What salary is needed for a middle class lifestyle? (San Jose: middle-class, for rent)

[nagleepark]

What salary is needed for a middle class lifestyle for 2 adults with 2 kids in this area?

I've read about people who made $350K+/year in the Silicon Valley who felt that buying a house was a stretch and that a middle class lifestyle was out of reach. But I've also read about people who managed to buy a condo, townhouse or house in Sunnyvale or Santa Clara on less than $125K/year and felt that they were middle class. (I even know a few.)

It does seem to depend on *which* middle class. I live in Naglee Park; I consider Willow Glen people to be rich but they consider themselves to be middle class. Most people seem to consider a Mercedes to be a middle class car; I don't. I consider the middle class to live in areas with mediocre to poor schools but, in other states, it seems common that even middle class kids expect and go to the best schools. Are Palo Alto, Los Altos and Cupertino middle class?

Being middle class in the SF Bay Area is a compromise, I think; you may have too long a commute or poor schools or a small house or an old house. But, from what I gather, being middle class in another state means no compromises except maybe weather, a dull job or boredom. In other states, a newly built 4-bedroom house in the best part of town with the best schools and a short commute is a middle class lifestyle; here, that's the lifestyle only of the rich.

If you ask me, $100K+/year buys you something in the San Jose area, even if it is only a condo in a sketchy neighborhood with poor-performing schools. $200K/year probably buys you a regular house with a medium yard (or a new house with a "pocket" yard) in an average neighborhood with good-performing schools. $275K+/year buys you a regular house with a medium yard in the Cupertino school district or a similar high-performing district. But all that assumes that you want to move here, buy a house in a few months (regardless of the housing market) and almost instantly have a certain lifestyle.

But, if you are willing to work your way up, that is, rent and save, then 3 - 5 years later, buy a condo/townhouse and, 5 - 10 years later, sell it and buy a regular house with 3 bedrooms (or buy a townhouse in Cupertino), you could do that on $100K - $125K/year, even if your salary never gets much higher, in my opinion.

Am I wrong?

[ccm123]

I would say anything above $200K household income is pretty solidly middle class. If you have a sufficient down payment, you can buy a home. Of course, $200K is not going to allow you to "keep up with the Jonses", but you can live a solid middle class lifestyle on that income.

[bobby_guz_man]

I agree on 200K/year being solidly middle class for a dual-income family. For a single person, as long as you know what "middle class" means (and like nagleepark said, a Mercedes is NOT middle-class), then about >70K/year will put you in the middle class. And if you can save, you can get that small condo/townhouse in a normally decent area of San Jose.

Middle class expectations shot up alot during the good years and still do in most other parts of the country. But here, middle-class is decidedly not as 'sexy'.

However, if you are willing to live the true middle-class life, and that means driving a Camry instead of a Lexus, wearing clothes from normal retailers with a few choice outfits instead of decking yourselves out in LV accessories and R&R jeans, having one long vacation a year with many short ones in between as opposed to 2-3 long ones a year, hit the ballpark once in a while instead of having season tickets, then YES, you can be middle class here with a ~70K single income.

[ccm123]

I have a friend who works in the tech sector (earning about $140k) and he supports his wife and a child on this single income. They bought a home in Fremont, many years ago and live pretty well on this single income. They are pretty frugal (drives 10 year old cars) and when they eat out, eat at inexpensive restaurants, etc. They are not flashy people, but if you saw their home, you would think that he earns more money.

It can be done if you budget right.

[buenos]

I think R&R jeans or Lexus are not middle class. Levi's jeans and Volkswagen are.

It not only depends on the salary, but also on other things:
-at what age do you pay off student loan debt (if any)
-how much gift cash you get from parents for buying your house
-inheritance, other source of occasional money
-at what age do you get your first higher paying silicon valley job/salary.
-how much debt are you comfortable with for mortgage. Some people think paying 30% of the family income for 30 years is OK (safe), other think it is irresponsible. And until what age do you want to be paying for your house, instead of paying for kids education or your own retirement. For non fixed interest, the 30% monthly payment can become 50% if the loan amount is too high and then you can loose your house. Or if you or your spouse loose job then it also jumps up on the combined income percentage wise. You also have to accumulate some safety buffer (medical, unemployment, disaster...), but you cannot if you pay everything into the mortgage payment.

[bobby_guz_man]

concur, that's why I said middle class is Camry and Old Navy with a few choice outfits here and there. Definitely not Lexus and R&R

[nagleepark]

Originally Posted by ccm123

I have a friend who works in the tech sector (earning about $140k) and he supports his wife and a child on this single income. They bought a home in Fremont, many years ago and live pretty well on this single income. They are pretty frugal (drives 10 year old cars) and when they eat out, eat at inexpensive restaurants, etc. They are not flashy people, but if you saw their home, you would think that he earns more money.

It can be done if you budget right.

Some will say, "That was then, this is now." Still, it is a testament to your friend's character.

[pondermin]

Originally Posted by ccm123

I have a friend who works in the tech sector (earning about $140k) and he supports his wife and a child on this single income. They bought a home in Fremont, many years ago and live pretty well on this single income. They are pretty frugal (drives 10 year old cars) and when they eat out, eat at inexpensive restaurants, etc. They are not flashy people, but if you saw their home, you would think that he earns more money.

The key phrase is "bought a home..many years ago." I fear the price of entry to Silicon Valley is much higher now. Perhaps it deflated a bit during the recession but it seems like housing price-to-income ratio never really normalized, and is now on the increase again. When the median home price is something like 8x the median family income, it's out of whack. I could probably make up to $200K out there, but with single income, 3 kids I would not be banking money left and right for retirement, college and plane flights (x5 people) back to visit family. I will actually make a higher salary here in the midwest, and can probably get a 15 or 20 year mortgage, pay it off sooner, save the max for retirement and 529 college plans, save to buy cars with cash, and still have some left over. I still have California dreams but am putting financial security above them.

[sonarrat]

Originally Posted by pondermin

The key phrase is "bought a home..many years ago." I fear the price of entry to Silicon Valley is much higher now. Perhaps it deflated a bit during the recession but it seems like housing price-to-income ratio never really normalized, and is now on the increase again. When the median home price is something like 8x the median family income, it's out of whack. I could probably make up to $200K out there, but with single income, 3 kids I would not be banking money left and right for retirement, college and plane flights (x5 people) back to visit family. I will actually make a higher salary here in the midwest, and can probably get a 15 or 20 year mortgage, pay it off sooner, save the max for retirement and 529 college plans, save to buy cars with cash, and still have some left over. I still have California dreams but am putting financial security above them.

You can't compare like to unlike. Land is scarce and unless you're in a far-flung suburb, you don't see a lot of big houses. The 2500 sf+ "family houses" are scarce and expensive because they simply didn't build them. In my neighborhood, which is considered one of the best family-oriented neighborhoods in the city, they top out at around 2000 sf - and by far, most of them are closer to 1500.

[mysticaltyger]

Originally Posted by sonarrat

You can't compare like to unlike. Land is scarce and unless you're in a far-flung suburb, you don't see a lot of big houses. The 2500 sf+ "family houses" are scarce and expensive because they simply didn't build them. In my neighborhood, which is considered one of the best family-oriented neighborhoods in the city, they top out at around 2000 sf - and by far, most of them are closer to 1500.

I think you're actually strengthening his point. You pay a lot more for a smaller house here. Housing prices as a multiple of median income are out of whack. Same story for rents.