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What does it take to "retire" in bay area?

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rated:
Hey all -- I've been running some numbers to figure out when I can conservatively stop working full-time. Ideally, I'd like to have freedom to start new businesses, teach, travel, etc.  I already exited a businesses early-on and now work at a large company.

We currently rent, and homes around here cost about 1.5M ... I'm assuming that we have a paid off home and the following monthly breakdown:
Per Month:

  • $1250 - Property Tax
  • $2500 - Food / Shopping, etc
  • $1700 - Health Insurance  (family with kids)
  • $1000 - Home repair fund / maintenance
  • $300 - Out of pocket medical
  • $500 - Vacation / travel
  • $300 - Utilities

Monthly total - $7550
Yearly total - $90600


Assuming I'd like to pull the plug in my early 40's, I'd like to assume a conservative 2% withdrawal rate. So that gives about $4.5M in investible assets. So with a house fully paid off that's $6M required. 

Am I missing anything else from the calculation or anything else to consider? Really appreciate any feedback.

(edit) I know could move to lower COL area as well...just trying to figure out options for not leaving. Most connections / investors who I might start future ventures with are and will remain here.
 

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rated:
hllpridi said:   
  anything else to consider? Really appreciate any feedback.

  
The ability to relocate to a cheaper place to live?
Even most parts of Hawaii would probably have a lower cost of living.

rated:
Nobody retires to the bay area. There is no draw to that area other than the high-paying tech companies.

There are about 500 better places to live in the country. Hawaii, SoCal, Oregon/Washington state, Arizona, Colorado, some areas of Texas, Miami, islands/coast of GA/SC/NC, Caribbean islands, etc.

And good luck finding a decent house for $1.5M in 5-10 years in that area.  You can barely do that now.

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If you want to retire there, the main thing is locking in your housing costs. You'd better buy whatever you're living in now. Or rent something that's rent controlled and gamble that you don't eventually get evicted.

Of course, the future is uncertain. The Bay Area could cool off and your investments could grow faster than housing prices, in which case you could just buy whatever you want later.

Another option is living somewhere cheaper and keeping a small apartment in the city, bought now, essentially locking in a fraction of your housing costs.

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You are not really trying to retire. Your desire to stay in the Bay area because "Most connections / investors who I might start future ventures with are and will remain here." suggests that you want to continue to "work" except not in a typical corporate environment. You want to be self-employed with freedom to travel etc.

You said you would "like to have freedom to start new businesses, teach, travel, etc.". But you have only a modest travel budget (6k per year) and nothing for starting a business. I am assuming the teach part would be revenue neutral, unless these are short professional courses/seminars/workshops where you plan to make money off of. 
 

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hllpridi said:   
Am I missing anything else from the calculation or anything else to consider?

 

  Inflation.

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fwuser12 said:   You are not really trying to retire. Your desire to stay in the Bay area because "Most connections / investors who I might start future ventures with are and will remain here." suggests that you want to continue to "work" except not in a typical corporate environment. You want to be self-employed with freedom to travel etc.

You said you would "like to have freedom to start new businesses, teach, travel, etc.". But you have only a modest travel budget (6k per year) and nothing for starting a business. I am assuming the teach part would be revenue neutral, unless these are short professional courses/seminars/workshops where you plan to make money off of. 

  
Yeah, I think that's right. I've been trying to figure out what my number is for when I don't have to work (e.g. have the basics covered). Any additional money earned could be used for extra / fun stuff... 

 

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Chesapeake Bay? Hudson Bay? Need to be more specific.

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atikovi said:   Chesapeake Bay? Hudson Bay? Need to be more specific.
  Don't forget Corpus Christi Bay and the Galveston Bay area that people in SE Texas call the Bay Area.  

rated:
I'd rather pick San Diego bay! America's finest city Perfect weather - I've lived in SD for 2 years. Didn't hit the heat even once during the 2 years... and the apt had no ac (no need for it).

