How rich do you have to be to move to the East Bay?
December 29, 2015 11:06 PM   Subscribe

I'm rich. Am I rich enough to live in the Bay Area?

I'm interviewing for a job that would require my family (two parents, two school-age kids) to move from the pleasant and relatively inexpensive city where we live to the East Bay. The price of housing there seems like madness to me. And yet I know a) people move there all the time, and b) we are, not to put too fine a point on it, pretty rich. I expect our household income, were I to take this job, would be $175-200K per year. That's a lot of money! But maybe not a lot if the whole economy there assumes you have two software-engineer incomes that bring home twice that. The rule of thumb is that you spend 2.5 times your annual income on a house; in my current city it would be hard to find a house that expensive, while in the Bay Area it seems impossible to find anything anywhere near that cheap. Even at four times our income there's not much. Snowflake factors: we don't own a house now, so don't have that home equity to start with. On the other hand, because we live in a cheap place, haven't bought a house, and have had some windfalls, we have a lot of savings: about $700K put away for retirement, $400K in 529 funds for the kids, and a little over $1m in liquid investments. Like I said: we're rich. But we're not tech-company rich.

So what would it mean for us to move to Albany or Berkeley or Emeryville or Oakland? More like "Stop worrying, you're rich enough, it's fine?" Or "You can afford it, but you wouldn't be rich anymore, you'd have to scrimp and save, and/or have a 90-minute commute?" Or "This is a terrible idea for someone of your relatively modest means?" Is buying a stupidly expensive house in the Bay Area good, because it'll only get more valuable, or bad, because the ridiculous house prices there thought to be about to collapse, leaving 2016 buyers in an impossible financial hole unless they're making Facebook salaries? There must be people who move there and don't work for Facebook -- aren't there?

(Followup questions or personal financial stories you don't want to share can be sent to
posted by anonymous to Work & Money (32 answers total) 6 users marked this as a favorite
You're totally rich enough. I mean, do the math for yourself, but I know people who get by on FAR less.
posted by salvia at 11:19 PM on December 29, 2015 [2 favorites]

You're good. Really. People (I) live here comfortably making far less than that. Start actually looking at places at least before you count yourself out.
posted by bleep at 11:29 PM on December 29, 2015

Based on my friends in tech in the Bay Area, and speaking as someone in a major city at a similar household income level... "You can afford it, but you wouldn't be "rich" anymore, and/or have a 90-minute commute" sounds close to right. Well, okay, you'll still be totally fucking rich as opposed to most of America.

Your savings put you into a significantly better level overall than most people I know, but you will not continue to accumulate those savings at the rate you're used to. You probably won't have to "scrimp and save," but man, I clip coupons like a crazy person and shop at Old Navy and sometimes buy sale stuff at The Gap or Macys. Then again, I am relatively risk averse and seem to have way more savings than most people I know in my situation (for instance, no, we don't need to vacation overseas once a year, and no, my kid absolutely does not need Ralph Lauren clothing), and our only debt is car payments and mortgage.

Throw the "house should cost 2.5x your annual income" thought out the window; that does not apply to most major cities. Don't expect property to appreciate exponentially in already-high-priced areas unless you're willing to move into a gentrifying area.

A not insignificant number of my friends in the Bay Area whose household incomes are in your range (or higher) who are in the "considering having/just had/about to have a second kid" phase of life are very seriously considering leaving the Bay Area for a slightly lower paying position in a much less expensive area of the country. I know at least five families in that situation who have left the Bay Area for Seattle, Portland, and even Los Angeles in the past three years.

