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That doesn't mean individuals' wages are keeping up with home prices.
Have been watching the wage to home price issue since the 80's when I started looking for my first home...
Have seen the same thing, everywhere in the country I had to go for work...
A nice home takes 2 average incomes to float the mortgage... I believe that started happening after WW2... when women entered the workforce en masse... and mortgages become commonplace... Home prices went up to absorb the second income... and the bankers benefitted the most (as well as sellers that got in prior to these event).
In Ca. it's even worse in the nice areas. Home price are 4x or more the national average... so an individual would need 9x the average income to float the mortgage.
Salaries have been flat for decades... so eventually we have to reach a cap... unless we are going to send the kids out to make a 3rd income to float the morgage on.
So if there have been price reductions as of late... just means the market it finding the highest price that folks in the area can afford. But rest assured... without an market implosion... it won't be to far from the multiples of income mentioned above.
Compare incomes to home prices in any part of the country, you'll see similar.
If those rough numbers don't hold... you can bet there's something wrong with that area. A reason folks don't want to live there.
At least that's been my experience.
For me the fault is clear... I failed to get into a career field that typically pays the 2x, 3x, or more that is needed to beat this game, when I was young. To old now to go back and become a surgeon, etc. However, if I could... I would. Rather than spend a life behind the eight ball on home prices.
What blows me away (and I'm college educated in at tech field) is how many folks richer than me there must be... even though I've worked my whole life... never had drug problems... no divorces... always been a saver... (but have lost it all more than once during bad periods and recessions in my career field)... no "crazy mortgages"....etc.
Every single home here in South OC that I can't afford....*someone* else can. And on the day I guess I have to packup and leave this region if I want a decent house... somehow the clerk at Wal*mart will somehow, still be able to live here.
So somehow... I missed the boat... to be sure! LOL!
Lots of different ways buyers are buying... not mentioning Interest rates are low compared to other periods.
Those 30 and under I have seen buying are all two incomes with no kids... maybe kids on the way but no kids...
Since I work in the medical field here is what I see... two RN's or a Police-Fire Fighter with RN or those involved with medical equipment sales and pharmaceuticals...
None of these require a 4 year degree but most new hire RN's do have BSN but not all...
The other part is help from family... and this happens with parents, grandparents and even Uncles and Aunts...
Another way is to buy a 2 to 4 unit property and live in one and rent the other units... this is exactly what I did... bought a home with a legal in-law in back... I lived in the in-law and the home rent covered most of my expenses and as a bonus I had depreciation on the rental part...
Another way which is less and less is using earned Military Benefits... which was standard practice for decades... now not so much but I know two that did just that in the last 3 years...
Yes, and if the average us salary is about $54K a year and the old standard of home price limit is 3x your salary... my numbers are spot on.
Granted... last time I talked to a mortgage broker this year... seems they are allowing people to go 6x their salary for the home price if they are qualified.
But historically my numbers are right on.
Takes 2 average incomes to float an average house in an average market.
Takes 4 average incomes in a market like Ca with your "average CA" number...
But more like 8 average incomes (or more) in markets like South OC, San Diego, San Francisco etc.
So I'm still dead on.
Have been fighting with this for decades if not years... I'm quite aware of the disparity between earning power and home prices in the places folks want to live.
Your CA number isn't representative of the OC market I was basing my statements on.
My apologies. Forgot that I was in the CA forum and not the OC forum.
Takes a roughly $250K / year household income in OC to afford an typical single family home mortgage. (Granted someone with cash in hand can have any mortgage they do or do not want.)
It's worse in the Bay Area.
South OC is bad, but there are actually worse spots for this discrepancy in Ca. Bay area is one of them.
And the thing to keep in mind is... the home and lot you get is pretty crappy at the average costs, compared to most of the rest of the country.
But of course the weather, etc. make many folks willing to pay the going rate.
I've said many times... "If I could make $250K a year, here's where I'd buy the house, if not Maui"... I'm one of the folks that *would* pay it... if I *could*... and therein lies the rub... for most of us... finding a way to earn $250K a year is not going to happen.
Working spouse of course, makes it more likely to have the needed *household* income... but for me... I'm single and older... ain't likely that an attractive high earning gal is going to decide to marry me any time soon. LOL!
Lots of different ways buyers are buying... not mentioning Interest rates are low compared to other periods.
Those 30 and under I have seen buying are all two incomes with no kids... maybe kids on the way but no kids...
Since I work in the medical field here is what I see... two RN's or a Police-Fire Fighter with RN or those involved with medical equipment sales and pharmaceuticals...
None of these require a 4 year degree but most new hire RN's do have BSN but not all...
The other part is help from family... and this happens with parents, grandparents and even Uncles and Aunts...
Another way is to buy a 2 to 4 unit property and live in one and rent the other units... this is exactly what I did... bought a home with a legal in-law in back... I lived in the in-law and the home rent covered most of my expenses and as a bonus I had depreciation on the rental part...
Another way which is less and less is using earned Military Benefits... which was standard practice for decades... now not so much but I know two that did just that in the last 3 years...
Yes, but most of what you are saying is *two people*... I.e. DINKs...
I'm just one person and in my 50's... not likely an attractive, high earning gal is going to hook up with me any time soon. At my age... it's expected that *I* already am a well off "big deal", LOL!
So the problem as it confronts me is, "single income household of one, with slightly above national average income".
As such, SoCal housing market is unaffordable if we are talking single family homes.
And well... while any number of condos are in reach... I've never seen a place with such crappy site planning for condos... between the density, the dumpsters and the recycled water used on everything... they are the equivalent of living in a waste transfer facility and wastewater plant.
