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> Housing is more expensive for them than prior generations I harp on this constantly. But housing is not more expensive in the majority of American metros. Ad

> Housing is more expensive for them than prior generations I harp on this constantly. But housing is not more expensive in the majority of American metros. Adjusted for inflation the median cost per square foot of new housing is almost exactly the same as it was in 1990. (This doesn't even take into account that mortgage rates are drastically lower since then.) We get skewed on this for two reasons. One is because homes today are substantially larger and have more amenities than they did in previous generations. We take for granted better fire safety, higher ceilings, central A/C, higher load electrical circuits, attached garages, better lighting, and swimming pools that are much more common in new construction. Two is that we're highly skewed to a handful of elite metros, whose housing markets are not representative of the country as a whole. Housing is expensive in San Francisco, New York, LA, and DC. But in places like Tampa, Omaha, Cincinnati, and Phoenix the cost of housing (per square foot) has barely gone up at all. The demand for ultra-expensive housing in places like the Bay Area is driven by the huge earning potential of the high-skilled labor market. (Of course the supply side of the equation is driven by NIMBY zealotry.) If you're talented enough to make it as an L8 at Google, then it probably does make sense to buy a house in Palo Alto. You'll earn far more money than you would in the St Louis tech scene. more than enough to make up for the living costs. But unless you have the potential to become an L8 at Google (or equivalent), it makes no financial sense to choose to live in the Bay Area instead of Raleigh. It's like somebody who works as a back office bookkeeper insisting on buying custom tailored Seville Row suits for his work attire, then complaining that the costs of clothes has gotten out of hand.

