Where do normal people live on the Peninsula? (apartment, to rent)

[gotpancit]

We've been looking at houses in the bay and prices are outrageous. I mean in general things are equally prices, i.e. bread, milk, etc. Housing prices just suck! In general $700k gets you a 3bd 2bth. How does a family with income of $200k actually do it? Or do you have to hit it off with a startup to actually purchase a house? Rent is the only thing I can think of.

I really don't know the reason of this post...oh yeah, so does everyone have a money tree in their backyard or do you really have to be an exec to afford your own home?

[StandingRoomOnly]

I think people in the bay area tend to be less conservative with the amount they are willing to spend on a house based on their salary (compared to many other parts of the country). For instance, it is commonplace for someone making 150k here to purchase a 600k home...but in other parts of the country they may find this completely absurd and find that 400k is their max budget at this income.

It depends on what kind of lifestyle you want and how you hold back spending in other areas of your life...people may spend 600k on the house but not travel much or buy expensive toys or cars. And there are those who don't make enough to support the 600k house, expensive cars and toys and get themselves deep in debt buying.

So in my view, 700k house would be doable for my family on a 200k income with the lifestyle and spending habits we have.... Keep in mind we believe in a good 20%+ down payment and lots of extra savings as a buffer. May not work for another family though based on their spending habits.

[gone down south]

For us, rent on a 2BR apartment and mortgage payments on a $650K house were almost identical.
The kicker was having to come up with 20% downpayment - THAT took budgeting and saving and borrowing from family, but it wasn't completely impossible to do.

[Wintermomma]

Originally Posted by gotpancit

We've been looking at houses in the bay and prices are outrageous. I mean in general things are equally prices, i.e. bread, milk, etc. Housing prices just suck! In general $700k gets you a 3bd 2bth. How does a family with income of $200k actually do it? Or do you have to hit it off with a startup to actually purchase a house? Rent is the only thing I can think of.

I really don't know the reason of this post...oh yeah, so does everyone have a money tree in their backyard or do you really have to be an exec to afford your own home?

After about a year and a half, this is my impression. My husband has a great job with an established company, but if we ever want to buy a house I think he'll have to leave aforementioned secure job for a start up, which of course is risky. It's not the mortgage payment that will be trouble, since as you see rent is so high anyhow, it's the down payment.

[80skeys]

Originally Posted by gotpancit

We've been looking at houses in the bay and prices are outrageous. I mean in general things are equally prices, i.e. bread, milk, etc. Housing prices just suck! In general $700k gets you a 3bd 2bth. How does a family with income of $200k actually do it? Or do you have to hit it off with a startup to actually purchase a house? Rent is the only thing I can think of.

I really don't know the reason of this post...oh yeah, so does everyone have a money tree in their backyard or do you really have to be an exec to afford your own home?

Not the first time somebody has asked this.
Basically the way normal people own homes around here is as follows:

1) they inherited it from their parents
2) they are a two-engineer household ($250k income) and they work several years to save up for a downpayment, (buy the house maybe with an interest-only loan because they plan to sell it in five years)
3) a bunch of relatives pool their money together for the downpayment

The startup wealth is a rare thing. Of course it happens, but only a few people can claim to buy a house with money they made from stock options.

Unless you fall into the above categories, you have to rent.

[StandingRoomOnly]

Or happen to work for a company that will let you do an international assignment overseas (with a great expat package!) and save all your income from the U.S. for your future house down payment... That'll give you a down payment in no time at all

[spicydreamt]

There are ways to own a $700k house on a combined income of $120k to $150k. Examples... telecommuting and only having one (older) car. Cutting off TV, having company pay for internet access and cell phone. Not eating at restaurants. Enjoying quasi-free outings and events with family. Not using daycare, by working different hours than the spouse. Trading a salary cut against a higher bonus component, then earning it. Having a sideline job or business (or even just a blog) with income potential, incorporating with tax benefits. Increasing insurance deductibles. Shopping at second-hand stores in wealthier neighborhoods. Postponing various misc. expenses. Having quasi-free hobbies such as reading and hiking. Having no debt save for a mortgage. Renting out to students. Learning DIY maintenance. Etc. The greatest challenge is really the downpayment, there is no guaranteed substitute to savings that I know of.

[TheGreatCurve]

Originally Posted by gotpancit

I really don't know the reason of this post...oh yeah, so does everyone have a money tree in their backyard or do you really have to be an exec to afford your own home?

Yes. Either that or strike it rich with stock options. I really don't see any other way to afford a house around the Bay Area.

[TheGreatCurve]

Originally Posted by Wintermomma

It's not the mortgage payment that will be trouble, since as you see rent is so high anyhow, it's the down payment.

Even if you could afford to pay 100% cash for a house, the prices are still outrageous and don't make sense. Would you be willing to pay $100,000 for an old, used Chevy Vega even if you could afford it?

[TheGreatCurve]

Originally Posted by StandingRoomOnly

Or happen to work for a company that will let you do an international assignment overseas (with a great expat package!) and save all your income from the U.S. for your future house down payment... That'll give you a down payment in no time at all

It doesn't work that way. I've been on several international expat assignments and the companies will deduct a "normalized" portion of your paycheck to cover your housing expenses, i.e., they deduct what it would typically cost for housing expenses in your home country (U.S.) and then cover the the additional cost of living differential in your assignment country. There's no free lunch.