Best Cities to Make the Most of Your Salary - Detroit #1

Forbes Magazine list says what most know, take away cost of living from earnings and your left with the most in the D.
http://fortune.com/2016/09/12/best-us-cities-salary/

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You might make less money in Detroit than you would in San Francisco, but your Motor City salary can take you a lot further.

That’s according to Glassdoor’s new list of 25 U.S. cities with the best cost of living ratios—the higher the ratio, the more money people can save [[or spend)...

1. Detroit
Median Base Salary: $61,500
Median Home Value: $123,100
Cost of Living Ratio: 50%

Unsurprisingly, big cities known for high housing prices have much lower ratios. With a median base salary of $70,000 and a median home value of $384,100, New York’s ratio comes in at 18%. Boston, which has similar figures, has a slightly lower ratio of 17%.

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My wife and I are aggressively saving for the future and plan to retire in our early 50's. The Detroit area does have its perks!

Are those median home values accurate or are they from a couple of years ago before prices rebounded? They are similar for all 5 cities listed, but sound shockingly low.

When I moved from Detroit to Santa Fe, NM three years ago I took a number of things into consideration. The cost of living was #1 which included the cost of housing. However, I also took into consideration the cost to insure my house, security, taxes, auto insurance as well as safety, amenities, culture, climate, etc. were all a consideration in my choice to move to Santa Fe. How helpful is a list based solely upon salary vs. housing costs?

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Originally Posted by 401don

Are those median home values accurate or are they from a couple of years ago before prices rebounded? They are similar for all 5 cities listed, but sound shockingly low.

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Median home values are pretty low in Michigan. In Metro Detroit, outside of a few upper-class burbs, you get a ton of house for your money.

But this is a double-edged sword, of course. Property values are low because long-term appreciation is crap. I would prefer a high cost market with strong appreciation over time over a cheap market with none.

Also, you can't judge relative costs /value by just comparing housing costs. Obviously you pay more in housing somewhere like NYC, but you also pay much less in transportation costs, and you need less housing, because people socialize outside their homes. If you're living in Rochester Hills you kinda need the man cave and the great room and the guest bedroom and the three-car garage. In Brooklyn, no one expects this.

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Originally Posted by Bham1982

Median home values are pretty low in Michigan. In Metro Detroit, outside of a few upper-class burbs, you get a ton of house for your money.

But this is a double-edged sword, of course. Property values are low because long-term appreciation is crap. I would prefer a high cost market with strong appreciation over time over a cheap market with none.

Also, you can't judge relative costs /value by just comparing housing costs. Obviously you pay more in housing somewhere like NYC, but you also pay much less in transportation costs, and you need less housing, because people socialize outside their homes. If you're living in Rochester Hills you kinda need the man cave and the great room and the guest bedroom and the three-car garage. In Brooklyn, no one expects this.

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Here in the Toronto area, we obviously have a high cost market. The long-term appreciation is great for people like me. I bought a 1280 sq. ft. semi on a tiny lot for 219K 12 yrs. ago. It is now worth about 675. It's a nice nest egg that if I need cash later in retirement I can cash in and either rent or move to a small town further away. With Toronto's pop. growth due to immigration, it may level off but is not likely to depreciate.
On the other hand, it's very difficult for millennials to get into the market now. Most need a big loan from parents, which many will gladly provide just to get them out of the basement.

Strikes me that taxes are not mentioned. With state and local income taxes, plus high real estate taxes, the takehome is not all that great.

This should not be a shock when one takes into consideration the recent history of area employers paying up for talent to offset the fact that the area is not very desirable when compared to other options.

Great new for the area - definitely the cost of living here is an appealing aspect of life.

What is interesting, is those anecdotal stories of everyone's friends who moved to Atlanta, Raleigh, Texas etc. The Financial Times had a really interesting article this week, about how the flood of people moving to those areas actually pushed wages down there. Interestingly, the top four places to move to get "poorer" were all in North Carolina. Not normally what you would expect.

https://www.ft.com/content/a8e9f23c-...b-db370181659f

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Originally Posted by Bham1982

But this is a double-edged sword, of course. Property values are low because long-term appreciation is crap. I would prefer a high cost market with strong appreciation over time over a cheap market with none.

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This is a common preference, but buying a cheaper house and investing the difference in something else is likely to give good results, and has the advantage of much greater diversification and liquidity. For instance, I would think we could agree that San Francisco has been one of the strongest housing markets in the US for quite a while. But according to the Case-Shiller index data, the price of housing there now [[June 2016, latest data) is 4.75 times as high as it was at the start of the series in Jan 1987. A couple strong, but less-strong markets like New York and Boston are 2.4 and 2.7 times as high as they were, respectively.

On the other hand, since Jan 1987, the S&P 500 is more than 8 times as high as it was then, not including dividends. With dividends reinvested, it is up by a factor of almost 15. In practice, unless you used the money to fund an IRA or something similar, a bunch of this would be eaten up by taxes, but someone putting their money there would still have returns which could be expected to be better than those of their housing investment.

Note that this is not an argument that people living in San Francisco should not buy houses--by buying a house they are getting a place to live without paying San Francisco rent, which is a fact that they are certainly including in their calculations. But it is at least a reason to think you might not really want to live in a higher-priced, higher-appreciation area on the basis of investment return when you could save the difference and invest it something else instead.

Interesting how these endless "lists" are dismissed as irrelevant by some DYers when they portray Detroit in a bad light, yet are embraced when it's the opposite.

Personally, I take all of them all with a grain of salt, as they are calculatingly designed as click-bait so that the reader can puff up their feathers and defend their hometown and vilify the other places on [[or off) the list in the "comments" section [[the lingering assisting the site in gathering more data) . As such, they inevitably omit key mitigating factors as to what comprises the very subjective & elusive "high" quality standard of living.

In addition to Bham & 401don's valid reference to the omitted appreciation factor is monthly utility costs. There are very few geographic areas of the US that have a truly temperate climate. What you aren't paying in mortgage, you're probably forking over anyway in heating or air conditioning bills. In Indianapolis or Buffalo it's the former--Memphis or Dallas the latter. As Bham stated, particularly if real estate is cheap & plentiful, a prospective owner is vulnerable to buying more space than they actually need, compounding these costs.