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Should I pull the plug and buy in a VHCOL area?

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  • hightower
    replied




    Update:  thanks everyone who opined–based on the very helpful comments we decided to sit tight and rent.

    Over the past 2 months we have definitely felt a dramatic “slump.”   Houses seem like they are sitting on the market forever, and those who really want to sell are slashing prices in 100k increments every other week.

     

    Some questions for WCI housing experts in VHCOL/HCOL areas:

    1) With the recent stock slump/Chinese investor pullout, would you sit tight or jump in before interest rates get too high?

    2) Will the tax cut changes starting in 2019 depress housing prices even more?

     
    Click to expand...


    I am very curious to see what happens out there over the next few years, especially after this year's tax bills hit for the first time with the loss of SALT deductions.  My prediction is a slow and steady decline in housing prices once people with jumbo mortgages start to see how much more they have to pay in taxes and decide they want out.

    Leave a comment:


  • snowcanyon
    replied
    I really feel your pain on this one. My NW was about the same as yours at 40, perhaps a bit less, but I didn't finish training until 35 or so, and I'm wondering how much you are managing to save a year- 650k if you've been out a decade in a raging bull market is not a ton. I do disagree with others on 1.5 years at your job- if you are employed, I doubt if it matters how long you've been there.

    There's no right answer here, and others have made good points. I would caution you that while suburbia may look great now, teens are often much happier, and in many ways safer (no driving), in the city. SF has some great public high schools (not sure what city you are in- Oakland is a different scene), although the grade schools can be lacking. I can't relate on this one because I find many suburban schools in that area not to my taste, and aside from Palo Alto, they just aren't enough to justify a move and commute IMHO, but this is personal to every family.  Just make sure you aren't moving somewhere you (or your kids) will regret in five or ten years. The cramped toddler stage doesn't last forever, and teens and tweens like the city.  But you sound as though you feel more comfortable in the suburbs and with suburban-style education and that an urban childhood is not something you want for your kids.

    From a purely financial perspective, of course you are better staying put in your rental, and of course only you can decide what the cost-benefit ratio is. Do remember that as an owner in a high-tax state, the SALT deduction cap may hit you quite hard, and that your expensive mortgage may not be fully deductible. Also remember that commutes are time and money wasters- if you work five days a week, you will be wasting a minimum of five hours a week sitting in your car.

    No right answer here- yes you can technically afford it, yes it will probably be a squeeze, no you probably won't reach FIRE or retire early. Make sure you realize fully what you are leaving (shorter commute, max walkability, city living, and cheaper COL) for what you are getting (schools you are more comfortable with, more space, maybe safer- check the actual crime stats, fewer homeless, yard).

     

    Best of luck....

    Leave a comment:


  • adsmithmd
    replied
    I live in the SF Bay Area and I was lucky to start practice in 2008 and still could not afford to buy.  I saved and finally bought in 2011 near my house where I grew up and where my parents live.  They help with our kids and I will help them as they grow older.  However, if my parents didn't live nearby and I had no real reason to live in this area other than the nice weather and good school district, I would consider another state.  I work very hard and don't see myself realistically retiring before 65 unless my investments really turn out well.  I'm fairly conservative and don't have any high risk, high return investments either.  I think geographic arbitrage for doctors is real!  There are great places to live around the country but you need to explore.  Less taxes, less traffic, more income.  If you don't have families ties, I would consider setting up somewhere else.....

    Leave a comment:


  • White.Beard.Doc
    replied
    Timing the housing market is similar to timing the stock market.  It is pretty tough to get it right. I like to think of housing first as a place to live and second as a financial decision.  Both are important, but if I found a good house in a good school district with a reasonable commute at a price that I could afford, I would jump on it.  If the market happens to soften a bit for a couple of years, who cares if your kids get to go to a good school for the next decade or more and you get to enjoy your community.

    Leave a comment:


  • CordMcNally
    replied


    1) With the recent stock slump/Chinese investor pullout, would you sit tight or jump in before interest rates get too high?
    Click to expand...


    With interest rates rising, you'd think that house prices would come down as demand would weaken. However, it seems like most VHCOL areas don't necessarily follow common sense with regards to housing prices.

    Leave a comment:


  • Stranded2x
    replied
    Update:  thanks everyone who opined--based on the very helpful comments we decided to sit tight and rent.