elektor 6y ago
That's a valid point but millions of people live and work in SF, NY, LA, and DC. Their needs for housing should be acknowledged as well.
- TuringNYC 6y ago
  I dont think this is a regional problem -- it is a problem of income/price and income/rent ratios off the historical chart almost regardless of where you live. It is a worse problem in SF, NY, LA, and DC but still a universal problem.
- war1025 6y ago
  The point is that it's a regional, not generational, problem.
  - tpm 6y ago
    It's a huge problem in large parts of Europe and Asia too.
  - computerphage 6y ago
    It's not just a regional problem if it's happening in every region.
    - zip1234 6y ago
      Local control over zoning is a massive problem. Most people agree that building more homes would bring housing prices down. However, most cities have more than half of the land exclusively reserved for single family homes and have rules that prevent any creativity or density. They want other places to add the housing. I can't see the problems going away unless entire states reform zoning.
    - kevin_thibedeau 6y ago
      The rust belt cities don't have skyrocketing housing prices if you're willing to buy non-McMansion older stock.
      - throwaway2048 6y ago
        And how likely are you to get a job that lets you afford said house?
        war1025 6y ago
        That depends on your skills and / or what you're willing to do. The rust belt is rusty in the sense that easy to obtain and hold down factory jobs are no longer a thing. If you have marketable skills, there is work pretty well anywhere. Just like how if cushy tech jobs someday dry up in Silicon Valley there will still be work there, it just won't be a sure thing like it is now.
- deleted 6y ago
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vsareto 6y ago
>One is because homes today are substantially larger This is the problem, really. It's hard to find a simple single-floor home for individuals or no-kid couples.
computerphage 6y ago
What about other years? 1980? 1970? I would love to see this data over time. > homes today are substantially larger Is there any availability of smaller homes in actual markets? If I'm a buyer in the market do I even have the option to buy a cheap smaller home?
- alchemism 6y ago
  No, you have the option of buying a condominium apartment in most cases. Here in the Philadelphia urban real estate market —- which has no shortage of reclaimable housing —- the break-even point for builders is about triple the value of the existing homes. No current resident can afford to buy one, so single family homes get converted into tiny “luxury” condos. [Edit: there are city subsidized ‘tiny-housing’ developments but these are more for welfare recipients than regular buyers.]
  - kickopotomus 6y ago
    The same thing is happening here in Austin. Developers are buying up older properties, demolishing them, and then splitting the lot into 2 or 3 sections and building smaller "modern" homes/condos.
- zzapplezz 6y ago
  This is because small and micro sized units are literally outlawed by many local zoning laws country-wide.
- mrep 6y ago
  Since 1978 at least [0], not sure how much data you'll get further back. [0]: https://www.supermoney.com/inflation-adjusted-home-prices/ https://www.supermoney.com/inflation-adjusted-home-prices/
- thinkharderdev 6y ago
  This is one of the perverse effects of limits on new construction. Since builders can only build so much, they naturally focus on the high-end where profits are fattest. In a well-functioning market there is only so much demand for luxury housing so they would also build smaller, less expensive stuff as well, but they can't
zzapplezz 6y ago
Sure, but post-WWII the federal government injected billions (in 2020 dollars) into the pockets of mostly white veterans to build millions of homes. The federal government also provided generous home loans and unemployment insurance. Today, these policies would be viewed as socialist by the very people who benefited from it the most.
- krakatau1 6y ago
  USA in 1945 was 91% white so it kinda makes sense that government did it. Homogeneous countries have no political issues with welfare because everyone is alike.
  - throwaway0a5e 6y ago
    People find differences. Back then the places that didn't have a ready supply of colored folks (might as well use the adjective of the day) were treating the Irish and Italians and eastern Europeans like crap in their place. 1945 is kind of different because by then it was pretty clear we were all in it together but in 1940 or so there was still plenty of "white on white" bigotry targeted floating around. 20+yr later it was considered novel that JFK was Catholic.
harimau777 6y ago
It seems to me that the places where cost of living is still low is places that people don't want to actually live. Whereas in previous generations regular people could afford to live in interesting parts of the country.
- gross_anat 6y ago
  if you think sf/ny/dc are interesting places to live i feel sorry for you. the cities are mostly delivery folk working for peanuts and everyone else walking around with earbuds in looking down or holed up in a tower with a guard. wealthy ppl just steal and commodify culture they don't create it. the forest is interesting, a cafe in a small town can be very interesting. everytime i'm in sf i feel something being extracted from me
tidepod12 6y ago
>One is because homes today are substantially larger and have more amenities than they did in previous generations. I have noticed that most of my fellow millennials seem to have completely forgotten the concept of "starter home" and assume that as soon as you turn 25 you should be entitled to a 4 bedroom house with a pool, huge yard, wonderful neighborhood, three-car garage, etc. Among my friends that have bought houses, many of them have gone into significant debt just to buy a 3-4 bedroom house, even though they have no kids and only use one of the bedrooms, because they think that at some point in their life they will put them to use. The extra rooms go completely unused (other than the extra furniture which they also went into debt for). It's like they see the house that their parents own and assume that their house also needs to be that, and ignore the fact that their parents probably started out in a much smaller home and then moved into a big one once necessary. >Two is that we're highly skewed to a handful of elite metros I contend that it's not even just this, but also that within metros millenials are highly skewed to a handful of elite neighborhoods. I live in a medium COL metro, and all of my friends constantly lament the "high" cost of houses and how they will never be able to afford a house. But when I ask what houses they are looking at, it's always the nicest, premiere neighborhoods that have McMansions with huge yards, white picket fences, hip restaurants within walking distance, etc. Not a single one of them even considers living in the many much cheaper neighborhoods. There certainly are issues with prices in some areas (cough SF cough) but at least in my metro and in my friend group, the "houses cost too much" meme seems to be a scapegoat for what is really just an inflated sense of what housing they are entitled to.
- mywittyname 6y ago
  > I have noticed that most millenials seem to have completely forgotten the concept of "starter home" and assume that as soon as you turn 25 you should be entitled to a 4 bedroom house with a pool, huge yard, wonderful neighborhood, three-car garage, etc. "Starter homes" for young people is the stuff that was built 30-40 years ago that hasn't been updated. So they are buying those mcmansions because that's what was built in the 80s-90s-00s. The really nice, older urban areas with housing built before that is way more expensive in absolute dollars. Smaller is not cheaper in most cases. Smaller is "established" and everyone with money wants to live in those established neighborhoods, not the suburban sprawl 50m from the city center.
mywittyname 6y ago
