Bay area home, buy now or wait?

New okon
May 16 376 Comments

I’ve been house-shopping in South Bay at Zillow and see that they forecast home prices to go down until at least mid-2020.
But my guts tell me prices will only go up with a lot of companies going IPO this year.
I have $540k in savings and looking to do down payment of $500k on a $900k 2bd, and rent out one bedroom.
TC is $215k and base is $160k.
Should I buy now, or keep renting till next year and see what happens next?

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TOP 376 Comments
  • Google hioki
    1. How the hell you have that much savings with your tc?
    2. Why not just a 1bdrm?
    3. Do what you want. Renting will almost always be the better option in the Bay area unless your considering the very long term
    May 16 38
    • Drift UOSN85
      In his situation he gets the utility of living in a property he owns and his only risk downside from a cash flow perspective is monthly expenses (mortgage, insurance, and HOA if condo plus/minus rental income). If you do the math, he might have zero risk / net profit. He also gets mortgage interest deduction, various tax write off potential, etc. Additionally, Prop 13 ensures he gets greater spread of his tax rate vs. market which increases his rental margins.

      Renting only gives him liquidity that he needs to find a risk adjusted instrument that beats the rental + asset appreciation and has more tax exposure. Hint, people with real estate can avoid capital gains because you generally never sell; just take a loan on the equity if you need capital. In my case, I needed almost 7 figures to pay my AMT due to exercise, so had no choice.
      May 20
    • Amazon hbfhyt
      If you get more than what interest you pay for mortgage, the leverage will work in your favor. Just make sure down payment to loan ratio is big enough
      May 20
    • Salesforce iLXU08
      Before 2008 crash, a house in San Jose was sold for 1.1M. In 2011, it’s zestimate was 900k. In 2014 it was sold for 1.2M. It’s zestimate is 1.8M right now. If location is good, i.e. good school district, close to transits, highways, then bay area land will ride the crash out gracefully. On the other hand, I know union city houses remained underwater for a long time. But even they have recovered now. Rent will go up but your can fix your living cost now with low interest available. Don’t be the one who pays rent, be the one who receives it.
      May 20
    • Salesforce pmyz88
      Past performance is no indicator of future performance.
      Cost of living has gone crazy high and prop 13 and regulations have created a vastly inflated market.
      As a result companies are moving out as they can no longer hire locally and more people are leaving SV than coming in as they realize that game is rigged for new comers.
      Also buying at current valuation means paying insane property taxes and high mortgage with little deductions.
      This might tip balance and start a downward spiral.
      Investing now could prove very risky.
      Will be interesting to follow for sure.
      May 20
    • Netflix / Eng contentenn
      Agree about past performance. Giving it’s a dark blue state I’d also predict it gets worse in the short term (5y) before it starts getting better(20y).
      So not buying thank you, do not gamble with regressive left politicians.
      May 21
    • Twitch / Biz Dev OWL#1Deal
      Wait so... Buy in deep south states? Like Alabama?
      May 21
    • Microsoft mistermiss
      I own three homes and have a high net worth as a result. The question should be list your net worth and you homeownership status. NW: $2M Age:38
      May 21
    • Cruise Automation LidarDoome
      What we are talking about is not if you are in the positive with your houses but if you could have done better using an alternative investment. Every fucking body is in positive given the economy of the last 8 years .

      Does any of you know the concept of opportunity cost ??? The whole point here is that by buying a house you lost vs the opportunity cost of investing in stocks
      May 21
    • Drift UOSN85
      NW: $10m+, conservatively, and money in two private funds (Artemis and Crescat). Per above post, RISK ADJUSTED, ETF Fantasy Land did not outperform Bay Area SFH real estate.
      May 21
    • Microsoft mistermiss
      It just depends on whether the person is actually investing it. I wonder where OPs 500k is actually sitting right now
      May 21
  • Intel rewt
    Seriously.. how the hell did you make 540k in savings...
    May 16 17
    • Square SQ1999
      I’m surprised people are surprised given that they didn’t even mention the number of years they’ve been working.
      May 19
    • Cruise Automation slwpquxle
      The same way everyone else does. Parents.

      People assume young because the question is inexperienced. I don’t think (hope) a 60 year old would be asking this question.
      May 19
    • New / Eng obfta
      Seriously? $200,000/yr, roughly 120 after taxes. Live within your means and rent brings that to 100. The rest of your expenses are negligible compared to that, but let's be VERY generous and say another 25k. That's 7 years to over 500k
      May 19
    • Facebook ycA5v81
      Damn that’s some shitty salary progression over 7 years
      May 19
    • Square SQ1999
      Not really
      May 19
    • Uber f7d83fju
      @obfta has the math right. I’ve avg under 200k (not an engineer) for 15 yrs and have saved $1m. Including profit on buying and selling a condo in SF. Even paid for my MBA in savings. Lived and worked in SF and NYC (Manhattan)
      May 19
    • Apple / Eng Applez
      Living within my means with a wife and child. Wife stays at home. Started with 30k in savings. 4 years at Apple ... 450k savings.
      May 19
    • New / Eng JexD77
      @Applez, do you mind to give more details?
      May 20
    • Apple fadedead
      Well, if you make over 350TC, it is not that hard to save 100k a year. That means, 420k in 4 years is possible for most people.
      May 21
    • New / Eng JexD77
      I see thanks, where you save?
      May 21
  • Nvidia figifaf
    If anyone knew they’d be making millions in housing futures instead of posting it here
    May 16 0
  • Google FetaCheese
    With the TCs on here, it’s insane that people are acting like they don’t have $500k in savings. What do you all do with your money? I save $100k/year and live well.
    May 19 8
    • Facebook / Eng nxujee
      Not everyone works at G/F or comparable
      May 19
    • Google FetaCheese
      Many people above who are shocked in fact do or did.
      May 19
    • eBay kdooeldd
      I wonder the same. I own two properties in the bay area, have $500k in the bank + have maxed out retirement accounts. My TC is around $300k I think? I never worked at any FANG either. What are y'all blowing your money on?
      May 19
    • VMware / Product brewston
      Yoe good sir? ^
      May 19
    • eBay kdooeldd
      18
      May 19
    • eBay eyxitsjtj
      When I started in Bay Area in 2013 non-tech role, I was making $85K base (25k savings from previous 4 years of 2 jobs - 53k and 67K no bonus no rsus, just base). Fast forward today, networth $950+ assisted by job hopping, RSUs tripling in value, and some profitable real estate deals. Never worked at Fang. Yoe 10. Current household income about $250k.