OP: generally, as you build a nest egg of a stock/bond balanced portfolio, you can siphon off 3-4% a year for living expenses, and let that personal "endowment" last into perpetuity. For 91k expenses, you'd need 2.3 million to 3.0 million. People used to say 4%, but there's been more and more people saying 3% nowadays, partly due to low bond yields. Then again, inflation is also low now. Play with firecalc and see what you find.

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Chargum85 said:   Nobody retires to the bay area. There is no draw to that area other than the high-paying tech companies.

There are about 500 better places to live in the country. Hawaii, SoCal, Oregon/Washington state, Arizona, Colorado, some areas of Texas, Miami, islands/coast of GA/SC/NC, Caribbean islands, etc.

And good luck finding a decent house for $1.5M in 5-10 years in that area.  You can barely do that now.

  
I would think if you don't want to leave California just move north into the Sonoma/Napa county areas or even the less populated areas off of Highway 1.   PLENTY of places in Napa that are much cheaper than the Bay but it is not that far of a drive if you need to go in for a day.  You may well find your prospective "partners" would rather come up for a day instead to get out of the city themselves.

Of course I am the reverse, it would take one HECK of a job offer to get me to move the California.  Last few offers I had were paying either the same or less than market rate in Dallas.  The only interesting one was in San Diego, where I do have friends -- but they were looking for a Masters degree person to do it, which made no sense based on the job description.  I still sent my resume and never heard back.

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Your costs now may not be the same as your costs when retired. 1.5m for a home is on the very high side even in the bay area. When you are retired many priorities with housing change, commute distance, schools, access to childcare. You also don't need as much space so you can get a smaller place and have substantially lower maintenance, taxes, and purchase price. When you are retired will you need health insurance to cover your whole family? Can you go with a high deductible plan?

2% is an extremely conservative rate. $2500 a month for food and shopping, really?

rated:
I will assume you've collected a bit of data and your rough numbers are suitable for you. I don't see a bucket for vehicle costs - I've been tracking insurance, maintenance, gas, parking, public transit there. And if you expect near term or periodic vehicle purchases, you should really plan for that somewhere. Otherwise, it looks to me like you have a number for everything I am tracking. I've been breaking it down pretty thoroughly, copying everything from every credit card and bank statement into a spreadsheet with categories like yours. There were no big surprises for me, but it did give me confidence and I expect to continue tracking at that level at least through this year.

2% does seem unreasonably conservative to me, but I can believe $1.5 million for a house. If this is your plan, make that purchase soon, it could double in 5-10 years. You can take your time paying off any loan if that's important to you. Where we've looked, that would be about the budget for a nice but nothing special condo. And that requires accounting for the separate HOA expense for the shared part of the property.

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gnopgnip said:   Your costs now may not be the same as your costs when retired. 1.5m for a home is on the very high side even in the bay area. When you are retired many priorities with housing change, commute distance, schools, access to childcare. You also don't need as much space so you can get a smaller place and have substantially lower maintenance, taxes, and purchase price. When you are retired will you need health insurance to cover your whole family? Can you go with a high deductible plan?

2% is an extremely conservative rate. $2500 a month for food and shopping, really?

  
I think you missed some subtext there..  OP is either VERY well paid or they both work and are well paid.  Based on costs and how much capital OP is talking about at his/her age they are not talking "subsistence" level living.  For a condo or house in a GOOD location (which should be understood based on what the OP was quoting) then $1.5M  isn't very high side at all.  Priced houses in the bay area recently?  Not what the executive assistant lives in, but the VPs place.   Yes, there are places from about $750K, but they are not what the OP is looking at.  $1.5 is what the homes in OPs area COST, and OP is renting.  (which should give you an idea what the rent payments are)

That was why I suggested Napa, you can get a much nicer place in the same price range and have the "amenities" available.  $2500/mo in food means dining out a LOT, or buying very high end food.   Both of which are available up there as well.  (which I get, first thing I do in a new area is check out all the local coffee shops, followed by the unique restaurants and grocery stores)  I pretty much decided where to live in Charlotte based on a pair of coffee/pastry shops.  (Smelly Cat and Amelie's for the locals, which also tells you where I was living...  )

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lonestarguy said:   
atikovi said:   Chesapeake Bay? Hudson Bay? Need to be more specific.
  Don't forget Corpus Christi Bay and the Galveston Bay area that people in SE Texas call the Bay Area.  

