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October 29, 2007


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Do they mean a separate bedroom for each of the kids? I wouldn't describe that as a middle class necessity myself, although I'd probaby say a room between 2 is the limit.

If you don't want to put up with the high cost of living can you get a better balance somewhere else? Or are there some careers/industries that are really only based in the Bay Area?

I can tell you this is certainly not unique to California! My wife and I live in NYC and between the two if us I believe we're earning above average salaries. Yet we still can't figure out how we can afford to buy a house here! Between inflated costs, taxes, and everything else it just doesn't seem possible right now to own a house without having a lot of debt. It's as if all we're earning is going towards the privilege of living in NYC but we're starting to wonder what the benefits of it is. We're saving all we can now and looking into moving to another city/location in a couple of years.

I've found SF and the Bay Area to have, in general, the highest salaries in the country (of course it will depend on your field and specific job) and statistics bear that out as well.

I think for those who are in the position to own a home, the diff. in salary here is not necessarily enough to compensate for the high cost of housing (which is really the main and basically only factor that makes this area expensive to live in). But for those who rent, there are plenty of reasonable options, especially in relation to potential income, and I've been able to have a better standard of living here than other supposedly "cheaper" areas.

When it comes time to own, many have to look elsewhere, but I don't think that's true for everyone. There are places to live a bit farther out that are cheaper and can be traded up later.

The availability of great jobs and good salaries in our fields makes this area very attractive. Cheap rent sweetens the deal, as does the very high quality of life, good public transportation (compared to many other areas).

We spend very little here to meet our recreation, entertainment, and travel needs because of how much is available in such a short distance all around us. Cultural, natural, recreational, etc. opportunities abound in every direction--and often we don't have to spend a thing (except maybe the cost of gas or subway) to access so much of what the area offers and that affects our bottom line as well. We'd spend more in cheaper areas that don't have the many opportunities easily (and cheaply) found here.

But again, it isn't just about we love it here and this is where we want to be, expensive or not (though that is somewhat true). Economically, given our current situation, we do better here than we would in most, if not any, other area, and we have a top notch quality of life on top of it.

It is expensive here, but stats. and numbers don't always tell the whole story. And acknowledging the often vast discrepancy b/w renters and owners here is tantamount to understanding the context of the numbers such as the ones you've quoted. Also, those numbers don't really apply to those who've bought here before the boom. Prices were very reasonable then. Not everyone is a first time homeowner. Many bought cheap places that are not worth close to a million, and they have high BAy Area salaries on top of it.

This area is a great one for saving money and getting ready to be in a position to buy somewhere else in the country. The opportunities for earning a great income and living below one's means are very high for those who rent especially (or those who have roommates or buy a duplex and have a tenant or try similar situations), and one does not need to sacrifice quality of life in order to do it. After saving up, depending on one's income, one can either buy a condo here in a cheaper area near SF, or move elsewhere having saved quite a bit of money and gotten good work experience (and had a great time doing it) in the Bay Area.

In summary I think the high cost of living is not quite as cut and dry as some numbers and article excerpts make it out to be. There are many factors that go into looking at how cost effective a place can be, and a lot of context that surrounds every statistic. Just my 2 cents as a long time resident whose lived elsewhere as well.

Do they mean a separate bedroom for each of the kids? I wouldn't describe that as a middle class necessity myself, although I'd probaby say a room between 2 is the limit.

@plonkee, in the article they talk about a family where the parents and children are all sleeping in the same room (they can only afford a one-bedroom apartment). So my guess is when they say a 'separate bedroom for the children', they mean from the parents.

I grew up in the NY area. We had friends who lived in the city and were willing to have a family of four in a one-bedroom, and they totally made it work, and I would say considered themselves middle class. However, they did spend a bit of money on arts and entertainment which was more important to them. But for the people who are struggling just to tread water, it doesn't seem like it would be worth it.

Yes, housing is tough to compare because it is both an expense and an investment so rentwise you can be better off in cities but buying is extremely expensive, and yes, some careers are really only available there, tech for the bay area and to a lesser extent NY and Boston, and finance for NY and Boston. Not that there are no jobs elsewhere but they are few and far between and not generally at the same level as these centers. It is really a matter of what one finds most important and compromising between them.

We're in San Francisco. My wife inherited her house from her father, who bought it circa 1955. There's a big-but-not-too-big mortgage on it now, but we pay something like $2,000/year in property tax on a house appraised (last year) for $740K. So while it is indeed outrageously expensive here, I'm not sure it would help us much to go elsewhere.

I haven't done the math though, partly because I know my wife would *never* sell this house; she's so emotionally invested in the idea of owning a house in SF that other options simply aren't on the table.

YEs I have probably made a similar comment many times (sorry) but yes, we moved from the Bay Area for precisely that reason. I have a lot of friends and family blinded by "opportunity" in the Bay Area and I think they are insane. We moved to Sacramento in 2001 or so and made life about 20 times easier. (I actually received a bit of a pay raise when I moved. Having a few more years experience I imagine today I could maybe make an additional $10k-$20k annually in the BAY but we'd have to trade in our $200k mortgage and 2600 square feet for a $600k mortgage and 1300 square feet. Plus $10k/year property taxes or something. Um, I just will never get the draw for people not in the "right" industries. The $20k raise would put us so far behind financially, you don't even know).