However, I also know families in your exact situation who are loving life and having a great time in the East Bay. I think it depends on your definition of a great time, and it depends on what your personal values are -- do you need to live in a nice, quiet, suburban atmosphere with big yards, big houses, and great public schools? Then the Bay Area may not be for you.
posted by erst at 11:34 PM on December 29, 2015 [15 favorites]

2.5x annual income sounds like a rule of thumb geared to a housing market that expects no capital gains on the value of the property. In the posh parts of San Francisco, 4-5x is common. But if you need lower monthly payments for your peace of mind, you can afford to make a larger down payment.
posted by Phssthpok at 11:35 PM on December 29, 2015 [1 favorite]

Do you have to buy? What about if something happens to your job or the housing market?
Right now you’re pretty set. If you buy a house there you could surely survive just fine, but you might lose all that cushion. You have to weigh where you are in life and what it’s worth for you to give up to live there.
posted by bongo_x at 11:41 PM on December 29, 2015 [1 favorite]

You can definitely afford it. But, you'll probably need to liquidate investments to pay for a house at the same level that you're used to living in. For comparison, without savings, on a 200k income you could probably rent a 2BR condo with laundry in the basement, or a nicer/newer unit in an inconvenient part of town (i.e. not near the city centers of any of those cities).

So it's not so much that you'll have to scrimp and save, or have a 90-minute commute; rather, if you want to avoid doing either of those things, you'll have to settle for a smaller and less nice apartment over a spacious house with a yard. If you measure wealth in terms of your living space, you'll feel poor.
posted by serelliya at 12:02 AM on December 30, 2015 [1 favorite]

One thing to factor in is property taxes. It's one thing to be able to afford to buy a $1 million+ house. They are everywhere in CA. The painful part is the ongoing property taxes on that house in addition to mortgage payments. Writing a check for $17,000+ that increases every year hurts.
posted by cecic at 12:04 AM on December 30, 2015 [7 favorites]

I don't think it would be a problem. I'd personally take out a mortgage and keep some money in other investments, rather than buy outright using your saved money - that way not ALL of your money is invested in this single piece of real estate.

But you have enough money that you could buy a place outright. It wouldn't be as large or as fancy of a place as you might have out where you are now, almost certainly wouldn't have the same amount of lawn unless you took on a major commute. Still, being able to afford to pay cash, even without touching your kids' college funds or your retirement savings, in itself should be somewhat reassuring! It means you can *choose* how large of a loan (and in turn, how much of a monthly payment) you take out. You aren't tied in to the standard assumptions of an 80% mortgage (which I'm sure is part of where that 2.5x number comes from, though I'd note I've never heard it before; I've lived in the Bay Area pretty much all my life, though). And you wouldn't need to lose your emergency fund, etc - you'd be nowhere near the edge in that regard.

As far as not bein rich, yes, you would be 'normal' rather than 'rich', most likely, in comparison to your neighbors and so on. But I think that'd be OK.
posted by Lady Li at 12:05 AM on December 30, 2015

Like I said: we're rich. But we're not tech-company rich.

Actually, you are. Your household income looks like one Facebook worker plus one worker in a more average job. By the standards of most such households, your savings are vast (you could buy a nice house here in cash if you wanted to---not that you should).

I think the key variable is what standard of living you expect, which you haven't said much about. I know people who have much, much less than you and have bought recently in the East Bay---but they accept a variety of trade-offs that may or may not work for you (type of neighborhood, amount of living space, commute time).
posted by aws17576 at 12:06 AM on December 30, 2015 [4 favorites]

$175-200k is the high end of entry level at many of the larger tech companies. That's still probably enough that you're in the top 10-15% by household income in the bay area (if not higher), but you likely won't feel rich. Part of that is houses overall are just smaller here, so you feel like you're paying a lot for not very much. Depending on how much you're making now, I wouldn't be shocked if your standard of living decreased.
posted by matildatakesovertheworld at 12:21 AM on December 30, 2015 [1 favorite]

So, you are likely going to be looking at houses in the 1.5 M range for decent (NOT fancy, needs updating) condition in a good school zone with an ok (45 min) commute. If you use a lot of your liquid reserves as a down payment you should be able to cover the almost 1M mortgage and property tax. At the 200k range you will not feel rich here but you will be comfortable, "average" even. Clearly there are people here who live on less but honestly I have no idea how. I consider 200k the minimum of what a family needs to live comfortable here (eg, 200k/year feels a lot like 90k/year elsewhere).

