Silicon Valley Rent Rises, you are now very priced out forever
South Bay leads increases as rents soar
The sharpest increases occurred in the South Bay counties, with the average rent jumping 8 percent to $1,786 in San Mateo and 7 percent to $1,679 in Santa Clara in the second quarter compared with the same period a year earlier. Even rents in the East Bay, where growth was more modest, climbed, helped by the strength of the San Francisco and Silicon Valley markets, according to Jerry Smith, regional manager for Marcus & Millichap’s East Bay office.“The East Bay is being framed by some very, very strong bordering markets that are experiencing 7, 8, 9 percent rent growth,” Smith said. “Silicon Valley and San Francisco are leading markets on a nationwide scale for rent growth. We’re seeing a lot of pressure on those rents, and it’s spilling over into the East Bay market.”
Average rents and vacancy rates
It remains a landlord’s market as rents have increased and the vacancy rate has remained stable during the last year in all nine Bay Area counties.*
County 2nd quarter, 2007 2nd quarter 2008 Year-over- year change
Vacancy rate Alameda $1,337 $1,409 5.4% 4.7% Contra Costa $1,250 $1,328 6.2 5.1 Marin $1,528 $1,591 4.1 2.8 Napa $1,264 $1,307 3.4 3.7 San Francisco $1,757 $1,926 9.6 4.0 San Mateo $1,654 $1,786 8.0 4.1 Santa Clara $1,569 $1,679 7.0 2.7 Solano $1,137 $1,164 2.4 5.0 Sonoma $1,140 $1,212 6.3 5.5
Didn’t you wish you had bought a place? Prices are still rising in the Real Bay Area. Rents are zooming. That giant gap between renting and buying? Well, it’s closing fast!
Pretty soon, if you don’t buy a place, rent will be $10,000 a month, and you will have no choice but to live in a Honday down by the river.
July 16th, 2008 at 6:48 am
What river? There’s no river around here; you mean the creek that runs through Palo Alto?…;-)
July 16th, 2008 at 7:27 am
[...] Emerald Hills. I hadn’t given that much thought, but her suggestion was reinforced today on Burbed, in an article about the rise in Silicon Valley rents. The increase in San Mateo County jumped 8% [...]
July 16th, 2008 at 7:37 am
test
July 16th, 2008 at 7:41 am
Oh no! If my rent rises another 8%, then my rent will only be around 1/4th of what it would cost to buy. I’m so tired of throwing money away…
July 16th, 2008 at 8:39 am
This is actually a big part in why I am buying. My rent is 21% lower than what my landlady is charging new tenants, and I have no rent control. If she raises my rent, and she probably will, then it will be cheaper to own (albeit on the other side of the water).
July 16th, 2008 at 9:24 am
sonarrat,
The latest house to sell in my hood sold for 380k. So there’s starting to be some cheaper houses in safer neighborhoods. This house was for sale @ 475k last year. Huge drop. So I think you could very well find cheaper houses in the not-so-far future.
July 16th, 2008 at 9:33 am
I’m not looking to catch a falling knife. I just want to get the hell out of my apartment, and I’ve been very patient waiting since the peak in 2006. I would not have been able to afford the Laurel six months ago.. I would’ve been stuck in Elmhurst or the Murder Dubbs.
July 16th, 2008 at 10:12 am
Well…
Good luck with whatever you do. But I’d probably be looking at what’s going on with the price declines that seem to still be occurring in transitional hoods. I wouldn’t be surprised if homes eventually hit 300k or less in these areas.
July 16th, 2008 at 10:45 am
Unless they hit $125K, I won’t be able to afford them. The peninsula is certainly going to stay out of my reach until I have some equity in a property in the East Bay.
July 16th, 2008 at 11:06 am
I don’t know what this average rent means. Two bedroom? And it varies so much in the same county.
I do notice recently rents in craigslist are going insane. Just a month ago they were pretty much as expected, and then several months back it was insane. Maybe there is a strong seasonal thing?
July 16th, 2008 at 11:41 am
>>Pretty soon, if you don’t buy a place, rent will be $10,000 a month, and you will have no choice but to live in a Honday down by the river.
It’s best to get out of renting when you still have breathing room. You don’t wait until the high tide comes before deciding to retreat from your spot on the beach. By that time, your options will be limited. You don’t want to choose between living in a Honda Fit or Austin.
Mark my words: Low rent and low interest rate will not stick around forever, and home appreciation is only a matter of time.
July 16th, 2008 at 12:13 pm
Mark my words: Low rent and low interest rate will not stick around forever, and home appreciation is only a matter of time.
Sounds like threatening words, RE. Rent almost always goes up when the housing market slows. Either that or the economy is in some sort of industry bubble like the tech boom. The reality is that even with the rise in rent, renting is still vastly less costly than buying, even when compared to the lower home prices. That more people rent is no surprise: less people can qualify to buy houses, which ultimately means more downward pressure on home prices. This could very well mean an eventual delta: home prices fall, rent rises, and the two meet closer together. When that occurs, then perhaps it would make more sense to buy. As it is now, there’s no rush.
I will say that the number of available rental houses seems to have gone down and of those available, the rent is a lot more than what I’m paying. Typically, the rent on 3-4 bedroom homes around us is $2200-$2500. That’s still signifigantly less than paying the $4,400-$5,000 you’d have to shell out for the equivalent home if you bought. But when we got into our rental 5 years ago, we had our pick of homes ranging from $1,000-$1,400. The one we chose was on the upper end of the rental scale at $1,600. But the landlord loves us so our rent is still the same.
By the time rents become insane, we’ll probably be out of here anyway- to Austin ( as you suggested we should avoid choosing above) or somewhere else. Good riddance.
July 16th, 2008 at 12:57 pm
Austin seems like a nice place, I visited there in 2004, as part of a group of accepted students for a PhD program to UT Austin. I really liked the town, I didn’t end up going to the program there, but it seemed good.
The town might be somewhere I could consider settling at. There is the summer which is really hot, I went during March, and it was somewhat hot. But then again I was in the Bay Area 2 weeks earlier and it was hot here too. At one point we went to Zilker Metropolitan Park, and rented boats, and rowed to the river.
July 16th, 2008 at 1:45 pm
How can you be priced out forever if average rents are up? “Priced out forever” refers to buying. If you can’t even afford to rent you aren’t priced out forever, you’re s— out of luck.
Tune: Forever Young, Alphaville
Let’s live in style, eat sushi a while
Heaven is here where we’re sipping our lattes
Hoping we qualify but not enough saved
Are you going to drop our rate or not?
Let us buy now or let us rent forever
We don’t have the income but the options might strike
We don’t have any WiFi, can’t paint the walls
Want to water my own lawn
Can you imagine when we borrow a mil
Scared of loans recasting on a one-year hill
Rent is increasing and LTV is clamped
This is a game for madmen
Forever out, I don’t wanna be forever out
Do you really wanna move to Austin, forever exiled away
Forever out, I don’t wanna be priced way way out
Do you really wanna try Seattle, never SF Bay
July 16th, 2008 at 2:48 pm
There is the summer which is really hot, I went during March, and it was somewhat hot.
Yup- it does get hot. Where I grew up was hot. Boston got hot and cold. Believe it or not, I’m probably one of the two people in the Bay Area that actually prefers hot weather. No problemo for me.
