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Some Silicon Valley Tech Workers Get Home Loans with No Money Down

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Re: Some Silicon Valley Tech Workers Get Home Loans with No Money Down

#161

Post by refurb »

encoderer wrote: post #137
gmarx wrote: post #52

Does anyone else experience mild anxiety reading stories about Bay Area real estate? Long ago I decided it can't be wise to buy instead of rent. Logic and math argue this must end and yet it seems there is always another "sucker". We seem to have entered a new phase in which Chinese are moving money offshore and into the local market. Lots of Chinese, lots of money, could go on and on but for how long? Ultimately a h…

Everybody thinks it's Chinese money, and sure there is some. But there are just a lot of very highly paid ppl in the bay area. Facebook, Google, &c are moving a lot more money into this region than any Chinese outflows. In all my experience here, SF is not a city of the empty pied-à-terre.

They just released some data on foreign purchases in another crazy market, Vancouver. In the last month (June?) 10% of purchasers were foreign (all countries) and the average house price was the same as domestic purchasers.

Foreign investment has an impact in Vancouver, but by and large, it's Canadians who are over-extending themselves to get into a market they think they will be priced out of forever.

Re: Some Silicon Valley Tech Workers Get Home Loans with No Money Down

#162

Post by refurb »

Johnie wrote: post #61
JumpCrisscross wrote: post #26

Earlier quoted context omitted.

> How does it make sense to tie up $1M+ at 1%? Three things likely going on here: loss leading, promotion and a hunt for yield. Let's start with the hunt for yield. Yesterday's auction priced the 3-year at 0.87% and the 5-year at 1.15% [1]. We don't know the term of Zuckerberg'a mortgage. If it was less than 5 years, the bank might make a spread. If it's a loan with a longer term the lender could have made more by le…

Also, someone like Mark Zuckerberg has almost 0 default risk. To the banks, this is free money. Remember, when the bank issues a mortgage for 3.5%, the spread between that and their cost of capital covers the risk of default. But if the default risk is minimal, they can basically issue the loan at cost.

Most banks don't hold mortgage risk. They sell the mortgages to investors who hold the risk.

Re: Some Silicon Valley Tech Workers Get Home Loans with No Money Down

#163

Post by refurb »

random28345 wrote: post #41

tl;dr: Houses are so expensive that people can't afford a down payment, so banks let people buy houses for no money down, driving up the purchase price of houses.

This is a great point to reinforce. Low interest rates are a HUGE driver of housing prices.

No one knows what interest rates will do, but if they go from 3% to 6% (historical average), then suddenly everyone can't afford as much house and prices decline.

Re: Some Silicon Valley Tech Workers Get Home Loans with No Money Down

#164

Post by mason240 »

mmanfrin wrote: post #134
gmarx wrote: post #52

Does anyone else experience mild anxiety reading stories about Bay Area real estate? Long ago I decided it can't be wise to buy instead of rent. Logic and math argue this must end and yet it seems there is always another "sucker". We seem to have entered a new phase in which Chinese are moving money offshore and into the local market. Lots of Chinese, lots of money, could go on and on but for how long? Ultimately a h…

I think the market is over-exuberant right now for sure, but I also feel that people like the Bay Area because the Bay Area is an exceedingly pleasant place to live . This market has hit a little perfect storm of pricing and may correct, but I think the longview is that Bay Area housing prices will just keep marching up. A lot of the price of homes is the land, which means that (barring local regulation) homes will b…

>but I also feel that people like the Bay Area because the Bay Area has exceedingly become a status symbol.

Re: Some Silicon Valley Tech Workers Get Home Loans with No Money Down

#165

Post by twblalock »

artursapek wrote: post #17
whack wrote: post #13

Earlier quoted context omitted.

Check out my earlier comment. Any time you get to borrow money at 1%, you should take that loan and reinvest it in something (anything) that yields a higher return. It's almost like getting free money.

But is the cost of a house significant to someone worth billions? I'm asking why he wouldn't just pay cash for it.

How would he get that cash? If he has to sell stocks, his capital gains taxes would probably cost him a lot more money than the interest on a mortgage, or on a pledge asset line of credit with his investments as collateral.

If you have to sell stocks to pay cash for a home, a mortgage could cost you less money overall.

Re: Some Silicon Valley Tech Workers Get Home Loans with No Money Down

#166

Post by twblalock »

dasil003 wrote: post #71
whack wrote: post #9

I have little interest in tying myself down by buying a house, but the part that's most appealing to me is the mortgage structure. You get to borrow money at a ~3.5% interest rate, in order to invest in something that produces 5-7% yearly returns. On average, this is going to make a ton of money in the long term. Is there any way to do something similar with stocks, without paying an insane amount of money in interes…

I'd be super careful with this. When I make 4x the median American income and have almost zero hope of ever being able to afford a home (until I get my FU money that is), that ought to tell you something about the sustainability of the current market.

