Cost of living is weird, since it ignores the fact that shopping on Amazon costs the same everywhere. I imagine it'd result in feeling like physical goods are incredibly cheap vs anything that requires local labor (restaurants, private schools, construction, medical, etc).
Buying a big TV or a new iphone would be a lower % of total salary since those wouldn't scale w/ the location. And then you'd turn around and pay $20 for a cocktail. But what do I know, I live middle of the country :)
I’ve lived in very expensive cities (Boston, Los Angeles) and now live in a moderately priced one (Cincinnati) and most things cost about the same except real estate. Gas (which I don’t use as I have an EV) is a bit more in California due to taxes but food, clothing, services, gadgets, utilities, etc are almost the same.
If I were a 20-something today I’d stay away from high cost cities. Real estate eats everything. I might consider living in such places for a little while to build network but would bug out after maybe two years. For example I’d say if you live in SF/SV and are approaching 30 and making under 300k you should leave.
If you insist on like-for-like, yes, so when I lived in NYC I just completely punted this question and didn't even try to live in anything like the kind of apartment I would have rented in basically any other city. I took a tiny, shitty studio in Hell's Kitchen for far less than I could afford and never worried about it.
Cost of living calculators assume you're trying to live in the same kind of housing in HCOL-city-A as you would have in LCOL-city-B, but there's no reason to accept this assumption.
I rationalized it this way: there is no amount of money in LCOL-city-B that could buy me the feeling of living in HCOL-city-A, so I'm going to treat the housing in HCOL-city-A the same way (i.e. mentally assume it's not available and consider that the tradeoff for getting the thing that isn't available in the lower-cost-of-living city).
This is a great mindset. I was forced to move from NYC to the bumfuck Midwest because of my girlfriend’s job, and I hate it here. Yes I own a house with a yard, but I’d trade it for my apartment in Manhattan any day of the week. Density makes life worth living
A lot of advice basically takes the form, "people should be more like me," but at risk of that in this case: I'd just try to find ways to maximize the benefits of homeownership. Try to take advantage of the things you can't do (easily) in NYC. I'm in Providence now and I miss NYC all the time, but I also have a garden and I put a little workshop in my garage and I'm trying to learn woodworking and I like to take on DIY projects and I play my guitar louder than I would in an apartment etc, etc.
This is the flipside of living in a tiny studio in Hell's Kitchen and pretending nicer apts don't exist. It's just a matter of making the most of it, in either case.
Price of gasoline in California has a lot of factors… like because of mountains, there are no pipelines from Texas. CA uses Middle East oil. Also, due to the way the wind and mountains block in the air, the smog is worse than areas where the wind blows it out to sea (indeed, the opposite can happen when china’s smog blows in). The clean air act has the fed gov force California to lower smog, which is does by changing the gasoline formation during the summer, which is more expensive. Plus taxes! But it is far more complicated than “CA is high tax”.
Oh, one other thing. I think if you are young you should definitely live in an expensive locale. After 30 years you can stay and be done. Or sell and move. You will be able to afford the entire country. If you stay in Ohio for 30 years, you will never be able to move to NYC or Los Angeles. You are forced to 2nd tier or 3rd tier cities.
Why is "moving to NYC or LA" a thing people should aspire to do?
Seems like a waste of effort dick measuring contest to me.
And even if you check that box when you do decide to cash out and move to Cincinnati or whatever nobody around you from that point forward will place any positive value upon the fact that you have checked that box.
The point is that decisions you made in your 20's will unfortunately lock you out of potential options 30 years later (without making major sacrifices). So they're saying the best move for someone in their 20's is the move that gives the most number of options for the rest of their life.
There's two sides to that coin. If you pop out some kids in NYC and spend the first 10yr of their lives raising them among the rat race you can't go back and re-raise them when you do finally decide to cash out and move to some suburb of Buffalo. Those years spent riding the subway are years not spent building your personal and professional network wherever you do wind up settling down.
You seem very fixated on what people think of you.
I live in NYC because it’s densely populated, diverse, with access to world class most things (museums, restaurants, theater, music, …). I get to experience and do interesting things.
That’s why people should consider moving to these cities. No one gives a shit what Joe from Cincinnati thinks or will think in some hypothetical future.
> No one gives a shit what Joe from Cincinnati thinks or will think in some hypothetical future.
This mindset is the problem. If the plan after 30 is to move and live next to Joe from Cincinnati, then like the parent comment says: this flippant attitude will not garner any positive value.
No, the parent comment says that living in NYC won't be important to the people in Cincinnati, and it provides little value as a bullet point in the resume of your life because of that reasoning.