July 16th, 2008 at 2:57 pm
Yup- it does get hot. Where I grew up was hot. Boston got hot and cold. Believe it or not, I’m probably one of the two people in the Bay Area that actually prefers hot weather. No problemo for me.
You ought to move to Livermore, then. Or Gilroy. Hot towns, lots of bargains. Alameda stays much cooler. Heck, Sunnyvale is warmer than Alameda.
July 16th, 2008 at 3:04 pm
I love going out the the Sierra Foothills in the summer. It gets so hot,you can actually go swim in the rivers and lakes. I always thought the tragic thing about the BA was that even though its right on the ocean… you can’t swim in it because it’s freezing cold year-round. I grew up swimming in lakes, so to me that’s what summer is all about.
July 16th, 2008 at 3:30 pm
Here’s a price comparable: moved to an Avalon “luxury” rental complex in Mountain View in 2004. Initial rent for a tiny (<525 sq. ft) one bedroom apartment: $825/month. Now? $1,425/month for the same place. That’s with a one-year lease. Month-to-month they were asking for $2,100+.
July 16th, 2008 at 3:33 pm
Sounds like they caught wind of Archstone’s modus operandi and decided they could do the same.
July 16th, 2008 at 3:47 pm
> Mark my words: Low rent and low interest rate will not stick around forever, and home appreciation is only a matter of time.
RE,
Thanks for providing entertainment.
Are you saying home will appreciate further when interest rates rise?
July 16th, 2008 at 4:03 pm
Initial rent for a tiny (<525 sq. ft) one bedroom apartment: $825/month. Now? $1,425/month for the same place. That’s with a one-year lease. Month-to-month they were asking for $2,100+.
All them durn’ Facebook employees…
Anyhow, it amazes me that rent could be so much more just a few miles down the freeway. I could drive a Ford Excursion from the East Bay every day and the cost of gas still wouldn’t cost as much as the difference in rent here versus the Peninsula. Oh well. I will never live anywhere near SV. Regardless- rent and housing is overpriced there by a huge margin.
July 16th, 2008 at 4:24 pm
I’m just no seeing the savings, if I move from Belmont to Newark/Fremont/Union City I save maybe $200/month on rent, but my commute goes from 3 miles each way to 15-17 miles each way. Roundtrip costs that means I will need to buy 1 extra gallon of gas a day. $4.60 a workday for fuel additional $4 extra for bridge tolls. Total $8.60 ignoring extra costs for tires, wear and tear, expected costs of additional accidents possible. $8.60 x 20 workdays a month = $178. So I save a great amount of $22/month, I just don’t see it working for me that way.
Granted I could trade the Accord for a Civic.
July 16th, 2008 at 4:30 pm
CEOs and Googlers can afford $10K/mo
July 16th, 2008 at 5:07 pm
sg,
Yes, when interest rate rises RE goes higher, and when interest rate is getting lower, boy, RE goes even higher.
And finally renters are put out of their misery by not being afford to rent, hence only multi-millionaires and people living in cars live in the BA.
July 16th, 2008 at 5:26 pm
he sharpest increases occurred in the South Bay counties, with the average rent jumping 8 percent to $1,786 in San Mateo and 7 percent to $1,679 in Santa Clara in the second quarter compared with the same period a year earlier.
——–
Gosh! It seems lots of people are renting nowadays. Even Facebook CEO is renting
This guy got to be heading for “Priced Out Forever” category.
July 16th, 2008 at 5:59 pm
Bill Gates is unemployed and Mark Zuckerberg rents a small apartment. And Carly Fiorina is backing a losing candidate.
What’s next? Is Jerry Yang being foreclosed on?
July 16th, 2008 at 9:14 pm
I didn’t realize rents were so high. I know the rental market is strong, because one of my houses was vacated (the current renters were paying $1700/mo with essentially no repairs), and when they moved out I had dozens of people contact me for the place, and one group (a couple coming up from LA, and some friends of theirs from the area) were so aggressive it really put me off, so I decided to keep the place vacant for 2+ mos while I put in a tile floor where the carpet was. that place will now rent for $2200- maybe more.
But seriously people- paying anymore than $1500 mo rent just doesn’t make sense. Put your pride away and buy a place in one of the borderline areas that I buy for investment. You will have a decent appreciating asset and you might be surprised in how much you like living there. When I moved to WG in the mid-90s I had to do it for work, thinking I never wanted to live in SJ- but now I wouldn’t go back to the mid-pen for anything.
July 16th, 2008 at 10:23 pm
>>But seriously people- paying anymore than $1500 mo rent just doesn’t make sense.
Exactly my point to Pralay, who’s paying over $2000 a month. It’s like giving away a 47″ flat screen TV every month. How generous of him! The funny thing is that these people think they are saving money. I guess without people like him, it’d be harder for people like me to make money.
July 16th, 2008 at 10:26 pm
The increasing tightness in the rental market demonstrates how heavy the demand for housing is in the Bay Area. It’s a sure sign buying a house here is a great investment.
July 16th, 2008 at 10:37 pm
The increased tightness in the rental market is due to increasing foreclosures. Not exactly a customer base for home purchases in an expensive market.
Oh yeah, and Countrywide is now requiring 25% down on jumbo loans, exactly what the RBA needs to keep prices up. Not.
July 16th, 2008 at 10:42 pm
I’ve been tracking this house on Loree for a long time, looks like the bank (Coldwell Banker) finally put the FB out of their misery. It is now relisted.
http://www.redfin.com/CA/Cupertino/18624-LOREE-Ave-95014/home/1830581
The FB bought it for 800k and the bank took back for 600k, the difference looks like a good down payment that the FB has lost.
July 16th, 2008 at 10:45 pm
25% down is a good idea anyways.
Your statement about rental prices being driven by foreclosures is nonsense. I already showed you less than 1 out of every 10,000 households are affected.
The real reason rents are going up is that we are at full occupancy for housing in the BA. In addition, rents are too low relative to home prices, so it must catch up.
July 16th, 2008 at 10:48 pm
Oops, looks like this one is more complicated than I thought, Coldwell Banker is just the RE broker.
July 16th, 2008 at 10:54 pm
You also have to consider that the decent areas haven’t dropped much in price (yet) so renting is still much, much cheaper. You might be able to buy a crap shack in bad parts of SJ for 400k, which would make buying there close to the same cost of renting in a much better area, but why would you want to?
Ignoring the fact the “RBA” are IMO 20% overprice relative to historical prices and rents, I can’t think of many people that would rather buy a shack in the hood than rent for the same price in a decent area. You have to compare apples to apples.
For instance in Sunnyvale, it only costs around 2k to rent a place that list for 700k (often more). Why on earth would one buy? Not having a calculator, I’m guessing you’d have to get about 10% appreciation a year for close to 10 years to break even. Not to mention you’ll be able to buy the place in 09′ or 10′ for 150k less. No, buying in any area that hasn’t already dropped 33% is still a very untenable proposition and will be until prices correct.
July 16th, 2008 at 11:20 pm
rich, why are you following that house on Loree? Trying to see how cheap Cupertino can get?
July 16th, 2008 at 11:43 pm
RealEstater: You are right — prices are way too high compared to rents.
