New(ish) attending physicians in the Bay Area: Housing

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Watty
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Re: New(ish) attending physicians in the Bay Area: Housing

Post by Watty » Tue May 15, 2018 4:36 pm

mac808 wrote:
Tue May 15, 2018 1:19 pm
mrsbetsy wrote:
Sat May 12, 2018 6:03 pm
You might get lucky like we did and experience a steady rise in the market.
I'll acknowledge that anything is possible, but I just don't see how there's much appreciation potential left. The median house is already priced for two working professionals with extremely high incomes, no job loss, rock bottom interest rates, and low personal savings rates. It might make sense to buy anyway, but whereas the trends in the past forecast price appreciation (falling interest rates, growing population) the current trends are mixed (some bullish trends, but also stagnant population, likely prop 13 modification, slower job creation, higher income taxes, and growing pro-development anti-NIMBYism). As physicians, the main advantage you have is job security. .....
I would take that with a grain of salt.

There has been some speculation that major health care reform could impact doctors incomes.

somekevinguy
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Re: New(ish) attending physicians in the Bay Area: Housing

Post by somekevinguy » Tue May 15, 2018 4:37 pm

mrsbetsy wrote:
Tue May 15, 2018 4:24 pm
[
I'll acknowledge that anything is possible, but I just don't see how there's much appreciation potential left.


That's what we said...twice. We were wrong both times.

This whole thread is starting to sound more like a tantrum about "being a two-physician family" and not being able to buy the house you want. Seriously. It doesn't matter what your profession is, it matters how much you earn and how much you keep and how far you are willing to stretch.

You can find a house to buy on the peninsula if you are willing to buy something that is a starter home. You aren't any more deserving of your dream house than anyone else just because you went to med school.

There really is no magic here....
[/quote]

Sorry mrsbetsy. That was not the intention. If you go back to the original post, it was meant to ask people in similar circumstances (ie no RSU's but decent income) about their strategies for housing while adhering to BH philosophy-or to quote your words "how far you are willing to stretch"-it has nothing to do with being "special" because we are physicians. I am extremely grateful for my job, my fortunate circumstances, and recognize that maybe only 5% of it has to do with my hard work or whatever. So yes, your comment is a good reality check but I assure you we don't feel entitled to some dream house.

I'd just ask for the benefit of the doubt rather than assumptions and judgment.

somekevinguy
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Re: New(ish) attending physicians in the Bay Area: Housing

Post by somekevinguy » Tue May 15, 2018 4:37 pm

Watty wrote:
Tue May 15, 2018 4:36 pm
mac808 wrote:
Tue May 15, 2018 1:19 pm
mrsbetsy wrote:
Sat May 12, 2018 6:03 pm
You might get lucky like we did and experience a steady rise in the market.
I'll acknowledge that anything is possible, but I just don't see how there's much appreciation potential left. The median house is already priced for two working professionals with extremely high incomes, no job loss, rock bottom interest rates, and low personal savings rates. It might make sense to buy anyway, but whereas the trends in the past forecast price appreciation (falling interest rates, growing population) the current trends are mixed (some bullish trends, but also stagnant population, likely prop 13 modification, slower job creation, higher income taxes, and growing pro-development anti-NIMBYism). As physicians, the main advantage you have is job security. .....
I would take that with a grain of salt.

There has been some speculation that major health care reform could impact doctors incomes.
yep- death and taxes.

mervinj7
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Re: New(ish) attending physicians in the Bay Area: Housing

Post by mervinj7 » Tue May 15, 2018 4:53 pm

You have $500k cash for downpayment, a 2 comma net worth, dual physician incomes (relatively recession proof), 0% loan (how is that possible?), and family who live in the area. Seems like a no brainer to me. Buy a $1.5M-$2M starter home close to work. If you are going to "stretch", buy a smaller place than you would like in the best possible neighborhood. You can always expand/renovate later. If you need specific advise based on neighborhoods, send me a PM. But since you already live here with family nearby, you probably have an idea where you want to be.

My favorite part of the monthly Bay Area Housing thread (and it really feels like its every month now) is the folks who live outside the Bay Area who keep claiming that the tech companies will leave here en masse soon. I can totally understand housing prices falling due to a nationwide or global recession and I can easily see any one of the tech companies getting wiped out (e.g. Tesla).

But do people really imagine juggernauts like Apple (25k local employees), Google (20k), Facebook (17k), Cisco (15k), Netflix (5k) just folding up their headquarters and moving to LCOL areas? Is Stanford (16k) and UC Berkeley (12k) also going to move out in this vision of a dystopian California? As far as I can tell they are not only expanding their main campuses but building more satellite campuses in "cheaper" neighborhoods within the Bay Area.

https://appleinsider.com/articles/18/03 ... eady-built
https://www.mercurynews.com/2018/04/12/ ... gle-adobe/
https://www.mercurynews.com/2018/03/16/ ... ple-tesla/

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mrspock
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Re: New(ish) attending physicians in the Bay Area: Housing

Post by mrspock » Tue May 15, 2018 5:18 pm

Carefreeap wrote:
Sun May 13, 2018 4:36 pm

Just because one is a doctor doesn't mean you deserve to live in the best neighborhoods in the Bay Area. Our former sellers were a pediatric nephrologist and a middle school teacher. I think he had hospital time at Stanford. The demographics of our little middle class coastal town have changed a lot since their kids (about our ages mid to late 50s) went to school. Our schools are better and we are no longer a sleepy blue collar town of contractors and airport personnel.

The OP has $500k to put down on a house and the opportunity to get a 0% loan. How many people have THAT opportunity? Plus free(?) childcare? They are so far ahead of the pack.

When we first moved to the SF Bay Area we paid 5x my husband's salary to buy our first house which was a stinky disgusting dump (but with potential :p). I'm not kidding. The ceiling and walls were yellow with nicotine and the carpet was literally falling apart between the sand and pet stains. The kitchen had grease everywhere. They must have fried every meal. And BTW those owners raised 6(!) kids in a 1000 sq.ft. 3/2 1958 rancher. Five years later we moved to the "Move-Up" house. Literally and figuratively speaking as it is four doors up the street from our old house. The current house is about 2500 sq.ft. on a 1/2 lot with amazing ocean and canyon views. My neighbor is convinced that it's worth $2M but I think that's probably a little optimistic. We shall see. We finally had a house come up for sale for the first time in 6 years. It's 2000 sq.ft. original 60s type elevated rancher. It's on 1+ acres (mostly hill) with no view. Listed for $1.2M. I'm sure it will go multiple offer, just a question of how high over list price.

O.P. I'd concentrate on a well cared-for 1500sqft home that has potential to add on in a neighborhood you like. Those kinds of houses are the most versatile; easy to live in while kids are a young age, easy to rent out if you need to temporarily relocate, nice sized house to age in place and the list goes on.
+1 on this. I’d first try to optimize your commute, and get it off peak. You’ll save yourself probably 50% right there as it opens up South/West San Jose, Santa Cruz, East Bay as options.

You might even want to consider relocating to Santa Cruz for work, I see many happy Physicians & Nurses here. It’s extremely livable, and housing is far cheaper vs the peninsula. For comparison, $1-1.3M will get you a brand new house here 2000sqft+ (https://www.redfin.com/CA/Santa-Cruz/Ro ... /144125939) within a bike ride to the ocean. Or if you want to live like a doctor for $1.5M ((https://www.redfin.com/CA/Santa-Cruz/12 ... me/2443887).

I don’t want this to come off the wrong way, but its critical for your financial future to have a “humble” mindset in Silicon Valley. You simply won’t get the same house, commute or “material” quality of life combination as peers in other places. That said, play your cards right and you will be just fine in almost every other way (which counts as much or more).

