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"I am a native Californian and I lived in California a long time.
The people who have problems, they work forever in California to get nowhere (because they can't afford a home in a good school district within reasonable commuting distance to jobs) instead of moving out of state and having it all (good schools, jobs, low stress, no traffic) now. Many other states offer expanded opportunities, with better quality of life, for less."
That is becoming true now. Though those States have their own problems. The difference is how youth use their youth and opportunities. Some goof off, others buckle down. Calif still is a good place for youth to grow, but only if they start with a reasonably mature outlook. Other States have caught up with Calif in both the good and bad. Now the difference is not quite as great for those living here.
Mind you I grew up poor, my father died when I was 11, my mother remarried a drunk who tried to kill her and she worked at the Goodwill to support us until I graduated from HS. Today because of her example and a desire not to be like many of my friends I learned and saved. Today I am in far better shape than anyone in my family. The problems of life and of California (or any State) cannot stop a person IF they apply themselves. Too many today just want to party, which is STUPID - STUPID - STUPID.
Sorry, but generally speaking people in Florida are way more fake and materialistic than people in California. California is a very progressive state with some of the best universities in the world, some of the most innovative people, the most interesting cities. Its a very diverse place where you can pretty much find anything youre looking for.
Florida is the kind of place you go when you realize you have no soul left.
Man..your dope supplier must be hookin you up..Florida has alot of Soul..being so close to the carribean,C'mon man..Cuban,Puertorican, Brazilian, Dominican,Nicaraguense, Jamaican,Trinidadian..Should i go on? Its almost guaranteed...I've also meet the most innovative people in the NYC/Tri state area..Way more advanced thinkers.. Not in California..You should travel a lil bit, your given people on City Data a way off perception of reality.
Man..your dope supplier must be hookin you up..Florida has alot of Soul..being so close to the carribean,C'mon man..Cuban,Puertorican, Brazilian, Dominican,Nicaraguense, Jamaican,Trinidadian..Should i go on? Its almost guaranteed...I've also meet the most innovative people in the NYC/Tri state area..Way more advanced thinkers.. Not in California..You should travel a lil bit, your given people on City Data a way off perception of reality.
Maybe the poster is referring to everything north of Miami?
Q: How in the Heck does Anyone Afford to Live in California?
- They rent out a room in their house. (Or rent out the shed or closet.) Use the extra monthly income to pay mortgage.
- They save $0. In other states, people save $100's/mo or $1000's/mo (in savings accounts or 401K or IRA etc). In CA, the savings rate is very low or zero or negative(!), based on my experience.
- They live as couples, even if they do not like the other person. (Few "have their own place".)
- They add illegal additions to the house to rent out. Such as: create a bedroom in a garage (against zoning laws) and rent it as a bedroom; or, create a bedroom out of a living room, and rent it as a "studio apartment" (which is a lie; it has no kitchen or often bathroom, though the landlord may throw in a hot plate + microwave in the corner & call it "the kitchen"); or, they rent to a family of illegal immigrants who live OUTSIDE in the small backyard patio underneath an awning & plastic sheet, who use the faucet of the garden hose to connect to a kitchen sink bolted to the outside wall and a BBQ as a cooking area. (Yes, it's true. Have seen it with my own eyes.)
- They buy using shady loan practices (0% down or even get a loan for 105% thus getting cash back!) on the "promise" from the real estate agent that their home will appreciate at least 8% to 12% per year. (This was true for the previous economic cycle.) They sell that house in 3 years, use the appreciation profit, buy another (of course bigger) house on similar terms. This process repeats several times until the market collapses and they either get a government dole out, or they lose everything; but since they didn't save any $ to begin with, bankruptcy isn't such a penalty: there's no net worth for the bank to take.
- They get family to give them a huge down payment and get a house on which they can barely afford monthly payments. I have seen some people resort to using credit cards to pay bills during summer months when electricity is high; in the down months, they pay off the credit cards, or they carry the credit card debt until they can re-finance or increase their loan borrowing from equity to pay down credit card debt.
- They get a weekend job, then switch shifts with others so they can work extra hours in a single weekend to create overtime pay by working double-shifts in a weekend.
I have heard real estate agents recommend to buyers that they do one or all of the above in order to afford a home in CA. Yes, really.
