October 2, 2011

A Bay Area Buying Calculator

Burbed readers are a fascinating bunch.  One of them has put together some Bay Area-specific buying calculators, and wants you, the Burbed readership, to have a look.  Since you’re all so hard to please and think everything out there sucks, this is your opportunity to ask the author to make it suck less.

Please welcome Burbed reader PKamp3 and the Don’t Quit Your Day Job blog, introducing lots of boring math, charts, and stats.  Some of you should just go back to sleep, while others should start a second pot of coffee and get ready to dig on in.

Here’s an article I wrote with 2 RBA calculators attached. I wrote it kind of in a Burbed mindframe: “who the hell can afford RBA prices”?

Here’s a preview:

image2362 LAURA Ln, Mountain View, CA 94043
$634,950

I can tell you before you click the link… using my default assumptions:(20% DP, 4.5% Interest, 30 Year Mortgage, 31% front end DTI.  You can change everything there.)  43% of Bay Area Households have the income to make the payment.  That’s 746,463, in the RBA 4… since I count Alameda County.

Might be interesting… now that I wrote the code I’m having fun looking at listings and running the numbers.  Maybe you can help come up with better house-hunter ranks?  I don’t want to spoil it, but based on home prices the rank changes.

image

Given how willing PKamp3 seems to be in helping make this tool more useful, please play with it and complain at length in the comments below.  I’ve already groused about the inability to put a cash amount rather than a percentage amount in the down payment, and noted that Alameda County’s presence in the dataset pretty much poisons the well of “Inner Bay Area” buyers.  It might be “Inner” but it’s not particularly Real.

Some of the limitations are due to what’s available.  Some cities have been removed from the dataset.  I felt that the RBA should be limited to San Francisco, San Mateo, and Santa Clara counties, with the possible addition of Marin.  Alameda County?  That’s a fine joke someone is playing on us.  Once those losers are removed, then we can talk about limiting the universe some more.  I would assume San Francisco residents probably don’t want to buy this crapbox in Mountain View, but you never know.

Head on over to the calculator and let us know what you think of this tool and how useless it is it could be improved.  Plug in some other home values and assumptions and see how many buyers you’re up against.  So, what do you think?  Do you see a use for this?  Or are you going back to sleep?

Comments (31) -- Posted by: madhaus @ 5:34 am

31 Responses to “A Bay Area Buying Calculator”

  1. Alex Says:

    Terrible calculator.

    Need a function for calculating the % of hot redhead and Asian women and the probability of scoring a sandwich!

    But what do you expect from some twit who looks at real estate statistics all day?!

    Get a life. Go chase some tail. Bang some college co-ed.

  2. PKamp3 Says:

    #1 The census includes ‘Asian’ statistics, but I couldn’t find a category for redheads. They also don’t have anything related to hotness.

    Thanks for the advice!

  3. Gallileo Says:

    we all know that the RBA is only 94306 these days, so you need to remove everything else.

  4. SEA Says:

    I had no idea that there were 846,913 Bay Area Households (not 48.96%, not 48.94%, but 48.95%) who could afford a $45,000,000–more than can afford to pay the $634,950 in the example above.

    You know the idea, just put 99% down, so you’re financing less than 80% of $634,950. I’m sure there are 846,913 (not 846,914) households with $44.5M to put down.

    Clearly RBA housing is totally affordable, as it always has been, and always will be. That’s not to mention that housing price appreciation takes care of everything, including taxes, insurance, and maintenance.

  5. very amused Says:

    Is PKamp3 a closet terrorist? First ad on the blog was for Sharia-compliant Islamic loans. Hope you don’t have any readership in Oklahoma or it’s the lockup for you.

    Burbed has all-American ads for foreclosure help: “Trustee Verification Delay Service.” Not for terrorists. They use suitcases full of cash to buy safehouses.

  6. Perfect Sense Says:

    Can’t you see
    It all makes perfect sense
    Expressed in dollars and cents

    Darling is the child warm in the bed tonight

  7. SEA Says:

    From PKamp3:

    “Front End Debt To Income is your estimate of what people in the Bay Area consider a safe payment. If a household makes $10,000 a month (gross – ie, pre-tax), a 28% DTI means they can afford a mortgage payment of $2,800. Play with this number to see how it affects affordability.”

    Somehow I’m thinking all the RBAers don’t have any other debt or other obligations that are frequently considered, such as a high level of child support. Even with the $12.5M dollar contract, Cromartie has difficulty keeping up with his baby mamas.

    In the RRRRReal RBA, you spend more to get less, and you tell about how good that is. Netflix anyone?

  8. The Gilroy Alex Says:

    $635k means $6350 a month to live there, by the only calculator I need.

    By my calculation, it needs to drop another 50% in price at LEAST to become somewhere near affordable.

    That’s what, 3 more years?

    My calculator is the calculator of the FUTURE!

  9. SEA Says:

    I’m trying to price this place using that affordability calculator.

  10. PKamp3 Says:

    #3 – Put the home from #9 in there and I bet it’s an interesting combo.

    #5 – Nope, Irish/German/Finnish/Catholic. Google tends to place ads about things you’ve searched for or articles you clicked on Google News. Were you reading an article on Shariah Law earlier in the day? I’m most interested in knowing what sort of ads #1 saw… Asian-Redhead dating sites?

    #7 – You joke, but child support is a good topic, especially with the high salaries in the Bay. It’s not a tax deductible expense and the recipient doesn’t have to declare it… it won’t show up in these stats. You also make a good point in #4 – I can’t figure out a good way to get household assets in the RBA, and most wealth stats are from 2004. Bubble upswing doesn’t count!

