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Sure, but 1h45 mins away in the middle of the desert is still unaffordable. A few posters including myself have broken down what the carrying costs of these mortgages are. The banks won’t approve a $600k mortgage to someone earning $70k a year, but that’s what these run down fixer uppers in the far suburbs cost . Why is it difficult for people to admit home prices are too high? We’re in the middle of an artificially caused scarcity from restrictive zoning and NIMBYism. Peoples incomes do not support what houses are selling for. Very, very few people earn enough to buy in today’s market. I’m guessing the % of homes sold to first time buyers is in the single digits nowadays, probably a fraction of that number those without co-signers. Just because there’s a million people wanting to sell their houses for a million dollars doesn’t mean there’s a million people making enough money for that. If shelter is too expensive to afford, people will live in squatters settlements on the streets. The tent cities we’re seeing are the first incarnation of that. If the housing crisis continues to get worse we will get more permanent type slums like you see in India
Sure, but 1h45 mins away in the middle of the desert is still unaffordable. A few posters including myself have broken down what the carrying costs of these mortgages are. The banks won’t approve a $600k mortgage to someone earning $70k a year, but that’s what these run down fixer uppers in the far suburbs cost . Why is it difficult for people to admit home prices are too high? We’re in the middle of an artificially caused scarcity from restrictive zoning and NIMBYism. Peoples incomes do not support what houses are selling for. Very, very few people earn enough to buy in today’s market. I’m guessing the % of homes sold to first time buyers is in the single digits nowadays, probably a fraction of that number those without co-signers. Just because there’s a million people wanting to sell their houses for a million dollars doesn’t mean there’s a million people making enough money for that. If shelter is too expensive to afford, people will live in squatters settlements on the streets. The tent cities we’re seeing are the first incarnation of that. If the housing crisis continues to get worse we will get more permanent type slums like you see in India
This is nothing new. When I lived in the San Francisco we could not afford to buy a house either. A lot of people did commute 2 hours each way in order to buy a house. We were patient and there was the S&L crisis 1990-1991 and we bought a 1,100 sq ft townhome in Dublin, California for $180k. A lot of good it did us as we got divorced (not of my choosing). That unit goes for $900k today. Where I live now I bought in 2002 (with a VA loan due to my service in the military). It had tripled in value (from 2002) during the pandemic. So, the guy next door owned the house as a rental purchasing it in 1/2016. He never did a thing to it. He put it up on the market for $595k and it took 4 months to sell it at $465k. So, the woman who is in the middle of a divorce that bought it told me she's going to put about $20k of work into it and call it a day. She's an engineer and not a stupid person. These houses sold to engineers when I purchased in 2002 and they are still selling to engineers today. She got very good pricing.
I guess it all depends if there’s a dip you can afford. Right now my area is supposedly in a “dip”, but you have to be in like the 95th percentile of incomes to buy a first property here. I don’t see how this is sustainable long term. It resembles feudalism where a small minority of landowners or gentry rent to the people who get their money through labour or “serfs”. Statements like this and the appearance of massive illegal squatters slums may seem hyperbolic now, but that’s the path we’re on if the trend stays the same and incomes don’t outpace property prices
I guess it all depends if there’s a dip you can afford. Right now my area is supposedly in a “dip”, but you have to be in like the 95th percentile of incomes to buy a first property here. I don’t see how this is sustainable long term. It resembles feudalism where a small minority of landowners or gentry rent to the people who get their money through labour or “serfs”. Statements like this and the appearance of massive illegal squatters slums may seem hyperbolic now, but that’s the path we’re on if the trend stays the same and incomes don’t outpace property prices
In the US we are not all trying to live in the highest cost of living areas. I have friends that cannot buy where they were raised and have all their friends and family. They rent and assume they will never buy. I blame the parents for staying in those areas knowing full well their children cannot afford it (possibly ever). In that case it would be upon the family to contribute. However, until their own parents pass on they may not be willing to do that. Also, other friends and their children have to live with the fact that they have to travel to visit. This happens anyways in the US as it is common to chase jobs to wherever they lead you.
And it was likely not her first property is the part you left out. The barrier is entering the market in the first place. People who owned already before the pandemic have had double or even triple digit growth on their home prices. Did she downsize after a divorce or something? Where’s the cash coming from? Is she living with you while you pay her bills to save like $80k a year from age 21-29? Things like that are not the norm for most people. I’m glad your daughter is successful and wish her well but the idea that prices aren’t overvalued simply because the top 5% of income earners are able to buy the cheapest properties is just not good math
By her later 20s she was earning in the $300K range, just like most all of her college class mates. Then she took a gap year to ski in Japan, and then the pandemic hit, and effectively she couldn't return to the USA for the better part of a year (couldn't legally work in Japan) - but she's been back for a while now.
But it isn't about my daughter, who probably is below the mean in compensation from her class. Indeed, one of her high school friends never went to college. While he was in High School, he had a part time job at Facebook. The friend was set to go to Harvard - but Facebook made him a very solid 6 digit offer not to go to college but instead go to Facebook and work full time. He's still there.
Last edited by moguldreamer; 01-09-2024 at 10:57 AM..
I think what people mean to say is that it is not possible for 95%+ of the young adult population to achieve those academic goals or earn those salaries.
They will lose the rat race and hence not be able to afford their dream homes for years if not decades.
I've not done a very good job of trying to make a point regarding real estate prices.
In Economics, there is the useful concept of "At the Margin", sometimes called "Marginal". Indeed, a useful analytical model used in many places in Economics is called "Marginal Analysis." Entire books & treatises are written about the topic.
Marginal Analysis can be applied to Real Estate prices. The average compensation in a local market is largely irrelevant to determining real estate prices. What matters is the financial picture of the "Marginal Buyer" in that market.
Last edited by moguldreamer; 01-09-2024 at 10:58 AM..
I've not done a very good job of trying to make a point regarding real estate prices.
In Economics, there is the useful concept of "At the Margin", sometimes called "Marginal". Indeed, a useful mental model used in many places in Economics is called "Marginal Analysis." Entire books & treatises are written about the topic.
Marginal Analysis can be applied to Real Estate prices. The average compensation in a local market is largely irrelevant to determining real estate prices. What matters is the financial picture of the "Marginal Buyer" in that market.
I do not think I ever heard you say what you did for a living when you were working. Were you actually employed as an "economist?" Like, what were your last 2-3 job titles? Obviously, you speak in foreign tongue - LOL
Thinking at the margin means to let the past go and to think forward to the next hour, day, year, or dollar that you expend in time or money. What’s better for you now or in the next few minutes? If you think at the margin, you are thinking ahead. At some point, if you continue to drive around the block again and again with no results, an economist would encourage you to think about the future instead of bulleting on the past. You can’t change the past, but you can change what you do next. (Economists sometimes summarize this by saying, “Sunk costs are sunk.”) And in what you do next, you should weigh the costs and benefits starting afresh for the next few minutes of your time–which is what economists mean when they say, “Think at the margin.” At the margin, you could get a parking spot for $10 or you could drive around and maybe get a parking spot for free with a probability of, say, 20% in the next hour. Thinking at the margin means weighing those future options, and not focusing on what you did in the previous hour of frustrating circling around.
I'd like to know where you are seeing these $150k salaries
High tech, Silicon Valley companies, overall Bay Area.
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