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If you have a family it’s not possible. Home prices average close to $1m. You’d have to save an entire years salary PRE tax to afford the down payment. That wil

If you have a family it’s not possible. Home prices average close to $1m. You’d have to save an entire years salary PRE tax to afford the down payment. That will take years and years to save. If you’re raising a family you’ll likely need two $200k incomes to afford a house, and even then, it’ll take at least 2 years to save for the down payment. The Bay Area is for college kids and millionaires. That’s it.

toast0 7y ago
20% down is a rule of thumb, and a requirement to avoid mortgage insurance, but it is not a requirement for lending. My credit union will do loans of up to 95% loan to value for $1.5M to first time homeowners or 90% loan to value up to $1.5M if you don't meet the first time qualifications. [1] I'm sure other volume lenders in the bay area have similar lending standards and programs. [1] https://www.starone.org/first-time-home-buyer/ https://www.starone.org/first-time-home-buyer/
- ryanSrich 7y ago
  It's a financial mistake to not put 20% down. Not only are you hit with $500+/month in PMI, you have almost negative equity into the house when you buy it. Meaning if you have to sell on short notice you're either completely underwater having to pay back cap gains, or you're just breaking even. That's not an ideal situation and if you don't understand the mechanics going in, you'll find yourself in a world of hurt in an economic downturn.
  - opportune 7y ago
    If you truly don't have the money for the down payment, the math of mortgage+insurance+property taxes+pmi+deductions might still work out to be in your favor over renting
    - nostrademons 7y ago
      It's pretty unlikely in the Bay Area. There are fairly large distortions in the local market (because of Prop 13, zoning, wealth inequality, and small home supply in general) that usually make renting significantly more affordable than buying in general. See eg. this $1.9M home (estimated payment $9000/month, not including PMI) vs. this $4900/month equivalent: https://www.zillow.com/homedetails/910-San-Marcos-Cir-Mountain-View-CA-94043/19511543_zpid/ https://www.zillow.com/homedetails/910-San-Marcos-Cir-Mounta... https://sfbay.craigslist.org/search/pen/apa?min_bedrooms=3 https://sfbay.craigslist.org/search/pen/apa?min_bedrooms=3 (Also note that the $1.9M home is currently assessed at $170K, so the current owners are paying < 10% the roughly $15K/year in taxes that the buyer would be.)
      - opportune 7y ago
        Oh, for the bay area, absolutely. I will say though, might not make the most sense to pick a house in Mountain View as an example. For a couple just starting out in the South Bay that don't have two high earners and want to own a house, Fremont/Union City/Milpitas/San Jose are more realistic. Also because of prop 13, it can make sense to lose money on buying vs. renting in the short term if you anticipate staying somewhere for a long time, because of the potentially huge property tax savings. And for basically the same reason it can make sense to lock in a mortgage payment that doesn't look like a great deal on paper in the short term.
        aceon48 7y ago
        Yes but then you need to commute an hour instead of 15 mins. Meanwhile that $5k rental oftentimes is in a brand new luxury building with full amenities and is very nice, and also has the 15 min commute
      - aledalgrande 7y ago
        Wow the Bay area is crazier and crazier, 2M for that dump... yeah 4 bedroom in Mountain View, but it's a 1964 and looks like it's going to fall down at the first gust of wind. Everything inside the house is to be remade too and in 2012 the property was worth 700K. That area is literally unliveable now.
  - toast0 7y ago
    Sure, PMI costs money. If it gets you off of the housing inflation train years earlier than waiting, it might be worth it. If housing prices go down after you finance with PMI, it might not have been worthwhile, but it's hard to know what's going to happen. It's worth at least looking down the path, and considering the details of your current situation, and not just not considering purchasing at all because you only have 10%, 15%, 18%, or whatever that isn't 20%. I don't understand how you can be 'underwater' but yet have capital gains. Certainly, selling a house is expensive, and if you put down only 5%, the loan balance could be more than your net sales price.
nostrademons 7y ago
It's certainly possible. You just don't own a home, you rent. It's much like NYC in that regard - you don't own a detached home in NYC regardless of how rich you are, you rent a swanky loft or penthouse. At most you might buy a condo, but you can still find plenty of hedge fund managers or Google engineers that rent their permanent residence (and sometimes have over $1M in liquid assets). In my wife's mom's group (which had a number of dual-tech-income couples working for places like Apple, Google, Palantir, Facebook, etc.), not a single parent owned their own home. I live in a small 13-unit townhome complex, and about 8 of the units have families with young kids.
- aledalgrande 7y ago
  Very interesting how affluent people still rent. I noticed the same in LA in a high end building. What is the reason? Having more money to invest in different asset classes instead of the biggest chunk being in real estate?
  - usaar333 7y ago
    Freedom to move, don't want to deal with burdens of ownership, better ROI to rent, etc.
    - aledalgrande 7y ago
      Can you describe better ROI to rent more in detail?
      - usaar333 7y ago
        Investment opportunity cost. I've written articles about this: 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... https://medium.com/@usaar33/an-up-to-date-buy-or-rent-calculator-22d0bf9bbbb5 https://medium.com/@usaar33/an-up-to-date-buy-or-rent-calcul...
  - nostrademons 7y ago
deleted 7y ago
[deleted]
sdan 7y ago
It’s possible. Family of 5 renting (around 3k) in the bay with 100k salary is certainly possible. Lived like this for over a decade. Now moving onto college.
- ModernMech 7y ago
  I have no idea how that is possible. I made $100k in the bay area and it was just my wife and I. Here's how it worked out: $100k salary = $74k after tax, so that's about $6k per month take home. $3000 per month for rent leaves $3000 for everything else. My wife and I have $1000 per month on our student loans. So we're down to $2000 per month. Health insurance and medication was $600 a month for the two of us, down to $1400. Groceries worked out to about $600 a month as well, down to $800. We got around via muni, so that takes off $200 per month for passes, down to $600. Electricity, water, internet, and cell came to about $200 per month. That left $400 for entertainment, incidentals, and savings. And that was for 2 of us. I can't imagine 5, but kudos for doing it.
  - nostrademons 7y ago
    I think your issue is SF. In most of the Bay Area (including desirable parts of the South Bay like Mountain View & Sunnyvale) you can get 1BRs for $2000/month or 2BRs for about $2600. Less in the East Bay. My family of 3 spends about $300/month on groceries - knowing the local immigrant grocers can shave off a lot on fresh produce, our vegetable bill is usually about $13/week for about 20 lbs. of fresh vegetables. We get meats at Costco for pretty cheap. I would also highly recommend paying off the student loans before having kids. My parents borrowed close to $100K to send my sister and I to college, and 4 years after graduation it was paid off completely, after saving 80% of my income and contributing it back to them. Because of compound interest, a few extra contributions towards the principal shorten the term of the loan dramatically, because it means that the loan balance shrinks, the amount of interest owed each month shrinks, and so a greater percentage of each payment is applied to the principal, which speeds up repayment even more.
  - sdan 7y ago
    Haven't gone too much into financials (given that it was my dad who was making the salary). But I know it was right around 100k and rent is exactly 3k(live in Cupertino) a month. Not sure what other strings had to be pulled, but I'm glad I lived a decent life in SV. Kind of ridiculous part is we don't even qualify for financial aid for some colleges/application fees.

