Looks like the price of starter homes. The high end is still holding up well, and will likely get juiced by the spate of IPOs this summer.
I'm skeptical IPOs will affect the market outside SF or Northern San Mateo county, given almost all are SF-based companies [with your windfall, you are going to buy yourself a crap commute in a more boring area?]. Note that SF rents and pruchase prices have gone up a bit YTD, but other areas are flat to falling.
(Finally, people/the media are way over-speculating how many people are going to start buying homes after an IPO. From my experience, going funemployed for a year or so was a more common thing to do with the windfall)
Exactly, I'm so glad Silicon Valley made it up to San Francisco for real this decade. This was always long overdue.
So maybe thats just a secret for you?
But I do like areas that are warm at night time too, which SF is not.
The last two houses I sold in Palo Alto (past couple of decades -- I'm no speculator!) sold in less than a week, tour -> cash in hand.
It sounds ridiculous but a few million dollars doesn't actually go that far in SF if you're wanting to be a home owner _and_ retired. If you want to continue working I guess it would be fine but why would anyone want to keep working if they worked like crazy pre IPO?
I suppose if you have a multi unit you could rent the space and live off of that income but now you've just decreased the value of your home significantly and you've taken on responsibility of being a landlord.
You'd think this is the perfect ticket out of here, they'd been waiting for. So many great cities in the US with much lower housing costs and no feces lining the streets.
Then again, with the money I'd be saving living in a more reasonable city, I could probably fly back here every weekend and still break even.
If you want what most middle class would regard as a nice home (1500 sq ft+, upgraded in the last 20 years, in a nice neighborhood), you're looking at $1.5M-$1.75M. Or with 20% down, a monthly payment (mortgage, taxes, insurance) of over $9,000+ per month or nearly 100% of the take home pay for a $200,000 a year job.
Maybe it's just wishful thinking, but houses can't keep going up like that. Take a look at the historical Case-Shiller data for SF[1] and tell me it's not "bubble-like". SF will always be expensive (always has), but this seems ridiculous.
I wouldn't live in SF if I had kids (before and after OK, from my experience) but Silicon Valley is OK if you have kids.
edit: 2% rise, my incorrect number was corrected by dragonwriter.
Capped at 1% of assessed value, California property taxes under Prop 13 are notably low. You-might in theory in SF, or some parts, have high Mello-Roos fees (which are parcel taxes not tied to value), though I don't think that's he case.
> prop 13 means they can't go up more than 1%/year
Assessed value for tax purposes is limited to 2% annual increase under Prop 13, not 1%.
edit:spelling
[0] https://www.investopedia.com/ask/answer/12/ipo-lockup-period...
edit: removed ‘usually much shorter’ which was wrong. Parent stated the right timeframe and I mathed bad.
They did value whatever the max was you could borrow against your 401k.
Basically the peninsula is unaffordable to own alone, but if I could get a two bedroom and rent out a room I could do it (alternative is having to buy in SF a one bedroom for 780-875k). Banks don't let you do this though and without this I'm priced out of two bedroom units.
I suspect you could create some new mortgage instrument that allows groups of friends to buy a house together since now we typically just do this via renting and splitting the cost for individual rooms (though I hesitate to suggest this since it would ultimately drive up prices even higher). It's also hard to find people willing to risk this, but I think a standard contract structure could go a long way to reducing the social risk.
I went to one open house in SF and the top floor was a nicely updated if small house. The basement/garage? The owner had put up walls to create 6 rooms and 2 bathrooms. The rooms were maybe 10'x10'? Apparently they rented them out to help with the mortgage. You could probably get $500-700/month for each or $3000-3600 for all six?
And that's one reason why parking is an absolute mess in SF even if you get away from the city center. A lot of houses have one or more in-laws (many illegal). And no place to park the car in the garage!
I think I'd be happy with a 1BR in someplace like SOMA where you can walk to everything you need. Conversely I'm not sure I'd want a long commute (across bay bridge, down South Bay, or in Marin) even if I could have a sweet house.
I'd love to hear some real world examples of people doing this. I'm curious if you need 20% down because that alone will put most of these folks who have been living off their salary alone out. (You can't easily save 20% down in less than 10 years for a $2-4m home on a single startup salary)
That could have gotten me in trouble when I was younger. I had startup stock that traded at $50+ on the day of the IPO. When the lockup ended, the stock was trading at $12. At the time, I more likely to think the stock was going to $1200, not $12. I'd likely have ended up owing a bunch of money I couldn't pay off AND a big tax liability.
If I were in that situation today, I'd see if I could find someone who would give me money at today's price and get N shares of stock in 6 months (the duration of the lockup period).
I don't think you'd be able to get a non-collateralized loan based on putative IPO stock value.
I've heard that people with a ton of stock can find people willing to work with them. If you have $100 million USD in HawtStartup, I'm sure someone who believes that stock is going WAY up would be happy to buy at today's price w/ some discount in 6 months. Kind of like how farmers sell futures. I'm not an expert on the subject, and I've never had the kind of equity locked up, so who knows.
Employees are typically prohibited from shorting the stock.
Even with 20% or more down though, we found it difficult to get a good APR. There was one lender who offered an APR which was comparable to income based mortgages (~4% for 30 year fixed), but their program had very stringent requirements.
IIUC, they took 80% of our taxable assets and 60% of our retirement assets, and assumed that amount would be uniformly depleted over the mortgage term. That model seems extremely pessimistic, but I guess it accounts for the fact that some borrowers won't invest responsibly.
This lender calculated a debt-to-income ratio by dividing the mortgage payments (plus HOA etc.) by the asset depletion income, and required that the ratio be at least 66. I think different programs have different debt-to-income requirements.
So let's say a borrower wanted a $1m mortgage from this program. If it's 30 years fixed at 4%, the total mortgage cost would be ~$1.7m. To reach the 66% debt-to-income with their formula, the borrower would need ~$3.2m of taxable assets, or ~4.3m of retirement assets! That's assuming no other income, no HOA fees, etc.
There are other programs with less stringent requirements, but they seem to have APRs of at least 5%.
> Bay Area real estate agents say the market has remained strong in certain areas — especially for starter homes listed at or below the region’s median sale price.
Price stuff to move and it moves. There's no surprise there.