SD Home Prices/Personal Finance Rant

[joeypants05]

Thanks for the input on things to consider. We did look at the tax implications of moving there since property taxes are quite notorious in some areas. The house we have under contract will have about $6000 a year in property tax (for a house @292k) which isn’t a ton higher in actual costs then the ~$4500 I pay in property taxes currently (house here is about 450k) although it is a much higher percentage. There is no state tax so I’ll be saving about $6k a year between state income tax and SDI.

Utilities are higher but most home also have two ACs so you can zone it out. The current owners sent their utility bills for the last year and they average out to about $200 a month between electric and gas which is also about on par with what I’m currently paying here. I’d speculate that utilities there are higher on average because the average house there is larger.

We don’t eat out much and most people we know here eat out everyday for lunch and a lot of days for dinner but that doesn’t sway our choices.

Prices there have seen some fairly large increases since the bottom of the housing downturn but they are developing a lot of areas which should mitigate any housing shortages in the area. Even if there was a large correction in the housing prices there we could absorb it much better then if the same were to happen here because the actual prices there are so much lower. Of course the inverse of that will be that the home we buy there won’t appreciate nearly as much as a house here but we are perfectly fine with that since we aren’t too keen on the idea of using our primary residence as a nest egg/investment.

[joec]

Yeah, prop tax is much much higher in Texas and also, with so much land, I don’t think Texas is as good of an investment in terms of housing, also without prop 13 that we have here. I don’t think prop 13 would ever go away completely for primary home buyers even though they may try to change it, but with businesses and the wealthy controlling all the laws, it’s unlikely anything will ever change IMO).

My parents have places in TX and they said that they’d lose money if they were to sell the place they bought and are renting.

CA with Prop 13 is a very unique state (are we the only 1 in the country?) so if people move to Texas or Nevada, or wherever, I don’t think they would ever move back to CA due to the much much much higher housing cost.

Not to mention prop tax would be higher if they bought a new place compared to the one that was sold.

Overall, I think if your income is super high, then no state income tax can make a big difference. We know dual income doctors making mil+ in a tax free state and I can see why you’d want to do that, but if that wasn’t you, then I don’t think the numbers are that great assuming you buy something not super great in CA.

A high mortgage is also a greater tax deduction if you are high income in CA so that 3k mortgage compared to TX may actually end up being 2k/month where in TX, you may be claiming the standard deduction.

[4blade1]

I agree with Kristopher SD. I have been renting for 4.5 years now. I am in the top 7% of income earner in SD and I just keep getting rolled by this market given the fact that I am trying to save up for a 20% down and an emergency fund. I am seriously thinking about buying a 50ft. Motor Yacht and living on it. If I do the math correct I can get a decent boat for around 185-200K which is what I have saved. and my slip fees and maintenance will be 2k/mo. That is more than 1/3 of a mortgage payment on a 1.1MM home that still needs up keep and work. No Brainer!

[mixxalot]

Boats are super expensive to own and maintain! I considered this route as well but slip fees are super hard to get and $$$ like over $500 a month and most don’t allow live aboard fees. The waits are years in many of the San Diego marinas as well.

[4blade1]

If you look at the Data Rodeo and believe that we are not in a bubble but a normal cycle some of the graphs would suggest that we are heading for a recession / market correction, and if not then we would be in a bubble at that point and prices will still continue to go up but then…………Pop! What is happening now though is that there will be a retraction of money coming into the market as overseas workers cannot get H1 visas now until 2020! there is a waiting list of 200,000 people for 65,000 spots. There is also a lot of economic fear out there as well.

[spdrun]

Realistically, what % of San Diego residents are here on H1 visas?

[SK in CV]

[quote=spdrun]Realistically, what % of San Diego residents are here on H1 visas?[/quote]

Interesting question. Seems there isn’t a whole lot of published data. I did find something from a couple years ago that indicated that the total number is about 650,000 across the country as of a few years ago. Because the annual number remains pretty stable, and the term remains stable, the guy who came up with that number seems to think the total also remains pretty stable.

This site:

http://h1base.com/visa/work/H1BvisaJobSponsorshipTopUSstates/ref/1573/

ranks SD as the 10th most popular source of H1B visa applications. It wouldn’t surprise me if the really big population centers (NY,LA,CHI) have 50-100K each. Same for the bay area and Washington. Wouldn’t surprise me if half the national total were in those 5 places.

[joeypants05]

[quote=joec]Yeah, prop tax is much much higher in Texas and also, with so much land, I don’t think Texas is as good of an investment in terms of housing, also without prop 13 that we have here. I don’t think prop 13 would ever go away completely for primary home buyers even though they may try to change it, but with businesses and the wealthy controlling all the laws, it’s unlikely anything will ever change IMO).

My parents have places in TX and they said that they’d lose money if they were to sell the place they bought and are renting.

CA with Prop 13 is a very unique state (are we the only 1 in the country?) so if people move to Texas or Nevada, or wherever, I don’t think they would ever move back to CA due to the much much much higher housing cost.

Not to mention prop tax would be higher if they bought a new place compared to the one that was sold.

