Comment by notyouravgdoge | Hacker News Reader

Comment by notyouravgdoge | Hacker News Reader

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What's missing in some salary discussions on HN:

Compensation Trajectory: Sure, I can relocate from [HCOL city] to [LCOL city] and come out ahead today after factoring taxes, home prices, etc. What happens in the long term? Will I have a harder time getting promoted because of lower visibility? Will my annual raises and stock refreshes be lower than my counterparts who did not relocate? In tech-dense areas like the Bay Area, I can switch jobs and negotiate a substantial salary increase. Will LCOL areas allow me to substantially increase my salary when I switch jobs?

Home Prices: Folks often cite cheaper housing as a reason for leaving HCOL areas. I generally agree with that. But housing is an investment, not necessarily an expense. You might be paying seven figures for a small townhouse in the Bay Area. However, you'll get your money back when you sell your home in the future (assuming a sufficiently long time horizon and the ability to wait out dips in the housing market). Like any other investment, there are risks associated and ROI is not guaranteed, but my point is that spending $1M on a house is not the same as spending $1M on a luxury car.

Purchasing Power: Earning more money in a HCOL city (relative to earning less in a LCOL city) goes a long way once you leave your local economy. Want to send your kids to a private university? Most tech employees won't qualify for financial aid regardless of where they live. In that case, tuition for [private university] is the same regardless of whether you live in San Francisco or rural Oklahoma.

Historically, nationwide, housing is not an investment. The average house in the US appreciates at approximately the rate of inflation, perhaps a bit better. And you always need somewhere to live; unlike stock or a business investment, you can't sell your house without needing to buy or rent another one. Your money should be put elsewhere for investment purposes. There are certainly some hot markets where this isn't true, however.

But they offer 10x leverage with the right first time buyer incentives. Invest 50k, earn 4-12% in appreciation on 500k.

Or lose 10-20% or more (see Vegas 2008)

Also the average cost to sell a house is around 10%. So 10% appreciates means you walk away with what you put in.

for those curious, here's Vegas data: https://fred.stlouisfed.org/series/LVXRNSA

I am shocked at how much it has recovered since the bottom.

Yeh, ao let me tell you a story: 2008/2009 happened. My house dropped over 70k in price because crisis. So nope

Did the value never recover?

> But housing is an investment, not necessarily an expense.

This attitude is exactly why HCOL cities are HCOL cities, and why said cities have been pushing their low-income residents further and further into the suburbs (or into entirely different metropolitan areas!).

The sooner we can do away with this attitude of land being something to hoard instead of something to be used, the sooner we can start actually addressing things like income inequality. And in the process, doing away with this attitude will almost certainly put a massive dent in the NIMBYism that plagues a lot of these same HCOL cities.

Hah, that's an interesting point. How exactly do you expect to get people to change their attitude?

I don't own a home and I've spent a nontrivial amount of my net worth paying rent in HCOL areas, including the Bay Area. Renters want prices to go down. Homeowners want prices to go up. And the world is round.

Perhaps some legislation and removal of zoning restrictions would help.

> How exactly do you expect to get people to change their attitude?

That is indeed the question. The people who stand to gain from a HCOL area being HCOL are almost certainly not going to do so on their own. Which brings us to...

> Perhaps some legislation and removal of zoning restrictions would help.

Perhaps. And luckily, renters typically outnumber landlords in these areas, so you'd think that'd be a slam dunk, but then said areas end up with milquetoast approaches like rent control instead of actually addressing the issue of land value speculation driving up rent.

My preferred solution would be to pull a Henry George and institute a land value tax, with the revenues going directly into a UBI program. This would readily stifle the idea of "investing" in land (since it'd be a waste of money to pay LVT on land you ain't using), while not stifling any incentives to develop on that land (since only the land itself would be taxed, rather than the improvements on it).

And then yeah, zoning restrictions need to get chopped down by quite a bit.

The problem in my mind is that while homes are investments they’re not great investments (they’re rather illiquid, they’re not diversified, they’re multipurposed when a domicile and that makes valuation and decisions messy). They carry a lot of benefits too though, so it’s a worthwhile asset, but having to put a larger % of your wealth into that asset would be suboptimal. In my experience the delta on home prices (and then down payments) is in excess of the salary deltas but however that math breaks down individually seems like the right thing to focus on.

Oh yeah and then after that you can choose where to live for whatever reasons work for you :-)

My understanding is that you can "liquidate" by taking out a home equity line of credit or by doing a cash out refinance. Both of those options only work if your home has appreciated in value.

It doesn't have to appreciate, the amounts just have to satisfy the loan-to-value ratios that the lender is looking for.

And both of those options leave you pretty much screwed if we get another 2008/2009.

I'm not particularly knowledgable about housing so I could be wrong here - but if another 2008/2009 happens, you can just keep the house and wait for prices to recover. There are some assumptions baked in:

- Either you don't plan on moving or you can cover a substantial amount of your mortgage from rental income if you do move.

- You're not overleveraged. If you lose your job or take a pay cut due to a recession, you can still continue making mortgage payments on your house without risk of foreclosure.

Caveat: There are probably some areas where housing prices never fully recovered after the 2008 financial crisis. But there also areas like the SF Bay Area, where the housing market is doing well even in the midst of wildfires, a pandemic, and tech employees fleeing the area in U-Haul trucks. As with all investments, nothing is guaranteed. For what it's worth, your run of the mill index fund would have taken a huge hit in 2008 as well. It wasn't just the housing market.

Not to take away from your comment but a $1 million car is very likely to be a great investment.

Cars turn into solid investments after a few hundred grand. People even make money selling their wait-list spots on some new cars.

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