the "living in California surtax"

[explanade]

I've lived most of my life in the Bay Area.

Market price of my townhouse is worth about $500k more than the mortgage I have on it.

Property taxes are about $5k a year but the HOA fees are creeping up, $375 a month compared to $190 a month 18 years ago.

I can cover the living and housing expenses easily and can get good retirement "income" from financial investments, without trying to leverage the gain I could get by selling.

But if I sell and tried to stay in the Bay Area, I'd probably have to put money in, to move to a larger home and pay double, triple, or more on property taxes per year.

I haven't taken advantage of the outdoor activities as much as I could have. I guess once I FIRE, I could do more hiking, more trips to Tahoe or to the coasts.

I'm aware that there are many places in the country with lower housing costs, lower taxes. Haven't really looked that deeply into moving though.

The things that would get me to leave would be to get more space for less money and less congestion, because traffic around my neighborhood has increased a lot.

One idea I'm playing with is to spend a lot more time traveling, including possibly staying a couple of months at a time overseas as opposed to taking 1 or 2-week vacations.

For that, it might be easier to stay where I am. I could lower my housing costs but being an hour away from SFO airport would be hard to beat for international flights.

 

[daylatedollarshort]

I'm not sure if you are being sarcastic or not. Everytime I have been approached about a job in California it has always been for less money. The big selling point is supposed to be the opportunity to move to California. They must get some takers.

When I graduated back in the 70s, I interviewed for several positions. The one around LA touted their charter bus that took employees to where they could afford to live and it only was a 90 minute ride. One position around SF talked up their program that put 4 single engineers in a 2 bedroom apartment so they could afford the cost of the apartment.

I took a job in Houston for an extra $25/month (not totally insignificant in the early 70s) and got my own one bedroom apartment for less than what my share of the 2 bedroom apartment would have been. I also avoided state income tax and other higher cost of living issues. I moved from the Seattle area so I definitely moved to a dramatically different climate.

I've certainly been to various parts of California and had some nice times there. I haven't been so overwhelmed with what I've seen to make me want to live there. If I was wanting to spend time there, I'd probably avoid the income taxes by moving my residency out of the state and rent condos on a monthly basis. I do understand that there's a lot of attraction to staying where you're comfortable with friends and family near-by. That's why I'll never drag DW out of Houston.

I think part of the equation is also home appreciation. Zillow shows a house we once owned in Texas valued at only 50% more than we sold it for decades later, so the home value has not kept up with inflation. Our house here cost twice as much initially, but has increased in value at double the rate of inflation. And property taxes on both houses are almost identical currently because of Prop 13 in California.

 

[NW-Bound]

So many people tout Prop 13 for low RE taxes, but the other side of the coin is that newcomers have to foot most of the bills. Public workers in CA are not cheap, particularly when we count their pension. And there's Mello-Roos too.

How long and how much higher do these new home buyers will bear? It's mind boggling.

 

[FIREd]

If you think the "living in California surtax" is bad, try Hawaii's!!!!!

You make a good point. Many areas around the country command a high premium: coastal California, Hawaii, the areas around DC, NYC, Boston, Seattle, etc... The situation in California is far from unique.

So, W2R, since Hawaii is number 1 on your list, would you be willing to pay the Aloha premium?

 

[Accidental Retiree]

I've lived most of my life in the Bay Area.

.....

I'm aware that there are many places in the country with lower housing costs, lower taxes. Haven't really looked that deeply into moving though.

The things that would get me to leave would be to get more space for less money and less congestion, because traffic around my neighborhood has increased a lot.

That's what did it for us. Earlier this month, we closed escrow on our home of 31 years in the Bay Area and went back south, to southwest Riverside County, where we purchased a 40-year-newer house with twice as much space inside and out.

We now have a pool, which we enjoy nearly every day, and we have plenty of wide open spaces around us. We paid cash for our new house and also were able to put a goodly sum into various accounts with what was left over. My current plan is to invest those funds to pay for any increases we may encounter along the way.

Unlike Rodi, we're not in Coastal California, but we are about 25 miles or so from the coast, so we get some of the same morning coastal fog as well as a great afternoon offshore breeze that comes through our area, which really keeps our weather pleasant, so far. (I hear July and August are going to be horrible.)

We took our Prop 13 basic assessment with us, but we will still pay a bit more in taxes, primarily for the local schools, which we don't mind.

Quality of life has greatly improved. So far every day seems pretty much like we're on vacation -- despite the unpacking that remains to be done.

 

[W2R]

You make a good point. Many areas around the country command a high premium: coastal California, Hawaii, the areas around DC, NYC, Boston, Seattle, etc... The situation in California is far from unique.

So, W2R, since Hawaii is number 1 on your list, would you be willing to pay the Aloha premium?

