3 ms·

I don't have a backyard, and nobody I know in my area that also makes six figures+ a year has one, either. This trend has been documented [0]. Granted, my cohor

I don't have a backyard, and nobody I know in my area that also makes six figures+ a year has one, either. This trend has been documented [0]. Granted, my cohort is all earlier in our careers. But with years of saving, much of it prioritized in 401k's, IRAs, and HSAs, I don't have enough left for a down payment on a single family residence. [0]: https://www.washingtonpost.com/business/2019/02/21/are-you-city-with-growing-number-high-income-home-renters/?noredirect=on&utm_term=.52d9b83f72bb https://www.washingtonpost.com/business/2019/02/21/are-you-c...

sjg007 7y ago
I mean.. move and work from home? Or sacrifice some of the retirement savings to get a down payment? Or wait for the market to crash?
- JMTQp8lwXL 7y ago
  When the upper incomes begin to see affordability issues, you have an unhealthy market. I like life with minimal use of a car. Urban areas areas are far friendlier to a car-free lifestyle. Also, homes in the surrounding suburbs aren't that much cheaper to meaningfully change the numbers. Another 5 years of savings should do it. So, 10 years to come up with just a 20% down payment. I'd rather not compromise my future by foregoing retirement contributions.
  - nradov 7y ago
    Building real estate equity is essentially a form of retirement fund contribution.
    - sjg007 7y ago
      Yes and you can take a loan out of your 401k for a down payment. If the appreciation works in your favor, refinance and pay yourself back in a few years.
iancmceachern 7y ago
Same here, and if I were able to afford a downpayment I would live in daily fear of an earthquake because I wouldn't be able to afford Earthquake insurance, and if I did I wouldn't have the 20% deductible in the bank. I'm convinced that most non-wealthy bay area homeowners are essentially betting their financial future on there being no earthquakes here until the house is greater than 50% paid off. Tenuous is a fitting word I think.
- anonseahorse43 7y ago
  I think you're substantially correct that most people don't recognize the risk, but you've actually got the situation backwards: The last thing you want to do in CA is own your house or have a mostly paid-off mortgage. Earthquake insurance is crazy for all the reasons you mention (and more), but at the end of the day your non-recourse mortgage is your insurance: if your property is destroyed you can simply walk away. Edit: I guess I should clarify that walking away from hundreds of thousands of dollars of "home equity" should hurt almost anyone. My point is simply that this protection is built into your mortgage, and is available on dramatically better terms than actual earthquake insurance, which in CA would likely be unable to pay out in the event of "the big one" anyway.
- nradov 7y ago
  California building codes have been pretty strong for many years. Only older residences are likely to suffer catastrophic structural damage when "The Big One" hits. Earthquake insurance is a terrible deal. Instead of paying insurance premiums, put the money toward earthquake safety retrofitting and saving an emergency fund. There will probably also be some state and federal disaster zone financial assistance.
  - JMTQp8lwXL 7y ago
    Fortunately, most of the property cost when you purchase in California is for the land, not the structure that sits on it.

sjg007 7y ago

I mean.. move and work from home? Or sacrifice some of the retirement savings to get a down payment? Or wait for the market to crash?

JMTQp8lwXL 7y ago
When the upper incomes begin to see affordability issues, you have an unhealthy market. I like life with minimal use of a car. Urban areas areas are far friendlier to a car-free lifestyle. Also, homes in the surrounding suburbs aren't that much cheaper to meaningfully change the numbers. Another 5 years of savings should do it. So, 10 years to come up with just a 20% down payment. I'd rather not compromise my future by foregoing retirement contributions.
- nradov 7y ago
  Building real estate equity is essentially a form of retirement fund contribution.
  - sjg007 7y ago
    Yes and you can take a loan out of your 401k for a down payment. If the appreciation works in your favor, refinance and pay yourself back in a few years.

iancmceachern 7y ago

Same here, and if I were able to afford a downpayment I would live in daily fear of an earthquake because I wouldn't be able to afford Earthquake insurance, and if I did I wouldn't have the 20% deductible in the bank. I'm convinced that most non-wealthy bay area homeowners are essentially betting their financial future on there being no earthquakes here until the house is greater than 50% paid off. Tenuous is a fitting word I think.

anonseahorse43 7y ago
I think you're substantially correct that most people don't recognize the risk, but you've actually got the situation backwards: The last thing you want to do in CA is own your house or have a mostly paid-off mortgage. Earthquake insurance is crazy for all the reasons you mention (and more), but at the end of the day your non-recourse mortgage is your insurance: if your property is destroyed you can simply walk away. Edit: I guess I should clarify that walking away from hundreds of thousands of dollars of "home equity" should hurt almost anyone. My point is simply that this protection is built into your mortgage, and is available on dramatically better terms than actual earthquake insurance, which in CA would likely be unable to pay out in the event of "the big one" anyway.
nradov 7y ago
California building codes have been pretty strong for many years. Only older residences are likely to suffer catastrophic structural damage when "The Big One" hits. Earthquake insurance is a terrible deal. Instead of paying insurance premiums, put the money toward earthquake safety retrofitting and saving an emergency fund. There will probably also be some state and federal disaster zone financial assistance.
- JMTQp8lwXL 7y ago
  Fortunately, most of the property cost when you purchase in California is for the land, not the structure that sits on it.