Money: "Top 25 Earning Towns" and how the heck they can afford to live where they do.

[MotoSook]

I was just over at the CNN Money.com site and saw the list of (just the top 10) towns. They list the [median] household income, the [median] house prices and the [median] dollars spent yearly for vacation.

An example:

#10
Travilah, Md.
Population: 8,300
Median household income: $177,477
Median home price: $1,456,430
Amount spent on vacations/yr: $10,783


I understand that there is old money and the whole trading up on houses thing, but how on earth does a household income of $177,477 afford a 1.5 million dollar house or how they can spend over $10K a year on vacation?

I'm not as frugal as I want to be, but I'm not as frivolous as some of the folks I know. Yet, I can't see how a household income in the $150-200K/yr range could ever afford a 1 million+ house or how they could spend 10K of post tax dollars on a vacation.

What are these people doing? Are they living "beyond their means?" If not, I want to know how they make their money work for them.

[frogger]

Median is the key word, Souk.

[livi]

So what is the attraction living in Travilah, Md??

[MotoSook]

Yes, I realize that, but that implies there are households that make less than the median; and I have a hard time seeing the spead in home prices to be 200K to 3M.

[legion]

Originally Posted by frogger

Median is the key word, Souk.

Yep. The median income is taken from a set that includes people who rent/live in apartments.

The median home price only includes homes (not apartments).

[MotoSook]

Some of the descriptions of the towns, don't give me the impression that there are too many houses, apartments or townhomes for rent. As a matter of fact, some of the communities are exclusively large homes, and with rentals (inc. townhomes and apartments) prohibited.

[MotoSook]

Here's #3:

3. Los Altos Hills, Calif.
Population: 7,700
Median household income: $199,370
Median home price: $2,371,601
Amount spent on vacations/yr: $10,928

Tiny Los Altos is the quintessential bedroom community - in fact, the only business in town is a bookstore. This Silicon Valley rural oasis has some of the largest homes in the Bay Area - one home boasts 18,000 square feet of living space - and all dwellings must take up at least an acre of this most prime real estate. The 60-acre Packard orchard is among the natural splendors, but the best feature besides the ritzy homes and choke-a-horse bankrolls is the Pathway System, a 63-mile maze of trails that winds through the pristine town.


And #1:

1. Hillsborough, Calif.
Population: 10,500
Median household income: $263,456
Median home price: $2,606,764
Amount spent on vacations/yr: $11,023

The expression "if you have to ask how much, you probably can't afford it" aptly sums up the town of Hillsborough. And the leaders here plan to keep it that way. Homes in this northern California enclave can be no smaller than 2,500 feet and no lot is less than half an acre. Moreover, you can't have an apartment here no matter what you can afford - town regulations forbid them, along with condos and townhouses. Bing Crosby hung his fedora here, and Hearst heiress Patty, in her pre-SLA kidnapping days, grew up in Hillsborough.

[legion]

Originally Posted by Souk

Some of the descriptions of the towns, don't give me the impression that there are too many houses, apartments or townhomes for rent. As a matter of fact, some of the communities are exclusively large homes, and with rentals (inc. townhomes and apartments) prohibited.

That's true.

I grew up in Naperville. Lots of big houses, not many (although there are more now) apartments. I know LOTS of my high school classmates who still live with mommy and daddy into their 30s. They would be counted in the set from which median income was drawn.

[MotoSook]

But the 30-somethings would add to the household income, not listed separately.

I know some people who live in Naperville, and some in pretty pricey abodes....and for the life of me I can't see how they do it. I know some of them folks have a household income below mine. I'm sure the bedroom topic of finances would make my head spin. Thank goodness my wife tempers my spending.

[legion]

There's always negative-amortizing, interest-only financing!

[MRM]

The median income will include retired people who may have millions in the bank but have no income. I wonder if investment income is reported or just earned income. I would think investment income that was not withdrawn for spending wouldn't be counted.

[Rick Lee]

Travillah is not really a town and I don't believe they even have a post office. It's a section of Rockville where there are lots of mcmansions, but where a few farmers and large landowners held out and kept their land. So just across the street from these hideous mcmansions is a general store and a few nice old houses on big lots. Lots of folks there bought when the houses were under construction and cost a tiny fraction of their current worth.

BTW, my parents used to spend around $10k on a vacation by renting a house on the beach at the NJ shore for three weeks. Not what I'd call a real exotic vacation. I, OTOH, have had some serious adventures in exotic lands for $1k-$2.5k for three weeks. If wealth is measured by what you spend on a vacation, I'm very happy to stay poor.

[p911dad]

You're right, Souk. That median income doesn't add up to reality. Anyone living in a $1.5 m house really needs to be earning the equivilent of at least $750K. I'm telling you, expenses just creep up. Like 2 or 3 expensive vehicles, club membership, taxes, insurances, au pair, riding and piano lessons, gifts, clothes, entertaining, 2nd and 3rd house costs, vacations, on and on. Being rich ain't easy.. or cheap.

[pwd72s]

Originally Posted by MRM

The median income will include retired people who may have millions in the bank but have no income. I wonder if investment income is reported or just earned income. I would think investment income that was not withdrawn for spending wouldn't be counted.

Bingo! Unless you sell an investment, it's not "income".

[pwd72s]

Originally Posted by gmeteer

You're right, Souk. That median income doesn't add up to reality. Anyone living in a $1.5 m house really needs to be earning the equivilent of at least $750K. I'm telling you, expenses just creep up. Like 2 or 3 expensive vehicles, club membership, taxes, insurances, au pair, riding and piano lessons, gifts, clothes, entertaining, 2nd and 3rd house costs, vacations, on and on. Being rich ain't easy.. or cheap.

Wrong...read "The Millionaire next door". Being rich can be both cheap and easy...just don't be ostentatious about it. Warren Buffett, the 2nd richest man on the planet comes to mind. He lives a very modest lifestyle, especially considering his vast wealth. He prefers to avoid the ostentatious stuff you've mentioned.

[legion]

In the latest issue of Automobile, a Ferrari dealer said that his richest customers are not his best customers. Reading between the lines, I gathered that the "aspiring rich" spend far more than the rich.

[Moneyguy1]

That is generally the case. The truly rich have nothing to prove.

[VaSteve]

My wife and I are both professionals and make pretty decent money. We know what things cost and try not to live outside our means. Knowing what things cost, we know there are some people living WELL BEYOND their means (else they are paid a fortune...and I don't think that's the case).

Interest only mortgages, leased luxury cars, credit card debt sure gives the appearance of wealth. Fake it till you make it I guess.

[cab83_750]

As for median home prices, don't forget that these house were probably worth half of 1/3 of what they were 3-years. I have friends who bought houses <6 years ago at $350K and now valued at over 1.2m.

Of course, watch out for the continued downward housing price trend.

I would not even tell you how much my house was and how much it is today (adjusted)!!!

[MotoSook]

So these people don't have any secret method for making their money work for them...phew! I thought I was missing something