      Its just appalling to see people with $500k tc complaining that they barely go by. But I also learnt about human behavior where people with sudden wealth develop upscale lifestyles right from the beginning and when they (or one spouse) lose a job they aren’t able to cope with downgrading their life and end up losing everything. Same is with a large number of lottery winners, nfl and nba players. People who have budgeted from the beginning with hourly or low salary have turned out to be better at managing money long-term.
      May 19
    • Ooyala / Other jgy65d
      Hah such BS from @ebay .. ya you bought you two properties for pennies on the dollar if ur here 18 years... First comer advantage... what else are you gonna tell us.. probably have no kids or wife and work 12h a day ... Fantastic SV life
      May 19
    • Aon Hewitt sfstreets
      Doesn't matter when eBay bought it looks like they are responsible with money and made a lot less. Their point is everyone else makes so much more and they aren't budgeting/saving properly
      May 20
  • Juniper / Eng sixpack
    If it is for investment purpose, wait till recession hits. You can buy that $900k house with your current savings. All cash. If it is going to be your primary residence, it doesn’t make sense to wait especially when you are ready.
    May 16 3
    • Facebook / Ops ATraveller
      Recession? 😂🤣 prices are only going up. There might be a slight correction but look at the housing data over the past decades. Companies here continue to hire and build new offices, market is fine, housing builds are not anywhere near workforce growth.
      May 16
    • Amazon .,.,.,.,
      I guess you have been in this industry less than a decade. Optimistic is good but do not over confidence. At the end, do whatever you think it sounds.
      May 19
    • Cruise Automation slwpquxle
      If we could predict a coming recession and believe we’d weather it employed, we would all be saving our TC to buy the bottom.
      May 19
  • New okon
    OP
    I have 4 yoe. Not sure about people saying it’s impossible to have 540k of savings. I earn 120k net anually. Rent a decent 3bed in prime location and share it among 5 people for $800. Buy groceries in cheap asian markets to cook for weekdays, and eat like a king every other weekend. I buy new (cheap) clothing once a month or two to stay sharp. My primary source of entertainment is the internet, and I almost never go to the cinema. I like hiking, trailing, etc (they are free). I only go to club once in a year for special occassions if invited by friends. Total spent per month is $1500 or $2k top if I decide to take a little trip. Every year I save $100k+, invest a bit in stock and wealthfront for additional 2k-10k per year. And guess what, I have a grilfriend too, but we always pay for ourselves except for special occassions like birthday or valentines.

    Think about all fresh grads who work in non-tech. If they can survive with $50k annual gross, we can too. Of course this is assuming you don’t have dependants.
    May 19 12
    • Google PgM1
      Good for you okon, i do believe its doable. Though is the math a bit off? 4yoe saving 100k/year and you end up with 540k saving? Or is that extra 140k came from stock/wealthfront?
      May 19
    • New okon
      OP
      I saved up all of my sign-on bonus. I don’t have student debt since parents paid for college fee. I started saving up and investing in stocks since Sophomore year of college. There are a lot of life hacks you can do as a student (free food at tech company info sessions, student discount, etc). Also, I was a teacher assistant, worked part time at school library, and interned at 2 top companies. By the time I started my first full-time job, I already have almost $100k in my savings.
      May 19
    • Netflix / Eng contentenn
      Good for you renting with 5 more dudes. But who wants that kind of life
      May 20
    • Google JimD
      Cool story, bro, except that you forgot to mention taxes for singles.
      May 20
    • Google blah🤯
      $120k after taxes in California leaves you with $84k. With $800 a month for rent, that's $10k lesser, bringing it to $74k. Another $10k for food, travel and entertainment. That leaves you with $64k and no car. I don't see how you make $100k unless you have a secondary source of income (that is not the stock market)
      May 20
    • New $€£
      I think he meant he is left with $120k after taxes and retirement contributions. And from that leftover he is saving around a $100k.
      May 20
    • Google blah🤯
      Oh that would make sense
      May 20
    • Google
      EIon Musk

      Google

      PRE
      Amazon
      BIO
      TesIa CEO
      EIon Muskmore
      If your current TC is 200k, how did you managed to make 120k net on your first year as a new grad 4 years ago? I remember I had 40k in my pocket after my first year.
      May 21
    • Western Digital SanDisk
      In your case, rent and not buy.

      The flexibility is better and to be honest right now as a single dude thats what you need.

      You also can live anywhere with bad school, but you don’t want to lock into a bad home for years.
      May 23
    • Fake .. doesn’t add up
      May 25
  • Facebook public2
    If you plan to own for a long time and continue to rent a room yes, buy yesterday. Also no reason to do more than 20%. Invest the rest.
    May 16 4
    • New okon
      OP
      How long is long?
      May 16
    • Facebook public2
      Let's say 7+ years
      May 16
    • Amazon saywha
      Agree with the advice. Minimum is 5years.
      May 19
    • Nvidia JenSon
      Totally agree, if it is your primary residence, buy asap.
      May 19
  • Facebook Pascality
    Housing is consumption, not investment - decide accordingly.
    And no-one (not Zillow, not your realtor, certainly not people on Blind) really knows what will happen to the housing market.
    May 19 12
    • Google Mr. Glass
      Housing is consumption only if you’re sheep and buy the biggest house your lender lets you. If you buy and live in a scrimpy tiny house so that your monthly payment =~ your rent if you didn’t buy, then you’ll come out ahead guaranteed
      May 19
    • Facebook Pascality
      The size of the house is irrelevant to the investment/consumption discussion. Buying a really big house could be better than renting it, depending on mortgage rates, rental market etc. And renting a really small house could be better than buying it.
      May 19
    • Facebook Pascality
      The point is, you could get lucky and your house could turn out to be a great investment (like the Bay Area in the past 30 years). However, averaged across the US over the past 90 years, house appreciation has barely beaten inflation even ignoring maintenance costs and property taxes. Both stocks and bonds are better investments. Hence, IMO, housing = consumption.

