Buying a Home in CA - San Francisco/East Bay

mjlbFebruary 21, 2012

We are considering moving to Berkeley, CA. We've visited and we know that we would like to be in the area around the University of CA - Berkeley campus. We've looked at on-line listings and done some drive-by's, but we won't contact a real estate agent until we have employment and know for sure that we are moving.

We now live in New England, so we noted some obvious difference like very small lots, and lots of traffic. But I am wondering about lots of other things, such as - are insurance premiums very high due to the earthquake risk? There were a fair number of foreclosures, which are rare here -- are there any CA-specific issues with buying a foreclosure? How do electric and water rates compare to the east coast? And anything else you could add! Thanks so much.

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I don't live in the area, but in Southern California. I do know EQ is not a covered loss for your regular Homeowners Insurance. You would need to buy a separate policy for that coverage. I don't buy it, the deductible is so big, it is not worth it for me. Of course, I know other people wouldn't go a day without it but I've never had it and don't think I ever will.
Yes usually lots are smaller in California, it takes some getting used to for some from other areas.

    Bookmark   February 22, 2012 at 12:19AM
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There are websites that will compare the costs of living between the place you are living now and Bekley. I bet it will be very eye opening for you.

    Bookmark   February 22, 2012 at 6:49AM
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My husband and I are both CA natives (southern CA and central valley), but most recently lived in Alameda until about 5 years ago. California is definitely different than every other state and very expensive, which is why we retired to Florida.
Keep in mind that the state is broke and that trickles down to everyone. Property taxes are very high, and I think they are talking about reversing Prop 13 so that will really change how people buy/sell homes. Gas is really high because of the extra taxes and fees and environmental add-ons. Car registration is really, really high. Sales taxes are really high - many in SF Bay area over 9%. Electricity is crazy - remember the brown-outs? Not sure if water is higher than everywhere else, can't remember.
We used to think that while everything was really expensive, overall, California was a good deal because of all the free sunshine activities. And then I just found out that Castle Crags was closed, along with a bunch of other state parks - and that was one of our favorite camping places. Yikes.
Anyway, you've probably already seen that Berkeley/Emeryville is a highly-desired area and expensive. As you branch away from the campus, please be very, very careful to look at the crime statistics. I had to forbid my Navy folks from living in Richmond because the low rents drew them in but the crime (at the time) was more than I wanted to worry about. Also many parts of Oakland were the scariest/grossest places I've ever driven through, and I'm no wimp, but some parts in the hills are gorgeous. Take a look at Alameda - a tight little community, no-freeway minutes from Berkeley, although there are some rough parts still in the north end of the island, the rest is a little paradise. If you have to get on a freeway, the commute to work will suck. No other way to put it. BART is...okay. If you can't walk to a station, the parking sucks. If you end up commuting, you end up paying for it somehow - gas, tolls, mass-transit pass - whatever - so you have to budget for it.
My hubbie had to commute to Silicon Valley, and although he carpooled with a Yahoo guy, it still sucked in the carpool lanes (1 hour to work early, 1.5 hours home). The Yahoo guy now takes the Alameda ferry to a downtown SF office and loves it. We lived in a large zero-lot line rental home, so one wall was on the neighbor's backyard - which was okay until they started bouncing basketballs off the wall (to our kitchen and dining rooms) - but they stopped when asked which was nice.
That's about all I can think of off the top of my head - hope this gives you things to think about.

    Bookmark   February 22, 2012 at 7:21AM
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The basic cost of living will be about 20% more from the Boston area to the San Francisco area, with housing about 80% more costly. Unless you are in a high demand high paying job, it's difficult to find "affordable" housing at all anywhere close in. And it's only going to get more costly in the near future.

Here is a link that might be useful: CA losing more residents than gaining

    Bookmark   February 22, 2012 at 8:19AM
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Being from CA, and living in SC for 60 years, I would suggest very strong that if you do find work, RENT first, do not buy. My DD lives in No CAL and it is difficult. Yes they do get earthquakes, but the lifestyle is entirely different, even between NC & SC. It is like two different states. Most of the Frisco area was settled by people from the East and many of the cultures are very similar. Calif is now a very challenging state, but oh so interesting. Where else can you go from the beach to snow in one day? Best food is San Diego area and No-CA. Would I go back? If I had to, but it would be the northern area. Be prepared to drive in the 80 mph on the freeways. Driving is a challenage. Yes I can still do it, but that is where I learned to drive.