Overall, I think if your income is super high, then no state income tax can make a big difference. We know dual income doctors making mil+ in a tax free state and I can see why you’d want to do that, but if that wasn’t you, then I don’t think the numbers are that great assuming you buy something not super great in CA.

A high mortgage is also a greater tax deduction if you are high income in CA so that 3k mortgage compared to TX may actually end up being 2k/month where in TX, you may be claiming the standard deduction.[/quote]

This depends on why you are buying the house. If you are buying the house as an investment then California is probably a better choice since your expected future appreciation is higher. If you are looking to buy a house to live in I’d argue that Texas is a better choice because you get more house for your money. The higher property taxes are more then offset by the income tax & SDI you don’t pay unless you are low income but if that is the case you aren’t in the market to buy a house in California.

I think you are overstating the effect of the mortgage deduction but I also would argue that paying less in interest is a better choice then taking a larger deduction. The deduction only adjusts your AGI down so if your marginal total tax rate is 40% you are still paying 60 cents in interest to get a 40 deduction. I’d rather pay 6k in interest a year and only get a 1k deduction then to pay 20k in interest a year and get a 8k deduction.

There is another key factor that I believe is overlooked which is risk. The risk of having a large mortgage is that if you fall on hard times, lose your job, get very sick etc then it is much harder to sustain a 3k mortgage payment or find a replacement income that can support it. A 250k mortgage in Texas will run you about $1100 a month which would be easier to maintain in case of disaster.

Like I said in my original post to the person that started the thread, we like San Diego but simply don’t want to afford a 3-4k mortgage to live in a not great place/area when basically everywhere else in the country (excluding a few key metro areas) we could live on much less in a much nicer house and area.

We could easily be wrong and if we get there and don’t like it we can always move back or choose the next place to try out.

[spdrun]

Why don’t you get a 2k mortgage on a nice 3/2 condo and enjoy San Diego rather than running to Crapholia, USA?

[FlyerInHi]

[quote=spdrun]Why don’t you get a 2k mortgage on a nice 3/2 condo and enjoy San Diego rather than running to Crapholia, USA?[/quote]

People want nice new large house. A condo is doable but it takes money to remodel and optimize the small space. I was taking to architect who convinced her husband to live in smaller space, but it took 2 years of design for her to show her husband the possibilities — live closer to the city, have a smaller space that requires less maintenance, less expensive, less responsibilities.

[bearishgurl]

[quote=joeypants05][quote=joec]Yeah, prop tax is much much higher in Texas and also, with so much land, I don’t think Texas is as good of an investment in terms of housing, also without prop 13 that we have here. I don’t think prop 13 would ever go away completely for primary home buyers even though they may try to change it, but with businesses and the wealthy controlling all the laws, it’s unlikely anything will ever change IMO).

My parents have places in TX and they said that they’d lose money if they were to sell the place they bought and are renting.

CA with Prop 13 is a very unique state (are we the only 1 in the country?) so if people move to Texas or Nevada, or wherever, I don’t think they would ever move back to CA due to the much much much higher housing cost.

Not to mention prop tax would be higher if they bought a new place compared to the one that was sold.

Overall, I think if your income is super high, then no state income tax can make a big difference. We know dual income doctors making mil+ in a tax free state and I can see why you’d want to do that, but if that wasn’t you, then I don’t think the numbers are that great assuming you buy something not super great in CA.

A high mortgage is also a greater tax deduction if you are high income in CA so that 3k mortgage compared to TX may actually end up being 2k/month where in TX, you may be claiming the standard deduction.[/quote]

This depends on why you are buying the house. If you are buying the house as an investment then California is probably a better choice since your expected future appreciation is higher. If you are looking to buy a house to live in I’d argue that Texas is a better choice because you get more house for your money. The higher property taxes are more then offset by the income tax & SDI you don’t pay unless you are low income but if that is the case you aren’t in the market to buy a house in California.

I think you are overstating the effect of the mortgage deduction but I also would argue that paying less in interest is a better choice then taking a larger deduction. The deduction only adjusts your AGI down so if your marginal total tax rate is 40% you are still paying 60 cents in interest to get a 40 deduction. I’d rather pay 6k in interest a year and only get a 1k deduction then to pay 20k in interest a year and get a 8k deduction.

There is another key factor that I believe is overlooked which is risk. The risk of having a large mortgage is that if you fall on hard times, lose your job, get very sick etc then it is much harder to sustain a 3k mortgage payment or find a replacement income that can support it. A 250k mortgage in Texas will run you about $1100 a month which would be easier to maintain in case of disaster.

Like I said in my original post to the person that started the thread, we like San Diego but simply don’t want to afford a 3-4k mortgage to live in a not great place/area when basically everywhere else in the country (excluding a few key metro areas) we could live on much less in a much nicer house and area.

