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I'm not sure what qualifies as wealthy, but most houses in the SF Bay Area bought in the past few years are probably financed with jumbo mortgages. E.g, 20% do

I'm not sure what qualifies as wealthy, but most houses in the SF Bay Area bought in the past few years are probably financed with jumbo mortgages. E.g, 20% down on a $1MM house leaves $800k to be financed, which is greater than the $765k criteria stated in the article.

alexhutcheson 6y ago
The median sales price for a house in the US is $327,000[1]. People buying houses for $1 million are wealthy by any standard. [1] https://fred.stlouisfed.org/series/MSPUS https://fred.stlouisfed.org/series/MSPUS
- gdubs 6y ago
  They’re not wealthy by the standard of the Bay Area, which is the point of the comment you’re replying to. Wealth is relative. Otherwise you could say that just about any American middle class family is wealthy — just look at the entire world’s population, where anyone making over something like $40k a year would be in the top 1%. Just to underscore the point, Palo Alto declares not too long ago that anyone making under $100k a year is considered “low income”.
  - BoiledCabbage 6y ago
    > Otherwise you could say that just about any American middle class family is wealthy — just look at the entire world’s population Any middle class American is wealthy by the world's standard. The quality of life provided by middle class America is the life of the 1%. To not see this is to not understand how most of the world lives, and the challenges people face from being less lucky.
    - gdubs 6y ago
      This is exactly my point though. If you look at averages, a jumbo home owner in the US is considered wealthy — but only if you ignore their local market. Like in the Bay Area where you could earn $100k a year and still be considered “low income”. These people may be huge earners compared to the average American. It doesn’t mean they’re living the lavish lifestyles of the rich and famous. A lot of them are living paycheck-to-paycheck. Markets are relative. Similarly, the average American making over $40k a year will not consider themselves the 1%, but to the average citizen of the world they are.
      - codingdave 6y ago
        If people are choosing to live in the Bay Area and spend all their money on COL expenses, that does not mean they are not wealthy. It just means they are choosing to spend all their wealth to stay there. Believe me, those of us who live a state or two east of there see plenty of people who have left after a few years of paying on those jumbo loans, and the equity from those homes sets them up quite nicely in another place. People who own homes in the Bay Area do not have massive disposable income. But they do have wealth.
        asdkhadsj 6y ago
        I feel like everyone is talking past each other. Or perhaps the definition of wealth is failing this discussion. Telling a family struggling to make ends meet that they are wealthy seems of little value. Depending on the scenario, they could be one job loss away from having nothing just like one of your families a state or two east. Now that same family, income and house with a paid off mortgage is in an entirely different situation. The difference is the wealth they accrued in paying down their mortgage. They claimed value in doing so. But merely having a massive mortgage in the Bay Area does not _inherently_ equate to wealth.
        nostrademons 6y ago
        As long as they have a supply of buyers for those houses. Article is suggesting that new buyers won't be able to get jumbo mortgages. If people can't borrow $2M for a house anymore the sale price of houses is going to take a big hit.
      - asdkhadsj 6y ago
        To agree with you, It's even more complex than even you outline, too. Wealth is, imo, a relative profit and cost of living expense calculation, regardless of how much you make. Ultimately it doesn't matter where you live or how much you make, you can be living paycheck to paycheck in almost any scenario. There are definitely subtleties, like how feasible it would be for you to reduce expenses while keeping your income the same. Life.. gets complicated.
    - api 6y ago
      That is true, but there's a flip side problem with this way of thinking: it can lead to a race to the bottom mentality in which improvements are argued against by comparison to those worse off. "Workers in America don't need better pay or benefits, they're already wealthy by world standards!" "Workers in China don't need basic safety protections and sane work hours, they're already better off than workers in sub-Saharan Africa!"