  Yea, but I get flooded with red for pointing it out.

rated:
OP - I "retired" out of the Bay Area in 2004. If you don't *have* to be within daily commute range, why would you be? The congestion, the cost of living...

Have you considered Santa Cruz? Or a little further south down the cost. Even Sac would be an option if you're not commuting.

I would choose Santa Cruz personally, if I had to stay roughly in the area. Then again I got the heck out

rated:
What about Vancouver, Washington, as residence for 6months + 1 day during late Spring to early fall season. No state income tax, across river to Portland , OR, for no sales tax for bigger items. Then rest of year (late fall to early Spring) back to "Bay Area" (assuming that is best weather season for that area).

Can rent apartment in Vancouver, WA, pretty inexpensively to meet the residence requirement. The state income tax savings will easily pay for the apartment cost. Gee, you may want to just find a month-to-month lease, small unit, light furnishings which can be stored inexpensively, so you only need to rent for little over 6 months to save even more monthly cost. Or just an already furnished, month-to-month unit. (If you can afford Seattle, WA, so much the better!).

Just don't die in the state of WA. They have their own estate tax!

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gnopgnip said:   Your costs now may not be the same as your costs when retired. 1.5m for a home is on the very high side even in the bay area. When you are retired many priorities with housing change, commute distance, schools, access to childcare. You also don't need as much space so you can get a smaller place and have substantially lower maintenance, taxes, and purchase price. When you are retired will you need health insurance to cover your whole family? Can you go with a high deductible plan?

2% is an extremely conservative rate. $2500 a month for food and shopping, really?

  Remember in California if you move to a new house the basis for your property tax resets.  It makes much more sense to buy a house there and live in it for 30-40 years plus.  

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lonestarguy said:   Remember in California if you move to a new house the basis for your property tax resets.  It makes much more sense to buy a house there and live in it for 30-40 years plus.Not if you're over 55 and stay in the same county. I believe there may already be or have been proposed new rules for this exception to work across counties. Just FYI.

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atikovi said:   lonestarguy said:   
atikovi said:   Chesapeake Bay? Hudson Bay? Need to be more specific.
  Don't forget Corpus Christi Bay and the Galveston Bay area that people in SE Texas call the Bay Area.  

  Yea, but I get flooded with red for pointing it out.


You have your head buried in the sand if you don't know what "the Bay area" means without context. It's the only bay area that matters.

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jd2010 said:   
atikovi said:   
lonestarguy said:   
atikovi said:   Chesapeake Bay? Hudson Bay? Need to be more specific.
  Don't forget Corpus Christi Bay and the Galveston Bay area that people in SE Texas call the Bay Area.  

  Yea, but I get flooded with red for pointing it out.


You have your head buried in the sand if you don't know what "the Bay area" means without context. It's the only bay area that matters.

  Guess I'm not so self centered to think that only one "bay area" is significant.

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FWjunkie2 said:   What about Vancouver, Washington, as residence for 6months + 1 day during late Spring to early fall season. No state income tax, across river to Portland , OR, for no sales tax for bigger items. Then rest of year (late fall to early Spring ) back to "Bay Area" (assuming that is best weather season for that area).

Can rent apartment in Vancouver, WA, pretty inexpensively to meet the residence requirement. The state income tax savings will easily pay for the apartment cost. Gee, you may want to just find a month-to-month lease, small unit, light furnishings which can be stored inexpensively, so you only need to rent for little over 6 months to save even more monthly cost. Or just an already furnished, month-to-month unit. (If you can afford Seattle, WA, so much the better!).

Just don't die in the state of WA. They have their own estate tax!