We could easily be wrong and if we get there and don’t like it we can always move back or choose the next place to try out.[/quote]

joey, every . single . person/family . I’ve known who has moved from SD County to TX (several SD natives) and tried to come back later and BUY a residence here was unable to. They couldn’t because they sunk all the equity from their sold property in CA into the property they bought in TX, got tired of the place they were living in within 2-3 years of arriving and tried to sell. When push came to shove, they couldn’t get all their (CA) equity back out upon the sale of their TX home and/or closing costs of selling (mainly realty commission, which is customarily 7% there) also ate into that equity. In short, they came crawling back to CA with LESS money than they left with and in a couple of cases, much, much less (these people “over-improved” their TX mcmansion and couldn’t get ANY of the cost of their improvements back out of it upon sale). Of course, while they were gone, SD real estate went up in price in the double-digit percentages. And it didn’t matter which year it was!

TX property doesn’t appreciate well (in some areas, not at all and other areas only sporadically) due to their state’s “Homestead Act” preventing judgment and other liens from forcing foreclosure of principal residences as well as preventing owners of principal residences from taking out 2nd TD’s and HELOCs on them. Hence, the RE market in TX didn’t “crash and burn” anywhere near as badly as it did around the most of the rest of the country between 2006 and 2010. It is a very stable market but people who buy homes in TX shouldn’t expect to be able to turn around and resell them quickly … or even in 5-10 years and come out with a “profit” after all is said and done.

If you want to move to TX, you should not do it simply to have a brick mcmansion situated around a man-made lake with a matching brick mailbox at the curb, IMO. You should do it because your family is offering you an executive position in the “family biz,” you want to keep and ride horses on your property, you want to collect antique cars and store them in a bldg on your property, you got a job offer there paying way more than you could ever make in your field in any coastal job center in CA or you have inherited property there that you want to reside in or build on.

Texans have a completely different life than Californians. The difference is as much as night and day from CA in the Dallas area, IMO. It seems from your posts on this thread that you are in contract to buy a home there simply for the house you can get. As other Piggs have (correctly) pointed out here, TX property tax can easily be based upon 2-4% of the assessed value of the property. If you keep your home in CA (or sell and buy another one now in CA) and have it paid for prior to retirement, its tax bill would have only gone up 2% annually from its 1% “ad-valoream” portion of its tax (and adjusted downward over the years and readjusted to no more than its Prop 13 level pursuant to Prop 8) during RE bust/re-boom cycles. You will have a much lower tax bill on your principal residence in retirement in CA.

The half-dozen longtime San Diegans I knew who moved to TX and tried to return and re-buy a residence here could not even come close to re-buying the home they sold (or even the home they built themselves and sold) here prior to moving to TX! They ALL went to TX to be closer to other family members and HATED the fact that they had to live under A/C 9-10 months per year, the huge flying bugs of every stripe, deafening crickets at night, the dangerous ice storms, the sweltering heat and humidity, threat of tornadoes, the colloquialism, the vastly different culture, etc, etc. They ALL bought newish large brick homes in TX but it didn’t matter. They HATED it. They ALL wanted a semblance of their old Cali home back upon returning and deeply regretted selling it. Two of these returning families stayed with us while looking for a rental and were beyond dismayed of how different their lives would be now that they returned to SD as opposed to before they left.

And why does it cost $3-$4K in mortgage payment to live in a not-so-good area of SD County? Does that include taxes and insurance? Either I am missing something important here or you are seeking to buy a $750K+ home with little to nothing down. What is wrong with your Escondido home? Are you selling it to move to TX??

[Panderso]

Another aspect to consider in the California vs Texas debate is state benefits, especially if you are looking to have kids. In California, a woman gets 3 to 4 months of paid disability/family leave and I believe the husband can take up to 6 weeks as well. Texas has no such program so you’ll be relying on your wife’s work’s disability insurance, which generally pays for 6 weeks max for her alone.

[joec]

[quote=Panderso]Another aspect to consider in the California vs Texas debate is state benefits, especially if you are looking to have kids. In California, a woman gets 3 to 4 months of paid disability/family leave and I believe the husband can take up to 6 weeks as well. Texas has no such program so you’ll be relying on your wife’s work’s disability insurance, which generally pays for 6 weeks max for her alone.[/quote]

I think CA is the only state that also has maternity/paternity care since I used it and took the max time off and got paid a little for it too.

No wonder I got laid off though 🙁

[poorgradstudent]

[quote=joec][quote=Panderso]Another aspect to consider in the California vs Texas debate is state benefits, especially if you are looking to have kids. In California, a woman gets 3 to 4 months of paid disability/family leave and I believe the husband can take up to 6 weeks as well. Texas has no such program so you’ll be relying on your wife’s work’s disability insurance, which generally pays for 6 weeks max for her alone.[/quote]

I think CA is the only state that also has maternity/paternity care since I used it and took the max time off and got paid a little for it too.

No wonder I got laid off though :([/quote]

Yeah, it’s pretty tough as a dad to take the max time off. I’m doing two weeks with my little one while my wife transitions back to work to make it easier on her before we put him in daycare. But considering people take 10 day summer vacations here all the time, I basically just get to horde my PTO and get paid 70% for 2 weeks off instead of taking an actual vacation.

[spdrun]

Which is why the government should mandate 4 weeks or so of PTO per annum, as most countries that aren’t over-worked shitholes do. It’s fucking sad that taking 10 days off per year is considered unusual instead of normal and healthy.

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