MNGirl2

I have a question for those of you who live in the San Francisco Bay Area. I am currently a Master's student in Minnesota and will be working in the east bay area this summer. I've looked online at housing prices and even inland quite a ways it's really unbelievable. My husband and I are both around 25 and are considering moving out there next spring if this internship leads to a full time offer. He could transfer with his company and given my intern salary and a slight increase in his current salary, I'd guess that we'd make a combined income of about 120k per year in California.

How far will this get us out there? Here in Minnesota we could live very well on that and we already own a house. I'm sure we'll figure a lot more out this summer, but do you think that's enough for two people starting out in life out there? I just don't understand how young people can even afford to buy a 900 square foot condo, even with some equity from a previous home.

I'd love to hear any input and thoughts from those of you who live there!

LoveItaly

Hello MNGir2, with an equity in a house you already own and a salary of about $120,000.00 you should be fine.

I would contact a Realtor and Mortgage Broker in the SF/BayArea regarding what you can afford to buy. That will give you a "for sure" idea as to what the future will bring.

J62

My 2c. Don't do it.

Yes, on that combined income with some equity from your current home you could probably qualify to buy a 900 sq ft condo, but in what location?

Is that a place you'll want to stay to raise kids (schools, neighborhood)? If you think you'll buy a starter place then move to a better location when the kids are of school age using the increased equity in the condo, guess what? The house you can't afford today will increase in price much higher ($$) than your cozy abode will. Many young families fall into this trap and the migration out of the Bay Area is as great as the migration in.

I think the Bay Area is beautiful, with an abundance of good jobs for highly skilled employees even in tough times, but the insane economics of the area drove me out of there a long time ago.

J62

That being said, it is an excellent place to start a career. Does the company your husband is going to work for have locations elsewhere to transfer to in the future? Does your career enable you to take move again in 5 yrs when you want room for a family?

For a young couple, the bay area is an exciting place to live - it's families with kids that lead the exudus.

PamSF

I'd say it all depends on what you want. If you are planning to stay at least five years, then consider buying. You will be shocked to see how little your $120K will buy in the immediate East Bay.

I live in the East Bay(Oakland) in a "destination" neighborhood. That being said, it's still Oakland where the public schools are generally a mess. A 3/2 1912 bungalow five doors up(1500 sq feet on a 3000 sq ft lot) is listed for $750K. The general consensus is it will go for more.
100 sq ft condos(generally 2/2) are going for 4-500K in the immediate area. In Berkeley, they will go for more given the proximity to the University. If you are willing to consider a 1/1 you could get in for less.

Whatever you invest in here in the East Bay will only increase in value. But is this where you want to live?

You should check things out when you are here in the summer. I recommend Gene Boomer at Prudential in Montclair for the Berkeley-Oakland area.

It's a great area, I'm glad we were able to buy when we did and if I were young I might consider elsewhere.

PamSF

whoops that should read 1000 sq ft condos.

suze

Of my friends, one couple who moved to the area and purchased a home, ended up in Walnut Creek which is a 1 hour commute to the city on a BART line.

Another girlfriend who rents ended up with something similar to her apartment in Seattle at a similar price out in Oakland.

J_Correa

My husband and I live in San Jose and we make a combined income of slightly less than your income would be. We recently bought a 1300 sq ft townhouse in a decent neighborhood. It's about 30 years old and needs some upgrading, but overall, it is in really good condition. This is our first home, so we didn't bring any equity to the deal.

billy_boy

Be prepared for the discouraging sticker shock in areas within, and some areas around, the city.

Back in the mid-to-late '90s, I accepted a job offer in the Bay Area and took a fair amount of equity on our home in the north-east. My sole income was about the same as yours, as my wife did not have the luxury of a job transfer (she did land a job near where we ended up living and her income proved to be a crucial supplement to a married couple like us). All our plans about living within the city, and in the same capacity as our previous home, quickly evaporated when my wife canvassed the area during our 3-month stay in a corporate-paid apartment.

I was used to, and hoping for, a short commute to work, but this didn't materialize as we ended up buying a home in a new development in northern Marin when the developers, get this, raffled-off the units to serious buyers. I had an-hour-and-a-quarter door-to-door- commute to my work in the city, but, at this point, this turned out to be one of the luckiest real-estate situation that happened to us as the prices have "obscenely" risen since we bought the property. I don't believe housing prices have lowered (or will ever lower) in certain areas of the Bay Area. You may just have to live quite a distance away from the city to be able to afford a home.

We are now back in NYC, I took a transfer, and happily still maintain our home in Marin.

RBCal

On a 120K yearly income you can afford a house that costs about 520K, or a $2800 per month mortgage payment.

KT

Well, the house next to my friend's house in West Berkeley (a marginal but up-and-coming area) sold for $430K last year, and prices have increased about 20% since then, so we can assume it would go for about $500K. And what was it? An ugly 1950's stucco shoebox, 2 small bedrooms, one bathroom, living room and unrenovated kitchen -- that's all. About 900 sq. ft. On a lot so small that the house is placed sideways, with the narrow end facing the street. For half a million dollars.