All: I ran a calculator (that included mortgage tax break at 35% tax rate — it’s for CEO’s right) and essentially a $2.3K/mo house is equivalent to a $500K purchase if you assume real estate appreciation of 3% and inflation of 2.5%. (YES, those are BIG ASSUMPTIONS).
My $2.3K/mo house in Palo Alto would sell for about $1.5M, but I would not rent this place for $7K/mo.
R: at 10% appreciation a year you can more than break even very very quickly, esp. if you put very little money down. 10% appreciation + leverage ALWAYS beats renting hands down. RealEstater knows this.
-zanon
July 17th, 2008 at 1:58 am
Exactly my point to Pralay, who’s paying over $2000 a month. It’s like giving away a 47″ flat screen TV every month. How generous of him! The funny thing is that these people think they are saving money. I guess without people like him, it’d be harder for people like me to make money.
——
Another straw man argument. Where did I say exactly that I am saving money by renting? To me, it does not make sense to pay $6000 for the same house which I am renting for $2000. That’s all. Nothing more and nothing less.
And, no Mr RealEstater, you are definitely not making money on me. You are paying $6000 for the mortgage for very same housing which I am renting for $2000. So, you are running with deficit of $4000 every month. And that explains why you hate renters so much and want them to buy your house. I guess rental is not a lucrative business for a landlord who bought his home at top of the bubble.
July 17th, 2008 at 3:07 am
My $2.3K/mo house in Palo Alto would sell for about $1.5M, but I would not rent this place for $7K/mo.
——-
Too bad you are giving away ONLY ONE 47″ flat screen TV instead of THREE every month.
July 17th, 2008 at 8:25 am
Pralay,
Like a sub-prime lender, you fail to see the long term results of renting. I am definitely saving money compared to you, because my home equity is higher than the value of your rental house (assuming you live in typical house in Santa Clara). In other words, if I choose to live in your house, it would be paid off already. My payment would be $0 compared to your 47″ TV giveaway.
July 17th, 2008 at 8:26 am
Correction: I mean sub-prime borrower.
July 17th, 2008 at 8:42 am
madhaus,
Oh yeah, and Countrywide is now requiring 25% down on jumbo loans, exactly what the RBA needs to keep prices up. Not.
This isn’t true- where did you come up with this. As an anecdote, my recent house which was not a jumbo was actually financed through countrywide- I had no idea, I thought I was dealing with Wells. But anyway it was essentially a NO DOC loan. To read the press you’d think no doc loans were a thing of the past. Untrue. Same with jumbo. I am qualified to buy any jumbo property I want with 5% down. Now not many can get this deal but a lot of people can get the 10% down. You just need a good loan broker. Maybe if you are a first time buyer with a 550 credit score you need 25%.
The fact is that banks made too much money off of bay area mortgages to turn their back on this area. There are hardly any defaults here except 95111 and 95148.
July 17th, 2008 at 8:46 am
As I have previously pointed it out numerous times, in BA both renting and owning are equally bad options even now. There were times when owning was worse than renting. But with recent RE price decline, both are kind of equally bad. More adjustments in price and/or rent has to happen for either one to be good. The reason behind this situation is simple: The hype that BA is “the” place to stay and work. The reality, on the contrary, is that BA provides the worst qality of life with worst cost of living. Perhaps the worst balance. The best option is to quit the place altogether.
July 17th, 2008 at 8:48 am
R, you know this is the renters fallacy around here.
You might be able to buy a crap shack in bad parts of SJ for 400k, which would make buying there close to the same cost of renting in a much better area, but why would you want to?
Believe me I know where you are coming from because I felt the same way in the early 90s. I couldn’t buy in the areas that I could rent in, so I avoided buying. THen I finally took the plunge and realized some things about the market. You need to buy a cheap house that you can afford in some appreciating area, and wait. Yes for the first few years it will not be as desirable experience living there as where you could rent, but that changes over time. I sat and watched while Hayward Park, San Mateo went from a ‘hood to a high end neighborhood. Same thing with Evergreen in san jose, or some outlying streets of Willow Glen happening now. Or foster city, once cheap. Some people are totally hung up on living in Palo Alto and for those, on a salary they will likely always be renters- fine if thats what you want but RE is a great investment for those interested in opening up the possibilities.
July 17th, 2008 at 8:53 am
High five WG. Hope to join you on that ladder soon.
July 17th, 2008 at 9:06 am
THen I finally took the plunge and realized some things about the market. You need to buy a cheap house that you can afford in some appreciating area, and wait….
…Then wait until you’re 40, sell, buy another ‘nicer’ house, sell, move up, turn 50, buy a “nice” house, wait some more, sell, move to Oregon like 99% of the BA old farts do because you realize that you don’t have enough to actually retire in the BA… buy a house in Bend, Oregon… wait…
I only mention this because that’s what I see people do here all the time. Jump through silly little hoops just to get the bare-essentials without even realizing it.Most people who’ve “made it” in the BA are old by the time they do when people elsewhere simply live their lives longer, cheaper, and more comfortably.
Or- you could perhaps do what Austindweller and many others do and save your excessive BA wage ( assuming you make one of those) for 5 years, move to another city, but a nice house from the very start by the time you’re 35, and retire at a decent age and actually get to stay put. No silly games. No get-rich schemes. No crazy risk taking.
The rent argument is still very heavily in the favor of renters. As I mentioned above, the only reason rent is going higher is because less and less people qualify. A year or so ago, if you could breath air, banks would lend you money, and give you a 0% down loan. Those types of people are the ones who live in the’bad’ parts of SJ, Oakland, EPA, etc.
This is why those houses are now getting to be “cheap” and also why anyone who buys them now will lose even more money because for one- rich people do not want to live in crappy neighborhoods, and secondly, the people who would won’t qualify for anything over 250k max.
I realize that my situation is highly unusual, but me and my Wife pay $1,200 a month for our part of the rent on our house. The cost to buy would be around $4,500 a month. Even if rent goes up 50%, we’re still paying a fraction of what it costs to buy. At least in our neighborhood, prices are going down. So if we bought, we would be losing money every month. What we put into investments- which I’ve already mentioned is more reliable- will gain more than what homes will appreciate. Homes in the juicy parts of the BA are flat at best. So even for those renting there, they are still saving more on avg than those who bought are are now losing value.
July 17th, 2008 at 9:13 am
zanon, hmm I am not so sure about your calculator, can you give any details?
All: I ran a calculator (that included mortgage tax break at 35% tax rate — it’s for CEO’s right) and essentially a $2.3K/mo house is equivalent to a $500K purchase if you assume real estate appreciation of 3% and inflation of 2.5%. (YES, those are BIG ASSUMPTIONS).
3% appreciation on 500K property is 15K per year or $1,250 per month. The mortgage on that property is $2770 assuming 50K (10%) down and 6.25% loan. Add another $600 per month for escrow approx. Your monthly payments are $3370, or $2225. if you want to take the tax advantage off the top. Personally I never use “tax savings” on my calculations and I don’t think I need to here, but you did so lets go with that. You have a $2225 out of pocket “cost” per month for a 500K house, but then, you are getting that 3% appreciation of $1250, therefore your actual cost of this house monthly is $975!!!!!! You can’t rent for that.
True, you lost the “investment potential” of the 50K you put down. Thats another red herring in this decade as far as I’m concerned because there are very few home run investments for individuals anymore with this whacked stock market. But anyway that is a negative.