  
6 months and a day isn't going to help you that much.  California is GOING to get their money.

rated:
jd2010 said:   
atikovi said:   
lonestarguy said:   
atikovi said:   Chesapeake Bay? Hudson Bay? Need to be more specific.
  Don't forget Corpus Christi Bay and the Galveston Bay area that people in SE Texas call the Bay Area.  

  Yea, but I get flooded with red for pointing it out.


You have your head buried in the sand if you don't know what "the Bay area" means without context. It's the only bay area that matters.

  
That is certainly debatable.

But despite the immense importance of the Chesapeake Bay (for industry, military presence, ecological significance, etc)... I've never heard it referred to as "the bay area", in the generic, by anybody.

It either gets the full name, or you refer to the specific sub-region by explicit sub-region name (since the Chesapeake Bay is huge, compared to the SF Bay).



And obviously a quick read of the OP and seeing the order-of-magnitude of specific costs made it clear which bay area was being discussed.

rated:
529 - college expenses

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Chargum85 said:   Nobody retires to the bay area. There is no draw to that area other than the high-paying tech companies.

Really now? That's pretty trollicious of you.

Reasons I could give would include natural beauty, weather (mild), and a highly educated and liberal minded populace to name a few. I have traveled all around the world and have yet to find a region that appeals to me more. People who love the bay area REALLY love it.

rated:
scripta said:   
lonestarguy said:   Remember in California if you move to a new house the basis for your property tax resets.  It makes much more sense to buy a house there and live in it for 30-40 years plus.
Not if you're over 55 and stay in the same county. I believe there may already be or have been proposed new rules for this exception to work across counties. Just FYI.

  
Good toknow. More research here

From http://www.lao.ca.gov/reports/2012/tax/property-tax-primer-11291...Property Transfers That Do Not Trigger Reassessment
Proposition Year Description
3 1982 Allows property owners whose property has been taken by eminent domain proceedings to transfer their existing assessed value to a new property of similar size and function.
50 1986 Allows property owners whose property has been damaged or destroyed in a natural disaster to transfer their existing assessed value to a comparable replacement property within the same county.
58 1986 Excludes property transfers between spouses or between parents and children from triggering reassessment.
60 1986 Allows homeowners over the age of 55 to transfer their existing assessed value to a new home, of equal or lesser market value, within the same county.
90 1988 Extends Proposition 60 by allowing homeowners to transfer their existing assessed value to a new home, of equal or lesser market value, in a different participating county.
110 1990 Allows disabled homeowners to transfer their existing assessed value from an existing home to a newly purchased home of equal or lesser market value.
171 1993 Extends Proposition 50 by allowing property owners affected by a natural disaster to transfer their existing assessed value to a comparable replacement property in a different participating county.
193 1996 Excludes property transfers between grandparents and grandchildren (when the parents are deceased) from triggering reassessment.
1 1998 Allows property owners whose property is made unusable by an environmental problem to transfer their existing assessed value to a comparable replacement property.


rated:
atikovi said:   
jd2010 said:   
atikovi said:   
lonestarguy said:   
atikovi said:   Chesapeake Bay? Hudson Bay? Need to be more specific.
  Don't forget Corpus Christi Bay and the Galveston Bay area that people in SE Texas call the Bay Area.  

  Yea, but I get flooded with red for pointing it out.


You have your head buried in the sand if you don't know what "the Bay area" means without context. It's the only bay area that matters.

  Guess I'm not so self centered to think that only one "bay area" is significant.

  
It's the only "bay" of note in the tri-state area.

rated:
The only tri-state area I'm familiar with is the DMV.

rated:
sfchris said:   
Chargum85 said:   Nobody retires to the bay area. There is no draw to that area other than the high-paying tech companies.

Really now? That's pretty trollicious of you.

Reasons I could give would include natural beauty, weather (mild), and a highly educated and liberal minded populace to name a few. I have traveled all around the world and have yet to find a region that appeals to me more. People who love the bay area REALLY love it.

  
That translates to "rich/lucky enough to live close to work/shopping and not have to commute."    To be fair I am mainly telecommuting at the moment and my new company office are 45 minutes away otherwise.