Good luck, and welcome to the area!

dknightd
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Re: New(ish) attending physicians in the Bay Area: Housing

Post by dknightd » Tue May 15, 2018 5:21 pm

somekevinguy wrote:
Sat May 12, 2018 5:15 pm
If it weren't for the fact that aging parents live here and definitely don't want to move (and we highly value the time they spend almost daily with our young kids) and that we essentially have dream jobs, we would definitely move.
Here is an off the wall crazy suggestion. Maybe move in with your parents. Well not actually move in with them, but share the piece of land. If they have an older house with land, perhaps you can add an addition, or maybe even a separate structure on the same lot. Just a thought . . .

Ron Ronnerson
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Re: New(ish) attending physicians in the Bay Area: Housing

Post by Ron Ronnerson » Tue May 15, 2018 5:25 pm

I'm not sure if I'm understanding the facts correctly (so please correct me if I'm mistaken) - you can get a 30 year loan at 0% but only one time? This seems strange but, if it's the case, it seems like quite the deal and I would want to take maximum advantage of it. I'd put as little down as I possibly could and still get that rate while stretching the budget a fair amount as well. I would get a nice house that I'd want to live in for many years. 30 year loans are edging close to a 5% rate now. That means about a $10k mortgage payment on a 2M loan (30 years). At 0%, the payment is cut in half to $5k. If inflation goes up, it will help you even more. You really have such an opportunity?

somekevinguy
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Re: New(ish) attending physicians in the Bay Area: Housing

Post by somekevinguy » Tue May 15, 2018 5:38 pm

Ron Ronnerson wrote:
Tue May 15, 2018 5:25 pm
I'm not sure if I'm understanding the facts correctly (so please correct me if I'm mistaken) - you can get a 30 year loan at 0% but only one time? This seems strange but, if it's the case, it seems like quite the deal and I would want to take maximum advantage of it. I'd put as little down as I possibly could and still get that rate while stretching the budget a fair amount as well. I would get a nice house that I'd want to live in for many years. 30 year loans are edging close to a 5% rate now. That means about a $10k mortgage payment on a 2M loan (30 years). At 0%, the payment is cut in half to $5k. If inflation goes up, it will help you even more. You really have such an opportunity?
Correct- it is designed as a recruitment tool to get people to sign on recognizing the high costs of living (and even with that, we still have some difficulty recruiting physicians). They figure once you've bought into the market, you have a home so have no need for their subsidized loan at that time.

There is no expiration on when we can use it but it has to be for your first home in the qualifying area. That being said the 30 year 0% loan is only for 450K and the 10 year 0% loan is for 175K. This is obviously great but very different than an unlimited or 2M 0% loan. The rest of the loan is on more conventional terms (ie 4.5-4.7% 30 year fixed). Also, there are no payments due on these loans until the term or you sell the home- hence, reduces the monthly mortgage a fair amount outside of interest but also assumes youre saving on the side or rolling the dice for appreciation to cover it.

Carefreeap
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Re: New(ish) attending physicians in the Bay Area: Housing

Post by Carefreeap » Tue May 15, 2018 6:03 pm

somekevinguy wrote:
Tue May 15, 2018 5:38 pm
Ron Ronnerson wrote:
Tue May 15, 2018 5:25 pm
I'm not sure if I'm understanding the facts correctly (so please correct me if I'm mistaken) - you can get a 30 year loan at 0% but only one time? This seems strange but, if it's the case, it seems like quite the deal and I would want to take maximum advantage of it. I'd put as little down as I possibly could and still get that rate while stretching the budget a fair amount as well. I would get a nice house that I'd want to live in for many years. 30 year loans are edging close to a 5% rate now. That means about a $10k mortgage payment on a 2M loan (30 years). At 0%, the payment is cut in half to $5k. If inflation goes up, it will help you even more. You really have such an opportunity?
Correct- it is designed as a recruitment tool to get people to sign on recognizing the high costs of living (and even with that, we still have some difficulty recruiting physicians). They figure once you've bought into the market, you have a home so have no need for their subsidized loan at that time.

There is no expiration on when we can use it but it has to be for your first home in the qualifying area. That being said the 30 year 0% loan is only for 450K and the 10 year 0% loan is for 175K. This is obviously great but very different than an unlimited or 2M 0% loan. The rest of the loan is on more conventional terms (ie 4.5-4.7% 30 year fixed). Also, there are no payments due on these loans until the term or you sell the home- hence, reduces the monthly mortgage a fair amount outside of interest but also assumes youre saving on the side or rolling the dice for appreciation to cover it.
So to clarify, you would owe no payments until year 10 for the 175k loan and no payments for 30 years for the $450k loan?

Ron Ronnerson
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Re: New(ish) attending physicians in the Bay Area: Housing

Post by Ron Ronnerson » Tue May 15, 2018 6:11 pm

somekevinguy wrote:
Tue May 15, 2018 5:38 pm
Ron Ronnerson wrote:
Tue May 15, 2018 5:25 pm
I'm not sure if I'm understanding the facts correctly (so please correct me if I'm mistaken) - you can get a 30 year loan at 0% but only one time? This seems strange but, if it's the case, it seems like quite the deal and I would want to take maximum advantage of it. I'd put as little down as I possibly could and still get that rate while stretching the budget a fair amount as well. I would get a nice house that I'd want to live in for many years. 30 year loans are edging close to a 5% rate now. That means about a $10k mortgage payment on a 2M loan (30 years). At 0%, the payment is cut in half to $5k. If inflation goes up, it will help you even more. You really have such an opportunity?
Correct- it is designed as a recruitment tool to get people to sign on recognizing the high costs of living (and even with that, we still have some difficulty recruiting physicians). They figure once you've bought into the market, you have a home so have no need for their subsidized loan at that time.

There is no expiration on when we can use it but it has to be for your first home in the qualifying area. That being said the 30 year 0% loan is only for 450K and the 10 year 0% loan is for 175K. This is obviously great but very different than an unlimited or 2M 0% loan. The rest of the loan is on more conventional terms (ie 4.5-4.7% 30 year fixed). Also, there are no payments due on these loans until the term or you sell the home- hence, reduces the monthly mortgage a fair amount outside of interest but also assumes youre saving on the side or rolling the dice for appreciation to cover it.
I understand now. I had thought the 0% for 30 years was on the entire amount. 0% on $450k is definitely a very nice benefit in any case and should help a decent amount. Thanks for clarifying.

somekevinguy
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Re: New(ish) attending physicians in the Bay Area: Housing

Post by somekevinguy » Tue May 15, 2018 6:13 pm

Carefreeap wrote:
Tue May 15, 2018 6:03 pm
somekevinguy wrote:
Tue May 15, 2018 5:38 pm
Ron Ronnerson wrote:
Tue May 15, 2018 5:25 pm
I'm not sure if I'm understanding the facts correctly (so please correct me if I'm mistaken) - you can get a 30 year loan at 0% but only one time? This seems strange but, if it's the case, it seems like quite the deal and I would want to take maximum advantage of it. I'd put as little down as I possibly could and still get that rate while stretching the budget a fair amount as well. I would get a nice house that I'd want to live in for many years. 30 year loans are edging close to a 5% rate now. That means about a $10k mortgage payment on a 2M loan (30 years). At 0%, the payment is cut in half to $5k. If inflation goes up, it will help you even more. You really have such an opportunity?
Correct- it is designed as a recruitment tool to get people to sign on recognizing the high costs of living (and even with that, we still have some difficulty recruiting physicians). They figure once you've bought into the market, you have a home so have no need for their subsidized loan at that time.