    Bookmark   February 22, 2012 at 11:44AM
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Thanks for all the info - even tho' much of it is discouraging. I had never heard of Alameda -- that was interesting. I expected real estate prices to be higher than here in the Boston area, and they definitely were the last time I visited CA. But this time the number of foreclosures seem to have brought CA prices down to roughly comparable to here (well, ignoring the difference in lot size). OTOH, I know how misleading real estate photos can be, and we only did a half dozen drive-by's. I'll look for those cost of living comparisons too. Would love to hear more from others too.

    Bookmark   February 22, 2012 at 12:52PM
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Prop 13 is unlikely to be repealed although it might be adjusted to tax commercial real estate more fairly. Plan on about 1.2% for property taxes. A million dollar home will cost around $12,000/year in taxes. It varies a little by city and county as there are local and parcel taxes added on.

You will pay a premium to be in the Berkeley hills, and you'll also pay a premium to be in a top school district.

    Bookmark   February 22, 2012 at 2:37PM
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We're in the same boat. Moved from Boston 8 months ago and headed for sunshine. Yes, it's expensive in some ways, but cheaper in others. Gasoline seems to spike here more, but it's comparable to MA. Heating and cooling are WAY cheaper. It used to cost us a fortune to fill our oil tank every winter, and our bill here is like nothing. Natural gas is cheaper (thanks to evil fracking), so it's less. Groceries are less, and oh so delicious.

Lot size is the biggest disappointment. Tiny, tiny lots. And the houses aren't as classic in style, so they look dated fast, which hurts resale. Of course, there are some cute places in Berkeley that will always be cute.

Housing is more, except if you keep moving up north. We're renting while scouting in Rocklin, and you can get a mansion for a song here.

I lived in Berkeley for awhile in college, and while I really like the mild climate, it can also be downright cold in summer, like 50. I moved because I was fed up with New England gloom, so you may want to think about that too.

Whomever said to rent first knows what they're talking about.

Good luck, and contact me if you want to ask any East-West questions.

    Bookmark   February 25, 2012 at 5:45PM
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Overall, Berkeley is 17% more expensive than Boston. Housing is a whopping 62% more expensive. Food and utilities are cheaper in Berkeley.

For the first time ever, I believe, California is losing more people than are moving there. Not good for resale prices.
And I won't even get started on living in a state that does not respect personal liberties.

    Bookmark   February 26, 2012 at 6:24AM
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It's funny about the real estate prices. I looked at the sites that compare cities and saw the 80% more expensive than Boston comparison. But when I compare actual Berkeley for-sale homes that I like to our home (admittedly a pricey suburb of Boston), the Berkeley prices are just about the same per sq. ft. In general, the Berkeley homes seem to be in better shape and more attractive too. Of course the big difference is Berkeley lot size which is only about 1/4 of what we have now.

We don't have kids so we can look in areas without excessive regard for schools. I know renting would make sense, and short-term rental likely would be necessary due to logistics. Our Berkeley home would be a very long-term purchase, so I would not settle for something I did not really love. But I am concerned that price movement could be rapid, so I hope that we would not rent for more than a few months.

We have electric heat pumps for heat (lots of ledge rules out gas), so $1,000 bills are not unheard of in the winter. Our water bill is maybe $30/mo. Real estate taxes are comparable. We'll definitely have to deliberate on the financial side of things. Certainly we were not intending to increase our costs, but it sounds like we definitely would.

When we returned from vacation, I did really notice the large private outdoor spaces at home, versus wide-open but public outdoor spaces of CA. And when I drove up to NH in less than an hour, it dawned on me that a similar road trip in CA could take forever. It's definitely something to think about. But there's a lot to be said for a new locale to investigate - (restaurants, parks, theatre, etc). While it's not really true, I feel like I've seen everything there is to see in Boston. While there are plenty of foreign languages spoken in the Boston area, it still feels like a parochial backwater in some respects.

    Bookmark   February 26, 2012 at 10:40AM
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I've lived in CA all my life and love it. I have no desire to move. I'm well aware how expensive houses are, I also feel very blessed that I can afford the prices. Of course many can't or won't pay the price.
I do point out to others we don't pay to heat or cool our house. That varies throughout the state some areas are very cold or hot, but usually the prices are lower there.
Also our public schools are highly rated so parents needn't pay for a private school.
I live in a beach area, prices are sky high, but I love the weather and lifestyle. It is really a personal decision for each person.
It may fun to try it for a few years to see if you like it. It is funny how many young just post college people I meet from the east. It seems like a they want to "come west" for the beach party lifestyle. Of course they are renting with roommates, some do go back home to family, some stay for ever like my dad did.