    Over the past 2 months we have definitely felt a dramatic "slump."   Houses seem like they are sitting on the market forever, and those who really want to sell are slashing prices in 100k increments every other week.

     

    Some questions for WCI housing experts in VHCOL/HCOL areas:

    1) With the recent stock slump/Chinese investor pullout, would you sit tight or jump in before interest rates get too high?

    2) Will the tax cut changes starting in 2019 depress housing prices even more?

     

    Leave a comment:


  • fasteddie911
    replied
















    Just came back from SF Bay area. The QOL cannot be beat. Amazing weather, things to do etc. I don’t care, you should go for happiness. Its reasonable that you can service the debt. This whole 2x income are all guidelines, not cancer marker. With AlexxTT. Go for it.
    Click to expand…


    Never confuse the QOL on vacation for the QOL living someplace. On every single vacation, I imagine myself living in the location, and the lifestyle always seems better than what I have at home.

    Then again, at home, I go to work, have a laundry list of things needing to be repaired or replaced at home, have kids that need to be supported, dogs that need a break from destroying the house to go on walks, bills to pay, etc.

    On vacation, it is all rainbows and ponies, great sites and activities, early cocktail hour, sumptuous meals, etc.

    Interestingly, of all of the places I have ever visited, SF is one of the few that I could not imagine living there. There are some very lovely places and interesting cultural activities, but these do not drive one’s daily happiness. I have not done an exhaustive study of the area, and I am sure that I could find acceptable places to live and work, but I was never motivated sufficiently to do so.
    Click to expand…


    I’ve lived in a few of these fun vacation spots, and you’re absolutely on point.  Over time things just become normal, excitement and newness wears off, the negative aspects become more apparent.




    Anecdotally, I’ve had 4 physicians acquaintances from socal who were burnt out from their “physician socal lives.” They all left for more money and lower COL. Internal medicine left for megamasion in Nashville. Rad Onc, left for Oklahoma. IM left for rural Oregon.  Colorectal Surg. left for Honolulu(lower COL because he became divorced and downsized). All but one came back within 2 years. I’ll let you guess the one that took.
    Click to expand…


    I was going to initially say the surg. in honolulu, but Hawaii is different.  I know many vacation there, think they’d want to live there, move there, but end up leaving in a few years.  I think eventually the rose-colored glasses come off, reality sets in, the isolation becomes real.  Those who stick usually have connections to the area.
    Click to expand…


    You’re right, but you couldn’t pay me to live on oahu. Hot, humid, and crowded, plus I don’t surf.
    Click to expand…


    I could be paid to live many places. I’ve never been to Oahu, but Im sure it would be on the “needs less pay”. Really for HI the issue is isolation. You’re really isolated and its hard to believe you wouldnt feel it in short order. Great cycling, surfing, hiking and snorkeling though.
    Click to expand...


    Also culturally it's a bit different and there's a certain ebb and flow to how things work there.  Based on the handful of people I know from there, it's not even an easy decision for them to live there and if it weren't for family they'd likely live elsewhere.  Likewise, I'd only live in a HCOL area for family reasons.

    For the OP, I'm a pro-rent person, but if you think there's very good chance you'll stick around the area/job for the next 5-10yrs, I think buying would be ok.  The 1.5yrs left on your contract would give me pause as who knows what can happen after that, as would the increased commute time.

    Leave a comment:


  • Zaphod
    replied













    Just came back from SF Bay area. The QOL cannot be beat. Amazing weather, things to do etc. I don’t care, you should go for happiness. Its reasonable that you can service the debt. This whole 2x income are all guidelines, not cancer marker. With AlexxTT. Go for it.
    Click to expand…


    Never confuse the QOL on vacation for the QOL living someplace. On every single vacation, I imagine myself living in the location, and the lifestyle always seems better than what I have at home.

    Then again, at home, I go to work, have a laundry list of things needing to be repaired or replaced at home, have kids that need to be supported, dogs that need a break from destroying the house to go on walks, bills to pay, etc.

    On vacation, it is all rainbows and ponies, great sites and activities, early cocktail hour, sumptuous meals, etc.