There is no expiration on when we can use it but it has to be for your first home in the qualifying area. That being said the 30 year 0% loan is only for 450K and the 10 year 0% loan is for 175K. This is obviously great but very different than an unlimited or 2M 0% loan. The rest of the loan is on more conventional terms (ie 4.5-4.7% 30 year fixed). Also, there are no payments due on these loans until the term or you sell the home- hence, reduces the monthly mortgage a fair amount outside of interest but also assumes youre saving on the side or rolling the dice for appreciation to cover it.
So to clarify, you would owe no payments until year 10 for the 175k loan and no payments for 30 years for the $450k loan?
Correct

mervinj7
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Re: New(ish) attending physicians in the Bay Area: Housing

Post by mervinj7 » Tue May 15, 2018 6:22 pm

somekevinguy wrote:
Tue May 15, 2018 6:13 pm
Carefreeap wrote:
Tue May 15, 2018 6:03 pm
So to clarify, you would owe no payments until year 10 for the 175k loan and no payments for 30 years for the $450k loan?
Correct
:greedy :sharebeer :sharebeer :greedy

dknightd
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Re: New(ish) attending physicians in the Bay Area: Housing

Post by dknightd » Tue May 15, 2018 6:31 pm

I assume you are renting now. I'd keep renting and keeping my eyes open for a house in the area you want. Then I'd use the 0% for 30 years if you think you are going to stay there. I raised two kids in a 1400 ft**2 house. Worked fine for us. YMMV

Poppy1234
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Re: New(ish) attending physicians in the Bay Area: Housing

Post by Poppy1234 » Tue May 15, 2018 6:53 pm

500+ for 10+ years would be news to me. I had always suspected RSU's with rapidly increasing stock prices were the main culprit of techies being able to put a lot down even though their incomes may be more "modest" (I say this recognizing how ridiculous it is) at 300-400K/yr. (ie 300-400K/yr in no way allows you to buy a 3M home while still maintaining any semblance of reasonable finances).

Alas, it is tough to have our finances called "middle of the road" with a stupidly high income, no debts, and a net worth that puts us in the top 3% for age amongst physicians but maybe that is the reality in the Bay Area (medscape physician wealth report)
It’s not that difficult to imagine. A lot of fresh college graduates get 125k+ base salaries (case in point: my brother and his friends whose are actually higher at their first jobs as base salary) at the age of 22. Counting 2 of them as households given they marry later means that’s a 250k+ base not including stocks, a solid 10 years before many physicians even start earning income or dig themselves out of debt. Ramp that base up in a few years and throw in stock during a huge record stock bull market, and suddenly that delayed medicine salary doesn’t look so good anymore. Plus they’ve been socking money into a 401k while we can’t bc hospitals don’t give us that benefit, and a few hit the IPO jackpot which is reinvested. That’s additional compound interest in a great stock market runup that we also missed. I know many techies in their early 30s single with more than 1,000,000 in networth. Some didn’t even try. And no I’m not exaggerating. It’s a hard pill to swallow but must be done if you’re going to be realistic in this area. And as another poster said, this isn’t just the Bay Area. This is common in large international major cities. There’s lots of people with money.

Carefreeap
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Re: New(ish) attending physicians in the Bay Area: Housing

Post by Carefreeap » Tue May 15, 2018 6:54 pm

somekevinguy wrote:
Tue May 15, 2018 6:13 pm
Carefreeap wrote:
Tue May 15, 2018 6:03 pm
somekevinguy wrote:
Tue May 15, 2018 5:38 pm
Ron Ronnerson wrote:
Tue May 15, 2018 5:25 pm
I'm not sure if I'm understanding the facts correctly (so please correct me if I'm mistaken) - you can get a 30 year loan at 0% but only one time? This seems strange but, if it's the case, it seems like quite the deal and I would want to take maximum advantage of it. I'd put as little down as I possibly could and still get that rate while stretching the budget a fair amount as well. I would get a nice house that I'd want to live in for many years. 30 year loans are edging close to a 5% rate now. That means about a $10k mortgage payment on a 2M loan (30 years). At 0%, the payment is cut in half to $5k. If inflation goes up, it will help you even more. You really have such an opportunity?
Correct- it is designed as a recruitment tool to get people to sign on recognizing the high costs of living (and even with that, we still have some difficulty recruiting physicians). They figure once you've bought into the market, you have a home so have no need for their subsidized loan at that time.

There is no expiration on when we can use it but it has to be for your first home in the qualifying area. That being said the 30 year 0% loan is only for 450K and the 10 year 0% loan is for 175K. This is obviously great but very different than an unlimited or 2M 0% loan. The rest of the loan is on more conventional terms (ie 4.5-4.7% 30 year fixed). Also, there are no payments due on these loans until the term or you sell the home- hence, reduces the monthly mortgage a fair amount outside of interest but also assumes youre saving on the side or rolling the dice for appreciation to cover it.
So to clarify, you would owe no payments until year 10 for the 175k loan and no payments for 30 years for the $450k loan?
Correct
So between your savings ($500k) 0% loans ($625k) and your salaries of nearly $900k you're having trouble paying for a $3M house?

It's time to step back and count your blessings. Life is never going to be perfect.

somekevinguy
Posts: 98
Joined: Mon Jan 16, 2017 9:23 pm

Re: New(ish) attending physicians in the Bay Area: Housing

Post by somekevinguy » Tue May 15, 2018 7:19 pm

Carefreeap wrote:
Tue May 15, 2018 6:54 pm
somekevinguy wrote:
Tue May 15, 2018 6:13 pm
Carefreeap wrote:
Tue May 15, 2018 6:03 pm
somekevinguy wrote:
Tue May 15, 2018 5:38 pm
Ron Ronnerson wrote:
Tue May 15, 2018 5:25 pm
I'm not sure if I'm understanding the facts correctly (so please correct me if I'm mistaken) - you can get a 30 year loan at 0% but only one time? This seems strange but, if it's the case, it seems like quite the deal and I would want to take maximum advantage of it. I'd put as little down as I possibly could and still get that rate while stretching the budget a fair amount as well. I would get a nice house that I'd want to live in for many years. 30 year loans are edging close to a 5% rate now. That means about a $10k mortgage payment on a 2M loan (30 years). At 0%, the payment is cut in half to $5k. If inflation goes up, it will help you even more. You really have such an opportunity?
Correct- it is designed as a recruitment tool to get people to sign on recognizing the high costs of living (and even with that, we still have some difficulty recruiting physicians). They figure once you've bought into the market, you have a home so have no need for their subsidized loan at that time.

There is no expiration on when we can use it but it has to be for your first home in the qualifying area. That being said the 30 year 0% loan is only for 450K and the 10 year 0% loan is for 175K. This is obviously great but very different than an unlimited or 2M 0% loan. The rest of the loan is on more conventional terms (ie 4.5-4.7% 30 year fixed). Also, there are no payments due on these loans until the term or you sell the home- hence, reduces the monthly mortgage a fair amount outside of interest but also assumes youre saving on the side or rolling the dice for appreciation to cover it.
So to clarify, you would owe no payments until year 10 for the 175k loan and no payments for 30 years for the $450k loan?
Correct
So between your savings ($500k) 0% loans ($625k) and your salaries of nearly $900k you're having trouble paying for a $3M house?

It's time to step back and count your blessings. Life is never going to be perfect.
Our salaries are nowhere near that. We are definitely not complaining- just looking for insight into how others have handled the situation. I realize our great circumstances make it easy to be like “quit your complaining” but honestly that probably applies to anyone posting on this forum just to different degrees. I can qualify each post with “I recognize how fortunate we are” but really, just looking for advice from similarly minded folks.

