Chapter 6: The Unreal Reality of California

July 9, 2018

 Moving To Mexico:  USAdios

Chapter 6:  The Unreal Reality of California

No talk of our plans of moving to Mexico in this article.  Lots of talk about some of the reasons we are leaving.


$117,000.00 income per year is the new normal for what is considered “low income”

in parts of the SF Bay Area. 


The median household income for Santa Clara is $106,000.00 per year; one of the highest priced counties in the SF Bay Area.


Let that sink in for a minute.

The average price of a home in San Francisco rose by $205,000.00 in the first six months of 2018 to a staggering average price of $1.62 million for a house.  But you can always get a condo, right?  Wrong.  Condo prices in San Francisco rose by $71,000.00 in the same time period with an average price of $1.21 million.  *By the way:  the first six month climb for condos in San Francisco was considered to be “significantly slower” than recent years, a real “buyer’s market.”

San Francisco is only 46 square miles and had a population of 854,816 in 2017 which makes it the 4th most populated city in California, the 13th most populated city in the USA.   Even fabled San Francisco is being chased down by its Bay Area neighbor and rival, San Jose, a city that is now driving prices up in neighboring cities, turning them into “bedroom” communities for the Silicon Valley.

San Jose, California just set a national record:  a 29% increase in average home prices in just two months with the median home price at just over $1.25 million.

The name “Jose” is a Spanish name.  In Spanish, the meaning of Jose is: “May God give increase.”  I guess God listened.


*By the way, “burbuja” is the Spanish word for “bubble.”



Well, maybe not so fast.  The extreme lack of housing, the tech boom and foreign investment continue to drive home prices up and there is no end in sight; for now.

As a real estate investor, appraiser and aficionado, I love to play with numbers that relate to real estate.  For example, if you were to buy an average home in San Jose and spent $1.25 million, the numbers might look like this:


Price:                                                                                                              $1,250,000.00

Down Payment                                                                                              $250,000.00


Monthly Payment:

Principal/Interest                                                                                             $5,141.00

Property Tax                                                                                                   $1,302.00

Home Insurance                                                                                              $200.00

HOA fees:                                                                                                       $200.00

$6,843.00 or

$82,116.00 per year


Average Salaries in San Jose:

Software Engineer $106,775.00
Senior Software Engineer $132,292.00
Mechanical Engineer $77,876.00
Sr. Software Engineer / Developer / Programmer $127,539.00


Getting the picture?  Mr. Mechanical Engineer will never afford a house. Even if he cut his house cost in half, he still cannot afford the payment if he expects to pay his taxes (huge in California), feed and clothe himself and own the requisite Prius for his 42-minute commute to the office, just ten miles away.

Miss Senior Software Engineer has a much better chance, but still will not be able to afford an average-priced home in San Jose unless she marries Mr. Software Engineer.  Just one issue:  if one or the other loses their job, they lose the house.  Even with their combined salaries of almost $260,000.00 per year they will still struggle to live an “average” life in San Jose where family size is 3.2 people per household.  Three mouths to feed and a monster house payment on roughly $162,000.00 after taxes.

Here’s how the numbers play out for the millennial newlyweds:

          After paying the mortgage, they have just under $80,000.00 per year to live on, or about $6,650.00 per month.  Since both must work, add two cars.  Since both must work, add domestic help for house and children, private school, 401K investment, healthcare bills, iPhones for all, Chipotle, Whole Foods, Pilates lessons, etc.

Childcare five days a week in San Jose will cost about $1,500.00 per month.  Ouch!  That’s 22% of what we have!  Gas is over $4.00 per gallon in San Jose, but our couple both drive Prius’ (of course…it IS Silicon Valley).  Their combined fuel usage is only about $150.00 per month, but the payment, insurance and registration cost another $1,000.00 per month.  Yikes!  That’s another 15% of our budget and we still have not paid for Isabella’s braces!

And Mom has been eyeballing that new Tesla SUV, MSRP from $79,500.00.  Hey, you’re only young once.  And you work HARD.  Why not reward yourself?  Besides, we’re thinking of having a second child and a SUV would be great for soccer games on the weekends.


It adds up. 