- They sell illegal drugs. Which is a highly profitable business. Cocaine is a good money maker, apparently. You might not recognize many part-time drug dealers; they look like everyone else, hold normal weekday jobs, etc.
- They fake the initial mortgage paperwork, lying about their monthly income (often encouraged/endorsed/under-the-table'd by the lenders). Then after mortgaging the house, they do something else like the above to make the monthly payment.
- They start a house flipping business in addition to their normal job. They spend large amounts of their extra time purposely remodeling the home in order to increase the value even higher and sell it within 1-2 years. Similar to the "buy it, hold it, sell it, upgrade" method but faster and much more time intensive. Sometimes these buyers have zero free time, as all their time is spent at the daytime job or the weekend-flip-job.
- They start a real estate agent business, get lucky a couple times, with enough money to buy their own home using insider information from being a real estate agent. They flip it without much remodelling, and preserve the profits to do it again. Since the real estate agent has access to MLS, or access to homes pre-list, they can use the insider information to their advantage. (I don't know if this is illegal, perhaps not. Though it still is using insider information to their own investment advantage and profiting from it.) After half a dozen or a dozen transactions like this, they either hold on to one of their "investment" properties to live in, or they take the money & invest into a "final" home. (Then they claim that they'll never work again because they deserve it, and they worked so hard to get where they are.)
- They marry rich, then divorce when they are "not feeling it anymore", take half of the spouses (usually husband's) equity or their 2nd home, and live in it, with monthly payments from the husband. In the beach towns these are the single white females around 40-45 y/o walking yipp-yipp dogs, usually angry poodles that they lavish with strange affection and even take them around town in baskets or baby strollers. (I am not making this up, I have known maybe a dozen women exactly like this in CA.) So marry rich and divorce purposely, then take the money & run.
- They get some kind of monthly stipend, usually from grandparents. Often they run up large bills (seemingly on purpose) which they can't pay, then grandma has to step in & pay off the debt, which at least puts them back at $0 instead of negative net worth.
- They move in with their grandparents, into the grandparents' large home purchased in the 1940's when everything was cheap. In exchange for minor taking care of the house & yard and acting as grandparent-monitor, they get to live rent free or with substantially reduced rent. By putting up with this "unpleasant" situation, they hold onto hope that they will be favorably placed in the will, so that at which time the grandparents pass, they will "win the lottery". (I had a friend like this, his grandparents had "an old 1940's ranch house" which equated to a modern mansion in size & land. Two other acquaintances also had this arrangement in So Cal.)
- They give up ever owning a home, and are satisfied to rent, though if they don't make much money, they compromise big time, and rent out a closet to sleep in (literally, a walk in closet, that they place a futon in, and "live out of"). Real estate agents or landlords sometimes joke about these spaces in homes or condos "just big enough to rent out for a couple hundred a month". (This is illegal as it usually violates zoning laws of 1 person per bedroom, etc, however no one enforces that and everyone does it, so it's a wash.)
On the more positive side (depending how you look at it), are the rare success cases:
- They make a hefty profit in the stock market after a lot of hard work and business luck, and are able to buy a home after cashing out the stock. (Happened a lot in the bay area during dot com days.)
- They create a business barrier of some kind (a patent, or licensing agreement, or royalty stream) and are able to obtain venture capital investment or private investors to their business. (Very common during dot com and still common until recently.) The venture capital pays enough salary to burn through in order to buy a home, especially if a stock conversion occurs (as above), and especially if the business owner can keep the investors "happy with a good story". The business might tank or be worthless or have only perceptual value while no money flows so is actually zero net worth (like Facebook or Twitter). However the founder(s) are presumed to have a high paper worth, and as long as investment keeps coming in, the house can get paid for.
- They create a highly profitable business (the simpler the better) and earn enough cash. Using the business as part of their net worth, they can qualify for a large home loan. Assuming the business stays flush with cash flow, they can make their monthly payment. If the business dies, they are in trouble, unless the "CA home appreciation bubble" has ramped the price enough so that they can sell the home, take the profits, and downgrade to a smaller home or rent while starting another business.
- They buy using "low income qualified buyer" government programs. These require household net to be under $35K for the family, or etc., and buying a unit requires no-flip contracts, etc. (There are occassional cases of people who try scam this, though I think it's rare.)
