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Re: House vs Retirement
Old 07-12-2006, 09:48 AM   #21
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Re: House vs Retirement

Home values are driven by demand and the income available to bu them.

Even expensive neighborhoods don't always have strong school systems. *When CA put a sharp curb on property taxes their schools suffered. *Parental involvement, family expectation that their children will work at school, and peers whose families value education are better predictors of academic results than home values. *
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Re: House vs Retirement
Old 07-12-2006, 09:53 AM   #22
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Re: House vs Retirement

So LG4N got me thinking (and you are right, by the way, speaking for Charleston, but along with the gay households you can include the college kids downtown). *
So I had to know the actual demographic numbers for where I live....

Johns Island, SC *pop. 2,682. Breakdown: white 985, black 1589, hispanic 108 on most recent info I could find. *So "I'm" in the under 40% white minority. *Please move in next door and help me with my landscaping projects. *
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Re: House vs Retirement
Old 07-12-2006, 09:54 AM   #23
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Re: House vs Retirement

Quote:
Originally Posted by MasterBlaster
Justin:

I looked at some of the pictures in your slide presentation.

What would youestimate the value of each of the home is on slides 24-33 ?
24 - $180k
25 - 150k
26 - 185k - they just doubled their house size and spent ~$100k on it
27 - 150k
28 - 170k
29 - 150k
30 - 180k
31 - 140k
32 - 170k
33 - 150k

I'm probably guessing a little high on these, but I'm assuming they have been well-maintained and updated on the inside and have no issues.

Our recent newsletter says:
"Since January 1, 2006, one-story homes in Brentwood
have sold in the range of $73-$108 per square
foot with an average of $97 per square foot. Split
Level/Foyer homes have sold in the range of $62-$83
per square foot with an average of $71 per square
foot."

Ranch 1 stories are usually 1200-1400 sf, and split levels are ~1800-1900. Split foyer 2 stories are usually 2500 sf. Most homes sell for $100k-$160k in our neighborhood.
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Re: House vs Retirement
Old 07-12-2006, 10:00 AM   #24
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Re: House vs Retirement

When you live where I do you sit amazed looking at what 180k buys you. I know in the Houston area our friends just purchasd a brand new 2000sq house for 150k. Nice area in The Woodlands.
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Re: House vs Retirement
Old 07-12-2006, 10:04 AM   #25
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Re: House vs Retirement

Quote:
Originally Posted by MasterBlaster
What people can't seem to grasp is that yes real estate prices are higher in SoCal. However salaries are higher too. After all of the bills are paid I suspect that the net cash flow is similar to living in other areas. Sure the midwest or the southern states have less expensive housing, however salaries in general reflect that.

What attracts people to SoCal is the year-round outdoor lifestyle. That moderate Mediterranean-type climate in SoCal is really hard to beat. I lived in Texas for a couple of years and we mostly stayed indoors cause of the humidity in the summer and the cold in the winter. But those two weeks in the spring and fall were great !
Salaries are higher - but by how much? 50% more? An accountant or engineer in Raleigh might make 40-50k starting salary. What does that equal in Socal? 60-75k starting salary?

Houses in Socal sound like they are 300-500% higher than other urban areas with moderate housing prices (Raleigh, Atlanta, etc).

Our company in Raleigh keeps getting new hires from bubble real estate areas - Washington DC and Florida. Recruiters have been trying to steal our employees, but who can afford to move to bubble areas now for a 20% pay bump, when they would face a 100-200% mortgage payment increase (and end up far away from work in a less than desirable area and school district)?
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Re: House vs Retirement
Old 07-12-2006, 10:07 AM   #26
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Re: House vs Retirement

I like that house on slide #27, the way it's partially obscured by the trees. I think I'd be worried about roots though, with them being that close to the house.

Looks like an interesting style, too. In most split levels I've seen , you enter on the main level and then go up half a flight of stairs to the bedrooms, or down half a flight to the basement. And the bigger ones often have another sub-basement under the livingroom/dining room/kitchen area as well.

With #27 though, it looks like you actually enter on the basement level, then go up half a flight to the living/dining/kitchen leve, and then up another half flight to the bedroom level?