      "According to the Case-Shiller Housing Index, the average annualized rate of return for housing was 3.7% between 1928 and 2013. Stocks returned 9.5% annualized during the same time.”
      May 19
    • Google Mr. Glass
      ^ you cherrypicked the two dates one the Great Depression and the other the biggest real estate recession. Good going
      May 19
    • Facebook Pascality
      I picked it directly from the first website I found: https://www.investopedia.com/ask/answers/052015/which-has-performed-better-historically-stock-market-or-real-estate.asp

      The great depression and the 2008 recession were much *worse* for stocks than housing. As is almost every recession. And vice-versa for bull markets.

      There's a lot of consensus that housing is worse than stocks as an investment (eg: https://www.npr.org/sections/money/2019/04/30/718348115/is-buying-a-house-overrated)
      Of course you may get lucky, like everyone in the Bay Area the past few years.
      May 19
    • Google Mr. Glass
      ^ says a noob who doesn’t know about leverage. Come back when you find a bank that’s willing to lend you money to invest in stocks before you ignorantly compare the two assets directly. Oh and another thing you forgot: a house can often cash-flow through rents at much higher rates than dividends given out by stocks. Appreciation is not the only metric to compare.
      May 20
    • Oracle / Product
      dbiA46

      Oracle Product

      PRE
      F5 Networks
      dbiA46more
      +1 ^^^
      May 20
    • Google Ilyas 🦆
      Sure nobody knows but there are some common sense things you can look at — big tech hiring. It’s not slowing down, they’re all building buildings and hiring. Compare that to how fast new housing is being developed. If demand is growing faster than supply, then you’ll be fine buying a house regardless. Big tech are very cash rich, during a recession I don’t think they’ll do lay offs much other than using it as an excuse to lay off low performers. They’ll keep hiring, and pick up talent with lower offers, give smaller refreshers and bonuses, etc, but the demand for housing will remain relatively high. If housing prices drop by as much as 10% for like 3-5 years, who cares, it won’t really hurt you if you don’t sell. On the other hand if housing prices come up as the stock market recovers, you’ll have missed out bigly.
      May 20
    • Facebook HMjq67
      Pascality talks some sense. That dude who called him a noob, good luck with your net worth.
      May 20
    • Facebook Pascality
      Ad-hominem attacks (calling someone a 'noob') aren't useful to discussion. So I will ignore it.

      Rent-producing properties are obviously an investment, but that's not what we're talking about here. We're talking about a home you live in.

      Leverage is one important advantage in favor of housing. Margin accounts are way more expensive than 30 year mortgages. Another argument is the lack of taxes on the first 500k of appreciation.

      Tech may grow a lot, or may not. Who knows? If your argument is something like "Bay area house prices will go up 10% annually in the next few years", then assuming you're right, of course buying a house is a good investment.
      May 20
  • Zillow Group smigol
    I recommend buying. You are setting yourself up to accumulate equity that way, even if it is only ~$500/ month or so, it adds up. Also, owning gives you the flexibility to do what you want with your space. It seems like your down payment is rather high, I would seriously consider going with 20% down payment at these interest rates.
    May 16 18
    • Facebook / Eng HUxE67
      10k salt tax cap
      May 19
    • Facebook / Eng dnpm23
      Up to 750k loan , interest tax deductable. That's free money. Borrow 750k!
      May 19
    • Intuit NotBrad
      SALT (State and Local Tax) is different than the property tax deduction. Dnpm23 is right—just don’t borrow more than $750k or you can’t deduct. SALT on the other hand, screwed us all in California (and other high state tax states like NY and NJ) as you used to be able to deduct every dollar paid in State income tax. Now it’s capped at $10k. Most of us pay WAY more than that to California (unless your TC is <$100k). Can’t wait till that law is repealed.
      May 19
    • Nvidia ilrk01
      All these rich people complaining about a progressive tax system :)

      You can have a million dollar mortgage, but you can only deduct interest for 750k of it I thought?
      May 19
    • Intuit NotBrad
      That is correct. So the prop tax law change was minor (only hurt people with $750k to $1M mortgages).
      May 19
    • Nvidia ilrk01
      You mean new mortgages larger than 750k. That is one of the reasons housing prices depressed.

      Anyway, first world problems.
      May 19
    • Nimble Collective / Eng
      hirorir

      Nimble Collective Eng

      PRE
      Nimble Collective
      hirorirmore
      The property tax deduction is considered a local tax, inclusive in SALT.
      May 19
    • Google azhkys
      Yep property tax is part of SALT
      May 19
    • Medallia lourhsbsbs
      Is 750k cap overall mortgage cap or for each home ?
      May 19
    • Google azhkys
      Investment home interest isn't deductible. The cap applies to the total from primary and secondary home.
      May 19
  • Amazon / Eng
    bbserver

    Amazon Eng

    PRE
    Microsoft
    bbservermore
    You can buy in Seattle and rent it out and make much more in rent for same price home. Use the rental income to rent in Bay area.
    May 16 3
    • Amazon / Eng Vijay anna
      The numbers won’t add up
      1. Rent in Seattle is cheaper than Bay Area. So you have to pay the difference.
      2. Your place may have a HOA that will eat a big part of your monthly rent
      3. If you are remote, property manager will take a 10% cut of your rental income. Else be prepared to do “bathroom is leaking” kind of issue from your tenant.
      4. Pay taxes on your rental income.

      After all this, do you think there will still be enough to pay your Bay Area rent?
      May 19
    • Tableau PulledPork
      Please fucking don't
      May 19
    • Autolist eFks14
      So people not know you can deduct deprecations from rental properties? It's almost like free money when you file your taxes properly. "Own what you rent and rent where you live"!
      May 19
  • Asurion IQJf80
    View from my porch. That is moon btw :-)
    You should definitely buy. Pay minimum down payment for a fixed rate. Inflation counters interest rate within few years. Invest rest of you savings.
    May 19 6
    • Facebook chromeo
      Quality photography.
      May 19
    • Intuit ttcvv
      What is exciting about viewing moon from porch? 🤔
      May 19
    • Google Mr. Glass
      He owns the porch and his home. The view is that much sweeter. You don’t see the merit in it coz you’re a renter 😉🤔😂
      May 19
    • Unless he bought the home full cash or has paid off the loan, the bank owns the home. 😂 In US, because of healthcare, you are always one step away from bankruptcy.
      May 20
    • Intuit ttcvv
      Mr.Glass, You Bay Area guys have low expectations of what a beautiful home is about, go elsewhere and buy a home way more beautiful for half the price!
      May 20
    • New Nobi
      I like the view of the moon from my tent.
      May 22
  • Roku kkUA10
    Why 500k downpayment ?
    May 16 17
    • BigCommerce XDLG71
      trying to beat 3.7% interest with a vague 5% after tax market long term avg? sure pay more in down, don’t listen to those couch experts above
      May 19
    • eBay eyxitsjtj
      The best strategy is this - put 500k downpayment, after 6 months of owning home apply for HELOC (you might get about 250K or more worth of Heloc at about 3-4% interest - this is a credit line just like your credit card, not a loan). You only pay interest based on the amount you use from the credit line. After 3 more months, refinance the loan and cash out extra equity and invest them in Index funds and forget about it for 30 years.