I have seen all of the above. I have heard landlords recommend to tenants that they sublease to make extra $$ with one of the "rent out the extra space" methods above.
Most surprising to me is the savings issue. I am a professional and work with professionals (making $90K+). I compromised living conditions (smaller place, getting house mates who paid rent) in order to continue saving while living on the coast of CA. Friends saved $0/month while using all existing savings into renting bigger places or buying.
I also had some contracting/consulting jobs on the side (weekends and nights) so worked +5-15 hours more per week (~$50-$100/hr) in addition to normal salary.
Take note: during the housing boom I invested in homebuilder stocks. (Profitably.) These companies had quarterly & annual conference calls. On these calls, the market analysts would sometimes ask the CEO's of the homebuilding companies to "break down the buyer segments". The CEO's would offer some opinions about the buyer demographics, and also add that they *had no idea* how most buyers were affording the homes they were selling. The common opinion was that many buyers (of higher end new homes) were using money from inherintence/family trusts for either down payment, monthly payment, or both.
as you can tell by my name I used to live in CA now live in CO. I spent most of my life in CA: grew up in San diego, grad school in berkeley, silicon valley, then los angeles. I love CA. why did I move? because I grew also to hate CA. I hated the high cost of living, even though we bought our first house in 1992 and traded upward several times. I hated the smog, the traffic, the stress. I hated the inability to save for anything, the fact that more than one third of our income went to our house. I hated that we could have one kid maximum, that I couldn't send my kid to public school (and I'm a liberal who really loves public schools!), that the libraries sucked, that no one in the legislature had the balls to end prop 13, that endless old folks whined about paying more taxes and constantly refused even tho the state was spiraling into the toilet. I could go on and on here, trust me, but I won't. I just looked around when my daughter was born and said to my husband, "we're leaving. I want her to breathe better air, play with kids on the street rather than have these artificial organized play dates. I want her to have the option of good public schools-we can do private if we want, not because we have to, and I want a mortgage that's teeny." so we moved and here we are in CO, much to coloradans' horror .
I worked for many years to get CA to change politically (I'm very politically active). wasn't going to stick around and watch the end of the state I love from the epicenter. Now I watch from afar and I feel sorry. it was a great state when my parents moved there in the mid 1960s. hate what everyone did to it.
(btw, we didn't do anything shady to get our first house. we just qualified for a 5% down mortgage, which was great for us. we'd been saving for 9 years for a house down payment (yes, nine years) and were ready. at that time, a 5% mortgage was backed by the govt and all you had to do was make less than 72,000 a year if I recall in Silicon valley (poverty in 1992 in CA). we squeaked under the wire, lol. ah, those were the days of regulation and stuff. )
I recruited and hired many software developers for a large Texas based software company. Our salary scale was 12% higher for the Bay Area. I was surprised the difference was that small - but we based our pay grades on industry data including companies such as IBM, Microsoft, Oracle, Sun, etc. We did run into people who had much higher expectations, but we didn't generally move higher in pay just because people wanted more!
Yeah, that's how it is in most industries in CA, I think. The slightly higher pay usually does not make up for the higher cost of living.
That is a great summary of what it's like to live and survive in California. I lived there 4 years in the mid-80s and had a great time, sort of as a long vacation, but I sure as heck was happy to get out and head back to Houston - it's just no kind of place to raise kids. I think if I had remained single it wouldn't have been too bad but if you end up with 4 kids you just can't live in any kind of 1st World living condition without resorting to some of things distasteful things you mention below. The high taxes and living costs basically force you to become a hustler - either by absolutely breaking your back legally on extra jobs or resorting to gray-area illegal stuff to make ends meet. Also, the place seemed to rely so much on what can be described as just plain luck - Prop 13 letting an older couple making a high income pay 1/3 the taxes as a young couple starting out in an identical type of house on the same street (that was us in 1986), folks lucking into a secretarial job with stock options at a .com company at just the right time becoming millionaires while a hardworking refiner or aeronautical engineer becoming bankrupt during a defense or oil industry dowturn, and other completely random stuff like that.
That's not to say that your life in California can't be interesting and exciting. I found the outdoor recreational ops for me as young man then were fantastic compared to TX (which isn't bad by any means, though)- beaches, wonderful mountains for summer hiking and winter skying and frollicking in the snow, apple orchards with wonderful just pressed cider, winery tours . It's just no kind of place for a morally straight-forward, non-hi-tech genius, person with a large family to live a low-stress life in peace.
