Which goes further- 90K in San Jose or 45K in Bakersfield? (Sacramento: renting, condo)

[NoMoreSnowForMe]

So many smart people here! I'm learning so much.

So, maybe the real comparison comes at retirement. Who's better off at retirement age? Who's better off in 30 years? The guy who was making $45,000 in Bakersfield who owns $130,000 home free and clear (minus costs of maintenance, taxes, etc.) and has no more house payments?

or, the guy in Cupertino who socked away more money but still has to pay rent.

If the Bakerfield person didn't get many pay raises, at least his housing cost stayed the same for 30 years...other than maintenance.

The guy paying rent in Cupertino probably had fluctuating rent, likely going up and maybe down occasionally. But, probably got more salary increases.

Of course, the guy in Bakersfield got to live in a 4/3 SFH, and the guy in Cupertino was/is in an apartment.

Too many variables.

Were they both to cash out in 30 years, the Cupertino guy would probably be ahead, cash-wise. But free rent in Bakersfield is nothing to sneeze at either. Well, as you say, though, it's not free rent. Just the cost of taxes and maintenance vs. paying rent then. And, this is assuming the house did not appreciate in value, either.

[NoMoreSnowForMe]

Wait! I know! The Cupertino guy buys a house in Bakersfield and rents it out for 30 years, while living and renting/working in Cupertino. The kid goes to Cupertino schools. Then he retires, and moves into the Bakersfield house where he can live rent-free and enjoy all the retirement money he saved while getting the write off for the rental in Bakersfield and his home office in his apt in Cupertino where he exclusively works on business regarding the Bakersfield rental, of course.

[MtnSurfer]

Originally Posted by NoMoreSnowForMe

Wait! I know! The Cupertino guy buys a house in Bakersfield and rents it out for 30 years, while living and renting/working in Cupertino. The kid goes to Cupertino schools. Then he retires, and moves into the Bakersfield house where he can live rent-free and enjoy all the retirement money he saved while getting the write off for the rental in Bakersfield and his home office in his apt in Cupertino where he exclusively works on business regarding the Bakersfield rental, of course.

Only problem is what if he can't stand retiring and living in Bakersfield for the rest of his days?

Better would be what my father-in-law did and buy an inexpensive retirement place in Santa Maria. At least he lives along the coast and not as far from grandkids who like to travel along the coast as well.

More seriously though there is another huge factor in the equation which is different than when you bought your place in SJ. Today's worker is much more transient for many reasons, all of which I cannot go into. But corporate culture is totally different now. The days of buying an affordable house near one's work and living in it for 30 years until it is paid off is much more rare. Most of the people I know including home owners change their residence half a dozen times or more during their working lives. While the initial 'dream' of buying a home and remaining in it 30 years sounds appealing the reality is very few actually do anymore. So the only money returned from the initial investment once one sells is equity minus all the maintenance, remodeling and other costs associated with home ownership. Been there, done that. Hundreds of thousands have turned out on the losing side of that equation and still are due to buying and selling at the wrong times, job changes, etc... Add to that insane CA buying frenzies where people are way overextended which artificially drives up home values. Then owning becomes much more of a risky investment.

Would it be nice to be retired and own a home? Sure. But the path to getting there may not be the same as it was 30 years ago. And basing life decisions on where one can afford to buy when they are young may not be the best use of their time and investment dollars.

Derek

[NoMoreSnowForMe]

Originally Posted by MtnSurfer

Only problem is what if he can't stand retiring and living in Bakersfield for the rest of his days?

Better would be what my father-in-law did and buy an inexpensive retirement place in Santa Maria. At least he lives along the coast and not as far from grandkids who like to travel along the coast as well.

More seriously though there is another huge factor in the equation which is different than when you bought your place in SJ. Today's worker is much more transient for many reasons, all of which I cannot go into. But corporate culture is totally different now. The days of buying an affordable house near one's work and living in it for 30 years until it is paid off is much more rare. Most of the people I know including home owners change their residence half a dozen times or more during their working lives. While the initial 'dream' of buying a home and remaining in it 30 years sounds appealing the reality is very few actually do anymore. So the only money returned from the initial investment once one sells is equity minus all the maintenance, remodeling and other costs associated with home ownership. Been there, done that. Hundreds of thousands have turned out on the losing side of that equation and still are due to buying and selling at the wrong times, job changes, etc... Add to that insane CA buying frenzies where people are way overextended which artificially drives up home values. Then owning becomes much more of a risky investment.

Would it be nice to be retired and own a home? Sure. But the path to getting there may not be the same as it was 30 years ago. And basing life decisions on where one can afford to buy when they are young may not be the best use of their time and investment dollars.

Derek

Well said, Derek. So true. What is the answer then?

[MtnSurfer]

Originally Posted by NoMoreSnowForMe

Well said, Derek. So true. What is the answer then?

That's the million dollar question.

Honestly there is no easy answer, especially in CA, when it comes to the right time to buy or not buy at all.

