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I think it is really all relative. Where you live now, what you make now, and what you will make in San Jose. Using my own example - I previously lived outside Washington, DC in Northern Virginia. One of the more expensive areas of the country - but nonetheless cheap compared to here. Here's how I figure it:
Salary in CA - Approx 150K, including bonuses, 130K without.
Housing Variance - maybe 15K/year.
Tax Variance - maybe 10K/year.
Those are the big 2 (housing and taxes). Other stuff may cost a bit more in CA (gas) or a bit less (electricity thanks to the climate). I feel like to a great extent it "comes out in the wash." But still, just to be "safe" lets throw in another 5K of miscellaneous variance.
That means the "California COL" devalues my paycheck by about $30,000 per year as compared to Northern Virginia. So if I could make 120K (100K w/o bonus) in Northern Virginia, I would be better off. But, I was only making 74K in Northern Virginia, and the best offer my prior employer could make me was 85K. So despite the substantial cost of living increase, I am still better off financially here in the Bay Area, which is a big part of the reason I decided to go ahead with the move. I also feel my earning potential is probably a bit higher out here and will grow faster.
The kicker out here is housing of course. My mortgage in Virginia plus condo fees and tax (e.g., total per month) was around 1600. Here, a similar place would probably be close to $3000. Rather than 3K I've "downgraded" slightly - 1 bathroom vs. 2, slightly less luxurious place - so I pay $2500. I'm sure many do the same thing.
This leads to what I call the Bay Area tradeoff. Home quality in exchange for disposable income. People out here with good incomes are likely to be able to travel more, have a nicer car, etc, but probably live in a pretty "crappy" place compared with the rest of the country.
So it depends on your focus. For someone who's be all end all is their home - this is not the place to live. Even if you are objectively better off here, it's still not the place to live if you want a big home. Big homes are hard to find period, and are basically unaffordable for even many high earners due to down payments (not many people have 50K-100K sitting around in a non-retirement account). Renting is an option, but again, it's hard to find a large, high quality home. If you are willing to sacrifice a bit on the home though, you may end up with a lot more "playing around money." Being single, I made the latter choice, since a large home is not a goal of mine. It does annoy me I can't even afford a small bungalow or condo out here though - I feel like I'll be renting forever.
To the OP's point about locking in with a 30 year fixed - that is indeed a good point, and with time, as salary grows and mortgage stays similar, you get further ahead. The problem, though, is that applies everywhere. I could "lock in" in Atlanta for $900/mo right now. So while locking in is an argument in favor of home ownership (if you will live in the home long enough for that to matter much) it applies everywhere so does not make San Jose any cheaper. And it also ignores the fact that most in this area won't be able to purchase a home due to down payment alone.
I think it is really all relative. Where you live now, what you make now, and what you will make in San Jose.
True, but, a big majority of people who are moving here and asking questions about COL are young families, and generally they are moving from places with a lower COL.
So, 1 bed/1 bath condos are out of the discussion, and all that "disposable" income for a nicer car and travel, is used, to support a family. Given a family of four, the "slightly" higher sales tax, or grocery cost, and $.75/gal fuel cost (have to drive the kids to their soccer games!), etc, adds up significantly.
Just back from a business trip to the San Jose/East Bay area. I had also casually looked at a job out there. Coming from the upper midwest, the topography is certainly beautiful, and the weather is pretty nice. Being Asian I also appreciate the large Asian population. Eventually I would like to look at opportunities in the Bay Area but it is too high risk financially right now, just getting a career underway and having a single income and young kids. Paradoxically, the type of job I'm currently looking for actually pays quite a bit less (literally half) in the Bay Area than where I am now despite the higher COL.
Admittedly, my housing budget may not be too different. In CA I would have to spend $500K minimum, although I will probably choose to spend that here as well. The differences are the size and condition of the house, and probably lot size. I don't want a huge McMansion with 3.5 car garage and $10,000 playset in the back, as I prefer my kids to be able to go to a neighborhood park. However, I have one special needs child who we can't just send down the street to play, so having a house with a nice backyard (maybe fenced) would allow him to freely play outside if we need to be in the house cooking or working. The special needs also mean it's difficult for the kids to share bedrooms so we would want a 4BR as opposed to 3 BR.
Higher income in the midwest as well as same/lower COL would allow me to: pay down the mortgage faster, pay off student loans, max out retirement and college savings, save cash to buy a car without a loan, buy better life insurance, and still have money left over to vacation to CA and other places.
I have to admit though, there is so much energy in my areas of interest (biotech/medical devices) that I would still consider making the move once I am ahead a bit financially. I recognize that there is the opportunity to be wildly successful, but I am risk-averse enough that I wouldn't feel right taking the risk when I could get on more solid footing first.
I think it is really all relative. Where you live now, what you make now, and what you will make in San Jose. Using my own example - I previously lived outside Washington, DC in Northern Virginia. One of the more expensive areas of the country - but nonetheless cheap compared to here. Here's how I figure it:
Salary in CA - Approx 150K, including bonuses, 130K without.
Housing Variance - maybe 15K/year.
Tax Variance - maybe 10K/year.
Those are the big 2 (housing and taxes). Other stuff may cost a bit more in CA (gas) or a bit less (electricity thanks to the climate). I feel like to a great extent it "comes out in the wash." But still, just to be "safe" lets throw in another 5K of miscellaneous variance.
