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You can't go home again
Old 05-11-2014, 01:30 PM   #1
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You can't go home again

Certainly not in the existential sense written about by Thomas Wolfe, but also commonly in the money sense.

One of my sons and his family is relocating to San Francisco. I still have a son here, so I will not be considering a move myself, but I did spend a little time and research seeing if I go back, economically. Also did the same for the only two other places I have lived that I might consider living in again. San Francisco, LA beach towns, or Boston central city.

I could not afford to return to any of these neighborhoods, at least not owning real estate, and it would not be a gimme even renting. I could easily have afforded to buy in all these places when I lived there, but that is forever gone. This would not be true for anyone who had made and saved many millions, but it is certainly true of me. This is not because my financial status has deteriorated, but because real estate and COL in these areas has sprinted ahead of most other US places.

Over the past 30 years popular and highly sought has become more popular and highly sought. If I were giving advice to young people today, I would say if your area is very attractive, and attracts well educated and ambitious people form other places, if you hope to stay, buy nice property now, because you may not always be able to.

Ha
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Old 05-11-2014, 01:40 PM   #2
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No argument here, good advice but...

I know several families who bought nice property in desirable areas decades ago (that they could no longer afford) expecting to stay indefinitely. But it didn't work out as ever bigger assessments and therefore property tax increases (along with more expensive services like utilities, parking, etc.) eventually forced them to sell and move to less desirable areas. Obviously they did well on their homes as investments, but they couldn't afford to stay anyway.

We've found the same thing though. 25 years ago we planned to retire in Mystic CT or San Diego, both appreciated out of our reach before I retired. Welcome to flyover country...
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Old 05-11-2014, 03:12 PM   #3
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Fifteen years ago we decided we wanted to retire on a lake. We were not ready to retire, but I knew the baby boomers were not far behind us. We purchased a one acre lot on a lake about an hour north of Houston. Three hundred feet of waterfront. Price, $37,000. Today it would go for between $150,000 and $200,000. That decision allowed us to retire the way we wanted.
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Old 05-11-2014, 03:44 PM   #4
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Ha has described the situation accurately IMHO. We made the move to be near grandchildren. Superficially the COLA numbers are stunning and these are often related to your housing choices and budget. Beyond that the costs feel comparable to other big cities we know or have lived in.

This move has been a great one - possibly the best we've made. The housing implications are outweighed by the other QOL issues for us. City living at its best for our needs and preferences. We don't live like royalty but are quite content.

The older we get the more we are willing to dig a little deeper to protect what we have. But no doubt it is costly.
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Old 05-11-2014, 04:50 PM   #5
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In reply to @Midpack - sometimes you just have to expand your target area slightly. In your example, Mystic CT may be expensive but New London, Waterford, Groton have probably gone backwards and there are some nice houses available pretty reasonably, mere miles from your original dream...
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Old 05-11-2014, 05:02 PM   #6
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YMMV of course.

I was curious about the house I lived for a while as a kid. My parents bought it for $54000 back in 1983. 31 years later, inflation has increased 236% since then. Today, the house isn't worth quite $127,440 ($54,000 inflated 236% to today's dollars).

The house was in a "desirable" area back in 1983, but that changed over the next decade or two. The metro area certainly has pockets of phenomenal growth in real terms (just a few miles from that house). And a wide array of big pharm, biotech, big law, IT, and other tech jobs are 10-30 minutes away, so it isn't like there's a lack of high paying jobs or demand for housing. It's just the demand for housing happened to focus on another area (due to a couple of locally relevant completely unforeseeable phenomena).

Just make sure you're lucky and you buy a place in the area that goes up in value over the next few decades, not one that can't keep up with inflation.

And if you are in the next Detroit or Milwaukee (desirable places 3-4 decades ago), be prescient and don't buy there because it won't end well for you.

It will be fun to watch (from the sidelines) what happens to real estate markets in the LA/SF/NYC areas if mortgage rates climb to 7-8%. A $1,000,000 mortgage at 4% is $4700 per month. The same amount at 8% is $7300 per month. Maybe that's chump change if you're making low to mid six figures?
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Old 05-11-2014, 05:06 PM   #7
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Old 05-11-2014, 05:19 PM   #8
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If I were giving advice to young people today, I would say if your area is very attractive, and attracts well educated and ambitious people form other places, if you hope to stay, buy nice property now, because you may not always be able to.
I grew up in a town about 30 miles from LA, it was a great place to live. Now, all the hills that had been covered with chaparral and live oaks are covered with houses. Traffic is terrible, and property taxes are incredible. Crime is higher than it was then and the demographics of the area have changed dramatically. So, even though I would have come out well financially from buying a house there, there's no way I'd want to live in it.

