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Where do people get money to buy CA homes these days? Often, from mom and dad
- socalnate1 8y agoIt feels like 2007 all over again (in Cali).
- dmitrygr 8y agoSome of us skimped on $15 lattes, very fancy apartments in San Francisco, and food delivery to save the money to do it. Don't generalize. Not every home owner is a spoiled brat.
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- princeb 8y agoif only these millennials drank 150 less lattes a day they'd be able to afford a downpayment on a place of their own in three years.
- deathanatos 8y agoThe median home price in SF is $1.6M. At median SWE salary in SF, the mortgage is >70% of your take-home pay assuming an improbably large 25% downpayment ($400k). More realistic assumptions put it at ~85% of take-home. Perpetuating myths about lattes, (or avocado toast[1]) does nobody any good; they are not the reason homes are unaffordable. Homes are unaffordable due to insane zoning policy and Prop 13. [1]: https://money.cnn.com/2017/05/15/news/millennials-home-buying-avocado-toast/index.html https://money.cnn.com/2017/05/15/news/millennials-home-buyin...
- dublidu 8y agoI agree there are certainly systemic issues that inflate prices beyond the reach of most Bay Area residents. However, first time home buyers are probably buying something cheaper than median. With dual tech income and no dependents, it’s certainly still possible to buy a condo or townhouse without family money.
- dmitrygr 8y agoYou do know what median means, no? It means that 50% of homes cost less. 50% I had no trust fund or parental help and bought a house in the bay area just fine by being frugal the decade before said purchase
- crazy_monkey 8y agoFrom the socially unequal distribution of wealth... duh...
- fourmii 8y agoThis is actually the same in Australia, especially in Melbourne and Sydney where home prices have risen crazily over the past 10 or so years. We call it the bank of mum and dad: https://www.domain.com.au/money-markets/majority-of-firsthome-buyers-now-use-bank-of-mum-and-dad-20180502-h0zjun-432274/ https://www.domain.com.au/money-markets/majority-of-firsthom...
- dublidu 8y agoParents chipping in down payment is certainly more prevalent in Australia and Canada than in California.
- ironjunkie 8y agoThe terrible thing here is that owning a home is pictured as the American dream, a goal in itself. I think it should almost only be seen as an investment. Like any sizeable investment, a lot of calculation should be made to decide if it makes sense or not. (And spoiler alert, in most places in California it does not make any sense anymore) Buying a home is extremely emotional and I'm actually shocked to see how few homeowner actually even calculated the opportunity cost of buying a home vs renting and investing the downpayment. Or even calculated anything at all. Never forget there is a huge lobby of people that want you to buy a home. (agents, banks, realtor, people that already own a home, ...) I think there is that emotional bias to absolutely want to buy a home, mixed with the fact that people think they will get the same +200% returns that you see since 2012 in the bay area. (Please don't respond with the typical "Paying rent is like throwing money out of the window") As a reference, a blog post on this subject that I mostly agree with: https://medium.com/@usaar33/why-you-shouldnt-buy-a-home-in-the-bay-area-right-now-9eff37da8d6 https://medium.com/@usaar33/why-you-shouldnt-buy-a-home-in-t...
- WalterBright 8y agoPaying mortgage interest is like throwing money out of the window :-)
- ironjunkie 8y agoI wish more people understood that concept.
- sjg007 8y agoAnd paying PMI just hurts...
- madengr 8y agoHow are they getting over the $15k gift limit for federal taxation? If the dude can’t cough up $10k for a $375k house, he has no business being in that house. I wonder if these mortgages are ARMs, or > 30 years.
- kasey_junk 8y agoHeadshot
- tanderson92 8y agoThis is a commmon misconception: there is no $15k gift limit. There is a $15k annual exclusion of gifts that do not need to be reported. If you want to gift more than that, you simply file a form and the excess about the annual exclusion counts against your lifetime exclusion. The lifetime exclusion in 2017 was $5.49M (if you're married it effectively doubles). Oh and as of 2018 it is now $11.18M thanks to the tax "reform" bill.
- moonka 8y agoIn addition to this, it's per person. If you have Mom + Dad in the picture, each can gift 15K, and if it's to a couple, they can each gift 15K to each member of the couple. Thus you can pass down 60K each year without any sort of forms/taxes.
- im_cynical 8y agoI sold my house in the bay area a year and half ago. Mine was bought by a young Indian family and funded by their parents who were both fancy doctors and 1+ million in liquid assets (asset proof was provided to me by the sellers as part of their initial offer). I asked my realtor because I was very curious. Folks can also gift against a lifetime limit not just the yearly. There's just some extra forms the donor needs to file with the IRS but it is possible. The limit there is something like 5 million
- classichasclass 8y agoWhat drove me to buy was incredibly noisy new upstairs neighbours, the near bottom of the local real estate market in 2011, and the ability to scrape together a minimum down payment out of my savings. Were it not for the conjunction of those three suns, I might still be in my tiny apartment. I'm very glad I'm not.
- ironjunkie 8y agoI think you were extremely lucky to time the market correctly. It is impossible to know when it is the "Peak" or the "Bottom"
- imh 8y agoIts impossible to know bottom, but its possible to know "probably relatively low." During the big recession when work was harder to find, everyone knew prices were low and it would be a decent time to buy, it's just that fewer people could afford to, hence the low prices.
- wahern 8y agoThe Great Recession will likely be the only period in our lifetimes where anyone could reasonably time the bottom of the market. I invested as much as I could but wasn't in a position to buy real estate, though I spent many evenings 2009-2011 trawling through Trulia and Zillow lamenting the missed opportunities.
- ironjunkie 8y agoIt is way more difficult to figure it out than you think. There are plenty of "local minimums" (or false bottoms), that go a bit back up then goes down again. Same thing is happening also for local maximum. People try to time the top of the market. People thought it was in Summer 2015, and lately around January//February 2018.
- wahern 8y agoWhat you say is a truism. But the Great Recession really was an exception. Not literally--you couldn't know for sure. But being able to purchase a beautiful (round dining room!) 2-bedroom condo in a completely renovated building in Nob Hill for $300k or buy Ford stock for $0.99 were as close to "sure thing" opportunities as there ever has been or ever will be. And if they didn't pan out? You'd have worse things to worry about because it would have been Mad Max times... Some may be skeptical about my examples (especially if they weren't paying attention at the time), but I assure you they were no-brainers. The reason many people didn't get rich during the time was because most of the people who normally would have had the money and inclination to make the investments were completely illiquid. And everybody else was simply scared. The flip side of irrational exuberance is irrational fear. I didn't have enough money for the condo. But I bought 1000 shares of that Ford stock my first year of law school, and sold it at a 10x gain (!) the last year of school to pay for all my living expenses in lieu of more loans.
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- randyrand 8y agoFamilial merit is something we should embrace. Being able to pass your wealth onto your children is incredibly rewarding.