      Now you have money invested in Index funds with large HELOC which can be used for several purposes like emergency fund, home repairs, or using it as a downpayment on investment properties (just don’t use it to invest in stocks).

      Always, leverage money to get more money that makes even more money.
      May 19
    • New want2
      Did anyone noticed houses are selling a little faster in South Bay?
      May 19
    • Facebook public2
      I laughed at the couch guy. 8% is higher than 3.7%. And that's not just my person decades of experience on tens of properties speaking :) lol
      May 19
    • Walmart.com taxhole
      eBay ? Heloc is pretty high interest not 3 to 4 percent. Cash out equity for a house with HELOC is really not possible either. What are you smoking!
      May 19
    • eBay eyxitsjtj
      You clearly have no idea that you can do it. My heloc that I got issued last july is 4.125%. You can get heloc plus cash out with certain lenders upto 90% loan-to-value. Just don’t go with Chase or Bank Of America and you’ll find galore of financing options. Also staying with same lender generally helps build more credibility and qualification becomes easy.
      May 20
    • Walmart.com taxhole
      Alright eBay tell me the name of your lender and I will test it today
      May 20
    • eBay eyxitsjtj
      The process is called Heloc subordination. It works well when the lien holders are the same companies generally otherwise it is very hard.

      How subordination works - when you refi your primary mortgage while you have heloc, then your primary mortgage is being paid off, in that case heloc moves up and becomes primary lien holder. But the refi provider would not like to be secondary so you have to make a request to Heloc lien holder to stay where they are (subordinate) while refi provider becomes the primary lien holder. Why would heloc lien holder stay subordinate? one incentive is if you are moving your primary mortgage to the same company as heloc then they can figure out internally whether they’ll agree to do it.

      My primary lender and heloc is meriwest mortgage. I learnt about refi + heloc after I got my Heloc from my primary lien holder. Ideally, leverage that you want to refinance and also apply for heloc with a new lender and do one step at a time - heloc first then refi. I don’t know if my lender does it but there are many private brokers out there who would consider this to just get multiple lines of business.

      If you call meriwest do let me know if they can do heloc subordination. I’ve missed the boat but I’ll let others know who to specifically go to in this situation.
      May 20
    • Walmart.com taxhole
      Thanks for the detailed answer. Will update this thread on how it goes
      May 20
    • Walmart.com taxhole
      Checked with meriwest. For 90 percent LTV the rate is around 7.5 percent . For 80 percent LTV is around 5.5 percent and for first 12 months there is a promotion for around 3 percent. I think you are still paying promotion rates, if so, your mortgage will go up 😁. They only do California and Arizona
      May 20
  • New / Eng
    TechLeed

    New Eng

    PRE
    Amazon
    TechLeedmore
    Proof that the dumbest people can make money. Who in their right mind would spend their own money buying a house in San Francisco
    May 19 9
    • Workday mrmouse123
      You are right millions of dumb people here.
      May 19
    • eBay letsFixIt
      U give money then.. I'll buy a home in SF
      May 19
    • Workday mrmouse123
      Buy where market is winning. Everywhere else is gambling
      May 19
    • Nvidia dynosight
      Great strategy to buy the top of the bubble
      May 19
    • New / Eng
      TechLeed

      New Eng

      PRE
      Amazon
      TechLeedmore
      It's winning right now but all I see is homeless, traffic, and shit on the streets. Not exactly a long term plus.
      May 19
    • eBay letsFixIt
      When u talk only about SF then it's got plenty of issues. If it's anywhere south or east then there r plenty of good neighborhoods.
      May 19
    • Workday mrmouse123
      My mistake. I'm referring to entire bay area
      May 19
    • Uber / Other thEI07
      Born and raised in SF. Homeless and shit on the streets always existed here....homes still appreciated 5x+ so yeah
      May 21
    • eBay letsFixIt
      SF sounds more like India.. 😂
      May 21
  • Adobe VFne54
    That’s a lot of savings. Are you if of those guys wearing costco shoes and eating ramen for lunch? Joke aside, if you plan on living here for awhile (+10 years) you should buy.
    There’s more to owning a house than paper numbers. Eg no landlord bullying, predictability etc. Stay away from Hoa if you can
    Good luck
    May 16 2
    • Magic Leap Leaper2020
      You’re probably right 😉
      May 19
    • Microsoft Hyad70
      Not everyone spends every nickel earned...
      May 19
  • eBay kdooeldd
    I wouldn't put more than 20% down if possible, and keep the rest invested in cash/stock. Now is a decent time to buy. Buy the most expensive house you can in the best neighborhood you can and plan to keep it forever. Get a 30 yr fixed mortgage. Buying and selling real estate in the bay area is expensive, mainly due to prop 13. People buy, planning to sell, but find it is better investment to keep property and rent it out
    May 19 0
  • Uber wwTKd
    homes are a expensive hobby. higher taxes. tons of time and money on upkeep, gardening, maintenance or HOA. cant move to better job opportunity or upgrade house without 8% selling cost or forced to deal with tenants. rent near your work and focus on your career. if your income is good you will always be able to buy a home.

    better yet just leave the bay area, calufornia is a trap. myself, sold my house moved to rental
    May 19 4
    • Workday mrmouse123
      Facts.
      May 19
    • Nvidia dynosight
      Or just WFH
      May 19
    • Zillow Group smigol
      Unless you can cover your entire housing expense by renting out your home or part of your home.
      May 21
    • New / Eng
      griesrt1

      New Eng

      PRE
      Flipboard
      griesrt1more
      Price to rent ratios are high. If you buy a house and then immediately rent it you won’t be able to cover the mortgage, taxes & insurance. Unless you get a killer deal then it’s a huge liability.
      Jun 2
  • Cerner pfdP78
    Why do you have $500k in savings. Why isn’t it invested in something that actually makes you money?