I think I'd advise a young person to save their money and, as they get older and mature, think about the characteristics they desire in their "permanent" settle-down house, and then buy one when the time is right. To try to guess which property is going to wildly appreciate >and< still be a great place to live >and< that matches your desires in a few decades--probably a long shot. It would be like telling a youngster to "just buy a lot of shares the next Apple. Inc when you are 20, it will be worth a lot someday." True, but the problem comes in the implementation.
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Old 05-11-2014, 05:41 PM   #9
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We moved around a lot when I was young, but I was just back in what I consider my home town last weekend. I had some extra time one morning and went back to the neighborhood we lived in when I was 6-12 yrs old. It probably hasn't changed much, just older, and things seem smaller. Except for my grade school, which was the biggest in the state at the time, over 1000 kids back then. Zillow says our old house is worth $111,000. Dad thinks they bought it for $25K in 1967 and sold it for $33K 7 years later. No desire to move back, and it certainly wouldn't be to that neighborhood.

That has little to do with ha's situation, but I think samclem is right. Besides, if ha followed his own advice, would he have wanted to live in SF for all the years the rest of his family was in Seattle?
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Old 05-11-2014, 06:25 PM   #10
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The corollary of this is I would advise young ones out of college to start their career in an expensive housing area and buy the most expensive house they can afford. The salary in those areas normally makes up for the difference in housing expense. By the time they retire they have the option to sell and move somewhere cheaper with a nice nest egg to boot.
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Old 05-11-2014, 06:33 PM   #11
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Payroll taxes have an effect on monthly mortgage payments. When I 1st started working a lifetime, ago, I grossed $100 per week....netted $82.00 after paying ss, income tax, state tax and HC costs. Today that starting salary would be around $500.00 a week and I'll bet all of payroll costs would be a lot more than 18% of gross pay. Most young folks buy houses based on monthly payments rather than price.....low interest rates were true back when I bought my 1st house and they are low today. Yes, area of the country means a lot; SF is far more expensive than Detroit......I think today's young families potentially have it tougher for many reasons......taxes, housing and medical insurance costs, expectation for married couples to maintain two incomes......and, we want to drive two cars in every household.....years, ago it was one.....today's average size home is far larger than it was a generation ago.....whew! it almost makes me glad I'm not just starting out! Iloved the book, "you can't go home again" It earned me an A in high school english......but, I do think that is true of most every generation.....change is constant!
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Old 05-11-2014, 06:45 PM   #12
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My mom still lives in the house they (mom & dad) had built on 1 1/2 acres when I was one yr old, in a small town in North Carolina. I was born in '58 & they moved into the house in '59. It's a 1600 sq ft all brick home, with a brick fireplace/chimney in the center of the house that the house was basically built around, not an insert like today's construction. The chimney goes all the way to the ground, & if you crawl under the house, you'd see it. Anyway, what I'm getting at it it's old-school construction of high-quality materials. The shower is tiled and although the house is nearly 60 yrs old, not one tile has ever come loose. Anyhow...this house cost them $12,000 in 1959. It's been paid off a long time, on a VA loan that my dad secured when he got out of the Army. I have no idea what that house would sell for, and my mom will never sell it. I & my sisters all grew up there. It's home. I suppose the three of us will have to figure out what to do with it when mom's gone. That's when we'll find out the present value, I guess.
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Old 05-11-2014, 07:32 PM   #13
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Fortunately, the places to which "you can't go home again" are generally centers of commerce and thus overcrowded hellholes. I grew up in Manhattan, went to graduate school in the SF Bay Area and spent my working life in the LA area. All of them are traffic and population ridden nightmares in which I have little desire to spend the rest of my life.

One of the greatest virtues of the FI part of FIRE is that it implies we can choose to retire in some pleasant part of the country rather than being tied to some frenetic center of employment.
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Old 05-11-2014, 07:35 PM   #14
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....Over the past 30 years popular and highly sought has become more popular and highly sought. If I were giving advice to young people today, I would say if your area is very attractive, and attracts well educated and ambitious people form other places, if you hope to stay, buy nice property now, because you may not always be able to......
IMHO this is trying to time the real estate market. Clearly this strategy has worked in some areas, but failed in others. Various regions in metro Detroit come to mind
Also- "hope to stay" does not work like it did in prior generations. Few seem to spend a full career in one place anymore & the costs of moving for a new j#b are not always covered by employers like they used to be.
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Old 05-11-2014, 08:32 PM   #15
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The corollary of this is I would advise young ones out of college to start their career in an expensive housing area and buy the most expensive house they can afford. The salary in those areas normally makes up for the difference in housing expense. By the time they retire they have the option to sell and move somewhere cheaper with a nice nest egg to boot.
This is what occurred with us. We had a modest little house for 3 years down in North San Diego Co. DH's managers transferred us to the SF Bay Area 32+ years ago, and we were told then we would take a "shellacking" here in housing.

