5 ms·

Comparing income vs median sales price across time isn’t quite as interesting as income vs. total monthly payment (principal + interest).

natoliniak 7y ago
yes, but in many desirable areas a significant portion of buyers are cash only buyers whose monthly payment is $0 (other than property taxes).
- bequanna 7y ago
  Intuitively, I would say the number all cash buyers is a pretty small number in every market. Especially in a low interest rate environment. Most people with the means to pay cash for a property would likely be savvy enough to understand that that they would be better off getting a jumbo mortgage at 3.25% and deploying that capital at a higher rate elsewhere.
  - scarmig 7y ago
    IIRC San Francisco all-cash buyers were accounting for 25% of transactions a couple years ago.
    - e1g 7y ago
      Manhattan is usually at 50% all-cash. Recently it softened to 40%+, but still much higher than intuition based on everyday-folks might suggest.
  - tspike 7y ago
    Buy cash, refinance later. In a competitive housing market, sellers would rather take the cash than risk a contingency falling through.
  - jedberg 7y ago
    In hot markets you see a lot of cash buyers because they don't want to lose the deal. Some will then finance afterwards, and a lot of them are flippers who will sell the house a few months later.
  - lotsofpulp 7y ago
    > Most people with the means to pay cash for a property would likely be savvy enough to understand that that they would be better off getting a jumbo mortgage at 3.25% and deploying that capital at a higher rate elsewhere. Sellers want buyers to pay cash to reduce risk of the transaction failing. Fewer parties in the transaction is less risky. Buyers can always refinance the house after they have the title.
jmpman 7y ago
I’d say it’s more interesting to look at recent immigrants income vs monthly payments. Existing residents aren’t necessarily buying new houses at 8x multiples. And the new arrivals to an area might be tech workers pulling in $400k, and can afford that $1.2M house with just a 3x multiple.
- pedrosorio 7y ago
  I'd say it's more interesting to look at income-after-taxes vs monthly payments. The same payments/gross income ratio for a worker earning a median salary is a lot better than for someone earning $400k (as the payments to net salary ratio for the latter is higher). Not to mention the probability of sustaining the income at the current level in the next 20 years is probably different as well.

natoliniak 7y ago

yes, but in many desirable areas a significant portion of buyers are cash only buyers whose monthly payment is $0 (other than property taxes).

bequanna 7y ago
Intuitively, I would say the number all cash buyers is a pretty small number in every market. Especially in a low interest rate environment. Most people with the means to pay cash for a property would likely be savvy enough to understand that that they would be better off getting a jumbo mortgage at 3.25% and deploying that capital at a higher rate elsewhere.
- scarmig 7y ago
  IIRC San Francisco all-cash buyers were accounting for 25% of transactions a couple years ago.
  - e1g 7y ago
    Manhattan is usually at 50% all-cash. Recently it softened to 40%+, but still much higher than intuition based on everyday-folks might suggest.
- tspike 7y ago
  Buy cash, refinance later. In a competitive housing market, sellers would rather take the cash than risk a contingency falling through.
- jedberg 7y ago
  In hot markets you see a lot of cash buyers because they don't want to lose the deal. Some will then finance afterwards, and a lot of them are flippers who will sell the house a few months later.
- lotsofpulp 7y ago
  > Most people with the means to pay cash for a property would likely be savvy enough to understand that that they would be better off getting a jumbo mortgage at 3.25% and deploying that capital at a higher rate elsewhere. Sellers want buyers to pay cash to reduce risk of the transaction failing. Fewer parties in the transaction is less risky. Buyers can always refinance the house after they have the title.

jmpman 7y ago

I’d say it’s more interesting to look at recent immigrants income vs monthly payments. Existing residents aren’t necessarily buying new houses at 8x multiples. And the new arrivals to an area might be tech workers pulling in $400k, and can afford that $1.2M house with just a 3x multiple.

pedrosorio 7y ago
I'd say it's more interesting to look at income-after-taxes vs monthly payments. The same payments/gross income ratio for a worker earning a median salary is a lot better than for someone earning $400k (as the payments to net salary ratio for the latter is higher). Not to mention the probability of sustaining the income at the current level in the next 20 years is probably different as well.