Absolutely not! It is just too expensive there for me and I am not willing to make that tradeoff. The cost of living there moves it WAY down my list ( which, as noted in my previous post on this thread, purposely did not take COL into account at all).

In contrast, I would not want to live in CA unless it was much cheaper than living here, as I remarked. If it COL was the same everywhere, I would avoid CA but I would live in HI.

 

[Kimo]

I will say, once you are here, it is difficult to move anywhere else...even knowing you are paying the aloha tax....when I talk with my friends from Reno in December it reminds me why I pay for this...

 

[MichaelB]

All this makes me wonder... Why do we want to stay again? Then I stroll through the redwoods and all is forgotten.

I know how it feels and get the math, having done a similar calculation (and seeing similar differences) for staying in the NY area vs moving. Once I left my job, however, I knew inside that leaving NY was inevitable.

It is good to have options and the ability to understand the trade-offs you are making.

 

[NW-Bound]

All this makes me wonder... Why do we want to stay again? Then I stroll through the redwoods and all is forgotten.

I strolled through the redwoods too, on my last visit. But then, there are the Sequoias, the redwoods in Northern CA, in Kings Canyon...

I guess I can live in CA, if I had a lot more money to stay out of populated areas. Just now look on the Web at Palos Verdes Estates in the LA county, as I remember driving through the area and seeing some nice, nice homes. They are $10M+ mansions, and there's this one that looks nice for only $1.7M. Not a mansion, just a nice home, but it is still way out of my budget of course.

Told my wife about this "deal", and she said "we don't need it". I said "what do you mean need it? We can't afford it". And she said, "Even if we have money, we still don't need it". Oh well!

 

[TimSF]

It's not just housing. Food and gas cost more here in California. But I wouldn't live anywhere else.

 

[FIREd]

I know how it feels and get the math, having done a similar calculation (and seeing similar differences) for staying in the NY area vs moving. Once I left my job, however, I knew inside that leaving NY was inevitable.

It is good to have options and the ability to understand the trade-offs you are making.

I am not sure yet we will be able to retire in California. If we can't, we would not mind moving back to the south and vacation in California from time to time. Neither one of us is ready yet to make a commitment either way (staying vs. going back). At this point we just want to keep our options open.

 

[Kimo]

It's not just housing. Food and gas cost more here in California. But I wouldn't live anywhere else.

I feel your pain...over 8.00 for a gallon of milk here...and if you go to the resort area, Ko Olina just 4 miles from me it is 11.00 per gallon....

 

[haha]

When I graduated back in the 70s, I interviewed for several positions. The one around LA touted their charter bus that took employees to where they could afford to live and it only was a 90 minute ride. One position around SF talked up their program that put 4 single engineers in a 2 bedroom apartment so they could afford the cost of the apartment.

This sounds odd. I lived In both LA and later Bay are during this period. In LA apartment buildings had big banners out advertising free first months rent. When I moved to Berkeley it was more expensive, but still not expensive. Your group of graduates must have been very poorly paid.

It is only fairly lately that some CA places, especially desirable neighborhoods in SF have become much more expensive than other areas.

Ha

 

[robnplunder]

I'm not sure if you are being sarcastic or not. Everytime I have been approached about a job in California it has always been for less money. The big selling point is supposed to be the opportunity to move to California. They must get some takers.

I wasn't being sarcastic. I was speaking in general term. E.g, my megacorp's wage for employees doing a same job is different for California employee vs others. Have you checked SF's minimum wage? It's in double digit. Sure, you can find counter examples. But in general, wages are higher (no comfort for some, no doubt).

 

[rodi]

On the CA wage differential.... My historical perspective as a tech worker. When I left San Diego in 1990 - the joke was that San Diego paid less, the balance was in "sunshine dollars". Qualcomm was a startup, General Dynamics was shutting down.

Later in 2001, when I moved back to San Diego in a job transfer - I did, indeed, get a wage bump over my Pennsylvania wages. About 18%. The eliminated that differential 2 years later - much to the dismay of a friend who transferred and didn't get it.

When I transferred - the HMO offerings were different - and a LOT lower than what I paid in PA. Almost two hundred a month less for family coverage.

They kept the NoCal wage differential - but slowly lowered it. It's down to 12% above the rest of the country. Looking at healthcare premiums, NoCal definitely paid more than SoCal for the same Kaiser coverage. (The rates were the same, nationally, for Blue Cross Blue Shield through MegaCorp.)

My division was sold to miniCorp - they are continuing the erosion of the bay area pay differential. But it's much more secretive - salary scales used to be available on the internal web with Mega - but miniCorp doesn't make the salary ranges/scales available. But I have friends who work in NorCal - and they've said they have to give smaller raises because of the compression/lowering of the pay ranges. And yes, people are leaving for greener pastures. Tech folks have no problem finding well paid work in the bay area.