That's not the point of living in a city like NYC for many of the residents here. No one here I know is planning on leveraging "10 years in NYC" to impress their neighbors in Cincinnati.
I sympathize with you as a lifelong Californian (grew up in Sacramento, educated in San Luis Obispo and Santa Cruz, working in Silicon Valley). I love the desirable coastal parts of California (basically anything from Sonoma County all the way down to San Diego). If money weren't an object, I'd own a home in either Aptos or Pacific Grove. I currently rent in Capitola, and it's the best place I've lived in California. I love the tranquility of the town while having somewhat easy access to Silicon Valley and its amenities and opportunities. However, I simply don't make enough money to purchase a home near the coast unless I move to Humboldt or Del Norte counties, which are far from any urban centers.
Unfortunately with the exception of Sacramento (which is getting pricey as of late) California doesn't have a lot of middle ground between its really desirable yet expensive places and places that are affordable but less desirable. The Sacramento area seems like a reasonable compromise for me. I can comfortably afford Fresno's and Bakersfield's nicest suburbs, but I don't know if I'd be happy in those cities. Much of the rest of the state is quite isolated from major metro areas; this has implications regarding educational opportunities for children and health care quality and availability. I don't see myself settling down and raising a family in many of California's more isolated areas due to this, though it may be a nice adventure visiting these isolated areas for recreation.
I don't know what I'm going to end up doing....maybe I'll end up marrying a woman from Vermont and end up moving there in a few years XD. But I completely sympathize with you and the crazy housing market we're contending with.
One of my good friends lives in Sacramento and he hates it. It has none of what makes California amazing.. the weather is too hot, there’s no beaches, no mountains, not really a good urban center either. And crime.
I lived in SoCal for 30+ year and now live in a Sacramento suburb. I previously had a pretty snobby view of Sacramento, but after living here for nine years I think it's the most underrated city in California. The restaurants aren't up to par with the bigger CA cities and it does get hot in the summer, but overall it's a great location.
One of the big benefits is that there are so many options for day trips. Visiting Lake Tahoe and the surrounding mountains is an easy day trip. Visiting SF or the beaches is doable in a day. Napa is close. For hikers, runners, and bikers there are tons of bikes paths and hiking trails all over the Sacramento region. And there are a lot of neat places in the nearby Sierra foothills.
To summarize: If you prioritize nightlife, music, and food, Sacramento might not be the best fit, but if you prioritize affordability (relatively speaking) and getting outside, it's hard to beat the Sacramento area.
That reminds me of Connecticut: there’s a little cool stuff in it, but the big thing people love to tell you is how close it is to other, better places like New York, Boston, and Vermont.
I've lived there and it's amazing, so many cool things, it's right on one of the largest navigable river deltas in the world, the farm fresh food is amazing, the art and music scenes are pretty great, on and on....
I live in the midwest and invest over 50% of my salary.
I'm in my mid 30s and have almost a million in investments already.
Meanwhile I have friends from college, same major etc, who live in expensive cities and work in the same industry and they barely have anything to save after the high costs of living there.
One of the biggest factor in gas prices in CA and the rest of the west coast is that much the oil comes from Alaska which is a more expensive source and then is refined in smaller west coast refineries that cost more to run. The result is an overall higher baseline cost for gasoline all along the US West coast.
Taxes in larger cities tend to be higher as well. With the exception of Seattle, Miami, and any of the large Texas cities. The removal of the SALT deduction amplified the issue no doubt.
There are "tricks" in expensive cities to look for as much nation-wide pricing as possible
Amazon and Walmart online, Whole Foods and Trader Joes in person. Doctors and drugs who are in-network for insurance would be the same cost anywhere in the US
It really is mostly childcare and housing that really kills you in the expensive cities
Target has different prices for shipping based on your selected store! This despite shipping from a warehouse, not the store. It would surprise me if the WalMart instore prices don't vary by location (I have not checked).
> Doctors and drugs who are in-network for insurance would be the same cost anywhere in the US
> What do you mean by 'cost of influence'? If I don't want influence, is it optional?
Every political system has patrician and plebeian tracks. In America, the former can be bought (versus solely inherited). Being a politically-active patrician in New York involves an expensive list of patronage. That’s where the power players are, and that’s where you’ll cut casual deals.
It’s optional. And it’s different from civic responsibility. But unless you think the status quo is hunky dory, you’re going to want to change things, and the cost of access varies geographically.
Think of an example such as you'd like a better public school system in your district. If you live in a rural county in Oklahoma of 20k people, you could likely get on the school board without any opposition and start making changes. Vs trying to change anything about the public school system in San Francisco.
