It sucks to admit, but we really feel priced out of the SF Bay Area. Even when I was working, I always felt like rent and home prices were just too darn high. I suppose it makes sense due to all of the high-paying jobs, but we were never really fit for the rat race and keeping up with the Joneses. But the Bay Area is still a great place to live. The weather is nice year round — not too cold in the winter and not too hot in the summer. Plenty of good food and natural beauty. Very diverse and well educated neighbors. Plus our families are based there. That’s a combination of factors that’s hard to match anywhere else. It’s with a bit of a feeling of defeat that I’m looking at other places to settle down.
I’ve been investigating the following areas, which are in striking distance of our families in the Bay Area, but significantly less expensive:
- Scottsdale / Phoenix
- Portland / Vancouver
- Sacramento / Folsom
- San Diego / Carlsbad
None of these places meets all of our criteria, although I admit we have not spent a lot of time in any of them. I’ve looked at real estate listings and read up on City-data.org forums. We also went on scouting trips to a few locations last year. Here’s my glass-half-empty assessment of each place:
1. Phoenix / Scottsdale
Visited once for work and once for pleasure during shoulder season. Biggest issue is weather. Realistically, I’m not a hot weather person. I get heat stroke pretty easily. Also PHX is not the most diverse area, but I never felt uncomfortable when visiting. Great place for golf though. Also the least expensive place we considered. Can get a 2 bed/2 bath condo for $175 to 225k. Schools are generally not good outside Scottsdale.
2. Portland / Vancouver
We visited last year in May and there was quite a bit of rain, but also breaks of sunshine. Living here year round might get depressing. Playing golf in the mud is also no fun. The second least expensive place on the list. I wanted to focus on the WA side to avoid income taxes. The town of Camas looks interesting, but never visited. There are risks of natural disasters including earthquakes and tsunamis due to the Cascadia Subduction Zone. Also has active volcanoes (e.g. Mt. St. Helens). Not that diverse. Great schools on paper in Camas.
Sacramento / Folsom
I haven’t been to Sac for quite a few years now. But I hear good things about Folsom and the surrounding areas. The weather is reasonable, but not as good as the Bay Area as it seems to get a lot hotter in the summer in Sac. Housing prices are a little high, but still doable. Schools look good too. Year-round golf is definitely in the cards. Also within an easy drive of the Bay Area.
San Diego / Carlsbad
Love this area!!! Weather is perfect and also close to L.A. where we have a lot of friends. But the most expensive on the list.
Ideally, we would only live in one area, but another option is to snowbird. For example, live in Scottsdale but escape to Portland in the summer. But I’m leaning away from this option because of the added cost and complexity. The cost can be offset by doing things like Airbnb, but that adds to the complexity.
I used a reverse SWR calculation to determine how much house would offset the $2k we paid a month in rent in the Bay Area. We are using a SWR of 3%, even though that gives a bigger number than 4% for the amount of house we can afford.
Here’s an example to show why the Bay Area doesn’t work for us. Let’s say we’re looking to buy in the Bay Area where property tax rates are approximately 1% and we’re looking at maintenance fees of $400 per month. Our annual rent payments of $24k divided by 3% is $792k. That’s how much we can spend on base housing expenses inclusive of purchase price, recurring HOA / maintenance fees and recurring property taxes. To account for those recurring expenses, you have to subtract $400*12 divided by 3% or $160k and 1% of the purchase price divided by 3% from the $792k, leaving a maximum allowable purchase price of $390k. There’s no realistic way we could find a place for that price in any reasonable part of the Bay Area. Alternatively, you could look for a single family home that does not have maintenance fees, but that only increases the maximum purchase price to $550k, which is still not doable. As an aside, it’s amazing how much of an impact the maintenance fee has on the allowable purchase price.
Here is how the math might work out for the four areas discussed above from cheapest to most expensive.
Scottsdale – 2 bed/2 bath townhouse for $225k with a $200 a month fee and a tax rate of 1.15%. The fees and taxes total $5,407 a year and the purchase price is equivalent to $6,750 in spending a year, for a total of $12,157.50. That’s about half of what we spent on rent in the Bay Area for a 1 bed 1 bath apartment straight out of the 1950s.
Portland / Vancouver
In Camas just west of Vancouver, we can get a 3 bed 2 bath house for $375k and no HOA fees. Prop tax rate is 1.41%. That works out to an equivalent annual expenditure of $16,500, which is 2/3rds of our former rent payment.
Sacramento / Folsom
Going back to California, we’re looking at a 3 bed 2 bath house in Folsom for $425k. No HOA and prop tax rate of about 1%. The equivalent annual expenditure is $16,600, which is close to that of the cheaper Camas place due to the 0.4% difference in property tax rates.
San Diego / Carlsbad
Finally, we get to my personal favorite area. We’re looking at 2 bed 2 bad condos for $420k and a $220 monthly fee. The condo is pretty small at about 1,000 sqft. Prop tax rate is about 1%. The equivalent annual expenditure is about $20k, which is really close to our rent payment.
No formal conclusions right now. But I am leaning against Scottsdale due to the hot weather. We would have to spend at least a year in Portland to see if we are OK with the rain, but for now it is closer to the bottom of the list. Ideally, we would end up in the San Diego area, but it is probably too expensive. I would like to create more breathing room in our budget in case we have to fit the cost of one or more kids in our plans. That leaves Folsom as the prime candidate right now simply due to the process of elimination.