    I call bullshit on this entire post.
    May 19 6
    • Google dumbfcuk
      Why do you think it's not invested anywhere. I keep a big chunk in low risk low return investments
      May 19
    • Gap / Strategy
      loanni

      Gap Strategy

      PRE
      McKesson, Accenture, Morgan Stanley, Gilead Sciences
      loannimore
      I think it'd be more reasonable to assume he has it invested (otherwise he wouldnt have 500k)
      May 20
    • Google HegYGql26u
      Huh. I know plenty of perma-bears with piles of cash who believe the next crash is around the corner.
      May 20
    • Cerner pfdP78
      He phrased it as “savings” indicating, to me, that it’s liquid. I don’t call my 401k, IRAs, and other investments as “savings.” If it is liquid and sitting in a bank account, it’s silly to have that balance not earning anything.
      May 20
    • Uber momo9
      Once you go past retirement limits, you put it in a liquid brokerage account. 500k in VTI is not that different from a savings account
      May 20
    • Cerner pfdP78
      Doesn’t seem likely with a TC of 215k.
      May 20
  • Facebook whodattt
    Pretty sure zillow said prices would go up 20% a year ago. They didnt.

    Dont trust zillow.

    Buying a house is a life choice. Do you want to live here long term? If so the dont try to time the market but just buy a damn house
    May 19 0
  • Tableau erri
    Buy crypto! You will be able to buy 3 apartments in 2 years.
    May 19 4
    • Uber Yol0$
      Naa
      May 19
    • Intuit ttcvv
      That’s crypto 🤣
      May 19
    • Google Mr. Glass
      ^ shoulda bought the dip eh?
      May 19
    • Nvidia JimTheTuna
      Eh, eh? Nyeaaah eh.
      May 22
  • Nvidia figifaf
    That being said buy when your professional and social life are stable enough so that you stay long enough that buying outweighs renting in expectation
    May 16 0
  • Western Digital ozvt57
    Historically speaking:
    Best time to sell is March - April.
    Best time to buy is November - January.
    At least wait a few months to see which way the market is going.
    If it continues to dip, wait until January to buy.
    By next March things should start to pick up again.
    May 19 1
    • Google Mr. Glass
      Best time to buy Nov, but you also get limited leftover choices to choose from.
      May 19
  • Accenture Aesrtd
    Buy a home with less HOA. We were in the same situation 2 years ago. Everyone said there would be a recession but nothing changed. We bought a new construction home(2600 sq ft single family home) in Newark ca for 1.05M (upgrades included) and the price of the home now is 1.4M. If it’s your primary residence it makes sense to buy a home rather than wait for recession. And as everyone said don’t invest more than 20%. Good luck!
    May 19 1
    • Atlassian / Eng
      Luffy, M.D

      Atlassian Eng

      PRE
      Facebook
      BIO
      A prematurely grumpy somewhat old man
      Luffy, M.Dmore
      Single family with no HOA is best but if he's talking 2br most around here are condo or townhomes and HOA becomes unavoidable
      May 19
  • Amazon lamardavis
    Why not go with a smaller place and forgo the hassle of renting out one room? Keep in mind if you rent out a room then your primary residence now becomes an investment property and when you sell it you'll have to pay capital gains tax on the sale. If you're home is your primary residence and then you sell it then there is no capital gains to pay.

    Personally real estate (not renting out my place) has been very good to me throughout the years. I've owned three homes and I've always walked away ahead. Since it was my primary residence I never had to pay capital gains and I've walked away with a couple hundred thousand.
    May 19 10
    • Facebook / Eng dnpm23
      It's still primary residence if you also live in it. No?
      May 19
    • Amazon lamardavis
      My hunch is since you're renting off part of it then a percentage of it is considered investment property. Meaning a percentage of the sale would be eligible for capital gains tax.

      Whenever you try to declare a part of your home a business then that usually sends up the red flag to the IRS. It used to be home offices that you declared on your taxes were red flags for an IRS audit. To me this sounds like a hassle. I say keep it clean and just buy a separate investment property. A completely separate property I think would reduce the hassle come tax time and would reduce the likelihood of an IRS audit.
      May 19
    • Soothe hahawtf
      He can just do a 1031 exchange at a later point.
      May 19
    • eBay eyxitsjtj
      This is not completely true. The property doesn’t fully become investment property if partially rented. The calculations are done on the basis of percentage of home that is rented out. And for that portion you can also claim depreciation. If you rent out a room that is 200sqft in 2000sqft home then the capital gains will be on 10% of profits. On that 10% of room you can ask more than 1200/mo rent which might be 25% of monthly mortgage and prop tax. If you rent out more rooms then eventually you can end up getting all expenses paid by the roommates and you can live for free in the master bedroom. This is the fastest way to start building equity with just downpayment and living for free and reaping the benefits of appreciation.
      May 19
    • Amazon lamardavis
      True he could do a 1031 exchange. What is cleaner and less hassle? A property that's 100% primary residence? Or a property that the certain percentage primary and a certain percentage investment?

      I haven't done a 1031 exchange but to me it seems easier and cleaner to not intermingle a primary residence with an investment property. To me it seems like the IRS could give him a hard time as to what percentage of the home is an investment property versus a primary residence. Also isn't it more of a hassle to have a roommate then to not have one?
      May 19
    • Amazon lamardavis
      What percentage of common living area would someone have? I understand that 200 square foot out of 2,000 square foot is pretty clear but what about common living area? Is the tenant not going to walk down any hallways? Will tenant crawl through the window and not use any of the common space? Will the kitchen not be used? Would the tenant rent a percentage of the kitchen? What about the scenario where he does not get a tenant for a while? Does he then start doing a percentage of living space based on the percentage of time that it is occupied? To me it just seems like one big hassle and not as clear cut as separate properties. It also seems like there could be more of a chance of screwing up the documentation around tax time and give the IRS something to be nitpicky about. Also what about simple privacy? What's OP going to do when he wants to bring over a girl/partner?

      I get that the tenant could end up paying for part of his home but couldn't a similar effect be achieved by just having a separate property?
      May 19
    • eBay eyxitsjtj
      ^ all this to be clarified exclusively in rental agreement.

      Renting is different than claiming home based business for IRS audits. Also I think you are averse with this idea because you got audited, however, the probability of audit is still way below 1% even for home-based businesses since 50% of registered businesses are home-based and there are 28Million registered businesses in US.