I would ignore the 30% tax savings in my calculations, because after all what if you don’t work one year? In that case you have a payment of $3370 per month and a net gain of $1250 per month or cost of $2120- STILL a better deal than renting.
I would say a 500K property now would yield higher than 3% appreciation by the way, just due to the bad market climate for the low end properties.
July 17th, 2008 at 9:15 am
>> Or- you could perhaps do what Austindweller and many others do and save your excessive BA wage
Since you mentioned saving, actually, I could not save much with the BA wage in BA. Now I find myself in a situation that I save more than twice with my BA wage in Austin. I have to admit though that very few could be fortunate enough to keep their BA wages when they move to outside state.
July 17th, 2008 at 9:26 am
Me and my Wife save a significant amount of our take-home pay. As in more than 50%. Perhaps even 55%. This is primarily because we live extremely frugal lives. No car payments, schools payments, kids, gadget fetishes, and we eat out rarely. I realize most people don’t live like that, and with the number of new cars I see on the road, I’d imagine most people are shelling out a chunk for car payments alone.
We sort look at the BA as our time period for “doing time”.We’re fully taking advantage of what we save because what we do put away every year is like another 10 years of home payments elsewhere. Again, our rent is incredibly cheap for today’s standards. So for us, renting absolutely makes sense.
July 17th, 2008 at 9:59 am
WG, you left the quality of life factor out of #43. Your proposal makes sense for someone starting out and wanting to get on the property ladder. However, some folks just want to live in a nice area. They have the funds to buy in that area or rent. So why not take the $300k+ in equity, invest it, and pay $2500-$3000 to rent in an area where you’d have a mortgage payment in the $5k/month range PLUS another $1,000/month for property taxes?
In this market it seems like a sane approach.
July 17th, 2008 at 10:02 am
One thing I left out - another alternative (bob’s kind of approach) would be to pay cash to live in EPA and not have a house payment at all!
July 17th, 2008 at 11:17 am
madhaus,
That house is probably the longest listed under $1m in Cupertino. I just wonder why it hasn’t been sold yet, afterall it is Cupetino, you see junks got sold all the time and this one is actually not that bad. Doesn’t RBA matter to someone?
July 17th, 2008 at 11:24 am
Like a sub-prime lender, you fail to see the long term results of renting. I am definitely saving money compared to you, because my home equity is higher than the value of your rental house (assuming you live in typical house in Santa Clara). In other words, if I choose to live in your house, it would be paid off already. My payment would be $0 compared to your 47″ TV giveaway.
——
What a convoluted comment. Who cares about YOUR example? If you really want to prove your theory, you should compare apples to apples - and with some number. Paying $6000 for mortgage for which can rented for $2000 is insane.
Atleast WG is able to make some his argument with some solid numbers. I have no reason to believe that you are smart. You are just a plain simple homeowner.
July 17th, 2008 at 11:38 am
I just wonder why it hasn’t been sold yet, afterall it is Cupetino, you see junks got sold all the time and this one is actually not that bad. Doesn’t RBA matter to someone?
———–
It’s too bad that all the bloody renters ignored RBA spirit and refuse to rescue Mr Martinez from his bad “investment” decision.
July 17th, 2008 at 12:20 pm
Hey that 6000 paid is 5500 in equity - in the last few years of your mortgage.
July 17th, 2008 at 12:21 pm
Or maybe you ignore the fact that the house is gaining 6000 equity every month?
July 17th, 2008 at 12:33 pm
Pralay,
Your post #52 is weak. Try again.
The outcome already speaks for itself. How did you get yourself into a situation of hosting the flat screen TV giveaway? Thank about that.
July 17th, 2008 at 12:38 pm
>> Hey that 6000 paid is 5500 in equity - in the last few years of your mortgage.
If you stay put there for ummmm… 30 years. Otherwise you are always paying the interest. Even then apart from the interest you will be making a lot of repairs and you may have to forget about that payment.
July 17th, 2008 at 12:45 pm
How did you get yourself into a situation of hosting the flat screen TV giveaway? Thank about that.
——–
I guess homeowners don’t pay interests. Those bank CEOs must be working in minimum wage then, right?
What outcome? Oh, I forgot - you work for frequent flyer mileage.
July 17th, 2008 at 12:47 pm
RealEstarer,
Needless to mention that you have no clue anything other than your personal experience.
July 17th, 2008 at 12:49 pm
Or maybe you ignore the fact that the house is gaining 6000 equity every month?
——-
I never knew that banks are giving home loans in 0% interests with no down.
July 17th, 2008 at 12:54 pm
Pralay, I think that comment from Rick was dripping with sarcasm…
July 17th, 2008 at 1:22 pm
RE,
I think Parlay made a good valid point, which is you were to compare apples to apples,buying or renting right now, Paying $2,000 versus $6,000 is too drastic to ignore. To say that buying would be more economically sensible would assume your house would gain $4,000 a month in equity, which as you’re well-aware of, it isn’t and in fact is actually losing value per the most recent report.
In a market like this, a renter will make more money investing in stocks over buying RE and losing equity every month.
July 17th, 2008 at 1:32 pm
I think Parlay made a good valid point, which is you were to compare apples to apples,buying or renting right now, Paying $2,000 versus $6,000 is too drastic to ignore.
———
Don’t expect him to compare apples to apples. All he will say that it WILL make sense in 2018.
July 17th, 2008 at 1:37 pm
I can understand that kind of a buy to rent spread in a place like Palo Alto, Atherton, or Saratoga which have always been destination places. You don’t get a neg-am zero-down loan to buy a property there, and you certainly don’t rent your house out (unless you’re an idiot). You buy there only if you have a substantial fortune or substantial equity in a number of different properties already, and you want a house that befits your elevated station in life. But Cupertino? Mountain View? Santa Clara? You’ve got to be shitting me.
July 17th, 2008 at 4:08 pm
On a 650K mortgage at 6.25% interest, you have $4K payments and you buy down the principal by about 8K that first year. So it is not that *nothing* goes to the principal- a little does. In the first 2 years, about $650 per month goes to principal, years 3-8 you are putting between $700-$1000 per month into principal, and from then on start with $1K and add about $100 per year that goes to the principal… so that in year 20 its about $2000 out of the $4K payment to principal, and so on.
When you buy a house, its amazing how fast the first 4 years go by while you are in that house. I was like many here thinking I had paid nothing to the principal during the first 4 years of a mortgage and I was pleasantly surprised to have paid down about 35K on my recent house.
July 17th, 2008 at 5:16 pm
WillowGlenner: This is the rent vs buy calculator I used
http://www.dinkytown.net/java/MortgageRentvsBuy.html
I was just interested in seeing what it said by $2.3K/mo rent was equivalent to, so I played with numbers to see.
So yes, on a cash basis flow, $2.3K/mo gives me a $500K house (as your own calculations showed). 3% appreciation gives me an extra $15K a year, which is material. lower (or negative appreciation) makes the house a nightmare financially. Given that the house is a $1.5M house, you need more heroic appreciation assumptions to come out ahead.
I too am ignoring expected return on the downpayment, as stocks have been a lousy place to be for a decade. That said, real estate is coming off a historic bull run, which has not ended in the RBA, while stocks are getting pummeled. The next 10 years might look quite different.
