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<\/a>The other day, an MMM reader stopped by and left the following comment on one of my older posts about the principles of FIRE:<\/p>\n
I wasn\u2019t smart enough to find FI when I was young so I sometimes feel like a lot of their advice is not going to help me or others who don\u2019t already own a home and don\u2019t have six- figure salaries in this post-pandemic world.<\/em><\/strong><\/p>\n \u00a0A lot of the ideas given to young folks are \u201chouse hack\u201d \u201cbuy a fixer upper\u201d but that is still out of reach and\/or complex to navigate with current prices and interest rates. Most townships around me do not want you to chop a house up into ADU\u2019s or multiple units. My cousin owns 60 acres of land but he is not allowed to live on a trailer on that land.<\/em><\/strong><\/p>\n \u00a0I don\u2019t know what the next generation of FI bloggers will offer, perhaps they are already out there and I just don\u2019t know who they are, but I\u2019d like to hear from them.\u201d<\/em><\/strong> As with every critique of our ideas, I thought about this comment for a while. Tried to determine if there were any Principles of Mustachianism that were genuinely going obsolete, versus the more common side effects of Complainypants and\/or Excuse-itis, two afflictions which have been weighing down our critics since the beginning.\u00a0<\/p>\n After all, this isn\u2019t the first time FIRE has gone obsolete. Over my retirement I\u2019ve seen it:<\/p>\n So what\u2019s the situation right now?\u00a0<\/p>\n Our commenter focuses on two things: the solid salaries of tech workers, and the major increases in house prices (and interest rates) in the most recent four years.\u00a0<\/p>\n The first one \u2014 high salaries in general \u2013 is still a factor and I don\u2019t expect that to change. Some jobs just pay more than others, and there\u2019s a lot you can do to increase your income and switch jobs, and I\u2019m all for it. However, ever-increasing income is not my usual focus here on MMM, because I have seen first hand that most people can waste almost any <\/em>amount of income and still have very little to show for it.\u00a0<\/p>\n In fact, the very existence of software engineers and doctors and other high earners who are my age and still feeling financial stress is proof of this: it\u2019s mathematically impossible to earn so much for almost 30 years and not have an absolute shit-ton saved, unless you are also spending an absolute shit-ton of money the whole time.<\/p>\n So instead, we focus on how to streamline your spending and live joyfully and efficiently without compromise. We focus on reducing waste<\/em>, while maintaining or even increasing all of the other benefits that come from spending money more purposefully. <\/em>These skills are essential even for the highest earners, but they become even more valuable as you move down the income ladder.<\/p>\n So now for the second issue: housing. Does the state of housing here in 2024 screw up the whole FIRE plan?\u00a0<\/p>\n As with any question, let\u2019s start by looking at the data: how much have US house prices actually risen \u2013 adjusted for inflation \u2013 since 2019?\u00a0<\/p>\n It turns out that our own St. Louis Fed makes this extremely useful\u00a0 information available here<\/a>.<\/p>\n So there\u2019s our answer: houses \u201cfeel\u201d about 25% more expensive right now than they did at the start of 2019 relative to the average salary and the price of everything else. Although interestingly enough,\u00a0 they are only up about 10% since the last peak in early 2006, a full eighteen years ago! So housing is a blow, but not a FIRE-extinguishing one.<\/p>\n However, this nationwide data masks some much bigger increases in certain popular cities, including my own: Plain old Longmont Colorado now sports a hilariously high $540,000 median home price. So houses are about triple the price they were when I started writing in 2011, which means they\u2019ve risen much faster than the average salary. Which means houses are much further out of reach for the average person in my area.<\/p>\n House Shopping With Your Middle Finger<\/strong><\/p>\n The solution to this is the same as most other problems: to stop thinking in the way our culture likes to train us (as a victim of outside forces beyond our control) and go back to thinking like a Mustachian.\u00a0<\/p>\n Houses are just like any other manufactured product, and as such they come at a wide variety of prices, subject to supply and demand.