> But in places like Tampa, Omaha, Cincinnati, and Phoenix the cost of housing (per square foot) has barely gone up at all. Maybe if you stop looking at like 2018. But my on-the-ground analysis living on one of these cities is cost of housing has fucking exploooded. I built a house just two years ago, which I thought was incredibly expensive at 2 times the median home price in the area. I had it in the back of my head that I was insane to pay so much for a house, but since I could easily afford it, I went ahead with it. Now, the median price has shot up by 25% and there are literally no new houses available for what I paid. My neighbors are relocating after only a year in their house and sold their house for 20% over what they paid new. The new construction 3 miles down the street from me starts at 30% more than what I paid, and a few are double or more. Meaning, 3-5x the median for the area. All of this is trickling down to the rest of the area. Houses that went for $130k in 2015 have sale prices in the $200k range. We're talking 60s era ranch houses that haven't been updated since the 90s.
- texuf 6y ago
  With the extremely low interest rates, I wonder if the monthly payments are about the same.
  - jeffbee 6y ago
    It doesn't help as much as you've implied since 1) you need 20% of the sticker price for the down payment, and 20% of $200k is more than 20% of $130k, and 2) in many jurisdictions you pay tax on the market value, so your taxes go up whenever mortgage rates fall and prices rise.
    - vondur 6y ago
      Is this true any longer? I assumed you can get into most houses with 10% down, so long as your credit and earnings are good.
    - toomuchtodo 6y ago
      FHA mortgage down payment is 3-5%. There’s frontloaded mortgage insurance as well as ongoing monthly mortgage insurance, but the credit score and down payment requirements are very low. Most people with a pulse qualify. If you come with enough money down, you can get a hard money loan with 70% loan to value (30% down) 1 day after bankruptcy or foreclosure.
iso1631 6y ago
https://www.longtermtrends.net/home-price-median-annual-income-ratio/ https://www.longtermtrends.net/home-price-median-annual-inco... Historically a house in the US cost around 3 times the median annual income. During the housing bubble of 2006 the ratio reached 4.5 - in other words, the median price for a single family home in the United States cost 4.5 times the US median annual household income
deleted 6y ago
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sharadov 6y ago
Unfortunately this is also where all the tech jobs are located. And the reason most people live here is that it's extremely easy to move jobs. Yeah, Austin and Seattle have become the next locations, but we need more. Hopefully the remote work options because of Covid become more permanent.
novok 6y ago
America & Japan are lucky that at least houses are somewhat affordable. Canadians & many europeans on the other hand...
MisterTea 6y ago
> But housing is not more expensive in the majority American metros My parents bought their NYC home in 1976 for $76,000. Adjusted for inflation brings that to around $350,000 in 2020 dollars. The house is currently valued at $800,000.
- nradov 6y ago
  Now repeat the calculation for a similar home in Toledo or Detroit.
  - graywh 6y ago
    just looked up a random 2-bed, 1400 sq-ft home in my city of 600k -- sold for $31k in 1975 (comparable to $150k now), easily worth $350k today this isn't a neighborhood known for gentrification, either
loblollyboy 6y ago
Uh my Zillowing suggests that you’re wrong. At least in WI - and what’s more middle American than WI. I’m talking even bumfuck, wi, where a hunting lodge with no plumbing and a woodfire oven for heating will set you back 100k. In Madison WI you are wrong nearly on an order of 10 (Comparing w 1990 prices).
rattlesnakedave 6y ago
Even houses built in the 70s and 80s where I live in central KY have “appreciated” much faster than inflation. W/r/t your point about hedonic adjustments, I’m not sure that matters if most still can’t afford it.
ummonk 6y ago
I believe that, while still low relative to SF or NYC, home prices in Tampa and Phoenix have risen rapidly in recent years. As for Cincinnati, not exactly a thriving job market.
egh 6y ago
I'm not sure what you're arguing here. The simple fact is the amount people pay for housing is up since the 1990s. You can find this data on the BLS web site: https://www.bls.gov/cex/csxmulti.htm https://www.bls.gov/cex/csxmulti.htm Here is the data adjusted for constant 2020 dollars: 1992 $9,799.06 1993 $9,543.99 1994 $9,760.55 1995 $9,924.05 1996 $9,825.29 1997 $10,106.90 1998 $10,473.38 1999 $10,712.59 2000 $10,506.40 2001 $11,055.55 2002 $11,121.33 2003 $10,997.04 2004 $10,800.20 2005 $11,497.24 2006 $12,317.69 2007 $12,262.90 2008 $12,447.28 2009 $11,989.00 2010 $11,503.97 2011 $11,187.78 2012 $11,070.20 2013 $11,114.82 2014 $11,481.16 2015 $11,670.71 2016 $11,844.36 2017 $12,399.22 2018 $12,015.43 2019 $12,190.00
- nickff 6y ago
  I think the parent is arguing that those numbers are (only slowly) increasing because: 1) They are skewed by a few 'elite' metro areas (which are best avoided by those without very high-paying jobs). 2) The houses are nicer and have more 'features', which cost money. And that if you remove the high COL areas, and control for the amenities, you will find costs are flat or decreasing.
  - watwut 6y ago
    But people can not buy theoretical smaller cheaper house with no AC if that one is not on sale.
    - nickff 6y ago
      Maybe people don't want those houses; maybe people are happy to move somewhere less prestigious to get the house they want.
      - WarOnPrivacy 6y ago
        > Maybe people don't want those houses It's not clear what kind of houses you are envisioning. Go to Zillow or Hotpads (rentals) & search for less prestigious homes. You still don't get places that can be afforded with a HS Graduate income. tl;dr: People can't move out in their 20s because of math.
ianmobbs 6y ago
> Two is that we're highly skewed to a handful of elite metros, whose housing markets are not representative of the country as a whole Right, but what matters is the housing price where people are. It doesn't matter what the housing market looks like in South Dakota if I don't want to live there. While houses in South Dakota may be 1/10 the price of houses in NYC (likely cheaper, honestly), they also have 1/10 the population. The notion that the quantity of land somewhere (in this case, quantity for sale) should somehow equate to importance more than the quantity of people is ridiculous. > It's like somebody who works as a back office bookkeeper insisting on buying custom tailored Seville Row suits for his work attire, then complaining that the costs of clothes has gotten out of hand. No, it's like someone who works as a back office bookkeeper in New York City being forced to pay insane amounts in rent while seeing thousands of empty AirBNBs, hotel rooms, etc. and complaining that the cost of living has gotten out of hand. Housing is a necessity, "custom tailored Seville Row suits" are not. And it's simply not feasible for the vast majority of people living paycheck to paycheck to just up and leave to Raleigh like you imply.
- ballenf 6y ago
  Ok so the change from a decade or two ago is that young people want to live in places they can't afford. In the past they were evidently more content to live in places they could afford. Doesn't really feel like cost of housing is what's changed.
  - ng12 6y ago
    I grew up in a small rust belt city. 40 years ago there were reasons to live there: factories with union jobs and an entire local economy built upon them (financial services, a hospital, bustling main street, etc). All that's gone now. It's not that I wouldn't be content like my parents were, it's that it's fundamentally not the same city it was back then.
    - pnutjam 6y ago
      You can't get that through to the parent poster. He only see's spherical cows, not reality.
vkou 6y ago
> I harp on this constantly. But housing is not more expensive in the majority of American metros. Adjusted for inflation the median cost per square foot of new housing is almost exactly the same as it was in 1990. (This doesn't even take into account that mortgage rates are drastically lower since then.) It doesn't matter that real estate on the Moon is free. There aren't any jobs on the Moon, or in third-tier cities.
munificent 6y ago
> Two is that we're highly skewed to a handful of elite metros, whose housing markets are not representative of the country as a whole. Housing is expensive in San Francisco, New York, LA, and DC. But in places like Tampa, Omaha, Cincinnati, and Phoenix the cost of housing (per square foot) has barely gone up at all. I think cities are fundamentally the wrong unit to look at when thinking about housing prices. What we really want to know is "how much does it cost to live some place where I can get a job". Knowing that Tampa is just as cheap today as it was 40 years ago means little if Tampa today has, say, only 70% of the jobs that it did back then. What we really need is some sort of normalized "job availability unit" like "per capita" but "per employment opportunity" and then try to calculate current and historical housing costs relative to that.