I find this whole discourse strange/obvious: mostly childcare/housing
I don't think people are spending upwards of $2,500 per month on impulse purchases on Amazon, groceries, or whatever, and blaming it on 'cost of living'
In Ohio I got twice the house for half the price compared to Austin. The cost of milk and eggs are way down there
I think this is exactly right, and explains why staunchly middle-income suburbs around San Francisco are filled with luxury cars. An $80k car feels relatively cheap when your mortgage is $1.5mm.
I spend most of my salary (130k$) on rent, food and daycare for my kid, not Amazon purchases. And 130k doesn't feel like a lot anymore even though I live in Ohio in order to reduce my expenses.
All around the western world, money printing to prop up the house price bubble is finally reaching breaking point, with housing costs completely decoupling from fundamentals, and inflation breaching the banks and flooding into consumer pricing.
> housing costs completely decoupling from fundamentals,
Not true in most markets. Compare to build/replacement costs.
In a high inflation environment with 30+ trillion in national debt and 186 trillion in unfunded liabilities, I'll take my chances with hard assets that are connected to fundamentals like housing.
They WILL pivot and print in overdrive. There is no way out at this point. And not just the US, the world cannot handle higher interest rates which causes more demand for the dollar. The entire world is jacked up on eurodollar debt that is not sustainable. And those with the assets will gladly choose inflation over deflation.
>The entire world is jacked up on eurodollar debt that is not sustainable
10 years ago this was a far bigger deal as the western game was the only one in town. Nowadays nonaligned countries can pivot to the Russia/China axis and still get resources and manufactured goods.
Very few countries want to trade in the currencies of Russia or China. But that's besides my point.
Getting resources and manufactured goods has nothing to do with my statement about sustainability.
Debt to GDP of 338% is not sustainable [1]. It doesn't matter if countries can get resources and manufactured goods. That's like saying - well I have 3X my salary in debt but it's ok... I can buy goods on Amazon.... on more credit, with a higher rate... and still be fine. No you can't.
There's about 20 trillion in US denominated debt / eurodollar debt [2] and 65 trillion in unrecorded debt overseas [2].
In order to service US denominated debt, you have to swap your currency to get USD. This is a major problem when you already need to keep printing to service your own unsustainable debt (> 300% debt to gdp), inflation rips on goods and materials you need and tax revenues drop in an economic downturn.
When interest rates go up, it squeezes you. Everyone kept rolling debt over in a debt drunk binge fest for decades as it kept getting cheaper and they have been feeling major pain from it going the other way.
I don't think that's fair. For example - we have a 2 party system that is designed so only one of them will win. And most people want to vote for someone that has a shot at winning. That doesn't make them morons. They're just picking the least dirty shirt in their minds.
Yes, you could say - well they don't vote in the primaries so it's their fault. But the same systems at play in the general elections are the same ones that drive the primaries. If primary voting was 1:1 with general election voting, the system would just adjust to influence accordingly.
Who exactly was going to do anything meaningful to save the finances of the US? The best options we've seen have been Ron Paul and Bernie and we saw what happened there. Funding and media are able to influence who wins. If someone says logical things and is anti Fed or even a little anti Wall Street establishment, they are painted out as nut jobs. And it's effective to the public who generally, has no savings and has little time to research like those that live more comfortably.
All candidates are all co-opted by special interests. And almost all by the financial system which is the biggest risk. It's not an accident that both red and blue appoint the same people to the Fed, despite fighting aggressive over almost every other nomination and appointment.
We also have a huge wealth gap and media divisiveness giving rise to populist candidates.
They make it one side versus the other meanwhile they both fleece the financials and economic prosperity that could occur if managed well.
We've gone past the point of no return, led by both parties at different times and here we are. Overextended. Huge wealth gap. Ripping inflation. Interest rate hikes that, in my opinion, are just theater as we can't afford to keep hiking them. And as we hike them, the world gets pissed off and moves quicker to a new world currency reserve.
No idea when that will happen, could be 10/20/30/40 years. But trade has already started to shift to other currencies. CBDCs are also underway and for everyone's sake, hopefully they don't get adopted.
What? No, there simply isn't enough housing. Prices don't always go up simply because of an increase in the money supply (which is also something you can measure).
Exactly. Not enough supply. Build costs exorbitant. There will not be some magical supply out of nowhere nor a big drop in build costs. So thus prices, IMO, in most major metros are connected to fundamentals.
If housing was not connected to fundamentals, home sale prices would have been exposed and taken a nose dive with the movement in interest rates. People aren't getting any easy money. They are still buying.