As long as there are a lot of people with enough money to afford homes at the market-rate price, the market will remain sustainable. You may make 4X the median income, but there is no shortage of people who make a whole lot more than that. I see no reason to believe that will change anytime soon.

Re: Some Silicon Valley Tech Workers Get Home Loans with No Money Down

#167

Post by refurb »

CPLX wrote: post #122
GeneralMayhem wrote: post #98

Earlier quoted context omitted.

The new elites are in tech, but they're not the rank and file. Making even $250k/yr may be top-5% for income and give you breathing room to make a few investments, but it will never make you wealthy . That's lifetime earnings of about $10m before taxes, so you likely wouldn't get to fuck-you money ever, let alone with time to use it. There's a very serious discontinuity somewhere around the $1m/year mark where you ge…

> it will never make you wealthy. That's lifetime earnings of about $10m before taxes This thread has taught me that people in the valley or the HN echo chamber really sort of have no idea how most people live in this country, let alone around the world.

The average American household (no individual) income is $52,000 (2014).

You've got people on HN claiming that making 5x that makes them solidly middle class because they can't afford a home in one of the most expensive places in the world.

Re: Some Silicon Valley Tech Workers Get Home Loans with No Money Down

#168

Post by refurb »

superuser2 wrote: post #101
CPLX wrote: post #56

Earlier quoted context omitted.

I find it hilarious that the answer to this isn't obvious. This is 2016. Tech workers are the American elites. Did you think elites were still guys with a monacle sitting in a drawing room that overlooks a coal mine or something?

Elites are the guys who make deals for a living. Investors, executives, traders, etc. The people who own the tech companies, the people who service the IPOs, the people who own the real estate we pay such ridiculous rents on, the CEOs and board members of our employers and the companies we buy stuff from. Our pay is high, all things considered, but not nearly as high as law or medicine, and certainly not management.…

It reminds me of the saying "An alcoholic (the elite) are those that drink one more drink (make more money) than I do".

Re: Some Silicon Valley Tech Workers Get Home Loans with No Money Down

#169

Post by dragonwriter »

CPLX wrote: post #122
GeneralMayhem wrote: post #98

Earlier quoted context omitted.

The new elites are in tech, but they're not the rank and file. Making even $250k/yr may be top-5% for income and give you breathing room to make a few investments, but it will never make you wealthy . That's lifetime earnings of about $10m before taxes, so you likely wouldn't get to fuck-you money ever, let alone with time to use it. There's a very serious discontinuity somewhere around the $1m/year mark where you ge…

> it will never make you wealthy. That's lifetime earnings of about $10m before taxes This thread has taught me that people in the valley or the HN echo chamber really sort of have no idea how most people live in this country, let alone around the world.

I think what you don't realize is that most people are, in traditional terms, working class (proletariat).

Relative to them, tech workers -- who are quite often in what is, in traditional terms, the middle class (the petit bourgeoisie) -- may seem like a narrow elite. This is an understandable perception, and there is a sense in which it is correct -- tech workers are elite workers.

But they aren't the elite within the country, and the gap between tech workers and the elite is much greater than the gap between the average worker and the average tech worker. The elite (the haut bourgeoisie) are not "workers" at all.

Re: Some Silicon Valley Tech Workers Get Home Loans with No Money Down

#170

Post by patcheudor »

refurb wrote: post #156
patcheudor wrote: post #150

Earlier quoted context omitted.

I found it to be a particularly interesting headline because I thought such things were normal. When I bought my home in 2004 it was not only zero down but on a 7/1 interest only arm at just 1 point above the basis rate with a maximum increase over the life of just 4 points. As a bonus I got $50K out to pay off the boat. Needless to say when the housing market crashed I wasn't freaked out because I had effectively no…

When I bought my home in 2004 I think the "2004" in your reply is key. Crazy things were happening back then and as you called out, the housing market crashed. I think what freaks people out is that only ~8 years out from the crash, you can already see lending standards getting more relaxed. Didn't we learn anything last time? Not to mention the number of people I've talked to that said "housing always goes up, it's…

Yeah, in my case I was far from a sub prime borrower. When everyone's rates adjusted up in the 2007-2009 timeframe mine went down. I was using a responsible mortgage tool. The problem was, people without an 850 credit rating were getting these same loans without great terms upon adjustment.
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