- maerF0x0 6y ago
  > "how much does it cost to live some place where I can get a job" And we'd do well to price that in hours of work per week after taxes, including commute. That is, making $30 an hour where a house is $300k can be better than making $60 an hour where a house is $600k . Think about progressive tax rates, CoL, commute time et al.
jbay808 6y ago
> The demand for ultra-expensive housing in places like the Bay Area is driven by the huge earning potential of the high-skilled labor market. Maybe the Bay area, but that's (sadly) not the case in places like Vancouver and Victoria. Sky high property prices, but no corresponding earning potential.
- thinkharderdev 6y ago
  I've never quite been able to figure out what happened in Vancouver. It's a great city with a tech scene but salaries there seem very low (by American tech worker standards). Who is actually buying all these multi-million dollar bungalow? None of the senior-level engineers I've worked with from the area would ever be able to even sniff being able to afford that.
  - jwiz 6y ago
    At least one theory is money laundering. https://themobmuseum.org/blog/chinese-triads-launder-billions-through-vancouver-buying-luxury-real-estate-cars/ https://themobmuseum.org/blog/chinese-triads-launder-billion...
  - dmitrygr 6y ago
    Chinese bureaucrats looking to park some money outside china's financial system. Some west coast cities even instituted special taxes to try to prevent this. https://www.wsj.com/articles/for-chinese-home-buyers-seattle-is-the-new-vancouver-1486500393 https://www.wsj.com/articles/for-chinese-home-buyers-seattle... https://www.businessinsider.com/middle-class-chinese-buyers-us-real-estate-investment-2019-1 https://www.businessinsider.com/middle-class-chinese-buyers-... https://www.marketwatch.com/story/chinese-investors-buy-more-us-residential-real-estate-than-any-other-country-but-trumps-trade-war-could-soon-end-that-2019-05-15 https://www.marketwatch.com/story/chinese-investors-buy-more...
  - square90 6y ago
    I think it's been heavily bought up by foreign real estate investors [0]. [0] https://vancouversun.com/opinion/columnists/douglas-todd-chinas-real-estate-investors-down-on-vancouver-but-not-out https://vancouversun.com/opinion/columnists/douglas-todd-chi...
rconti 6y ago
My immediate reaction is "adjusted for inflation" != "adjusted for wages".
calebkaiser 6y ago
I tried to confirm this for Cincinnati. Zillow reports that the median list price/square foot in Cincinnati was $131 in March 2019. In March 2011, it was $82 (roughly $93.20, adjusted for inflation). That is a huge increase proportionally, and that's only going back 8 years. I would be shocked if the increase isn't more severe going back to 1990. Source: https://www.zillow.com/cincinnati-oh/home-values/ https://www.zillow.com/cincinnati-oh/home-values/
mdoms 6y ago
America is not the only country.
bergie 6y ago
You make it sound like fire safety is a luxury people could and should live without.
dang 6y ago
(We detached this subthread from https://news.ycombinator.com/item?id=24491909 https://news.ycombinator.com/item?id=24491909.)
ketzu 6y ago
> (This doesn't even take into account that mortgage rates are drastically lower since then.) Which is an important factor, too! In Germany rates seem to be around 1%, as low as 0.5% fixed for 10 years. (US seems higher though)
- Xylakant 6y ago
  Keep in mind that this is the advertised best rate, often not including fees etc. It’s unlike that you’ll actually end up paying that rate.
contravariant 6y ago
Is this the median per metro? Because if so then I'd very much like to know what % of the population lives in a 'cheap' (i.e. below median) metro.
deleted 6y ago
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wonnage 6y ago
You are so, so close to understanding the problem, and then stopped at the last minute. Are you arguing that SF should be only populated by L8s at Google? Surely not. It should make financial sense for teachers and cooks and Uber drivers to live in SF, because that's how cities work. L8s are great at writing design docs for obscure CI systems but what if I want a burrito?
- pwillia7 6y ago
  Well, then that'll be $287.65
- hindsightbias 6y ago
  There were cheap burritos everywhere before tech arrived.
  - mixmastamyk 6y ago
    …and housing starts ended.
tstewart161 6y ago
I’ll ding you on the financial sense of not living in Bay Area vs living there even if you’re just a new grad (or just below L8). I live in a very low cost of living area with salary nearly twice the median software engineer and I’d still be able to save 40% more on a google paycheck even adjusting for the rent 5 times my current for the same amenities.
- jdashg 6y ago
  We don't even need to be that frugal! 100% of the net increase to VHCOL compensation can go into VHCOL housing expense increases with plenty of room to spare. If we would pay 33% of your income in LCOL housing, and move to someplace that pays us (net) 100% more, we can afford 4x(!) the rent we did previously. We're bidding against everyone else who wants what we want, so it's no wonder housing is insane in the Bay Area, since household incomes are so much higher.
neilparikh 6y ago
> But unless you have the potential to become an L8 at Google (or equivalent), it makes no financial sense to choose to live in the Bay Area instead of Raleigh. It's like somebody who works as a back office bookkeeper insisting on buying custom tailored Seville Row suits for his work attire, then complaining that the costs of clothes has gotten out of hand. Buying a custom tailored suit requires extra/better labour and materials, so it makes sense that the costs associated with it would be higher. For this analogy to apply to housing, the cost of constructing and maintaining housing should be higher in the Bay Area too. However, almost all the increases to rent in urban areas has come from increased land values. This isn't a result of the landowner putting in "extra work" to make it better; they get to extract the added land value that the community created while putting in no extra labour or capital. The fact that private landowners capture all this extra value the community created is not inevitable! It's entirely a result of the economic system we've chosen to stick with. There are solutions that are both more fair, and economically efficient [0]. [0] - See https://en.wikipedia.org/wiki/Georgism https://en.wikipedia.org/wiki/Georgism and https://en.wikipedia.org/wiki/Land_value_tax https://en.wikipedia.org/wiki/Land_value_tax
- charlesu 6y ago
  Not sure that's true. L8 at Google is a total compensation of >$500k. You can afford to live on that in the Bay Area. If you leave Google for a job in Raleigh, you're probably going to take a massive pay cut. Remember, the average SWE makes like ~$100k. It's not nothing but it's not that great either after you factor in a mortgage, car insurance, gas, utilities, food, retirement, and increased healthcare costs due to being on an inferior health insurance plan. At a certain point, you're better off at Google.
  - beefalo 6y ago
    L6 at google is >$500k for engineering... L8 should be $1M+
sanp 6y ago
Cost per sq. Ft. may not have gone up significantly (adjusting for inflation) but if all you can get are larger houses (i.e., builders are not making 1300 sq. Ft. houses like they used to) then it really doesn't matter. See https://www.manhattan-institute.org/reevaluating-prosperity-of-american-family https://www.manhattan-institute.org/reevaluating-prosperity-...
thescriptkiddie 6y ago
> Adjusted for inflation the median cost per square foot of new housing is almost exactly the same as it was in 1990 Now go back to ~1970, when real wages stopped keeping up with productivity, and old housing started to increase in value instead of depreciating.
mixmastamyk 6y ago
Those points are not wrong per se, but you don't mention them being a result of the NIMBY phenomenon, supported and enshrined by law. If we built hundreds of Tokyo-sized apartments over every metro station, the housing shortage would be over.