-zanon
July 17th, 2008 at 5:22 pm
On a 650K mortgage at 6.25% interest, you have $4K payments and you buy down the principal by about 8K that first year.
——-
Or alternately, according to RealEstater, I can have zero dollar payment every month (no mortgage). No 47″ TV for bank CEO either.
July 17th, 2008 at 5:24 pm
Oh, all this math, it hurts my head - so I thought, hey, I’ll look at one of those houses in a “distressed” area that WG is talking about.
Hmm, yeah, it’s $500k for a house that rents for $2000. But appreciation will make up the difference, right?
But wait! It sold for $650k just two years ago? I don’t think I like that price appreciation very much. In fact, I don’t appreciate it at all.
Even *I* get that math.
I guess I’ll just stay a dumb ol’renter for a while longer.
(And for the humor impaired, yeah, I know how to run the numbers, I’m just tired of posting them again and again. It’s a dumb time to buy. Wait ’till prices bottom out, it takes a long time to save $50k, but only months to lose it in this housing market.)
July 17th, 2008 at 5:38 pm
And who says it’s hard to get good returns outside of RE, so might as well put it there? (WG, was that you, or REer? I’m too lazy to read the whole thread again.)
I have a “play” account for a small portion of the down payment that I’ll one day use, and I’m up by 25% so far this year - and that’s *after* the thrashing I got the last two days.
Of course, that requires actual work (research), and risk (15% or so of capital), unlike buying RE, where all you have to do is risk 150% of your leveraged capital, and fix toilets and such.
July 17th, 2008 at 5:39 pm
WG, I am sure the remaining years go back even faster than the first 4 years.
July 17th, 2008 at 5:40 pm
WG, I am sure the remaining years go by even faster than the first 4 years.
July 17th, 2008 at 5:43 pm
I can understand that kind of a buy to rent spread in a place like Palo Alto, Atherton, or Saratoga which have always been destination places. You don’t get a neg-am zero-down loan to buy a property there, and you certainly don’t rent your house out (unless you’re an idiot).
You don’t, err, live there, do you? I know a couple guys who live in those places, and yes, you can (or could) get a neg-am zero-down loan to buy those properties (the cheaper ones, anyway). And yeah, you can rent there, too, even in the more expensive parts, if your checkbook can handle it.
But maybe the folks I know are the exception, and you’re speaking from experience. I’m hardly an expert in such hoity toity living - those places make me itchy… If I had that kinda money, I wouldn’t live there, I’d just retire to a shack on a tropical beach.
July 17th, 2008 at 7:17 pm
**Oh yeah, and Countrywide is now requiring 25% down on jumbo loans, exactly what the RBA needs to keep prices up. Not.**
This isn’t true- where did you come up with this. As an anecdote, my recent house which was not a jumbo was actually financed through countrywide- I had no idea, I thought I was dealing with Wells. But anyway it was essentially a NO DOC loan. To read the press you’d think no doc loans were a thing of the past. Untrue. Same with jumbo. I am qualified to buy any jumbo property I want with 5% down. Now not many can get this deal but a lot of people can get the 10% down. You just need a good loan broker. Maybe if you are a first time buyer with a 550 credit score you need 25%.
WG, this is as of a week ago. You bought your latest house before then. Give your broker a call and check if you can still have those conditions. Read it on a San Francisco real estate blog and the editor confirmed it.
Pralay, if you’re giving away flatscreen TVs can I have one too? My mortgage runs about one flatscreen TV as well.
rick, there’s a bunch of cheapo Cupertino property in Rancho Dinkynada. I can’t tell you why Loree hasn’t sold. Was it where the brothel was?
July 17th, 2008 at 8:42 pm
You don’t, err, live there, do you? I know a couple guys who live in those places, and yes, you can (or could) get a neg-am zero-down loan to buy those properties (the cheaper ones, anyway). And yeah, you can rent there, too, even in the more expensive parts, if your checkbook can handle it.
Yes, I grew up in such an area. Even in the late ’80s when my parents bought, the only people buying were people who owned their own businesses, had healthy portfolios, or were high up the corporate ladder lived there. There are absolutely no rentals in the area, whatsoever. I mean, you don’t buy a truly desirable property because you want to rent it out. The numbers just don’t add up, because they’re not supposed to. I can’t understand why anyone would do that to themselves. My parents could only afford to buy and move out here because they made a fortune off of stock options. Before that, they rented a house in Wellesley, Mass.
By comparison, I’m doing it the hard way, keeping my nose clean and waiting the bust out until I can get something acceptable on an inadequate salary. Meanwhile, a lot of other people my age who got in over their heads buying their first homes in the past few years have ensured they won’t really be able to own a property for another decade at least.
July 17th, 2008 at 10:00 pm
I mean, you don’t buy a truly desirable property because you want to rent it out. The numbers just don’t add up, because they’re not supposed to. I can’t understand why anyone would do that to themselves.
I think your data may be old.
Sure, you don’t buy it to rent it, but Prop 13 means that you’ve got a strong incentive to never sell, so if you’re spending some time overseas (for instance), you could leave the place fallow, or you could rent it out.
Now, most of the rich people I know dislike wasting money. For many of them, that’s how they got rich. Leaving a house fallow would be pretty abhorrent to them. And selling little better. So guess what that leaves. (Of course, for people who just struck VC Lotto, they tend to be a touch more careless with cash, so those folks don’t count for this discussion…)
Craigslist isn’t where *I* would go to look for such a rental, but see here:
http://sfbay.craigslist.org/sby/apa/753271387.html
6 br/ 4 ba / 8000 sq ft / $12k
July 17th, 2008 at 10:27 pm
>>Pralay, if you’re giving away flatscreen TVs can I have one too? My mortgage runs about one flatscreen TV as well.
The difference being Madhaus is buying the TV for himself, while Pralay is giving it away. In the long term, that is ALWAYS what ends up happening. Even you buy at the top, it would still end up that way. Guaranteed. Don’t try to time the market. It doesn’t help, and it doesn’t matter.
July 17th, 2008 at 10:47 pm
In the long term, that is ALWAYS what ends up happening. Even you buy at the top, it would still end up that way. Guaranteed. Don’t try to time the market. It doesn’t help, and it doesn’t matter.
Look at the pretty diagram here after the term “sweet spot.”
It most certainly matters. If I’d bought this house in 1990 instead of 1993, I would have paid 20-25% more for it. Actually I would have been Priced Out of this house, and would have bought a smaller place or stayed out of CUSD.
When prices go up again, they won’t shoot up right away. But there is plenty of time to save more.
July 17th, 2008 at 10:48 pm
Pralay, if you’re giving away flatscreen TVs can I have one too? My mortgage runs about one flatscreen TV as well.
——
Of course you can get one TV every month provided you give me your house for living (of course with a big kitchen and lawn for watering). Although shelter is more important than a TV, but don’t expect that I am going to buy your home for the price of THREE TVs every month and pay for your retirement - even if you have a home at 94301 zipcode and you are still living in denials.
July 17th, 2008 at 10:54 pm
>>It most certainly matters. If I’d bought this house in 1990 instead of 1993, I would have paid 20-25% more for it. Actually I would have been Priced Out of this house, and would have bought a smaller place or stayed out of CUSD.