Gratitude is important but recommendations to count blessings or be grateful are not really what we’re looking for from this forum.

random_walker_77
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Re: New(ish) attending physicians in the Bay Area: Housing

Post by random_walker_77 » Tue May 15, 2018 8:47 pm

somekevinguy wrote:
Sun May 13, 2018 10:58 pm

Yes. The home we rent (which is quite nice) has a price/annual rent ratio of over 38 (being conservative)- more realistically about 45. That is the benefit of these home owners who literally pay property taxes of only a few thousand dollars a year due to prop 13 whereas if I were to buy the same home, the property taxes would jump by about 25K. There definitely is a premium on owning but with our plans to stay 20+ years and with the housing supplement from both of our employers factored in, the math becomes a little bit less clear. I highly doubt any home will fail to keep up with inflation and with interest free loans and straight salary supplement, if it is within budget and still allows us to save for retirement/other goals, can't help but thinking it still may be worth it.
I guess it depends -- just how much of a salary supplement is this? The interest-free loan is valuable. If you value the cost of funds at 4%, then that's about 18K/yr.

There is the golden handcuffs aspect. And if you're never moving, and never changing jobs, that's maybe less relevant. What if you have to leave the job for unexpected reasons (i.e. medical disability, or turmoil at the hospital, for example?)? Do you have to pay it off as a balloon payment? Since it's tied to your employer, you can't really think of it as a non-recourse loan, can you? But if you had to separate from your employer, what happens if you walk away from the loan?

Also, what the the tax implications on the 0% loan? Is that considered taxable income, taxed at your ~50% federal+state?

How much would it bother you if the market dipped a lot and you find yourself deeply under-water, on paper? Would you have buyer's remorse, or would it be irrelevant since you're in your house and not planning to leave so the price on paper is irrelevant?

Is this house because:
a) you need a place to live
b) you want the stability of having your own place so you won't need to move again
c) you want to participate in the potential appreciation of bay area housing

visualguy
Posts: 629
Joined: Thu Jan 30, 2014 1:32 am

Re: New(ish) attending physicians in the Bay Area: Housing

Post by visualguy » Tue May 15, 2018 9:06 pm

somekevinguy wrote:
Tue May 15, 2018 7:19 pm
Our salaries are nowhere near that. We are definitely not complaining- just looking for insight into how others have handled the situation. I realize our great circumstances make it easy to be like “quit your complaining” but honestly that probably applies to anyone posting on this forum just to different degrees. I can qualify each post with “I recognize how fortunate we are” but really, just looking for advice from similarly minded folks.
You're looking for some special insight that doesn't exist - there's no magic solution. People in your situation buy the house they need, and, yes, it's probably somewhere in the $2.5M to $3M range these days, and then move on with their lives. A home in a good part of the Bay Area is a wonderful asset to have - you aren't throwing your money away. No need to worry about it so much - it's likely to appreciate at least as much as your other investments if not more.

ofckrupke
Posts: 484
Joined: Mon Jan 10, 2011 2:26 pm

Re: New(ish) attending physicians in the Bay Area: Housing

Post by ofckrupke » Tue May 15, 2018 9:26 pm

random_walker_77 wrote:
Tue May 15, 2018 8:47 pm
Also, what the the tax implications on the 0% loan? Is that considered taxable income, taxed at your ~50% federal+state?
IRC section 217 titled "Moving Expenses" is suspended until TCJA sunsets in 2025.
But the sections of the code that establish criteria for "employee-relocation loans" and their recipients, and exempt from imputed income tax liability any shortfall of charged interest relative to the pertinent AFR(s) for an employee-relocation loan, are not in section 217, and are still in effect under the TCJA regime. So if the criteria are met, and the employer certifies that a loan is an employee-relocation loan, then there is no imputed income or associated tax liability.
Since the OP and spouse moved from out of state for their jobs and haven't bought locally since moving (yada), they're going to qualify.

somekevinguy
Posts: 98
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Re: New(ish) attending physicians in the Bay Area: Housing

Post by somekevinguy » Wed May 16, 2018 12:07 am

random_walker_77 wrote:
Tue May 15, 2018 8:47 pm
somekevinguy wrote:
Sun May 13, 2018 10:58 pm

Yes. The home we rent (which is quite nice) has a price/annual rent ratio of over 38 (being conservative)- more realistically about 45. That is the benefit of these home owners who literally pay property taxes of only a few thousand dollars a year due to prop 13 whereas if I were to buy the same home, the property taxes would jump by about 25K. There definitely is a premium on owning but with our plans to stay 20+ years and with the housing supplement from both of our employers factored in, the math becomes a little bit less clear. I highly doubt any home will fail to keep up with inflation and with interest free loans and straight salary supplement, if it is within budget and still allows us to save for retirement/other goals, can't help but thinking it still may be worth it.
I guess it depends -- just how much of a salary supplement is this? The interest-free loan is valuable. If you value the cost of funds at 4%, then that's about 18K/yr.

There is the golden handcuffs aspect. And if you're never moving, and never changing jobs, that's maybe less relevant. What if you have to leave the job for unexpected reasons (i.e. medical disability, or turmoil at the hospital, for example?)? Do you have to pay it off as a balloon payment? Since it's tied to your employer, you can't really think of it as a non-recourse loan, can you? But if you had to separate from your employer, what happens if you walk away from the loan?

Also, what the the tax implications on the 0% loan? Is that considered taxable income, taxed at your ~50% federal+state?

How much would it bother you if the market dipped a lot and you find yourself deeply under-water, on paper? Would you have buyer's remorse, or would it be irrelevant since you're in your house and not planning to leave so the price on paper is irrelevant?

Is this house because:
a) you need a place to live
b) you want the stability of having your own place so you won't need to move again
c) you want to participate in the potential appreciation of bay area housing
Salary supplement worth 150K total over 9 years pretax. Would not be worried if the market dipped and we were under water on paper. As long as we could make payments and liked living there, it would be fine. Not looking at it as an investment and not planning to leave so paper price irrelevant.

a and b (b due to young kids and not wanting to move them from school to school). c is nice to have but as stated above, not a necessity.

somekevinguy
Posts: 98
Joined: Mon Jan 16, 2017 9:23 pm

Re: New(ish) attending physicians in the Bay Area: Housing

Post by somekevinguy » Wed May 16, 2018 12:13 am

visualguy wrote:
Tue May 15, 2018 9:06 pm
somekevinguy wrote:
Tue May 15, 2018 7:19 pm
Our salaries are nowhere near that. We are definitely not complaining- just looking for insight into how others have handled the situation. I realize our great circumstances make it easy to be like “quit your complaining” but honestly that probably applies to anyone posting on this forum just to different degrees. I can qualify each post with “I recognize how fortunate we are” but really, just looking for advice from similarly minded folks.
You're looking for some special insight that doesn't exist - there's no magic solution. People in your situation buy the house they need, and, yes, it's probably somewhere in the $2.5M to $3M range these days, and then move on with their lives. A home in a good part of the Bay Area is a wonderful asset to have - you aren't throwing your money away. No need to worry about it so much - it's likely to appreciate at least as much as your other investments if not more.
No magic solution desired. Just thoughts from people in similar situations about roughly how much they overextended. For example, there are KlangFools rules which would be nearly impossible to use in the Bay Area. If others without significant RSU's but decent steady income who also adhere to BH philosophy tell me that yes, they stretched to x% of their net monthly pay going to PITI and that it has worked out (or not worked well), that is meaningful to me. My day job involves some pretty critical emergent decisions and I am by nature, not a worrier. This post and request for insight/information is simply a small part of feeling like I'm doing due diligence before putting 3x my net worth into a single illiquid asset.

barelybarefoot
Posts: 41
Joined: Mon Oct 21, 2013 7:15 pm

Re: New(ish) attending physicians in the Bay Area: Housing

Post by barelybarefoot » Wed May 16, 2018 3:45 am

You are looking for strategies/advice from folks in your similar situation. I recommend you post on WCI forum. Sounds like you want direct advice, maybe actual numbers and how things worked out and some of us not comfortable posting on BH about our $500k/yr salary and 10k/mo housing costs on a lowly 2 physician income. My advice, suck it up. If it’s long term and you already know that because you’ve been in your current jobs for a few years and there are no new changes (as far as you can predict) in the near future then run numbers and buy what’s reasonable on a monthly budget. Be sure to include all housing costs in these estimates, ALL insurance costs (life, disability, umbrella etc), estimated childcare costs and go from there. You’re focused just on housing, not sure how many kids you have but our childcare costs for many years were more than most non-Bay Area folk’s mortgages. Dual income means substantial childcare costs - be sure to budget it in. And as some earlier chimed in, just becaus you drive and old car etc, life style creep is very real and lots of friends we know who bought hosing for the ‘great public schools’ still ended up sending kids to private schools.