    - borkt 6y ago
      I’ve spent time a lot of people that live much better than me in what are considered third world countries, including overall quality of life, who make far less than I do. There are countries where money goes much further and family holds much greater value when compared to work than US culture (and laws) generally produces. They see friends and family for meals many times a week, their health care is affordable, and their jobs are more secure. It would be thought of as a cultural taboo to value work over family, whereas the majority of US employers see placing family over work as a fireable offense. Yes we have more paper wealth, but if we have to work longer hours and are spending it all on utilities, healthcare, and vastly overpriced housing, does it really matter? Edit: This applies to countries with relatively reasonable populations with respect to their resources. This does not apply to places like China and India where there is a huge population to support.
      - borkt 6y ago
        This recent post covers what I am describing here far more in depth and relate to Europe. My experiences have been in South America https://news.ycombinator.com/item?id=22777745 https://news.ycombinator.com/item?id=22777745
      - anoraca 6y ago
        You're spending time with the wealthy people of those countries. Half of the world does not have a flush toilet at home.
      - CalRobert 6y ago
        Seriously. I sometimes cringe when I think what I could be making if I moved back to California (I'm even _from_ norcal...) but I just can't handle US workaholism (most of it performative) and the idea that even if I manage to pull off 5+ weeks of PTO a year, my spouse certainly won't, and I like living somewhere everyone gets a month off a year and even people under the median wage can afford a decent holiday.
      - BoiledCabbage 6y ago
        > They see friends and family for meals many times a week, their health care is affordable, and their jobs are more secure. This is all true - and all of those are possible while still being wealthy. The peculiarities of US culture are different from being wealthy. As another example you don't need to have an obsession with guns to be a wealthy country, but the US does.
    - perl4ever 6y ago
      "The quality of life provided by middle class America is the life of the 1%" It's been said many times before about similar statements, but this is not true or mathematically possible. I believe it's off by about an order of magnitude. Middle class in the US is something like $45,200 to $135,600 in household income, which is roughly half the population. Half the population is about 2% of the world population. And every American is not wealthier than everyone outside the US. If you google something like "global income percentile" you will find a considerable amount of BS claims - the first one I found was on Investopedia. For fun or ideology or whatever, the meme that middle class Americans are in the top 1% is something that people will just go on the internet and lie about. I didn't spend enough time looking to find really satisfactory sources, but in trying to find something relatively unbiased I ended up with something that suggested the US middle class might very roughly be around the top 10% globally. Source: https://www.pewresearch.org/global/2015/07/08/a-global-middle-class-is-more-promise-than-reality/ https://www.pewresearch.org/global/2015/07/08/a-global-middl... (Note that in the terms of the linked article, it seems like the global middle class is a tier below the US middle class, so if about 85% of the world is "poor" or "middle class", then the remainder or 10-15% equates to the US "middle")
  - _curious_ 6y ago
    "Otherwise you could say that just about any American middle class family is wealthy" Comparatively correct in the global sense. Nothing bad can come from putting things (yourself?) into a global human perspective. Considering how much chance is involved with where we are born, a middle class person/family in the US is quite wealthy by default. I wonder how many take pause on any regular basis just to acknowledge and appreciate the relative wealth that they were lucky to be born into?
  - api 6y ago
    Agreed. The notion of wealthy needs to be calibrated for local cost of living as do statistics like the CPI.
    - alistairSH 6y ago
      Sure. But San Jose's median household income is almost double that of the US as a whole. Is its COL double than national average? I don't believe it is.
      - api 6y ago
        Cost of living anywhere in the Bay Area is much higher than the national average due almost entirely to real estate.
        alistairSH 6y ago
        As long as "much higher" is 2x the national average, Bay Area residents still come out ahead, especially on gross cash basis. Median household in SJ earns ~120k. Median for USA is ~$60k. Even if the SJ resident spend 40% on housing, they come out WAY ahead of the median household spending 25% on housing.
        nickv 6y ago
        Housing is considerably more than 2x. Average cost of a house in America is around $380k, average cost of a house in San Francisco is $1.7M according to Zillow. San Jose is $1.2M. Fremont is $1.1M. The cheapest (and not a great place to live and horrible commute) place in the Bay Area is Vallejo and that's still $450k. So 3-6x more expensive depending on where you look generally.