By the way, this paragraph below by the other author sums up the nut-n-bolts every day life considerations of Calif as nicely as anything I've ever seen. Anybody fed up with living in other parts of the country thinking about chucking it all to go to the "promised land of Cali where the streets are lined with gold" should read and reread several times before selling the farm and heading out!
Quote:
Originally Posted by ILikeSmartHippies
Q: How in the Heck does Anyone Afford to Live in California?
- They rent out a room in their house. (Or rent out the shed or closet.) Use the extra monthly income to pay mortgage.
- They save $0. In other states, people save $100's/mo or $1000's/mo (in savings accounts or 401K or IRA etc). In CA, the savings rate is very low or zero or negative(!), based on my experience.
- They live as couples, even if they do not like the other person. (Few "have their own place".)
- They add illegal additions to the house to rent out. Such as: create a bedroom in a garage (against zoning laws) and rent it as a bedroom; or, create a bedroom out of a living room, and rent it as a "studio apartment" (which is a lie; it has no kitchen or often bathroom, though the landlord may throw in a hot plate + microwave in the corner & call it "the kitchen"); or, they rent to a family of illegal immigrants who live OUTSIDE in the small backyard patio underneath an awning & plastic sheet, who use the faucet of the garden hose to connect to a kitchen sink bolted to the outside wall and a BBQ as a cooking area. (Yes, it's true. Have seen it with my own eyes.)
- They buy using shady loan practices (0% down or even get a loan for 105% thus getting cash back!) on the "promise" from the real estate agent that their home will appreciate at least 8% to 12% per year. (This was true for the previous economic cycle.) They sell that house in 3 years, use the appreciation profit, buy another (of course bigger) house on similar terms. This process repeats several times until the market collapses and they either get a government dole out, or they lose everything; but since they didn't save any $ to begin with, bankruptcy isn't such a penalty: there's no net worth for the bank to take.
- They get family to give them a huge down payment and get a house on which they can barely afford monthly payments. I have seen some people resort to using credit cards to pay bills during summer months when electricity is high; in the down months, they pay off the credit cards, or they carry the credit card debt until they can re-finance or increase their loan borrowing from equity to pay down credit card debt.
- They get a weekend job, then switch shifts with others so they can work extra hours in a single weekend to create overtime pay by working double-shifts in a weekend.
I have heard real estate agents recommend to buyers that they do one or all of the above in order to afford a home in CA. Yes, really.
- They sell illegal drugs. Which is a highly profitable business. Cocaine is a good money maker, apparently. You might not recognize many part-time drug dealers; they look like everyone else, hold normal weekday jobs, etc.
- They fake the initial mortgage paperwork, lying about their monthly income (often encouraged/endorsed/under-the-table'd by the lenders). Then after mortgaging the house, they do something else like the above to make the monthly payment.
- They start a house flipping business in addition to their normal job. They spend large amounts of their extra time purposely remodeling the home in order to increase the value even higher and sell it within 1-2 years. Similar to the "buy it, hold it, sell it, upgrade" method but faster and much more time intensive. Sometimes these buyers have zero free time, as all their time is spent at the daytime job or the weekend-flip-job.
- They start a real estate agent business, get lucky a couple times, with enough money to buy their own home using insider information from being a real estate agent. They flip it without much remodelling, and preserve the profits to do it again. Since the real estate agent has access to MLS, or access to homes pre-list, they can use the insider information to their advantage. (I don't know if this is illegal, perhaps not. Though it still is using insider information to their own investment advantage and profiting from it.) After half a dozen or a dozen transactions like this, they either hold on to one of their "investment" properties to live in, or they take the money & invest into a "final" home. (Then they claim that they'll never work again because they deserve it, and they worked so hard to get where they are.)
- They marry rich, then divorce when they are "not feeling it anymore", take half of the spouses (usually husband's) equity or their 2nd home, and live in it, with monthly payments from the husband. In the beach towns these are the single white females around 40-45 y/o walking yipp-yipp dogs, usually angry poodles that they lavish with strange affection and even take them around town in baskets or baby strollers. (I am not making this up, I have known maybe a dozen women exactly like this in CA.) So marry rich and divorce purposely, then take the money & run.
