Maybe it's just a stupid statement made out of tv shows like 'extreme makeover home edition', correct me please if I'm wrong....
In US most of the houses seems to be made over a wooden structure, making them more fragile, easy to be renovated / customized / moved / rebuilt and, most important, cheaper.
Here in Italy (and AFAIK in the whole Europe) there's nothing like that: full concrete and a proper basement, basically no wood (except from roof).
I just bought my first flat and I've spent 168k euros for a 85 square meters flat 25 km from Milan. Despite the crisis, prices are stable and/or are decreasing very slowly.
You will never find, even in the worst zones of the cheapest cities an house at 10k euros here, neither a bunch of bricks will be sold for that. :)
Well you can find houses like that : the ones that have to be demolished (often in relatively nice locations too), and rebuilt. Of course, buying the property means that after that there's still 300k to be paid to build a new house.
I'd really like to see a low-tax, low regulation part of the US (WA, NV, TX, or TN) where someone buys a few thousand acres and lets people build "temporary" structures (with power/fiber/wifi/etc.) for living and solo-working, combined with some more permanent structures for offices, meetings, socialization, etc. Essentially like a 2-5 year Burning Man encampment campus for various startup projects.
If someone's "personal burn rate", while living comfortably and efficiently, were $10-15k/yr (while still eating great food, socializing, medical care, etc.), it would make mostly-equity compensation as part of a founding team really viable.
The point would be to get the benefits of density without the costs of luxury.
There's no need for someone to buy a few thousand acres and let people build structures. You could move to several 250,000+ population cities in the Midwest and there are already startup communities, incubators, and coworking spaces. I live in Omaha and went to school in Lincoln, NE. Omaha is getting gigabit internet soon from CenturyLink, Kansas City has Google Fiber. I worked at an incubator in Lincoln for the summer after my sophomore year in college and got the chance to build whatever I wanted to build with a team of five other students with all expenses paid. There are startups here that have problems finding enough qualified technical talent. I actually laughed really hard when I interned in Palo Alto and saw the internet speeds at our office.
Anyway, my point is that the problem isn't one of infrastructure. It's a chicken and egg problem in meatspace: if there were huge startups hubs in cheaper cities then it would be an easy decision for many to move to lower cost of living cities, but it's hard to start a movement. Silicon Valley's present success is the result of decades of tradition. What makes the small towns in the South Bay interesting places to live isn't the infrastructure but the density of interesting people.
Edit: I should add that the cost of living in the Midwest for a decently frugal, childless hacker willing to live with roommates is indeed $15,000 or less.
Just a datapoint that I (as a healthy young adult) live on 18k. It's a comfortable life in a beautiful neighborhood near UC Berkeley. You could do better if you moved into an oakland apartment or bart-enabled suburb.
tangent: can I email you? I'm moving to SF in September and trying to conserve my funds, and it seems you know the area quite well. I'd be happy to buy you a drink in exchange for your time.
Are you proposing we endorse a shantytown? History has shown us those go downhill fast, and I don't see how temporary shelters won't turn into a shantytown (and amusingly enough become permanent, much like every piece of shanty-code I write)
A shantytown full of rich (at least, in earning potential elsewhere) startup/burningman type people which grows around convenient fiber might be different than one full of labor surrounding a mine.
I don't really buy it. The hallmark of shantytowns is everything is "half-assed". I can't see tech workers breaking out the saws and sandpaper and building quality neighborhoods in their spare time, and nobody will invest real money and labor into something you intend to bulldoze in 3-5 years. You will also get a domino effect; people with money and the desire for a nice place to live will automatically avoid your shantytown, filling it with people that don't mind living in squalor, leading to a more squalid shantytown- thus looping back on itself.
"I can't see tech workers breaking out the saws and sandpaper and building quality neighborhoods in their spare time"
I should have you over to my house sometime. I completely tore out the downstairs of my house. The guy that's helping me with the kitchen cabinets is an old cobol programmer. I think your experience with carpentry and people that enjoy carpentry might leave a little to be desired. (I don't mean any disrespect by this) and I'm not saying that just because you chose "saws and sandpaper" for what is needed to build a structure.
I am curious why do you think tech people would not be interested in building things using lumber? If you are looking for a book to read pickup "Shopclass as Soulcraft." I don't think its going to make you want to pick up a trade but I think it might give you a different perspective.
People keep thinking I'm saying technical folks don't like wood, or something. I just mean when everyone already has a day job, and no one has real training or worthwhile experience, you are probably going to have trouble getting good results in a reasonable amount of time.
IMO this falls into the ol' boat of engineers thinking they can do everything just as well as people who were professionally trained. "Drilling for oil? How hard can it be!"
P.S. Unless frames come precut or premade these days, how exactly do you plan to build a house without some form of saw?
It was the sandpaper part that sounded funny to me.
Speaking of framing, you know that aisle of 2x4x8s you walk past at home despot? They are not all 96 inches long. If you look close some are labeled "framing studs." They are precut to 92 5/8 precisely so that you don't need to cut down every stud when you are framing a wall.
You might not like New Zealand then - its 95% stick built (well, wood) and has a minimum of concrete. That was changing, but after seeing the Christchurch earthquake, this wobbly island isn't going to be allowing heavy stuff that isn't braced like a battleship anytime soon.