For what it’s worth, we were in similar situation 8 years. Bought starter ‘lowly condo’ in SF and so glad we did because you never know with ‘dream’ jobs (we moved later, sold and bought another home in the Bay Area). You’re still MDs after all and there is high burnout rate amongst us. Someone may want to cut down on hours, reduce workload etc. The dream job is still a physician job which, whether in academics or private practice, will still have their challenges. You can afford the mortgage on 1.5-2.5 M house, but once you buy, stop reading blogs about super early FI and ‘I paid off my mortage’and be okay with that despite your salary being higher than these folks. Even if you got a smaller or older home now and wanted to sell/rent it out in 5 or so years, per your report you are great savers so may not need/should not need that 0% interest only loan later.

You’ve made lots of arguments against renting. You don’t have any intention of leaving the Bay Area. You stressed many times you intend to stay longterm. I think you’re ready to buy but look closely at how much house to buy. If you buy 1.7 M house, then PITI on 1.2M mortgage is -10k/mo. Of 500k salary, That’s $120k/yr of $300k take home (welcome to Ca taxes). Add on 2k/mo for childcare per kid, insurance, food, some well deserved vacations etc etc. Buyer beware! But all jest aside, we sleep fine with our huge mortgage once we stopped thinking of it as an ‘investment.’

mac808
Posts: 468
Joined: Mon Sep 19, 2011 8:45 pm

Re: New(ish) attending physicians in the Bay Area: Housing

Post by mac808 » Wed May 16, 2018 9:54 am

barelybarefoot wrote:
Wed May 16, 2018 3:45 am
You can afford the mortgage on 1.5-2.5 M house, but once you buy, stop reading blogs about super early FI and ‘I paid off my mortage’and be okay with that despite your salary being higher than these folks.
This jumped out at me as especially good advice. Part of the mental struggle here might be reconciling the messages around early finance independence and retirement with the reality of a large mortgage in HCOL area. Even if one has no particular desire to retire early, the messaging on these forums can be a powerful subconscious influence.

A-Commoner
Posts: 153
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Re: New(ish) attending physicians in the Bay Area: Housing

Post by A-Commoner » Wed May 16, 2018 11:36 am

Another angle to consider is the possibility of financing your lifestyle on one income rather than 2. Can you still afford this house if only one of you worked? While physicians have stable jobs, losing the ability to work because you have been disciplined by the medical board and stripped of your license is actually not uncommon. I know a few physicians who have had that misfortune. The thing about a doctor’s license is that it is the Achilles heel of your wealth-generating ability. Once you lose that license, you are screwed. It is a “rate-limiting step”, in chemistry-speak. You can’t practice in that state and maybe anywhere in the US (due to reciprocal reporting rules among licensing agencies).

EnjoyIt
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Joined: Sun Dec 29, 2013 8:06 pm

Re: New(ish) attending physicians in the Bay Area: Housing

Post by EnjoyIt » Thu May 17, 2018 5:41 pm

visualguy wrote:
Mon May 14, 2018 5:29 pm
Not sure what "bubble" people are talking about. High house prices don't signify a bubble. There's a chronic supply/demand problem in the area, not a bubble.

The typical approach in the Bay Area for people in stable high-paying jobs is to stretch to buy a place where they would be ok in the long run. Climbing the equity ladder isn't a good strategy in the Bay Area. In other words, you don't want to buy something insufficient with the expectation of upgrading in the future. It just becomes harder and more expensive - prices keep going up, the property taxes will be higher, etc. You get trapped. Instead, stretch to buy what you need, and stay there.
This sounds like buying yourself a prison that keeps you working full time/overtime for many years to come. I would hate to live that kind of life just for a house.

visualguy
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Re: New(ish) attending physicians in the Bay Area: Housing

Post by visualguy » Thu May 17, 2018 7:45 pm

EnjoyIt wrote:
Thu May 17, 2018 5:41 pm
This sounds like buying yourself a prison that keeps you working full time/overtime for many years to come. I would hate to live that kind of life just for a house.
It's a strong motivator to achieve something exceptional. It's hard to be strongly driven to do new things when life is too easy. Regardless, it's possible to sell the house in the future for a lot of money, move to a less demanding location, and get out of the rat race. Some do that, although most don't.

viz
Posts: 46
Joined: Fri May 04, 2018 11:22 pm

Re: New(ish) attending physicians in the Bay Area: Housing

Post by viz » Thu May 17, 2018 8:08 pm

mervinj7 wrote:
Tue May 15, 2018 6:22 pm
somekevinguy wrote:
Tue May 15, 2018 6:13 pm
Carefreeap wrote:
Tue May 15, 2018 6:03 pm
So to clarify, you would owe no payments until year 10 for the 175k loan and no payments for 30 years for the $450k loan?
Correct
:greedy :sharebeer :sharebeer :greedy
Mostly true! You will pay taxes on the prevailing interest rate. Assume that you take 100k loan and prevailing rate is 2%, 2k will be added to your W-2. How do we know, we have a similar loan (it is forgiven after n years) and we are paying taxes on the interest. No free lunches :(

ofckrupke
Posts: 484
Joined: Mon Jan 10, 2011 2:26 pm

Re: New(ish) attending physicians in the Bay Area: Housing

Post by ofckrupke » Thu May 17, 2018 8:24 pm

viz wrote:
Thu May 17, 2018 8:08 pm
mervinj7 wrote:
Tue May 15, 2018 6:22 pm
somekevinguy wrote:
Tue May 15, 2018 6:13 pm
Carefreeap wrote:
Tue May 15, 2018 6:03 pm
So to clarify, you would owe no payments until year 10 for the 175k loan and no payments for 30 years for the $450k loan?
Correct
:greedy :sharebeer :sharebeer :greedy
Mostly true! You will pay taxes on the prevailing interest rate. Assume that you take 100k loan and prevailing rate is 2%, 2k will be added to your W-2. How do we know, we have a similar loan (it is forgiven after n years) and we are paying taxes on the interest. No free lunches :(
This was covered upthread.
Obviously your employer does not consider yours to be an employee-relocation loan under 26 CFR 1.7852-5T, paragraphs (b)(6) and (c)(1)(i).

viz
Posts: 46
Joined: Fri May 04, 2018 11:22 pm

Re: New(ish) attending physicians in the Bay Area: Housing

Post by viz » Fri May 18, 2018 2:39 am

ofckrupke wrote:
Thu May 17, 2018 8:24 pm
viz wrote:
Thu May 17, 2018 8:08 pm
mervinj7 wrote:
Tue May 15, 2018 6:22 pm
somekevinguy wrote:
Tue May 15, 2018 6:13 pm
Carefreeap wrote:
Tue May 15, 2018 6:03 pm
So to clarify, you would owe no payments until year 10 for the 175k loan and no payments for 30 years for the $450k loan?
Correct
:greedy :sharebeer :sharebeer :greedy
Mostly true! You will pay taxes on the prevailing interest rate. Assume that you take 100k loan and prevailing rate is 2%, 2k will be added to your W-2. How do we know, we have a similar loan (it is forgiven after n years) and we are paying taxes on the interest. No free lunches :(
This was covered upthread.
Obviously your employer does not consider yours to be an employee-relocation loan under 26 CFR 1.7852-5T, paragraphs (b)(6) and (c)(1)(i).
:oops:

