon has already moved in. And, on the other side of downtown, take a stroll down South First Street and compare it to South First Street 4 years ago when they started doing First Fridays. It's like night and day.

In any case, I'd bet on those things improving the quality of living in San Jose (leading to more price stability) more than I'd bet on some vague 'price stickiness' notion.

That said, I now have a vested interest in San Jose growing and becoming better, so take anything I say with a grain of salt. :)

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