I will give you that a lot of our friends and families could make bank if they stick it out. They really could. But in the meantime they take on far more risk than we would ever consider. We have a MUCH more relaxed lifestyle having moved a mere 2 hours away. I'd say we easily live twice as well on 1/2 as much.

For all we have done to keep our housing costs down, other costs are just so out of control. I Would not be surprised if we left California eventually. That is a much harder decision though when it comes to comsider giving up family and friends, and the wonderful weather we are used to. Etc., etc. For now we are doing fine, but something to consider in the long run as health care and such is extra expensive here.

Plonkee - certainly not a room for each kid. Most of our peers in the Bay are paying $800k for 2-3 bedroom fixxers. Or you could rent a studio apartmnet for $k/month or something. Most people I know in the Bay lead pretty frugal lifestyles since there isn't much cash left over after the house payment or rent! The wages certainly do not translate into lavish lifestyles for the average person there.

Sorry - I meant $1k/month rent for the studio.

I had to add my parents took the risk of paying 75% of their income to a mortgage (in the early 80s) and they made bank. IT paid off for them. Today they own a million dollar home outright (a modest home) and my dad makes a spectacular wage and is well on track for retirement. He's in the "right" industry though. I find for our peers (in their 20s) that it is a MUCH harder road these days. We left when housing was hitting $500k. We knew we could never take on that risk no matter what king of wages we could garner. The same houses are $1 mil today. Certainly isn't getting any easier.

I agree with a lot of what FMF is saying. The Bay Area and California in general is not a good place to live if:

You want to raise children and don't make well above 77K a year. I'd say you need close to 125K to 150K to raise kids in a decent manner here. That isn't an impossible income for a lot of people given the higher prevailing pay....but for most it's out of reach.

However, if you're single with no kids and are not obsessed with having a house with a zillion square feet, then you can make it work for you. I would have to change careers to earn the same income somewhere else as I do here. But because I chose to make sacrifices (having roommates, and/or living in a studio apartment etc), I have been able to sock away decent money for many years that I simply would not have been able to save had I done the same job somewhere else.

That said, I even see a lot of single people who are simply not willing to make the necessary sacrifices in order to save money.

I also agree with "m" who says this is a good place to save money so you can move and buy property somewhere else. My version of that: sock as much as I can in the 401K and retire early somewhere else.

So, I think if you have a realistic mindset, you can make an expensive place work for you. The problem is a lot of people ARE overly attached to living in a 'glamor' area they really can't afford.

I also do think it's telling that a lot of people coming to California are immigrants from 3rd world countries. For them, maybe it's a step up. But for most native born Americans, it really is a step down.

I just read the entire article. I have to agree....trying to raise 2 kids on 53K a year in this area is just NUTS. A 53K income is ok if you're single or a couple without kids. But it's a pretty miserable existence to try to raise 2 kids on that here in the Bay Area.

I don't know why the couple featured in the article doesn't move. They could work the same kinds of jobs somewhere else, and even with lower salaries, they could come out ahead almost anywhere else. Maybe their noses have been so close to the grindstone they haven't been able to pull back and see the big picture. I think this couple has a short sighted "get by" mindset, which is why they have to live the way they do.

The main drawback to places like California and NY isn't just the insane housing prices--it's the taxes! State and local income taxes and property taxes are a HUGE drain on people that live in those states.

I live in Dallas and we have no state income tax. It's like giving yourself a huge raise to move here even if you keep the same salary. And this is a very metropolitan city with more culture and things to do than I could EVER cram into a year. Plus it's a huge financial center with a booming job market in a variety of industries. Cost of living is relatively low--which is why people seem to have so much money to burn I guess. Everywhere you look it's designer clothes and luxury cars and there are more restaurants per capita than any other city.

Right out of school a friend of mine moved to NY and now she pays $1000/mo to share an apartment with 4 other girls. And she's barely making enough to pay for the basics--certainly not enough to save much. I, on the other hand, own a beautiful condo and have a comfortable discretionary income and save 15% of my gross income. NY isn't very fun when you can't afford to do anything.

I think that one of the huge benefits of living in a country like america is that you actually HAVE so many cities.

In Melbourne, Australia, if we want to move to another city the choices are really Hobart, Perth and Adelaide. That's it. Those are the other three comparable cities.

Hobart is not very far away, just a short 5 hour trip across the Bass Strait.

Adelaide is a bit further, about 1000km (11 hr drive). And Perth is the full 2500km away. Between Adelaide and Perth there's _nothing_. Just a thousand k's of the Nullarbor Plains.

Not the sort of thing where you can just drive back home for Christmas.

I agree on all accounts about California. I simply do not understand how people afford to live in areas where the median home cost is 10x what the median family income is!

California aside, there are a lot of other expensive areas where the cost of living/salaries vary wildly. There are numerous factors to take into account in every city.