Given your healthy savings, go for it.
posted by saradarlin at 1:28 AM on December 30, 2015 [1 favorite]

You are rich enough, but why do you want to move? If you stay in a low cost of living area you may have enough money to retire now or very soon; if you move to the Bay you will have to keep working to maintain a more expensive lifestyle. Maybe you like working, maybe you love the idea of moving to SF, but unless you have family or lots of friends there I wouldn't do it.
posted by chaiminda at 4:24 AM on December 30, 2015 [21 favorites]

My friends recent experience isn't necessarily relevant as they have been looking at 1-3 bedroom small homes and condos but I might be concerned that, even though your good financially on paper, the actual mechanics of buying in that market right now are such that you could expect homes listed at 1.4 to go for 1.75 all cash. Find a good realtor who you trust.
posted by Exceptional_Hubris at 4:26 AM on December 30, 2015 [1 favorite]

You could buy a house and be perfectly comfortable. I wouldn't advise it, not just yet.

Oakland and Berkeley have gorgeous rental properties and they have rent stabilization, so does San Francisco for that matter. I have a friend who moved into his apartment in the Noe Valley neighborhood in San Francisco in 1985, it's a one bedroom flat, with three walk in closets and an eat in kitchen. He pays around $2000 for it. Market value would be close to $5000. He has no maintenance, no taxes, no insurance and a parking space in the building. THAT is gaming the system. MY suggestion would be to get into a good rental and stay there forever.

I would recommend renting in a community close to your job and start going out and about on weekends to explore different communities before you buy. Nothing worse than finding out once you bought that your city has terrible police or is about to be bankrupt or has a crumbling water system.

Know that property taxes and insurance work differently in California. For example, earthquake insurance typically has a 33% deductible. Think about that for a minute. If your home were to be damaged by an earthquake you'd be out of pocket the first third of the repairs. That is if you were to even buy earthquake insurance, because it's hella expensive.

Basically you get a lot less bang for your buck in the East Bay. Also, the East Bay is pretty big and the cities can be very different. Will it be Oakland/Berkeley? Further up 80 towards Richmond? More to the east to Pleasanton? Concord/Walnut Creek? Each of these places has a VERY different vibe and feel. Frankly $200k isn't enough to entice me to live in Pleasanton, but that's me.

If you have good public schools where you are, with good enrichment like music and art classes, be aware that California public schools don't.

Taxes can be pretty steep too, so factor that into your decision.

If this is a game changer in your career, then take the plunge, if you're just making a change because that $200,000 is a large figure...don't do it!
posted by Ruthless Bunny at 4:53 AM on December 30, 2015 [6 favorites]

Can't speak to California (tho can speak to living in high cost/high income areas). One thing to keep in mind about the aphorism about home price/income is that it has an embedded assumption about interest rates that doesn't necessarily jibe with the current environment. A better metric is payment to income. That said even on that measure you might be uncomfortable with what you want for your family costs. Of course if that's the case and you think you are in a high part of the income distribution that's probably a sign to rent, not buy.
posted by JPD at 5:17 AM on December 30, 2015 [1 favorite]

To answer the question at hand. With 1M in liquid assets and 200k+ a year, yes you can buy a house in the East Bay. I live in Berkeley and you can get well into a place you can afford. 2.5x your income for the price of a house (and for that matter the lack of home equity) doesn't hold when you can plunk 500k into a down payment and still have 500k in reserve.

The other thing about the east bay, oakland and berkeley in particular is that they are broad swaths socioeconomically and you can spend whatever you want on a house depending on neighborhood. If you want something a little more suburban you also have Orinda or Moraga to the West which are very valid family options and only an additional stop or two out on BART.

The Bay Area housing market is as close to a safe bet from an investment perspective as I've ever seen, particularly with the safety cushion you've got which would keep you from having to sell in a down market. 2008 was the worst crash for the bay area market in 30 years and it recovered in about 4 years.
posted by bitdamaged at 6:34 AM on December 30, 2015 [1 favorite]

Oh one other note.

