Buying your first home?

Controller_7Controller_7 4,052 Posts
edited December 2010 in Strut Central
For those who have become home owners can you give me some insight on what you did to prepare? I'm just wondering if people saved like crazy, took a crazy mortgage, or maybe inherited something and made a trade.

I'm not really in a position to buy anything in California and it's overwhelming. I've got a job I love and we are in a good spot right now (renting from grandma). Wed like more space as we've got a baby and will most likely have another sooner than later. We also are thinking about schools. I'm just shook about the whole thing. A 3 bedroom in an area we like...almost non existent under 800,000. :(

And people keep getting shot in my neighborhood. In the last year a dude got shot in the face 2 blocks away to the left and then a 15 year old shot dead two blocks to the right and tonight 6 shot about a block and a half away. This is south San Francisco. The crazy thing is my street is nice and mostly older people and nice homes. A couple blocks down and I guess it's gang territory. Not where I want my family to be.

Any tips, input, advice, anything appreciated.
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  Comments


  • spelunkspelunk 3,400 Posts
    Years away from that point in my own life, but I went through this when my Dad bought a home in the East Bay two years ago. There's just no easy way around the reality that if you have kids finding a safe neighborhood with good schools in the Bay Area (or anywhere in CA for that matter) is extremely tough and expensive. I can only imagine San Francisco being exponentially tougher than the East Bay - especially considering school districts - private school is the pinnacle of cash-drain and it seems people have recognized that as home values in Berkeley/Albany just keep going through the roof. And whereas a few years ago I would have staunchly stood by the Albany/Berkeley as the place to be if you've got kids, I just don't know anymore - there's a big generational/economic shift and it pains me to say it but the Piedmontization of where I grew up is well on its way to becoming reality.

    Even foreclosures are expensive to the point where buying a fixer-upper necessitates having a LOT of cash on hand, and at a time when home equity loans are so much tougher to come by than a few years back. Foreclosures are also never a done-deal until you have the keys and the previous owner is out - it can be a great deal but also a world of hurt.

    One thing that I would highly recommend is for any house you're seriously considering making an offer on, pull all building permits that are on file with the city and reference them against what has actually been built - so much work is done without a permit and getting a permit retroactively often means bringing other things up to code that may be unforseen, as well as many headaches when it comes to appraisals, refinancing, etc. This is such a pain in the ass and the less you can deal with SF City government the better, having worked there.

    Always be wary of reasons why something has been on the market for more than a month in the Bay - turnover in the Bay is LIGHTNING quick, especially these days since so many sellers have pulled out of the market knowing they can't get the price they would have two years ago.

    Redfin.com (and the iPhone/iPad app) is a great resource for viewing MLS listings. Their email newsletter is pretty informative regarding local trends, and very honest. But looking at what properties in the Bay sold for back in 1997 is some true "why must I cry" material. People easily quadrupled their money in a matter of 10 years.

    If you want to talk to a local agent at some point I've got one that I can wholeheartedly recommend, who would really have no problem sitting down with you even if you're not considering buying for quite some time. PM for his info.

  • the_dLthe_dL 1,531 Posts
    Are you determined to stay in the area you are currently in? I know my sister and her husband were looking at SF but ended u buying in a gated community in Sacremento as the market was still a lot softer there

  • Controller_7 said:
    saved like crazy

  • i am a first time home buyer and i just bought a new house in July after living in the same condo for 12 years paying rent, i took out my work RRSP's for the down payment of about $15,000 for a $250,000 5 bedroom house, my work has a matching RRSP program that i contributed to since i started here 5 years ago, they have a program for first time home buyers, so i didnt have any type of penalties to pay or anything like that....not sure if you have anything like that, that you can take advantage of or not, the rest is in a 5 yr mortgage (after 5 yrs we will renegotiate our mortgage), but in my case its actually costing me less to own a house then it was for me to continue to rent my condo...so it was a win-win situation for me

    other then that i hope i never have to buy another house again in my life, it was the most time consuming event, headaches, lawyers, banks, lawyers, banks, home inspections, offers, counter offers, on top of that you have the wife running around looking at paint colors for a place you just looked at...lol, ugh!

    good luck!

  • JusMeJusMe 68 Posts
    dj_cityboy said:
    in my case its actually costing me less to own a house then it was for me to continue to rent my condo...so it was a win-win situation for me

    i hope i never have to buy another house again in my life,

    good luck!

