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There is NOTHING wrong with renting. However, the realistic problem for MANY "perma-renters" (people that rent all their lives) is they don't save up NEARLY enough to cover their future housing costs when they are older. Sure, it's cool and convenient to be mobile. I get that.
But there is NOTHING cool about being late 50's, 60's or 70's with no substantial future housing needs covered and then on limited incomes. That's a big problem in America and it will continue to be a problem. And that ain't cool at all. It would be downright scary!
Yes, sure some people that are perma-renters all their lives do save up for ALL of their future housing needs but they aren't in the majority.
You nailed it here. I am one of those oddball perma-renters who saves a healthy portion of my salary for retirement. I have always been "weird" and I'm good with that, especially if it means the growth in my investment portfolio can pay for the rent increases without me breaking out a sweat when I can no longer work. But I know this isn't how most people play it. People are so programmed into home ownership and so not programmed into financial assets/income.
And you are so right about people in their 50s with little or nothing saved. I have seen this scenario multiple times with people I know and people I've read about. People in their 50s with minimal or no savings who are permanently booted out of decent paying employment. People act as if they're going to hold onto good paying jobs into their mid 60s or even 70....but a lot of times (most of the time?), that doesn't happen, even among the smart and better educated.
that was not my point at all. I wasn't saying everyone should rent. I was pointing out a very real stratification between newcomers to CA like me and people whose families have been here for decades. They are more ABLE to buy homes due to their circumstances (NOT their income).
Just to support earlyretirement's point....I have a sister who is a perma-renter in NYC. I assume she makes around the same amount you do. While she doesn't have any credit card debt and has a good emergency fund in the bank, she only has 10K saved for retirement at age 45. She wouldn't even have that much saved if I hadn't nagged her to death to start a retirement plan for herself (she works contract jobs) and nagged her some more to actually contribute to it. So I think my sister is (unfortunately) typical of perma-renters, even ones with good incomes. Owning a house gets people into a commitment mindset. Not owning somehow seems to lead to a more short term mindset. I know I'm not like that, but I also know I'm the oddball in this regard.
Just to support earlyretirement's point....I have a sister who is a perma-renter in NYC. I assume she makes around the same amount you do. While she doesn't have any credit card debt and has a good emergency fund in the bank, she only has 10K saved for retirement at age 45. She wouldn't even have that much saved if I hadn't nagged her to death to start a retirement plan for herself (she works contract jobs) and nagged her some more to actually contribute to it. So I think my sister is (unfortunately) typical of perma-renters, even ones with good incomes. Owning a house gets people into a commitment mindset. Not owning somehow seems to lead to a more short term mindset. I know I'm not like that, but I also know I'm the oddball in this regard.
I moved to CA at 34. I'm just settling in and beginning to save, I haven't made my income for the last 10 years. But for me to get here took a lot and to settle into my role. It has nothing to do at this point with a short term mindset but with the prohibitive costs of putting a down payment on a home vs. many of peers with a smaller income, but their parents have paid their down payment or given them a home, etc.
That's all. I wasn't looking to be attacked for my lack of savings, "perma renting" etc. If I hadn't been renting I wouldn't have been able to get the job I have now. But I do save for retirement. I also have a nice ESOP plan through work.
My only point was that the circumstances are different for many of us moving here vs. people who have had an easier time of it in CA. Once such example is my ex boyfriend. I'd love to be a teacher and have had a nice home. I couldn't afford his home (with the down payment) even making much more than he does, at least not for several more years of saving. Of which, he did none of course.
I don't see a bleak future for San Diego at all, at least not for those who can afford it. It's a gorgeous place to live assuming you can make it happen, not everyone can or should.
EXACTLY Sassberto. San Diego has been and always is basically a paradise for those that have stable and steady and safe jobs or that made their money elsewhere earlier in life or that have passive and GUARANTEED cash flow with former assets or investments. For these people San Diego is pretty much paradise.
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Originally Posted by mysticaltyger
I live in San Jose, but am considering San Diego for retirement, which at this point, is likely 12 years away. Hope you don't mind me poking my nose in this forum! I have learned a lot. Sometimes I don't say much because I don't know the specifics of the area. However, while SJ has a better job base than SD, most of the economic issues faced in SD are the same ones we have in the Bay Area...high housing costs making it difficult for people at median or even above median incomes to buy homes and raise kids. The incomes here are higher, but so is the cost of living, so it comes out about the same....which is why I've commented a lot on this thread. These economic issues are pretty much all the same in all of the coastal CA metro areas. Limited housing supply, which drives up home prices and rents, and makes life difficult for people at median income or lower.
