Why on Earth would they not sell the $3M house and either move to Florida and live well-off lifestyle there or (if staying in the area is critical) just move into a smaller place in Bay Area and free up $1.5m+ for cash-generating investments or even just cash to spend? Just resistance to change?
Grim picture for those with a large mortgage and career runway ending for sure... But if the house is paid off and one is retired, option value does not look too bad.
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I wonder about the same thing myself. They have told me silly things like "but where would we go?" I've actually heard the same thing from a lot of house rich retirees on the Peninsula. I think these folks derive a lot of self esteem by saying they have millions while complaining about the high cost of everything else. Like having their kids living nearby.
The 70 yo couple wants to give their home to their son who cannot afford to live in Palo Alto. They own the home free and clear. The fifty somethings have a way to go on their mortgages - they bought upmarket when they were promoted in their 40s.
I don't get it. But then, I'm the guy who left. I don't think it's worth living there unless you are drawing good pay. But everyone I know who gets a big raise moves up to a more prestigious home. I guess it is emotional with these folks. Having lived in the community since 1992, I can say part of the culture is always saying how wonderful the place is. You need to do this when the mortgage consumes an entire salary for a working couple. After you tell the same lie too long you start believing it.
A good friend of mine recently gave up on building a dream home in Maui. He ran out of cash. I asked why he didn't just sell his $2M home since he no longer worked and he replied "I cannot do that, where will I stay when I come back?"
I dunno a hotel? Delusional response. This is what happens when you play too many mental games with yourself to soldier on.
As for the RV living,I knew two people who did this in the late 90s. They saved up big bank accounts but later went on to piss the money away and end up poor. Not that you cannot be the exception. If you are disciplined and invest your rental savings away it can be brilliant. Especially if you're drawing a sw engineer's salary at Facebook.