Almost there...

Friday, October 04, 2002

So Rick and I have been contemplating housing again. There's a complex in Union City where we could get a 3 bedroom townhouse for less than $300,000. It's about the only place in the bay area where we could get that. Conveniently enough, there's a unit for rent in the same complex that's $55 less a month that what we're renting now, so we're probably going to move into it so that we can try (the area, the commute, the size, the quirks) before we buy.

And that's all well and good, except when driving back from a meeting yesterday with Marie, who's lived in the Bay Area her whole life, tells me that the house she grew up in in Piedmont (part of Oakland) just went on the market. Her family bought it when her mom had quit working to raise the kids, her dad was working in an entry level white collar job, and it was what they could get for $11,000. They sold it five years later for $17000 because it was just too small for their family. Forty-five years later, this same house (with the same crack in the frosted glass bathroom door) just sold for $700,000.

Now, homes in the Bay Area are expensive. It's a desirable place to live. But no entry level young family could possibly afford to buy a home here. First, you're supposed to save 20% of the purchase price for a down payment. On a nice entry level home like this one, that's $140,000. Sure. No problem. That's should only take half a lifetime to save. And then there's the payments. Assuming you get the full 20% down (an utterly ridiculous assumption for a first-time buyer) and don't have to pay PMI, the mortgage alone (before insurance and property taxes) runs about $3500 per month. Since lenders get grumpy if your mortgage debt ratio is higher than 40% of your total income, then your monthly take home pay to support buying that house would have to be at least $8750. So your annual take home pay would need to be $105,000, at least. So, assuming a 40% tax rate (just a guess. It's probably higher), then your income would need to be $262,500. All that, just to buy a small, older home once suitable for an entry level white collar worker and his housewife and their two kids.

Something is deeply out of joint in the bay area housing market.

And sure, there are homes out there in less desirable neighborhoods (like East Palo Alto, East San Jose, Morgan Hill, Hollister), that sell for less than $700,000. But it really does grate on me to think that as a mid-career professional, I can only afford to purchase the least that the bay has to offer. And never mind that empty dime bag in the kiddie play area. Sigh.


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