    ^this^ b/w 800,000 for a for a 3 bed??? I love SF but forget that.

  • Hey T,

    If you're interested, I've got a great realtor who's also a lender. Super nice guy, and very thorough. If nothing else, he can answer all your questions (we had tons) and stay in touch until you're ready. Feel free to holleur.

  • billbradleybillbradley You want BBQ sauce? Get the fuck out of my house. 2,806 Posts
    I did an 80/20 Mortgage. Basically, I took out two loans. One for 80% of the cost house and another 20% loan for the down payment at a slightly higher interest rate and a shorter term for paying it off. If you do not put 20% of the cost of the house down you have to pay Mortgage Insurance. That money cannot be claimed at the end of the year on your taxes, so it is money down the drain. By taking out the 20% loan all mortgage interest I pay on it can be claimed at the end of year. There are a lot of sites out there explaining this better, but I thought I'd throw it out there as an option for you to consider. Although, these days it might be harder to get into 80/20 loans.

    Another good tip someone gave me was to pay down as much of my debt as possible before attempting to get a loan. Also, once you do go to a loan officer and have them pull your credit report ask for a copy of the report. Then fax that copy to several other loan officers, rather than have each loan officer pull up their own copy. Having multiple reports pulled counts against you, or so I hear. Getting a copy to fax on is easy and avoids that. Go through as many loan officers looking for the best possible interest rates. Don't count on a friend or a friend of a friend to get you the best rate. Shop around, because you are the one paying that mortgage payment each month and there might be someone else that can get you a slightly better rate.

  • JusMe said:
    800,000 for a for a 3 bed??? I love SF but forget that.

    ^^ QFE, screw that man move to canada...lol

  • CosmoCosmo 9,767 Posts
    Be prepared to stress the fuck out, but it's totally worth it.

    dj_cityboy said:
    JusMe said:
    800,000 for a for a 3 bed??? I love SF but forget that.

    ^^ QFE, screw that man move to canada...lol

    Yeah man, but you got to pay to play in some areas. Shit, I paid bout half a milli for a 2 BR in Brooklyn. Shit is real in the battlefield.

  • I just bought my first place last month -- ended up with a 2 bedroom row-house in DC. It needs work (took out an FHA rehab loan), which is slowly happening. I put about 25% down, got a very low interest rate, and think I got a great deal. Once all the work is done, I'll have about $50-$75 in equity (I think). It's in a part of town where home values should be rising pretty steadily in the next several years.

    That said, it was def the most stressful process I have been through in my 30 years. I had a great agent, but dealing with lenders, contractors, banks, getting documents, inspections, etc is very time consuming and seemingly never ending. And then suddenly you own and are 100% responsible for something that costs a whole lot of money.

    Not saying I regret it (I haven;t moved in yet, but so far I don't), but there are moments of "holy shit, what have I done..."

    At the same time, once things are good to go and I move in with my girl, it will definitely be cheaper then renting here in DC. Significantly. And, for the money, I think I got a lot of space. The cheapest one-bedroom condos in DC are going for at least 25% more than what I paid. I've got a front porch, a big backyard, no condo fee, and get to customize to some degree...

    Anyway, my advice would be to talk to an agent. A good one will be able to answer any questions you have and help you figure out what you need to do to make it happen.

  • BreezBreez 1,706 Posts
    Cosmo said:


    Yeah man, but you got to pay to play in some areas.......... Shit is real in the battlefield.

    ^^this^^

    Me & the wife got our house 10 yrs ago. It was a foreclosure. 3 BR, finished basement on 1/8 acre for $109,000. Talk about luck.... Plus, my daughter's school is about 300 yards from my front door and it's rated one of the best in our county.

    But the best advice is to just save as much as you can.

  • Congratulations first off on even considering this step, its the first move towards the real deal in the grand scheme. That and kids i suppose, so yeah.

    Anyways, shit is deep out here in the wild west, and i have been through the ringer twice, happened to learn a fair amount too - i'll pm you my phone number and am willing to talk at length in things i probably can't even cover here, so i'll just give a cliff notes version:

    0) Start saving money

    0.5) don't take any advice on real estate from anyone outside of California. Shit is different here. WAAAY diferent. I read alot of books on the market a few years ago only to find out that yes, some places in the US will allow you to get an 80,000 home. California will not, and any advice not directly related to your local will just confuse the situation.

