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Money In, Money Out in Loudoun and Other Local Jurisdictions
The Post had an interesting article today discussing how many area homeowners end up spending very high percentages of their income to pay their mortgages.
This was particularly pronounced in Loudoun, where 71% and 85% of homeowners earning over $50K and $75K, respectively, pay over 30% of their incomes on housing. The comparable figures for Fairfax were 55% and 53%, respectively, while the comparable figures for Montgomery were 55% and 57%. All these figures were high compared to the national averages; overall, only 28% of those in the U.S. earning more than $50K or $75K spend more than 30% of their incomes on housing.
It's food for thought for those who are attracted to this region by the seemingly high salaries; they'll have to deal with a high cost-of-living as well. In addition, their ability to build wealth - as opposed to earn a high income - may continue to be largely tied to the fortunes of the local housing markets.
Is this old news? Given better job prospects in other parts of the country, do many believe they would actually stand a better chance of actually saving a bit of money if they moved somewhere else with lower housing costs? Of course, I guess the housing costs elsewhere would be higher if there were more jobs....
We'd save money living elsewhere, absolutely. Not just on housing, either. I'm amazed when we visit family how much cheaper gas, groceries, and services like hair cuts are in comparison to NoVA. My parents just spent the week visiting from SoCal, and even they had sticker shock in the grocery store.
But there aren't many jobs for DH elsewhere, thanks to being tied to a federal niche (we've looked). The jobs that are there scare me, because they're in areas where if that company failed, there's not a whole lot else. Here, we always have a dozen other options. We are currently choosing stability over a little extra money in our pockets.
I'm not sure that I agree with the Post on this article. One thing that can skew statistics between the counties is how long some people have owned homes. Loudoun tends to have more new home owners, Fairfax tends to have more people who have owned homes for several years (sometimes for a few generations). New homeowners are going to pay a higher percentage of their salary for a house than someone who has held a mortgage for 20 years.
Moving on to the question of how this would affect someone considering moving here, well, that person will be a new home owner no matter what section of Nova he moves into, so he'll spend a higher portion of his salary on his house than an "average" resident who has lived there since the 1970s. In other words, if you're moving here expect to spend 30% of your salary on a house no matter which county you choose.
So... does that mean you are smarter to move to another city rather than Nova? Depends on just how much money the job will be paying.
Let's assume for the moment that the Post's statistics are correct, and let's say you have a choice between a job in Nova where you make $100K but spend 30% of your salary on housing. Or a job in some significantly less expensive city, such as Cleveland. A comparable job would pay you $40K, but you would only spend 15% of your salary on housing. Who ends up with more money after paying housing expenses? The guy who pays 30%.
The job in Nova would leave you with $70K after you pay for housing. The job in Cleveland would leave you with $38K.
So what if you spend less of a percentage on housing? $70K is still more money than $38K. OTOH, if you can find a job in Cleveland that pays $100 K then you can buy a much bigger house there and live like a king.
It is extremely eye opening for me to see the e-mails I'm now receiving from people I used to know in Redondo Beach. People I thought would never leave California are now sending out feelers. They say the job situation there is frightening, even for companies that used to seem very secure (like Northrop Grumman). Taxes are getting worse and worse, and a lot of people are reaching a point where they feel they have to move away. I know it's expensive to live here right now, but personally I feel lucky that I'm not in one of the states going through severe economic challenges right now.
(OTOH, we have more than enough people moving here right now. So if life is less expensive for you somewhere else, or if you want to move somewhere else for whatever reaon, by all means move there and I will applaud you every step of the way!!!!)
I agree with Normie's assessment on the percentage issues. I think when you have an influx of workers and a good economy, there are many, many people new to their careers getting houses and, at that stage, the mortgage payment takes up a lot of their income.
I bought my house 16 years ago. At that time, we had a combined income of about $70,000. My mortgage seemed like it took up an enormous amout of my take home pay but it was modest compared to what some others were doing. We make quite a bit more than that now and I'm not even sure what my percentage is (how do they figure that out--on gross or net??).
But maybe in other parts of the country where the job market is slower and times are rougher, new homeowners are less likely to take the risks in home ownership that I think people here are more apt to do.
One other factor to consider, on the whole cost of living issue: you lose other things living in this area (besides higher groceries, gas, haircuts, etc). I've lost more than my share of tax deductions over the years. Those deductions/credits are based on a level of income that that level is the same nationwide. We are paid more here because it costs more here. I am no means "rich" because I live here (much of my salary is eaten up by higher housing costs and other costs named on this thread), yet the tax man doesn't factor that in. So I lost tax credits for many years on dependent care and, more recently, for college tuition. Had a lived/worked in a area with a lower cost of living, I most like would have had the same standard of living PLUS been able to take advantange of various tax credits.
