Housing

Buy or Rent?

Amazon DjangoFree
Jan 6

I have $230k in savings and around $130k in stocks. I live in SF bay area. My apartment lease is running out in a couple months. I have been here for over 4 years. Should I buy or Rent? My budget is 1-1.2 million but the falling median prices, price drops, piling up of inventory, etc news articles are spoiling my "let's buy a house right now" mood. I have waited for two months now and I only see prices falling more and more. Should I rent/wait?

Have a Green card. Will apply for citizenship next year. So, no visa issues.

Would like to know your thoughts.

TC: 250k

comments

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  • Google possible
    Falling median prices, price drops and piling up of inventory should actually increase your “let’s buy a house mood” because you’ll get a better deal. Buy low and sell high :)
    Jan 611
    • Dropbox / DataGbo
      You don’t time the housing market unless you can see the future
      Jan 6
    • Capital One EXwk33
      Housing market has a lot of momentum in prices, so unlike stocks you can time it reasonably well...
      Jan 6
    • Capital One EXwk33
      I should say at least in the short term. Long term is not easy to time..
      Jan 6
    • Amazon DjangoFree
      OP
      Wait. How can you time the housing market better?
      Jan 6
    • Capital One EXwk33
      Look at housing prices over time. They regularly do roughly what they did the previous month. For example they went up every single month from 2000-2006. They then went down every month from 2006-2011... I have no idea where they will go in the l long term, but in the short term they will likely follow the trend they are on.
      Jan 6
    • Amazon DjangoFree
      OP
      Oh I see. Didn't know this. Thanks for the tip
      Jan 6
    • Microsoft pJcW86
      I'd like the financial course on where past performance of an investment is indicative of future performance.
      Jan 6
    • Amazon / MgmtKYuG83
      Capital one is saying that you can just lag the trend. So, OP should wait until prices are going up a couple months in a row. The market is somewhat timable as a buyer, because its trends are less volatile, so follow them. As an owner and seller, if you wait for the trend line to go down as your indicator to sell, you may be stuck with inventory on hand for a very long time though.
      Feb 12
    • Microsoft pJcW86
      Don't bother timing the market if this is a house you are going to live in. Cause you also just missed the trough (winter, Nov and Dec). From here it picks up until spring.
      Feb 13
    • Amazon DjangoFree
      OP
      Thanks guys. I have chosen to wait and watch the market as it unfolds. Don’t have the appetite for the kind of volatility that’s in the market right now.
      Feb 15
  • Walmart.com ToKL28
    I would not recommend it. You will be stripped of savings and stuck with a large mortgage bill, house maintenance bill, tax bill, etc. Unless you can increase your take home monthly cash, you will be stuck to living paycheck to paycheck. Yes, your house might appreciate, but you will be under stress and it will be difficult to perform at work as good as you would without stress. Consider opportunity loss.
    Jan 612
    • Amazon DjangoFree
      OP
      ^^ Agree with the reasoning. And yeah, I am already looking to jump ship to another FAANG to keep my TC higher. I am ready to buy, and it's really the falling prices that's so enticing to "wait and watch" instead of a "quick buy"😀
      Jan 6
    • Walmart.com ToKL28
      Think about this... You want to jump ship to go from 250k to what? 400k? Difficult, but possible. Yet, what about growing internally either at your old or the new job. Smart companies pay unfairly. The best performers migh get paid enough to buy your 1.2mil house for cash after a good year. To be the best, you will need to have laser focus. You can't afford to lose focus and spend half a day looking for plumber to fix leaking toilet. Yeah, your 1.2 million house migh become 2.4 million in 10 years. Would not it be better if your 250k TC become 1.25 in 5? Do the math.
      Lose the stress. Focus on the prise.
      Jan 6
    • Walmart i have no intention of changing your mind. Enjoy your strategy and I will enjoy mine. In 10 years I will have a nice fat package, 3 homes, a management service taking care of my properties and 3 tenants like u paying my mortgages. So I will make money when I am at work and will make money when I am home. In 15, I will retire with a fat 401k and shit load of rents coming in from 4 properties.
      Jan 6
    • Walmart.com ToKL28
      @oath, so you think you can be better at being a real estate investor than doing what you are doing now?
      Jan 6
    • Salesforce CrimeMaste
      Walmart I don’t think u will be spending half a day looking for plumber I mean with if you spend that time for such a small task you should be earning that high TC. Also can you explain how to make 1.25 million salary in next 5 years ? ( just said that getting 400k is difficult ) and best people can do multitasking more efficiently and don’t get scared with responsibilities though don’t feel buying house is a lot of stress have 3 homes already and managing 2. Just be smart how u choose tenants
      Jan 6
    • Walmart.com ToKL28
      Again, some people are better at real estate investing and managing it than at software engineering. All the power to them.
      Jan 6
    • Salesforce CrimeMaste
      This is what I completely disagree smart person will excel in all fields not just one 😊. Smart people learn and explore and get better at things which they don’t know. And if that was not the case you won’t see so much technology adoption in non tech fields.
      Jan 6
    • Snapchat whatTheAnd
      Just accept that there’s always a divide on the stance. I think the math comes down to these factors:

      1 - is ur rent significantly higher than mortgage/HOA?
      2 - will you stay at least 7 years? (Or maybe 5)
      3 - are you comfortable with dedicating all of your asset into housing at one single point in time? And are you comfortable with the risks (losing your job and being locked in with a long and high mortgage) Are you at least aware of REITs, cap ratio in other parts of the country, and other potential alternatives?

      If you answered yes to most/all these questions, go for it.

      Don’t try to time it. You’ve already lost the timing - the best time to buy houses was 2012-2017. Those people truly made bank. You will not get what they got. The same could be said of stocks and many other investments (cryptocurrency)

      Also don’t listen to all the speculation - “people around the world will come and tech will keep the Bay Area housing highest...etc”. Those are just speculations (... tech companies could just start moving to other parts of the country)

      Personally, I would hold off a big life decision for one month, think it through and why u want/need this house, and THEN if you really want to, go get one! Good luck!
      Jan 6
    • Amazon DjangoFree
      OP
      WhatTheAnd - yours is by far the best advice/reply I ever got. Appreciate it bro. :)
      Jan 6
    • Snapchat whatTheAnd
      Thanks :) and congrats on saving up so much! A lot of people in the bay would love to be in your position!
      Jan 6
  • Apple iPhone Xs
    Are you on a visa? Would be careful buying with recession
    Jan 68
    • Amazon DjangoFree
      OP
      No visa issues. Updated the post too.
      Jan 6
    • Uber ayiayi
      We are NOT in a recession! We past the correction territory, yes. Not recession.
      Jan 6
    • Amazon / Englegend
      Yes, Janet Yellen said there will be no recession ever in our lifetime. You are crazy if you don't believe her 😆
      Jan 6
    • Facebook AyyoLeMayo
      Recession means negative gdp growth, stop reading tabloid financial news and see it for what it is. Stock prices and economic strength are not the same thing
      Jan 6
    • Walmart.com ToKL28
      Wft is negative growth?? What happen to the word decrease??
      Jan 6
    • Uber ayiayi
      Thanks Ayyo, “recession” is a buzz word thrown around lightly. No wonder click-bait sites and doomsday news media is making a killing.
      Jan 6
    • Amazon DjangoFree
      OP
      Agree. Dow falls 20% and there are so many click baits about recession
      Jan 6
    • Amazon / Englegend
      Yeah, what connection could Dow possibly have with the real economy? Are these just some greedy people fooling around with something like a lottery?
      Jan 6
  • Rent. If everyone starts buying, who will pay me rent?
    Jan 67
    • Veritas / EnghYwH16
      If everyone starts buying, you can sell your home for a lot more
      Jan 6
    • Amazon DjangoFree
      OP
      Haha.
      Jan 6
    • Nope doesnt work that way. I would prefer 2 properties rented out over 5 empty properties 😁
      Jan 6
    • Amazon DjangoFree
      OP
      Do you have any properties in the bay area? How many?
      Jan 6
    • Yes. 1. Converting a detached garage into in law suite which i will rent since i have a r2 zone lot with two entrances.
      Jan 6
    • Amazon DjangoFree
      OP
      Sweet. I have also been thinking about doing something similar if we buy a house but my wife doesn't like the idea of having someone on the property. I like the $$ but am finding it hard to convince her.
      Jan 6
    • Yeah i dont want anyone on my property either. But i was lucky to get a house with 2 entrances so it becomes like two separate properties. And this only works for r2 single family homes. Dont buy r1 if u want to build an in law suite.
      Jan 6
  • Medtronic / EngSnakeDr
    Buy...owning in nearly always better than renting, as its investing rather than paying someone else
    Jan 65
    • Chegg gladiator_
      Buying home is not investing. You should read some good investment books.
      Jan 6
    • AMD / EngLEtV72
      This is a myth. Primary homes should not be treated as investments. Longer term you may break even and even lose $$ value for owning vs renting because of property tax/house maintenance costs and commissions/fees wrt selling..if the house appreciates like crazy for ex. Bay area in last 4-5 yrs, then yes it will turn out to be a good investment..
      Jan 6
    • Amazon DjangoFree
      OP
      @letV72- how much % appreciation do you think is good enough to say a home purchase was a good buy and is safe for a reselling?
      Jan 6
    • Medtronic / R&DSnakeDr
      Mine has gone up 60% in 15 years, so yeah I suppose I could have done better with other investment options.
      Jan 6
    • AMD / EngLEtV72
      Depends on property tax and unexpected maintenance costs...a new roof or HVAC or other unexpected repairs will throw off your calculations..but you can easily calculate this with conservative estimates..and do a 5yr or 10yr breakdown and see which one is better...
      Jan 6
  • New / Eng
    JCoM17