    1) Pull your credit report. You are entitled to one free one a year that won't ding your history. do it. Know where you stand and if there are discrepancies handle that shit asap. Get rid of all extra addresses they may have listed on your credit history.

    2) Pay off any revolving debt completely (if you can't do that, sell records to do it, sell something, be ingenious) Get that shit zeroed out.

    3) Look back at your credit report, what's the most amount of money it says you ever were responsible for and handled without defaulting or debting? Look at the credit limits to amounts carried, are they good ratios? Would you lend yourself half a million based upon the information contained therein? All real questions.

    3.5) If you don't have one, find a way to get a credit card with a limit over 10K. Amex, Capital One, whatever. Get it, use it a few times, pay it off and let it marinate. You are leaving a paper trail of responsibility.

    4) Taxes. How much did you pay last year? Time to start claiming all income, Dj shit, record sales, etc. Paying taxes and leaving a paper trail of realistic income. Taxes are a small price to pay for being able to buy a home/car/etc in the US, alot of people from our generation are oblivious to this.

    5) Keep saving.

    6) after all this, you should have a realistic idea of what you can afford. plan on 20% cash down. you may not need it, but realistically, that's what you'll need. And having it will help you get a loan for the rest. Any plan to skirt that reality will probably fail. That means that anywhere in modern, urban safe Ca, you're probably going to need 100K in the bank at some point - give or take. It's a good number to shoot for.

    7) Open an ING online savings account, not because the rate is good but because once the money goes in it takes three days to pull it out, which is a good little safety net against temptation.

    8) Get the redfin app for your phone and bookmark it on your home computer, and sign up for alerts within your price range and neighborhood where you are looking. Even if you aren't sure yet, or it might be a year away (or even two) right now is the time to start becoming an expert on home prices. Why?

    9) Comps are king. Be able to spot anomalies within a local market. Is a home priced to high? Is a home priced to low? should be able to tell at first glance. The sad reality in this market is that banks are gunshy and beauty or style has no bearing on the land beneath. So in the same street, for the same sized lots and square footage, one house could be a crack house and one could be completely remodeled and you will have a hard time convincing the bank to deviate up or down from 10% on the comp. Yes 10%. that's all the wiggle they get - they don't care if it has new bathrooms or windows, etc. 10% up or down from the comps is all they'll probably let go, up or down.

    10) Ice grill. There's no room for emotion in any of this. Your life will be public for a second, as will the lives of the peoples whose homes you are looking at. Knowledge is king and real estate people, form lenders to agents love to tell you shit - but for the most part you should know everything you need to know before you even get in the game, people will sense it and they will be more honest.

    11) Pre-Approve yourself. ABSOLUTE MUST. Have that letter that says you are authorized to buy something for a certain amount.. it will a) keep you from looking and getting attached to something outside of your price range, b) give you bargaining power and leverage int eh negotiation and c) show everyone you are serious. Believe it or not, lots of people like to drive around on sat and sundays going to open houses on some voyeur tip. Letter in hand means you are as serious as the middle aged guy with a fancy car who is snooping around.

    12) If you are comfortable with all this, get a redfin agent - chances are you are going to find the homes yourself on redfin faster than a realtor can send you listings, so have a redfin agent show you homes and close and you can get a portion back of their 3% commision. That's no chump change on a 800,000$ home.

    13) Remember, you don't have to live there forever. Some homes are stepping stones to second homes. Your first home will likely not be your last. As such, make a smart investment to stop paying rent and building equity, and don't feel like the first home has to be perfect... it just has to be smart.

    14) 30 YEAR FIXED. that's it. Don't let anyone tell you otherwise or they are selling you some bullshit. These interest rates are still ridiculous and you would be a fool to do anything otherwise. If you can't qualify for a30 year fixed, it might not be time to buy a home - regroup, rethink and try it again. No ARMS, etc. That's hwo this real estate foreclosure crisis happened. 80/10/10 is a good look if you are cash strapped but otherwise seriously ready, just remember that that is more dificult to qualify for now (more than a few years ago) and that you will eb carrying a market rate HELOC the second you walk through the door... so just be ready to refi shortly to a... you guessed it... 30 year fixed.

    15) Tools are cheap and knowledge is free in 2010. Be ready to fix some shit and it will be worth it tenfold.