    Bookmark   February 26, 2012 at 12:14PM
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I moved here from Chicago (and have also lived in LA) and you really, really should rent first. Housing prices are not going to zoom up anytime soon. The banks have a large shadow inventory and CA is one of the three worst states for foreclosures.

It is very time-consuming to buy a foreclosure. Figure it will take 4x longer than to buy normally. Homes in foreclosure are often in bad shape; quality of construction in CA is often very low. Labor costs are high and skillful workers harder to find than they should be.

Do not assume you can remodel a not-so-perfect house into what you want. The NIMBY-ism here is hideous and in all the major cities it is extraordinarily difficult and expensive to enlarge a home's footprint. You are legally constrained from covering more than 40% of your lot anyway, I believe, and with our small lots that's not a big footprint.

Permits are expensive to obtain and if you make structural changes, it will be required that you bring everything up to current building code. Since every year brings in stricter earthquake building codes, this can add so much to the cost that remodeling projects become impossible.

For example, our neighbor wanted to turn their downstairs into a legal in-law: adding a second bathroom, building a single-story, one-room addition. They had $75K in cash as their budget (we live in the Oakland foothills, nice older area, starter homes).

It took them over $12K and almost two years to go through the permit process. Eventually they were told they had to apply for a waiver because they were taking 2' from the single-car garage which was already minimum size allowed, so they had to have the architect re-draw the plans and resubmit them. Permit cost, BTW, is 10% of the cost estimate in our city.

The City of Oakland does the engineering study for all projects. As we live on a hill (great east-facing hillside views), they were told to stabilize their lot, it would be necessary to sink 40 piers, each 37' deep to bedrock, filled with steel rebar and concrete. 25 of the piers would be for the single-room addition (which was only going to be about 17x25') and the remaining 15 would be placed all along the north side of the existing house.

The cost for the pier work alone? $65,000.

Needless to say, they did something else with their remaining $63K.

You might be surprised what you pay for utilities here. PG&E is one of the most expensive utilities in the country, and most older homes aren't insulated well. Our home is insulated with double-pane windows, we live in a warmer microclimate than Berkeley, I keep my home fairly cool, yet we pay on average $170/mo for gas (furnace/dryer/stove) and electricity. No one can place any dependency on PG&E absorbing all the costs for their unmapped leaking gas mains (a neighborhood in San Bruno saw its gas main blow up and 8 people died); we ratepayers will almost certainly see our rates rise yet again.

Water isn't that expensive, but earthquake-proofing our EBMUD water reservoirs is. Our bi-monthly water bill for a large garden (1/6 acre) and 3 people runs $45 for water and $100 for earthquake work.

We do have earthquake insurance. There is a fault that runs right through Alameda County and it's overdue for another major quake. Homeowners insurance is fairly low - less than $1K, and umbrella liability is around $200/yr. Earthquake insurance with a $100K deductible costs us almost $4000/yr. However, we have no mortgage so we are carrying all the risk on our home. It made sense for us to purchase risk mitigation.

To be afraid of all of Oakland is ridiculous. There are some very good neighborhoods here, just as there are some bad neighborhoods in Berkeley. If I were buying for the first time, I'd look in El Cerrito on the east side of San Pablo Ave. Good, stable neighborhoods, nice weather, easier city traffic, great services/shops.

I like Alameda, but access is limited to the bridges, and traffic is easily snarled at commute times. Traffic is the huge issue in the Bay Area. If you are still working, you need to really see how the traffic patterns work, not just when things go right but when things go wrong.

Public transit is pathetic compared to Chicago, NY and Boston. Cars are a necessity in the East Bay; you can get around without one but it will take forever and making transfers between systems is a pain.

Don't ignore the sales tax. The first time you pay sales tax on a new car, you will definitely feel the pain! Food is a conundrum: you can spend less and get higher quality, but on average Bay Area residents eat out more often than anyone else except New Yorkers, over 4x/week.

I don't mean to sound discouraging. We love living here but there is no denying CA is an extremely expensive state. State income taxes are high and services are dwindling. You will find politics very different here than back East.

    Bookmark   February 27, 2012 at 2:23AM
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>It is very time-consuming to buy a foreclosure. Figure it will take 4x longer than to buy normally.