You've never been to burningman, have you? People spend hundreds/thousands of hours individually or in small groups for stuff that they expend in a week. They go to the extent of learning to weld, do carpentry, etc., and actually pushed some tech innovation for things like EL wire.
People also spend ~$50 dollars a day for the tickets. The Burningman organizers arrange for medical care and infrastructure concerns before any of that cool shit even happens. And that's for living out of a god damned tent.
I'm saying "that doesn't make sense and the closest analogues failed before, please try to convince me more". This isn't a courtroom, but until rdl puts forth a solid case, the burden of proof is not upon the detractors.
Because as much as engineers tend to think they are experts in all fields, they aren't actually. So take a bunch of working professionals who just came home from an 8-hour day, and see how much quality skilled labor in fields they don't know anything about you can get.
I mean, I like building things, yes. I make small tables, I replace parts on my car. But I can't really hope to raise a decent house, even if I had 20 of me.
Ok, so you managed to put up a house? Wait, there's more! Did you build it to code for fire, sanitation, earthquakes...? Of course, some of the codes are overly pedantic and there is some baggage there, but frankly I don't expect IT professionals moonlighting as completely untrained architects will build houses that aren't going to crush hundreds of people in earthquakes or start fires.
I was thinking stuff in the 300-500 square foot range, which is far more feasible. Converted containers or other modular elements. Mobile homes/trailers at the low end. The idea would be to have private cheap/transit stuff and a few professional/serious buildings (like older converted farmhouses).
I can certainly build a shed, even from lumber, and pretty much anyone moderately competent could.
There are plenty of architects with an interest in experimental communities. And not a lot of opportunities for them. You'd be able to find someone. Probably have your pick, actually.
Now you might think that, the way things are going, by 2025 a person born without VC connections (i.e. an EIR position earmarked for him when he's in the womb, somewhat like a trust fund) will have to live in a shantytown in order to have a shot at surviving in VC-istan.
Well, I'm here to tell you that you're wrong. He won't have to inhabit a shantytown. He'll have a nice storage cell to live in.
I was actually half-joking. I don't actually believe that software engineers will have to work out of storage cells in 12 years. It was a Snow Crash allusion.
Septic tanks and water tanks work pretty well in semi-ruralish areas; you could either have a couple of trucks, or lay pipe. Or, have no plumbing in the temporary structures themselves, but have shower/bathroom trailers (which, admittedly, would suck a bit) separate from the temporary structures.
I assume you'd build more infrastructure with time; putting in a real sewage plant would be expensive up-front and not really worth it for ~50 people on 2000 acres, but maybe in time.
(You could even probably do zero-grid, with wifi/wimax/4g coverage to a couple of hard points with fiber, and decentralized electrical generation on each structure using solar/wind + batteries, at least to start.)
What I'd really like is a hangar with some vault/storage space nearby, so the hangar can be reconfigured for various projects (with tools/etc. on roller carts to a great degree, or in side partition areas with roller doors so they can be opened up to the main hangar space).
Steel span structures are fairly cheap, but I suspect I could buy an old factory (ideally something fairly clean) for less than construction cost somewhere. A shotcrete shell with steel mesh would be fine too.
You'd be surprised with how easy this is to do without making any major changes to ones lifestyle. A bit over a year ago I quit my relatively high paying job with $1k in savings, moved to the midwest, and I've been living comfortably on around $15k/yr (I'm taking the luxury of removing my student loan payments from the equation). I don't own a car, live in an inexpensive house thats shared with a few other entrepreneurs in a similar situation, I stay reasonably frugal, and share many expenses.
We all work out of an incubator that provides us with free office space (wouldn't significantly affect our numbers if we had to pay).
Bootstrapping in the midwest has worked quite well for me, but there's certainly disadvantages. For one, a lot of the local investment capital is old money. Old money that is extremely conservative with their investments. If we ended up receiving capital, we'd likely be forced to move to a more expensive city largely because of proximity to the investor and more importantly for skilled labor. The good developers all tend to flock to SF or NYC where the pay is high. They still exist in the midwest, but you really need to hunt to find them.
I'm an advocate for the midwest, there's challenges, some of which your concept may alleviate, but IMO it's perfect for bootstrapping a small team.
Where are you going to get staff for the great medical care facilities? I'm dating a girl who just graduated from medical school and I can't imagine any of her friends wanting to move next to shantytown.
Do you think the burning man-esque campus would work over a 2-5 year time period with burning man level of sewage treatment facilities?
I lived in a GP Medium tent next to (100m) a medevac HLZ. Even a Chinook isn't a big deal if you set it up properly. You don't land right on top of the tents. Any kind of terrain feature helps, or just distance.
I don't see why people assume "can have your own housing in a high density area" is inherently shoddy construction; 4 x 20' containers and about $20k in work could build something quite nice.
"Writer's cabins" are exactly this model (although you don't get the option of building your own workspace; maybe something where you get space, or a shell, or a furnished cottage). I'd trust an engineer to build something a hell of a lot more than a YA fiction writer or particularly a postmodernist. :)
I was running with the shantytown line just to be a pain.
I dont hate the idea. I actually think it would be cool if you changed the "DIY/bring your own shelter" to a rehab existing structure and used the program as part of a city program to clean up decrepit neighborhoods.