elektor 6y ago

That's a valid point but millions of people live and work in SF, NY, LA, and DC. Their needs for housing should be acknowledged as well.

TuringNYC 6y ago
I dont think this is a regional problem -- it is a problem of income/price and income/rent ratios off the historical chart almost regardless of where you live. It is a worse problem in SF, NY, LA, and DC but still a universal problem.
war1025 6y ago
The point is that it's a regional, not generational, problem.
- tpm 6y ago
  It's a huge problem in large parts of Europe and Asia too.
- computerphage 6y ago
  It's not just a regional problem if it's happening in every region.
  - zip1234 6y ago
    Local control over zoning is a massive problem. Most people agree that building more homes would bring housing prices down. However, most cities have more than half of the land exclusively reserved for single family homes and have rules that prevent any creativity or density. They want other places to add the housing. I can't see the problems going away unless entire states reform zoning.
  - kevin_thibedeau 6y ago
    The rust belt cities don't have skyrocketing housing prices if you're willing to buy non-McMansion older stock.
    - throwaway2048 6y ago
      And how likely are you to get a job that lets you afford said house?
      - war1025 6y ago
        That depends on your skills and / or what you're willing to do. The rust belt is rusty in the sense that easy to obtain and hold down factory jobs are no longer a thing. If you have marketable skills, there is work pretty well anywhere. Just like how if cushy tech jobs someday dry up in Silicon Valley there will still be work there, it just won't be a sure thing like it is now.
deleted 6y ago
[deleted]

vsareto 6y ago

>One is because homes today are substantially larger This is the problem, really. It's hard to find a simple single-floor home for individuals or no-kid couples.

computerphage 6y ago

What about other years? 1980? 1970? I would love to see this data over time. > homes today are substantially larger Is there any availability of smaller homes in actual markets? If I'm a buyer in the market do I even have the option to buy a cheap smaller home?

alchemism 6y ago
No, you have the option of buying a condominium apartment in most cases. Here in the Philadelphia urban real estate market —- which has no shortage of reclaimable housing —- the break-even point for builders is about triple the value of the existing homes. No current resident can afford to buy one, so single family homes get converted into tiny “luxury” condos. [Edit: there are city subsidized ‘tiny-housing’ developments but these are more for welfare recipients than regular buyers.]
- kickopotomus 6y ago
  The same thing is happening here in Austin. Developers are buying up older properties, demolishing them, and then splitting the lot into 2 or 3 sections and building smaller "modern" homes/condos.
zzapplezz 6y ago
This is because small and micro sized units are literally outlawed by many local zoning laws country-wide.
mrep 6y ago
Since 1978 at least [0], not sure how much data you'll get further back. [0]: https://www.supermoney.com/inflation-adjusted-home-prices/ https://www.supermoney.com/inflation-adjusted-home-prices/
thinkharderdev 6y ago
This is one of the perverse effects of limits on new construction. Since builders can only build so much, they naturally focus on the high-end where profits are fattest. In a well-functioning market there is only so much demand for luxury housing so they would also build smaller, less expensive stuff as well, but they can't

zzapplezz 6y ago

Sure, but post-WWII the federal government injected billions (in 2020 dollars) into the pockets of mostly white veterans to build millions of homes. The federal government also provided generous home loans and unemployment insurance. Today, these policies would be viewed as socialist by the very people who benefited from it the most.