Afty
Posts: 744
Joined: Sun Sep 07, 2014 5:31 pm

Re: New(ish) attending physicians in the Bay Area: Housing

Post by Afty » Fri May 18, 2018 11:04 am

viz wrote:
Thu May 17, 2018 8:08 pm
mervinj7 wrote:
Tue May 15, 2018 6:22 pm
somekevinguy wrote:
Tue May 15, 2018 6:13 pm
Carefreeap wrote:
Tue May 15, 2018 6:03 pm
So to clarify, you would owe no payments until year 10 for the 175k loan and no payments for 30 years for the $450k loan?
Correct
:greedy :sharebeer :sharebeer :greedy
Mostly true! You will pay taxes on the prevailing interest rate. Assume that you take 100k loan and prevailing rate is 2%, 2k will be added to your W-2. How do we know, we have a similar loan (it is forgiven after n years) and we are paying taxes on the interest. No free lunches :(
Yup, same here. AIUI, this "income" is deductible as mortgage interest. So if you are already itemizing, maybe it is free after all?

mervinj7
Posts: 452
Joined: Thu Mar 27, 2014 3:10 pm

Re: New(ish) attending physicians in the Bay Area: Housing

Post by mervinj7 » Fri May 18, 2018 12:34 pm

Now, that I have a better understanding of your commuting needs and your unique loan situation, here's a worked out example of a "modest" house purchase in Campbell with a 10 rated elementary school.

https://www.redfin.com/CA/Campbell/4764 ... me/1326696
4 Beds, 2 Baths, 1825 sq ft, 6171 sq ft lot

Listed Price: $1,449,000
Selling Price: $1,600,000

Annual Property Tax @ 1.26% --> $20,160
Downpayment: $500K
0% Loan for 30 Years: $450K
0% Loan for 10 Years: $175K
Mortgage Principal -->$475K

Mortgage Payment @4.5% APR-- > $2407/month
PITI: $4337/month

Note, you will still need to pay off the $175K loan in 10 years. At your current savings rate, I'm not too worried about that.

austinpilot
Posts: 2
Joined: Sun May 01, 2016 11:15 am

Re: New(ish) attending physicians in the Bay Area: Housing

Post by austinpilot » Sat May 19, 2018 4:24 pm

Afty wrote:
Fri May 18, 2018 11:04 am
viz wrote:
Thu May 17, 2018 8:08 pm
Mostly true! You will pay taxes on the prevailing interest rate. Assume that you take 100k loan and prevailing rate is 2%, 2k will be added to your W-2. How do we know, we have a similar loan (it is forgiven after n years) and we are paying taxes on the interest. No free lunches :(
Yup, same here. AIUI, this "income" is deductible as mortgage interest. So if you are already itemizing, maybe it is free after all?
This caught my eye. I am in a very similar situation - forgivable loan from my employer for a house purchase, interest charged at AFR and forgiven every year, but interest amount added as "other taxable income" to my W-2 - and I have never heard that I can deduct this "income" as mortgage interest. Certainly my employer did not issue a form 1098 for this.

Is there any IRS literature or any other source that confirms that forgiven interest on an employer loan can be deducted as mortgage interest? This seems strange because the loan is not actually backed by the house, technically it's just a personal loan, I think, but I'd love it if it were indeed deductible!

Afty
Posts: 744
Joined: Sun Sep 07, 2014 5:31 pm

Re: New(ish) attending physicians in the Bay Area: Housing

Post by Afty » Sat May 19, 2018 5:05 pm

austinpilot wrote:
Sat May 19, 2018 4:24 pm
Afty wrote:
Fri May 18, 2018 11:04 am
viz wrote:
Thu May 17, 2018 8:08 pm
Mostly true! You will pay taxes on the prevailing interest rate. Assume that you take 100k loan and prevailing rate is 2%, 2k will be added to your W-2. How do we know, we have a similar loan (it is forgiven after n years) and we are paying taxes on the interest. No free lunches :(
Yup, same here. AIUI, this "income" is deductible as mortgage interest. So if you are already itemizing, maybe it is free after all?
This caught my eye. I am in a very similar situation - forgivable loan from my employer for a house purchase, interest charged at AFR and forgiven every year, but interest amount added as "other taxable income" to my W-2 - and I have never heard that I can deduct this "income" as mortgage interest. Certainly my employer did not issue a form 1098 for this.

Is there any IRS literature or any other source that confirms that forgiven interest on an employer loan can be deducted as mortgage interest? This seems strange because the loan is not actually backed by the house, technically it's just a personal loan, I think, but I'd love it if it were indeed deductible!
Here is a reference on Stanford's loan program. I’ll quote the relevant part:
CE-RIP loans can be in one of two forms, a CE-RIP Loan or a CE-RIP Employee Relocation Loan. For borrowers holding a CE-RIP loan with an interest rate of zero, the University is deemed, for income tax purposes, to have paid the borrower additional compensation which is then returned to the University as mortgage interest. For borrowers who itemize deductions, these two items may offset each other for income, but not FICA (Social Security) tax purposes. Compensation/interest will be imputed on the outstanding loan principal at the Applicable Federal Rate (which is based on U.S. Treasury Bill rates). This deemed compensation/interest will be reported as taxable income each year on Form W-2 and is subject to FICA tax withholding. The amount will also be reported to you on an IRS Form 1098 statement of mortgage interest paid by you.
https://fsh.stanford.edu/brochures/CERIP.pdf

Note that this only applies to interest that is forgiven. Any principal that is forgiven is taxed as income.

austinpilot
Posts: 2
Joined: Sun May 01, 2016 11:15 am

Re: New(ish) attending physicians in the Bay Area: Housing

Post by austinpilot » Sat May 19, 2018 5:18 pm

Afty wrote:
Sat May 19, 2018 5:05 pm
Here is a reference on Stanford's loan program. I’ll quote the relevant part:
CE-RIP loans can be in one of two forms, a CE-RIP Loan or a CE-RIP Employee Relocation Loan. For borrowers holding a CE-RIP loan with an interest rate of zero, the University is deemed, for income tax purposes, to have paid the borrower additional compensation which is then returned to the University as mortgage interest. For borrowers who itemize deductions, these two items may offset each other for income, but not FICA (Social Security) tax purposes. Compensation/interest will be imputed on the outstanding loan principal at the Applicable Federal Rate (which is based on U.S. Treasury Bill rates). This deemed compensation/interest will be reported as taxable income each year on Form W-2 and is subject to FICA tax withholding. The amount will also be reported to you on an IRS Form 1098 statement of mortgage interest paid by you.
https://fsh.stanford.edu/brochures/CERIP.pdf

Note that this only applies to interest that is forgiven. Any principal that is forgiven is taxed as income.
Ah, this is an actual interest-only mortgage. Mine is a forgivable promissory note, which explains why the interest is not deductible.

ofckrupke
Posts: 484
Joined: Mon Jan 10, 2011 2:26 pm

Re: New(ish) attending physicians in the Bay Area: Housing

Post by ofckrupke » Sat May 19, 2018 5:33 pm

austinpilot wrote:
Sat May 19, 2018 5:18 pm
Mine is a forgivable promissory note, which explains why the interest is not deductible.
Your interest paid, charged at AFR and withheld at payroll but exactly offset by the taxable fringe benefit, is not deductible because the home is not pledged as security.

The reason that nonzero interest needs to be charged, and the offsetting "forgiveness" accounted as a taxable fringe benefit in payroll lest both be imputed in the same amounts, is that it's not an employee-relocation loan (though the fact that it's not secured by the property alone disqualifies it as such). The CE-RIP employee-relocation loan in Afty's citation is an example of a mortgage loan that can have below-AFR (and in this case, zero) interest accounting in payroll yet be exempt from imputation of interest/income at the AFR.