So really the only "negative" to retiring there is the cost.  Since its assumed you are going to live in your "type" of area and not have to commute to work.  (by type I mean if you want to live in big-box-burbia, or "up/intown/downtown" or in a glitzy shopping area/upscale district you can find the place you enjoy and without a commute its your "personal" paradise)  I still laugh at the "upscale rednecks" of whom I know a lot who live out in the far to exurbs because they want their nuclear family hub with acreage and then realize they like civilization a bit more than they expected (or their wife does) and they end up moving back to the middle of suburbia.    

rated:
needdealsnow said:   
scripta said:   
lonestarguy said:   Remember in California if you move to a new house the basis for your property tax resets.  It makes much more sense to buy a house there and live in it for 30-40 years plus.
Not if you're over 55 and stay in the same county. I believe there may already be or have been proposed new rules for this exception to work across counties. Just FYI.

  
Good toknow. More research here

From http://www.lao.ca.gov/reports/2012/tax/property-tax-primer-11291... Property Transfers That Do Not Trigger Reassessment

Proposition Year Description
3 1982 Allows property owners whose property has been taken by eminent domain proceedings to transfer their existing assessed value to a new property of similar size and function.
50 1986 Allows property owners whose property has been damaged or destroyed in a natural disaster to transfer their existing assessed value to a comparable replacement property within the same county.
58 1986 Excludes property transfers between spouses or between parents and children from triggering reassessment.
60 1986 Allows homeowners over the age of 55 to transfer their existing assessed value to a new home, of equal or lesser market value, within the same county.
90 1988 Extends Proposition 60 by allowing homeowners to transfer their existing assessed value to a new home, of equal or lesser market value, in a different participating county.
110 1990 Allows disabled homeowners to transfer their existing assessed value from an existing home to a newly purchased home of equal or lesser market value.
171 1993 Extends Proposition 50 by allowing property owners affected by a natural disaster to transfer their existing assessed value to a comparable replacement property in a different participating county.
193 1996 Excludes property transfers between grandparents and grandchildren (when the parents are deceased) from triggering reassessment.
1 1998 Allows property owners whose property is made unusable by an environmental problem to transfer their existing assessed value to a comparable replacement property.


  Good info.  So in OPs situation where he wants to retire in his 40's then prop 60 is useless.  Be interesting to see what counties do and don't participate.

rated:
If you can go from renting to accumulating $6m of wealth by your early 40's you should have no problem living in the bay area.  Most people can't even accumulate $1m in their entire lifetime.  You didn't list the costs to raise your children in your $90600 annual total expenses, and your transportation costs (car payments, insurance, gas, parking).  How old will the children be when you are in your early 40's?  If the kids are close to college age there will be huge expenses so drawing 2% from $4.5m will not cover all the expenses.

For those interested in Prop 90, these are the 11 counties that participate in Prop 90 inter-county property tax transfers.  Prop 90 transfers  
 

rated:
lonestarguy said:   
needdealsnow said:   
scripta said:   
lonestarguy said:   Remember in California if you move to a new house the basis for your property tax resets.  It makes much more sense to buy a house there and live in it for 30-40 years plus.
Not if you're over 55 and stay in the same county. I believe there may already be or have been proposed new rules for this exception to work across counties. Just FYI.

  
Good toknow. More research here

From http://www.lao.ca.gov/reports/2012/tax/property-tax-primer-11291... Property Transfers That Do Not Trigger Reassessment


Proposition Year Description
3 1982 Allows property owners whose property has been taken by eminent domain proceedings to transfer their existing assessed value to a new property of similar size and function.
50 1986 Allows property owners whose property has been damaged or destroyed in a natural disaster to transfer their existing assessed value to a comparable replacement property within the same county.
58 1986 Excludes property transfers between spouses or between parents and children from triggering reassessment.
60 1986 Allows homeowners over the age of 55 to transfer their existing assessed value to a new home, of equal or lesser market value, within the same county.
90 1988 Extends Proposition 60 by allowing homeowners to transfer their existing assessed value to a new home, of equal or lesser market value, in a different participating county.
110 1990 Allows disabled homeowners to transfer their existing assessed value from an existing home to a newly purchased home of equal or lesser market value.
171 1993 Extends Proposition 50 by allowing property owners affected by a natural disaster to transfer their existing assessed value to a comparable replacement property in a different participating county.
193 1996 Excludes property transfers between grandparents and grandchildren (when the parents are deceased) from triggering reassessment.
1 1998 Allows property owners whose property is made unusable by an environmental problem to transfer their existing assessed value to a comparable replacement property.


