RealEstate advice for the BayArea

[MichiganMat]

Im a software engineer from MI and Ive been living in the BayArea for a few years now. I have a great job and I make OK money doing it. I knew coming here that housing costs would be high but I always assumed that I would be able to buy something *eventually*.

Well, after 4 years of saving and working, Im not even close to having a down payment, much less a house. I've been renting all this time and living with roommates to keep costs down. I've bought a few toys here and there (the Pcar, my Rover, etc) but I've always lived fairly conservatively (used cars, roommates, DIY stuff, etc)

I learned today that a coworker who has been my company a few years longer than me has just put a downpayment on his first place: A new townhouse in San Jose for $700K. Its no doubt bought with stock, but I just can't understand that kind of price for what he's getting.

Does this make any sense to anyone here? Its got me depressed enough that Im seriously considering leaving this place and working someplace else in a cheaper part of the world. Im young, only 26, and single, but having a home just seems like a natural progression to all the hard work I've done, life with roommates is losing its appeal. Is the grass infact greener on the other side of the country or is saving for the next 20 years an option I should consider?

[JavaBrewer]

Bay Area is expensive. First time homebuyers, especially those w/o trust funds, need to downscale their expectations. Start at the bottom and work your way up. Look for a wreck of a condo in a decent area and invest sweat time. That's how I did it.

[RallyJon]

Given that housing prices are almost completely dictated by location, you have to ask yourself, is living in the Bay Area a must for you? Are the only companies that offer you the career opportunities you want located there? Does the, um, attitude make you feel right at home? Is the social scene right up your alley? If you went back to MI now, would you think, "Ahh, I'm home!" or "Ugh, what an armpit, this is SO beneath me!"

But your basic assessment is correct. You're coming up to the part of your life where you should be thinking about buying a home. If you find you can't where you are now, it's probably not you that is the problem.

[motion]

26 is too young to be beating yourself up over home ownership. Don't sweat it... its cheaper and makes more financial sense to rent right now in overheated markets such as SF, LA, OC & SD. As David says, it will come to you with time.

[john70t]

When I was looking in '99, there were well over a hundred homes under $150K in the Oakland/east bay area.
A few years later a 600sq in San Bruno was offered for $400K with people lined up at the door(realtor pulled up in a SLK).
Moved back to Mi, and couldn't be more content.

Ask yourself if you want to stay in the area for 10-20 years, and will have consistent work in order to pay the mortgage (rent probably won't cover it). The traffic and wishy-washyness did it in for me.

[MichiganMat]

I just can't see a way to live here without trying to hack the system: stock/options, creative financing, tapping to my 401k, renting rooms out, marrying into money, etc. I don't come from money, I make more than my parents actuall, so most of those options are out for me. Im thinking my love affair with the Bay Area is coming to an end.

[cantdrv55]

I know you've considered these but they real options.

Get married for convenience and tha second income. Sex every night (yeah, right) is a nice fringe benefit.

Consider a duplex/triplex/fourplex and rent out the other apartments. I don't know what the rents are there but you may be able to cover most of the mortgage.

Can you borrow from friends and family for some of the downpayment?

Consider commuting too.

[turbo6bar]

You could always move to Sacramento and commute. I've been told 1 out of every 4 homes sold is via short sale or foreclosure, so there are bound to be good deals in there somewhere.

Seriously, you're at the crest of the biggest housing boom in recorded history. You are't going to make the numbers work. You could make the leap of faith or simply sit back and let prices float back to earth.

[therotman]

I'm was born and grew up in the bay area and almost everyone I know my age (29) has moved somewhere else for more affordable housing. The prices may fall a bit, but I doubt they will ever be reasonable again in the bay area.

[motion]

Originally posted by therotman
The prices may fall a bit, but I doubt they will ever be reasonable again in the bay area.

I agree, and why would they? SF is one of the most beautiful & desirable places on earth.

[ckissick]

Try

www.mlslistings.com

There are several places in the Santa Cruz Mountains for under 700K. I grew up in the SC Mountins, far from school and stores, and loved it.

Be creative. I bought my first place, a Tenancy-in-Common, (TIC)is SF with a friend when I was 30, in 1990 for 140K. Two years later, I bought him out. In '99, I sold it for 420K, bought a lot in Montara, built my house, and now it's worth way, way, more than I could ever afford. I beleive such a scenario can still be done.

Remember, if you leave the Bay Area, you will never be able to move back.

[scottmandue]

Originally posted by cantdrv55

Consider a duplex/triplex/fourplex and rent out the other apartments. I don't know what the rents are there but you may be able to cover most of the mortgage.