And remember:  this is AVERAGE for San Jose.  Most people spend money like it’s on fire in the SF Bay Area.  More than 37% of California households could not live at the poverty level for 90 days if Mr. Slate fired Fred.  46% did not save a penny in 2017.  21.1% of jobs in California pay low or minimum wage.  Why?  The cost of housing is the number one culprit with state business costs a close second.  Workers can’t earn more, and owners can’t afford to pay more but prices keep going up.  We have a lose/lose situation here.

Many reports describe how millennials choose renting over homeownership as a “lifestyle choice.”  And the numbers would support this:


Oakland — 59 percent of residents rented in 2016, up 12 percent from 10 years ago.

San Jose — 42 percent of residents rented, up 16 percent

Fremont — 42 percent of residents rented, up 31 percent.

Fresno — 52 percent of residents rented, up 8 percent

San Francisco — 56 percent of residents rented, up 4 percent.

Sacramento — 50 percent of residents rented, up 11 percent.


However, I believe that many millennials are making this choice due to the cost of ownership numbers I listed above.  The “lifestyle” choice is that they want to eat at Whole Foods, replace their $1,000.00 Apple iPhone every year and buy bottled water costing 240-10,000 times more than tap water.  *If our family paid bottled water prices for their tap water, their water bill would be close to $9,000.00 per month.

It’s not a sustainable lifestyle, but renting allows them to do this, for now.  Rents are climbing, too.  Buying a home is just too expensive and salaries are not keeping up with costs.  I don’t blame them for choosing renting or even a tiny house in Montana over chaining themselves to a mortgage payment.


Dear Millennials,

 I still resent the man-bun, the constant selfies, FOMO, YOLO, Slumbro and the constant consumption of “energy” drinks.  (Who in their twenties and early thirties needs that much energy?  Wait until you’re fifty!  Then Rockstar on!) 

Good luck, millennials.  I’m a member of Generation X, the first generation that did not do as well financially as their parents.  I wish better for you.

 Love your pal,

Tom Collins


The odd thing is:  even with the high prices, people keep coming here.

Well, we do have great weather! 

          People in California love to brag about our weather.  It is wonderful.  Problem is, whenever you want to go somewhere on your day off the traffic is so thick that you might just stay home.  The last business meeting I had in San Francisco was at 10:00 AM.  I left Walnut Creek at 7:00 AM and barely made it in time.  It took over two and a half hours to go 23 miles during “rush hour”, which we now just call “RUSH.”

Don’t believe me about our traffic?  If not, then why has the average home size in California grown so much even though the average family size has gotten smaller?  *Today’s homes are 1,000 square feet larger than they were in 1973 with living space per person doubling in that same amount of time.

Why are we investing in home theaters, home gyms, lap pools, wine cellars, sport courts, massive decks with outdoor kitchens and $1,500.00 espresso machines?

Because these were all things we used to do outside the house.  Remember going to the YMCA to swim or shoot hoops?  Remember walking to the local coffee shop or cinema?  Californians would rather stay home.  It’s more convenient, less of a travel hassle.


And it is much safer.

That’s right: safer.


San Jose is the Bay Area’s largest city.  In 2016 it suffered a 14% jump in violent crimes (homicides, aggravated assaults, rapes and robberies).  In 2017 it had another 7% rise in violent crime.  Police and the mayor’s office report that much of this spike in crime is due to “youth” crime; translation:  gangs.  Somewhere along the recent timeline, San Jose reduced its police force of 1,500 to just 1,000.  That’s right, one cop for every 1,000 residents.  Recently, the mayor announced the training of 450 new recruits, cheaper, but less experience.  Watch for more videos of cops being accused of shooting too quickly.

Man, am I glad I don’t live in San Jose.  So much opportunity being chased by millions of American Dreamers.  Prices, traffic and crime.  These are all good reasons to leave this area because San Jose is not the only city going through these changes.  The whole San Francisco Bay Area is blowing up, Los Angeles is a mammoth place that keeps getting bigger and all of the surrounding cities, counties and even states are feeling the growth surge in California.

I wouldn’t mind owning a property in San Jose that I could sell before the inevitable bubble bursts.  What goes up, always comes down.  But when, and how far down this time?  Ask Warren Buffet.  The rest of us are just guessing.  After the recession of 2008, it took ten years for my property value to recover.  Ten lost years of equitable growth.


I’m making my move in about eleven months.  I just hope my timing is good.

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