    16) Foreclosures and short sales are not a good idea. My hairline hath receded.

    holler

  • JimBeamJimBeam Seattle. 2,012 Posts
    Controller_7 said:
    For those who have become home owners can you give me some insight on what you did to prepare? I'm just wondering if people saved like crazy, took a crazy mortgage, or maybe inherited something and made a trade.

    I'm not really in a position to buy anything in California and it's overwhelming. I've got a job I love and we are in a good spot right now (renting from grandma). Wed like more space as we've got a baby and will most likely have another sooner than later. We also are thinking about schools. I'm just shook about the whole thing. A 3 bedroom in an area we like...almost non existent under 800,000. :(

    And people keep getting shot in my neighborhood. In the last year a dude got shot in the face 2 blocks away to the left and then a 15 year old shot dead two blocks to the right and tonight 6 shot about a block and a half away. This is south San Francisco. The crazy thing is my street is nice and mostly older people and nice homes. A couple blocks down and I guess it's gang territory. Not where I want my family to be.

    Any tips, input, advice, anything appreciated.

    not to derail, but where you at currently? portrero? bernal?

  • RockadelicRockadelic Out Digging 13,993 Posts
    4YearGraduate said:


    14) 30 YEAR FIXED. that's it. Don't let anyone tell you otherwise or they are selling you some bullshit. These interest rates are still ridiculous and you would be a fool to do anything otherwise. If you can't qualify for a30 year fixed, it might not be time to buy a home - regroup, rethink and try it again. No ARMS, etc. That's hwo this real estate foreclosure crisis happened. 80/10/10 is a good look if you are cash strapped but otherwise seriously ready, just remember that that is more dificult to qualify for now (more than a few years ago) and that you will eb carrying a market rate HELOC the second you walk through the door... so just be ready to refi shortly to a... you guessed it... 30 year fixed.


    This

  • El PrezEl Prez NE Ohio 1,141 Posts
    Rockadelic said:
    4YearGraduate said:


    14) 30 YEAR FIXED. that's it. Don't let anyone tell you otherwise or they are selling you some bullshit. These interest rates are still ridiculous and you would be a fool to do anything otherwise. If you can't qualify for a30 year fixed, it might not be time to buy a home - regroup, rethink and try it again. No ARMS, etc. That's hwo this real estate foreclosure crisis happened. 80/10/10 is a good look if you are cash strapped but otherwise seriously ready, just remember that that is more dificult to qualify for now (more than a few years ago) and that you will eb carrying a market rate HELOC the second you walk through the door... so just be ready to refi shortly to a... you guessed it... 30 year fixed.


    This

    +1

  • marumaru 1,450 Posts
    There's some good advice in this thread.

    My wife and I are actually in a similar situation as yours Controller. No kids yet, but living in SF and looking to buy a house in the near future, hopefully next year. We're from Albany/Berkeley and are pretty stubbornly set on either of those two locations even though people we talk to are trying to get us to branch out to other places like El Cerrito, Moraga, Oakland, etc.

    It is quite depressing how expensive things are in the Bay Area, and after a certain point you just have to tell yourself you're basically paying for living in the Bay Area. Our price range is around 500-600k, which will basically buy you a 2 bedroom/1 bathroom spot, 3 bedroom if you're really lucky. You tell this to people from other parts of the country and they just give you incredulous stares.

    I've been looking on Redfin periodically just to see what's out there. They also show records of past sales, and like Spelunk said it's on some true "why must I cry shit" as everywhere has at least doubled in the past 10 years. If you want to cry some more, just look at housing in other cities like Portland and see what 500k can buy you.

    Anyways, no real advice to give you, just sayin we're in the same boat. We've already talked to our realtor and lender and are planning to submit our paperwork for a loan early next year. If you have any questions feel free to PM.

    Good luck.

  • NateBizzoNateBizzo 2,328 Posts
    I live in Berkeley and put in about 6 offer's on before one was accepted over the course of a year. If you're looking for Berkeley/Albany there are some deals around, just have to be determined and on it.

    It is true that 3bdr for 800K is the standard, but we got our spot (2bdrm) for much much less and then remodeled it into a 3bdrm for much less than buying a 3bdrm would have cost. Need to look at it from every angle. ThesOne speaks the truth above.


