Is it worth it living in southern California

[AIdoc]

Greetings! I'm in my last year of fellowship Allergy/Immunology and I've been always "dreaming" of living in southern California ( I just like the sunny days and being able to visit the beach). I understand that it's more expensive to live in S.Cali but it seems the main difference is in the house/ real estate value which should be viewed as an investment , right ? I mean if you buy a 500K house in Cali that would worth only 200K in other states, it's not like you're loosing money! As a matter of fact, it seems it's a good way to force you to save to keep your money in an asset/investment that will likely not depreciate overtime!

For those who live in Cali , do you agree ? Is there a fallacy in my logic ?

Thanks.

[pistolpete]

This depends. The premium is worth it to me, but it may not be to you. If you move here, you do so knowing about the cost of housing, taxes, etc.

[FIREshrink]

I did residency in SoCal and that was enough to scratch the itch. Whenever we go back I am dumbfounded by the congestion and traffic. No way I could raise a family there, though obviously many people do. To be near the beach you’ll pay a premium for housing beyond the usual SoCal premium; as an allergist it may not even be affordable. To live inland is pretty miserable; smog and traffic and you have to drive a lot to get ‘anywhere.’ To each his own. Maybe try it a little while, rent for a couple years, see what you think.

[janettebournes]

I disagree.

Taxes can also be a big factor depending on what city / state you are using in comparison to California.

More expensive housing also means you'll need more upfront for the down payment and that you'll be carrying a larger mortgage. Both of which can slow you down on the path to earlier financial independence (if that matters more to you). You will be surprised at how little 500K can buy you in southern California (and especially popular cities like LA / SD). If you are one of those people who have a specific vision of what a "doctor's house" should look like, you'll likely find it costs significantly more in California than in a low cost of living area.

I'm originally from California (although further north of where you're targeting) and decided the financial tradeoffs just weren't worth it. The lowest contract offers for me came from practices in California because once I turned them down, they had plenty of other applicants banging on the door to get in. My husband and I practice in an area that has a lower cost of living but more importantly, also pays significantly better (our household income is >4x what we would've signed for in California)

I will admit the draw of having friends/family close by grows stronger with each passing year. As we continue to establish a solid financial base, we are starting to entertain the idea of returning sooner rather than later. (Now I just have to convince my husband that California is the place to be and not NYC which is where he's from )

[StarTrekDoc]

Academic Internist San Diegan here - absolutely.   You definitely pay a premium and it's not insignificant.  Living 1 mile from the beach--priceless.

Now housing is really costly here.  You may have a good appreciation of housing, but unless you retire and move out of paradise, you'll never recover that entry line cost.  Also, yearly taxes are higher along with the mortgage interest paid on that x3 sized loan -- so the recurring annual costs also are higher because of all this.

 

[Lithium]

There are plenty of other states with a warm climate and proximity to the beach that don't have the high taxes, nightmarish traffic, and outrageous housing costs.

I also think there are problems with assuming you need an expensive house to "force" yourself to save and invest:

- your house can't be used to pay for your living/retirement expenses if you're still living in it

- it's risky to concentrate too much of your net worth in one asset in one market

- there are other ways to make yourself save and invest, such as making an IPS, setting aside contributions from payroll, etc

[Zaphod]

It very much depends. Traffic is miserable, though can be mostly avoided if you know where you'll be working and want to live, but doesnt sound like youve lived here so might not be true for you.

Everything is more expensive here. In the desirable cities, you cannot get a house for 500k, thats pretty normal for the 'cheap' parts of Cali, which arent like the Cali people come for.

I go back and forth, I love California, hate the high prices, etc....I would totally do a stint somewhere for double pay to sock it away, come back. Theres lots of good things as well, those you know and also lots of great things for drs as well like malpractice laws etc..

Everything is a trade off, any other "nice climate" place without taxes comes with other issues. Humidity comes to mind, which does not fall into the nice weather category for those of us from the west coast. Seriously though there are tons of great places to be, trade offs abound.

[AIdoc]

Thank you all. I like the idea of spending a few years in high pay area then move to Cali. I am by no means interested in luxurious lifestyle. I'm single and if it's up to me ( I'm sure that will change if and when I get married), I'm fine with a 700 ft one bed room apartment! I value being able to go to the beach, have more sunny days, be outdoors, being in a large city where there are social/cultural events, museums, concerts, etc.

[Zaphod]

AIdoc wrote:

Thank you all. I like the idea of spending a few years in high pay area then move to Cali. I am by no means interested in luxurious lifestyle. I’m single and if it’s up to me ( I’m sure that will change if and when I get married), I’m fine with a 700 ft one bed room apartment! I value being able to go to the beach, have more sunny days, be outdoors, being in a large city where there are social/cultural events, museums, concerts, etc.

Click to expand...

Well you may be ready now then, lol.