Looks like a nice area to live.
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Re: House vs Retirement
Old 07-12-2006, 10:11 AM   #27
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Re: House vs Retirement

Justin:

How much of your income actually goes towards housing ?

Keep in mind that just cause houses in SoCal cost 3 times as much as where you live that you need not make 3 times as much to have a comparable lifestyle.

a moderate increase in salary goes further than you have indicated.

I stand by my statement that in general terms after all of the bills are paid that your cashflow is similar.
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Re: House vs Retirement
Old 07-12-2006, 10:12 AM   #28
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Re: House vs Retirement

Quote:
Originally Posted by Andre1969
With #27 though, it looks like you actually enter on the basement level, then go up half a flight to the living/dining/kitchen leve, and then up another half flight to the bedroom level?
You got it! This style house is very similar to mine, except I only go up 2 steps between the lowest level and the middle level, and then ~10 steps from the middle level to the uppermost level.
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Re: House vs Retirement
Old 07-12-2006, 10:18 AM   #29
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Re: House vs Retirement

Quote:
Originally Posted by MasterBlaster
Justin:

How much of your income actually goes towards housing ?

Keep in mind that just cause houses in SoCal cost 3 times as much as where you live that you need not make 3 times as much to have a comparable lifestyle.

a moderate increase in salary goes further than you have indicated.

I stand by my statement that in general terms after all of the bills are paid that your cashflow is similar.
So you are disagreeing with the OP and saying that even in SoCal a choice between owning a house and saving for retirement doesn't have to be made i.e. you can do both?
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Re: House vs Retirement
Old 07-12-2006, 10:20 AM   #30
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Re: House vs Retirement

Quote:
Originally Posted by MasterBlaster
Justin:

How much of your income actually goes towards housing ?

Keep in mind that just cause houses in SoCal cost 3 times as much as where you live that you need not make 3 times as much to have a comparable lifestyle.

a moderate increase in salary goes further than you have indicated.

I stand by my statement that in general terms after all of the bills are paid that your cashflow is similar.
For me, the mortgage plus taxes, plus insurance and flood insurance is $851/mo. Although that includes about $30,000 I cashed out above the purchase price for investment purposes.

The total housing cost is equal to ~10% of our annual income. How many Socal families buying into an average middle class neighborhood could make the same claim?

I seriously doubt cashflows are similar after all bills are paid. You forget about taxes. I pay very little because of the progressive rate structure. If you're making $50k more/yr, you're only getting a portion of that after taxes.

I'm sure if you compare Podunk, Nebraska incomes for some jobs with Socal incomes for the same jobs, you may see that the income differential compensates for the housing differential. But compare incomes btw more desirable metro areas (with plenty of professional employment), and then see if the income differential pays for the house. Maybe at the very upper end of society (a place I'm not at!) your assertion holds true, but for the majority of middle class America, I doubt it.
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Re: House vs Retirement
Old 07-12-2006, 10:29 AM   #31
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Re: House vs Retirement

Justin:

Well to beat this thing to death.

The houses that you showed in the slideshow sold for around $150k and up. Without putting lots of money down it would be very hard to get a $851/month total housing payment.

To purchase one of the homes in the slide with say 10 percent down would take at least 15% of your income.

So if you get a 30 percent raise then the same cashflow would support a home costing three times as much.

Per the income taxes, Keep in mind that most of the interest/taxes are tax deductable so the extra income would be a wash.
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Re: House vs Retirement
Old 07-12-2006, 10:41 AM   #32
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Re: House vs Retirement

Lets say the Socal guy likes his area and likes his job but is attracted to the Brentwood area (it is a nice slide show). He can work for 30 years and pay off the high priced house. He sells the house for $1M, moves to Brentwood and buys the lakefront house for less than $200K and has $800K, plus SS and whatever he was able to sock into his 401K and savings to live on. (All figures in today's dollars and assuming Brentwood stays a relative value -- maybe not a fair assumption).
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Re: House vs Retirement
Old 07-12-2006, 10:45 AM   #33
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Re: House vs Retirement