That means the "California COL" devalues my paycheck by about $30,000 per year as compared to Northern Virginia. So if I could make 120K (100K w/o bonus) in Northern Virginia, I would be better off. But, I was only making 74K in Northern Virginia, and the best offer my prior employer could make me was 85K. So despite the substantial cost of living increase, I am still better off financially here in the Bay Area, which is a big part of the reason I decided to go ahead with the move. I also feel my earning potential is probably a bit higher out here and will grow faster.
The kicker out here is housing of course. My mortgage in Virginia plus condo fees and tax (e.g., total per month) was around 1600. Here, a similar place would probably be close to $3000. Rather than 3K I've "downgraded" slightly - 1 bathroom vs. 2, slightly less luxurious place - so I pay $2500. I'm sure many do the same thing.
This leads to what I call the Bay Area tradeoff. Home quality in exchange for disposable income. People out here with good incomes are likely to be able to travel more, have a nicer car, etc, but probably live in a pretty "crappy" place compared with the rest of the country.
So it depends on your focus. For someone who's be all end all is their home - this is not the place to live. Even if you are objectively better off here, it's still not the place to live if you want a big home. Big homes are hard to find period, and are basically unaffordable for even many high earners due to down payments (not many people have 50K-100K sitting around in a non-retirement account). Renting is an option, but again, it's hard to find a large, high quality home. If you are willing to sacrifice a bit on the home though, you may end up with a lot more "playing around money." Being single, I made the latter choice, since a large home is not a goal of mine. It does annoy me I can't even afford a small bungalow or condo out here though - I feel like I'll be renting forever.
To the OP's point about locking in with a 30 year fixed - that is indeed a good point, and with time, as salary grows and mortgage stays similar, you get further ahead. The problem, though, is that applies everywhere. I could "lock in" in Atlanta for $900/mo right now. So while locking in is an argument in favor of home ownership (if you will live in the home long enough for that to matter much) it applies everywhere so does not make San Jose any cheaper. And it also ignores the fact that most in this area won't be able to purchase a home due to down payment alone.
Your numbers seem a little questionable, $3000/mo for a 2bd condo sounds high, I live in a 2bd condo, and we can't get out of our underwater mortgage because it will not sell for anywhere near as much to add up to a 3000/mo mortgage. Running the numbers, optimistically the place would sell for $360K, and so according on an online calculator (I'm not vouching for it) loaning 100% with 1.25% taxes 0.5% PMI and 4% interest it would come out to $2100/mo in mortgage payments, slightly less than rent for the same unit.
It sounds to me like you either bought near the top of the market, like my partner did, or you're living in a prime location, or luxury building. I used to live in NoVA, and you'd be lucky to find a condo in Arlington for 360K, the size of this one for example, Reston on the other hand would be cheaper, probably closer to 300K. But the numbers I don't think would run as far different as what you're saying, we are talking San Jose, not Palo Alto, or Cupertino, or the pricey end of SC Co.
No, we are not overhyping the high COL here. You have to move here to feel the impact. You are a frog boiling in water. We new comers are the ones who feel that it's boiling and want to jump out!!!!
ITA. Except I like it here.
But breaking into the housing market is so hard, and if you're renting - unless you are really lucky, that cost goes up yearly. Much faster than your (average employee not hitting the "Silicon Valley" lottery) salary will go up.
Everything costs just a little more here, and houses cost a lot more and if you have school-aged children then it's even worse ("GOOD" district houses are astronomical, or private schools which aren't cheap unless you're going to go to the Catholic route). Your kids' lessons are going to cost more, your hair cut, any service that requires someone pay for a property to exist in - costs more.
We did lots of studying of options before accepting a job here with an income that sounded plentiful. Checked websites with COL comparisons, so we did not go into this blindly, but it definitely was more than anticipated. Plus gasoline has gone up everywhere at the same time. Eating out costs more. More of the "good" medical professionals can afford to be picky about what insurances they will take b/c so many have so much money here.
I don't think it is overhyped at all. Having said that, with some adjustments it has been doable and we're very happy.
For homebuyers, probably not...but for renters, a lot of people are overhyping the COL.
I've seen posts saying you have to live frugally on 80k and will have a difficult time on 60k.
I see some of the budgets of those who said that...and I just shake my head. For one, many of the costs would be similar, or exactly the same anywhere (i.e. student loans) and two, with what some people think they need...they wouldn't be able to make it in Texas on 60k.
For homebuyers, probably not...but for renters, a lot of people are overhyping the COL.
I've seen posts saying you have to live frugally on 80k and will have a difficult time on 60k.
I see some of the budgets of those who said that...and I just shake my head. For one, many of the costs would be similar, or exactly the same anywhere (i.e. student loans) and two, with what some people think they need...they wouldn't be able to make it in Texas on 60k.
It is true. My 1-bedroom in San Jose is $1500, and the average in Austin, TX is around $950. I would save over $500 a month on rent, but I would likely lose much more than that $6000 a year through just having a lower income.
It is true. My 1-bedroom in San Jose is $1500, and the average in Austin, TX is around $950. I would save over $500 a month on rent, but I would likely lose much more than that $6000 a year through just having a lower income.
Don't know where you pulled that number. Too high.
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