Finally - a friend recently left his director position at Qualcomm to go to Google. He thought the double the salary would be more than enough. Despite selling their home here for well over a Million - they can't afford a home half the size, even with a budget of $1.5M. The wife is going back to work to help pay for the expected mortgage. Part of that is by choice - since they are insistent on being in the Palo Alto school district - very pricey.

 

[HillCountry]

I don't mind paying the surtax. But I don't want my kids to struggle to get into UC. I might move back after kids going to college. And a lot might depends on where they choose to live.

 

[photoguy]

I fire'd recently and did exactly what rob is thinking about -- sold our home in san jose. Staying in San Jose would have meant several more years of building up our portfolio to pay for mortgage and property tax.

In hindsight, I think a more optimal path would have been picking up a "retirement" home during the recession. We could have afforded the extra mortgage and could have made a large down payment (we'd have downsized from a SFH to a condo). Given that ER is still a ways off for the OP, this may be another option (downsize in place).

Food, gas, services all somewhat more in CA than you would expect in middle america. But for the most part this was irrelevant to us as they make up a relatively small part of the budget. In addition, heating/electricity is also very small due to the moderate climate so that helps as well. The killer of course is housing costs and property tax (if you didn't buy years ago and have a low basis). Depending on where you fall on the income scale, CA income tax may not be too bad.

However I wouldn't leave CA unless (assuming you enjoy it already) unless the extra home equity would make a *substantial* difference in the quality of life.

Regarding the CA wage differential. I have a few younger friends (new phd grads) that had offers at the big tech companies in both silicon valley and seattle. It seems that the salaries are comparable but this might be due to seattle (and the tech companies there) being less desirable -- thus they need to pay more to attract the talent.

 

[CaliforniaMan]

In spite of some stellar companies starting here San Diego has always been a bit of a backwater in the tech area compared to places further north in Irvine and especially the Bay Area. I realized in the 90s that there was maybe 10x the number of tech companies I could work for in Irvine as in San Diego, but IMO the lifestyle of the coastal communities in northern San Diego County just couldn't be beat by more money or an ungodly commute. I gladly took the hit in my wallet to live a much less hectic lifestyle. It can never be all about the money.

 

[ejman]

California living can involve some tricky timing questions. Particularly when looking back!

I lived in the SF Bay area for quite a few years and sold my house in 1999 prior to moving to Oregon. The proceeds from the sale allowed me to buy a nice property with acreage in Oregon free and clear to realize both of our dreams - my wife's dream of acreage with plenty of critters on it and my dream of giving a nice raspberry to the work world. The tricky timing issue is that if we had remained in the bay area for another five years or so that same house would have sold for a cool million dollars instead of the $400 K I got for it. Oh well - easy come easy go.

 

[explanade]

In spite of some stellar companies starting here San Diego has always been a bit of a backwater in the tech area compared to places further north in Irvine and especially the Bay Area. I realized in the 90s that there was maybe 10x the number of tech companies I could work for in Irvine as in San Diego, but IMO the lifestyle of the coastal communities in northern San Diego County just couldn't be beat by more money or an ungodly commute. I gladly took the hit in my wallet to live a much less hectic lifestyle. It can never be all about the money.

How far north, like Oceanside?

How's the hiking away from the beaches?

 

[martyp]

Obviously there are a lot of factors in deciding where you might move to but remember that once you leave CA you probably will not be able to return for the same reasons you are considering moving out.

 

[REWahoo]

Obviously there are a lot of factors in deciding where you might move to but remember that once you leave CA you probably will not be able to return for the same reasons you are considering moving out.

I hear that statement frequently yet the census info below says ~500,000 people per year move from other US states to California. Maybe it isn't the one-way trip it appears to be?

Restless America: state-to-state migration in 2012

 

[NW-Bound]

I hear that statement frequently yet the census info below says ~500,000 people per year move from other US states to California. Maybe it isn't the one-way trip it appears to be?

Restless America: state-to-state migration in 2012

The article says that "there are more people leaving California than there are arriving there. 566,986 people left the Golden State in 2012, for states like Texas, Nevada, Washington, and Arizona, presumably for the lower cost of living."

 

[explanade]

I think it's the jobs.

Anyone with an engineering or business degree from top schools can get jobs at glamorous companies out here.

But even before tech boom, CA economy was a powerhouse for decades.

 

[CaliforniaMan]

How far north, like Oceanside?

How's the hiking away from the beaches?

I am referring to the coastal "surfer" funky, laid back feel of the communities from say about Solana Beach, through Encinitas, Carlsbad and Oceanside.

There you never know if the old guy surfing on the beach next to you is a burned out hippie, a musician, a physicist, an electronics genius or or all of the above.

Generally the further north and further inland you go, the less expensive the homes.

Probably the best hiking info is in the book by Jerry Schad, Afoot and Afield, San Diego County.