  11. SEA Says:

    #10- I still cannot figure out why, in some areas, prices keep going down, even if so-called affordability (based on various metrics) keeps improving.

    Start with this post, which points out that while there is a relatively high level of pending sales in EPA, such are coupled with what I would consider high losses. Does the duration matter, when the losses are so high? Many found EPA ‘affordable’ at the peak.

    Even if one can afford something, that does not make it a good deal, nor does it suggest that the future value will be high.

  12. Divasm Says:

    So I’m the only one who had fun playing with the calculator just to see how many different ranks I could get – Eichler Liker, Palo Alto Seeker, Pets.com investor, Internet IPO Millionaire, School District Shopper? It’s like playing house, only the part where you’re in tons of debt!

    My husband immediately discounted any actual usefulness of this as a tool because, as stated, “it’s silly to assume everyone can come up with 20% down payment.” It’s ridiculous to show that, given today’s crazy low interest rates, anyone can afford a home and ignore the $150K plus entrance fee to the party in the RBA.

    And I also submit that Alameda County is not RBA.

  13. SEA Says:

    The only calculator that is needed for the RBA is one that computes the ‘automatic price double every 10 years or sooner.’

  14. madhaus Says:

    I am terribly disappointed to see useful comments here instead of whining. This is PKamp3‘s virgin post, everyone, you could muss up some bytes or something.

  15. Divasm Says:

    I know we redheads are an elusive bunch, but I did not count whining about not having hot redhead stats as a useful comment…

  16. PKamp3 Says:

    #11 – I was actually worried when I started digging into the census numbers nationwide. I know that “It’s Different Here™” but the correlation between home price multiples, home prices, new home sales and interest rates has broken down since 2008. It’s a few articles back on my site titled “Rooting for Price Increases and Low Interest Rates” (it’s a sarcastic title). However, I’m of the opinion things will go back to being nicely behaved… eventually. I guess my point is “before 2008, when houses were this ‘affordable’ people bought.” I’m no Keynes fan, but he had a point when he said, “Markets can remain irrational a lot longer than you and I can remain solvent.”

    #12 – My argument to Madhaus for the inclusion – people from Alameda County want to buy in the RBA so they are still your competition. I defer to others’ expertise, however, I think Fremont, Bay Farm Island, and the Oakland Hills should get a say!

    Also, your husband is right. I have a calculator that works in the reverse direction (http://dqydj.net/home-price-affordability-calculator/) so you can check how I came up with the payments. The calculator really just lets you get an idea of how many people can theoretically cover the payment.

    There are 8 rankings. I think there should be at least double that.

  17. SEA Says:

    #16- “I guess my point is “before 2008, when houses were this ‘affordable’ people bought.” I’m no Keynes fan, but he had a point when he said, “Markets can remain irrational a lot longer than you and I can remain solvent.””

    I’ve watched too many people buy all the way down to bankruptcy.

    How long will prices remain high in the RBA?

  18. madhaus Says:

    Divasm, I played with the labels too. A $300K house makes me an RBA move-up buyer? Seriously? You can’t even buy a dumpster house in the RBA for $300K, which is, after all, not a lot of money.

  19. Divasm Says:

    Madhaus, I believe you are forgetting about that PA trailer park! Living the RBA dream baby!

  20. SEA Says:

    Although #3 points out that the RBA is only part of 94306, that trailer park is in the correct zip code!

  21. PKamp3 Says:

    #17 – I wish I knew! I’d *guess* prices will be generally flat for a few years. Worse if a city in the RBA goes the way of Vallejo (http://www.vanityfair.com/business/features/2011/11/michael-lewis-201111?).

    #18 – And with default settings, people start looking for Eichlers pretty cheaply!

    #19/20 Garbage in, Garbage Out:
    3980 El Camino Real #27, Palo Alto, CA 94306
    Home Price $27,000
    Estimated Mortgage Payment: $109
    Your House Hunting Rank: Pets.com Investor
    Percentage of Bay Area Households Able to Afford Payment: 100%
    Number of Bay Area Households Able to Afford Payment: 1730166

    The formula definitely fails at the margins! It doesn’t factor in HOA or space rent…

  22. SEA Says:

    “The formula definitely fails at the margins!”

    Are the margins larger than the whole?

  23. ms Says:

    Madhaus,
    RBA can’t be defined strictly by county line.
    Not even in SF does anyone think the Bayview or rather large portions of Ingleside are RBA.
    The San Mateo coast past Devil’s Slide: Not RBA.
    Santa Clara south of San Jose: Not RBA.

  24. madhaus Says:

    Ummm, ms, you are FAR too generous.

  25. SEA Says:

    That’s from April 2010, back when the RBA was rather large.

  26. ms Says:

    Burlingame’s still RBA, esp. west of ecr
    The rest I can largely agree with

  27. PKamp3 Says:

    I think it’s been established… the RBA is 94306, even if you live in a dumpster!

  28. Carnivals and Links, Week of 10/3/2011 Says:

    [...] may not be a carnival, but the comments section certainly felt like one!  Thanks to Burbed for featuring our article on Bay Area Home Prices, “Bay Area Home Prices – And Why It’s Probably Not a [...]

  29. paul Says:

    front end dti 0f 28% WITHOUT taxes

    the $12000 a year taxes add onto your payment can make a big hit on your lifestyle

  30. Revised Real Bay Area Income and Home Calculator, 2011 Edition! Says:

    [...] couple of weeks back, we here at DQYDJ tried to get some Bay Area street cred with our screed on how Bay Area house prices make more sense than one might [...]

  31. The DQYDJ Weekender (Week of 12/26/11) Says:

    [...] asked, because we’re just the sort of writers who can answer that question!  Check out the comments on the original over at [...]


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