Works for me, I have a two houses on a lot and rent out the front house, only way I could afford a house in LA on my salary.

26 and single eh? Have you consider hanging out at high end bars and flirting up older women?

[Jim727]

I live in the North Bay. The area is expensive for a reason - it has lots to offer.

At 26 you're too old to have roommates, and the right age to be wanting a house of your own. So far it makes sense. What doesn't make sense is the pricing of homes in the area. My home has taken a 10% hit in the market - not huge considering how much speculation has been seen in lots of areas, and I doubt that we will see too much more decline here in Sonoma County, so waiting around for "affordability" could be a long wait.

The biggest hurdle to getting into a home in the area is the down-payment, that's why so many shysters are touting 110% loans and such. That said, the fastest way to scale down the down-payment is to scale down the purchase price. Established homes and new developments are really expensive ----- but:

1) Foreclosures are up. Keep an eye on those. Lots of people got in over their heads on creative financing, leased cars, credit card debt, etc. There are bargains to be had there.

2) The duplex/triplex idea is not bad as tenants will pay lots of your mortgage. However, study up on being a landlord and get good insurance. The biggest downside to living in a duplex/triplex and renting part of it is that your tenants know where you live. No small thing.

3) You're a techie. Consider a telecommute if possible. Even a couple of days a week of telecommuting can make putting some distance between yourself and the office palatable. Also, commuting requires transit - like bart - or you'll go nuts.

4) Consider building your own home. That's not as nuts as it sounds. The assessor's office in most cities has a list of available, buildable lots that you can get for a very small fee. Find a decent one (notice I didn't say Los Gatos or Belvedere) and put a small home on it. A manufactured home (no, not a trailer) from a place like www.irontownhomes.com; they can put a place together for about $125/sf instead of the $600-plus you're probably looking at.

5) If your schedule permits, consider getting a real-estate appraiser's license and doing part-time appraisals. You'll learn lots about the market and where bargains are to be had.

Once you're in you are light-years ahead. Don't give up yet.

Jim

[tc-sacto]

First off, I disagree with the idea of too old to have roomates: You do what ya gotta do to make money and buy a place.

I think you sights might be set too high. A cursury view of realtor.com shows lots of Condos for sale in Berkeley for under $400,000. (2bd/2bth). Buy something like this. (never sale any of your realestate). This would be a nice starter place for a single guy. Rent the other bedroom out. Not the most desireable thing, but hey, someone else is helping you pay for your first place. In five years take some to the equity out an move up. Rent both bedrooms out.

I did this and now have one condo, three rental homes and my current residence.

First place wasn't much to speak of, but a few home depot classes go a long way. As long as the building location is fairly good.

PS. You don't need to make six figures to make this happen.


555 PIERCE ST
ALBANY, CA 94706
MLS ID#: 40243550
$398,000
2 Bed, 2 Bath
1,040 Sq. Ft.


Estimated payment:
$2,013 Per Month

[nota]

buy a boat
good size used older sailboats are cheap on the west coast
anchor out or join a club
I lived aboard and wish I still did

[nostatic]

quit whining. I couldn't afford my first house until I was almost 40 and married with 2 incomes...

And now at 45, divorced, no way I can buy another one now. At some point though...or not. Whatever.

[Chuck Moreland]

Move back to Michigan and the houses will be cheaper, and your salary much lower.

Live below your means, pull together a downpayment, and buy a dump. Sweat equity is your friend. If you need roomates, fine. They can rent from you to help pay the mortgage. In a few years you'll have equity and can move up to something better. The key is getting started, even if very modestly.

[ed martin]

You've got a some positives working for you. You are young and gainfully employed. I've been an agent for a short time here in LA and I just sold a property to a couple whose combined income was about $130,000. They purchased thier home for $615,000 with no money down 30 year fixed rate 6.5%. Their payment works out to about $4,300 a month. They were able to pull it off because their credit was strong.

I have no idea what your income is but I get the sense that you may want to set your sights a little lower price wise. $700 is a lot. Like some of the other posts mentioned you may want to keep your eyes open for a fixer upper, maybe multiunit. Turn those room mates into tenants! That will help to offset your mortgage and build equity. If you purchase something decent you could turn that into a keeper and finance another purchase down the line with the equity. The key is having solid credit to qualify for better terms and rates and try to get as much as a down as possible. Stay away from adjustable and interest only loans. Lock in a low interest long term mortgage with your good credit. Don't forget, you have to learn to walk before you can run!