YES, that area is more expensive and housing costs are insane. But in all reality it's not really the same as you think it is. It's not "pretty much all the same". The BIGGEST difference is that you lose your job there, although it's more expensive there, you can more easily find a replacement job. You lose a high paying job in San Diego, and odds are unless you are in a limited # of fields.....you pretty much better expect to pack your bags and move to another area.
I've seen it happen many many times with other friends. It's not the same thing in San Diego. Yeah, the cost of living isn't as much as in other areas of California. The biggest difference is you can find a replacement high paying job much easier for the most part. You must remember that. It's not "the same".
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Originally Posted by mysticaltyger
You nailed it here. I am one of those oddball perma-renters who saves a healthy portion of my salary for retirement. I have always been "weird" and I'm good with that, especially if it means the growth in my investment portfolio can pay for the rent increases without me breaking out a sweat when I can no longer work. But I know this isn't how most people play it. People are so programmed into home ownership and so not programmed into financial assets/income.
And you are so right about people in their 50s with little or nothing saved. I have seen this scenario multiple times with people I know and people I've read about. People in their 50s with minimal or no savings who are permanently booted out of decent paying employment. People act as if they're going to hold onto good paying jobs into their mid 60s or even 70....but a lot of times (most of the time?), that doesn't happen, even among the smart and better educated.
Yeah, hey as long as you have the discipline to save and cover your future housing costs for your LIFETIME. That's the key. Most people will spend that money later in life when they need it the most. When they can't work or no one will hire them. Really, all owning is for many people is a forced savings plan to cover their future rent. And even people that pay cash or paid off their homes. I don't look at it as having an "asset". I look at it as prepaying your rent forever ahead of time. I certainly do NOT count my house as part of my net worth. I look at it as pre-paying my "rent" forever. That's all owning a house is in all reality. People that own houses are just basically guaranteeing their rent at a fixed and dependable payment each month until it is paid off. Then once it is paid off, all they did was just pre-pay their rent. It's that simple.
Sure I have property taxes, HOA fees and utilities but my "rent is paid". That's how people need to look at owning. IMHO.
Quote:
Originally Posted by mysticaltyger
Just to support earlyretirement's point....I have a sister who is a perma-renter in NYC. I assume she makes around the same amount you do. While she doesn't have any credit card debt and has a good emergency fund in the bank, she only has 10K saved for retirement at age 45. She wouldn't even have that much saved if I hadn't nagged her to death to start a retirement plan for herself (she works contract jobs) and nagged her some more to actually contribute to it. So I think my sister is (unfortunately) typical of perma-renters, even ones with good incomes. Owning a house gets people into a commitment mindset. Not owning somehow seems to lead to a more short term mindset. I know I'm not like that, but I also know I'm the oddball in this regard.
Oh yes. The biggest problem I see in society is everyone seems to think that somehow magically later in life whether it's 50's 60's , etc. they are going to win the lotto or something! That just isn't happening for most people. That's not realistic. No one is saying whether buying or renting is better. The truth is that buying does NOT make sense for every one. However, one thing we know for sure is that everyone will always need a roof over their heads until the day they die. That is a certainty.
mysticaltyger, you can hang out in our "hood" (SD Forum) as much as you want. As far as I'm concerned, you're providing intelligent information. Really there have been some great discussions lately.
Thankfully I had Grandparent that preached saving and made real the Great Depression to a young child...
I would ask questions and my Grandmother would point out homes on her street of people she knew that lost them in the 1930's for thinking the stock market could only go up and bet the house on it...
Maybe I'm odd that way in that most of my friends have all been older... I worked afterschool and weekends at a shop that restored antique cars... I just like the older classics and was always hanging around and one day the owner put me to work at $2 an hour.
Most of the customers were well off, many had their own companies and others were Airline Pilots and Doctors...
It was great because just about everyone was willing to give advice to the kid... I would ask how they got into the hobby and what they did for a living.
Just about all of them told me to get into Real Estate as soon as I could and I listened buying a 700 square foot home on a postage stamp size lot that was undergoing condemnation hearing... seriously, what else could I afford after just finishing college?