    I want somebody I know to buy this house down the street from me. Insane privacy on a big lot with lots of potential.
    http://www.grubbco.idxre.com/idx/detail.cfm?cid=42&bid=2&pid=40484611

  • Surveyance is a wise idea. I'm not sure if its any different in the states or whether a realtor takes care of this.

    Property Surveyors offer impartial, specialist advice on a variety of property related issues and the services which they provide are diverse.

    They work in all fields of property and building consultancy. At the most basic level, their duties include valuing property and looking for structural defects in buildings. They also provide expert consultancy advice in property, construction and related environmental issues.

    They basically help you to get up to speed on any issues there might be with a house you're considering buying, so you dont buy a place and then find out it has dry rot, or is built on a flood plane.

  • "13) Remember, you don't have to live there forever. Some homes are stepping stones to second homes. Your first home will likely not be your last. As such, make a smart investment to stop paying rent and building equity, and don't feel like the first home has to be perfect... it just has to be smart."

    ^^This


    Don't think of it as a home, think of it as an investment with a horizon of your choosing.

    Here in Sydney we have the highest median house prices in the world, but we also have a severe housing shortage due to a rapidly growing population. Which means super high rental return. If you want to build a property portfolio, aim for areas which will continue to demand high rental returns and will grow in value into the future. Sounds obvious but understanding what drives growth in your city is key and don't buy where rent doesn???t rise commensurably. Buy small with a plan to pay down enough so you have the option to move out and install tennants which can cover the nut, use the equity to step up. If grandma is renting to you cheap, stay there and let someone else pay down your mortgage for a while maybe until you have the equity to step up.

    If you do go this route, beware of vacnacy rates above 3%.

    Map out potential property yeilds, if your not making a decent yeild in your target areas, you may be better off buying stock.

    Don't be scared to buy a shitbox to fix up, any money you sink into capitol works will treble at sale and increase equity. Be prudent, meaning no shell encrusted resin toilet seats, keep shit neutral but don't be stingy. Value add as much as you can afford meaning built-ins, internal laundry, double glazing etc. Also nothing puts people off more than shitty fittings come time to sell.

    20% down at a minimum, borrowing your deposit at a higher rate is a sucker move imo.

    Do your due diligence.

    Have a complete strategy for each property and benchmark your potential return against what you might achieve elsewhere.

    Don't fusk with trusts, funds or syndicates. Or any of those weird ass loans you have over there, anything that sounds too good to be true, be not true.

    Read up on your read ups and utilize your tax laws to the fullest, we do a lot of work to negative gear our properties regardless of income, means more pressure but comes back around at tax time.

    Don't put all your eggs in one basket, property should account for 10-20% of an investment portfolio. Sounds stupid when your just getting started but some thing to think about.

    Yall have some low ass interest rates which may mean prices may be heavily inflated in your area, check your trends. Don't buy something that is going to hit the wall when rates rise, which they will.

    All the shit Thes said is really insightful and sounds like it pertains directly to your target area. You should also at least meet with Hogginthefogg's broker, positive recommendations from people you trust in the property game are worth their weight in gold.

    Good luck, don't be scurred or stressed, buying property is a game and a fun one at that.

  • Damn 800,000K will get you a mini manison here in Georgia...

  • pimlicosquirrel said:
    Don't think of it as a home, think of it as an investment with a horizon of your choosing.

    Not to quibble, but I would caution against thinking of your home as an investment these days.

    Many real estate expert types are saying the era of home-as-investment may be over (in the U.S.) for a long time, if not for good. The thinking is that the housing market will go through a long period of readjustment after which home prices will rise at more or less the same rate as inflation, meaning that homes will essentially not rise in value.

    Obviously there will be exceptions to that locally, and the Bay Area may be one of them, but buy your house to live in foremost, and don't count on it to return a profit. Make your $$$ elsewhere.

    Lots of good advice in this thread - I went through the process five years ago and I agree with pretty much all of it.

  • BurnsBurns 2,227 Posts
    shooterali said:
    Damn 800,000K will get you a mini manison here in Georgia...

    Yeah, it will get a you a 7,000 sqft. house over looking the Ohio River here in Louisville, pretty much your choice of housing in Louisville.

    The graduate is right the market is different in California than other states, but common house science and buying isn't.

    Location, location,lo.... is the key. Close to schools and parks is so important wherever you live.

