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  • From: Michael Czeiszperger <czei AT webperformanceinc.com>
  • To: internetworkers AT lists.ibiblio.org
  • Subject: Re: [internetworkers] ?s about Salary - the importance of home ownership
  • Date: Mon, 4 Nov 2002 22:52:20 -0500

On Monday, November 4, 2002, at 09:17 PM, Thomas C. Meggs wrote:

Michael Winslow Czeiszperger wrote:

If you plug in a typical right-out-of-school starting salary of
$45K/year in Raleigh, you'd have to make $142K/year in San Francisco to make up for the cost of living. (Note: the $45K figure was just pulled out of the air for comparison.)

I can't help but feel like you are a little off with your numbers. I lived in SF for a bit a couple years ago, and I lived rather comfortably with a decently sub $100k salary.


Comfort, as they say, is relative. The number reported above was calculated by Monster, and doesn't seem out of whack to me. I refer you to a study published today in the New York Times comparing the rise in the cost of housing compared to the rise in salaries:

http://www.nytimes.com/2002/11/04/business/04REAL.html

"Throughout much of the rest of the country, particularly in the South and Midwest, the decline in mortgage rates has kept first homes as affordable as they were in past years. [...] home prices and incomes have grown at roughly the same rate, making the typical home effectively less expensive today than it was seven or eight years ago, once mortgage rates are taken into account."

"But in California, the Northeast and other hot housing cities like Denver, renters say they feel some of the same pangs of regret that were common among investors who missed out on the run-up in stock prices during the late 1990's."

Check at the chart of the median home prices v.s. median income over time. The largest differences between housing prices and salaries were in San Jose and San Francisco, where the average home price has almost tripled in the past 10 years, while salary increases have been comparatively modest. Considering that home prices in those areas started from a point where home ownership was out of reach for most people even making technology salaries, the almost tripling of median home prices has made that area of the country unlivable in my opinion.

The recent tech. depression should cause housing prices in SF to fall, but so far that hasn't happened, but even if prices do fall, what difference does it make if a house costs $650K or falls to $600K-- its still can't be purchased on the median $100K salary.

While housing is not the only factor in the cost of living, its the largest, and everything else in the SF area is more expensive as well. Since the salaries are higher, you'll be paying more taxes in a higher tax bracket, as well as higher overall taxes.

Why not just live in an apartment and not worry about owning property? The reason is the single biggest factor on your net worth down the road will be how soon you invest in real estate. Compared to any other investment you could make, its relatively safe and gives a big tax deduction. What about the stock market? No one can predict the future, but even over a long period of 17 years between 1964 and 1981, the down rose only one point: http://www.fortune.com/ indexw.jhtml?channel=artcol.jhtml&doc_id=209842&page=2

Consider "a recent study by economists Andrew Holliday and Eliot Eisenberg of the National Association of Home Builders. They compared the return on residential real estate with the broad equity market and government bonds over the 25 years through the third quarter of 2001. In any three-month period, the chance of wealth loss in a single-family home was a minuscule 0.26%. For stocks, it was 32.3%."

http://www.fortune.com/sitelets/retirement2002/realestate_sleep.html

Note that the research was done by researchers working for the real estate industry. Biased? Perhaps, but not any more biased when you consider most of the statistics you read about the relative performance of the stock market is from people who are paid by brokerage firms that make their money from selling stocks.

--------------------------------
Michael Czeiszperger
czei at webperformanceinc dot com
Web Performance, Inc.
9207 Baileywick Road, Suite 203
Raleigh, NC 27615
919-845-7601





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