krakatau1 6y ago
USA in 1945 was 91% white so it kinda makes sense that government did it. Homogeneous countries have no political issues with welfare because everyone is alike.
- throwaway0a5e 6y ago
  People find differences. Back then the places that didn't have a ready supply of colored folks (might as well use the adjective of the day) were treating the Irish and Italians and eastern Europeans like crap in their place. 1945 is kind of different because by then it was pretty clear we were all in it together but in 1940 or so there was still plenty of "white on white" bigotry targeted floating around. 20+yr later it was considered novel that JFK was Catholic.

harimau777 6y ago

It seems to me that the places where cost of living is still low is places that people don't want to actually live. Whereas in previous generations regular people could afford to live in interesting parts of the country.

gross_anat 6y ago
if you think sf/ny/dc are interesting places to live i feel sorry for you. the cities are mostly delivery folk working for peanuts and everyone else walking around with earbuds in looking down or holed up in a tower with a guard. wealthy ppl just steal and commodify culture they don't create it. the forest is interesting, a cafe in a small town can be very interesting. everytime i'm in sf i feel something being extracted from me

tidepod12 6y ago

>One is because homes today are substantially larger and have more amenities than they did in previous generations. I have noticed that most of my fellow millennials seem to have completely forgotten the concept of "starter home" and assume that as soon as you turn 25 you should be entitled to a 4 bedroom house with a pool, huge yard, wonderful neighborhood, three-car garage, etc. Among my friends that have bought houses, many of them have gone into significant debt just to buy a 3-4 bedroom house, even though they have no kids and only use one of the bedrooms, because they think that at some point in their life they will put them to use. The extra rooms go completely unused (other than the extra furniture which they also went into debt for). It's like they see the house that their parents own and assume that their house also needs to be that, and ignore the fact that their parents probably started out in a much smaller home and then moved into a big one once necessary. >Two is that we're highly skewed to a handful of elite metros I contend that it's not even just this, but also that within metros millenials are highly skewed to a handful of elite neighborhoods. I live in a medium COL metro, and all of my friends constantly lament the "high" cost of houses and how they will never be able to afford a house. But when I ask what houses they are looking at, it's always the nicest, premiere neighborhoods that have McMansions with huge yards, white picket fences, hip restaurants within walking distance, etc. Not a single one of them even considers living in the many much cheaper neighborhoods. There certainly are issues with prices in some areas (cough SF cough) but at least in my metro and in my friend group, the "houses cost too much" meme seems to be a scapegoat for what is really just an inflated sense of what housing they are entitled to.

mywittyname 6y ago
> I have noticed that most millenials seem to have completely forgotten the concept of "starter home" and assume that as soon as you turn 25 you should be entitled to a 4 bedroom house with a pool, huge yard, wonderful neighborhood, three-car garage, etc. "Starter homes" for young people is the stuff that was built 30-40 years ago that hasn't been updated. So they are buying those mcmansions because that's what was built in the 80s-90s-00s. The really nice, older urban areas with housing built before that is way more expensive in absolute dollars. Smaller is not cheaper in most cases. Smaller is "established" and everyone with money wants to live in those established neighborhoods, not the suburban sprawl 50m from the city center.

mywittyname 6y ago

> But in places like Tampa, Omaha, Cincinnati, and Phoenix the cost of housing (per square foot) has barely gone up at all. Maybe if you stop looking at like 2018. But my on-the-ground analysis living on one of these cities is cost of housing has fucking exploooded. I built a house just two years ago, which I thought was incredibly expensive at 2 times the median home price in the area. I had it in the back of my head that I was insane to pay so much for a house, but since I could easily afford it, I went ahead with it. Now, the median price has shot up by 25% and there are literally no new houses available for what I paid. My neighbors are relocating after only a year in their house and sold their house for 20% over what they paid new. The new construction 3 miles down the street from me starts at 30% more than what I paid, and a few are double or more. Meaning, 3-5x the median for the area. All of this is trickling down to the rest of the area. Houses that went for $130k in 2015 have sale prices in the $200k range. We're talking 60s era ranch houses that haven't been updated since the 90s.

texuf 6y ago
With the extremely low interest rates, I wonder if the monthly payments are about the same.
- jeffbee 6y ago
  It doesn't help as much as you've implied since 1) you need 20% of the sticker price for the down payment, and 20% of $200k is more than 20% of $130k, and 2) in many jurisdictions you pay tax on the market value, so your taxes go up whenever mortgage rates fall and prices rise.
  - vondur 6y ago
    Is this true any longer? I assumed you can get into most houses with 10% down, so long as your credit and earnings are good.
  - toomuchtodo 6y ago
    FHA mortgage down payment is 3-5%. There’s frontloaded mortgage insurance as well as ongoing monthly mortgage insurance, but the credit score and down payment requirements are very low. Most people with a pulse qualify. If you come with enough money down, you can get a hard money loan with 70% loan to value (30% down) 1 day after bankruptcy or foreclosure.

iso1631 6y ago

https://www.longtermtrends.net/home-price-median-annual-income-ratio/ https://www.longtermtrends.net/home-price-median-annual-inco... Historically a house in the US cost around 3 times the median annual income. During the housing bubble of 2006 the ratio reached 4.5 - in other words, the median price for a single family home in the United States cost 4.5 times the US median annual household income

deleted 6y ago

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sharadov 6y ago

Unfortunately this is also where all the tech jobs are located. And the reason most people live here is that it's extremely easy to move jobs. Yeah, Austin and Seattle have become the next locations, but we need more. Hopefully the remote work options because of Covid become more permanent.

novok 6y ago

America & Japan are lucky that at least houses are somewhat affordable. Canadians & many europeans on the other hand...