Quote:
What people can't seem to grasp is that yes real estate prices are higher in SoCal. However salaries are higher too. After all of the bills are paid I suspect that the net cash flow is similar to living in other areas. Sure the midwest or the southern states have less expensive housing, however salaries in general reflect that.
MB: I would also have to disagree with you on this. I recall hearing info. that CA wage growth is not keeping up with home prices...that is the reason why folks have moved to the non-traditional mortgages like interest only...to be able to afford housing.
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Re: House vs Retirement
Old 07-12-2006, 10:48 AM   #34
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Re: House vs Retirement

Donheff:

That is exactly the retirement plan of many. They are the so-called equity bandits who have been known to drive up real-estate prices and property taxes.

The locals have no problem selling houses at inflated prices to outsiders. However they then like to complain that their younguns can't then find a "reasonably" priced house and it's those outsiders (especially Californians and New Yorkers) fault.
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Re: House vs Retirement
Old 07-12-2006, 10:48 AM   #35
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Re: House vs Retirement

I'd imagine that the people in SoCal that are the best off are the ones that have lived there for ages, or at least have enough equity built up in their homes that they could move into a bigger home and be able to put a nice, big down payment on it.

Aren't property taxes capped in California, so that they rise really slowly as long as you don't move around?
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Re: House vs Retirement
Old 07-12-2006, 10:49 AM   #36
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Re: House vs Retirement

Quote:
Originally Posted by MasterBlaster
Justin:

Well to beat this thing to death.

The houses that you showed in the slideshow sold for around $150k and up. Without putting lots of money down it would be very hard to get a $851/month total housing payment.

To purchase one of the homes in the slide with say 10 percent down would take at least 15% of your income.

So if you get a 30 percent raise then the same cashflow would support a home costing three times as much.

Per the income taxes, Keep in mind that most of the interest/taxes are tax deductable so the extra income would be a wash.
Plenty of the houses are selling for around $100k. I would say $150k is the higher end of most of the houses that sell in this neighborhood. Those that sell for this amount are very nicely remodeled and have nice yards. For a fixer upper 3-4 BR house that might have previously been a rental in a less desirable section of the neighborhood, ~100k is the norm.

Here's the numbers I'm looking at:

$150,000 house in a low cost of living area vs. a comparable $600,000 house in Socal.

Put $15000 down on BOTH houses.

The monthly mortgage payment (principal and interest only) is $900 vs. $3900 per month. Assume taxes and insurance run you 1.2% of the house value (based on what I pay now). That's another $150 vs. $600 per month.

All said and done, I'm paying $12,600 per year, and Socal Joe is paying $54000 per year (or $41400 more than me). Ignoring taxes and other costs of living which are most likely higher in Socal (to some extent, maybe small?), I'd have to get a $41400 pay raise (about 41% of our current household income). Good luck!

You have a point that higher incomes will help with higher housing costs, but I don't think it's a wash.



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Re: House vs Retirement
Old 07-12-2006, 10:51 AM   #37
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Re: House vs Retirement

Quote:
Originally Posted by donheff
Lets say the Socal guy likes his area and likes his job but is attracted to the Brentwood area (it is a nice slide show). He can work for 30 years and pay off the high priced house. He sells the house for $1M, moves to Brentwood and buys the lakefront house for less than $200K and has $800K, plus SS and whatever he was able to sock into his 401K and savings to live on. (All figures in today's dollars and assuming Brentwood stays a relative value -- maybe not a fair assumption).
Or you can move to Brentwood in the first place, plunk the $10,000's extra savings in index funds for 20 years, and retire 10 years earlier!

I concede it's a trade-off if you really love Socal.
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Re: House vs Retirement
Old 07-12-2006, 11:07 AM   #38
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Re: House vs Retirement

Maddy:

I read that people are priced out of the market then I look at my personal example. My house is worth around 4 times what I paid for it 20 or so years ago. However people where I work at the salary grade that I was then at make more than twice as much as I did. Furthermore interest rates are approximately half of what they were when I bought. I'd say the cash flow to buy a house like mine compared to when I bought is about the same. I don't see any housing penalty in my personal example.

Justin:

You win ! You are better off than me! And I just may move next door to you when I cash out of here in a few years.

