1. I hate paying so much for a house, this is ridiculous, they need to build more supply.
2. I bought a house for some ridiculous price anyways.
3. I'm now fucked if more supply is added. Vote against any proposition that adds more units to the city.
4. Go to my job where I make the world a better place.
I just moved to the bay area from a large urban center. I live in the far away surburbs right now (Sunnyvale). It's kind of incredible to me how flat and sprawled out everything is. There are almost no buildings taller than 2-3 floors.
The bay area has a housing crisis, and it needs to grow vertically. There should be tall apartment buildings being built, especially in the suburbs, there's plenty of space. It's pretty clear that the bay area refuses to grow, because of political reasons, which are often selfish as you pointed out.
IMO, the inevitable outcome is that tech will slowly relocate to other areas that are more willing to accomodate (and perhaps welcome) the growth. I think it's already started.
Hey, thanks for posting this to HN. For those curious, our designer/CEO (DEO!) Judd Schoenholtz made the graphs in Sketch (we're huge fans). A little trick from him on making the bars to scale... use the actual values as the pixel heights then scale group to your desired size. Seems obvious but I would have done something dumber and more complicated.
As for the data, it's from the SFAR MLS (we're a participating broker member) and was double-checked with data from Paragon RE. If you want it, email datarequest@openlistings.com (I think we need to pull it into its own spreadsheet but I'll post the link here when we do).
How does anyone afford the median 1.2M house price? The income multiplier I always considered was 2X annual income which would require an income of $600K per household. I don't know anyone who makes that much as a programmer, even a dual $300K income seems unlikely. Are there really that many startup millionaires in SF?
People leverage themselves to the hilt. That's true in most of the major markets. Here in DC, there is a compressed clustering of houses around the 1-1.5m mark. Just below 1m you're talking about a dilapidated 3br in Bethesda. Above 1.5m you're looking at mansions in Georgetown.
I found the compressed range weird until I realized it was driven by the max mortgage you could qualify for on two incomes each in the 100-150k range (common mid-upper end government or NGO salary).
Got any stats on the mortgages issued? In the last housing boom I was concerned about the rate of buyers being over-leveraged and found that 80%+ of Seattle area mortgages were less than 5% down - that was a red flag for me to sell ASAP. Despite having bought a place only a month before I found out, I tried desperately to sell (nobody wanted to sell a place that had a lawsuit against the HOA and I was unlucky to have a lender whose underwriters didn't care when everyone else did) and get out of the impending doom but couldn't.
Last I remember in northern Virginia around Fairfax and Vienna (early 2015) more than 80%+ of home purchases were cash-only purchases and with median of 850k - this differs drastically from what you're seeing in DC though it seems. I did notice that my real estate agent was strongly pressuring me to buy when I wasn't ready to buy nor had the $150k+ to put down. Even worse, Virginia (and I think DC) is a recourse state so if house prices crash again you'd be on the hook to pay the difference back resulting in a likely bankruptcy or a debt burden that makes most student loan debt look laughable if all your equity and then some is erased.
For simplicity, let's say you put 200k down on this 1.2 mil home. Your mortgage payment on a $1 million loan would be a $4,490/month, or around $50,000 per year. $30,000 of that is tax deductible.
A general rule of thumb is that you shouldn't spend more than roughly thirty percent of your income on rent, so I think any person or family making over 150k/year could feasibly think about a purchase like this.
The major caveat is that $200k in savings is hard to come by.
You'd also have ~ $13,200/year in property taxes (also deductible) and should budget another ~ $4,000/year for maintenance and upkeep. Not earth shattering but it does add up. There's some political risk that the Feds will eliminate or at least limit one or both of these deductions. Your basic premise is accurate which is that low rates have enabled people to stretch their incomes to meet high housing prices. Since rates have steadily fallen since the late 70s we've sort of seen this play out before, and we know how it ends: people get into trouble when they lose their jobs and can't sell their house in a down market. If you have 30 years of relatively steady employment, then you are fine.
>The income multiplier I always considered was 2X annual income
It's generally 3-5x, depending on rates. I know that in Silicon Valley everyone thinks everyone is "killing it", but I bet people would be surprised how few people are actually making the ~$250,000 required to service a mortgage this size. The median income in SF is less than $80,000.