      Op has saved up a lot so he has the luxury to separate primary home from investment property. However, for anyone with $100k-$200k saved up and would like to start building equity plus savings then this is still be best option.

      Also, most people end up in analysis paralysis and never take any bold action. CPAs and Tax Attorneys are there to handle everything. Paying them 2k a year opens door to make several hundred thousand in future.
      May 19
    • Amazon lamardavis
      I have never been audited. I'm all for bold action. I left a solid life with a steady income to move to a completely different city. When I moved to Seattle I actually took a pay cut (based on COL) but I thought the risk was worth it. Based on rsu appreciation as well as my primary residence appreciation it has worked out really well for me.

      What percentage does he declare to the IRS for shared space? I get that the 200 ft bedroom is clear cut but to me it seems like there's ambiguity around the shared living space. Yes I agree it can be done but the hassle factor seems more trouble than it's worth for someone with so much money saved. For me I say no to roommates :-) I would stick with two properties.

      He does not necessarily have to buy a rental property in the Bay Area. He could buy rental property in another market which would give him more diversification. Actually he probably could go into a cheaper market and buy a couple homes and rent those out. That would also diversify him away from one tenant.
      May 19
    • eBay eyxitsjtj
      Actually, turns out it is not as complicated!

      Pub 523 exception to living area. Rent out a room and you still don’t pay capital gains!
      May 19
    • Amazon lamardavis
      Cool...still would vote to not have a roommate if I had a choice ;-)
      May 20
  • Atlassian / Eng
    Luffy, M.D

    Atlassian Eng

    PRE
    Facebook
    BIO
    A prematurely grumpy somewhat old man
    Luffy, M.Dmore
    Let me be a contrarian and suggest that the big down payment IS a good idea. Guaranteed 2-3% (remember you lose the tax benefit if the difference between the smaller mortgage, up to 750k, so its really like 60-80% of the total interest you are saving, not 100%), and even if the house value goes down you are that much closer to having a paid off house. If you can afford 20% down for 30 years OR 50% down there's a good chance you can afford the payments on a 15 year loan (or to make payments that size on a 30 year, which doesn't get you the lower interest rate but leaves you free to drop back to the 30 year payment if cash gets tight) and a paid off house goes a long way towards freedom from the wage earner grind.

    I mean, property tax on a 900k place is still going to be around 1000 a month but if property tax is that, hoa is 400 (in a condo) and insurance and utilities are maybe 300-400 a month that's peanuts around here. And if you move, once the mortgage is gone it should be super easy to rent out profitably even losing 10% to management and maintainence.
    May 19 5
    • Uber YeeHaw!
      This is silly.
      You clearly don’t count the ‘opportunity cost’ of putting that extra $300k which could be invested somewhere else.
      May 20
    • LinkedIn beotbtys
      Also how does house value going down after you buy lead to having the house paid off quicker???
      May 20
    • Atlassian / Eng
      Luffy, M.D

      Atlassian Eng

      PRE
      Facebook
      BIO
      A prematurely grumpy somewhat old man
      Luffy, M.Dmore
      The opportunity cost of putting $300k there rather than elsewhere is real, but anything you can put it in that would earn more also comes with risk of losing principal. Technically so does the house, of course, but when it's paid off one way or the other you have a paid off place to live (or a source of rental income with - in CA with Prop 13 - a likely very low carrying cost.)

      Whether it's worth the lost growth on that in investment income depends totally on your time horizon and long term goals

      As for the house going down in value, that's orthogonal to the house being paid off quicker, not directly related. My point is that for many people even if there is some long term loss relative to inflation or even compared to market growth there is a huge benefit to having the bulk of one's housing cost prepaid and not subject to future cost increases. A higher down payment gets you there that much faster, and who knows whether any of us can predict any coming dip or whether it will be big enough to matter.
      May 20
    • LinkedIn beotbtys
      I can’t say I agree but I see your point and if it works for you then my opinion doesn’t matter. 👍
      May 20
    • Atlassian / Eng
      Luffy, M.D

      Atlassian Eng

      PRE
      Facebook
      BIO
      A prematurely grumpy somewhat old man
      Luffy, M.Dmore
      I didn't have that much to put down, but in general I've taken a similar approach - avoid risk, pay off debt rather than use leverage. May not make me rich, but as someone whose spent most of my career before TCs got this high I've had a lot of freedom and I'm looking forward to a paid off house in a lot less than 30 years at this rate.
      May 20
  • Workday mrmouse123
    I'd say lock in a low interest rate, and 20% down. This way, if there is a market crash. You can cover all your debts for years. Even if you lose your job, etc. People get into trouble if they don't keep enough liquid to weather the storm, say 12 months expenses. Assuming total market calamity of 50% you could ride out a year and have no worries.

    If we have total market crash, like 1929. No one will have a job or be able to pay their bills. So no need to worry about this extreme. People will be rioting in the streets for a bailout.
    May 19 1
    • Reddit abc129
      people will definitely still have jobs if we get 1929 again, just not as many of them and salaries will drop. At the height of the great depression unemployment maxed out at 25%
      May 20
  • SAP / Product bvrk18
    The real-estate bubble is going to continue thru’ the election year 2020 and might burst in 2021 or so - longterm you can buy, short-term your choice, tough to predict
    May 19 8
    • eBay letsFixIt
      It's not a bubble. There r plenty of ppl with loads of cash like our OP waiting for that impossible thing to happen. It's clearly demand supply. For last few years every open house has atleast 100visitors and ppl ready to put 100s of thousands in down payment. Imagine even if a correction happens about 100-200k for a 800k-1M$ home there will be ppl ready to overpay to get that home. It sounds really stupid ppl think it's a bubble.
      May 19
    • Amazon saywha
      Yes. The job market is real and so is the cash. But if layoffs begin that’s when the downward spiral begins. There is a high correlation with new hiring that high paying companies like FAANG do and the real estate market.
      May 19
    • eBay letsFixIt
      Well it doesn't make sense to me how is it even remotely related.
      May 19
    • Google Mr. Glass
      @saywha do you see downward trend in hiring at Amazon? 😟
      May 19
    • Amazon saywha
      Cant say for sure. But just follow the revenue numbers of these companies. They are slowing down across the board. Not a verdict on the economy but law of large numbers. You cant keep growing 30% yoy forever.