  Good info.  So in OPs situation where he wants to retire in his 40's then prop 60 is useless.  Be interesting to see what counties do and don't participate.

If married, do both owners need to be above 55 for prop 60 to apply?
 

rated:
needdealsnow said:   If married, do both owners need to be above 55 for prop 60 to apply?I didn't read the whole thing, but it starts with "any person over the age of 55 years", so I'd guess one of them would be enough. Full text in California Constitutional Provisions, Article XIII A, Section 2.

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id rather ive in a cardboard box in Green Bay in winter rather than Cal....

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trumpotron said:   id rather ive in a cardboard box in Green Bay in winter rather than Cal....Finally something we agree on -- I too would rather you lived in a cardboard box in winter.

rated:
trumpotron said:   id rather ive in a cardboard box in Green Bay in winter rather than Cal....
  Why? I really want to know why everyone thinks CA is so terrible yet 40mm people live here.

rated:
Stubtify said:   
trumpotron said:   id rather ive in a cardboard box in Green Bay in winter rather than Cal....
  Why? I really want to know why everyone thinks CA is so terrible yet 40mm people live here.

  According to this article, more Americans are moving out of California than into it.  This is from the local paper in San Jose: 
Mercury News Article

rated:
Stubtify said:   
trumpotron said:   id rather ive in a cardboard box in Green Bay in winter rather than Cal....
  Why? I really want to know why everyone thinks CA is so terrible yet 40mm people live here.

  
The boiling live frog effect...  you can turn the heat up slowly and they will never jump out.   

Most people who move INTO the state do so for what seem to be much higher wages.  Until they have to pay all the taxes and fees that are based on that higher income and end up actually making less.  It is not actually THAT bad IF you ave moving permanently.  Its the temp contractors that have issues separating CA from their income after they leave the state to go home.  CA has a bad habit of calling everyone a resident after a fairly short time even if they have a permanent residence in another state.

I was lucky, almost all my work in CA was before the official ruling that required me to pay "local" income taxes even for short projects.  I was doing serial one-week projects for several years for Siemens -- spent 4 months in San Diego, a month in San Bernardino, 2 weeks in NYC, ect -- but taxed based in TX...  I can only imagine all the state income tax forms and tracking they have to do THESE days.

rated:
lonestarguy said:   
Stubtify said:   
trumpotron said:   id rather ive in a cardboard box in Green Bay in winter rather than Cal....
  Why? I really want to know why everyone thinks CA is so terrible yet 40mm people live here.

  According to this article, more Americans are moving out of California than into it.  This is from the local paper in San Jose: 
Mercury News Article

  and yet real estate values are skyrocketing, instead of collapsing. strange.

Skipping 22 Messages...
rated:
rufflesinc said:   
lonestarguy said:   
Stubtify said:   
trumpotron said:   id rather ive in a cardboard box in Green Bay in winter rather than Cal....
  Why? I really want to know why everyone thinks CA is so terrible yet 40mm people live here.

  According to this article, more Americans are moving out of California than into it.  This is from the local paper in San Jose: 
Mercury News Article

  and yet real estate values are skyrocketing, instead of collapsing. strange.

In my town 80% of the new home purchases are foreign cash buyer investors. I hear that's the case with most of the neighborhoods that have gotten too expensive. That's a significantly high number. I think they are squeezing out the middle class.

They plan to add another 20,000 homes here averaging over a million dollars per home.  I wonder who is going to buy them?  

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