The benefit of greenfield is not being part of a current political system. There is almost always a political/demographic/cultural reason someplace becomes Detroit; it's not in a vacuum. I'm pretty sure I could go to counties in Central WA or parts of TX and get an almost Disneyworld level of autonomy, being allowed to run local utilities, sheriff, ems, etc. if it got to that scale, with only minimal county and some state/federal oversight.
I have no faith Oakland or Detroit would leave a high-net-worth enclave alone.
blueseed would be more reasonable now :) although at sea you'd have much harsher environmental conditions, so construction would be more difficult and expensive, vs. on land.
Worth pointing out is that even $40,000 houses appear to have $1,800 a year tax bills. Treating that tax as a perpetuity you would need to invest 1800/.0357 = $50139 at mortgage rates to break even. It's still surprisingly inexpensive, but property taxes tell at least some of the story. A $4000 sedan that obligates you to $2000 in annual license fees is not a particularly good deal, even if it will run for another ten years.
This is why I'm very reluctant to buy a million dollar shack here in Silicon Valley. What if the tech industry goes on the same trajectory as the automobile industry, and San Francisco ends up being the Detroit of the 2020's? Is there something intrinsically "magic" about the Bay Area, or is it just the coincidental clustering of tech companies that makes this place special?
Couple comments. I didn't research the exact numbers in the post. I heard the house was sold for $4k, and the point wasn't about the exact price, but my perception of life after growing up in an area of constant economic decline.
Also one of my goals for 2013 was to hit the home page of HN. I didn't think my first attempt would do it. Thanks!
I grew up there from 79 to 97. My mom was mayor and a ton of my friends live there. I've since gone to school and lived in NYC, LA and now DC. Jamestown is still one of my favorite places on the planet. Cheap housing is just a bonus.
The question is how to get the money... :) probably contribute to your community. Err I mean contribute a new app idea to the community of angel investors. Whatever. ;)
This post struck a chord with me as I'm from the central NY region, not too far from the OP. I get back to my hometown every year or two and the decline is more apparent every trip. Everything from my youth- the places I worked part-time, the schools I went to, the places I used to hang out at, the major local employers, they're all gone or in major decline. Many houses are boarded up, abandoned, and are being slowly reclaimed by nature. Most of my school friends have moved away, and most of those that have stayed around have basically wasted away. In my own lifetime I have seen long-term economic decline happen and it has scarred me in a way that is difficult to articulate.
I'm glad you liked it. I believe I (and other people from the area) look at the world differently than those from more prosperous regions.
There is a constant thought in the back of my head that this could all be temporary. Boom towns go bust. Industries go bust. But I also think I've left opportunity on the table because of my fear.
I've come to realize that the difficult part of life is balancing the upside with the downside -- knowing when to be conservative and when to be risky.
If I could give advice to anyone leaving school or home for the first time it would be: remain cognizant of the downside, but don't let it prevent you from taking advantage of the upside if it presents itself to you.
I grow up in a place that went through a steep decline (after the collapse of USSR). The good thing is that in any decline there is allays a bottom line (although I suppose that most people aren't prepared to acknowledge this idea, especially when it's personal in some way). Things adjust a bit, that's all.
1. Why do you choose to live in a house rather than an apartment?
2. Why do you choose to own that house, rather than rent it?
To the first question, a house often provides a much higher quality of life than an apartment. You might get a backyard garden, or a workbench, a guest room, an office, a full kitchen, etc... and, you can drill all the holes you want, paint it your favorite color, and so on.
To the second question, buying a house rather than renting it generally increases your options by about a hundredfold -- many, many more houses are available for sale than for rent. And while property tax can be painful, it's generally substantially cheaper than what you'd pay in rent on the equivalent property. So you get to save a lot more of your income, or at least apply it to paying down your mortgage.
> To the second question, buying a house rather than renting it generally increases your options by about a hundredfold -- many, many more houses are available for sale than for rent. And while property tax can be painful, it's generally substantially cheaper than what you'd pay in rent on the equivalent property. So you get to save a lot more of your income, or at least apply it to paying down your mortgage.
It also reduces your options, in the sense that your mobility may be drastically reduced.
To me, though, the main advantage of home ownership is the promise of one day not having a rent or mortgage payment at all. That's one of the main steps towards retirement.
Financially, though, the fair comparison is whether the capital invested in a house generates more rental income (from yourself) than what the capital would make in equity, after accounting for property taxes, insurance, and upkeep.
Most calculations I see suggest it's pretty much a toss up at that point, and which you choose should depend on factors like preference for mobility or stability.
I don't own a house, but here is how I would justify it:
I assume (and you are free to disagree with my assumptions):
- Inflation will exist like it has over the long term
- I need to save for retirement
---
With these two assumptions, a home allows you to take a leverage position against the area in which you live in's rate of inflation (hedge against rent increases with 4x leverage). Additionally, if you commit to paying down your home, you are deleveraging over a long period of time.
If you stay there for 30 years, you can live almost rent free. (you will still need to pay expenses), and will increase your buying power dramatically.
If inflation doesn't exist, or doesn't exist in your market, i.e. Buffalo, you are screwed. But, if you use an expected value, and a long-term history of what has happened, you are making a logical investment.