- They get some kind of monthly stipend, usually from grandparents. Often they run up large bills (seemingly on purpose) which they can't pay, then grandma has to step in & pay off the debt, which at least puts them back at $0 instead of negative net worth.
- They move in with their grandparents, into the grandparents' large home purchased in the 1940's when everything was cheap. In exchange for minor taking care of the house & yard and acting as grandparent-monitor, they get to live rent free or with substantially reduced rent. By putting up with this "unpleasant" situation, they hold onto hope that they will be favorably placed in the will, so that at which time the grandparents pass, they will "win the lottery". (I had a friend like this, his grandparents had "an old 1940's ranch house" which equated to a modern mansion in size & land. Two other acquaintances also had this arrangement in So Cal.)
- They give up ever owning a home, and are satisfied to rent, though if they don't make much money, they compromise big time, and rent out a closet to sleep in (literally, a walk in closet, that they place a futon in, and "live out of"). Real estate agents or landlords sometimes joke about these spaces in homes or condos "just big enough to rent out for a couple hundred a month". (This is illegal as it usually violates zoning laws of 1 person per bedroom, etc, however no one enforces that and everyone does it, so it's a wash.)
On the more positive side (depending how you look at it), are the rare success cases:
- They make a hefty profit in the stock market after a lot of hard work and business luck, and are able to buy a home after cashing out the stock. (Happened a lot in the bay area during dot com days.)
- They create a business barrier of some kind (a patent, or licensing agreement, or royalty stream) and are able to obtain venture capital investment or private investors to their business. (Very common during dot com and still common until recently.) The venture capital pays enough salary to burn through in order to buy a home, especially if a stock conversion occurs (as above), and especially if the business owner can keep the investors "happy with a good story". The business might tank or be worthless or have only perceptual value while no money flows so is actually zero net worth (like Facebook or Twitter). However the founder(s) are presumed to have a high paper worth, and as long as investment keeps coming in, the house can get paid for.
- They create a highly profitable business (the simpler the better) and earn enough cash. Using the business as part of their net worth, they can qualify for a large home loan. Assuming the business stays flush with cash flow, they can make their monthly payment. If the business dies, they are in trouble, unless the "CA home appreciation bubble" has ramped the price enough so that they can sell the home, take the profits, and downgrade to a smaller home or rent while starting another business.
- They buy using "low income qualified buyer" government programs. These require household net to be under $35K for the family, or etc., and buying a unit requires no-flip contracts, etc. (There are occassional cases of people who try scam this, though I think it's rare.)
I have seen all of the above. I have heard landlords recommend to tenants that they sublease to make extra $$ with one of the "rent out the extra space" methods above.
Most surprising to me is the savings issue. I am a professional and work with professionals (making $90K+). I compromised living conditions (smaller place, getting house mates who paid rent) in order to continue saving while living on the coast of CA. Friends saved $0/month while using all existing savings into renting bigger places or buying.
I also had some contracting/consulting jobs on the side (weekends and nights) so worked +5-15 hours more per week (~$50-$100/hr) in addition to normal salary.
Take note: during the housing boom I invested in homebuilder stocks. (Profitably.) These companies had quarterly & annual conference calls. On these calls, the market analysts would sometimes ask the CEO's of the homebuilding companies to "break down the buyer segments". The CEO's would offer some opinions about the buyer demographics, and also add that they *had no idea* how most buyers were affording the homes they were selling. The common opinion was that many buyers (of higher end new homes) were using money from inherintence/family trusts for either down payment, monthly payment, or both.
Q: How in the Heck does Anyone Afford to Live in California?
- They rent out a room in their house. (Or rent out the shed or closet.) Use the extra monthly income to pay mortgage.
- They save $0. In other states, people save $100's/mo or $1000's/mo (in savings accounts or 401K or IRA etc). In CA, the savings rate is very low or zero or negative(!), based on my experience.
- They live as couples, even if they do not like the other person. (Few "have their own place".)
