I’ve seen many articles and often hear how engineers making $200k+ in salary plus equity can’t afford to buy a house in the Bay Area. I don’t understand it so I’m hoping someone can help me. I am not an engineer making $200+ salary. I bought a condo almost a decade ago in SF. Even though the economy was down at that time, I️ paid the full price of $420k for the condo (sounds like a steal now) because it was a new build so the builders wouldn’t budge. At the time, I was only making $70k on my own and was able to purchase it with 20% down. Now I’m in a business role at Facebook making $125k. The stocks I got were minimal at $75k and I’m new so nothing has vested. My spouse makes $90k and has about $200k in equity. Together we only make $215k in combined income. We have no debt accept the condo mortgage of $1500/month. We are looking to buy a bigger place to start a family and easily qualified for $1.3m (we can put a down payment up to $320k). Not saying we’re going to spend this much, just what we qualified for. One person at Facebook did post internally about this topic. She said she could never afford a place in the Bay Area. People asked her to lay out her numbers and spending and she went into how her eating out, entertainment, shopping equaled some high number like $3k a month in entertainment on top of her bills. No wonder she can’t save for a down payment. I️ envy engineers who make such great money - hell, I️ don’t even have a college degree - but I don’t understand how they can’t afford a house. Can they really not afford it or is it because they don’t know how to budget and have been spending lavishly? Am I missing something completely? Btw this is not to knock any renters; this is just about people who say they want to buy, make lots of money, but say they somehow can’t afford to buy.
we can and are, these are just people who don't know how to budget it are scared to take out such a large loan
Always been curious: to what extent do banks consider stock comp as part of our income? Do they only go off of base salary, or discount the grant price of the shares? What about pre-IPO companies versus say Google or Facebook?
I don’t believe they don’t consider pre-ipo stocks - that seems way too risky. For my approval, they accepted 100% if vested stocks, obviously because they are vested. And only 70% of unvested stock. And since I’ve been at fb less than 2 years, they wouldn’t count any of my stock or bonuses for some reason. But I guess they need to be conservative after they went loan crazy back in 2008 that got us into the mortgage crisis.
Well, at least for me (I’m single) that’s the reason I can’t buy even though I have the down payment: my base alone isn’t nearly enough to afford something like a $1m townhome. I think most traditional lenders won’t consider RSUs but some might to a certain extent.
They spend it trying to impress people that don't care.
Yes this is definitely part of it. I know it is for some of my friends.
You understand that my liquid assets are worth more than five houses where I used to live, right? You understand that Google pays $300k+ not in the bay area, right? I moved here because of an interesting job prospect. I don't intend on leveraging my net worth based on real estate value in the bay area.
I’m not talking about you. Totally cool whatever you want to do with your money. My question is why people who make so much money and want to buy a house in the bay say they can’t afford it. I’m trying to understand their logic and point of view. On another thread, a guys said he makes $200k and can’t afford it and he can’t only afford if he makes $500k. I don’t understand people’s calculations and also wondering if I’m missing a point somewhere.
I couldn't even understand spending $3,000 discretionary in a month. I think your understanding of "I want a home, I have a low six figure salary in the bay area, and maybe I'm reckless and/or scrappy enough to maybe have a kid" is roughly very doable. But people here think that a six figure salary means riches and a private jet and not thinking about money.
Also some stubborn bargain hunters around. I've seen people overbid by a little, lose the deal, then say they can't afford it. They don't want to pay market price and don't want to settle for something cheaper. People do that all the time, like saying they can't afford concert tix. They just don't want to pay it.
Overall: what happens if the 1.3 million dollar condo drops in value by 50%?
If you’re afraid of it, you say you don’t want to buy. But OP asks about people who say that they want to buy but can’t afford.
I think agv s point is that part of why they can't buy is because they're afraid of inflated values which is fair I'm.
Engineers spend least. Look at how they dress or what they do in weekdays - coding as hobby or leetcode practice or gaming. Most of the engineers in bay are from overseas developing countries where saving is considered as good deeds due to uncertainty of the future in economy. These people do not want to buy a house unless they have downpayment of almost half the price and want to save as much as possible. Many will save so their kids can go to expensive private colleges or help their parents and families. Some people who tasted massive profit in real estate like some East Asian countries tend to buy an expensive house by paying the highest mortgage possible though. From what I have seen, Indians and Russians wait till they have more but end up unable to buy at all since the price keeps going up despite making more money. Europeans and Chinese are middle pack. Some Chinese from big cities or Koreans/Taiwanese are the ones who buy a house with maximum mortgage they can afford.
For some people, especially those that grew up in less expensive parts of the US, it is more that they can't afford the type of house they want rather than a house at all. If you grew up in a 4-5 br house somewhere in the East Coast that today is valued at 400-500k, then it becomes hard to psychologically accept that you'll have to spend 2m+ to be able to raise your kids in something similar. Of course, you can buy a cheaper townhouse but then you'll have to reconcile your expectations with the reality of what the market is in the Bay area and people don't want to do that.
This is a good point, I think it’s a major factor. I immigrated from Europe and have always lived in smallish houses, doesn’t bother me. But I’ve noticed Americans are more concerned about having a bigger house.
This is exactly why I am not buying a home on the west coast. I can't get over the fact that a plumbers salary in the Midwest can buy more home and have a better wlb than a Dev with a masters degree here.
My husband and I make a combined $400-500k a year and own two homes in the bay (one in SF where we used to live and suburb now where we live) and two investment properties outside California. Bought the home in soma when we were making $250k combined. It’s totally doable if you aren’t stupid and have super high standards. I feel like millennials wait until they see the PERFECT house and don’t bid and years go by and the less ideal house they saw a year ago is now worth way more.
Just wondering, How many years of experience do you have?
Graduated college in 2011 and husband is 2 years older than me Oh forgot to note - both the homes in the Bay Area, we bought with single income/loan. Homes are fairly modest but have increased in value significantly over the years, so now if we want that $2-3M home we will raise our family in etc, we can totally do that with the combined equity.
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This is a question for me as well. I came to America with $5k in my pocket 3 years ago, never had any material support from family, and now I have a condo in the Bay Area while making less than 200k. I bet these people know how to spend but don’t know how to save.