*additionally, in the US you get a nice tax savings from the interest which ends up having a pretty good value in and of itself.
Obviously, you can alter the assumptions and come up with different investment ideas, but in general, housing is at least logical.
The 30 year fixed mortgage, with a low interest rate and high leverage, is also the product of government subsidies.
The reason it makes sense for a lot of Americans to buy a house is because the government spends an awful lot of money making sure it makes sense. Otherwise economies of scale, differential costs of capital, and risk-free returns from diversification would lead to a very different picture.
This is an excellent question. First, note that you will always need a place to live. If you rent, you have no option but to pay market rents forever. Another way to put this, in the language of finance, is that you are "short" housing. Purchasing a home covers this short position - a homeowner must pay their mortgage, but need not be exposed to market fluctuations in the cost of housing. In this sense, the purchase of a first home is a risk reduction technique.
Second, market forces keep the cost of owning a home below the cost of renting a home (in most markets).
Third, there are substantial legal and financial benefits to owning at least your primary residence. Home sales are usually free of all capital gains tax; mortgage interest and property tax are tax deductible; and homestead exemptions exist in many states in the case of bankruptcy.
Finally, there are only so many other places to put your money. It is difficult for an employee of a corporation making in the low six figures (i.e. for a typical reader of this website) to shelter more than around $30,000 of earnings a year from taxation. Because of the advantages listed above, once you max out your retirement accounts and have an emergency fund set up, there is often no better investment than the purchase of a primary home. Also note that paying down your mortgage early is equivalent to investing your money in a savings account that earns a rate of interest equal to the rate of interest on the note (at this point, this rate is much higher than the rate you can earn in a savings account). This is on top of all of the other benefits.
This cannot be right. Buying a house surely increases your risk, because the price of your house now affects a majority of your wealth. If you didn't spend all that money taking on debt to purchase a home, you could have your assets spread across a far less risky portfolio.
That's not even counting all the risk you expose yourself to by being locked into a particular house in a particular neighborhood, such as not being able to switch jobs due to the expense of relocation.
You're thinking about this as purely a financial investment, but that's not all it is. It's a solution to another problem entirely: One way or another, you must have shelter.
By paying for it with a mortgage, you get shelter and a valuable asset at a set cost, and, once the mortgage is paid off, that cost drops to taxes, maintenance, and insurance.
Paying rent, you get only temporary shelter, for which you must pay whatever the market price is, forever. Your rent is unlikely to fall, can rise dramatically, and you don't come out the other end with an asset, that money is just gone. You didn't put it in a diverse portfolio.
I just bought a house outside the bay area last year, and tacked on a partial remodel with new wiring, heat pump, water heater, and bathroom.
My required payment -- including escrow for taxes, insurance, and (for now) PMI -- is comparable to the rent for a mediocre single-bedroom apartment in a sketchy area of the south bay. I'll be adding enough each month to have it paid off in 10-15 years.
For that, between the main level and the basement, I have around 2300 square feet that I can use as I wish, and I can modify it freely to suit my needs and wants.
But I would never buy a house in the bay area, at least not unless I had $20m+ in the bank.
Buying in the Bay Area is not that bad. It's a matter of trade-off, as with many things in life. You won't get huge lot or huge house for the cheap for sure, but there are other factors making up for it. For one thing the weather is fantastic. The food are amazing. It's closer to the tech center if that's your priority.
I own a single-family house on the San Francisco peninsula which I bought three years ago (and spent the summer of 2010 remodeling it and the summer of 2011 landscaping it).
What others have said elsewhere in this thread is true: owning a home limits your flexibility in terms of moving for another job. It ties up a lot of your assets, for most people, in a decaying pile of lumber that needs maintenance and upkeep and furnace replacements and driveway repaving and so on. Patrick.net, run by a SF bay area programmer-renter, is an able representation of this point of view.
For me, the benefits outweigh the costs. I'm in the mid-peninsula off the 280, so if necessary I can work at any job between and including San Francisco and San Jose and closer portions of the east bay. I was tired of renting and wanted a place that I could customize and run multiple Cat6 and RG-6 cables to each room, install a home automation system, etc. Plus single-family homes available for rental aren't as nice as the ones available for purchase. Finally it's a hedge against inflation.
Those are reasons why, to a first approximation, anyone in the SF bay area who plans to stay here long enough and can afford to buy a home does.
As bradleyjg said further down, the relative desirability of home ownership is also due in part to government subsidies. The first $250,000-$500,000 of appreciation in home value is not taxed when you sell. And mortgage interest is tax deductible.
If you're willing to disclose the data, how much did your house cost?
The cost of housing is one of my major deterrents to moving to the Bay Area. Otherwise I'd be there in a heartbeat if I could bring my SO along.
I just feel like with the typical developer wages quoted on Hacker News for the Bay Area I really don't see how I could afford a $1M home, which seems to be the going rate there. I'm in Houston and could get a $100k-$150k house here if I were willing to commute. Even if my salary doubled going to SF, it'd be hard to swallow the fact that housing would go up to nearly seven figures.
Quite right. What's interesting is that the Canadian homeownership rate is similar to that of the U.S., last I checked, even despite the different tax treatments.