While living here in Monterey for the past 5+ years it has been better to rent for us after selling our home in CO. The overall cost of ownership just hasn't made sense especially in the nicer areas where we enjoy living along the coast. Carmel, Monterey and Pacific Grove are crazy expensive when considering what one gets for their money and what normal folks earn. Consequently most families with younger kids like ours choose to lease rather than buy. The overall cost of entry is just too high considering what one gets for their money, similar to SJ. If I lived in the CV or other lower cost locations maybe buying would make more sense there. I know it did while we lived in CO. But not along the coast or in SJ. Even if I had money to burn I just don't see the value in these homes which are being sold for crazy prices. They are not worth a million+ dollars considering what one gets.

The bottom line is whether to buy or not depends largely on the individual and the location in which he/she desires to live. But as I said earlier selecting a place to live based on where one can afford to 'buy' isn't always the best premise to base life decisions upon. In some ways its backward thinking. If someone is working at a somewhat low paying job for example and then asks 'where could I afford to buy a house?' they may in fact be asking the wrong question to begin with. Home ownership in and of itself does not intrinsically improve one's quality of life the way other things may like living in a more desirable location, closer to family, nearer a more satisfying job, or the things which one loves most. I've learned that the hard way via direct experience. Why not instead follow one's dream wherever that might lead with their career or other endeavors. Then if buying makes sense in that location do so. Otherwise rent and enjoy the many benefits of being right where one is happiest living.

Derek

[NoMoreSnowForMe]

Wow. You should run for office. I'm sold LOL!

I must admit, I really like that I don't have to worry about maintenance issues as a renter. And I am so over yardwork :-)

[bigdumbgod]

Originally Posted by NoMoreSnowForMe

Wow. You should run for office. I'm sold LOL!

I must admit, I really like that I don't have to worry about maintenance issues as a renter. And I am so over yardwork :-)

Too bad - we have an exceptional climate, and the Master Gardeners' heirloom seedlings and expertise at our disposal here in the South Bay.
Quite nice to produce stuff like this in your own yard:

I had all but one of those varieties this year in Burbank, with minimal effort.

[mysticaltyger]

Originally Posted by NoMoreSnowForMe

So many smart people here! I'm learning so much.

So, maybe the real comparison comes at retirement. Who's better off at retirement age? Who's better off in 30 years? The guy who was making $45,000 in Bakersfield who owns $130,000 home free and clear (minus costs of maintenance, taxes, etc.) and has no more house payments?

or, the guy in Cupertino who socked away more money but still has to pay rent.

If the Bakerfield person didn't get many pay raises, at least his housing cost stayed the same for 30 years...other than maintenance.

The guy paying rent in Cupertino probably had fluctuating rent, likely going up and maybe down occasionally. But, probably got more salary increases.

Of course, the guy in Bakersfield got to live in a 4/3 SFH, and the guy in Cupertino was/is in an apartment.

Too many variables.

Were they both to cash out in 30 years, the Cupertino guy would probably be ahead, cash-wise. But free rent in Bakersfield is nothing to sneeze at either. Well, as you say, though, it's not free rent. Just the cost of taxes and maintenance vs. paying rent then. And, this is assuming the house did not appreciate in value, either.

As you are saying, there really are a lot of variables. In general, when kids are involved, the balance tends to tip in favor of the lower salary in the cheaper area. Of course, it depends on how much lower the salary is and how cheap the area is, and what the career growth potential is.

But I am one of those people who would probably only earn half of what I do in Bakersfield if I moved there. And since I don't have kids and I rent a small apartment and sock away more than 1/4 of my gross salary for retirement. So I will (hopefully) have a good portfolio by retirement age that will be enough to support me in SV or anywhere. The problem I see with renters is they tend to be really bad at saving. While this can be true for homeowners, too, I think renters are worse. So I know I am an oddball exception.

It also depends on how you define quality of life. No offense to people in Bakersfield, but that is not a place I'd ever want to live. I don't care about having a big house. I actually prefer renting over home ownership. So there are a lot of variables as far as personal preferences and values go as well.

Also, people in high cost areas with decent retirement savings may have the option of retiring to cheaper ares. But if you live in a cheap area and have minimal or no retirement savings, you're kinda stuck. It's great that you own a house, but that's not going to buy you food or your next car, unless you borrow against it or take out a reverse mortgage. But even a reverse mortgage is not going to give you much if your house isn't worth much.

[darkeconomist]

Originally Posted by DwightOnFireE

I read the threads about how much more income is required to live well in Silicon Valley as opposed to other areas so I created another unscientific poll to see what you think?

Which goes further in terms of buying housing for a family of three with one income? Costs including renting or buying a home in a neighborhood with high achieving schools, food, insurance, car payments, clothing, entertainment, and emergency money.

The better question would be: Which city offers the best QOL for the given income. I'd choose SJ because I'm willing to give up some things--home ownership, property size--for the value I get from living here, with weather I like, things I like to do, and places I like to go.

I say $45k goes further in Bakersfield than $90k in SJ, but that is irrelevant to any choice I made between the two.

[bigdumbgod]

Originally Posted by darkeconomist

The better question would be: Which city offers the best QOL for the given income. I'd choose SJ because I'm willing to give up some things--home ownership, property size--for the value I get from living here, with weather I like, things I like to do, and places I like to go.

I say $45k goes further in Bakersfield than $90k in SJ, but that is irrelevant to any choice I made between the two.

Sure, that $45k might go further, but for...what? Extra trip to the WalMart? I'd choose SJ, too.