- They add illegal additions to the house to rent out. Such as: create a bedroom in a garage (against zoning laws) and rent it as a bedroom; or, create a bedroom out of a living room, and rent it as a "studio apartment" (which is a lie; it has no kitchen or often bathroom, though the landlord may throw in a hot plate + microwave in the corner & call it "the kitchen"); or, they rent to a family of illegal immigrants who live OUTSIDE in the small backyard patio underneath an awning & plastic sheet, who use the faucet of the garden hose to connect to a kitchen sink bolted to the outside wall and a BBQ as a cooking area. (Yes, it's true. Have seen it with my own eyes.)
- They buy using shady loan practices (0% down or even get a loan for 105% thus getting cash back!) on the "promise" from the real estate agent that their home will appreciate at least 8% to 12% per year. (This was true for the previous economic cycle.) They sell that house in 3 years, use the appreciation profit, buy another (of course bigger) house on similar terms. This process repeats several times until the market collapses and they either get a government dole out, or they lose everything; but since they didn't save any $ to begin with, bankruptcy isn't such a penalty: there's no net worth for the bank to take.
- They get family to give them a huge down payment and get a house on which they can barely afford monthly payments. I have seen some people resort to using credit cards to pay bills during summer months when electricity is high; in the down months, they pay off the credit cards, or they carry the credit card debt until they can re-finance or increase their loan borrowing from equity to pay down credit card debt.
- They get a weekend job, then switch shifts with others so they can work extra hours in a single weekend to create overtime pay by working double-shifts in a weekend.
I have heard real estate agents recommend to buyers that they do one or all of the above in order to afford a home in CA. Yes, really.
- They sell illegal drugs. Which is a highly profitable business. Cocaine is a good money maker, apparently. You might not recognize many part-time drug dealers; they look like everyone else, hold normal weekday jobs, etc.
- They fake the initial mortgage paperwork, lying about their monthly income (often encouraged/endorsed/under-the-table'd by the lenders). Then after mortgaging the house, they do something else like the above to make the monthly payment.
- They start a house flipping business in addition to their normal job. They spend large amounts of their extra time purposely remodeling the home in order to increase the value even higher and sell it within 1-2 years. Similar to the "buy it, hold it, sell it, upgrade" method but faster and much more time intensive. Sometimes these buyers have zero free time, as all their time is spent at the daytime job or the weekend-flip-job.
- They start a real estate agent business, get lucky a couple times, with enough money to buy their own home using insider information from being a real estate agent. They flip it without much remodelling, and preserve the profits to do it again. Since the real estate agent has access to MLS, or access to homes pre-list, they can use the insider information to their advantage. (I don't know if this is illegal, perhaps not. Though it still is using insider information to their own investment advantage and profiting from it.) After half a dozen or a dozen transactions like this, they either hold on to one of their "investment" properties to live in, or they take the money & invest into a "final" home. (Then they claim that they'll never work again because they deserve it, and they worked so hard to get where they are.)
- They marry rich, then divorce when they are "not feeling it anymore", take half of the spouses (usually husband's) equity or their 2nd home, and live in it, with monthly payments from the husband. In the beach towns these are the single white females around 40-45 y/o walking yipp-yipp dogs, usually angry poodles that they lavish with strange affection and even take them around town in baskets or baby strollers. (I am not making this up, I have known maybe a dozen women exactly like this in CA.) So marry rich and divorce purposely, then take the money & run.
- They get some kind of monthly stipend, usually from grandparents. Often they run up large bills (seemingly on purpose) which they can't pay, then grandma has to step in & pay off the debt, which at least puts them back at $0 instead of negative net worth.
- They move in with their grandparents, into the grandparents' large home purchased in the 1940's when everything was cheap. In exchange for minor taking care of the house & yard and acting as grandparent-monitor, they get to live rent free or with substantially reduced rent. By putting up with this "unpleasant" situation, they hold onto hope that they will be favorably placed in the will, so that at which time the grandparents pass, they will "win the lottery". (I had a friend like this, his grandparents had "an old 1940's ranch house" which equated to a modern mansion in size & land. Two other acquaintances also had this arrangement in So Cal.)
- They give up ever owning a home, and are satisfied to rent, though if they don't make much money, they compromise big time, and rent out a closet to sleep in (literally, a walk in closet, that they place a futon in, and "live out of"). Real estate agents or landlords sometimes joke about these spaces in homes or condos "just big enough to rent out for a couple hundred a month". (This is illegal as it usually violates zoning laws of 1 person per bedroom, etc, however no one enforces that and everyone does it, so it's a wash.)