Really? Is this a CA thing? Around here a short sale, yes, but a foreclosure is like any other normal sale.

    Bookmark   February 27, 2012 at 10:21AM
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jkom - thanks for all your comments -- particularly about the earthquake coverage. The Claremont area that we like actually is partly in Oakland, so I know there are some really nice areas of Oakland.

    Bookmark   February 27, 2012 at 8:26PM
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The State of CA attorney general is working to halt foreclosures for the next year due to the many paperwork irregularities that have been discovered by independent auditors.

Many lawsuits have been filed by homeowners to void foreclosure proceedings due to the inability to determine who actually holds the title when the mortgage has been resold multiple times.

If the homeowner files bankruptcy, that will also delay foreclosure.

CA has more lawyers than the entire nation of Japan. We are lawsuit-happy here. Even when the homeowner defaults, the title issues can slow down the process to a crawl.

You are also making the assumption that banks WANT to make home loans. Actually, they don't. Making loans means they have to tie up their capital, which means they must take a hit to their capital reserve ratio. It's far more profitable to use their capital in other market segments.

The whole issue with all the shadow inventory the banks are carrying is that it is cheaper for them to hold onto foreclosed homes than it is to sell them at a loss on the original mortgage. Once that resale is publicly logged, the bank has to record any loss, again against their capital reserves. It's better to hold on to the properties and let the market recover, to try to avoid that 'hit'.

This is why so many people complain about the buying process - banks making demands for more paperwork to draw the loan process out, not to mention the problem with appraisals not coming in high enough to justify the asking price.

    Bookmark   February 28, 2012 at 2:26AM
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Probably already on your radar - but being that Berkeley is a large university with lots of off campus living, party houses can be a problem in some neighborhoods. However, if you are looking at Claremont I doubt there would be much of a problem in that area...I also love the Tilden Park area myself

    Bookmark   February 28, 2012 at 3:46PM
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I was mentioning this thread to my DH and he pointed out something I hadn't included. It's cheaper to buy a home within walking distance of the El Cerrito BART stations compared to the Berkeley BART stations. None of the stations were built with sufficient parking and it can be difficult to find a space at certain peak times.

If you find a rental near EC's Center St., you're also near the following supermarkets: the largest Lucky's, the largest (and brand new) Safeway, two massive Target stores, Costco in Richmond, and Trader Joe's in the EC Plaza.

Monterey Market is easy to reach from either, as is Tokyo Fish Market. The only thing that's not in El Cerrito is Whole Foods, which is in Berkeley, and the Berkeley Bowl (both locations, Ashby Ave and Heinz Ave). These markets are about 7 miles away/15 min or so, depending on traffic.

    Bookmark   March 16, 2012 at 8:21PM
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    Bookmark   March 27, 2013 at 7:53AM
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Chiming in - I live on the peninsula side not the east bay. Yes housing prices are crazy here and climbing fast. There may be more foreclosure inventory in Berkeley/Oakland areas than there is here.

Buying an REO is not time consuming in CA, buying a short sale or foreclosure auction home is. However I don't know if it's the same in the east bay, but the REO homes only stay on the market about a week. They are snapped up by cash investors for the most part. We tried putting in offers on a few and we had no hope against the cash offers with our conventional loan financing. The REOs often get multiple bids and the banks will take their time getting back to you. REO transactions are typically complete in 1 month, less with cash transactions.

Short sales, don't even bother. It tales months and then the home goes off the market as the resident tried to negotiate, comes back on... it is crazy.

Another thing to be aware of - be very careful if the house you are buying is currently rented out. CA has very strong tenant protection laws and it can be very difficult to move in to the home if there are tenants present! You cannot make them move if they have a lease, and even on month to month it can be very difficult.

I concur with the advice to rent first - get to know the area, figure out where you want to live, settle in a bit.

As for all the articles about CA losing people, those are about 2-3 years out of date. People are flooding back in, the roads are busier again and the economy is booming.

We love the bay area and don't ever want to move. Everyone loves it here, that's why housing is expensive.

Traffic is much worse in the east bay. I hate driving over there! I would honestly prefer to rent closer to work than to own and commute. We are fortunate that we found a very affordable townhouse 4 miles from my work so we have the best of both worlds... another unit in our complex just sold for almost twice what we paid for ours less than 1 year ago.

    Bookmark   April 1, 2013 at 9:51PM
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