MisterTea 6y ago

> But housing is not more expensive in the majority American metros My parents bought their NYC home in 1976 for $76,000. Adjusted for inflation brings that to around $350,000 in 2020 dollars. The house is currently valued at $800,000.

nradov 6y ago
Now repeat the calculation for a similar home in Toledo or Detroit.
- graywh 6y ago
  just looked up a random 2-bed, 1400 sq-ft home in my city of 600k -- sold for $31k in 1975 (comparable to $150k now), easily worth $350k today this isn't a neighborhood known for gentrification, either

loblollyboy 6y ago

Uh my Zillowing suggests that you’re wrong. At least in WI - and what’s more middle American than WI. I’m talking even bumfuck, wi, where a hunting lodge with no plumbing and a woodfire oven for heating will set you back 100k. In Madison WI you are wrong nearly on an order of 10 (Comparing w 1990 prices).

rattlesnakedave 6y ago

Even houses built in the 70s and 80s where I live in central KY have “appreciated” much faster than inflation. W/r/t your point about hedonic adjustments, I’m not sure that matters if most still can’t afford it.

ummonk 6y ago

I believe that, while still low relative to SF or NYC, home prices in Tampa and Phoenix have risen rapidly in recent years. As for Cincinnati, not exactly a thriving job market.

egh 6y ago

I'm not sure what you're arguing here. The simple fact is the amount people pay for housing is up since the 1990s. You can find this data on the BLS web site: https://www.bls.gov/cex/csxmulti.htm https://www.bls.gov/cex/csxmulti.htm Here is the data adjusted for constant 2020 dollars: 1992 $9,799.06 1993 $9,543.99 1994 $9,760.55 1995 $9,924.05 1996 $9,825.29 1997 $10,106.90 1998 $10,473.38 1999 $10,712.59 2000 $10,506.40 2001 $11,055.55 2002 $11,121.33 2003 $10,997.04 2004 $10,800.20 2005 $11,497.24 2006 $12,317.69 2007 $12,262.90 2008 $12,447.28 2009 $11,989.00 2010 $11,503.97 2011 $11,187.78 2012 $11,070.20 2013 $11,114.82 2014 $11,481.16 2015 $11,670.71 2016 $11,844.36 2017 $12,399.22 2018 $12,015.43 2019 $12,190.00

nickff 6y ago
I think the parent is arguing that those numbers are (only slowly) increasing because: 1) They are skewed by a few 'elite' metro areas (which are best avoided by those without very high-paying jobs). 2) The houses are nicer and have more 'features', which cost money. And that if you remove the high COL areas, and control for the amenities, you will find costs are flat or decreasing.
- watwut 6y ago
  But people can not buy theoretical smaller cheaper house with no AC if that one is not on sale.
  - nickff 6y ago
    Maybe people don't want those houses; maybe people are happy to move somewhere less prestigious to get the house they want.
    - WarOnPrivacy 6y ago
      > Maybe people don't want those houses It's not clear what kind of houses you are envisioning. Go to Zillow or Hotpads (rentals) & search for less prestigious homes. You still don't get places that can be afforded with a HS Graduate income. tl;dr: People can't move out in their 20s because of math.

ianmobbs 6y ago

> Two is that we're highly skewed to a handful of elite metros, whose housing markets are not representative of the country as a whole Right, but what matters is the housing price where people are. It doesn't matter what the housing market looks like in South Dakota if I don't want to live there. While houses in South Dakota may be 1/10 the price of houses in NYC (likely cheaper, honestly), they also have 1/10 the population. The notion that the quantity of land somewhere (in this case, quantity for sale) should somehow equate to importance more than the quantity of people is ridiculous. > It's like somebody who works as a back office bookkeeper insisting on buying custom tailored Seville Row suits for his work attire, then complaining that the costs of clothes has gotten out of hand. No, it's like someone who works as a back office bookkeeper in New York City being forced to pay insane amounts in rent while seeing thousands of empty AirBNBs, hotel rooms, etc. and complaining that the cost of living has gotten out of hand. Housing is a necessity, "custom tailored Seville Row suits" are not. And it's simply not feasible for the vast majority of people living paycheck to paycheck to just up and leave to Raleigh like you imply.

ballenf 6y ago
Ok so the change from a decade or two ago is that young people want to live in places they can't afford. In the past they were evidently more content to live in places they could afford. Doesn't really feel like cost of housing is what's changed.
- ng12 6y ago
  I grew up in a small rust belt city. 40 years ago there were reasons to live there: factories with union jobs and an entire local economy built upon them (financial services, a hospital, bustling main street, etc). All that's gone now. It's not that I wouldn't be content like my parents were, it's that it's fundamentally not the same city it was back then.
  - pnutjam 6y ago
    You can't get that through to the parent poster. He only see's spherical cows, not reality.

vkou 6y ago

> I harp on this constantly. But housing is not more expensive in the majority of American metros. Adjusted for inflation the median cost per square foot of new housing is almost exactly the same as it was in 1990. (This doesn't even take into account that mortgage rates are drastically lower since then.) It doesn't matter that real estate on the Moon is free. There aren't any jobs on the Moon, or in third-tier cities.