      - subsubzero 6y ago
        It is prb about 3 times cheaper than other areas of the country, - Gas: is still $3 a gallon here while a majority of the nation enjoys close to $1 a gal. - State taxes: run close to 10% on professional salaries, most other states have 4-5% or no state taxes. - Housing: This one is the big one, try finding a 3 bedroom house for less than $1M in the san jose/pennisula area, it just isn't possible (I am excluding parts of east san jose where housing is cheaper). A typical house in the US goes for roughly 350k. rent is no better, a 3 bdrm rental in a half decent area runs you 3.5k on up. - Property taxes: this one is tied to housing, enjoy paying 1.5% a year forever on your $1M+ house, that is 15k+ a year
  - alexhutcheson 6y ago
    People buying houses for $1 million are wealthy even by the standards of the Bay Area. Median household income in the San Jose-Sunnyvale-Santa Clara metro area is ~$125,000[1]. A traditional $1 million mortgage would require a $200,000 down payment, and ~$5000/month. The monthly payment alone would be 48% of the combined monthly pay for everyone in the household in a household making the median. House purchases at this price are only possible for households that are making significantly more than the metro-area median. [1] https://data.census.gov/cedsci/table?q=United%20States&tid=ACSST1Y2018.S1903&t=Income%20and%20Poverty&vintage=2018&hidePreview=true&g=310M400US41940&moe=false https://data.census.gov/cedsci/table?q=United%20States&tid=A...
    - onlyrealcuzzo 6y ago
      And most people spend >40% of their income on rent & mortgage payments in The Bay. The average person with a house in The Bay probably doesn't make as much money as you think. They mostly have very high debt to income ratios.
      - tehwebguy 6y ago
        Sure but someone is still running the drive-thru at every McDonald’s in the bay area.
        berbec 6y ago
        And I imagine they take a hellishly long mass transit commute
        duskwuff 6y ago
        And there's a good chance that they rent, not own.
        mandelbrotwurst 6y ago
        Or live with family / many roommates.
  - tren-hard 6y ago
    > They’re not wealthy by the standard of the Bay Area Is that because all of the people working service jobs can no longer afford to live in the Bay Area which makes $1 million 'not wealthy'? Those people who make minimum wage of course work there so do we include or exclude them from this pov?
  - throwlaplace 6y ago
    > They’re not wealthy by the standard of the Bay Area, which is the point of the comment you’re replying to. Wealth is relative. they end up in possession of an asset worth $1MM. ill-liquid sure but still a durable asset. you can borrow against that asset, it appreciates proportionally, you can eventually sell it, etc. what's the difference between it and $1MM and equities holding? i don't understand how you think being in possession of something like doesn't cross the threshold for wealth simply because other people in the neighborhood are also wealthy?
    - gdubs 6y ago
      With mortgages people are generally paying a ton of interest up front, and it takes a long time to build up equity. People are limited by the equity in how much they can borrow against the loan, and for a very long time the bank has a million dollar asset, not the borrower.
  - throw1234651234 6y ago
    Doesn't matter - if you can afford to make payments on a 1 million house for several years, you are wealthy, simply because you can sell it, take $400,000, and go buy a huge house in the midwest cash. Being able to pay for a $1,000,000 house and put 200k down makes you well off.
  - ta1771 6y ago
    > Otherwise you could say that just about any American middle class family is wealthy They..are?
gnopgnip 6y ago
The median home price in the bay area is under $1m. There is also some stickiness right around this price point, and most buyers are not getting jumbo mortgages in the bay area.
