Many people in my life are thinking about or have just begun home ownership and I would love to buy a house within the next few years. Back home in Ohio, we could’ve afforded to buy several years ago. But here in California, I knew it would be much more expensive. (The higher cost of living is supposedly compensated by higher salaries here, but neither of us experienced much difference in pay when we moved.) So I set out to calculate the costs and was stunned at the difference between the two cities.
I wanted to do a direct comparison between modestly sized houses in San Diego and Cleveland, in neighborhoods where we would like to live. It was hard to find a perfect comparison, but I found something close enough.
Both are old bungalows with charming craftsman details, hardwood floors, and lots of natural light. Neither requires fixing up. Each is in a quiet neighborhood in the first historic ring of suburbs a 15-minute drive from downtown, with old character homes and an average school system. Both are a short walking distance to an elementary school, a park, and a vibrant, funky commercial district with hipster restaurants and night life.
|Feature||North Park, SD [listing]||Cleveland Heights [listing]|
|Size||1,342 sq ft||1,655 sq ft|
|Lot||5,000 sq ft/0.11 acres||7,405 sq ft/0.17 acres|
The price difference is astonishing, but what does it look like in a monthly budget? I’ve invented a case study that’s similar to my situation, but with numbers derived from national averages. Let’s say you are a 28-year-old couple who graduated college debt-free, got professional jobs, and spent and saved wisely to accrue a $50k down payment. In 2011, although median family income in the U.S. was $60,974, the median income for families headed by college-educated individuals was $100,096 [source]. So let’s say this couple earns a combined $100k per year.
|Cost||North Park, SD [listing]||Cleveland Heights [listing]|
|Mortgage||30yr fixed 3.322%||30yr fixed 3.322%|
|Principal & Interest||$2,732||$329|
* Numbers differ slightly due to limitations of the Zillow online calculator
** Required for down payments under 20%
Standard advice states that your monthly housing payment should not exceed 28 percent of your gross income. For our case study, $100k times 0.28 equals $28k, which divided by 12 means they should not pay more than $2,333 per month. This puts the San Diego couple in way over their heads, while the Cleveland couple is able to save tons of money for other expenses or home improvements (oh, and the heating bill).
Results in a Nutshell
1. In San Diego, the house price is 5.4x more, and the monthly payments cost 6.3x more.
2. I don’t know how anyone can afford to buy a house here in Southern California. I love living here and would absolutely pay more to enjoy this wonderful weather and city. Our rent here, for a slightly smaller but nicer apartment in a similar neighborhood, is about 1.5x more than back home. But 6x more for buying? That seems impossible.
3. Fun fact. For the same $669k from San Diego, that couple could buy a luxury 6-bed, 6-bath, 4800-square-foot historic mansion on an acre of landscaped grounds in Shaker Heights, home of Cleveland’s best public school district [listing].
(Of course they’d need a zillion more dollars to furnish and heat that mansion, but that’s a story for another day.)