The Northern part of East Bay (Oakland/Berkeley/El Cerrito) has been slightly isolated from the Silicon Valley boom because of its distance (I occasionally have to visit clients in Sunnyvale and the commute home to Berkeley can take 2 hours, double the trip without traffic). As more tech has moved into SF this has started to change as commuting from the East Bay to SF is ridiculously easy wth BART. Uber moving into downtown ("uptown"?) Oakland in the next two years I think is going to change the game completely, already that part of Oakland near the Sears building is starting to gentrify. I think Oakland may finally be primed to have more technology move in which will likely start inflating housing prices in this area. That's purely me being an armchair speculator and folks have said Oakland is going to take off forever and it's managed to fight off most attempts of so far but it seems more likely now then ever.

Hope that helps. If you want any more insight into neighborhoods etc feel free to memail me.
posted by bitdamaged at 6:45 AM on December 30, 2015

A few thoughts.

Your economic profile -- modest cash income, high relative investment assets -- is very typical for the Bay Area. Housing prices in the good parts of the Bay Area are sky high relative to cash incomes, because the tech industry actually puts a pretty low cap on salaries for all but the senior executives, and people buy their houses when their equity compensation pays off. In New York, for example, where lawyers and financiers make cash incomes, two or three times your annual income is a pretty common benchmark for buying homes -- jumbo mortgage lenders and co-op boards are very reluctant to let you spend much more.

But that said -- you will not be "rich" by Bay Area standards. You will not be able to live in the neighborhoods the rich people live in, you won't be invited to the fundraisers they go to, you won't be able to join their country clubs or otherwise be in their social circle, you won't have the political or business decision-maker access they have.

(I do like the notion that with an East Bay job Orinda, Moraga and Lafayette are options for you: places where the neighborhoods are great, public schools are usually very good, and the Silicon Valley zillionaire factor is much reduced.)
posted by MattD at 6:58 AM on December 30, 2015 [3 favorites]

I don't think people here are giving you quite the right advice. El Cerrito, Oakland, Berkeley and Albany have not been saved from the boom - at all - houses are still going for 100,000+ over asking. The reality is that you are going to get way less with what you have. If you have a 4- or 5-bedroom now with a large yard next to a park with good schools, be aware that that costs about 4,000/month+ in the Bay area (or a million+ if you buy). You can find things that are cheaper here, but you get less - the schools are not as good, and the crime here is pretty nasty when it pops up (how do you feel about shootings? Do you want the police to respond when your house is being burglarized?) If you want a real assessment, call a real estate agent and ask (the cost of houses on the market is not what they are selling for - think all cash, no contingencies, 20+ offers on every house). If you are ok with all of this, then pack you bags!

Also, how do you feel about $8 coffee?

If you want more info, feel free to Memail me.
posted by Toddles at 6:58 AM on December 30, 2015 [7 favorites]

You are. But IMO, not worth it unless you have a relatively short commute. East Bay --> SV commutes are the stuff of nightmares, even if you have access to a corporate shuttle. EB --> downtown SF isn't at all as bad, if you're close to BART on both ends and don't commute during the very peak of rush hour.
posted by un petit cadeau at 7:24 AM on December 30, 2015 [5 favorites]

Here are a handful of my thoughts. I am someone who works as a barista in Oakland and lives with housemates in a rent-controlled apartment (without which I would certainly not be able to afford it.)

-Single unit housing is exempt from rent control here, so that's a factor. Also, housing stock that's under rent control laws is at a premium here because of the tech boom.

-a customer of mine who moved here from Michigan with a partner (and kids? I think?) to work at Apple as an engineer told me that she's finding it tough financially. But she's also used to Detroit prices, so...

-There are no $2000 rent-controlled apartments in Noe Valley anymore. I mean, there are people who pay that because they have been living there for years. You, someone looking for one in 2016, are not going to get one. A few days ago I saw someone in a Facebook group advertising a $2900 living spot in SOMA which turned out to be one bedroom in a two-bedroom apartment. Up til that moment I'd thought about what a bargain $2900 was for a 2-bedroom (even though that's outside of my personal budget.)