The housing situation here defies belief.

bobludlow

Car insurance, healthcare, and other expenses can be 10-20% higher in the Bay Area. But housing is the biggest factor. If you don't KNOW that you want to spend at least 6-10 years in the area I would recommend renting vs buying. Housing prices have been climbing through the roof for years here, but rental prices have actually fallen quite a bit since the dot-bomb. Don't believe people who tell you that bay area real estate only goes up. So if you rent, figure your $120K salaries equate to a little under $100K of spending power in Minnesota. Is the money trade-off worth the job opportunities, weather, culture, and opportunity to experience a different part of the country for a while? That's up to you.

jlm_mi

RBCal - That may be what the real estate agents and mortgage people will tell you, but I assure you that not everyone who makes 120k can afford a 520k house! My husband and I, making closer to 135k yearly, would never dream of buying a house for more than 400k, and that would seriously affect our lifestyle now and in the future. In order to be able to afford to do things in life (travel, etc.) and save significantly for the future, we really wouldn't be happy in a house more than 300k. It's all about priorities I guess, but if we had to pay $2800/month just in our mortgage payment, we'd have little money to put anywhere else.

AZWildcat

HI MNGirl,

My DH and I are in the exact situation you are describing. When we moved here, we rented for a year $2200/month for a 900sq. ft. home (needed yard for the dogs). Then we bought a house in Tracy and I did a 69-mile one-way commute for two years (yes, that's 3.5-4h in the car everyday, and alot of gas$$ at $2.65/gallon, bridge tolls)--because it was the only place we could afford to buy a house. When I called the bank to ask about a loan, they asked, "Would it be possible to get a gift from a family member to help with the downpayment?" NO-IDIOT!! That's why I'm &*$%&$*& calling the bank!!!

Anyways, two years of commuting hell paid off for us, as that house appreciated 50%, also thanks to some sweat equity, and we have moved closer. Now we are renting in the East Bay (daily commute down to 1.5h total), for $1500/month, and trying to buy a house in Oakland. We've been looking for five months, and good luck buying a fixer property without getting outbid by tons of investors and contractors...one house we bid on had 69 offers! And we're the lucky ones, since we don't have kids, so we're not even concerned about the school systems.

Now, I don't want to get you totally down about it--it is a FABULOUS and FUN area to live. Just warning you about the housing so that you don't become a bitter old 31-year old DINK (double income no kids) like I am!

billy_boy

<< On a 120K yearly income you can afford a house that costs about 520K, or a $2800 per month mortgage payment. >>

Figure that after taxes, monthly expenses, car, insurance, etc., you may have to forego one meal each day.

utahtea

To bubudlow,

Yes, the prices of houses went down ONCE in the 33 years that we have lived in the bay area. That was in the mid-1980's. If people could have stuck around another couple of years, then they would have seen the prices go back up. Right now prices are jumping on average in my neighborhood of $100,000 per year and that's been for the last 3 years!

Utahtea

crefloors

My brother and SIL live in Orinda. They bought their house oh about 25 years ago I'd say during the Carter days at 13% interest. They had a first, a second, and a third with a baloon payment. We all thought they were nuts. They paid 130,00 for the house and now in their neighborhood the houses are being bid up way above appraisal and are selling for well over 700,000. I bought my house in Novato in 1972 and paid 26,000-doesn't that make you want to cry?. Oh my don't I wish I knew then what I know now. I would have kept that house and rented it when I moved. I'd be retired and travelin'. The Bay Area is a tough deal right now and I don't really see anything much changing in the near future. I left for a lot of reasons but it's a wonderful place to live so hope you can put it together and pull it off. I know you'd love living there.

acwsf

Well, my DH and I are in our late 20s and just managed to purchase a condo in SF. We were able to pull it off because we lived at my parent's house (we are lucky in that they live in the City) for almost 2 years rent-free and saved up a lot. I grew up in the City so a lot of the people I know here are also natives. They all have bought condos only after living at home for a period of time (or their parents buy them a building - arg! - but that's another topic). I don't know how people buy in the area if they've moved here from somewhere else unless they make a ton of money or they bought 10-20 years ago. There is a reason that something like 70% of the residents of SF are renters!

If you are only going to be here a couple of years, maybe you suck it up and rent. Purchasing a place wouldn't be worth the financial strain or headache and might not be a good investment in the short-term. ALso, rents aren't as high, proportionately, to the cost of purchasing right now. I used to live in NYC so I think SF rents are pretty reasonable at this point even though they may seem high to you being from MN.

But given all the drama, this area is really amazing and a great place to live. Good Luck!

KT

Reading this thread reminds me of another thread on Fodor's in which a poster chided me that, even as a single person without family help or a high-paying job, I should be able to buy a house in the Bay Area if I only cut back on coffee at Starbucks and name-brand running shoes.

Does anybody want to calculate how many cups of coffee would be enough for that? (And I don't even drink the stuff....)

SFImporter

My advice for the Bay Area is to never rent if you can afford to buy. Renting is throwing your money away. And although buying could eat up your entire savings (allow for a cushion for emergencies) - you will gain that money back and no doubt more once you sell.

The only thing that drives prices down in the Bay Area is Earthquakes. Think of how many people left after the last big one!

When looking to buy a home here, be flexible. Some people have a hard time seeing the diamond in the rough. We bought our home for just over $400k about seven years ago - and neighborhood houses are now selling for $1.3M. Granted, we had to spend about $400k on remodeling over the years - but that still puts us ahead.

If you can afford it - make the leap. You'll only be in debt until you pay off your mortage or decide to move out of the state.