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[Michael Czeiszperger <czei AT webperformanceinc.com>]

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