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Yes, rents are set by wages as you have to pay them out of your wages. Supply and demand also works for buying. Because central banks have ran with ultra-loose

Yes, rents are set by wages as you have to pay them out of your wages. Supply and demand also works for buying. Because central banks have ran with ultra-loose monetary policy since forever credit supply is huge and prices detach from wages. What a total mess these guys have created. Easy on the way down, chaos on the way back up.

gragas 10y ago
> rents are set by wages as you have to pay them out of your wages. Are you implying that there's some sort of grand-scale collusion on rent prices? If most rent takers think "hey, the median salary is X so I'll just charge X * 0.33" then what's stopping another rent taker from drastically undercutting that price?
- 13of40 10y ago
  You could argue that home prices are tied to wages and rent is tied to home prices.
  - ehnto 10y ago
    I would say that easy access to loaned capital has perversed the connection between wages and house prices a bit.
    - gragas 10y ago
      >easy access to loaned capital has perversed the connection between wages and house prices a bit Only to a certain extent. Loaned capital is still limited by wages (no one is going to give a $1 million mortgage to someone who makes $40k per year). But again, I don't think wages has hardly anything to do with house prices; it's all about supply and demand. Sure, most people might only be willing to pay 1/3 their salary on housing. That doesn't mean that the price for housing is that number. If a huge supply of housing for less than that price floods the market, then why would everyone continue to pay 1/3 their salary for housing when they could pay 1/4 or 1/6?
  - gragas 10y ago
    I'd like to see that argument. The median home in California is not by any means affordable. The median home in many other states is absolutely affordable. Furthermore---and back to my original argument---suppose that home prices are X * C where X is the median salary and C is some number between 0 and 1. What's stopping someone from drastically undercutting the artificially-high home price? I have no reason to believe that either home prices or rent are set by wages.
  - branchless 10y ago
    Nope. Loose money (low rates) mean yiu can borrow more for the same cost on the interest portion.
- branchless 10y ago
  I've no idea where to start with this. Prices are set by what the market can bear.
morgante 10y ago
Wages are a factor of demand (and hence help to drive rent prices), but they're far from being the only factor. Supply is also a key factor though: there is far from being a perfect correlation between wages and rent.
bouis 10y ago
This is a false dilemma. Higher wages cause rent to increase (as you mentioned), but new housing causes rent to decrease (as OP mentioned). If high wages are making housing unaffordable for people, you can increase the housing supply. I think with the existing situation in SF where you have a lot of young people with high wages who will live in a run-down place in the mission and pay $2-5k, if you build a bunch of luxury condos and need people to fill them, those people will move out of the mission and into a luxury condo. As buying pressure for lower quality housing e.g. off Mission St. is released into the luxury market, prices come down and schoolteachers can once again afford the Mission, or Lower Haight, or wherever. One valid point I see coming from the anti-development camp is that the new surge in tech jobs is caused by a credit bubble, and once that crashes, you'd have all this excess supply, and it will tank the SF housing market, making the NIMBYs worse off than if expansion happened gradually. I guess it comes down to whether you "believe in" the sustainability of bay area tech.
- morgante 10y ago
  Opposition to development from existing homeowners is entirely logical. They're the ones who have the most to lose. It's disguising of this NIMBYism as looking out for low-income renters that is ridiculous.

gragas 10y ago

> rents are set by wages as you have to pay them out of your wages. Are you implying that there's some sort of grand-scale collusion on rent prices? If most rent takers think "hey, the median salary is X so I'll just charge X * 0.33" then what's stopping another rent taker from drastically undercutting that price?

13of40 10y ago
You could argue that home prices are tied to wages and rent is tied to home prices.
- ehnto 10y ago
  I would say that easy access to loaned capital has perversed the connection between wages and house prices a bit.
  - gragas 10y ago
    >easy access to loaned capital has perversed the connection between wages and house prices a bit Only to a certain extent. Loaned capital is still limited by wages (no one is going to give a $1 million mortgage to someone who makes $40k per year). But again, I don't think wages has hardly anything to do with house prices; it's all about supply and demand. Sure, most people might only be willing to pay 1/3 their salary on housing. That doesn't mean that the price for housing is that number. If a huge supply of housing for less than that price floods the market, then why would everyone continue to pay 1/3 their salary for housing when they could pay 1/4 or 1/6?
- gragas 10y ago
  I'd like to see that argument. The median home in California is not by any means affordable. The median home in many other states is absolutely affordable. Furthermore---and back to my original argument---suppose that home prices are X * C where X is the median salary and C is some number between 0 and 1. What's stopping someone from drastically undercutting the artificially-high home price? I have no reason to believe that either home prices or rent are set by wages.
- branchless 10y ago
  Nope. Loose money (low rates) mean yiu can borrow more for the same cost on the interest portion.
branchless 10y ago
I've no idea where to start with this. Prices are set by what the market can bear.

morgante 10y ago

Wages are a factor of demand (and hence help to drive rent prices), but they're far from being the only factor. Supply is also a key factor though: there is far from being a perfect correlation between wages and rent.

bouis 10y ago

This is a false dilemma. Higher wages cause rent to increase (as you mentioned), but new housing causes rent to decrease (as OP mentioned). If high wages are making housing unaffordable for people, you can increase the housing supply. I think with the existing situation in SF where you have a lot of young people with high wages who will live in a run-down place in the mission and pay $2-5k, if you build a bunch of luxury condos and need people to fill them, those people will move out of the mission and into a luxury condo. As buying pressure for lower quality housing e.g. off Mission St. is released into the luxury market, prices come down and schoolteachers can once again afford the Mission, or Lower Haight, or wherever. One valid point I see coming from the anti-development camp is that the new surge in tech jobs is caused by a credit bubble, and once that crashes, you'd have all this excess supply, and it will tank the SF housing market, making the NIMBYs worse off than if expansion happened gradually. I guess it comes down to whether you "believe in" the sustainability of bay area tech.

morgante 10y ago
Opposition to development from existing homeowners is entirely logical. They're the ones who have the most to lose. It's disguising of this NIMBYism as looking out for low-income renters that is ridiculous.