[AlexxT]

Northern Ca. is wonderful.   San Diego is wonderful.  LA, in my opinion, is not a nice place to live.  Its mostly quite barren, few trees ( the local palm trees are tall, skinny and threadbare ).  Terrible traffic.  I'm from NY, and used to bad traffic, but in LA it's relentless.  There are only a few nice places to live in the LA area.  Off hand, only Santa Monica comes to mind.

As for the housing issue, there would be no problem if buying a house in CA meant  buying a 200k house for 500k.  The problem is that you have to buy a 200k house but pay 2 to 5 million for it.   No, I'm not exaggerating, although less desirable and more rural areas have more normal prices.  But those are the prices for anywhere you would really want to live.   ( 4 to 5 mill minimum for a nice house in Santa Monica )

In my experience, houses have appreciated at the same rate as the stock market over the past 15 years in my area, even after accounting for interest and taxes.  So my net worth has not suffered ( although appreciation has slowed in the past year or two ).  The problem is that you might end up "house poor".    If you had a 5 million dollar net worth of which 200k was a house, you could retire on about 192k a year.  If you have a net worth of 5 million of which 4 million is a house, you can retire on $40,000  a year.  Same net worth, but vastly different cash flows.  You need to take that into account.

[StarTrekDoc]

Really depends on the proximity and size to the beach - each bloc is easy $20k

Here are some examples down the way in nicer part of San Diego with first rate beaches, food, and schools and local to most major hospitals

1.  Dream Big :  https://www.redfin.com/CA/Del-Mar/100-Stratford-Ct-92014/home/4433347

2.   Beach Condo:  https://www.redfin.com/CA/Del-Mar/424-Stratford-Ct-92014/unit-B26/home/4426960

3  Typical middle road house 2500-3500: https://www.redfin.com/CA/Del-Mar/13763-Mar-Scenic-Dr-92014/home/4428875

4.  notice how one mile makes a difference: same district: https://www.redfin.com/CA/San-Diego/5034-McGill-Way-92130/home/4475705

 

[AlexxT]

Try northern CA, Silicon Valley:

3 br, 3 ba, 2123 sf.   10,000 sf lot  5.5 million

https://www.zillow.com/homes/for_sale/Palo-Alto-CA/19496227_zpid/26374_rid/globalrelevanceex_sort/37.477821,-122.126641,37.423787,-122.181573_rect/13_zm/

 

To be fair, this is one of the most expensive neighborhoods.  But not the most expensive.

You can get a townhouse for 1.5 million about 10 miles away. ( 3 br 3 ba  1600 sf )

45 min away a normal house is about 800k, but it's 90 min in rush hour and it's an additional hour to San Francisco.

[StarTrekDoc]

As a doc, you don't have to live in Palo Alto in the heart of tech mania.   Just pointing out that it's a doable option for the OP.  It's definitely a lot more expensive cost of living, but if the prerequisites are :  beach, local to metro area for food/lifestyle/weather -- there's plenty of choices that's 'affordable' in the doc salary range.

We're in a standard suburban cookie cutter californian 3800 ft home on some 8000ft lot.   for a basement bargain price of 1.4M.  -- not cheap, but this isn't hometown Detroit either.

[AlexxT]

StarTrekDoc wrote:

As a doc, you don’t have to live in Palo Alto in the heart of tech mania.   Just pointing out that it’s a doable option for the OP.

Click to expand...

I agree.  San Diego is the place to be, especially if you want the beach.   Nicer beaches than LA.  Northern CA doesn't have great beaches, and the water is cold.

I also agree that you don't have to live in Silicon Valley.  Even if you do, you can do ok with a 2 million dollar home.  ( 2000 sf on an 8000 sf lot )    All the docs I know there have nice enough houses and they seem to retire before they die.

[Hank]

I love San Diego, but I'm not especially fond of Sacramento.  (Our town is nice, but our state government and it's tax and regulatory policies are out of control.)

Whether you live in Bel Air, San Francisco, Kern County, or El Centro, you're subject to 9.3% to 13.3% state income tax.  Plus you'll run into this curious phrase "California does not conform" to federal tax law.  You'll get taxed by the state on 529 contributions and HSA contributions because our betters in Sacramento have decreed that no-one should be responsible for his future and plan accordingly.

The traffic in LA is godawful.  Try to live west of the 405, in Pasadena, or not in LA at all.  San Diego and Santa Barbara are nice, but pretty dang pricy as well.

Realize that each mile inland makes a heck of a difference for heating and cooling bills as well as comfort when you step outside your home.  The home prices that StarTrekDoc cited make more sense once you realize just how much of a quality of life difference a few miles inland makes when it comes to setting foot outside your home.

Close to the beach, your yard is practically another living room.  Whether you're near the beach or in BFE in the far interior, you probably should spring for solar panels for your roof.  The local cost for electricity (and gasoline) is hideous, so you might as well capture that tax credit and make your own.

Despite the high taxation and occasionally irrational social policies, I kind of like it here.  I'd feel better still if I spent more than half the year in a tax-free state and maintained my residence in California as a vacation home instead of a primary (taxable) residency.