Andre:
Quote:
Aren't property taxes capped in California, so that they rise really slowly as long as you don't move around?
Yes due to a voter initiative (Prop 13) property taxes are capped at 1 percent of the original purchase price of the house. This amount can then go up a maximum of 2 percent a year. However they have just shifted the burden from property taxes to higher income taxes. For a retiree with a paid off home bought long ago that could be good cause the property taxes will be low and income taxes might be moderate for a retiree on a moderate income.
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Re: House vs Retirement
Old 07-12-2006, 11:29 AM   #39
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Re: House vs Retirement

Quote:
Originally Posted by MasterBlaster
Justin:

You win ! You are better off than me! And I just may move next door to you when I cash out of here in a few years.
I don't think this is about winning or losing the discussion at hand. The original poster asked whether the solution to the problem of high cost of living in the LA area is to move out of state. I would say "yes", it is a possible solution. Not the only solution by any means. I tried to provide concrete examples of why it would make sense from a strictly financial sense. It seems financially foolish to ignore the facts as they are today.

If you really love the Socal area and have a ton of family and friends that you can't part with, then stay. You'll probably be happier in the long run. Acknowledge that you will pay a financial price however.

People in general are usually very willing to relocate to less desirable places for a 10-20% pay bump at a new job. Why not relocate for a 20%+ reduction in housing expenses? The goal is the same - put more money in your pocket after all the bills are paid. Sure, you're building more equity in Socal with your oversized mortgage payment, but almost all of your mortgage payment is for interest (who cares if it's deductible?!).

I went to salary.com to see how much more I'd earn in LA than here in Raleigh being a civil engineer I. $57938 in LA versus $50912 in my zip code. That's only 14% more. The number is amazingly accurate for my locality based on my personal salary and knowing what peer civil engineer I's are making. Maybe it's way off base for LA?


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Re: House vs Retirement
Old 07-12-2006, 11:43 AM   #40
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Re: House vs Retirement

Quote:
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I wonder if one reason that gays might go where "traditional" families may fear to tread is the school system?*...I don't have kids, so the school system is usually the last thing I think of.* However, it can affect even childless people, as property taxes usually foot most of the school costs.* With inefficient school systems, they often have to raise the property taxes to raise more money to inefficiently use up!
even though florida totally bans gay adoption, 16 states are (quick web search 2004 figure) actively seeking to ban gay adoption and only 9 states openly allow gay adoption--never mind that we still actually have the parts to make our own--even though the largest portion of my tax bill goes to the school board to pay for the children of people who vote to keep me from enjoying the same rights they have, speaking for the gay population, we do believe in an educated society and we do prefer living within the boundries of a good school system, if only for resale's sake.

i would further add something my ol'man once told me and i think rings always true: you can get a great education at a state school or a crappy one at ivy league. as to the resources of schools, our county divides the money fairly. schools are regionalized so one neighborhood does not have more tax money than another. inequity does exist where communities pour local resources into a system beyond taxes collected. so a cookie drive will bring in more money in a wealthier area. also, volunteer non-working mom's improve individual schools. but even in lower income areas, given some measure of organization, it would seem the mothers could unite where maybe one does day care for the group while another is freed up to volunteer in the school. it's just a matter of building community. not too difficult if you want it. involvement of the student and the parent, more than money, determines the quality of education.

in the x-crack neighborhood i helped pioneer, where on the site of the old drug rehab center now rises loft townhomes (two remaining unsold & selling for over a half mil each), the elementary school just two blocks from my house is an international studies magnet. a mostly minority "a" school. we tore down the old one, built a brand new one, and it is my neighbors (40% gay) who pushed for the development of the school and who paid to put in a playground for the school and lighting for their ballfields.

turns out though, now that we've so successfully redeveloped and increased prices on 2/1's from $60k to $400k that young families can no longer afford to move here with their children and so our school goes underpopulated. now that the re-redevelopment is underway and the 2/1's are being replaced with million dollar 4/4's, i would imagine those kids will be going to private school.

oh well, at least we got a nice playground and a ballfield for our gay softball league out of it.
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