    Buy a house that was built between the 1930's to early 1950's if you can, the craftmanship and quality of lumber was ten fold compared to now. The houses are stronger, yet the windows sucked

    Things to check when walking thru a house: updated high efficiency furnace and air conditioner, new windows, blown insulation in the walls, foundation repair if any, new roof, new hot water heater, updated electrical outlets, property code violations, any energy savings updates just to name a few.

  • maru said:
    There's some good advice in this thread.



    It is quite depressing how expensive things are in the Bay Area, and after a certain point you just have to tell yourself you're basically paying for living in the Bay Area. Our price range is around 500-600k, which will basically buy you a 2 bedroom/1 bathroom spot, 3 bedroom if you're really lucky. You tell this to people from other parts of the country and they just give you incredulous stares.


    I don't know what you earn but repayments should never exceed 30% of a combined income. From what I can gather about SF, yall have a really high purchase to rent ratio which usually points to severely overvalued properties. This could be due to affluence and possibly geographical or historical planning constraints. Granted I know fuck all about your city, but from cursory checks I would probably be renting while investing in something with a higher yield potential, lest the bubble burst.

  • pimlicosquirrel said:
    I don't know what you earn but repayments should never exceed 30% of a combined income. From what I can gather about SF, yall have a really high purchase to rent ratio which usually points to severely overvalued properties. This could be due to affluence and possibly geographical or historical planning constraints. Granted I know fuck all about your city, but from cursory checks I would probably be renting while investing in something with a higher yield potential, lest the bubble burst.

    This point is more valid now than ever - do extensive research to determine if buying is indeed a better option than renting for you.

    Of course, there's the idea that you may prefer to own a house, even if it doesn't make sense money-wise.

  • Controller_7 said:
    For those who have become home owners can you give me some insight on what you did to prepare? I'm just wondering if people saved like crazy, took a crazy mortgage, or maybe inherited something and made a trade.

    I'm not really in a position to buy anything in California and it's overwhelming. I've got a job I love and we are in a good spot right now (renting from grandma). Wed like more space as we've got a baby and will most likely have another sooner than later. We also are thinking about schools. I'm just shook about the whole thing. A 3 bedroom in an area we like...almost non existent under 800,000. :(

    And people keep getting shot in my neighborhood. In the last year a dude got shot in the face 2 blocks away to the left and then a 15 year old shot dead two blocks to the right and tonight 6 shot about a block and a half away. This is south San Francisco. The crazy thing is my street is nice and mostly older people and nice homes. A couple blocks down and I guess it's gang territory. Not where I want my family to be.

    Any tips, input, advice, anything appreciated.

    hey Tommy don't forget that I am a real estate agent and am more than willing to help you out at any time...this is of course true for any other people in the Bay Area that are looking to purchase... or wanting to sell their home

  • Horseleech said:
    pimlicosquirrel said:
    Don't think of it as a home, think of it as an investment with a horizon of your choosing.

    Not to quibble, but I would caution against thinking of your home as an investment these days.

    Many real estate expert types are saying the era of home-as-investment may be over (in the U.S.) for a long time, if not for good. The thinking is that the housing market will go through a long period of readjustment after which home prices will rise at more or less the same rate as inflation, meaning that homes will essentially not rise in value.

    Obviously there will be exceptions to that locally, and the Bay Area may be one of them, but buy your house to live in foremost, and don't count on it to return a profit. Make your $$$ elsewhere.

    Lots of good advice in this thread - I went through the process five years ago and I agree with pretty much all of it.


    Yeah, look I don't know much about the US housing economy but the argument that you buy a house simply to live in, is in my opinion a poor one. For most people it is the most significant monetary investment they will make in their lifetime. If the market is as volatile as you say then I would be cautious in investing in it. Doesn't mean I wouldn't invest in it it just means I would check any baggage at the door before commencing. For me that means dispensing with the emotional attachment that comes with buying things, particularly homes. Like I say above, if you live in the Bay Area and the purchase to rent ratio is mostly fucked across the board then renting and investing elsewhere is the prudent option lest the bubble burst. The emotional cost will be much higher if your dream home's value plummets in the future. Like I said though, I don't know enough about your market, but if it isn't making me money I ain't having it. I'd rather let my money marinate elsewhere till things look up.

    Isn't the American Dream what got yall in trouble in the first place?

