Can I afford a $1.4M house in the South Bay?

Microsoft Mayolo
Jun 2 33 Comments

Coming up on the end of my lease and got to thinking about what it would take to afford a decent house.

Wife and I make ~350k TC and have around 425k in liquid assets. Looking at houses around 1.2M to 1.5M range in the South Bay.

When does it make sense to stop renting and just buy with 20% down? Will the value of houses continue to increase at the same rate?

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TOP 33 Comments
  • American Express uktg07
    Nobody knows. Very few markets still go up in a recession which is impending. How much of that is your cold hard salary?
    Jun 2 6
    • American Express uktg07
      I personally wouldn’t buy based on your cash reserves and because there’s a great probability that the housing prices will go down. You’re going to eat up half your cash reserves on a downpayment alone and I personally wouldn’t do that. I’d save up until I had at least $600K. All it takes is one injury or job loss and the balance can get eaten up quickly. Doesn’t sound like you’re married either, so you’d be shouldering all of that solo.
      Jun 2
    • Microsoft Mayolo
      OP
      I am married, but yes you're exactly right we'll need savings for that rainy day.

      Really appreciate the input!
      Jun 2
    • Workday / Product str
      AmEx, what part of “wife and I make 350k” did you not understand ?
      Jun 2
    • Microsoft Mayolo
      OP
      str, I edited the post :)
      Jun 2
    • Workday / Product str
      Lol okay. Never mind AmEx. Love the Platinum charge card.
      Jun 2
  • F5 Networks RRA
    If you don't know you'll be in the area for 10 years, not worth it. And if you're not married, also not worth it.

    Edit: Whoa, 240k cash comp per year between you both? This is a bad idea. Don't do it.
    Jun 2 10
    • Microsoft YsTJ07
      How do you set those numbers without past experience??? Otherwise, you're just making shit up
      Jun 2
    • Apple / Eng gtUh6$
      Sure, dude. You win
      Jun 2
    • Tree.com vDYq17
      @microsoft, it's based on historical trends. 10+ years offsets short term downtrends. So it's safer to buy if you're interested in the house for long term.

      You got lucky walking away with an upside in a shorter duration but statistically that's higher risk
      Jun 2
    • Microsoft YsTJ07
      I was strictly replying to "past performance is not a good indicator of future performance". You can't rely on historical trends while agreeing to the quoted text. They are contradictions.
      Jun 2
    • Tree.com vDYq17
      Sure, dude. You win
      Jun 2
  • Mentor Graphics entrep
    If this is going to be your primary residence, I would base the decision on the following factors:
    1. Buy vs rent calculation - depending on your current rental cost and the tax benefit that you would get from the mortgage.
    2. How long you plan to stay there.
    3. If you have kids whether you want to send them to public vs private school. Generally, the rental and house prices in good school districts will be higher.
    4. Your job security relative to overall market.

    Overall, Bay Area is a strange and resilient market and very difficult to time. Given the slew of IPOs no one knows where the market will go.

    The other thing to consider is that you would have your 425k invested somewhere and if the market turns, your investment will do down as well. By purchasing, you will be moving from one asset class (stocks) which is at all time high to another (housing) which is also at all time high.

    Good luck!
    Jun 2 1
    • One thing I want to add is: Investment in house almost always has higher leverage compared to investing in stocks, thus in a not-so-upward market, you could see your asset burning much faster.
      Jun 2
  • Zillow Group SnDe72
    You want your house to be 3-6x your combined income and less than 20years * yearly rent. If this isn't the case, it's not a good investment but that doesn't necessarily mean you shouldn't buy.
    Jun 4 1
    • Apple foobee
      Net or gross income?
      Jun 5
  • Autolist eFks14
    Even if we experiences another 2008 crash, 30% drop would only be under $1200/ month over the 30 year period if the price stays the same for that level. And I personally believe the house price will going up over the long run. So if you are able to buy and your rent is over $1200/ month, I had say go for it. The risk is pretty low here 🙂
    Jun 2 0
  • eBay goforIT!
    No one knows if the value will go up or down but you know if you will save in rent or not
    Jun 2 0
  • Illumina tech lead
    Data point for you - if it matters :)

    My wife and I have very similar numbers. Married with 1 child with 1 on the way.

    Comp is 250k/yr in cash. 340K/TC. 500k net worth. Looking to buy lt 1.05M (5600/mo) in SoCal. For this price we could have a 4/3 2600sqft 2 yr old home in a 9/10 school district. Currently rent a 1960s, 1200sqft beat-up 3 bed for $3000/mo.
    Jun 2 4
    • Apple / Eng gtUh6$
      Where are these prices in SoCal dude??? Been looking but the combination of price, rooms, sqft, schools, and year built, does not exist. Are you from an alternate reality??
      Jun 2
    • Illumina tech lead
      San Diego? :) North of the 56
      Jun 2
    • Living that biotech life. Love San Diego. Poway? Rb?
      Jun 2
    • Illumina tech lead
      Mmhmm. Prices will be cheaper in Poway / RB. PHR / Del Sur / 4S / CV has these prices. PHR being closer to 1.3 for brand new.
      Jun 2
  • Palo Alto Networks noones
    Didn’t you notice the whole market is going down and recession is on the way ?
    Jun 3 1
  • Microsoft TonyM
    Good advice from Mentor.
    Jun 2 0
  • Autodesk rar!rar!
    US Bank will finance anything
    Jun 2 0