Family of four, moving to Bay Area, making $115K. Is this crazy?

January 27, 2008 11:11 PM

Family of four, moving to Bay Area, making $115K. Is this crazy?

I live outside the US. I have been offered a job in Mountain View making $115K, which is a lot anywhere else except the Bay Area it seems. I have the potential to make $30K+ in bonuses annually, but bonuses don't pay the mortgage. I would have ~$300K in home equity to make a down payment on a house. So my question is two-fold: one, can I actually live a reasonable life on this much money in the Bay Area? 1100 sq ft 3-bedroom houses seem TINY to me. Is this really the best I can expect to be able to own? The second question I care less about, but of course the big question is whether buying a house in the peninsula in the next few months is bad timing. But I'm a believer that you cannot time the market, so really it's the first question I care about. Can I, my wife and 2 kids live in a nice neighbourhood for that much money? (Finally I would have a relocation package, so transaction costs are not an issue, just making monthly payments on somewhere worth living and not having to eat beans, as much as I enjoy them).

posted by anonymous to work & money (15 comments total)

I would resist the urge to jump into a new home until you get a feel for the various areas, commute times, lifestyle adjustments, etc. Why don't you rent a place for six months or a year before buying?
posted by wfrgms at 11:24 PM on January 27, 2008 [1 favorite has favorites]

It sounds like a reasonable amount of money, and I imagine you'll live pretty comfortably (even with the high cost of living there). I wonder, though, if you'd even get a home loan right off the bat. Because of the mortgage crisis, lenders are becoming very wary of issuing out loans, especially to someone new to the country (and presumably without the same sort of credit that someone inside the country would have).

I second wfrgms' suggestion of renting for a bit. While you rent, try to pay as absolutely much as you can with credit cards (paying them off immediately e.g. via online banking), so that you can build up a decent credit score. This will also allow you to wait for the house prices to hit rock-bottom (which I imagine will happen sometime in the next 6-8 months), and you can take advantage of the flood of foreclosures. From there you can decide what your price range is. By the way, 1100 sqft for 4 people is tiny.

Good luck!
posted by spiderskull at 12:13 AM on January 28, 2008

I ran the numbers, and it looks like you'd have in the low 700,000s (I made a raft of assumptions, so you should ask a mortgage broker). I haven't shopped in Mountain View, but I do read Burbed, so I am a bit skeptical about what you're going to get for that. It's not out of the question that you'll find a house you like in a decent neighborhood, but you'd probably get a lot more for that money even somewhere like Berkeley.

Here's another thing to worry about: schools. I'd find out how the schools in wherever city you're planning to move to. I know even some people who wanted to use the public schools who ended up paying for private school. In that area it can cost $20-$30k/year apiece (iirc).

Here's something to read: In Silicon Valley, Millionaires Who Don't Feel Rich. I was at a South Bay party last night where people were talking about how they were all spending $25-$50,000 to remodel their bathrooms (the $25k people explaining how much they'd had to do themselves). I dunno, is that normal?

As for timing, no one knows, obviously, but one person who has a theory about the timing of housing bubble deflation is this guy (eg). (If you want more links to housing bubble blogs, I have a little collection.)
posted by salvia at 12:38 AM on January 28, 2008

I think it all depends on your standard of living. I'm able to rent an actually quite nice place in the city (with roommates) and live semi-comfortably on an NIH stipend, which is less than 30k annually. It's not like I'm being squeezed for cash either; there was enough left over this year to go in with a group renting a cabin in Tahoe for the winter, and take a trip overseas in the summer. But then again, I don't drive a car, to save money. It sounds like you'll be needing at least one vehicle to get your family around. I also cannot relate one bit to the incidental expenses brought on by the little ones. I don't recall where I read this, but there was an article which did the math and showed that it is impossible for a family of 4 making what is considered a middle-class income of around 70k/yr to provide what are considered standard things in the rest of the country, like food, vehicles, adequate housing. That said, there is probably a way to make it work if you want to live here, and believe me, if you can make it work it's worth it.

Like Salvia said, private schooling is something you should look into. It's widespread in the city, but can be very competitive to get into the right school in the right place, as there are so many people here whose only problem seems to be how to get rid of their money.
posted by StrangerInAStrainedLand at 1:12 AM on January 28, 2008

But I'm a believer that you cannot time the market

good luck with that.

Anyhoo, the simple answer is to get on mlslistings.com and go to town, eg: this charming 95014 listing.

With 20% down non-conforming loans are certainly available, here's a 5 year fixed $800,000 with $200K downpayment from eloan.com:

APR: 5.000%
Points: 0.988%
Monthly payment $4,295
ARM Margin: 2.750%

Unfortunately your $115K is pretty much peanuts here as far as home buying is concerned, with a 35% DTI limit your upperbound borrowing power tops out at $650,000 (assuming 5 year ARM).

Currently, there are (literally) thousands of GOOG and AAPL zillionaires pinging through the real estate market in all the good areas. This activity may have peaked recently, but it remains to be seen what other macro-economic forces will arrive to sustain prices.