I'm not sure that I agree with the Post on this article. One thing that can skew statistics between the counties is how long some people have owned homes. Loudoun tends to have more new home owners, Fairfax tends to have more people who have owned homes for several years (sometimes for a few generations). New homeowners are going to pay a higher percentage of their salary for a house than someone who has held a mortgage for 20 years.
Moving on to the question of how this would affect someone considering moving here, well, that person will be a new home owner no matter what section of Nova he moves into, so he'll spend a higher portion of his salary on his house than an "average" resident who has lived there since the 1970s. In other words, if you're moving here expect to spend 30% of your salary on a house no matter which county you choose.
So... does that mean you are smarter to move to another city rather than Nova? Depends on just how much money the job will be paying.
Let's assume for the moment that the Post's statistics are correct, and let's say you have a choice between a job in Nova where you make $100K but spend 30% of your salary on housing. Or a job in some significantly less expensive city, such as Cleveland. A comparable job would pay you $40K, but you would only spend 15% of your salary on housing. Who ends up with more money after paying housing expenses? The guy who pays 30%.
The job in Nova would leave you with $70K after you pay for housing. The job in Cleveland would leave you with $38K.
So what if you spend less of a percentage on housing? $70K is still more money than $38K. OTOH, if you can find a job in Cleveland that pays $100 K then you can buy a much bigger house there and live like a king.
But I think that's the key point that Reston Runner and others have made here previously--the salaries in places like Cleveland are NOT much different from those here, but housing costs are. There's no way that you would make only $40K for the same job that would pay you $100K here. There might be a 15-25% pay difference. Check out the Federal GS geographic pay differentials as one example showing the pay isn't that different, but housing and other costs ARE very different.
I think right now the major advantage this area has is the relatively low unemployment rates, as other people have pointed out. If you knew you could get and keep a similar career path in many other cities, you would be far ahead financially to live there, but that is a huge "if" right now.
Of course there are many intangibles (a major reason that we moved here)--if you like what this region has to offer, then that factors heavily.
But I think that's the key point that Reston Runner and others have made here previously--the salaries in places like Cleveland are NOT much different from those here, but housing costs are. There's no way that you would make only $40K for the same job that would pay you $100K here. There might be a 15-25% pay difference. Check out the Federal GS geographic pay differentials as one example showing the pay isn't that different, but housing and other costs ARE very different.
My father-in-law was a Fed in this area for nearly 20 years. He was a GS-13 and lived as most GS-13s with a family do in this area--comfortable yet by no means rolling in the cash. He then transferred to Asheville, NC as a GS-13. He lost the COLA that he gets here, but said he lived like a KING in Asheville. Best move he ever made. Of course, there was only a few 13s there and the responsibility of a 13 in that area is much more than a 13 in this area. Regular workers are 13s in this area and not generally supervisors. That's kind of what they have to do hear to get people of to a livable wage in the DC area.
But I think that's the key point that Reston Runner and others have made here previously--the salaries in places like Cleveland are NOT much different from those here, but housing costs are.
Hey, if you can make big bucks in another city, then I say go for it! I lived in Cleveland for a few years and Cleveland rocks.
Funny thing is... you just don't see this mass exodus of people rushing off to those high paying jobs in Cleveland. Just guessing, but could it be those high paying Cleveland jobs aren't quite as available as some people want us to think?
But I think that's the key point that Reston Runner and others have made here previously--the salaries in places like Cleveland are NOT much different from those here, but housing costs are. There's no way that you would make only $40K for the same job that would pay you $100K here. There might be a 15-25% pay difference. Check out the Federal GS geographic pay differentials as one example showing the pay isn't that different, but housing and other costs ARE very different.
Bingo! My coworkers that live in Chicago or Columbus or Dallas make 10% less than me. Their rents are 1/3 to 1/2 of mine though. They have much much more disposable income than I do!
Funny thing is... you just don't see this mass exodus of people rushing off to those high paying jobs in Cleveland. Just guessing, but could it be those high paying Cleveland jobs aren't quite as available as some people want us to think?
It's not that the high paying jobs aren't there, it's that the jobs, period, aren't there. That's why people will continue flocking to DC, and why COL stays high here.
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