Madhaus, you are the testament to my statement. You could’ve bought ANY house in 1990, and still made tons more money than a renter can save. It does not matter if you bought in 1990 or 1993, and it does not matter if you’re in CUSD or not. The worst decision you could’ve made was to not buy. In fact, even if you bought in 2003, as I did, you would still be just fine. 2008 could be another 1990. So what?
July 17th, 2008 at 10:56 pm
Pralay,
I think you can drive a Ferrari for $2000/month. Have you thought about that? You are giving out free rides in a Ferrari.
July 17th, 2008 at 10:58 pm
When prices go up again, they won’t shoot up right away. But there is plenty of time to save more.
———–
Madhaus,
Two years back those vultures from RE industry said “don’t get priced out forever” (in other way to say: timing is important). Now they are saying “don’t try to time the market” (which also means: price is falling, so what? buy it anyway.).
Basically, it’s ALWAYS good time to buy NOW.
July 17th, 2008 at 11:06 pm
I think you can drive a Ferrari for $2000/month. Have you thought about that? You are giving out free rides in a Ferrari.
——
That’s perfectly fine. I refuse to give THREE Ferrari rides to some homeowners who want to sell their homes in inflated prices.
It’s such a dumb analogy, RealEstater. I thought being smart is the norm in RBA, especially in management class neighborhood of 94301 zipcode.
July 17th, 2008 at 11:12 pm
It’s such a dumb analogy, RealEstater. I thought being smart is the norm in RBA, especially in management class neighborhood of 94301 zipcode.
Lots of dumb analogies tonight like the claim of “even buying in 2003,” which was the beginning of the ninja loan housing bubble. The whole point of timing the market is to buy at the trough or at least the beginning of the rise.
I cannot take advice from anyone who could say
School.
District.
Matters.
More.
Than.
Anything.
Else.
To.
Us.
July 17th, 2008 at 11:16 pm
You could’ve bought ANY house in 1990, and still made tons more money than a renter can save. It does not matter if you bought in 1990 or 1993, and it does not matter if you’re in CUSD or not. The worst decision you could’ve made was to not buy. In fact, even if you bought in 2003, as I did, you would still be just fine. 2008 could be another 1990. So what?
———
I just can stop laughing after reading your comment, RealEstater. I repeat my earlier statement: I thought being smart is the norm in RBA, especially in management class neighborhood of 94301 zipcode.
Anyway, here the gist of the comment:
- if Madhaus bought on 1990, he would have made tons of money.
- Madhaus bought on 1993, hence he made tons of money.
- RealEstater bought on 2003, he still made money.
Conclusion:
- if you buy NOW, you will make tons of money.
- if you buy on 2011, you will make tons of money.
- if you buy on 2021, you will make tons of money.
Bottomline, you are going to make money anyway. No hurry. Don’t try to to time the market.
July 17th, 2008 at 11:22 pm
Lots of dumb analogies tonight like the claim of “even buying in 2003,” which was the beginning of the ninja loan housing bubble.
———–
It seems someone just can’t accept the fact that the home price run-up he saw since he bought his home in 2003 is not going to happen again. Poor guy.
July 17th, 2008 at 11:24 pm
Come on Pralay, SillyCon valley has a lot of $250k couples who are dying for a Ferrari.
Where do you think you are? $2000 for a Ferrari ride? That only happens in Stockton, here it only gets you a 1950 Chevy. Here we have the air and the most beautiful freeway in the world, not to mention the privilege of driving to see Google/Apple, in Stockton you smell dunk and see cows.
July 17th, 2008 at 11:40 pm
Tune: Alice’s Restaurant
You can’t buy a thing you want
The RBA’s Priced You Out
You can’t buy a thing you want
The RBA’s Priced You Out
Rent a house but sit in the back
You might as well live by a Superfund tract
You can’t buy anything you’d want
So wait until 2010.
July 17th, 2008 at 11:45 pm
It seems someone just can’t accept the fact that the home price run-up he saw since he bought his home in 2003 is not going to happen again. Poor guy.
Not only that, that was the world’s shortest family vacation I’ve ever seen for someone who gets an entire month off every year. So this guy prefers being insulted here more than spending quality time with his actual family. That’s really sad.
July 18th, 2008 at 12:20 am
Madhaus,
I’m actually taking 2 vacations. Vacation #2 will start in about a month. It’ll be a longer international trip. When are you taking your vacation?
July 18th, 2008 at 12:21 am
Thanks for the TV, Pralay.
July 18th, 2008 at 12:23 am
Not only that, that was the world’s shortest family vacation I’ve ever seen for someone who gets an entire month off every year.
———-
Running short of frequent flyer mileage? Not smart as David Phillips, who could earn enough frequent flyer mileage WITHOUT working 9-5 everyday? I thought smartness the norm in RBA.
July 18th, 2008 at 12:31 am
Come on Pralay, SillyCon valley has a lot of $250k couples who are dying for a Ferrari.
————
Ooops, I totally forgot about it. But don’t forget about Porsche and Trophy wife.
July 18th, 2008 at 8:33 am
School.
District.
Matters.
More.
Than.
Anything.
Else.
To.
Us.
Dude… I just came up with another plan. If California wants to make housing more affordable, they can do it much more inexpensively by actually having a good school system. If California built new schools and stocked them with better paid, more qualified teachers in EVERY district, then it wouldn’t be like a third world country anymore: ALL neighborhoods would be in GOOD school districts. This would dump property values like a rock all over the place because suddenly parents wouldn’t be prepared to do hand-to-hand combat with each other to get their kiddies into the “best” schools. Why… you could live anywhere and your kids would have a good education no matter what. Am I a genius or what?
July 18th, 2008 at 10:45 am
madhaus obviously school district matters most to you, which is commendable. But it is not the key determining factor in real estate all the time. It just isn’t. It HELPS to be in a good school district of course. And some areas like Cupertino have nothing to offer *but* a school district so obviously it matters there. School districts tend to be sort of a midrange carveout of importance to real estate. The highest of the high end areas don’t really care about schools and for years HILLSBOROUGH had worse schools than foster city. That may well still be true. San Mateo area in general had crappy schools due to the districting issues there, this was the *entire county* including Burlingame, San Mateo westside, etc. It didn’t matter to property valuations and now that RE has appreciated there, the schools are improving, but they are still not better than some *much cheaper* San Jose areas such as Evergreen. In fact there is this one blog poster on the san jose sq ft blog who whines about how overpriced willow glen is every month or so because “the schools aren’t that good”, and properties are $1mm in WG. She doesn’t get it.
Moral of the story, if you need schools because your kids are in school fine. If you are buying for investment, schools are one of a HUGE LIST of important characteristics to look at.
July 18th, 2008 at 10:49 am
bob, we simply could not allow that! It sounds like communism.
Only the rich are entitled to a good education for their kids, and they must pay the price - wait - to the RE “investors?” (Hehe, just think: even if a little of that bubble inflation went to taxes instead, we could have really good schools already!)
RE, your entrenched beliefs, stated over and over with only the flimsiest support really are tiresome. I think even the most adamant real estate investor or realtor, who is rational and somewhat objective, could agree that in some cases it just doesn’t make sense to buy right now. Some people don’t have the 30-year time horizon to not care if they pay 20% too much for their place, if this turns out to be Japan-style meltdown. Check this out:
http://www.oftwominds.com/blogoct06/japan-bubble.html
2006 was the first year in 15 years that prices went up. And they were up 0.9%. Yippee.