      Why the sad face Mr. Glass, you recently bought?
      May 20
    • eBay letsFixIt
      Warren buffet bought recently. Maybe that inspired many ppl.
      May 20
    • Google Mr. Glass
      I want tech to grow at least next 5 years
      May 20
    • SAP / Product bv18
      The bigger it grows, the greater would be the fall this time
      May 20
  • Adobe xyzss
    This is what I would do. Only 20% downpayment on primary home to have balance not more than 750k. Buy 2 investment properties outside of Bay Area and invest the rest there. With interest deduction, renting one room in primary and positive cash flow from rental properties, you will end up making money while living totally mortgage free. Think about it.
    May 19 2
    • New alexal
      Assuming you can rent all the time the second property and that nothing breaks.
      May 21
    • American Express uktg07
      This.
      May 21
  • Snapchat Bobdy
    Why you want to put 50% down payment to buy a condo? With your TC you can afford 20% down, save the cash for investment at market downturns. Current interest is still low.
    May 19 0
  • Google watdduck
    Stopped reading at “my gut”
    May 17 0
  • Facebook hrwsbmufd
    DO NOT put more than 20%. The interest you save by putting in more will almost certainly be lower than future earnings from investing the difference in index funds!
    May 16 0
  • I concur with public2. 540k in savings??? How ?
    May 16 1
    • Internet Brands LONp72
      You should ask his YOE. Probably 10+
      May 19
  • eBay letsFixIt
    How the hell could u save that much? Jeez
    May 19 8
    • eBay / Eng
      Henry8

      eBay Eng

      PRE
      Microsoft
      Henry8more
      If someone is single and living simply, at that TC they could be saving upwards of 100k a year.
      May 19
    • How does that math work out? 160k base is 103k after taxes accord pay check calculator. How are you living with 3k? If we assume 20k in bonus and rest in stocks which is liberal, that’s 16k~ extra after tax. How are you living in SF with 19k?
      May 19
    • Google KUwQ28
      I was on 160k base and saving a little over 100k per year the past few years. TC was 320k though.
      May 19
    • I haven’t worked at FANG. Could you breakdown your tc not including base? I’m trying to understand how are you getting the extra cash to save. Isn’t it mostly stocks that doesn’t go into your pocket?
      May 19
    • eBay letsFixIt
      Yaa an expansion would help poor ppl like me.
      May 19
    • Google QmTN21
      I did similar at Google while single. Free food every day and don't go out on vacation. Bike to work and own a cheap car. Rent a room for 1k a month. Other expenses come to around 500/month.
      May 19
    • Cisco wedcgte
      We are leading a decent life with all vacations, still I can save 100k easily. In 5 years 500k possible
      May 19
    • Google blah🤯
      @Google QmTN21 - how much did you save a year/month?
      May 20
  • Move hd753ss
    I believe there would be a downward trend in home prices starting July or so, (if they aren’t already). We already see downward trends in no. of offers made, increase in inventory, days on market in Bay Area. Tax benefits used to be one of the top reasons to own a home, with the recent changes in taxes that isn’t the case anymore. July is usually the peak time for real estate transactions, and this time it would be interesting to see how many people who have filed taxes in April would show interest to purchase a home. As I see it the demand will be low, hence my hunch of drop in prices especially in Bay Area.
    May 19 6
    • Google bayarea6
      yes prices are down across the board in every single city of the 300+ cities in the bay area. it remains to be seen if they'll go lower (i think they will). 2017 was a flattish year. 2018 was ridiculous euphoria! pick any city here. prices are down https://agentsunlocked.com/allcities
      May 19
    • Google Mr. Glass
      Good, if people don’t buy they’ll be forced to rent. More tenants and limited housing, you do the math genius. Stay a sheep, while I enjoy cash flow from rentals 😉
      May 19
    • Uber sadbear
      It is not like they are homeless right now and will be forced to rent from you soon. If they have to rent, they already rent.
      May 20
    • Google Mr. Glass
      But there will be more of them every year doofus, population growth in Bay Area is around 8%
      May 20
    • Apple / Eng wBLy52
      only 38k last year slowing down significantly
      May 20
    • Google Mr. Glass
      ^ citation?
      May 21
  • Nvidia creamcake
    Btw Zillow is garbage, use Redfin
    May 20 1
    • Redfin y0lo3
      I second this 😃
      May 20
  • Google gliz
    What if your gut is wrong?
    May 19 1
    • Google dumbfcuk
      You know gut is full of shit, right
      May 19
  • Facebook chromeo
    It really depends on your situation. If you’re planning on having kids in the next 5 years and having to think about living in an area with a good school district, then I’d lock in a house now (now meaning over the next 2 years) and not wait for the market to make any big moves. This is assuming you’ve decided to set roots here and are not planning, for example, to return to a country you may have immigrated from.

    If you’re young, I would just wait and invest the money in the market. By renting you get optionality to move if you want to and won’t be subject to big moves in the housing market. You’ll likely make more from the market from an investment perspective.

    I agree that I think the market may get hotter due to IPOs but big tech companies are actively building presences elsewhere and avoiding growth, where possible, in the Bay. They’ve all acknowledged that this area is tapped out in term of real estate.
    May 19 0
  • Amazon / Eng newGal
    540k??? Yoe?
    May 19 0
  • Microsoft sqiF24
    Wait. Market is high.
    May 19 2
    • Workday mrmouse123
      Isn't that what people have said since we recovered from 2008?
      May 19
    • Google Ilyas 🦆
      Interest rates have to come up, trump has caused an artificial delay which can’t last. When they do rise, mortgages become less affordable and that brings house prices down. They’ll do it gradually and this will happen all over the country, but the Bay Area can be the great anomaly.
      May 19
  • Yelp kingkrush
    If you can score a place given the tough competition, go for it. You will likely net a few hundred thousand dollars in 5 years. People are getting richer in the Bay Area and supply is not keeping up. When I bought 5 years ago, it felt expensive at the time. Now it’s generated a free $250k! I expect a few hundred K more in upcoming years.

    You don’t need to put that much down. You might want extra cash for things like furniture. 25% down is sufficient. The extra rent from the second room will easily cover mortgage plus other things.
    May 20 0
  • Google 🚲 gbike
    An even bigger indicator of housing price growth is looking at the big 6 tech companies’ Bay Area hiring. I know Google and Facebook are building many more offices and they’ll all fill up within the next 1-3 years. Globally these companies tend to hire at a rate consistent with revenue (keeping revenue/employee constant). Google grows at 20% yoy, and it isn’t slowing.