My theory on this is that the prices adjust to cancel out the benefit from the tax break. The out-of-pocket expense to the buyer is the same and the general taxpayer is subsidizing a higher price for sellers. It's a cash transfer from taxpayers to established landowners cunningly disguised as a legup for the middle class.
I think the prices must adjust in this way since the supply of housing close to the supply of paid work is limited.
If anyone can point me to a decent analysis of this, I'd be grateful. But this is my pet theory.
This largely depends on the relative price of rent vs. mortgage repayments. If they're roughly similar, then it makes a lot of sense to buy a house because after 30 years you own a house. 30 years of renting doesn't leave you with a house.
In my case the tax deductions make it effectively $500/mo cheaper than renting a comparable apartment and the yearly coop fee increases are less than the yearly increases in rent. Doing some real quick math, I think, ignoring appreciation, its roughly an 8% ROI on the money tied up in the downpayment.
Nothing that I felt was even vaguely worth renting was available. This is a huge one. Most buy/rent arguments seem to assume that for any given area and type of property you will always have the choice of renting or buying an equivalent property. This has not been my experience at all. Being willing to buy opens up a much bigger and better selection of property to choose from. Any other argument is pretty much secondary to that one.
Also having crunched the numbers for our particular scenario, buying made financial sense. There is also a perceived feeling of security and stability that comes from owning. But really all of this is very much secondary to my first point.
Why not typing up a large percentage of the net worth in housing? What is net worth for beyond the cash needed for basic living? If the cash part of the net worth has already covered all/most of your needs, why not putting the rest in somewhere else? Like housing.
Of course you should do asset allocation to balance out the risk involved with each asset class, housing being one of the classes.
Because I need to live somewhere. It's tended to constrict certain decisions. But I have a nice spot on five acres in rural Mass. Will be paid off in the not distant future. And hasn't been a a particular drain on my other investments.
I think the only time I have met anyone from Chautauqua county out here was when I went to see a Bills games at the Northstar Cafe in SF. When I was reading your blog post, I actually jumped a bit, because I thought I recognized the house (the red-brick street combined with the Bills banner is a familiar sight).
OP neglects to mention if there were any back taxes or water liens owed. Or if the house had been condemned. All I could find was one lot (not house) under 8K.
The point is that the house isn't worth even the back taxes on it. That is hard to imagine from a west coast perspective. Even after the bust in 2009, I don't think it got that extreme in too many places.
Would it make sense for cities to forgive the back taxes and liens to encourage new growth, or have they borrowed against the money owed to the point that forgiving it would bankrupt the city?
The population of California has a perception of growth, while the Rust Belt has a perception of decline. This must effect the collective psyche to point where taking risk becomes less socially acceptable. Taking entrepreneurial or financial risk when you are gainfully employed is less tolerated when many people around you (and in fact entire industries) are struggling to get by.
I think there's something more subtle going on here. If the economy as a whole is doing well, risks tend to pay off; if the economy as a whole is not doing well, risks tend to not pay off. You don't even need any social pressure to make people in the rust belt take fewer risks than people in silicon valley; you just need people who use past performance as an indicator of future returns.
My mom was mayor of Jamestown for a couple years. Most houses that were maintained have kept their value. We just have a twisted sense of how housing value should work.
Even around Chautauqua lake, where the best real estate is in that county, the max is probably around $3mil for houses that would make an $3mil house around here (DC) look like a cottage.
Location, location, location. I can drive there in under seven hours these days. Straight through central PA which makes central Jamestown look like London.
It's better for well established players to move to low cost areas. Startups need to be in places where there is abundance of talent. Engineering salary are extremely high as-is, it would be nigh impossible to make them move to the middle of nowhere.
And, hate to say it, but Talent likes to live where it is desirable, fun, and interesting to live. Because Talent can afford it, and Talent wants a life full of desirable characteristics. The Bay Area isn't expensive because of magic. It's expensive because people want to live there, and people want to live there because it really is a great place to live, all things considered. You can play the value game all you want and try to make the argument that upstate New York is somehow unfairly treated by an economic imbalance, but the truth is, people want to live there less than they want to live in NYC or SF or nearly anywhere else.
In a world of PaaS and the cloud, and amazing communication capabilities like Skype and Google Hangout, why? What about CA or NY makes them more talented? They're there because the work is there, not vice versa. Also, you don't have to be in the middle of nowhere. There's plenty of large American cities where you can buy a nice house for less than $150K. I realize that the SF reality distortion field would suggest that everywhere else is powered by oil lamps, but I figure as long as you have high speed Internet and are within an hour of an Apple store, then you are quite capable to getting the work done from your home.
What you are saying makes total sense as a founder. But for an engineer there us no motivation to move to an area where there are not many opportunities.
Engineer salaries are not "extremely high". Compared to cost-of-living, they're more than adequate and on the high side by historical standards, but not "extremely high". In fact, most engineers make less than all those supernumerary non-technical VPs and product managers for nonexistent products that plague VC-funded companies.
"Extremely" high starts around $350k per year for a mid-career (10 years) engineer and things aren't at that point right now.
And you don't even have to go to such extremes as to move to the small town where the OP is from. Chicago, for example, is the 3rd largest city in the country and can be relatively affordable. Although it's not huge, there is an existing entrepreneurial ecosystem that allowed the likes of Groupon to rise.