- tempsy 6y ago
  Maybe the entire Bay Area but not SF proper or majority of Silicon Valley. And not SFH. That must include condos.
kbob 6y ago
Not just the last few years. Bay area mortgages have been jumbos for decades. When I bought my first house in San Jose for $325K in 1994, the conforming loan limit was $200K.

alexhutcheson 6y ago

The median sales price for a house in the US is $327,000[1]. People buying houses for $1 million are wealthy by any standard. [1] https://fred.stlouisfed.org/series/MSPUS https://fred.stlouisfed.org/series/MSPUS

gdubs 6y ago
They’re not wealthy by the standard of the Bay Area, which is the point of the comment you’re replying to. Wealth is relative. Otherwise you could say that just about any American middle class family is wealthy — just look at the entire world’s population, where anyone making over something like $40k a year would be in the top 1%. Just to underscore the point, Palo Alto declares not too long ago that anyone making under $100k a year is considered “low income”.
- BoiledCabbage 6y ago
  > Otherwise you could say that just about any American middle class family is wealthy — just look at the entire world’s population Any middle class American is wealthy by the world's standard. The quality of life provided by middle class America is the life of the 1%. To not see this is to not understand how most of the world lives, and the challenges people face from being less lucky.
  - gdubs 6y ago
    This is exactly my point though. If you look at averages, a jumbo home owner in the US is considered wealthy — but only if you ignore their local market. Like in the Bay Area where you could earn $100k a year and still be considered “low income”. These people may be huge earners compared to the average American. It doesn’t mean they’re living the lavish lifestyles of the rich and famous. A lot of them are living paycheck-to-paycheck. Markets are relative. Similarly, the average American making over $40k a year will not consider themselves the 1%, but to the average citizen of the world they are.
    - codingdave 6y ago
      If people are choosing to live in the Bay Area and spend all their money on COL expenses, that does not mean they are not wealthy. It just means they are choosing to spend all their wealth to stay there. Believe me, those of us who live a state or two east of there see plenty of people who have left after a few years of paying on those jumbo loans, and the equity from those homes sets them up quite nicely in another place. People who own homes in the Bay Area do not have massive disposable income. But they do have wealth.
      - asdkhadsj 6y ago
        I feel like everyone is talking past each other. Or perhaps the definition of wealth is failing this discussion. Telling a family struggling to make ends meet that they are wealthy seems of little value. Depending on the scenario, they could be one job loss away from having nothing just like one of your families a state or two east. Now that same family, income and house with a paid off mortgage is in an entirely different situation. The difference is the wealth they accrued in paying down their mortgage. They claimed value in doing so. But merely having a massive mortgage in the Bay Area does not _inherently_ equate to wealth.
      - nostrademons 6y ago
        As long as they have a supply of buyers for those houses. Article is suggesting that new buyers won't be able to get jumbo mortgages. If people can't borrow $2M for a house anymore the sale price of houses is going to take a big hit.
    - asdkhadsj 6y ago
      To agree with you, It's even more complex than even you outline, too. Wealth is, imo, a relative profit and cost of living expense calculation, regardless of how much you make. Ultimately it doesn't matter where you live or how much you make, you can be living paycheck to paycheck in almost any scenario. There are definitely subtleties, like how feasible it would be for you to reduce expenses while keeping your income the same. Life.. gets complicated.
  - api 6y ago
    That is true, but there's a flip side problem with this way of thinking: it can lead to a race to the bottom mentality in which improvements are argued against by comparison to those worse off. "Workers in America don't need better pay or benefits, they're already wealthy by world standards!" "Workers in China don't need basic safety protections and sane work hours, they're already better off than workers in sub-Saharan Africa!"