Now I don’t think our case will be anywhere near that bad, but I can respect the opinions of people who don’t feel ready to take the plunge.
July 18th, 2008 at 10:51 am
WG,
I am curious, what is on your list?
It would be interesting to compare expensive neighborhood to average ones and see whether there is a big difference.
July 18th, 2008 at 11:11 am
Madhaus,
Two years back those vultures from RE industry said “don’t get priced out forever” (in other way to say: timing is important). Now they are saying “don’t try to time the market” (which also means: price is falling, so what? buy it anyway.).
Basically, it’s ALWAYS good time to buy NOW.
If you can afford it - no, really afford it, not just saying of course you can, not spending 95% of your monthly income, not based on winning a $50K lottery scratchoff, not only for five years until the interest rate resets then you’re screwed - then it always is a good time to buy. The only bad time to buy is when it’s not safe for your own security (or the majority of other potential buyers) to do so. How many people who bought in 2006 could qualify for the same size of loan today? 25%?
The market has now had to correct based on how much money and how much income people actually have at their disposal. So it makes sense that economically working-class areas like Menlo Park’s Belle Haven, East Palo Alto, Oakland, and San Francisco’s Bayview lead the declines, because the people there don’t make much money and don’t save enough of it anyway, plus they are more susceptible to scams and schemes. That’s not to say it didn’t happen in every sector of the market, because it did. I’m talking simple economic principles here. The more money you have, the more closely you guard it, because everybody is out to get your dollars.
July 18th, 2008 at 11:40 am
bob, school districts will never all be uniformly good anywhere. The reason is simple- the KIDS in the schools matter as much as the school itself. You will never be in a location where all kids from every town are identical- there are always smart kids, not so smart kids and troublemaker kids that take up a schools resources etc and those kids are not uniformly distributed anywhere.
I once remember a frontline episode about kids locked up in jail for life in the USA. There was this one kid from Colorado whose parents were venture capitalists and he obviously came from a good home, involved parents etc. The problem was this kid was in a BAND at school, and one of the band kids came from a bad home living in an apt in town. The good kid went to the bad kids’ house to practice, and at that very moment the bad kid killed his mom (accidentally) by hitting her in the head with some fireplace tools. Now, the good kid is in jail for LIFE, because his trial just happened to be the same week as the Columbine kids trial (and his first name was Eric). What was the real problem here- the SCHOOL that kid attended had some “wrong side of the track” kids in it. Teachers and no child left behind will not change this type of situation.
July 18th, 2008 at 11:46 am
Through the eyes pf Californians, sure- I’d buy that there’s a belief that a public school system can’t be universally good. This was certainly not the case back in TN or probably in many other states for that matter. It was a given back home that if you went to public school, then you probably went to a ‘good’ school. Nobody made a big deal about it. There weren’t any lotteries.
In all seriosness though, California has a serious, growing stratification problem. I do believe that this has a lot do do with real estate prices. As people with kids seem to allude to, having a good school system in their district is about the same as having a giant golden nugget sitting in the back yard. It shouldn’t be this way. I feel that by making attempts to equalize the school system, this would eliminate much of the added preciousness to areas simple because they’re near a good school.
Its all crap in my opinion. If I had kids, I’d probably do what was best for them and move to a state that had better schools.
July 18th, 2008 at 11:57 am
rick, I would put lot size (6500+ flat lot), view, charm of house (a 40s charming house is superior to rancher as long as it is upgraded), proximity to a good “downtown” (WG, Los Gatos, Los Altos are the best for this)- preferably walking distance, close in to major employers (example San Bruno fails this), close in to other amenities like grocery,hospital all as things to consider as well as school in evaluating whether a property is worth buying. Then you need to look at the price, and what you get for the money. The problem is that in the best school districts like Cupertino- virtually ALL of the above features fail except lot and employer. Palo Alto has great schools and all the other things so thats fine, but Cupertino/Sunnyvale doesn’t. Its not like schools don’t change, either. Like I said San Mateo schools have sure changed for the better.
July 18th, 2008 at 12:39 pm
close in to major employers (example San Bruno fails this)
SFO airport? South City’s biotech? And it’s only 30 minutes to downtown SF.
July 18th, 2008 at 1:21 pm
WG, that is a big surprise, you don’t talk about weather (San Carlos would be quite different than WG, living in the hills of San Carlos is different than down the hills), etc.
Let’s check San Carlos vs Fremont (since you might think I think too much of Cupertino):
1. good “downtown” - I like San Carlos better, but Fremont definitely have a bigger downtown and more shops/varieties. There is a good feeling hanging around San Carlos downtown but if you want to shop Fremont is better.
2. Close to major employers - other than Oracle which is not in San Carlos and there is little around. Fremont has pretty diverse employers, there is even a automobile research center there.
3. Grocery, hospital, food. I think Fremont beats San Carlos hands down, unless you only consider expensive ones.
In the end I think it all comes down to how far are you away from the money centers, which really puzzles me about San Francisco and north of it. PA and the sillicon valley maybe able to lift a few cities around them, but San Francisco and San Jose are much bigger populations with very little going for them.
July 18th, 2008 at 2:09 pm
WG you are buying for investment. I am buying (or holding off on buying) for a family home and secondarily for appreciation. Therefore we have different priorities on what we look for. As I clearly stated above, school district is the most important thing to us. Not to you or necessarily to anyone else.
I certainly never said that real estate prices were based only on school district, but it’s a huge factor in otherwise identical houses around here. Cross Fremont Avenue to Sunnyvale school district and you lose 15%. Cross the boundary from Cherry Chase to Cumberland and the price goes down again. Or compare the same house on either side of Wolfe where you go from Cupertino to Santa Clara school district.
Hillsborough school scores, 2008:
Crocker Middle - 948, gee almost as high as 3 of Cupertino’s middle shcools
North Hillsborough - 967
South Hillsborough - 960
West Hillsborough - 970, only elem school to break out scores by White & Asian, which means other 2 don’t have enough Asians
Going by school scores, the kids can pass the danged test. So what was “bad” about Hillsborough schools? Were they just not as gold-plated as the houses?
July 18th, 2008 at 2:48 pm
I suppose most of you saw the report a few days back indicating that 25% of all students in California drop out. That’s disturbing. What’s more is that most who drop out are black or Hispanic while those who stay are Asian or white. There is some really disturbing racial inequality in this state these days, and the most offensive are the schools. Again- I blame the fact that people are so willing to shell out small fortunes to live within the ‘better’ school districts that it has the unfortunate effect of basically shutting the door on other minorities. That’s really sad. Racial inequality in my opinion should never occur in the classroom.
July 18th, 2008 at 3:32 pm
Bob,
If a certain racial group doesn’t emphasize education, you can’t blame it on inequality. No one is prevented from buying into a neighborhood due to race.
July 18th, 2008 at 3:52 pm
I feel that by making attempts to equalize the school system, this would eliminate much of the added preciousness to areas simple because they’re near a good school.
The equalizing that needs to take place is about class ratios, which are not going to change until funds are increased across the board. The “good” schools are good partly because parents have the leisure to be involved, thereby putting more adult eyes on the student, and partly because parents have more cash to shell out for the holes in the roof.