That house looks big enough for a very spacious office.
Google says it's a 6:30 drive to NY, which is no Valley, but should present enough opportunities. One could get up early and be there by noon, for meetings or whatever.
What kind of maintenance fees would one be looking at, with a house that size?
Taxes in Upstate NY are going to be high. But keep in mind that central and western NY are depressing places. The place peakedin the 50's with industrial, rilroad and defense industries that are long gone. The city of Buffalo demolishes 2 houses a day. It was a city of 600,000, now down to 250,000.
A nice $50k house in Schenectady, NY (former industrial city 3 hours from NYC) has $5000/year taxes. The house is worth 10x the Jamestown house because of the proximity to state government (150k jobs).
If you want to live in the country, lots of cheap houses in rural towns <2 hours from NYC.
I think we'll see this. I don't think anyone knows for sure where the future is, but it's not in New York or the Bay Area. High housing costs mean that the wrong kinds of people are winning to have innovation or to build the future.
I still have faith that Real Technology will make a comeback when this social media bubble blows up and, after that happens, we're going to start to see an outline of the future emerging.
I hope there won't be a single "winning" location. I don't think that's a good thing for society.
Cost of new construction for single family homes in North America is generally between $100 and $150 per square foot. Houses often sell below replacement cost because supply outstrips demand in areas that are losing population or the style of the house is no longer en vogue or there may be thousands of dollars worth of deferred maintenance.
Right, and a house is a liability as well as an asset: at that sort of price, the main cost of owning the house is the ongoing maintenance, utilities, etc.
In NY state, I think the main cost of the house is going to be property taxes. I don't recall the rates, and don't care to look them up. But I do recall (when the subject has come up) that my sister-in-law in Alden, NY (small town 30 miles east of Buffalo) pays ridiculously high property taxes in comparison to what we pay here in Redmond, WA.
What makes you think a house can be built for $12,000? That's not what the post said at all. It said the house was sold for $12,000 in the 1970s. Depending on exactly when it was sold, that could be the equivalent of almost $70k today.
Because you'd need lots of upfront capital, you're gambling that the land will still be valuable 2 years later when you've finished and there's probably a local regulation against buildings above a certain height.
yeah, well maybe all manufacturing will be superseded by 3D printing.. in which case you'd want to move into design rather than assembly.
I think eg. Foxcon is going to be a very temporary thing.
I always thought that at some point a robot arm will be cheaper than a human to assemble electronics.. but we may skip that stage altogether. Pretty soon you'll just print your iPhone, bypassing assembly completely.
3D printing electronics from the transistor (or even IC) up is a very long way away. Centralized manufacturing will exist for a long time. ICs are significantly cheaper in quantities of 10k+, and there's no way a 3D printer could generate a silicon wafer and etch a working circuit onto it, at least not economically. Chip fabs still cost 10 figures.
This is going to be an increasing issue and it's something that Western nations in particular just haven't had to deal with until now.
The West came out of Europe. Europe is small. To put it in perspective, the distance from SF to NYC is ~2900 miles. The distance from London to Baghdad is ~3100 miles. So abundance of land is not a problem the West has traditionally had (not until colonization anyway).
Added to this, mortality has been high but population growth has been higher. The last century saw a dramatic rise in life expectancy (primarily due to a drop in infant mortality). The last 50 years has seen a dramatic drop in population growth (the lesson seems to be that the natural reaction to uncertain times by people is to breed more).
So the West is being crushed by the weight of supporting an ageing population from a system established at a time retirement was a rarity.
Add to this to overall trend of the last century has been one of urbanization.
And just to put the nail in the coffin, low-tech manufacturing has largely fled the West for the developing world where labour is cheap.
Our entire society seems premised on both population and economic growth. What exactly do we do when the population starts shrinking? This is a bridge we haven't crossed yet.
The experience in parts of the US seem to indicate the transition won't be an easy one. Cities with negative population growth have suffered from appalling crime and poverty that seems much harder to flush out in a city full of vacant buildings.
The ongoing story of Detroit is nothing short of surreal. That's a city that is slowly being reclaimed by nature, which is really what should happen. Half-empty cities are not healthy cities.
Now add to this the whole concept of home ownership. Home ownership is aspirational. It's political goal. Home ownership comes with a huge cost however.
- The unlucky who buy in declining cities have a huge part of their wealth eroded leading to virtually impoverished retirement.
- It leads to an inflexible labour market (people are unwilling or unable to move to where the jobs are).
- It has a snowball effect, particularly in the US, where much of the funding for local infrastructure comes from property taxes.
I haven't been to upstate New York. I'm one of those living in NYC where half a million dollars for a studio doesn't seem that outrageous.
If there's one lesson from this is that everything is transitory. I believe one of the largest fallacies of the Twentieth Century was that the idea set in that everything was going to keep growing and keep getting better forever. The institutions you grew up with would last a life time.
Hell, this even applies to climate where we base our views on a ridiculously narrow band of Earth's or even human history.
Cities come. Cities go. Nations come. Nations go. To think that the USA or Europe will exist as they do today a thousand years from now is the height of hubris and/or naivete.
> The unlucky who buy in declining cities have a huge part of their wealth eroded leading to virtually impoverished retirement.