  • mannybolonemannybolone 15,032 Posts
    Lots of solid advice in here. I also agree with Horseleech; I think it's a risky to assume your home will earn equity given the post-crash market. Almost everyone I know who is a homeowner in California is currently upside down on their mortgage, in some cases, upwards 30-40%. HEAVY shit.

    As one friend put it, "this isn't a house, it's a coffin; I'm going to die in this house" BUT he has a really nice house in a decent neighborhood and his job is very stable so he can stay there for years and years.

    In other words, if you KNOW you want to stay in a particular area and your career lends itself to that kind of stability, then it's worth trying to buy. But you seem to be skating on the razor's edge in terms of what you can afford and how much you have saved for a downpayment and under those circumstances, I'd have to agree that renting may be a better option to accruing investment income through other means than real estate.

    This said though, in the Bay Area, esp. good-school-district areas, there's likely going to be more stability in home prices over the long term since demand will always be high (in theory).

  • mannybolonemannybolone 15,032 Posts
    maru said:
    after a certain point you just have to tell yourself you're basically paying for living in the Bay Area

    Well, yeah. I mean, that's why housing prices are high in cities like LA, SF and NY: people want to live there and are willing to pay a premium for the privilege. I think this is depressing only when you're looking at the property and not the city that goes with it.

  • spelunkspelunk 3,400 Posts
    The point re: house as an investment is even MORE crucial in a post-bubble housing market - whereas before it was assumed that CA property everywhere would at the absolute minimum maintain its value, that's no longer true. Thinking of a house as an investment does not mean expecting to cash in big later, but it does mean buying a home whose value will gradually appreciate due to all the many, many factors discussed here. This is particularly important in CA where the stakes are so high already - people who bought really, really wisely were basically unaffected by the real estate crisis, and now have enough equity in their houses to refinance at the crazy low rates that are out there. My dad closed on his house right as the market collapsed, almost the day of the peak of the overall housing market - over the past two years he's gained 50-75k in equity. Doesn't mean he's a genius, it just means he really grasped the magnitude of the decision and didn't settle for anything less than the absolute right deal, in the right zip code.

    There are other reasons why buying a home is an investment, beyond pure resale value - if you're still there when it's all paid off, it means retirement is much more feasible. You can pass the house down to your kids. You can sell and use the cash to travel around the world for a long time, take out equity to start a business, etc. Owning a home outright is pretty much the only reason so many of my friends parents (lot of librarians, teachers, underpaid professors & non-profit employees) were able to afford paying their kids college tuition these days. So hell yes it is an investment in many futures.

    Home as an investment, especially in the Bay Area, often means remodel/expansion potential - for example, Bizzo did an outstanding job spotting somewhere in Berkeley that had tons of potential, had the cash to put in, and I have no doubt that when he's finished the house will have at least doubled in value - and dude got to help design every aspect of it.

    To that end, doing an extensive remodel like that increases your home value WAY more in some areas than others - in Berkeley you may gain more equity in your house than you'd spent, but in other areas that's not the case.

    To return to San Francisco - it's why no matter how astronomical the rent is in SF, I would be so wary of buying any sort of condo/TIC or even one of the cookie cutter houses that are squeezed so tightly together - the potential to change it and truly make it yours if just so limited, as are any value-adding additions or improvements. I'd also be wary of any area where values have very rapidly spiked - IMO there should always be common sense explanations based on facts that justify why home values in a particular area are stable and increasing (schools, lot size, air quality, proximity to good & bad areas, etc.) - areas without these are pretty much slaves to the larger real estate market.

    Just my two cents. When you're putting in hundreds of thousands into something, damn straight you better look at it as an investment.

  • spelunkspelunk 3,400 Posts
    mannybolone said:
    maru said:
    after a certain point you just have to tell yourself you're basically paying for living in the Bay Area

    Well, yeah. I mean, that's why housing prices are high in cities like LA, SF and NY: people want to live there and are willing to pay a premium for the privilege. I think this is depressing only when you're looking at the property and not the city that goes with it.

    Yes, to a point, but it's just insane when you look back to the absolute height of the dot com era, during prosperous economic times, and see 3 bedroom houses in great areas were selling for well under $200,000, and fixer-uppers in West Berkeley or North Oakland for under $100,000. I'd say 90% of my friends' parents who bought back in the 90s could never afford to buy in Albany in the current market, and the demographic and occupational shift this has caused is really glaring. Same goes for SF where the mass-exodous of families has been going on for decades.
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