And since your loan is not secured by the property, the lender is not required to report the received interest via form 1098.

md&pharmacist
Posts: 262
Joined: Fri Mar 23, 2018 7:05 pm

Re: New(ish) attending physicians in the Bay Area: Housing

Post by md&pharmacist » Sat May 19, 2018 10:29 pm

OP, the harsh reality of your situation:

Given a 2 physician household struggling to find 2000 sq ft of housing in the area you want, it must be an area where many VHNW ($30M+) like the upper echelon of silicon valley, superstars and athletes, fund managers, lottery winners, top-tier law firms, long established plastic and neuro-surgeons want to live as well.

Your best bet is for you and the family (including parents) to relocate. In my area, 2000 sq ft runs about $200,000. So given the same salary, you are actually essentially paid 17.5 x less ($3.5M/$200k) in lifestyle. Even worse, in my area physicians are compensated better (LCOL suburb) and there is no state income tax. The harsh reality is your location is a major detriment to your long term financial success.

A home is a financial drain, not an investment. You are going to be severely house poor.

We built a 7500 sq ft home that I paid off within 5 years. We built a 15000 sq ft office building that we hope to pay off within 5 years. I am 45 with NW approx. $10M, with millions free for market investing because I am in a LCOL area.

Living next to a Mel Gibson penthouse (not that it's your intent) is going to be very costly for you over the long term. Think this one through very hard and take the emotion out of it. At some point it's just not worth it.

4Health
Posts: 7
Joined: Tue Nov 11, 2014 7:06 am

Re: New(ish) attending physicians in the Bay Area: Housing

Post by 4Health » Sat May 19, 2018 10:43 pm

What employers aside from Stanford and Kaiser in the Bay Area are offering these types of loans for physicians? I know kaiser is the $175k, but what about the larger loans?

EnjoyIt
Posts: 1511
Joined: Sun Dec 29, 2013 8:06 pm

Re: New(ish) attending physicians in the Bay Area: Housing

Post by EnjoyIt » Tue May 22, 2018 5:37 pm

visualguy wrote:
Thu May 17, 2018 7:45 pm
EnjoyIt wrote:
Thu May 17, 2018 5:41 pm
This sounds like buying yourself a prison that keeps you working full time/overtime for many years to come. I would hate to live that kind of life just for a house.
It's a strong motivator to achieve something exceptional. It's hard to be strongly driven to do new things when life is too easy. Regardless, it's possible to sell the house in the future for a lot of money, move to a less demanding location, and get out of the rat race. Some do that, although most don't.
Great point and I can see that potentially happening.

On the other hand why should I be motivated by a massive expense. How does having an expensive house make my life better? How is working full time day in and day out just to pay down that expense make my life better and my family's life better? I see physicians with massive homes working 6 days a week just to pay their overpriced lifestyle. They say they do it for their family yet they spend almost no time with them. I see the same physicians getting divorced because they are never around.

I think being forced to work because of a mountain of debt isn't good motivation but instead a source of burnout and turmoil. I think innovation and success comes from freedom and not servitude.

visualguy
Posts: 629
Joined: Thu Jan 30, 2014 1:32 am

Re: New(ish) attending physicians in the Bay Area: Housing

Post by visualguy » Wed May 23, 2018 1:49 am

EnjoyIt wrote:
Tue May 22, 2018 5:37 pm
Great point and I can see that potentially happening.

On the other hand why should I be motivated by a massive expense. How does having an expensive house make my life better? How is working full time day in and day out just to pay down that expense make my life better and my family's life better? I see physicians with massive homes working 6 days a week just to pay their overpriced lifestyle. They say they do it for their family yet they spend almost no time with them. I see the same physicians getting divorced because they are never around.

I think being forced to work because of a mountain of debt isn't good motivation but instead a source of burnout and turmoil. I think innovation and success comes from freedom and not servitude.
The desire to escape servitude can lead to a lot of creativity and motivation. There's a tremendous amount of innovation in the Bay Area, so I think it's working!

Like all of the major economic centers in the US and around the world, the Bay Area isn't a "take it easy" place. There are plenty of other locations for that if that's what you want to do. There isn't a right or wrong here - it's a matter of personality, ambition, abilities, priorities, etc. Pick the place that fits who you are. Thankfully, there are many options out there.

EnjoyIt
Posts: 1511
Joined: Sun Dec 29, 2013 8:06 pm

Re: New(ish) attending physicians in the Bay Area: Housing

Post by EnjoyIt » Wed May 23, 2018 9:48 pm

visualguy wrote:
Wed May 23, 2018 1:49 am
EnjoyIt wrote:
Tue May 22, 2018 5:37 pm
Great point and I can see that potentially happening.

On the other hand why should I be motivated by a massive expense. How does having an expensive house make my life better? How is working full time day in and day out just to pay down that expense make my life better and my family's life better? I see physicians with massive homes working 6 days a week just to pay their overpriced lifestyle. They say they do it for their family yet they spend almost no time with them. I see the same physicians getting divorced because they are never around.

I think being forced to work because of a mountain of debt isn't good motivation but instead a source of burnout and turmoil. I think innovation and success comes from freedom and not servitude.
The desire to escape servitude can lead to a lot of creativity and motivation. There's a tremendous amount of innovation in the Bay Area, so I think it's working!

Like all of the major economic centers in the US and around the world, the Bay Area isn't a "take it easy" place. There are plenty of other locations for that if that's what you want to do. There isn't a right or wrong here - it's a matter of personality, ambition, abilities, priorities, etc. Pick the place that fits who you are. Thankfully, there are many options out there.
At least you agree it is servitude. And I 100% agree with your second paragraph. Different folks have different goals and joys from life. I will admit that mine is not to have to see patients just to make ends meet and pay down a home. I would rather see patients because I enjoy what I do.

Unless a physician is able to build a growing practice and keep growing there is a good chance that income will decrease over time for the following reasons:
1) As we get older we get slower and therefore make less per hour.
2) Decreasing reimbursement. Currently with no change reimbursement is scheduled to increase by 0.5% a year while inflation is expected at 3% Then no increase after 2019 irrespective of inflation. Unless CMS changes the rules, reimbursement is going down for many years to come.
3) Increasing regulations making us work more for the same result.

I see way too many physicians being forced into taking on extra shifts, extra call, extra patients because they need to keep paying for the lifestyle they bought. This eventually leads to increasing stress, conflict at home and burnout. It leads to mistakes and patient errors. Sometimes it even leads to divorce and suicide ... and yes, sadly I have seen this as well.

Hey, I agree if one's goals and happiness in life is to live in the Bay Area and there is nothing better worth doing and experiencing then by all means saddle up with debt and go for it. One can always sell the home and move if they change their mind paying 4-6% in commissions. Personally I would rather be financially independent in my 40s than a prisoner in my late 50s.

Pawpatrol
Posts: 19
Joined: Sun Sep 24, 2017 5:21 pm

Re: New(ish) attending physicians in the Bay Area: Housing

Post by Pawpatrol » Wed May 23, 2018 10:14 pm

[/quote]

I see way too many physicians being forced into taking on extra shifts, extra call, extra patients because they need to keep paying for the lifestyle they bought. This eventually leads to increasing stress, conflict at home and burnout. It leads to mistakes and patient errors. Sometimes it even leads to divorce and suicide ... and yes, sadly I have seen this as well.
[/quote]

This. Also, Death by suicide is 1.7x general population, over 2x for women physicians = ~400 deaths a year.

visualguy
Posts: 629
Joined: Thu Jan 30, 2014 1:32 am

Re: New(ish) attending physicians in the Bay Area: Housing

Post by visualguy » Thu May 24, 2018 12:06 am

Pawpatrol wrote:
Wed May 23, 2018 10:14 pm
This. Also, Death by suicide is 1.7x general population, over 2x for women physicians = ~400 deaths a year.
Right, but not sure it has much to do with money pressures. It is one of the most depressing professions around, unfortunately... I'm glad some people are able to do it - I wouldn't last a day. The combination of facing sick people all day, and being unable to offer so many of them much help would be devastating. Also, the fear of causing them more harm than good with medical intervention.