    Meanwhile housing supply is increasing in the Bay Area, we would need numbers for this. I suspect this is why we are seeing a slight decrease in Bay Area real estate pricing. But I don’t think the supply can keep growing... there just isn’t enough space and infra. There’s also emigration, but I don’t think it’s happening at a rate that people imagine... it’s one of those things people are disproportionately loud about.

    So overall I think we will have a slump in pricing over the next year or two but then it’ll come back roaring once we hit a supply wall. I don’t think the next recession will happen until we hit 7% mortgage interest rates. So maybe 3 years. And even then, it’ll hit the rest of America hard, and it’ll be mostly business as usual in the bay.
    May 26 4
    • New / Eng
      TechLeed

      New Eng

      PRE
      Amazon
      TechLeedmore
      I think there is a fair amount of shit on the streets to warrant people wanting to move out at the high of the bubble
      May 26
    • Oracle Stream.of
      You are crazy to think 7% in 3yrs while EU and the rest of the world is on the break of a recession.

      Moreover, the fed is done with rate hikes for the year, and in a typical year they do four hikes of .25. The math doesn’t add up.

      Now it’s a cool down period, especially with lower foreign money, and is period of uncertainty. Overall, I agree that in a long run perspective the housing market in Bay Area is a sure bet.
      May 26
    • Google 🚲 gbike
      The fed will do at least one and possibly two this year. Let’s see how it plays out. 🍿
      May 26
    • Oracle Stream.of
      They said they are going to sit and watch.
      May 26
  • Google / Product
    bmy2012

    Google Product

    PRE
    PayPal, Google, Accenture
    bmy2012more
    How about all smart engineers make good use of their ML skills and extrapolate from some data... Or just follow your guts and FOMO like everyone else ;) : https://www.bayareamarketreports.com/trend/3-recessions-2-bubbles-and-a-baby
    May 19 1
  • Netflix redwood63
    Just buy if you want to own a house and would live in it. It is definitely not an investment from monetary point of view in Bay Area.

    It’s a very different experience living in a house you own vs rented one, it’s worth more just rent vs buy calculator. If you have a family and kids then the worth, because of memories you make in house you own, increases multiple times.

    Now regarding recession and housing market crashing etc etc, many around you, even with lesser savings are buying. All these people will be on road if a big crash happens. Are you a really expecting Bay Area to be Detroit? If you think that then yes don’t buy here.

    There are some point here regarding 1950s housing and continuous need to fix. Just don’t buy cheap garbage where you would need to continuously do the fixes, get a well maintained house, you might need to pay premium for that but you wont be needing to call contractor every now and then. Some maintenance is anyways needed in anything you own e.g car, bike etc, same is applicable for a house, old or new.
    May 19 0
  • Sage / HR
    khCi60

    Sage HR

    PRE
    Coca-Cola, The Home Depot
    BIO
    East coast
    khCi60more
    Never buy there
    May 19 0
  • Microsoft MSOFTStock
    Depends on your goals! But I think it makes sense to buy. Also good job on saving up
    May 19 0
  • No math can justify the intangible benefits of owning a home. When I had 8 relatives visiting me for few nights, making all of them comfortable in any rented home would be impossible. It was easy with my 1800 sq. ft. home. High leverage, Mortgage tax savings and a low interest rate plus property appreciation.. you can’t beat it with any investment coz u just don’t take such high leverage risks
    May 25 7
    • New / Eng
      TechLeed

      New Eng

      PRE
      Amazon
      TechLeedmore
      Maybe schedule people to come on different weekends than all on the same time?
      May 25
    • Sure Einstein.. they were here for a family event 🙄
      May 25
    • Microsoft Ashish ved
      More the merrier!!!
      May 25
    • Atlassian / Eng
      Luffy, M.D

      Atlassian Eng

      PRE
      Facebook
      BIO
      A prematurely grumpy somewhat old man
      Luffy, M.Dmore
      You can rent an 1800 sf house, and for that matter four hotel rooms for a few nights isn't that expensive.

      Leverage is great as CA is a non-recourse state but real estates around here is already crazy inflated so there is still the possibility of loss or at least stagnation compared to other investments.
      May 26
    • Try finding a good SFH for rental. Most of them are shitty and not upto our living standards. When real estate is inflated so are other asset classes, but atleast u have a home to live, enjoy and build memories with your family. These are intangibles which other investments cannot offer..
      May 26
    • Atlassian / Eng
      Luffy, M.D

      Atlassian Eng

      PRE
      Facebook
      BIO
      A prematurely grumpy somewhat old man
      Luffy, M.Dmore
      Purchasing is a pain in the neck. Especially if you want something reasonably big and modern, a lot of the peninsula and inner South Bay housing stock is older, more like 1200sf 3br.

      Finding a good rental is a pain in the neck. Which one works out better for cost depends on the deal you can get on either, but you are not locked into the higher cost when the market falls with a rental.

      At least in CA we have prop 13, but as a pure investment it is better to invest in real estate you don't live in. Hard to make a rational choice to take profits on the place you have lived, enjoyed and built memories in
      May 26
    • Facebook chromeo
      Impossible? AirBnb.

      Certainly the small amount of effort is much easier than the effort get goes into purchasing a home.
      May 27
  • VMware jRAv71
    If not buying, then what is the best way to invest money? Stock market is not easy and high risk. Index funds are option but they will crash if US housing crashes. Probably one could put 100k in stocks, but not $500k.
    May 19 1
  • Facebook G-Striker1
    I don’t know but I agree with Juniper above, I would wait till recession hits and then buy. The market is bound to change. It’s a cycle my friend. Look at the past 20 years, not 10. We are due for another recession and it’s just around the corner
    May 19 1
    • Salesforce namehere1
      Been hearing that for years. You will definitely be right one of these years.
      May 20
  • Google Ilyas 🦆
    Buy real estate out of state, generate cash flow, and rent better here.
    May 19 0
  • Google / Eng davi5
    Don't try to time the market. (Whether it's real estate or stocks.)
    May 19 0
  • Amazon destr0
    Only fools take net earnings and put them back into the market unless you have a high degree of risk, and who can blame you this market has only showered the debt laden with more opportunities
    May 19 0

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