On the more positive side:

-I have a friend who just bought a house in Albany. The neighborhood is really adorable and would be great for kids. He works in tech but he's very young and not wealthy. Downside: it's a tiny 1-br cottage. And he works in Oakland, so there's not a long commute, which might not be your situation. BART feels fairly congested to me these days and not getting a seat on a long commute makes it hard to relax and use the time for something productive or enjoyable.
posted by needs more cowbell at 7:34 AM on December 30, 2015 [5 favorites]

needs more cowbell makes an excellent point. My friend's apartment in Noe Valley started out being $900 in 1985, but rent control kept the price down. He's only getting it for $2k per month because he's been there for 30 years.

So no, as I stated, Market rate, which is what you would pay, is WAY more than that.

Also, there is stiff competition for properties both rental and purchase.

I lived in Albany for years and I agree, it's flat out adorable. If I could live in Albany, I might consider the sacrifice.
posted by Ruthless Bunny at 8:02 AM on December 30, 2015

My advice is to vet all the advice that you get. Advice from people who've been living in the Bay Area for 5 or 10 or 20 years is generally useless (or actively misleading). Advice from people who've never lived here is completely worthless. Advice from people who've moved from an area like yours and did so very recently and who have similar goals/lifestyle expectations to yours is about the only useful advice.

(This message brought to you by the amount of well-meaning but terrible advice about living in the Bay Area that I've gotten from co-workers, family members, and friends.)
posted by wintersweet at 8:03 AM on December 30, 2015 [11 favorites]

California has a fairly 'progressive' state income tax, so you would be looking at a marginal state tax rate of a little over ten percent. Mortgage deduction and painfully huge property taxes help knock that down a little bit. But remember to include it in your calculations.

As a pessimist, I think housing prices can't possibly rise more. But interest rates seem unlikely to say this attractively low for much longer. I suggest renting first, because it's hard to make a smart decision about location factors without spending quite a bit of time scouting neighborhoods.

Some people who transfer to CA find our weather monotonous. They tend to say they "miss the seasons". What we get in N. Ca is like 8 months of fairly balmy weather (especially when there's a drought), followed by about 4 months of cool or cold weather. Even I get a bit bored, and I grew up here.

I hear there are traffic prediction capabilities on Google maps, but I haven't used them. You are going to want to take a look at the time estimates and predicted speeds. Or you could google "Sigalert Bay Area" during our rush hour and see what the traffic delays look like. Driving to an appointment in the eastern East Bay last month, my traffic speed dropped to about two miles an hour on 680 heading into Walnut Creek. That was suckier than even I expected.

Reddit has a /bayarea subreddit that handles questions on relocation and commutes and triangulating two commutes quite frequently, although most questioners have smaller families and less money than you do.
posted by puddledork at 8:07 AM on December 30, 2015 [1 favorite]

Oh yeah, one more thing:

There must be people who move there and don't work for Facebook -- aren't there?
Sure. In my experience, they
a) are young and adventurous and think living in a small house or apartment with a bunch of strangers is fun
b) constantly worry about making the rent and generally have close to zero in the bank
c) live with Mom and Dad
d) commute 100 miles roundtrip every day, or more
e) get a second or third job
f) are desperately trying to move out of state
posted by wintersweet at 8:13 AM on December 30, 2015 [3 favorites]

The factors you want to consider are:

1. Commute -- can you expect to telework? If so, you may be willing to spend more time in traffic or on buses or trains. Is your potential office near BART? If not, is there a shuttle to BART? Is there an express bus line nearby? Are you willing to drive, and is there parking available for you? I recommend sitting with Google Maps and drawing circles around the areas that fall within what you would consider a reasonable commute time.

2. Based on that, look at schools, amenities & housing prices. The commenters above are correct: almost everything is going for over asking price, and the types of houses you would be looking at are definitely going for at least 50K over asking. But you have a lot of savings, and if you really want to, you'll be able to buy in most areas. It's the other issues that are the limiting factors.

