4 ms·

Renters and pro-growth, urban-minded owners would seem to constitute a majority in many of the highest cost parts of California. And yet my town recently passed

Renters and pro-growth, urban-minded owners would seem to constitute a majority in many of the highest cost parts of California. And yet my town recently passed a milestone of sorts: the principle and interest to buy the median home consume 100% of median household income, before taxes, food, or any other expenses. This study appears to explain how the current situation has come about.

michaelchisari 9y ago
California seems to have a (huge) added problem of speculative real-estate investment. The median price on a home will skyrocket if there's a significant amount of people who buy up properties for investment and not for use.
- mistursinistur 9y ago
  What's the evidence that speculation is driving price increases in California?
- eherot 9y ago
  People buy properties as "investments" when they see prices rising constantly, not the other way around.
  - michaelchisari 9y ago
    Sure, but it exacerbates the problem of rising rents.
pjschlic 9y ago
This sounded interesting, do you have a link to this study? I was going to try to do this analysis for where I live, and after looking up median income for the area, I realized I wasn't sure what you meant by 'down payment and interest consume 100% of income.' Did you mean a 20% downpayment and interest on a loan would consume one year's worth of income... because that actually seems pretty cheap if a median income in my area was enough more than the 20% down payment for a median home in my area that it could also cover the interest for year... Had you meant 3% + 1% PMI + 4% interest for an FHA consume 100% on median, because that definitely implies either high prices on houses or low median incomes.
- wnissen 9y ago
  It's not really a study, just the slightly more than back of the envelope calculation that you're sketching out. The census records median household income, check for a typical rate, and in the Bay Area at least, you get a huge fraction.
opportune 9y ago
That's a weird comparison. Not every household makes enough money to afford a home. I don't think home ownership is a universal human right so I don't really see the problem with this. The median household shouldn't be buying a median priced new car either
- maxsilver 9y ago
  > Not every household makes enough money to afford a home. I don't think home ownership is a universal human right so I don't really see the problem with this. I think this is a sad step backwards in the development of human society. It's downright dystopian. The average household should be able to own an average home (or condo/apartment, for cities). For the same reason that the average person should be able to own a toothbrush, cell phone, some clothing, and so on. This idea that it's just 100% OK that no real person could/should ever afford any housing, and every poor-middle-class person should always be beholden to renting from a private for-profit corporation forever is incredibly destructive to public finances and the ability of regular people to generate any meaningful savings or financial stability.

michaelchisari 9y ago

California seems to have a (huge) added problem of speculative real-estate investment. The median price on a home will skyrocket if there's a significant amount of people who buy up properties for investment and not for use.

mistursinistur 9y ago
What's the evidence that speculation is driving price increases in California?
eherot 9y ago
People buy properties as "investments" when they see prices rising constantly, not the other way around.
- michaelchisari 9y ago
  Sure, but it exacerbates the problem of rising rents.

pjschlic 9y ago

This sounded interesting, do you have a link to this study? I was going to try to do this analysis for where I live, and after looking up median income for the area, I realized I wasn't sure what you meant by 'down payment and interest consume 100% of income.' Did you mean a 20% downpayment and interest on a loan would consume one year's worth of income... because that actually seems pretty cheap if a median income in my area was enough more than the 20% down payment for a median home in my area that it could also cover the interest for year... Had you meant 3% + 1% PMI + 4% interest for an FHA consume 100% on median, because that definitely implies either high prices on houses or low median incomes.

wnissen 9y ago
It's not really a study, just the slightly more than back of the envelope calculation that you're sketching out. The census records median household income, check for a typical rate, and in the Bay Area at least, you get a huge fraction.

opportune 9y ago

That's a weird comparison. Not every household makes enough money to afford a home. I don't think home ownership is a universal human right so I don't really see the problem with this. The median household shouldn't be buying a median priced new car either

maxsilver 9y ago
> Not every household makes enough money to afford a home. I don't think home ownership is a universal human right so I don't really see the problem with this. I think this is a sad step backwards in the development of human society. It's downright dystopian. The average household should be able to own an average home (or condo/apartment, for cities). For the same reason that the average person should be able to own a toothbrush, cell phone, some clothing, and so on. This idea that it's just 100% OK that no real person could/should ever afford any housing, and every poor-middle-class person should always be beholden to renting from a private for-profit corporation forever is incredibly destructive to public finances and the ability of regular people to generate any meaningful savings or financial stability.