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Yeah, while I appreciate the above article I can only wish that were true. There is a very small inventory of housing in the $1-1.5M range in the city I’m looking and most of the best options are new construction. The rest of the market is littered with old style homes, so if you want a modern home - which most buyers do now - then your options are few and far between. The luxury segment is moving incredibly fast and has seen a big rebound this year. It was lagging the market, that’s true, but it isn’t true anymore. Not in hot housing markets at least.
I think their statistics are a bit laughable too. If “rich person” is the top 10% and you’re saying the median has a net worth of only $1.2M, of course those people aren’t in $1M homes; they can’t afford them. They’re not rich. They’re doing well enough, but you shouldn’t have more than 20-30% of your net worth in your house. So if you had a $1M house that means you hardly would have anything down and better have an enormous income to support that mortgage. When I talked to one luxury builder ($1.5-2M homes), half of their buyers are all cash buyers. People buying million-plus homes have a net worth way more than $1.2M, so that whole part of the article is misleading. If that’s your entire net worth you’d be wise not to be in a house above $500,000 ideally.
I would be curious to know where people are seeing strong markets on the higher end other than maybe Silicon Valley.
Exactly. South Dakota has been heating up recently. Pockets of the rust belt appear on the move. Pittsburg looks like a decent investment opportunity. Nice homes in Detroit have been normalizing in price again in good locations.
Among 122 metropolitan statistical areas analyzed in the report, those with the biggest year-over-year increase in median prices were San Jose, California (up 25.0 percent); Flint, Michigan (up 23.7 percent); Seattle, Washington (up 14.3 percent); Boise, Idaho (up 14.3 percent); and San Francisco, California (up 14.2 percent).
San Francisco has the economic input and the constraints, but is actually starting to lose people. San Jose has the economic input and is still gaining people. Seattle has physical restrictions of land...and all the former San Francisco populace moving there. Flint...I hope has improved non-financial conditions like water and lowering crime, or could be recovering on replacement cost. I know nothing about Boise.
Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
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Originally Posted by Grlzrl
I would be curious to know where people are seeing strong markets on the higher end other than maybe Silicon Valley.
Here where I live in Sammamish, WA (pop. 64,000) there are several new developments of homes in the 3,000 sf and up range, starting at $1.3 million, and they are selling fast before even built. The median price for an existing home is at $945,000, and they have been selling in a few days at over asking price, though lately may take a week.
I would be curious to know where people are seeing strong markets on the higher end other than maybe Silicon Valley.
It’s not hard to look. Las Vegas has a very hot luxury housing market. Every house in Axis for instance in Henderson is $1M or more and because I won’t have my cash until early next year and the market is so hot, I won’t likely get in there. Another community is Nova Ridge, those houses are all $1M or more by the time you buy the lot and pay for upgrades. They’re all listed in the $600-800K range but that’s literally no lot and no upgrade and no yard. Another builder just acquired land for 324 home sites in Summerlin at $69M, they will be building homes in the $900K to $1.5M range. I couldn’t find any houses I even liked below a million in Vegas and the high end market is hot enough that selection is going fast and the best lots are taken immediately. There’s no market for luxury homes in flyover states, maybe, but in the good housing markets luxury houses are selling fast. There is a ton of wealth created by the stock market and booming economy. None of those people at the upper end are buying starter homes lol.
I'd put attribute that to land scarcity. Dallas has significant economic and population growth, yet there is low land scarcity in the area. The government is easy to work with. There's lots of land to choose from. Contrast this with New York City and developments are only open to a select few.
Unless you're looking at it from a true materials/labor only construct. Labor was certainly an issue in Williston, ND a few years ago. I would imagine hauling certain materials to a town 100 miles outside of Barrow, Alaska may have difficulties as well. That aspect was truly overlooked, but I'd classify it in land scarcity for the point of this conjecture.
San Fransisco and Manhattan simply wins your argument.
Vacation is over, but thought I'd leave this little tidbit. It's a graph of home price relative to annual income...I believe for a family. If you look at the short term, we're getting closer to the peak in 2006. It looks like valuation is starting to bubble a bit.....but if you look way back in history at the ration from the 40's and 50's, it was surprisingly just as elevated then on a more constant basis.
It may be understandable in that most households were single income at that point. You also have big migrations form the city cores to the suburbs and the country started building interstates. You had more people being born.
As the golden age of the worker came into play in the 60's, the ratio fell.
One thing I don't know for is when loan offerings switched. As you may imagine, the early home loans were for 5 years, just like companies. Over time it moved to 10 and then it settled on 15 for awhile. Later on the new crazed loan product was the 30 year, which eventually became the norm for first time home buyers....we flirted with interest only and still longer terms briefly, but it was never the majority. The other loan piece would be understanding when and to what extent the government entered the home mortgage market.
It's a graph of home price relative to annual (household) income...I believe for a family.
...but if you look way back in history at the ratio from the 40's and 50's, it was surprisingly just as elevated then
on a more constant basis.
But the 40's and 50's was also mostly a SINGLE earner household world;
almost entirely so at middle class households and above. Which pretty much negates the comparisons that can be made.
If the second earner incomes in most of our current households weren't NEEDED to cover basics...
I would say Land availability. The amount of high paying jobs do not match up 1:1 with the high priced homes. In certain places it's 1:10 which leaves many homes empty being owned by oligarchs, conglomerates just to sit there with nobody in it.
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What factors drive housing prices?