Yes, we did, but our home here has been paid off for some time, and after we close escrow here, some of the shellac will provide some nice, liquid, CG tax-free funds for our nest egg.
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Old 05-11-2014, 08:42 PM   #16
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Fortunately, the places to which "you can't go home again" are generally centers of commerce and thus overcrowded hellholes. I grew up in Manhattan, went to graduate school in the SF Bay Area and spent my working life in the LA area. All of them are traffic and population ridden nightmares in which I have little desire to spend the rest of my life.

One of the greatest virtues of the FI part of FIRE is that it implies we can choose to retire in some pleasant part of the country rather than being tied to some frenetic center of employment.
Then again, most of the places that I lived in the past are places that I wouldn't want to "go home again" because they are depressed rural areas with no cultural amenities. I could buy any house that I wanted, but there is nothing there that I would want. No music, no restaurants, no golf, no museums. But I'll tell you what, they are cheap as hell! Despite the traffic issues around here, the pluses currently outweigh the minuses for us. As you say, however, the virtue of FI is that each us can define for ourself where "pleasant" is located.
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Old 05-11-2014, 08:44 PM   #17
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. . . but our home here has been paid off for some time, and after we close escrow here, some of the shellac will provide some nice, liquid, CG tax-free funds for our nest egg.
It works out for some people. But if the cost of housing is already high, it may mean that little is left over for conventional investments and a very high percentage of net worth is tied up in (illiquid) real estate. If the market continues to be strong when it's time to jump, then that's great. But it can lead to a very narrow "bet."

Some people did great by concentrating their 401K investments in company stock, but it's not an approach that is widely recommended.
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Old 05-11-2014, 08:56 PM   #18
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It will be fun to watch (from the sidelines) what happens to real estate markets in the LA/SF/NYC areas if mortgage rates climb to 7-8%. A $1,000,000 mortgage at 4% is $4700 per month. The same amount at 8% is $7300 per month. Maybe that's chump change if you're making low to mid six figures?
We bought in SoCal during one of those era's - 1982 ring a bell for anyone? Our megacorp subsidized rate was 12%, an improvement of 3-4% from what was then prevailing - 16%. It didn't appear to impact home prices, and it certainly didn't lessen our desire to own a home. It simply dictated how much home we were going to be able to afford.

The scale back of defense in the late 80's flattened prices here in SoCal for a time, but not inflation rates.

Many is the time I've joked to my DH about selling our home and purchasing in a less expensive area, banking the difference. He has always had the same response, "Once we leave, we can likely never afford to come back." That shuts me up every time.
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Old 05-11-2014, 09:52 PM   #19
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Count me as one of those that left a high price area and don't intend to ever go back. I could not be happier getting out of SF bay area in my case. I was happy to sell my house and take the increased value for my after-tax savings.

CA may be beautiful in some areas of the state outside the cities, and has great weather. But it also has the high COL, high taxes on everything, way too liberal politics for my tastes, overcrowded, and bad traffic. Those quality of life issues outweigh any benefit of pay.

Too bad that what was once CA land of opportunity, has become the land of get the hell out. Back in 1960's and prior, CA had lots of aerospace and other manufacturing. It really did give people a chance to move in and make a career. Now most of that is gone, started in the 1970's and has become progressively worse. High tech has become the jobs sector. Even agriculture in CA is a lot less than it used to be, thanks to all the water issues there.

I grew up in SF bay area, but with both of my parents passed away, my siblings all live out of state, and wife has no family there; so I do not see any reason to ever return. I don't miss CA either.........
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Old 05-11-2014, 10:42 PM   #20
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I miss Hawaii sometimes, but I don't want to make the cutbacks in other aspects of my lifestyle that would be required in order to buy real estate there.

Besides, there's the Thomas Wolfe issue. The Hawaii that I remember is always with me in my memories, but I am pretty sure it doesn't exist any more. The last time I was there, in 2001, I might as well have been on Mars. So much had changed!

That's OK. I don't have to be there in order to live a happy life.
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