The problem is that there is a knee-jerk resistance to increasing teacher salaries. They’re just layabouts who get the whole summer off, etc. This cuts off educational improvement at the knees, because a high number of adults in the school, is the one factor that makes the most difference in student outcomes.
July 18th, 2008 at 3:56 pm
In other words, it’s not about band classes or art classes or a nice computer lab or a nicer classroom or better school books, all of which are relatively easy to get money for. All those things, nice and useful as they are, are gravy. What studies show to be important, is having the grown-up there to catch the kid who’s slipping. That’s why certain populations (that not coincidentally are likely to be poor) fail in school; it’s because the adults are distracted by the business of survival.
July 18th, 2008 at 4:12 pm
It’s also about what those failing kids’ parents value. If their parents are also in survival mode, and there aren’t any (or few) role models who succeeded because of education, the kid has no incentive to do well in school anyway.
The best way to ensure your child succeeds at school is to read to him every night — that child will then read on his own, and a reader does better at school. The other best way is to pick your child’s school so that his peer group is full of readers, not wastrels. That’s really what those parents are outbidding each other for: an exceptionally high-performing peer group.
July 18th, 2008 at 4:13 pm
WG re: comment #98, I thought the band kids were the “good kids.” They must have been in rock band, that’s full of losers.
July 18th, 2008 at 5:44 pm
I don’t know how to get the historic APIs, madhaus. But San Mateo schools were baaaad in the early 90s. Like we once mentioned here, Carlmont High was the inspiration for the movie “dangerous minds” about hood kids, and that is in the middle of the San Carlos hills! Clinton gave a “whats wrong with education in the USA” speech THERE, of all places around 98 if I recall. Well, ALL of the SM county schools were like that! Aragon, everywhere. There used to be a large mexican part of San Mateo right off the downtown near 3rd that was really rundown and beat up, and then you had all the east side kids from EPA bussed everywhere. I think the EPA bussing was the key issue- EPA is in San Mateo county. Anyway thats all cleaned up now. but had you waited for schools to improve back then, you would have missed out on great RE gains. BTW my area WG has the same problem with our schools- apparently these were the best schools in SJ in the 60s and 70s and then the bussing started with the kids from the other side of the tracks which in this case is a street called Alma and Alameda. But, like with san mateo time passes, these rundown areas that are next to the million dollar areas improve, and the schools improve. Of course if you have kids at the moment you can’t wait. And Cupertino has been the best school district forever so it is a sure thing.
July 18th, 2008 at 6:39 pm
If a certain racial group doesn’t emphasize education, you can’t blame it on inequality. No one is prevented from buying into a neighborhood due to race.
It would have been better to stop after the first sentence. The second is rather, um, elitist at best. I’m sure you don’t need me to tell you this, but certain racial groups tend to have a high proportion of working class folks. They can’t afford to buy a home. They can barely afford rent, much less in an area with good schools. And if a group doesn’t emphasize education, the caliber of the schools would be a moot point anyway.
It’s been said on here before: parent involvement (and even peer pressure) have as much to do with the value derived from an education as classroom size or teacher ability. There are always stories you can find about kids who come from severely disadvantaged backgrounds and are able to overcome it through adult encouragement and a focus on the value of education.
July 18th, 2008 at 8:15 pm
ho ho ho madhaus. There are 2 kinds of “band kids”. The kind you are thinking of are the people in the SCHOOL BAND. The other kind are the kids that start a rock band in their spare time to play at parties in the area.
2 different groups of kids there.
July 18th, 2008 at 8:21 pm
But San Mateo schools were baaaad in the early 90s. Like we once mentioned here, Carlmont High was the inspiration for the movie “dangerous minds” about hood kids, and that is in the middle of the San Carlos hills! Clinton gave a “whats wrong with education in the USA” speech THERE, of all places around 98 if I recall. Well, ALL of the SM county schools were like that!
That was because Ravenswood High closed in the ’70s, and much of the student body - from Belle Haven and East Palo Alto - was bussed over to Carlmont, which was just as much white bread then as it is now.
July 18th, 2008 at 8:58 pm
ho ho ho madhaus. There are 2 kinds of “band kids”. The kind you are thinking of are the people in the SCHOOL BAND. The other kind are the kids that start a rock band in their spare time to play at parties in the area.
2 different groups of kids there.
There are 3 bands at the high school my oldest will attend. Marching band, concert band, jazz band.
WG, I did mention rock band above. We just came from my younger kid’s rock band concert. He spent 2 weeks in rock music camp and they all wrote original songs. Their band defined their genre as “Alternative/Hard Rock.” Sweet. We must be grooming him to be a baaaaaaaaad kid. At least my older kid is going to do jazz at music camp.
Heck, they both did theater camp, they are destined to be arty weirdos in high school anyway. Wonder if they’ll end up befriending the type who’d hit their parents with a tire iron.
Nah, this is Cupertino school district. You know what an Asian Fail is here? A “B.” Hahahahahaha! I think one of those kids could get rid of a parent by bringing home straight “A-”s.
July 18th, 2008 at 9:23 pm
I want to quote what Madhaus wrote above, which is so true it should be framed:
“The best way to ensure your child succeeds at school is to read to him every night — that child will then read on his own, and a reader does better at school.” The other best way is to pick your child’s school so that his peer group is full of readers, not wastrels. That’s really what those parents are outbidding each other for: an exceptionally high-performing peer group.”
July 18th, 2008 at 9:39 pm
Pralay says,
“To me, it does not make sense to pay $6000 for the same house which I am renting for $2000. That’s all. Nothing more and nothing less.”
Anybody who talks about a $6000 mortgage is smoking dope. Data shows that the typical mortgage payment in Santa Clara County is only $2880/month (http://blogs.mercurynews.com/realestate/2008/07/18/are-santa-clara-county-homes-affordable-at-least-typical-new-mortgage-payments-are-dropping-added-bonus-positive-news/).
July 19th, 2008 at 8:07 am
RE, I think that “typical mortgage for SC buyers in June” might be a bit misleading. I believe the hottest part of the market right now in Santa Clara county are these cheap low end properties like what I just bought. Somebody lit a fire under the low end in May sometime. From your link,
And another fact that hit the editing room floor: The percentage of homes sold in June in Santa Clara County that had previously been foreclosed upon rose to 17.9 percent in June, up from 16.8 percent in May. In June 2007, only 1.7 percent of sales were previous foreclosures.
This is skewing the numbers. Investors are looking for 500K properties and buying them.
For the purposes of the people here though, who are typically looking in the better areas to live, I would honestly say that a very common mortgage for a family buying in a good area they intend to live in, is about $4500-$5000 when you include escrow. Thats a 650K loan on a 850K property or thereabouts- in other words a DECENT house somewhere.
But $4500 in mortgage payment is not really a problem, particularly with rents at $2000+.
July 19th, 2008 at 9:06 am
Quote: “right now is a good time to buy.”
By: Leslye Krutko, director of San Jose’s housing department.
Source: San Jose Mercury News
Link: http://www.mercurynews.com/ci_9919747?source=rss
July 19th, 2008 at 9:11 am
Based on the above article, anyone who is saying they are priced out is making excuses. Right now SV is affordable for the majority of folks here who are mak