A twenty-minute walk observing patients in a hospital is enough to depress me for a week with thoughts about the tremendous cruelty of nature; a cruelty that most of us have to endure sooner or later.

People outside the medical profession can keep their mind on other things, but when you're in this profession you have to face it all the time. My brother-in-law is an oncologist. I don't fully understand how he copes, but it feels like he managed to build some sort of a mental shield which doesn't let his experiences at work get to him.

bo105954027
Posts: 38
Joined: Wed Mar 30, 2016 4:00 pm

Re: New(ish) attending physicians in the Bay Area: Housing

Post by bo105954027 » Thu May 24, 2018 3:35 pm

I am very curious about where those who are doing regular jobs live in Bay Area if a two tech/physician family can't afford an entry level home. Even big tech companies have a lot of administrative and supportive positions.
Time in the market beats timing the market.

visualguy
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Re: New(ish) attending physicians in the Bay Area: Housing

Post by visualguy » Thu May 24, 2018 6:38 pm

bo105954027 wrote:
Thu May 24, 2018 3:35 pm
I am very curious about where those who are doing regular jobs live in Bay Area if a two tech/physician family can't afford an entry level home. Even big tech companies have a lot of administrative and supportive positions.
Good question... I wonder about that myself. I think it's a combination of things. In housing developments, there are units which are reserved as "affordable housing", so some live there. Some commute from really far away. Some live in areas that haven't been "gentrified". Some live in shared housing with roommates. Some are married to a spouse who is making good money. Some are old-timers who bought before it got so crazy. Some have family money, etc. etc. It is definitely a huge problem in the Bay Area, though - hard to get anything done that involves labor, and labor of most kinds is very expensive.

HEDGEFUNDIE
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Re: New(ish) attending physicians in the Bay Area: Housing

Post by HEDGEFUNDIE » Thu May 24, 2018 9:43 pm

They rent. OP could rent too, 4-bedroom houses go for $5000/month in my neighborhood (San Mateo).

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Watty
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Re: New(ish) attending physicians in the Bay Area: Housing

Post by Watty » Thu May 24, 2018 9:57 pm

visualguy wrote:
Thu May 24, 2018 6:38 pm
bo105954027 wrote:
Thu May 24, 2018 3:35 pm
I am very curious about where those who are doing regular jobs live in Bay Area if a two tech/physician family can't afford an entry level home. Even big tech companies have a lot of administrative and supportive positions.
Good question... I wonder about that myself. I think it's a combination of things. In housing developments, there are units which are reserved as "affordable housing", so some live there. Some commute from really far away. Some live in areas that haven't been "gentrified". Some live in shared housing with roommates. Some are married to a spouse who is making good money. Some are old-timers who bought before it got so crazy. Some have family money, etc. etc. It is definitely a huge problem in the Bay Area, though - hard to get anything done that involves labor, and labor of most kinds is very expensive.
When people talk about the earthquake risk in the Bay Area one factor is how difficult it would be to get contractors to repair earthquake damage after a major earthquake.

Someone might rationally decide that the risk was acceptable since they could afford a $50K repair since that is small relative to the cost of a home there. The problem is that if you cannot find any contractors to do the work you could still be in a bind.

I know someone that has family where Hurricane Andrew hit and they had significant damage to their roof. They had insurance and could afford to pay for the new roof but they went for three years with blue tarps on their roof until they could get someone to fix it. The roofing companies were so busy that they would not only not answer their phones, but they also had their voicemail turned off so that you could not even leave a message.

toomuchRE
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Re: New(ish) attending physicians in the Bay Area: Housing

Post by toomuchRE » Fri May 25, 2018 10:05 am

Good question... I wonder about that myself. I think it's a combination of things. In housing developments, there are units which are reserved as "affordable housing", so some live there. Some commute from really far away. Some live in areas that haven't been "gentrified". Some live in shared housing with roommates. Some are married to a spouse who is making good money. Some are old-timers who bought before it got so crazy. Some have family money, etc. etc. It is definitely a huge problem in the Bay Area, though - hard to get anything done that involves labor, and labor of most kinds is very expensive.
[/quote]

I'm calling this the top and downhill from here fro Bay area.. Probably September.. This is exactly what happened in 2006. Same reasons given for appreciation... The Chinese buying houses... SFO and LA markets are at-least 1 year ahead of rest of US.. This is not like a third world country where the economy is getting transformed overnight. Like some cities in India and China...

Two doctors can't afford a entry level house.. US median home prices surged highest in 12 years.. Its happening again guys.. Be warned.

Carefreeap
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Re: New(ish) attending physicians in the Bay Area: Housing

Post by Carefreeap » Fri May 25, 2018 3:06 pm

toomuchRE wrote:
Fri May 25, 2018 10:05 am
Good question... I wonder about that myself. I think it's a combination of things. In housing developments, there are units which are reserved as "affordable housing", so some live there. Some commute from really far away. Some live in areas that haven't been "gentrified". Some live in shared housing with roommates. Some are married to a spouse who is making good money. Some are old-timers who bought before it got so crazy. Some have family money, etc. etc. It is definitely a huge problem in the Bay Area, though - hard to get anything done that involves labor, and labor of most kinds is very expensive.
I'm calling this the top and downhill from here fro Bay area.. Probably September.. This is exactly what happened in 2006. Same reasons given for appreciation... The Chinese buying houses... SFO and LA markets are at-least 1 year ahead of rest of US.. This is not like a third world country where the economy is getting transformed overnight. Like some cities in India and China...

Two doctors can't afford a entry level house.. US median home prices surged highest in 12 years.. Its happening again guys.. Be warned.
[/quote]

Topping out but not crashing. As has been pointed out, there's a lot of cash with these sales, not funny money borrowing like the last recession. I'm not seeing ads for 125% financing like I saw in Phoenix in 2006. 8-)

And the OP isn't talking about "entry-level" house. He's talking about a 2000 sq.ft. house in the most expensive area of Silicon Valley. Which BTW he can afford but doesn't want to pay. World of difference.

It's still very hard for the average person. It takes a family income of about $250k to buy the $1M starter house in my (formerly) blue collar neighborhood. But those numbers aren't much different than when we moved to the Bay Area in 1990 on a $50k salary and bought a $240k house. And interest rates were about 12% back then.

toomuchRE
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Re: New(ish) attending physicians in the Bay Area: Housing

Post by toomuchRE » Fri May 25, 2018 6:50 pm

Where did all the cash come from all of a sudden .. to warrant 25% hike in 1 year... Sure there are cash buyers but that is not what is driving the prices.. Its the fear and rush..

bltn
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Re: New(ish) attending physicians in the Bay Area: Housing

Post by bltn » Sat May 26, 2018 12:18 pm

Very interesting conversation.
Of primary concern is whether you can afford the house payment. From what I hear, 25-30% of take home pay should be the maximum house payment.
Second, trying to stretch to get a house you ll be happy to keep throughout your life seems to be good advice in a super inflated housing market. Trading up later will be tough.This may mean a longer commute, but that will be part of working harder at your job to afford the housing.
I think, in your position, I would buy a house much like the house referenced above with 1800 sf, 4/2, for 2 million dollars. I don t know how far out that is, but those seem to be the numbers that would work for you.
Worst case scenario, your careers change so that you decide to change cities, when your house is underwater. Seems very unlikely, but you ll just have to eat the difference.
Get the house. Keep working. Plan to retire in 30 years , at the age when most of us who like our work plan to retire.
Best.

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