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5 Reasons California is Cheaper Than It Appears Print E-mail
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Personal Finance - Education
Written by Omie Ismail   
Thursday, 24 June 2010 04:18
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5 Reasons California is Cheaper Than It Appears
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I heard it again the other day:

"There's no way I could afford to live in California, It's WAY too expensive."

It's true, California is one expensive place. Even with the crash in real estate, things in the Golden State are far from being cheap. When I used to recruit people from Californiaoutside of California, there was always that moment of truth where a candidate would have to come to grips with the sticker shock of housing prices. If they were leaving behind a nice family home on a good size lot in Northern Virginia or Chicago, they realized that an exact replacement would  fetch $2 million anywhere within 30 miles of the coast line. Once they survived the housing shell shock, they would face the prospect of  forking over 8% or 9% of their income to the state. But for all of its expense, there are factors and policies that lighten the burden of living in California and make it less deserving than its ultra costly image. Here's 5 ways California is a bit cheaper than it appears.

1) Low Property Taxes:

Three decades ago, California passed Proposition 13 which limited annual increases of property taxes to a mere 2%. What that means for anyone living in the Golden State is that once you buy a home, you've locked in your taxes for as long as you own it. After 35 years of homeownership not only will you have paid off your mortgage but at most, your taxes will have doubled. And with an average rate of about 1.15%, the amount of taxation one of those million dollar homes can actually be quite reasonable. Ask someone in New York State, where the property taxes on a $400,000 home can run well into the 5 figures and where many retired people are forced to sell their homes due to the ridiculous tax burden. For Californians that have owned their home for a number of years, property taxes often add up to a very small percentage of their income.

2) No Heat, Little A/C:

Heating your home in much of California is entirely optional. There will be the ocassional cold spell where you have to remember how to turn on the heater but if you don't mind wearing a sweater, you'd be hard pressed to run up an annual gas bill over $300. Compare that to the Northeast where heating with oil might cost you $1,500 to $2,000 a year. Air-conditioning is very dependent on how far your live from the coast, but then again, so is the price of housing. If you live in the interior where A/C is vital, the price of your house drops significantly to levels on par with the rest of the country. The heat in California is dry and once the sun goes down, the temperature drops quickly leading to cool night breezes. The fact is that millions of people in California hardly use any heat or air conditioning and those that do usually live in areas away from the coast where housing is far cheaper. When you take into consideration that utilities are paid for with after tax dollars, the money you save in heating and air conditioning can cover a good chunk of the tax deductible interest on that expensive house. 

3) Great Cheap Local Vacations:

When I lived in the Midwest, people would always talk about their winter vacation. Florida, the Caribbean, Mexico, or maybe California. They'd long for the February break after enduring months of endless clouds and sub-freezing temperatures. Even modest vacations for a family of four can easily run $5,000 to any warm weather spot in the dead of winter when you factor in airfare, lodging, food, and transportation. In the winter in California, you can warm by taking a day trip the desert, head to the beach on a good day, or go up to the mountains to ski in some of the best conditions in the country. In the summer, the choices are about the same, head to the Coast, do some camping in the mountains, or dunk yourself in a pool in the desert. The key is that there's no airfare, no rental car, and lodging bargains abound. After traveling for many years to the typical spots, one year my wife and I decided that we would vacation in San Diego, a mere 120 miles away. We had such a good time, we realized that we would rather vacation there than nearly any place in America. For those of you that like National Parks, the choices are endless. If you don't have the need to travel to Europe or the Far East, you can cut your vacation expenses by at least half.

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elida kellogg |2012-02-18 08:02:56
I am looking for something specific in Ca, an affordable place to live for a 60 years young woman who is legally blind and on disability.

Please help if you can!
Cleo  - What about the floods? |2010-06-25 07:18:41
I was recently looking at the LA floods on Youtube. That must do some damage to houses. And structural damage is the worse thing to happen to a home.
Omiewon |2010-06-25 08:57:06
You'd be surprised how little the floods really affect houses here in SoCal (If that is what you are referring to). There are about 8 million homes in Southern California and there were about 100 affected. They were not far from where we live at the base of the foothills.

It all looks impressive on Youtube and CNN, but it affects very, very few people. Only the fires really affect a wider group of houses but even the worst in recent memory(which was really bad in San Diego) destroyed 3,000 homes. If you compare that to the flooding in the Midwest in Iowa for instance or the hurricanes in Florida it really isn't that bad.

To be sure earthquakes are what can do a ton of damage and we are going on 15 years since the last major one in SoCal and 21 years in the Bay Area.
PaulaJo  - Summer Vacation |2010-06-24 10:14:42
I would certainly agree that there is so much to do in California. The size of it alone makes for a vacation if you want to travel far to get away. But I must say that we don't go anywhere during the summer months (when the kids are out of school and families are likely to be vacationing also). During the summer everybody and their brother are also out there vacationing and it is brutal. My idea of "vacation" does not include throngs of people, both from california and those traveling from outside our fair State. But that does leave around 8 months to choose from to travel, and what with our excellent weather here, it isn't a problem. P.S. I love people from out of State that are fortunate enough to be able to travel and choose California to see. It's just that I am glad they are able to go home at the end of their vacation. The perils of living in a nice place I suppose, but I've never traveled anyplace in this beautiful country that didn't have nice places.
Omiewon |2010-06-24 10:36:08
PaulaJo, I know what you mean. Summer time can get congested especially on weekends near the beach. One of the positives about the current downturn is many fewer people on the roads but the beaches are still packed on weekends. Free is always popular.

There are a number of lesser known spots in the state that can be quite free of people in the Summer. Yosemite will be packed but Sequoia relatively free of people. If you can stand the heat of the desert in the Summer there aren't many people vying for your hotel room.

In other areas, one thing that used to be cheap but is far less so now is the University of California. Steep tuition hikes have brought tuition from a few thousand dollars to about $10,000 a year. Still a relative bargain but far more expensive than it was only 5 years ago.
Frank M  - Little heat, No A/C |2010-06-24 13:30:09
Sure. Maybe if you live on the beach in Malibu. I've lived in CA for 30 years and I can tell you I've spent many thousands of dollars on utilities. I lived in Humboldt County where you better have heat in the winter. And I lived in Palm Desert where you damn well better have good A/C. And it will cost you 'cause utilities are high except in communities where they generate their own power (Anaheim for example). Not to mention gasoline, car insurance...vacationing is really don't have to go anyplace. Everyone comes to you!
PaulaJo |2010-06-24 14:23:39
That's another thing. I live in Sonoma County and it is only 23 miles to the coast, but I'll tell you that heating this 3 bedroom house with electricity is EXPENSIVE. We are going to switch to alternate energy (solar panels). Right now my husband, who is a licensed general contractor, is going to classes to learn how to install this all himself. At least we only have to end up using the A/C about 3 days a year.
Omiewon |2010-06-24 19:47:01
Humboldt, that is true Frank, pretty far north not far from Oregon. Of course, the tradeoff is far cheaper housing on par with the rest of the Country.

It's more than just Malibu down here. Probably 10 million people in SoCal don't need air-conditioning. My house doesn't even have A/C and when I lived closer to the Coast virtually none did.

I think the trick in the major metros of California is if you live and work in the same town or close by. Then gas, car, etc go pretty low and you aren't killing yourself with the commute.
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