  - borkt 6y ago
    I’ve spent time a lot of people that live much better than me in what are considered third world countries, including overall quality of life, who make far less than I do. There are countries where money goes much further and family holds much greater value when compared to work than US culture (and laws) generally produces. They see friends and family for meals many times a week, their health care is affordable, and their jobs are more secure. It would be thought of as a cultural taboo to value work over family, whereas the majority of US employers see placing family over work as a fireable offense. Yes we have more paper wealth, but if we have to work longer hours and are spending it all on utilities, healthcare, and vastly overpriced housing, does it really matter? Edit: This applies to countries with relatively reasonable populations with respect to their resources. This does not apply to places like China and India where there is a huge population to support.
    - borkt 6y ago
      This recent post covers what I am describing here far more in depth and relate to Europe. My experiences have been in South America https://news.ycombinator.com/item?id=22777745 https://news.ycombinator.com/item?id=22777745
    - anoraca 6y ago
      You're spending time with the wealthy people of those countries. Half of the world does not have a flush toilet at home.
    - CalRobert 6y ago
      Seriously. I sometimes cringe when I think what I could be making if I moved back to California (I'm even _from_ norcal...) but I just can't handle US workaholism (most of it performative) and the idea that even if I manage to pull off 5+ weeks of PTO a year, my spouse certainly won't, and I like living somewhere everyone gets a month off a year and even people under the median wage can afford a decent holiday.
    - BoiledCabbage 6y ago
      > They see friends and family for meals many times a week, their health care is affordable, and their jobs are more secure. This is all true - and all of those are possible while still being wealthy. The peculiarities of US culture are different from being wealthy. As another example you don't need to have an obsession with guns to be a wealthy country, but the US does.
  - perl4ever 6y ago
    "The quality of life provided by middle class America is the life of the 1%" It's been said many times before about similar statements, but this is not true or mathematically possible. I believe it's off by about an order of magnitude. Middle class in the US is something like $45,200 to $135,600 in household income, which is roughly half the population. Half the population is about 2% of the world population. And every American is not wealthier than everyone outside the US. If you google something like "global income percentile" you will find a considerable amount of BS claims - the first one I found was on Investopedia. For fun or ideology or whatever, the meme that middle class Americans are in the top 1% is something that people will just go on the internet and lie about. I didn't spend enough time looking to find really satisfactory sources, but in trying to find something relatively unbiased I ended up with something that suggested the US middle class might very roughly be around the top 10% globally. Source: https://www.pewresearch.org/global/2015/07/08/a-global-middle-class-is-more-promise-than-reality/ https://www.pewresearch.org/global/2015/07/08/a-global-middl... (Note that in the terms of the linked article, it seems like the global middle class is a tier below the US middle class, so if about 85% of the world is "poor" or "middle class", then the remainder or 10-15% equates to the US "middle")
- _curious_ 6y ago
  "Otherwise you could say that just about any American middle class family is wealthy" Comparatively correct in the global sense. Nothing bad can come from putting things (yourself?) into a global human perspective. Considering how much chance is involved with where we are born, a middle class person/family in the US is quite wealthy by default. I wonder how many take pause on any regular basis just to acknowledge and appreciate the relative wealth that they were lucky to be born into?
- api 6y ago
  Agreed. The notion of wealthy needs to be calibrated for local cost of living as do statistics like the CPI.
  - alistairSH 6y ago
    Sure. But San Jose's median household income is almost double that of the US as a whole. Is its COL double than national average? I don't believe it is.
    - api 6y ago
      Cost of living anywhere in the Bay Area is much higher than the national average due almost entirely to real estate.
      - alistairSH 6y ago
        As long as "much higher" is 2x the national average, Bay Area residents still come out ahead, especially on gross cash basis. Median household in SJ earns ~120k. Median for USA is ~$60k. Even if the SJ resident spend 40% on housing, they come out WAY ahead of the median household spending 25% on housing.
        nickv 6y ago
        Housing is considerably more than 2x. Average cost of a house in America is around $380k, average cost of a house in San Francisco is $1.7M according to Zillow. San Jose is $1.2M. Fremont is $1.1M. The cheapest (and not a great place to live and horrible commute) place in the Bay Area is Vallejo and that's still $450k. So 3-6x more expensive depending on where you look generally.