Wouldn't mind a nice condo, if it weren't for the generally crammed sit plans they sit on.
To be honest, even most single family homes are so smacked in and on such small lots that they have similar issues in much if Mission Viejo, Laguna Niguel, Aliso Viejo, Rancho Margarita, etc.
Which surprises me... Ca. is supposed to be about conservation, ecology, etc... and yet the wastewater plants and dumps are literally right in the residential areas. It's really lousy civil engineering to my eyes.
But, same conumdrum... it's SoCal... so people put up with it and are willing to pay huge markups for it.
The only mystery to me is... how are they affording it? I'm a degree professional, with no real debts, etc. and it's out of reach for me.
Yet there are millions here doing it somehow.
I just figure I must be really dumb or something. LOL!
.. it's SoCal... so people put up with it and are willing to pay huge markups for it.
The only mystery to me is... how are they affording it? I'm a degree professional, with no real debts, etc. and it's out of reach for me.
Yet there are millions here doing it somehow.
They bought at one of the low points of the housing market (2012-2016, 1995-2002, etc), they bought back when you really COULD buy a starter house in southern California for 3 X your salary, parents/family members helped them with a down payment, or they were lucky enough to buy and sell their home during a period when the value of the home doubled.
I have watched prices go up and down over the years. Realize that they never get down to the last low and they always surpass the last high. In the run up between 2000 and 2008 I saw home prices in my area climb from the $150,000 range for a 60's era 3 bed 2 bath home on up to $600,000+ I watched those same home decline down to the $290,000 range. I see them back at the $525,000 range today. I don't see prices having a dramatic drop just yet.
If I can follow the price of homes in my area for the past 40 years, with drops and increases over time, I would say we are a few years away from a correction of any kind. I would not rule out a drop, but that happens from time to time. Minor corrections are not a falling market.
The reality though is real estate is a local thing. Region's are connected and can effect each other, but local issues can still prevail.
For me we are in this for the long haul, and hopefully will not ever need to move. The goal is to pay the home off and live our life. You have to have a place to live anyway. I am under the mind set that a home should not be included in our net worth. While it is an asset, it is an asset that cost me money to keep up. It only becomes a benefit when we sell the home, and if we can sell for a profit. The money earned becomes an addition to our net worth. Take all the people that sold a home and realized a gain. They still had to live somewhere. They may have moved to a cheaper home. I know plenty that did that. They sold a high price home here and moved to another state, buying a lower priced home. The remainder that is left over is a realized gain that can be invested.
They bought at one of the low points of the housing market (2012-2016, 1995-2002, etc), they bought back when you really COULD buy a starter house in southern California for 3 X your salary, parents/family members helped them with a down payment, or they were lucky enough to buy and sell their home during a period when the value of the home doubled.
Some of it is just pure luck in regard to timing.
Folks who bought in during the housing bust of a decade ago have enjoyed nice value appreciation, some more than doubling. Yours truly is one who has enjoyed this in the bay area. Prior to the bust I was considering places like las vegas, arizona, oregon, central california etc to retire, since I was a renter. My plan was to save as much as possible and buy at one of these locations. Then by some accounts, the sky begin to fall. The stock market, the housing crash happened. I begin to realize that I could afford a lot of these properties. Since I was a superstar at work and my job was secure, I begin searching for the best location, best value that my hard earned dollars could afford. As they say the rest is history.
Folks who bought in during the housing bust of a decade ago have enjoyed nice value appreciation, some more than doubling.
This is an area where you need to choose what matters.
You want a NICE, affordable house? Or a prestigious one?
Choose. You can't always have things both ways.
Case in point. While many areas (Bay/OC/SD/LA) have doubled and in some cases even tripled in the last decade, my house-which was brand new build in 2009....SFH...on a small cul-de-sac (which just this alone should command something of a premium) in my Central Valley town has gone up just ≈20% in the same time period.
This is an area where you need to choose what matters. You want a NICE, affordable house? Or a prestigious one?
Choose. You can't always have things both ways.
Case in point. While many areas (Bay/OC/SD/LA) have doubled and in some cases even tripled in the last decade, my house-which was brand new build in 2009....SFH...on a small cul-de-sac (which just this alone should command something of a premium) in my Central Valley town has gone up just ≈20% in the same time period.
Priorities man. All about the priorities.
There's no question that the path I took was the best for my circumstance. If I ever decide to relocate to a lower cost of living place like the central valley, just by the appreciation and equity that I've accumulated, I could afford something in the 700K range, and still have change left over. For now I prefer the bay area because the vast number of amenities it offers. I live in a nice home in a desirable neighborhood in silicon valley, something that seemed totally out of reach a few years ago. Sure I may get more bricks on a nice lot in the central valley, but for now i'm perfectly happy with my current situation.
Location: Formerly Pleasanton Ca, now in Marietta Ga
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Quote:
Originally Posted by RockyCity
There's no question that the path I took was the best for my circumstance. If I ever decide to relocate to a lower cost of living place like the central valley, just by the appreciation and equity that I've accumulated, I could afford something in the 700K range, and still have change left over. For now I prefer the bay area because the vast number of amenities it offers. I live in a nice home in a desirable neighborhood in silicon valley, something that seemed totally out of reach a few years ago. Sure I may get more bricks on a nice lot in the central valley, but for now i'm perfectly happy with my current situation.
You’re sitting on gold. I can’t see ever wanting to move based on your circumstances.
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Your facts are way off. 
