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Yea it is always funny when someone tries to do some sort of calculation that is not based on any sort of rationality (as Sav858-a Californian pointed out), even as far as intent goes. Quite amusing.
This is interesting. The nerd in me simply likes doing these kinds of comparisons. I have a question for you real estate aficionados.
Can this information be used to obtain an estimated value of a Metro? I.E. What is the cost to buy-in and what is a Metro is worth?
For example, if the Bay averages let’s estimate for ease $600,000 per unit and has 7.4 Million people, we can make reasonable assumptions. At an average family size of 2.6 people, we have 2.85 Million Units. At $600,000 per unit, that’s $1.707 Trillion dollars of Real Estate that the people in the Bay have invested in their homes. Total buy-in of the area.
I do the same for the Los Angeles, let’s just say Greater LA is 18 Million people and let’s just assume an average of $250,000 per unit. LA is worth $1.731 Trillion in single family homes.
Do the same for 9.7 Million in Chicagoland, at 187K per unit, and it’s only worth 676 Billion, a mere fraction of the Bay and LA.
The whole tri-state area gets to $3.2 Trillion for reference. Feel free to try this with other metros.
[Perhaps a more technical person like Danny or Lifeshadower can assist, or point out where I went wrong, but it looks like LA and the Bay are practically worth the same. And when you plug in a comparable metro, Chicago, and it drops to just a fraction.
Crazy right?!? Any thoughts?
There is a Census Bureau stat which measures the total aggregate value of all housing units and only 3 areas, NY, LA and SF are over $1 Trillion. DC comes next and then everywhere else.
What's the median income in the Bay Area? Less than $100k with an average home price of over $600k? How many people that live there can actually afford to buy a home?
What's the median income in the Bay Area? Less than $100k with an average home price of over $600k? How many people that live there can actually afford to buy a home?
Well, according to the Census Bureau, 974,000 households in the Bay Area earn $100,000+ annually and considering there are only about 6-7 thousand single family homes for sale at any time in the Bay Area at any given time, its no wonder that competition is pretty fierce.
Also about 300,000 households earn $200,000 a year so actually many households can afford the homes currently for sale and that's why the market is booming. Limited supply and increased demand with the improving ecomomy.
Some cities seem WAY too expensive to live in lately:
Denver (It's essentially the Plains and there's not a huge scarcity of developable land. Why so expensive?)
Austin (very expensive for Texas, and just expensive in general. I thought the big draw to the area was affordability?)
San Diego (I get it, there's an ocean. Do jobs pay enough to cover this cost in SD? I don't hear much about that.)
Milwaukee (higher than Minneapolis AND Chicago -- why?)
On the other hand, some places seem incredibly cheap considering the cost of living and avg. salary for white-collar jobs (like Atlanta).
Short answer is no, this a median, meaning half are more and half are less (in theory 49% in LA could be over 10 Million and still have a median at this rate). So in simple terms an average would be a better marker. Your calculation assumes normal distributions between the areas.
What you can do is use housing units times average to get your number
It also assumes that every homeowner owns their home outright, which becomes further and further from the truth when as the value of the home increases. Most people own like 30% or less of the principal value of their home. I wonder how those percentages change depending on the median home price (or IF they change at all)?
San Diego (I get it, there's an ocean. Do jobs pay enough to cover this cost in SD? I don't hear much about that.)
Not really, that's why SD can still be very expensive even though compared to the Bay Area housing costs are significnatly lower; the salaries are less in line with the COL. People call it the "sunshine tax" and it's one of the biggest gripes about the area people have.
Some cities seem WAY too expensive to live in lately:
Denver (It's essentially the Plains and there's not a huge scarcity of developable land. Why so expensive?)
Austin (very expensive for Texas, and just expensive in general. I thought the big draw to the area was affordability?)
San Diego (I get it, there's an ocean. Do jobs pay enough to cover this cost in SD? I don't hear much about that.)
Milwaukee (higher than Minneapolis AND Chicago -- why?)
On the other hand, some places seem incredibly cheap considering the cost of living and avg. salary for white-collar jobs (like Atlanta).
Austin has a higher percentage of Government, Tech, Professional and Educational jobs than the rest of the state.
Its average hourly wage is $22.18 an hr (which is second to only Houston in the State).
Anyway, the bulk of homes in Austin sold last year sold for less than 300K. About half of the distribution of sales falls between 100k and 300K. So I guess a median of 219K is accurate in this instance. It might not be that Austin is high it may be that using median value for places like Chicago gives a low ball. Houston for example,, has a wider distribution than Austin, having the bulk of its homes sell for between 100k and 400K.
Using the mean, Austin value is even higher than the median -251.7k in 2011 (The mean for Houston was 250K due to the wider distribution, it got a mean closer to Austins)
What I did notice was that in 2007 Austin had 12,100 building permits for single family homes (Houston is only 3 times as large as Austin yet 4 times as many permits were issued in 2007) and a mean value of these permits at $170K. In 2011 the permits had dropped by half to 6,200 permits at a mean value of 180K. The value jumped as far less homes were being built.
For the City of Austin the median Home price for the 4th quarter of 2011 was 183K. I guess under building drives up demand. Combined that with a more professional workforce allows Austin to have a higher than normal median home value for single family homes.
Some cities seem WAY too expensive to live in lately:
Denver (It's essentially the Plains and there's not a huge scarcity of developable land. Why so expensive?)
Austin (very expensive for Texas, and just expensive in general. I thought the big draw to the area was affordability?)
San Diego (I get it, there's an ocean. Do jobs pay enough to cover this cost in SD? I don't hear much about that.)
Milwaukee (higher than Minneapolis AND Chicago -- why?)
On the other hand, some places seem incredibly cheap considering the cost of living and avg. salary for white-collar jobs (like Atlanta).
Yes, to some people, the natural beauty surrounding the city is a MAJOR part in their decisions to move there.
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