    - subsubzero 6y ago
      It is prb about 3 times cheaper than other areas of the country, - Gas: is still $3 a gallon here while a majority of the nation enjoys close to $1 a gal. - State taxes: run close to 10% on professional salaries, most other states have 4-5% or no state taxes. - Housing: This one is the big one, try finding a 3 bedroom house for less than $1M in the san jose/pennisula area, it just isn't possible (I am excluding parts of east san jose where housing is cheaper). A typical house in the US goes for roughly 350k. rent is no better, a 3 bdrm rental in a half decent area runs you 3.5k on up. - Property taxes: this one is tied to housing, enjoy paying 1.5% a year forever on your $1M+ house, that is 15k+ a year
- alexhutcheson 6y ago
  People buying houses for $1 million are wealthy even by the standards of the Bay Area. Median household income in the San Jose-Sunnyvale-Santa Clara metro area is ~$125,000[1]. A traditional $1 million mortgage would require a $200,000 down payment, and ~$5000/month. The monthly payment alone would be 48% of the combined monthly pay for everyone in the household in a household making the median. House purchases at this price are only possible for households that are making significantly more than the metro-area median. [1] https://data.census.gov/cedsci/table?q=United%20States&tid=ACSST1Y2018.S1903&t=Income%20and%20Poverty&vintage=2018&hidePreview=true&g=310M400US41940&moe=false https://data.census.gov/cedsci/table?q=United%20States&tid=A...
  - onlyrealcuzzo 6y ago
    And most people spend >40% of their income on rent & mortgage payments in The Bay. The average person with a house in The Bay probably doesn't make as much money as you think. They mostly have very high debt to income ratios.
    - tehwebguy 6y ago
      Sure but someone is still running the drive-thru at every McDonald’s in the bay area.
      - berbec 6y ago
        And I imagine they take a hellishly long mass transit commute
        duskwuff 6y ago
        And there's a good chance that they rent, not own.
        mandelbrotwurst 6y ago
        Or live with family / many roommates.
- tren-hard 6y ago
  > They’re not wealthy by the standard of the Bay Area Is that because all of the people working service jobs can no longer afford to live in the Bay Area which makes $1 million 'not wealthy'? Those people who make minimum wage of course work there so do we include or exclude them from this pov?
- throwlaplace 6y ago
  > They’re not wealthy by the standard of the Bay Area, which is the point of the comment you’re replying to. Wealth is relative. they end up in possession of an asset worth $1MM. ill-liquid sure but still a durable asset. you can borrow against that asset, it appreciates proportionally, you can eventually sell it, etc. what's the difference between it and $1MM and equities holding? i don't understand how you think being in possession of something like doesn't cross the threshold for wealth simply because other people in the neighborhood are also wealthy?
  - gdubs 6y ago
    With mortgages people are generally paying a ton of interest up front, and it takes a long time to build up equity. People are limited by the equity in how much they can borrow against the loan, and for a very long time the bank has a million dollar asset, not the borrower.
- throw1234651234 6y ago
  Doesn't matter - if you can afford to make payments on a 1 million house for several years, you are wealthy, simply because you can sell it, take $400,000, and go buy a huge house in the midwest cash. Being able to pay for a $1,000,000 house and put 200k down makes you well off.
- ta1771 6y ago
  > Otherwise you could say that just about any American middle class family is wealthy They..are?

gnopgnip 6y ago

The median home price in the bay area is under $1m. There is also some stickiness right around this price point, and most buyers are not getting jumbo mortgages in the bay area.

tempsy 6y ago
Maybe the entire Bay Area but not SF proper or majority of Silicon Valley. And not SFH. That must include condos.

kbob 6y ago

Not just the last few years. Bay area mortgages have been jumbos for decades. When I bought my first house in San Jose for $325K in 1994, the conforming loan limit was $200K.