toast0 7y ago

20% down is a rule of thumb, and a requirement to avoid mortgage insurance, but it is not a requirement for lending. My credit union will do loans of up to 95% loan to value for $1.5M to first time homeowners or 90% loan to value up to $1.5M if you don't meet the first time qualifications. [1] I'm sure other volume lenders in the bay area have similar lending standards and programs. [1] https://www.starone.org/first-time-home-buyer/ https://www.starone.org/first-time-home-buyer/

ryanSrich 7y ago
It's a financial mistake to not put 20% down. Not only are you hit with $500+/month in PMI, you have almost negative equity into the house when you buy it. Meaning if you have to sell on short notice you're either completely underwater having to pay back cap gains, or you're just breaking even. That's not an ideal situation and if you don't understand the mechanics going in, you'll find yourself in a world of hurt in an economic downturn.
- opportune 7y ago
  If you truly don't have the money for the down payment, the math of mortgage+insurance+property taxes+pmi+deductions might still work out to be in your favor over renting
  - nostrademons 7y ago
    It's pretty unlikely in the Bay Area. There are fairly large distortions in the local market (because of Prop 13, zoning, wealth inequality, and small home supply in general) that usually make renting significantly more affordable than buying in general. See eg. this $1.9M home (estimated payment $9000/month, not including PMI) vs. this $4900/month equivalent: https://www.zillow.com/homedetails/910-San-Marcos-Cir-Mountain-View-CA-94043/19511543_zpid/ https://www.zillow.com/homedetails/910-San-Marcos-Cir-Mounta... https://sfbay.craigslist.org/search/pen/apa?min_bedrooms=3 https://sfbay.craigslist.org/search/pen/apa?min_bedrooms=3 (Also note that the $1.9M home is currently assessed at $170K, so the current owners are paying < 10% the roughly $15K/year in taxes that the buyer would be.)
    - opportune 7y ago
      Oh, for the bay area, absolutely. I will say though, might not make the most sense to pick a house in Mountain View as an example. For a couple just starting out in the South Bay that don't have two high earners and want to own a house, Fremont/Union City/Milpitas/San Jose are more realistic. Also because of prop 13, it can make sense to lose money on buying vs. renting in the short term if you anticipate staying somewhere for a long time, because of the potentially huge property tax savings. And for basically the same reason it can make sense to lock in a mortgage payment that doesn't look like a great deal on paper in the short term.
      - aceon48 7y ago
        Yes but then you need to commute an hour instead of 15 mins. Meanwhile that $5k rental oftentimes is in a brand new luxury building with full amenities and is very nice, and also has the 15 min commute
    - aledalgrande 7y ago
      Wow the Bay area is crazier and crazier, 2M for that dump... yeah 4 bedroom in Mountain View, but it's a 1964 and looks like it's going to fall down at the first gust of wind. Everything inside the house is to be remade too and in 2012 the property was worth 700K. That area is literally unliveable now.
- toast0 7y ago
  Sure, PMI costs money. If it gets you off of the housing inflation train years earlier than waiting, it might be worth it. If housing prices go down after you finance with PMI, it might not have been worthwhile, but it's hard to know what's going to happen. It's worth at least looking down the path, and considering the details of your current situation, and not just not considering purchasing at all because you only have 10%, 15%, 18%, or whatever that isn't 20%. I don't understand how you can be 'underwater' but yet have capital gains. Certainly, selling a house is expensive, and if you put down only 5%, the loan balance could be more than your net sales price.

