How in the world do people afford to live in California? (San Diego: real estate, condo)

[redguard57]

What I want to know... How do people afford to live in California?

I recently just had another CA job opportunity- Long Beach, CA, starting salary $75-85K. From what I can see on Zillow - a decent house in the area STARTS at $500K, and it would be better to pay $600K+ WTF!?!?

I just..... don't get it. There's no way I can make that move, even though it would be a "step up" in my career. I currently make $51K and my mortgage costs me $900 right now - 36% of my net income. If I blanked out my savings and begged for help from my and my wife's family, we could come up with the $130K for 20% down on a $600K house... but our mortgage would still be 2400 - about 52% of net take home off of an 80K salary. I would have to pray that my wife got a great job just to get back to the place we are right now.

The way I calculate it, even if they offered me the high side of their starting salary range, I would be taking at least a 12% pay CUT, possibly 15-18% depending on their offer, AND I would have to blank out my savings.

I previously had a similar opportunity in Fremont, CA, where the housing cost:wage ratio seemed even more out of whack. They were going to pay about $90K but decent houses were in the $750K+ range.

I've been to SF Bay area, LA/OC area and San Diego area a handful of times and liked it... but it didn't seem like the streets were paved with gold. I feel quite privileged with even being able to have these kinds of opportunities... makes me wonder how it is for people who make much less money. It must be terrible.

[sav858]

[CA4Now]

How do people afford to buy a house here?

If you read through the above thread, the OP actually ended up buying a fixer condo here.

[SupBro]

Originally Posted by redguard57

What I want to know... How do people afford to live in California?

I recently just had another CA job opportunity- Long Beach, CA, starting salary $75-85K. From what I can see on Zillow - a decent house in the area STARTS at $500K, and it would be better to pay $600K+ WTF!?!?

I just..... don't get it. There's no way I can make that move, even though it would be a "step up" in my career. I currently make $51K and my mortgage costs me $900 right now - 36% of my net income. If I blanked out my savings and begged for help from my and my wife's family, we could come up with the $130K for 20% down on a $600K house... but our mortgage would still be 2400 - about 52% of net take home off of an 80K salary. I would have to pray that my wife got a great job just to get back to the place we are right now.

The way I calculate it, even if they offered me the high side of their starting salary range, I would be taking at least a 12% pay CUT, possibly 15-18% depending on their offer, AND I would have to blank out my savings.

I previously had a similar opportunity in Fremont, CA, where the housing cost:wage ratio seemed even more out of whack. They were going to pay about $90K but decent houses were in the $750K+ range.

I've been to SF Bay area, LA/OC area and San Diego area a handful of times and liked it... but it didn't seem like the streets were paved with gold. I feel quite privileged with even being able to have these kinds of opportunities... makes me wonder how it is for people who make much less money. It must be terrible.

You buy what you can afford. And then move up with your increase in equity in 5-10 years.

[EdJS]

There are two different questions: How do people afford to move to California, and how do people afford to live in California. You want the answer to the first question, and frankly I don't know the answer. But I do know how many of us afford to live in California. We've been here a long time, and bought houses when they were much, much cheaper.

In fact I would go so far as to say that the best financial decision I made in my life was to buy a house in California in 1997. It seemed expensive at the time but it was unbelievably cheap compared to today.

[JustMike77]

Originally Posted by redguard57

but it didn't seem like the streets were paved with gold.

No, you have it all wrong. Our streets are CRAP. It's the residential lots that are paved with gold.

[Ruth4Truth]

Originally Posted by SupBro

You buy what you can afford. And then move up with your increase in equity in 5-10 years.

If you think about it, that doesn't work. Because as his equity increases, the cost of the better homes he wants to get into has gone way up, too. He'd be better off doing a garage convert, or adding on to his starter house in some way.

OP, I don't know if this will be any comfort, but UC Berkeley in the past has had trouble attracting faculty, because what they offer is so out of whack with the cost of housing, that people come full of enthusiasm, interview, are shocked when they check out the real estate mkt, and say "no, thank you" and apply for jobs elsewhere.

Maybe employers should go in together on housing co-ops, for their employees. A few towns have done something like that, so that police, teachers and firefighters can afford to live in the communities they serve.

[Tex?Il?]

Originally Posted by redguard57

What I want to know... How do people afford to live in California?

I recently just had another CA job opportunity- Long Beach, CA, starting salary $75-85K. From what I can see on Zillow - a decent house in the area STARTS at $500K, and it would be better to pay $600K+ WTF!?!?

I just..... don't get it. There's no way I can make that move, even though it would be a "step up" in my career. I currently make $51K and my mortgage costs me $900 right now - 36% of my net income. If I blanked out my savings and begged for help from my and my wife's family, we could come up with the $130K for 20% down on a $600K house... but our mortgage would still be 2400 - about 52% of net take home off of an 80K salary. I would have to pray that my wife got a great job just to get back to the place we are right now.

The way I calculate it, even if they offered me the high side of their starting salary range, I would be taking at least a 12% pay CUT, possibly 15-18% depending on their offer, AND I would have to blank out my savings.

I previously had a similar opportunity in Fremont, CA, where the housing cost:wage ratio seemed even more out of whack. They were going to pay about $90K but decent houses were in the $750K+ range.

I've been to SF Bay area, LA/OC area and San Diego area a handful of times and liked it... but it didn't seem like the streets were paved with gold. I feel quite privileged with even being able to have these kinds of opportunities... makes me wonder how it is for people who make much less money. It must be terrible.

They buy a smaller house (think the size that Europeans or Japanese live in), or they commute further (to the IE, etc.).

[saibot]

Originally Posted by EdJS

In fact I would go so far as to say that the best financial decision I made in my life was to buy a house in California in 1997. It seemed expensive at the time but it was unbelievably cheap compared to today.

Yep. We panicked when our agent told us in 1997 that we should be looking at $200K houses. That just seemed astronomically high and out of reach. We settled for a smaller house at $160K, and it was definitely a very good decision, but...we wish now we'd bought a $200K house.

[SupBro]

Originally Posted by Ruth4Truth

If you think about it, that doesn't work. Because as his equity increases, the cost of the better homes he wants to get into has gone way up, too. He'd be better off doing a garage convert, or adding on to his starter house in some way.

OP, I don't know if this will be any comfort, but UC Berkeley in the past has had trouble attracting faculty, because what they offer is so out of whack with the cost of housing, that people come full of enthusiasm, interview, are shocked when they check out the real estate mkt, and say "no, thank you" and apply for jobs elsewhere.

Maybe employers should go in together on housing co-ops, for their employees. A few towns have done something like that, so that police, teachers and firefighters can afford to live in the communities they serve.

I guess this is why I have a job.




Actually the main thing that kills you is the broker commission to your realtor. With a 7 year hold and everything escalating at 3%/yr you can buy something worth ~22% more in today's dollars.

This calculation also doesn't include any tax benefits. Also, while I did assume a modest 40 bps increase in interest rates, I honestly believe that as interest rates increase home prices will not increase as much as they have so it will be a wash.