    NewEng

    BIO
    Structural engineer switching to data science.
    JCoM17more
    Do you need a house? If you are a couple then living in a 1bed/1bath might be the best option for you. You have saved a lot of money by doing just that! You would never buy a 1bed/1bath so account for this when you run the numbers. You will be paying for a luxury (bigger house) you do not need. Rent is wasted money, but so is mortgage interest, property taxes and house maintenance. The new tax law with higher standard deductions is beneficial to renters! I do not think you should not buy, but make sure you understand what it is costing you. Search for “collins buy vs rent” articles to get a better idea of why a house should not be thought of as an investment.
    Jan 64
    • Amazon DjangoFree
      OP
      I would agree with that unless if you are probably in the bay area? Over here, house prices appreciate considerably and you can always sell to make up for all the lost cash and move out when you please. Yes?
      Jan 6
    • Snapchat whatTheAnd
      Past performance is not indicative of future performance. The same applies even to the Bay Area. If what you said is always true, why have house prices been dropping?

      Buy because u need that place to live in for the next 7 years. If you like to speculate, I suggest go buy some REITs. In housing, your returns are based on leveraging. That leverage works VERY quickly against you when prices drop.

      Also , the other guy’s part about tax is very important. Trump fucked you a little on taxes for not supporting him.
      Jan 6
    • Amazon DjangoFree
      OP
      Haha. Yep. Trump did spoil the party here :(
      Jan 6
    • Snapchat whatTheAnd
      Yeah.... :/
      Jan 6
  • Salesforce CrimeMaste
    Think about how many new grads all over the world join companies in Bay Area every year. Now these folks will start family and would have to rent/buy houses ( people with family prefer houses rather than condos ). This cycle is every year, so buying houses in bay year should be a no brainer. Also think of all the automation happening around you (driving, robots, voice recognition) this is going to take away jobs from 3rd world countries and put more money in hands of tech companies. If you have money then buy and hold and repeat 😊. Also time in market is better than timing the market
    Jan 64
    • Amazon DjangoFree
      OP
      Agreed. But. All of this was true during 2001 and 2009. But prices still fell considerably.
      Jan 6
    • Are the prices still at what they were in 2009? Or do you want to buy only for 1 year? Buying a house is a 7-30 year commitment. Don’t buy if you want to sell in 2-3 years because that doesn’t happen. Ever.
      Jan 6
    • Amazon DjangoFree
      OP
      Prices have sky rocketed since the 2007 highs and 2009 lows. I want to buy for long term, but also don't want to catch a falling knife (if that's a way to describe the housing market now)
      Jan 6
    • Salesforce CrimeMaste
      Agreed that’s what I said u can’t time the market. How much do you think the house prices would drop, 1million house no one will be selling for 500k ( if that’s the case, people with cash would be buying them in dozen, bit of a exaggeration but true ) . Also only reason it would drop so much is if h1b visa is revoked or something along that line which won’t happen. Prices have dropped and are back to dec 2017 price level might drop a bit but next year is ipo season lot of people will have good amount of money to make down payment. So jump in before they outbid you.
      Jan 6
  • Facebook AyyoLeMayo
    Most likely housing prices will stabilize in the near term, given the recent comments of the federal reserve.