Thats the same what I thought when I read that comment. Here in germany most hoses go around for 300k-1M€. And still they are bought from families with a COMBINED income of far less then 100k€. It's quite normal for people to pay for a house for 20years, which would make it still cheaper then renting.
Also, 3.5% in mortgage interest? That's ridiculously high. Where I'm from you can easily get a mortgage with a variable interest of 1.46%.
In completely unrelated news, Stockholm is in a crazy housing bubble as well, and prices are actualy above Silicon Valley levels, yet people sustain that with incomes much lower.
>Also, 3.5% in mortgage interest? That's ridiculously high. Where I'm from you can easily get a mortgage with a variable interest of 1.46%.
I'm not sure where this even came from but: 3.5% isn't "high", historically. And that fact that you can get a variable rate of 1.46% during a period of globally historically low interest rates has little relevance to the 20-30 years it will take to pay down your mortgage.
In fact, buying a more expensive house because you can get a super-low rate now, without accounting for future rates, is a classic blunder.
How to buy a home in the US is weird and baffling to me, everything is different from what I'm used to.
The interest rate discussion is one thing, I don't understand why everyone here is only talking about a long-term fixed rate mortgage, where I'm from, everyone advertises the lowest variable rate. Coincidentally, Stockholm has a crazy housing bubble, so there's that.
Dual $300K income is achievable in households where they're both engineering or management professionals. But honestly, most of the people I know who've bought here have done so with the help of family money, eg. their parents plop down $500K for the down payment and they handle the mortgage.
Prices are also being driven up by a large number of foreign (largely Chinese) investment buyers. Their incomes are driven by all the Americans who buy goods manufactured in China, and so normal salaries don't apply.
I have always heard the loan should be 3x or less (so 100k salary = a 300k loan). Though that was back when interest rates were much higher and initially you would be paying mostly interest. Most people here are doing 5x or more.
As far as income, some engineers make 150k but then make close to another 150 due to bonus and RSUs.
The real question is will you make that for the next 30 years it takes to pay off the mortgage...
Most of my friends who purchased in SF or NYC used family money. There are a ton of wealthy families out there. Tech stock options follow close behind, but seem much more cyclical.
It is different. In 2007 the bubble was everywhere. Today markets like Los Angeles, San Francisco, Seattle, Vancouver are at or above 2007 levels. Other markets like Phoenix, Atlanta and most others have still not recovered.
It's lack of inventory causing the increase, not sub prime mortgages. I just bought a house myself in a hot market. It had 35 offers on it. That week there were about 3 houses available in the entire county of similar price. And every week I've shopped, the outlook was just as grim. They will need to build a lot more to meet the demand, but there isn't enough space.
The bubble really wasn't everywhere. The areas with a lot of genuine demand because of job growth and other factors (Bay area, prime areas of Northeast, prime areas of NYC) didn't decline to nearly the same degree that locales like Las Vegas did. Presumably, absent the sub-prime crunch, prices would have started rising more and sooner in the popular areas.
It just gives an income-adjusted figure to be able to compare with other cities in the US, and around the world [0]. It also gives a rough idea of how long a typical household would have to save in order to buy a home (though this depends on tax and other spending).
That represents a median multiple of ~16.4 (1.285m / 78378), second only to Hong Kong (19.0)[0], which has topped the survey since its inclusion.
Median is a tough number to use if a bunch of folks at the high end skew the data during a month- especially if volumes are drying up.
To get at what is occurring you probably need to show it in price bands. say top/bottom and middle third of real estate prices. How much volume at each and trends in each.
You have it reversed. The advantage of the median (50th percentile) is that a few outliers at the high end won't skew the data. To move the median, you have to move half of the distribution.
What I'm saying is the real estate market has very different characteristics in the low, medium, and high end. So the top third, middle thirds and bottom thirds should be broken out and you can't use median for the market as one sample set.
I agree that it can be misleading but it's the most common statistic used to describe the health of a real estate market. I think that's because it's rather robust to outliers. But, as we show in the post above, it's not robust to tightening / loosening of the price bands above and below median (e.g. median went down last month but the 1st quartile went up).
But isn't there a little bit of circular reasoning there? The median is the best statistic because it's the most common, and it's the most common statistic because it's the best.
I'm not advocating for any other single-number analysis presentation, nor do I think the median number is totally meaningless, but you're leaving a lot of data out in the name of creating a simple chart without asking if it's informative.