    Interestingly, of all of the places I have ever visited, SF is one of the few that I could not imagine living there. There are some very lovely places and interesting cultural activities, but these do not drive one’s daily happiness. I have not done an exhaustive study of the area, and I am sure that I could find acceptable places to live and work, but I was never motivated sufficiently to do so.
    Click to expand…


    I’ve lived in a few of these fun vacation spots, and you’re absolutely on point.  Over time things just become normal, excitement and newness wears off, the negative aspects become more apparent.




    Anecdotally, I’ve had 4 physicians acquaintances from socal who were burnt out from their “physician socal lives.” They all left for more money and lower COL. Internal medicine left for megamasion in Nashville. Rad Onc, left for Oklahoma. IM left for rural Oregon.  Colorectal Surg. left for Honolulu(lower COL because he became divorced and downsized). All but one came back within 2 years. I’ll let you guess the one that took.
    Click to expand…


    I was going to initially say the surg. in honolulu, but Hawaii is different.  I know many vacation there, think they’d want to live there, move there, but end up leaving in a few years.  I think eventually the rose-colored glasses come off, reality sets in, the isolation becomes real.  Those who stick usually have connections to the area.
    Click to expand…


    You’re right, but you couldn’t pay me to live on oahu. Hot, humid, and crowded, plus I don’t surf.
    Click to expand...


    I could be paid to live many places. I've never been to Oahu, but Im sure it would be on the "needs less pay". Really for HI the issue is isolation. You're really isolated and its hard to believe you wouldnt feel it in short order. Great cycling, surfing, hiking and snorkeling though.

    Leave a comment:


  • Ghetto
    replied
    Why live in a VHCOLA?

    It’s just another huge strike against financial independence. I love me some flyover country. My family lives in a really nice house we built with a pool on three acres about four blocks from a historic downtown area of a small town in Texas. My wife and I walk to the nice restaurants on Main Street, share a bottle of wine and stumble home. Great schools, no crime, lots of city parades and events. It’s a 25 minute drive from a top 10 city (with nearly any type of cuisine and cultural offering). Our house and land together cost $1.1 million and in California I’m sure it would go for $4 mil easy.

    With those kind of savings we can fly anywhere to get our fix of other parts of the country (love to visit the Bay Area and other parts of Northern CA). I also like Hawaii but I sure wouldn’t want to live in either place with the traffic, taxes, and high costs.

    Actually, the Californians are moving here in droves already. Forget I said anything...

    Leave a comment:


  • burritos
    replied










    Just came back from SF Bay area. The QOL cannot be beat. Amazing weather, things to do etc. I don’t care, you should go for happiness. Its reasonable that you can service the debt. This whole 2x income are all guidelines, not cancer marker. With AlexxTT. Go for it.
    Click to expand…


    Never confuse the QOL on vacation for the QOL living someplace. On every single vacation, I imagine myself living in the location, and the lifestyle always seems better than what I have at home.

    Then again, at home, I go to work, have a laundry list of things needing to be repaired or replaced at home, have kids that need to be supported, dogs that need a break from destroying the house to go on walks, bills to pay, etc.

    On vacation, it is all rainbows and ponies, great sites and activities, early cocktail hour, sumptuous meals, etc.

    Interestingly, of all of the places I have ever visited, SF is one of the few that I could not imagine living there. There are some very lovely places and interesting cultural activities, but these do not drive one’s daily happiness. I have not done an exhaustive study of the area, and I am sure that I could find acceptable places to live and work, but I was never motivated sufficiently to do so.
    Click to expand…


    I’ve lived in a few of these fun vacation spots, and you’re absolutely on point.  Over time things just become normal, excitement and newness wears off, the negative aspects become more apparent.




    Anecdotally, I’ve had 4 physicians acquaintances from socal who were burnt out from their “physician socal lives.” They all left for more money and lower COL. Internal medicine left for megamasion in Nashville. Rad Onc, left for Oklahoma. IM left for rural Oregon.  Colorectal Surg. left for Honolulu(lower COL because he became divorced and downsized). All but one came back within 2 years. I’ll let you guess the one that took.
    Click to expand…


    I was going to initially say the surg. in honolulu, but Hawaii is different.  I know many vacation there, think they’d want to live there, move there, but end up leaving in a few years.  I think eventually the rose-colored glasses come off, reality sets in, the isolation becomes real.  Those who stick usually have connections to the area.
    Click to expand...


    You're right, but you couldn't pay me to live on oahu. Hot, humid, and crowded, plus I don't surf.