    Long term nobody knows so don’t listen to these armchair economists in this thread.
    Jan 60
  • HPE mtpbg
    I would wait, the market is still going down
    Jan 60
  • Oracle Pearman
    U shd but I don’t see issues ... no visa issues and good time to invest the money in real estate ... even if it goes down and you plan to keep it for the next 5 years or so you should be in profit
    Jan 65
    • Amazon DjangoFree
      OP
      Sure enough. That's why I thought of buying. But if median prices are falling a 100k per month. That's 20k (assuming 20% down) saved as cash in my hand. That's the tempting part that makes me wait. :(
      Jan 6
    • Salesforce MorningLad
      What about interest rate though? Are they going up? Sorry I haven't researched.
      Jan 6
    • Bose boxbox
      Amazon I think u don’t understand the loan.. let’s say u loan 800K and downpay 200k and then home falls down 200K in value .. so that means ur down 200K not 20% of 200k. Bank hasn’t made any loss yet
      Jan 6
    • Amazon DjangoFree
      OP
      Box Box- You're right. But you're talking about "after" buying the house when all the 200k will be my loss. I was talking about waiting and "before" buying when that 200k decrease can help me with 40k in cash savings that didn't go in for down payment (I plan to do a 20%). We're both right, just talking about before and after buying. :)
      Jan 6
    • Amazon DjangoFree
      OP
      MorningLad- interest rates should increase because fed raised them last month. But it hasn't really shown up anywhere yet. 5/1 arm still available at 3.25%
      Jan 6
  • Facebook GbGE75
    Stay as you are. Homes are not investment vehicles. They are how you choose to rent/buy a certain lifestyle (mainly schools for children). The finances involved usually require staying 5-8 years for the math to even work.

    You’d be better off continuing to rent and maximize cash flow to investment vehicles (max 401k, ira, brokerage account). If you REALLY want to own real estate invest in a REIT.
    Jan 60
  • Oracle wJnl24
    After the tax reform it is better to keep renting. You will lose standard deduction and no benefit from property taxes. But you can think about buying and rent it out. You can deduct all expenses from investment property. Buy where you would like to live sometime in future. Consult your CPA on this.
    Jan 61
  • New / Eng
    JCoM17

    NewEng

    BIO
    Structural engineer switching to data science.
    JCoM17more
    I am in the bay area:) Buying and selling a house takes 2-3 months, and has high commission fees. Buying and selling and index fund costs nothing and takes 1 sec:) All I am saying is run the numbers and understand what it is costing you.
    Jan 60
  • New / R&D
    JohnMcPop'

    NewR&D

    PRE
    Harvard Business Publishing, Dick's Sporting Goods
    BIO
    sex on the beach
    JohnMcPop'more
    Hodl
    Jan 60
  • Volvo YdCn11
    How much rent you pay monthly? Find a “good” deal and buy
    Jan 63
    • Amazon DjangoFree
      OP
      Roughly $2100 per month. We live in a modest 1B1B in the south bay. That's how I was able to save so much.. By keeping expenses low.
      Jan 6
    • Google thinknot
      Unless you need the additional space or new location, renting is your best option for now. A home purchase will cost you an additional $3-4k a month. That money could be spent on travel, entertainment and savings. Let the market work itself out over the next 6-12 months.
      Jan 6
    • Amazon DjangoFree
      OP
      @Thinknot: I see your logic. This is what I thought in 2017 when I could have bought a house but waited. And now, I see almost all houses have appreciated like crazy (20-40%) in the bay area. :(
      Jan 6
  • Intel
    freshmonky

    Intel

    PRE
    Intel, Apple
    freshmonkymore
    How long did it take you to save that amount?
    Jan 61
  • Micro Focus / ProductGWOz11
    Not a resident of the bay area, but if you decide to buy, just make sure that you purchase something that you're comfortable to afford. Just an opinion of mine, at least consider about 500-1000 in annual home expenses. This is just something I do. It may be Overkill but at least you'll have a buffer.
    Jan 60

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