This is not an extreme example. Housing costs in NC are a small fraction of what they are in the valley.
Also notice that the housing prices in NC are very consistent, the bubble didn't happen there. The values in Palo Alto swing up and down 30% or more in a span of 2 years.
Obviously the job market is better in Palo Alto, but top talent can get a job anywhere.
Consider a hypothetical engineer (software developer in east coast terminology). He might make around 100k in NC, and $140k with a good gig in the bay. After taxes, 401k, etc lets say this is a take home income of 60k and 95k. The valley engineer is paying $59064 for housing, leaving him around 36k for every other expense in his life, around $3k per month.
The Raleigh engineer pays $7716 for housing, leaving him $53k, or around $4415 per month.
So after you subtract housing, assuming purchase, the Raleigh engineer is better off initially. Of course, assuming Palo Alto housing prices don't plummet, the valley engineer is putting equity into the house which he can use if he moves for retirement.
Of course, there are other benefits to living in the valley, such as not having to live in North Carolina. Weather, opportunities, schools, healthcare, and the job market are far better here.
I previously lived near the area in NC that I'm describing, and I left to come work for a startup in Palo Alto. The quality of life here is far better.
Housing is outrageous though, but that is primarily a function of geography, being in a narrow valley near the sea, there is simply no room to expand. That is why all the towns in the valley are fighting high speed rail, they know that once the pressure is released by allowing easy access to jobs in the valley, housing prices will drop shockingly.
This is partly why lax lending standards did so much damage. Anyone spending 2/3 of a single net income on a mortgage is one minor life event away from being completely screwed, so much so that banks wouldn't even offer you that much rope until a few years ago (when they could sell it off with a bogus rating). Now it's going to be a long and reluctant price adjustment back to what the majority even here can realistically afford. In the meantime, I rent within my means as a single (about a mile away from that house), so the wage difference for being here is huge for me.
So after you subtract housing, assuming purchase, the Raleigh engineer is better off initially. Of course, assuming Palo Alto housing prices don't plummet, the valley engineer is putting equity into the house which he can use if he moves for retirement.
And the NC person isn't putting equity in to a house?
The value of the house is about 1 year of salary for the engineer in NC, and about 5 years of a higher salary for the engineer in the Valley. No, its not a better deal for the valley engineer still, but at least they have something to show for all those mortgage payments that are bleeding them dry.
In the Research Triangle area of North Carolina, you can get this 1300sft house for $643/month: http://www.zillow.com/homedetails/211-Barbary-Ct-Cary-NC-275...
In Palo Alto you are looking at this 1140sft house for $4922/month: http://www.zillow.com/homedetails/4205-Wilkie-Way-Palo-Alto-...
This is not an extreme example. Housing costs in NC are a small fraction of what they are in the valley.
Also notice that the housing prices in NC are very consistent, the bubble didn't happen there. The values in Palo Alto swing up and down 30% or more in a span of 2 years.
Obviously the job market is better in Palo Alto, but top talent can get a job anywhere.
Consider a hypothetical engineer (software developer in east coast terminology). He might make around 100k in NC, and $140k with a good gig in the bay. After taxes, 401k, etc lets say this is a take home income of 60k and 95k. The valley engineer is paying $59064 for housing, leaving him around 36k for every other expense in his life, around $3k per month.
The Raleigh engineer pays $7716 for housing, leaving him $53k, or around $4415 per month.
So after you subtract housing, assuming purchase, the Raleigh engineer is better off initially. Of course, assuming Palo Alto housing prices don't plummet, the valley engineer is putting equity into the house which he can use if he moves for retirement.
Of course, there are other benefits to living in the valley, such as not having to live in North Carolina. Weather, opportunities, schools, healthcare, and the job market are far better here.
I previously lived near the area in NC that I'm describing, and I left to come work for a startup in Palo Alto. The quality of life here is far better.
Housing is outrageous though, but that is primarily a function of geography, being in a narrow valley near the sea, there is simply no room to expand. That is why all the towns in the valley are fighting high speed rail, they know that once the pressure is released by allowing easy access to jobs in the valley, housing prices will drop shockingly.