This is where my fear of the downside comes from. My parents actually met in the 60s in LA, but decided to move back to WNY. I don't regret the fact that they did, but they had much different economic experience than they would have if they remained in California.
They now live on a property on about 5 acres. My Dad did much of the work on it, and it is beautiful place, but they will probably never get the money the put into out of it -- especially inflation adjusted.
If you end up on the downside of one of these economic decisions, it can really change your financial outlook for potentially the rest of your life.
One of the reasons that NYC and its suburbs have a higher cost of living than upstate New York is because they have higher county taxes. They have higher county taxes because each county has to pay for it's own Medicaid. The larger counties have more poor people in them. New York State is notorious for having horribly inefficient Medicaid system.
Also, just because the U.S birth rate is declining doesn't mean that it will eventually have a negative growth rate. The U.S population is still growing, but just not as rapidly.
There are countries that are experiencing negative growth rates right now; Russia is one of them.
It could have read 2900 gribloops vs 3100 gribloops and, not knowing anything about gribloops other than it's a measure of distance between cities, the expected conclusion is the same: the two pairs of cities are roughly the same distance apart. Ergo, converting the units presents no additional information.
I really have no idea what 200 miles represent. It's like if I start talking in Yen to you, you would have to convert that to the US$ if you're not familiar with it.
No I wouldn't. If you complain to me that you make 1000 Yen per hour but your coworker with the exact same experience doing the exact same job makes 2000 Yen per hour, I don't need to know the value of a Yen to understand that you're being shafted because you only make half of what your coworker does.
In the original comment, the point was that Europe was small but the USA is big. To rephrase what was written, the distance between the two American cities is 1.07 times the distance from the UK to the Middle East. The actual measurement, whether expressed in planck lengths or lightyears, is entirely irrelevant.
> Our entire society seems premised on both population and economic growth. What exactly do we do when the population starts shrinking?
Our population is shrinking because it's what happens when the education level (specifically of women) gets high enough. So we use those smart people and build high-tech manufacturing facilities, etc.
Low-tech is fleeing our shores because nobody wants to do it and it doesn't pay well. If you want it to stay here, import foreigners from poor countries but instead of keeping them foreign, make them citizens and keep their wages here.
This stuff is trivial. It's only made hard because we don't want to share. If we try for a team victory it's almost inevitable.
> I believe one of the largest fallacies of the Twentieth Century was that the idea set in that everything was going to keep growing
Yes. Not that we shouldn't expect progress, which comes from increased understanding, but expecting unlimited growth is crazy.
> [The idea that the] institutions you grew up with would last a life time. [...] Cities come. Cities go. Nations come. Nations go. To think that the USA or Europe will exist as they do today a thousand years from now is the height of hubris and/or naivete.
Can you imagine thinking, after a thousand years(!!) of history and conquest, that Rome would fall? Madness!
(This is more of a response to several of the comments posted so far.)
I'd like to come to the defense of low-cost living but also acknowledge that (expensive) city living has its obvious pluses that people already in SV might be taking for granted.
I created a low-cost living situation while living in a big (old/pretty) house in New Hampshire by renting out all of the rooms to friends. My rent is "free" and utilities are split 5 ways ($50 per person in summer, $150 in winter. Heating the house is expensive). If you can stand living with other people, I think this is one of the better ways to bootstrap "new job out of college" money instead of putting a down-payment on a smaller home that might not bring in any cash.
The house just so happens to be the house I grew up in, which my father sold in 2005 and foreclosed on in 2010 (ultra-conveniently, the year I graduated from college). It needed lots of work, so instead of trying to (re)sell it for cheap I made a deal to fix it up while living in it for reduced rent. Three friends living there cover the rent.
The house may be worth more in the future than current rates, and certainly has its share of things-needing-fixing, and my friends pay below-market rent rates, so it seems like a good deal for everyone involved.
If I did not have such a house, I think I'd try to buy one and do the same thing. It's nice to have some communal society around after college. (I've planned other things in my life to try to re-create that, too, because I think its important and under-acknowledged.)
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It's worth noting that there are downsides to living in a lower-cost-than-SV/Major City area. I don't have any programmer friends in real life outside of the people at my work (a very tiny company, and no one is remotely near my age (24)). That becomes a little problematic. I'm reminded of a quote from John le Carre:
> Coming home from very lonely places, all of us go a little mad: whether from great personal success, or just an all-night drive, we are the sole survivors of a world no one else has ever seen.
It's hard to talk about programming things and I think that's bad. I'm not around as many career-driven people as I'd like to be either and I think that's bad too. I end up spending a lot of time on the internet to talk about those areas of my interest. (And especially HN: I have a lot of affection for the repeated names in this place, even if we all tend to be a tad too negative. Consistent commentors still make a community and I'm thankful for that. Really.)
So it's a good setup. And while my salary isn't amazing it's more than enough for my area, and I love my walkable, lovable hometown in New Hampshire. But there's certainly something to be said for cities and high cost areas. I miss being around as many smart people as there were in college.
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On a note actually related to the article, when I drove around western NY - went to college at RPI, near Albany and headed west for Craigslist ventures - the places I saw just seemed surreal. Some parts of western NY, if you were just dropped there with no context, you'd think to yourself "A war must have happened here maybe 30 years ago". Strange levels of decay and halted-/de- construction
I think I've seen your posts on this topic here before. I actually lived in a shared housing situation in a large victorian mansion in Epping, NH in my 20s. I really enjoyed it. I wanted to do the same thing when I moved to Tahoe as the owner, but couldn't afford a house big enough to make it work out.