On the more positive side (depending how you look at it), are the rare success cases:
- They make a hefty profit in the stock market after a lot of hard work and business luck, and are able to buy a home after cashing out the stock. (Happened a lot in the bay area during dot com days.)
- They create a business barrier of some kind (a patent, or licensing agreement, or royalty stream) and are able to obtain venture capital investment or private investors to their business. (Very common during dot com and still common until recently.) The venture capital pays enough salary to burn through in order to buy a home, especially if a stock conversion occurs (as above), and especially if the business owner can keep the investors "happy with a good story". The business might tank or be worthless or have only perceptual value while no money flows so is actually zero net worth (like Facebook or Twitter). However the founder(s) are presumed to have a high paper worth, and as long as investment keeps coming in, the house can get paid for.
- They create a highly profitable business (the simpler the better) and earn enough cash. Using the business as part of their net worth, they can qualify for a large home loan. Assuming the business stays flush with cash flow, they can make their monthly payment. If the business dies, they are in trouble, unless the "CA home appreciation bubble" has ramped the price enough so that they can sell the home, take the profits, and downgrade to a smaller home or rent while starting another business.
- They buy using "low income qualified buyer" government programs. These require household net to be under $35K for the family, or etc., and buying a unit requires no-flip contracts, etc. (There are occassional cases of people who try scam this, though I think it's rare.)
I have seen all of the above. I have heard landlords recommend to tenants that they sublease to make extra $$ with one of the "rent out the extra space" methods above.
Most surprising to me is the savings issue. I am a professional and work with professionals (making $90K+). I compromised living conditions (smaller place, getting house mates who paid rent) in order to continue saving while living on the coast of CA. Friends saved $0/month while using all existing savings into renting bigger places or buying.
I also had some contracting/consulting jobs on the side (weekends and nights) so worked +5-15 hours more per week (~$50-$100/hr) in addition to normal salary.
Take note: during the housing boom I invested in homebuilder stocks. (Profitably.) These companies had quarterly & annual conference calls. On these calls, the market analysts would sometimes ask the CEO's of the homebuilding companies to "break down the buyer segments". The CEO's would offer some opinions about the buyer demographics, and also add that they *had no idea* how most buyers were affording the homes they were selling. The common opinion was that many buyers (of higher end new homes) were using money from inherintence/family trusts for either down payment, monthly payment, or both.
I glanced at this like three times but it seems it doesn't address those of us (me) who bought when housing was less expensive like in 1997. I bought a brand new home in Thousand Oaks for $150/sqft (2200 sqft for $330K). My wife didn't work. We drove older cars. We never had a credit card balance. We never contributed anything less than the max to 401(k)s and two Roth IRA and college savings accounts. We never had a car loan either. We took out a 30 year conventional loan too, I think at 6.5% back then. We never took out any other loans except the mortgage. While my neighbors were putting in $100K landscaping/hardscaping, I did all the landscaping including renting a trencher and putting my own irrigation system in, planting shade trees, planting my lawn. I only paid someone to put in the concrete patio and patio cover and a some crafty brick work.
Here's my neighbor's backyard in 2003, (totally fit the house is an ATM profile). He took out huge loans to put in a pool.
Here is my backyard with me doing a lot of the work myself in 1998
San Francisco General was hiring new grad RN's starting at 100k... I've posted the link previously...
I know ER/Trauma Nurses that take home a lot more... based on overtime and differential...
Surgery Centers start new Grads @ 32.50.
I've posted about a young couple, high school sweethearts, they are both 25... he's a police officer and she's a RN... they make 200k combined...
from what I've seen people with high education and wanting to live more simply can make quite a bit of money in California. I have been pricing stuff in the Bay Area and the rent isn't really any more than it is in a little college town here. Housing is another story but rent...about the same out of SF proper, but that is to be expected... I wouldn't really expect somebody who is simple and frugal to live in Manhattan or River North Chicago either... but taking the BART or bus in? No problem. For what we eat... smaller ethnic stores and Trader Joe's are significantly cheaper for the food items than the mega chain grocers here. Especially true for people like me and my gf... double incomes, no kids, smaller living space, no car, no insurance... but can get high paying jobs not found elsewhere and if saved right that money starts to compound. We are actually projecting to have a lot more expendable income there.
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Great Summary