3. I would recommend coming out and spending a few days checking out the neighborhoods that seem like they would work: stuff that looks acceptable on paper really might not be, or might not meet your needs for some reason.
posted by suelac at 8:54 AM on December 30, 2015 [1 favorite]

A different way of looking at the cost angle is this:

Would you spend $1million (to purchase a house) to make $175-200k?
In essence you would be financing this new employer's need for an employee by spending your own money to relocate.

Pretend for a minute that you can't use your liquid assets to finance this move, would you still think it would be a good idea to do it?
posted by eatcake at 9:01 AM on December 30, 2015 [10 favorites]

The math is really on the marginal increase of the cost of living vs the marginal increase in salary. With some measure for a potential change in career progression thrown in.

Because investing a million bucks to earn 200k is a pretty great ROI.
posted by JPD at 9:31 AM on December 30, 2015 [1 favorite]

If you're not a homeowner now, there's also no need to leap into anything right away. I'm assuming your new tech job is paying your relocation costs (if they're not, you should get on the phone with the recruiter right now), so if you commit to renting somewhere for a year, you can evaluate your options while you're local enough to actually know the neighborhoods you're considering. I'm in a pretty-expensive part of the country (though I know Boston isn't comparable to SF), and we were able to afford to buy here because we restricted our search to neighborhoods that look kind of shitty on paper but have downsides we could live with. If we hadn't been able to see the neighborhood, and spend time in the immediate downtown, it would have been way too iffy for us to consider. The same is most likely true of East Bay communities you're considering. It's tempting to see a hot real estate market and think you need to buy as soon as possible, but remember that your transaction cost for buying a house is tens of thousands of dollars, but for a rental is just the hassle of a moving truck.

tl;dr: you can probably afford it, but if you're going to move, rent first and use that year to scout houses to buy while you turn your semi-liquid assets into a down payment.
posted by Mayor West at 10:45 AM on December 30, 2015 [2 favorites]

What wintersweet wrote is not my experience at all. I live in the bay area (Albany) and many people I know are rooted here, own homes, are earning less than what you're suggesting would be your income, and are doing just fine. Self included. Having the savings for a large down payment makes living here possible, so you're in a good position in that sense, if you do decide to buy a home.
posted by quinoa at 2:14 PM on December 30, 2015 [2 favorites]

I know plenty of lawyers who live there on your income, or maybe less. You can definitely afford to live there.

You won't be as financially well off as if you were making that money in Minneapolis, obviously. But you already know that, right?
posted by J. Wilson at 12:12 PM on December 31, 2015

I would probably NOT move under those conditions.

I live in Marin, so that does skew things a bit, especially financially. You can't really buy a house here for under half a million, but it's genuinely a great place to live, it's close to the city, and the schools are amazing. Even rent is crazy - over $3k for a two bedroom condo in a semi-undesirable area.

However, many big tech companies run shuttles from Marin, or from the ferry terminal. There are tons of executives for those organisations who live in Marin, particularly Tiburon, where I's one of the best schools in the country, I think.

Schools obviously need to be a factor in your decision.

I've worked in Pittsburg, San Lorenzo, Oakland, Hayward, Napa and Marin in my 12 years as a public school teacher. I would hesitate to send my kids to most of those schools, or others in the district. Yes, there are good schools in the East Bay, but they are much harder to find.

Union City and Fremont may be places to look - it's a better commute AND the schools are better there. It's not the East Bay necessarily, but it's not far off.

Also: as someone whose medical conditions require living gluten free, the Bay Area is a freaking paradise compared to most other places. If there are factors that require any kind of special diet, it does make it easier here. And farmers markets here are pretty fantastic. I'm planning a move away from the Bay Area in the future, and those are two things I will definitely miss and will reduce my quality of life.

I guess this is the real question: do you really want to leave a place with stability and no financial concerns to a place where you'll have to worry about it again?

I wouldn't want to.
posted by guster4lovers at 6:06 PM on January 3, 2016 [2 favorites]

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