nostrademons 7y ago

It's certainly possible. You just don't own a home, you rent. It's much like NYC in that regard - you don't own a detached home in NYC regardless of how rich you are, you rent a swanky loft or penthouse. At most you might buy a condo, but you can still find plenty of hedge fund managers or Google engineers that rent their permanent residence (and sometimes have over $1M in liquid assets). In my wife's mom's group (which had a number of dual-tech-income couples working for places like Apple, Google, Palantir, Facebook, etc.), not a single parent owned their own home. I live in a small 13-unit townhome complex, and about 8 of the units have families with young kids.

aledalgrande 7y ago
Very interesting how affluent people still rent. I noticed the same in LA in a high end building. What is the reason? Having more money to invest in different asset classes instead of the biggest chunk being in real estate?
- usaar333 7y ago
  Freedom to move, don't want to deal with burdens of ownership, better ROI to rent, etc.
  - aledalgrande 7y ago
    Can you describe better ROI to rent more in detail?
    - usaar333 7y ago
      Investment opportunity cost. I've written articles about this: 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... https://medium.com/@usaar33/an-up-to-date-buy-or-rent-calculator-22d0bf9bbbb5 https://medium.com/@usaar33/an-up-to-date-buy-or-rent-calcul...
- nostrademons 7y ago

deleted 7y ago

[deleted]

sdan 7y ago

It’s possible. Family of 5 renting (around 3k) in the bay with 100k salary is certainly possible. Lived like this for over a decade. Now moving onto college.

ModernMech 7y ago
I have no idea how that is possible. I made $100k in the bay area and it was just my wife and I. Here's how it worked out: $100k salary = $74k after tax, so that's about $6k per month take home. $3000 per month for rent leaves $3000 for everything else. My wife and I have $1000 per month on our student loans. So we're down to $2000 per month. Health insurance and medication was $600 a month for the two of us, down to $1400. Groceries worked out to about $600 a month as well, down to $800. We got around via muni, so that takes off $200 per month for passes, down to $600. Electricity, water, internet, and cell came to about $200 per month. That left $400 for entertainment, incidentals, and savings. And that was for 2 of us. I can't imagine 5, but kudos for doing it.
- nostrademons 7y ago
  I think your issue is SF. In most of the Bay Area (including desirable parts of the South Bay like Mountain View & Sunnyvale) you can get 1BRs for $2000/month or 2BRs for about $2600. Less in the East Bay. My family of 3 spends about $300/month on groceries - knowing the local immigrant grocers can shave off a lot on fresh produce, our vegetable bill is usually about $13/week for about 20 lbs. of fresh vegetables. We get meats at Costco for pretty cheap. I would also highly recommend paying off the student loans before having kids. My parents borrowed close to $100K to send my sister and I to college, and 4 years after graduation it was paid off completely, after saving 80% of my income and contributing it back to them. Because of compound interest, a few extra contributions towards the principal shorten the term of the loan dramatically, because it means that the loan balance shrinks, the amount of interest owed each month shrinks, and so a greater percentage of each payment is applied to the principal, which speeds up repayment even more.
- sdan 7y ago
  Haven't gone too much into financials (given that it was my dad who was making the salary). But I know it was right around 100k and rent is exactly 3k(live in Cupertino) a month. Not sure what other strings had to be pulled, but I'm glad I lived a decent life in SV. Kind of ridiculous part is we don't even qualify for financial aid for some colleges/application fees.