I see everyone in the Bay Area buying a house as soon as they are able to.
I am not sure what I am missing. I am totally able to afford a house here, but the cons just seem to be a bit much.
Monthly payments are about 2.5x the rent in any area that I am seeing. A down payment of ~0.5 million seems to be required for a half decent place.
The way I see it
- House prices will never appreciate as much as my investments do. In fact, it won’t even get close to it (especially at current house prices). As I see it, it is taking a substantial loan to buy an expensive asset that will appreciate (if at all) less than what you will be liquidating.
- I not only lose the 1.5x monthly disposable income for investing, but also any appreciation I would have seen for the down payment money.
- Equity is not as much I imagined either. For a ~2 mil house, property taxes, interest, insurance, etc (stuff that doesn’t add to equity) is already around 2/3rd of rent.
- You lose any kind of flexibility. For instance, moving closer to a new job or renting a new place with an extra room for a year or two temporarily. Upsizing and downsizing becomes trivial.
- I need not be paranoid about good public schools turning bad in the 20-30 year timeframe. I can easily move when that happens.
- I have 0 intentions of retiring in this 💩hole of a state.
What am I missing that people want to buy a house and take such a huge bet and compromise so much in their young and productive ages for a couple of thousand bucks of equity (if at all) a month?
We all know the maxim to rent luxury and buy utility. The house prices here are definitely in the “luxury” range without actually being luxurious by a long shot.
It just seems so fiscally irresponsible to buy a house here. Any decent financial analyst will tell you this. And yet the demand is so high - I just don’t get it. What am I not seeing?
TC - 620K
Household - 950k
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comments
1) quality of life - a house you live in is not an investment, it's about not having neighbors, a landlord, or how.
2) folks want to lock in their cost of living asap. Especially in CA we have prop13 which lockes your taxes for life so earlier you buy less you pay.
3) appreciation doesn't matter. You never ever sell real estate. There is a fear that once people realize it is insane to sell real estate there will be fewer and fewer sales until one day almost nothing.
4) you can still move, you retain the property as a rental with an extra advantage of a lower rate.
5) You don't have to worry about local schools if you pick a good area
6) If you don't plan to own in ca for life then don't buy but ca is the best state, hands down, to own real estate (see #2)
It’s good for people like you (and me)! Take the easy money!
I ll consider buying here at some point. If I settle in the USA, California is a likely place for me to live, but I can afford to wait a long time.