\u00a0<\/p>\n And just because you happen to live in a certain place (even if you were born and raised<\/em> there), doesn\u2019t mean you\u2019ll automatically be able to afford to buy a house there. Just as a baby born upon the Apple campus in Cupertino today doesn\u2019t automatically get a new iPhone Pro Max every year.\u00a0<\/p>\n With every purchasing decision, you need to go through the same series of choices:<\/p>\n So when it comes to houses, you run the numbers, then decide between renting or buying<\/a><\/span> or house hacking. You might start <\/em>by doing the analysis right in your own city, but also keep in mind that there are lots of other cities and even countries in the world, and there are happy people living in all of them.\u00a0<\/p>\n But Wait: I don\u2019t want to move to a whole new place!<\/strong><\/p>\n At this point, people get defensive. We all have ties to our current location, and the stronger the ties the more difficult it becomes to consider moving.\u00a0<\/p>\n But there\u2019s a difference between genuine, positive bonds to a place and just plain old fear of change. So it\u2019s my job to at least make you question your assumptions, because not <\/em>doing so is what got you where you are, and it\u2019s also what got our country where it is.<\/p>\n And on a country-wide basis,\u00a0 I notice that our general fear of relocating creates a very irrational pattern of house prices. They are ridiculously high in some places and ridiculously cheap in others. There does seem to be a general correlation between niceness and cost, but not a perfect one (especially since everyone has their own definition of \u201cnice\u201d)<\/p>\n And that\u2019s where the opportunity lies.<\/p>\n Example:<\/strong><\/p>\n I moved to Longmont in 2005 because it met our young family\u2019s needs at the time, at the right price with homes about $200,000. Today, at the $540,000 price level (houses average about $450 per interior square foot) it has to compete with a much broader range of cities which offer nicer amenities at equal or lower prices.\u00a0<\/p>\n Let\u2019s do a hypothetical search using another amazing tool: FRED\u2019s list of the top 1000 metro areas<\/strong><\/a> with price per square foot, and plot some of them based on my own judgment of their desirability:\u00a0<\/p>\n I\u2019m biased towards Colorado because I have so many ties there, and I also highly prioritize sunny climates. My chart suggests that if I wanted to save money, I might start looking around in Albuquerque, whereas Denver would give me a nicer life in the same price range as my current city of Longmont. And if I were willing to spend even more on housing to live somewhere even nicer, I should suck it up and move to Boulder.<\/p>\n Just for fun, I pulled the data from that same FRED website into a separate google spreadsheet (which I\u2019ll share here<\/a><\/span>) and sorted it by cost per square foot. Then, I highlighted a band of affordable cities with housing centered on the $100 per square foot range, which would mean a 2,000 square foot house is about $200k.<\/p>\n As an added bonus, I added a column to calculate the change in house prices over the past year, just in case it helps us see if a city is on the way up or getting cheaper at the moment.<\/p>\n A chart like this is just a starting point \u2013 you\u2019d need to read more about any place and then go visit in person before considering a move. But the idea is to start with data, and then do some fun research based on what you learn.<\/p>\n The Earth Awaits: Casting a Worldwide Net<\/strong><\/p>\n House prices are a valuable metric, because they influence the cost of living more than almost anything else for the typical Mustachian. After all, biking and nature are always close to free, Costcos are available nationwide, and we probably care less than average about the costs of other services like valets and salons.<\/p>\n But there\u2019s still plenty of value in looking at the bigger picture, considering more data points, and also being open to renting versus buying your housing. For this, I\u2019m a big fan of a FIRE blogger-created site called The Earth Awaits<\/strong><\/a>, and we can take it for a test drive right now with the following search criteria:<\/p>\n Geographic area:<\/strong> North America<\/p>\n My total monthly budget:<\/strong> $0-$6000<\/p>\n Family size:<\/strong> 2<\/p>\n Apartment type:<\/strong> Two bedroom (outside city center)<\/p>\n Temperature range:<\/strong> January lows not colder than 10F<\/p>\n The exact parameters don\u2019t matter too much, as long as you don\u2019t make them too narrow. The important thing is the resulting list, which is meant to give you ideas to research further. For example, that first simple search gave me this list:<\/p>\n
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