That home was a stepping stone and I was able to take the eyesore of the neighborhood and transform it and made a lot of friends in the process. About 18 months later, I found a duplex needing work and rented out my first home and made the move and kept doing it.
It seems to me that many today are unwilling to take on a project... they would rather go into massive debt to get instant gratification...
I was not alone...several of my High School friends did the same and some were married and still are to the same person today... I can remember the patio parties, the new roof parties, driveway and drywall parties... as in work parties!
By the way... I'm one of those with almost nothing in retirement savings... I do have income property that is fully paid for after 15 years and had no trouble hanging in for the long haul.
There is NOTHING wrong with renting. However, the realistic problem for MANY "perma-renters" (people that rent all their lives) is they don't save up NEARLY enough to cover their future housing costs when they are older. Sure, it's cool and convenient to be mobile. I get that.
But there is NOTHING cool about being late 50's, 60's or 70's with no substantial future housing needs covered and then on limited incomes. That's a big problem in America and it will continue to be a problem. And that ain't cool at all. It would be downright scary!
Yes, sure some people that are perma-renters all their lives do save up for ALL of their future housing needs but they aren't in the majority.
I agree and disagree with this. Some people are lucky enough to jump right out of college and make big bucks not long thereafter. But most people don't have the connections to even come close to that. You can jump out of college into the consulting world, IB world, law firms, etc and make $100K. Except you work 100+ hours a week and your life is work. Your friends become your co-workers. Most people burn out long before they start making the big bucks or big bonuses. Hell, even most doctors aren't making big bucks until they are well into their thirties.
So this is where I have an issue in the concept of "should have saved money" and you start looking at somebody who didn't start making 200K per year until they were 35 and so on. Most people aren't able to make huge money until a decade after college. That's just how it works. You make enough good connections, you get real world experience, and so on and finally all that hard work paid off. Except it's years later.
So when I see a 30 year old buying a $1 Million dollar house and putting over $200K down, i highly doubt most of them were working their butt off earning most of that down payment. Yeah there are those who work on wall street and a few others, but most got the money from a parent or grandparent. Because this concept of Saving for a home is nice, except most people still need to live somewhere. So yeah if somebody is living with their parents until they are 30 years old, damn in most big cities that's $1-2K saved per month. So if you have that option and can save $2K per month instead of paying rent, that's 24K per year. It'll still take you close to a damn decade to save up for that $200K down payment though.
But that's why I never get the concept of "you should have saved for a house" when you were young. Yeah people who live with their parents or have 4 roommates, but rent is rent. Live in a halfway decent place in San Diego and it'll cost you over $1K per month. That's over $12K per year. So yeah if you lived at home and your parents were doing your laundry, feeding you, and who knows what else, then it should be easy to save up that kind of money. But if you have to pay for all those things and make about $50K per year, it's hard to save $200K for a down payment..
Like I said, most people aren't jumping out of college into $250K per year jobs. Not even doctors, lawyers, and Investment bankers. Even in a good field where you start out at say $70K per year, it probably means you are living in an expensive city.
Savings is nice concept, but you aren't saving $200K on $70K per year and have to pay to live in some expensive city. So somebody who plops down $200K+ on a million dollar home at 30 years old, is probably getting that money from a parent or grandparent.
But back to the perma-renters vs home owners. Rent isn't cheap in many areas. Yeah if you are forever single and have a dozen roommates in a similar situation, then why not. But then again, would that person really ever care to buy their own home anyway? But somebody who is renting 1500-2K per month will have a hard time coming up with a downpayment for a house many areas in San Diego and California. And most of the time it isn't worth it. Buy a house for a million bucks and how much will it really go up at this point? And then unless you plan to leave the state, that million dollar asset just means you need to sell it and buy another property that costs just as much, if not more.
That's the thing. Yeah if you buy a house for a million, sell it for 1.5 in a decade, and then move down to Nicaragua and buy a huge place for $200K, yeah you made out. And many people that bought homes years and years ago made out. Or their kids and grandkids made out. But somebody buying now, even with low interest rates, for the avg home owner, they just have a million dollar home that is never really worth a million bucks unless they move to someplace far cheaper. People still need to live somewhere.
And the truth is, a renter will be in trouble at 70 years old with no money just as much as some 70 year old home owner who can't pay their property taxes and HOA fees. Yeah the homeowner can sell the house, but they still need to find a place to live after that. They would have more options in that sense to go move to South America or Iowa and so on. That is if they didn't take out a bunch of second mortgages over the years.