One thing we DO know, however, is that the 2003-2005 run-up was largely due to these aforementioned 2 & 5-year ARMs, combined with even sketchier loan products like stated-income and negative amortization loans (accounting for the majority of transactions in the area over the past 5 years). These over-engineered mortgages are only beginning to unwind now, and with the collapse of the credit markets last year this unwinding portends good things for future home buyers.

As far as research data goes, nobody beats this guy.
posted by panamax at 1:18 AM on January 28, 2008

(correction to above, that was $800K borrowed, $200K down = $1M price loan example)
posted by panamax at 1:20 AM on January 28, 2008

My husband and I have both lived in the bay area and have friends there, but we decided not to move there even though we would probably be around a 150-200k income for just the two of us. Part of it is I'm just tired of having to compete for everything and deal with all the traffic and workaholism.

I have to admit I'm a strong believer in timing the market, but even if I wasn't I would rent for a while just to get an idea of what the neighborhoods are like. I think it's a great time to buy where we are living now but we took a year lease anyway because I don't want to get stuck owning a house before I have explored all the possible areas. I would feel even stronger about this if I were looking at half a million plus priced houses in an area where prices have been declining.
posted by Melsky at 7:28 AM on January 28, 2008

As a local, I can attest that Peninsula life isn't much fun. Cars are a necessity, the housing opportunities are grim and the work with the larger entities can be soul-sucking. If your spouse doesn't have the potential to match your salary, I'd pass on this transition. It sounds like the right opportunity for a younger person, with less concerns about home ownership and child rearing.

That said, working in tech and being in this area has been one of the most rewarding things I've done with my life. If you truly love what you do and are looking for an opportunity to do important work here -- perhaps it's worth the sacrifices.

Re: credit, we purchased a home in SF with $200k down on a foreign credit record. Mind you, it's 700 sq. feet, but to us it's a small and joyful home -- not a cramped cage for our family. It's all about mindset. What I can tell you is that my salary is comparable to yours and there's no way I'd sign up for a $400k mortgage on my own. Your spouse will have to find a well-paying job for it to work, or you're going to be in a tough position. Being that strapped while working so hard, an in an unfamiliar place, could break a man.

Given what I know about your situation, I'd use this offer as a springboard to explore jobs in other metropolitan areas with comparable salaries but better options for families and home ownership. Perhaps the company you're interviewing with has offices elsewhere?
posted by cior at 8:01 AM on January 28, 2008

The kind of living you do in the Bay Area will have trade-offs. Example: I prefer not to live in suburbia but instead in a rural environment. I therefore trade off less-expensive housing for a commute of an hour's length (this, mind you, is not a bad commute in terms of time but it is long in terms of distance). Assuming you have kids, a strong driver for you might be school district. Cupertino and Palo Alto are very highly regarded and people pay a lot to live in those districts.

Nthing the idea that you should rent (especially if you are going to arrive before the school year starts) and examine different places in the Bay Area. Mountain View is not all that well served by public transit except by the VTA trolleys from San Jose, and the Caltrain from San Francisco. Living in the East Bay (like Berkeley) has a set of trade-offs that would drive me absolutely batshit insane if I had to work in Silicon Valley, but were I working at UC Berkeley they'd be just fine.
posted by jet_silver at 8:46 AM on January 28, 2008

With $300,000 in home equity and a salary of $115,000 you're well within the range of what people are living with here.

A constant refrain I hear from people who have moved out of the SFBay is: "The housing is cheaper, but everything else costs the same here." Other than the cost of mortgages (and property taxes), the cost of day to day living is similar to anywhere else in the U.S.

So -- you can calculate your mortgage (and property tax) up front. If you feel comfortable supporting your family on what remains, then you can afford to live here.
posted by tkolar at 9:22 AM on January 28, 2008

I'm a college student, so I can't really answer your question because my house buying experience is pretty limited but I'm from Mtn View, so if you have any other questions about the area I would gladly answer them via MeFi Mail.
posted by baserunner73 at 9:49 AM on January 28, 2008

$115k is not a grand amount for Mountain View, especially with a family.

Depending on where you are moving from, you may be looking at a lower saving rate and potentially a lower standard of living (smaller home, more expensive child care, groceries). On the plus side, heating costs are lower, so if you're moving from New England, you get to say good bye to that big winter bill.

I would recommend what others said - strongly consider renting. Rental rates in many areas are much lower than the comparable mortagage on the same kind of home in the same neighborhood. Also, consider property tax in your equation. New homeowners get hit big time in California due to Prop 13, so the price you pay may be 10x what your neighbors pay. I could be wrong, but I believe it would not be surprising to pay over $1000/mo in property tax on a new home.
posted by zippy at 10:15 AM on January 28, 2008

Gas is more expensive ($3.32/gallon) in San Francisco than in most other places.
posted by kirkaracha at 11:04 AM on January 28, 2008

That's just in San Francisco, though. Down in the Silicon Valley it's $3.03/gallon.
posted by tkolar at 2:04 PM on January 28, 2008

My fiance and I are trying to buy a house in the Mountain View area right now. I can tell you that you will find it difficult to afford a house with that down payment and salary. There's just too many overpaid CEOs around here. If you'd like a recommendation for a good realtor or financial adivisor in this area, I can give you one. Send me mefi mail.

Good luck.
posted by bananafish at 5:57 PM on January 28, 2008