    Leave a comment:


  • fasteddie911
    replied







    Just came back from SF Bay area. The QOL cannot be beat. Amazing weather, things to do etc. I don’t care, you should go for happiness. Its reasonable that you can service the debt. This whole 2x income are all guidelines, not cancer marker. With AlexxTT. Go for it.
    Click to expand…


    Never confuse the QOL on vacation for the QOL living someplace. On every single vacation, I imagine myself living in the location, and the lifestyle always seems better than what I have at home.

    Then again, at home, I go to work, have a laundry list of things needing to be repaired or replaced at home, have kids that need to be supported, dogs that need a break from destroying the house to go on walks, bills to pay, etc.

    On vacation, it is all rainbows and ponies, great sites and activities, early cocktail hour, sumptuous meals, etc.

    Interestingly, of all of the places I have ever visited, SF is one of the few that I could not imagine living there. There are some very lovely places and interesting cultural activities, but these do not drive one’s daily happiness. I have not done an exhaustive study of the area, and I am sure that I could find acceptable places to live and work, but I was never motivated sufficiently to do so.
    Click to expand...


    I've lived in a few of these fun vacation spots, and you're absolutely on point.  Over time things just become normal, excitement and newness wears off, the negative aspects become more apparent.




    Anecdotally, I’ve had 4 physicians acquaintances from socal who were burnt out from their “physician socal lives.” They all left for more money and lower COL. Internal medicine left for megamasion in Nashville. Rad Onc, left for Oklahoma. IM left for rural Oregon.  Colorectal Surg. left for Honolulu(lower COL because he became divorced and downsized). All but one came back within 2 years. I’ll let you guess the one that took.
    Click to expand...


    I was going to initially say the surg. in honolulu, but Hawaii is different.  I know many vacation there, think they'd want to live there, move there, but end up leaving in a few years.  I think eventually the rose-colored glasses come off, reality sets in, the isolation becomes real.  Those who stick usually have connections to the area.

    Leave a comment:


  • StarTrekDoc
    replied
    Beauty of most doc jobs  -- your job is quite portable if you're willing to be flexible.  That's hard to say for most jobs.  Commute is what you're willing and wanting to do.  Others don't have that luxury.

    We chose to be 20minutes closer and $400k more expensive in real estate.  totally worth it for us.

    Leave a comment:


  • adventure
    replied


    and the emotional toll of coming home exhausted every day after the drive and not being able to spend time with growing children. Forget about going to kid’s school activities or games unless you have shift work.



    Some are willing to sacrifice things like this in life for the glory of living in the Bay area.
    Click to expand...


    This is the key to me.

    I can't handle a 5 minute drive to work, so make sure the new "life" you'd be starting is one you'll love. Suburbia, minivans, driving, driving, driving, etc etc etc. Just be honest if that's what you'd all enjoy. Kids are a noble priority, but you can raise kids well in most any place.

    Leave a comment:


  • burritos
    replied
    Anecdotally, I've had 4 physicians acquaintances from socal who were burnt out from their "physician socal lives." They all left for more money and lower COL. Internal medicine left for megamasion in Nashville. Rad Onc, left for Oklahoma. IM left for rural Oregon.  Colorectal Surg. left for Honolulu(lower COL because he became divorced and downsized). All but one came back within 2 years. I'll let you guess the one that took.

    Leave a comment:


  • Lithium
    replied
    Worth posting again:

    https://www.financialsamurai.com/scraping-by-on-500000-a-year-high-income-earners-struggling/

    Child care costs look like a big factor.  Intuitively just about every activity you do with your kids will probably cost more.  There aren't as many open soccer fields or safe parks where kids can just go hang out.

    Housing is a major cost difference, but the costs of a bigger mortgage are compounded in other areas.

    Consider property taxes.  If you have a house worth half your annual income in a corn field, and it's taxed at 1%, 0.5% of your income goes to property taxes every year.

    If you get the same house for 4x the price in the Bay Area, it's 2% of your income.

    If you double the property tax rate, it's 4% of your income.

    Finally, if you take a 25% pay cut in moving, it's between 5-5.5% of your income.

    Your home insurance also gets a lot more expensive.

    The more money that is going to your mortgage, property tax, and home insurance, the less there is going to pay off student loans and other high interest debt, or potentially tax-advantaged retirement accounts (allocating more money for state income taxes has similar consequences).

    Leave a comment:

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