> If housing was not connected to fundamentals, home sale prices would have been exposed and taken a nose dive with the movement in interest rates.
But prices have fallen (and even more, volume, has fallen, whether because there are fewer buyers are because sellers are deferring because of the fall in prices). This is clear in national figures, and hot metros that at some other times have defied downward real estate trends also show it.
If you mean they have fallen from the peak of May 2022 you would be right. But that's not the story. And that has no bearing on fundamentals. Just because there has been a price movement doesn't mean it got disconnected from fundamentals. Price came off peak? Ok. Well cost of money also ramped up disproportionately to that. Prices have been resilient and when rates go the other way, they will go even higher IMO.
Prices are still, on median, 100k higher NOW over pre-pandemic. That's 33% more in just a few years. Sale to list prices is still at 98.9%. Off the peak of 103.1% but money was WAY cheaper then.
March 2020 median home price was $300k. March 2023.... $400k. [1]
March 2020 loans were about 3.5%. March 2023.... 6.5%.
It costs a shit ton more to service a loan now, inventory is down, yet prices are only 30k off the peak.
Is everyone buying a house with these interest rates a moron? No they aren't. Are banks approving risky loans now? No they aren't.
Volume is irrelevant when we are talking about fundamentals. Sellers are a key part of that. If they pull inventory due to the numerous factors in the housing market and the economy, then the prices are what they are. There is no shadowy hand now keeping home prices higher over their fundamentals, nor a shadowy hand telling the homeowners to not list their home. This is the market at work; and its been resilient with what is going on.
And to my point, if you couple supply and demand with the state of affairs and you look at build cost you'll see that current inventory is priced at or better than any fundamental analysis would suggest. And not overpriced.
I ONLY buy on build/replacement cost. Sure some areas went crazy, but if you are disconnected from build costs, you are rolling the dice and I highly recommend you don't do that unless you love the house so much you don't care what happens. But by and large, housing prices are NOT disconnected from replacement costs. They are still cheaper.
If you can buy a "used" house for 300k. Or build a new house for 350k (+6-12 months of your time and carrying costs on the housing you are currently at and potential unexpected costs), then where is the disconnect? I don't see it.
If housing WAS disconnected from the fundamentals, then you'd simply see a shit ton more building going on and with more inventory and less buyers and affordability due to interest rate hikes, price would drop a lot. That's not the case. There has not been a meaningful price drop with the interest rate hikes, we just have less buyers on average, and about 4% less on the sales price to list.
People waiting on the sidelines in most markets aren't going to be happy as inflation keeps on trucking, build costs are out of control, and inventory is low. Rent will go up.
"Year-over-year rental price growth will rise from 5.8%, as of June 2022, to 8.4% as of May 2023, according to a Federal Reserve Bank of Dallas forecast that uses data from the federal government’s consumer price index"
You used to be able to just stash cash and then when interest rates jack up you could get a real deal. No more. Housing is an inflation hedge and the market has been pumped up.
When the pivot occurs and cheaper money returns because the asset owners would rather have inflation than deflation, the housing market will go even higher IMO. 30T debt and 180+T in unfunded liabilities along with a pissed off world that has gotten drunk off cheap USD leaves no choice but to print in overdrive. I won't be holding USD or more than retirement money in the stock market. I'll be primarily in RE and private companies. If you are big on stocks, you may still do ok - we've seen that we can print and not cause extreme inflation, by pushing dollars into equities. But I think that game will end as it's further exposed and money rotates out.
And secondly is Cleveland a city that has absorbed its suburbs over the past century or is Cleveland basically just "downtown" as that will affect the average.
> Cost of living is weird, since it ignores the fact that shopping on Amazon costs the same everywhere
This is because most goods are manufactured in Asia and imported. They differ in online retail price due to local/import taxes and in offline price due to labor/rent costs. Hence, if you purchase goods online, the price remains mostly the same within the same country.
It's an important exercise to consider whether globalised cheap labor is fair to the laborers, given that the profits of their labor are absorbed by the destination high-CoL market.
Labor is a huge expense. it explains why technology has not put a dent in tuition, plumbing, hvac, dental implants costs, etc. Even cars are so expensive even though they are mass produced. The assembly line at best only applies to relatively small part of economy, and non-manufacturing costs like advertising are major contributors to inflation even for non-labor intensive things.
Buying a big TV or a new iphone would be a lower % of total salary since those wouldn't scale w/ the location. And then you'd turn around and pay $20 for a cocktail. But what do I know, I live middle of the country :)