If I was in my 20s and working in an area as engineer with a reasonable cost of living, I would seriously consider this exact thing. When you are just out of school it is actually nice to be able to share a living space and it makes economic sense.
What I find interesting is that communal living is not new (it has all the benefits you describe) but there hasn't been more of it recently. Historically this has been a common way for artists to get by and practice their skills. Given how much programming and design is artistic in nature I'm surprised there aren't more such communes these days.
Maybe broadcast tools (like craigslist) and reputation tools (like social networks) make it a lot easier for people to spontaneously organize shared living situations. This makes it so easy to join or form 4-5 person cells to share a house that it takes out the demand for a larger and more formal commune. Maybe.
I'm finding these posts kind of surreal, I had no idea shared living was NOT the default in many places.
I posted down a bit re: flatting, but in NZ it's a very common living arrangement for people in their 20s. The standard progression is:
parents -> flatting -> house
The way it goes is, first ask all your friends if they knew of a room going, failing that, see if you can find some friends to organise a lease with ("founding" a flat).
As a last resort, you crack open the newspaper to the "flatmates wanted" section and troop around houses. This has been replaced by various web sites but they're not really social - they just replaced the newspaper.
I think this is where you might have room to innovate - even in established markets like the NZ, the UK and Australia. Being able to cyberstalk your prospective flatmates a little would be really handy and could save a lot of unneccesary travel.
Usually there's a mini interview where the flatmates figure out if they can live with you, and you see if you could live with them. This can lead to some hilarious situations which serve to underline how utterly different people can be.
One sticking point is that the most successful flats never have to advertise rooms. There will always be a friend of a friend who is willing to move in.
HN is kind of a silo that isn't at all representative of the population at large. In particular, programmers currently make more than enough money to comfortably live alone pretty much anywhere in the US. Even fresh out of college, most of the time. That combined with the tendency for programmers to be asocial makes living alone the default around here.
Among my non-programmer friends and family, the standard after college is (and has been since my parents' time) to live with a close friend or two until someone gets married.
I zoomed in on google map, was hoping for streetview [ in which I fantasized seeing Jack Reacher walk past for some reason ]
From the OP, I assumed this would be literally 100 miles from the nearest drugstore/711.. but its bang in the urban grid of a small town.
Shouldn't some of the bailout money be towards loans for people to do up cheap homes like this? It would seem a good investment for the future at low cost to enable more people to pick up these low end deals. Are the banks now so stupid they cant get people into homes and paying interest.. instead of this foreclosure fire-sale nonsense ?
Assuming this place can get internet installed, it would make some family a great home which they could gradually renovate, after which they would look after the place and contribute to the town.
Such bailouts and programs for average Joe don't really work. When real estate price is in decline, housing becomes in time more affordable. In this conditions you may actually get a chance to buy a house without a loan. It's a natural evolution. Now suppose the government steps in, throwing easy money - what do you think will happen next? I don't live in USA, I live in Romania, EU. Here the real estate prices jumped threefold after the government started „the first home” (literal translation) - a program that wanted to support young families in getting a home. I don't say there weren't any benefits for involved parties - the program actually spurred a lot of construction around, the banks made a lot of profits, and some young selected couples had in the end the privilege to be supported in buying overpriced living places. For everyone else (most of us) the entire thing made the housing more expensive. I don't want to see such things happen again.
Plenty of CDBG money has gone into Jamestown. Mostly in different parts of town. At its peak the city was 50k people. Now more like <30k. That house is shot. If you go west a bit you can find the worst off housing in the city (right next to a park oddly enough). That part of the north side of town also has really nice old houses east of the cemetery.
I left Western NY decades ago, a small town 60 miles from Buffalo, because there was nothing there for me. It's not a place for software entrepreneurs. But now, as I struggle with costs in downtown Chicago, I wonder if there's some way to make something of the old place.
The answer is no, unless you can attract the right people there, and for that there has to be a good job and at least few amenities. Both can be created, but only if lightning strikes. It's a tough situation.
Location is basically an extortion racket enabled by the economic collapse of the U.S. outside of a handful of star cities. With NIMBY policies, people in economically vibrant locations keep supply artificially low. This way, a class of people who've ceased providing value can still enrich themselves on a self-sustaining pattern of clueless talent rushing in for the gold rush.
What we see is that most of the country is dying-- that's why the real estate is so cheap in places like Jamestown-- but that's driving the costs in the few not-dying stretches to obscene levels.
In US most of the houses seems to be made over a wooden structure, making them more fragile, easy to be renovated / customized / moved / rebuilt and, most important, cheaper.
Here in Italy (and AFAIK in the whole Europe) there's nothing like that: full concrete and a proper basement, basically no wood (except from roof).
I just bought my first flat and I've spent 168k euros for a 85 square meters flat 25 km from Milan. Despite the crisis, prices are stable and/or are decreasing very slowly.
You will never find, even in the worst zones of the cheapest cities an house at 10k euros here, neither a bunch of bricks will be sold for that. :)