When considering moving 2-3 hours north to the DC area my pay would go up about $15-20k but the housing costs twice what it does where I'm at so you'd assume it wouldn't make sense to move. However, the rent up there is only a few hundred dollars more a month than what I pay due to insane rents around here. It was an even trade after that when considering traffic/job opportunities.

In the Seattle area where I'm looking to move the housing is almost twice what it is here but I would have to take a 30% or so pay cut as the jobs there do not pay as well. Many positions in other fields pay fairly low as well or lower than you think they would. My best friend was recruited by the number 1 accounting firm in the US which was also rated the most desired company in the US to work for! The pay for a starting CPA in the Seattle area is ok but much lower when compared to living in Houston where he was. He is able to live comfortably but in a studio apartment downtown rather than a nice house 15 minutes from work like he would be able to in Houston.

I live in Westchester county, NY, and our prices aren't much cheaper than in California. The average house price is around 600K. One bedroom condos go for 300K; asking price for condos in a newly build complex in my town are 400K for a one bedroom and 630K for a townhouse, but I doubt they'll be able to sell all units at this price - this is too ridiculous because the location isn't even that nice (except for it is in walking distance from Mt Kisco train station). I visited their open house out of curiosity and I hated the layout. They did manage to sell a couple of units which really surprised me. I am lucky because I bought in the 90s, but I don't see how someone earning 77K a year can buy anything except for maybe a co-op (150K+ for one bedroom, 260K+ for a one level two bedroom).

We are in commuting distance from NYC, and this drives prices up. I think the same applies to Long Island and Southern Connecticut.

You just have to buy smaller places in these areas - buy condo or a co-op instead of a house. In terms of rentals - if you cannot afford 1300-1800 for a one bedroom in a town by Harlem Metro-North line, you can get a cheaper one bedroom in a private house farther from trains or share a one bedroom if you are single. If you have a family and want to buy, you can look at condos or co-ops or just wait until prices come down. They might.

"The main drawback to places like California and NY isn't just the insane housing prices--it's the taxes! State and local income taxes and property taxes are a HUGE drain on people that live in those states. "

Word. I currently pay $3700 for a two bedroom townhouse-style condo and it is considered cheap. There is a condo complex next door to mine, the taxes are over $10,000 a year. I wanted to move to this condo complex - it is nicer and while it is more expensive then mine, I could afford it, but these taxes scared me. It is like paying another mortgage, except for you can have fixed rate on a mortgage and pay it off, but taxes will only go up. When I lived in a one bedroom condo, I paid $2700/year in taxes. It depends when property is built and town. There are some places where taxes are only $4000 for a house, than there are where they are over $10,000 for a similar house. I am not even talking about income tax..

California and Florida cap property tax increases and in California they are transferrable to children and grandchildren which makes for low taxes over time. There is another difficultly with renting in these areas. Rents rise faster than incomes so if you don't buy you will be forced down or out. These areas are for those that really appreciate them. Life is easier in middle america.

Brent - Brisbane doesn't count?

Thanks, Brent for the post about our diverse options here in America.

To a certain extent, I definitely agree with you. However, a lot of American cities are similar in character....lots of characterless, cookie cutter suburban houses and strip malls. So there's a lot of quantity, but much of it is the same bland stuff from coast to coast.

Am I sounding like a spoiled American here?

"The opportunities for earning a great income and living below one's means are very high for those who rent especially"

I totally agree with that. I rent and save a significant percentage of my income. Rent difference between SF Bay Area and other areas is no more than a few thousand a year. Yet salary difference is a lot more than a few thousand.

Lord: What you say about rents in CA is true. I keep my rent to about 20% of my gross income...but that may not hold forever. If my rent gets over 25% of my gross, I will have to seriously think of moving out of state.

I've been priced out of the housing market ever since I moved here 11 years ago. The possibility of being priced out of the rental market is ever present on my mind, even though that problem is not yet imminent. I will move before going back to having roommates....which I did until I was 35.

We're in Davis, just outside Sacramento. It's not cheap to live here, and I have considered moving to the Midwest (where I went to college), but the quality of life in this town is so very high that I think we'll stay here. I can bike to work year-round. It's easy to get good food--in restaurants and at the twice-weekly, year-round farmer's market. The schools are first-rate. The region's population is diverse, which is important to me. And I've found the best doctor, dentist, vet, mechanic, and professional mentors I've had anywhere.

But my husband took a big pay cut when we moved up here from SoCal, and I was in grad school until recently, so we're kind of struggling now with the debt (student loans and consumer debt) that seems to plague everyone here who pursues a Ph.D. Still, I can see better financial times ahead. We might never be able to purchase a home here, but that's not as important to us, as we found a "bargain" 3-bedroom home to rent at $1500/month that, if we wanted to buy it, would cost us far more than that in mortgage payments.

In terms of quality of life, this is the best place I've ever lived. Sure, it might not be that desirable geographically (kind of land-locked and HOT during the summers) compared to other California cities, but it makes up for it in other ways.

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