My grandmother had a house that never had a mortgage on it. My grandfather built it with his own hands and it cost probably a few hundred bucks a long long time before I was ever born. But he died a long time ago, she retired a long time ago, and her son, my uncle, was down on his luck and moved in. He took out some mortgage on the house and then bailed like he always did. Nobody else wanted to help or had the money, so the house went up in foreclosure and that was that. So just because they had a home really didn't mean anything.
Don't forget there are folks that are just in the right place at the right time.
My Godsister is one... her stock options let her buy her home in her 20's...
It was just a summer job in High School at a little startup called Apple that because full time after she graduated from Cupertino High...
I know about a dozen like her...
I've known of people like this as well during the dot com boom. It's far rarer these days for things like this to happen. Look at FB. Who really made out like a bandit besides the founders and few others? That stock hasn't done anything for most of their employees, even with a discount. Most people these days are getting a nice bonus, and nothing more. I know plenty of companies who took on hundreds of millions in VC & Angel funding. So even if those companies get bought out for 500 million, they have to pay back all those investors first. Then you have all the other expenditures thrown in, and then the founders and first few employees get the boatload of rewards. After all that, the rest of the employees get something. And then you have taxes on top of that. So at the end of the day, a company can get bought for $500 Million and employee #100 gets $20k. Not bad, but it' s not going to buy them a house. And really that is where the market is these days. The days of tons of IPOs and a janitor making millions just doesnt' seem to happen anymore.
Hell, I was one of those millionaires on paper at one point in my life. Except it was just paper and you really never had that money. It was kind of fake. Options that would have been worth millions if the market took another year or two to crash. Or if I had the right connections, I'd have sold my company for millions and be set for life. But that's the way life works sometimes. That's why it's funny when people talk about 'hard work and being smart" and discount all the other factors that come into play. Hell if Yahoo wasn't so dumb, they would have bought Google like they were going to and who knows where we'd be at this point in time. Mark Cuban wouldn't be a billionaire because he wouldn't have been able to sell some pointless company for billions. Yahoo would have bought google instead.
In our area I know people that started with Amgen and became millionaires. Many of those people spent the money though. We lived near one woman that told us she was moving to a house she had just bought. She sold some Amgen stock to pay for it outright. She had kept most of her stock and at one point was worth $26million and she was in food service for Amgen, not even one of the core people or working in the core business, just a support person. You just never know what you will do will have the pay off you want, or like many you cash out as soon as the payday happens and make some money now by leaving on the table what could have been.
I don't know the answer to living in San Diego. I live in Oxnard and we need $100,000 + to make it in Oxnard. I do know that preperation goes a long way. You can not think that a low wage job is going to help you make it in life. Choose your own lifestyle and do not settle for less. That is the only way I know how to make it in life.
In our area I know people that started with Amgen and became millionaires. Many of those people spent the money though. We lived near one woman that told us she was moving to a house she had just bought. She sold some Amgen stock to pay for it outright. She had kept most of her stock and at one point was worth $26million and she was in food service for Amgen, not even one of the core people or working in the core business, just a support person. You just never know what you will do will have the pay off you want, or like many you cash out as soon as the payday happens and make some money now by leaving on the table what could have been.
I don't know the answer to living in San Diego. I live in Oxnard and we need $100,000 + to make it in Oxnard. I do know that preperation goes a long way. You can not think that a low wage job is going to help you make it in life. Choose your own lifestyle and do not settle for less. That is the only way I know how to make it in life.
Oh for many of us during the dot com era it wasn't about leaving anything on the table. We just weren't allowed to or couldn't. It was just a piece of paper and it made you feel like you were worth something. Except you couldn't sell or short or do anything. Pointless stock options that had to sit around and wait. But there were certain moments where you felt like a king. And then the bottom fell out and many of us were just worth something in a dream, nothing more. That's why when people speak about "salary is low but we can offer you stock options" it's kind of a joke to many of us from back in the day when that meant nothing. And these days most companies dont' even do the IPOs anymore.
As far as my company, knowing some investors would have given it a flying chance of succeeding. Of hiring more people To market. Would it have done well? Who knows. Maybe it would have or maybe it would have tanked. But at the end of the day, that's the way life goes. Having rich powerful connections means crap if you are lazy and aloof and don't want to learn anything. But having them and doing those things, sure helps. Not all of us ever have those kinds of connections.
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