munificent 6y ago

> Two is that we're highly skewed to a handful of elite metros, whose housing markets are not representative of the country as a whole. Housing is expensive in San Francisco, New York, LA, and DC. But in places like Tampa, Omaha, Cincinnati, and Phoenix the cost of housing (per square foot) has barely gone up at all. I think cities are fundamentally the wrong unit to look at when thinking about housing prices. What we really want to know is "how much does it cost to live some place where I can get a job". Knowing that Tampa is just as cheap today as it was 40 years ago means little if Tampa today has, say, only 70% of the jobs that it did back then. What we really need is some sort of normalized "job availability unit" like "per capita" but "per employment opportunity" and then try to calculate current and historical housing costs relative to that.

maerF0x0 6y ago
> "how much does it cost to live some place where I can get a job" And we'd do well to price that in hours of work per week after taxes, including commute. That is, making $30 an hour where a house is $300k can be better than making $60 an hour where a house is $600k . Think about progressive tax rates, CoL, commute time et al.

jbay808 6y ago

> The demand for ultra-expensive housing in places like the Bay Area is driven by the huge earning potential of the high-skilled labor market. Maybe the Bay area, but that's (sadly) not the case in places like Vancouver and Victoria. Sky high property prices, but no corresponding earning potential.

thinkharderdev 6y ago
I've never quite been able to figure out what happened in Vancouver. It's a great city with a tech scene but salaries there seem very low (by American tech worker standards). Who is actually buying all these multi-million dollar bungalow? None of the senior-level engineers I've worked with from the area would ever be able to even sniff being able to afford that.
- jwiz 6y ago
  At least one theory is money laundering. https://themobmuseum.org/blog/chinese-triads-launder-billions-through-vancouver-buying-luxury-real-estate-cars/ https://themobmuseum.org/blog/chinese-triads-launder-billion...
- dmitrygr 6y ago
  Chinese bureaucrats looking to park some money outside china's financial system. Some west coast cities even instituted special taxes to try to prevent this. https://www.wsj.com/articles/for-chinese-home-buyers-seattle-is-the-new-vancouver-1486500393 https://www.wsj.com/articles/for-chinese-home-buyers-seattle... https://www.businessinsider.com/middle-class-chinese-buyers-us-real-estate-investment-2019-1 https://www.businessinsider.com/middle-class-chinese-buyers-... https://www.marketwatch.com/story/chinese-investors-buy-more-us-residential-real-estate-than-any-other-country-but-trumps-trade-war-could-soon-end-that-2019-05-15 https://www.marketwatch.com/story/chinese-investors-buy-more...
- square90 6y ago
  I think it's been heavily bought up by foreign real estate investors [0]. [0] https://vancouversun.com/opinion/columnists/douglas-todd-chinas-real-estate-investors-down-on-vancouver-but-not-out https://vancouversun.com/opinion/columnists/douglas-todd-chi...

rconti 6y ago

My immediate reaction is "adjusted for inflation" != "adjusted for wages".

calebkaiser 6y ago

I tried to confirm this for Cincinnati. Zillow reports that the median list price/square foot in Cincinnati was $131 in March 2019. In March 2011, it was $82 (roughly $93.20, adjusted for inflation). That is a huge increase proportionally, and that's only going back 8 years. I would be shocked if the increase isn't more severe going back to 1990. Source: https://www.zillow.com/cincinnati-oh/home-values/ https://www.zillow.com/cincinnati-oh/home-values/

mdoms 6y ago

America is not the only country.

bergie 6y ago

You make it sound like fire safety is a luxury people could and should live without.

dang 6y ago

(We detached this subthread from https://news.ycombinator.com/item?id=24491909 https://news.ycombinator.com/item?id=24491909.)

ketzu 6y ago

> (This doesn't even take into account that mortgage rates are drastically lower since then.) Which is an important factor, too! In Germany rates seem to be around 1%, as low as 0.5% fixed for 10 years. (US seems higher though)

Xylakant 6y ago
Keep in mind that this is the advertised best rate, often not including fees etc. It’s unlike that you’ll actually end up paying that rate.

contravariant 6y ago

Is this the median per metro? Because if so then I'd very much like to know what % of the population lives in a 'cheap' (i.e. below median) metro.

deleted 6y ago

[deleted]

wonnage 6y ago

You are so, so close to understanding the problem, and then stopped at the last minute. Are you arguing that SF should be only populated by L8s at Google? Surely not. It should make financial sense for teachers and cooks and Uber drivers to live in SF, because that's how cities work. L8s are great at writing design docs for obscure CI systems but what if I want a burrito?

pwillia7 6y ago
Well, then that'll be $287.65
hindsightbias 6y ago
There were cheap burritos everywhere before tech arrived.
- mixmastamyk 6y ago
  …and housing starts ended.

tstewart161 6y ago

I’ll ding you on the financial sense of not living in Bay Area vs living there even if you’re just a new grad (or just below L8). I live in a very low cost of living area with salary nearly twice the median software engineer and I’d still be able to save 40% more on a google paycheck even adjusting for the rent 5 times my current for the same amenities.

jdashg 6y ago
We don't even need to be that frugal! 100% of the net increase to VHCOL compensation can go into VHCOL housing expense increases with plenty of room to spare. If we would pay 33% of your income in LCOL housing, and move to someplace that pays us (net) 100% more, we can afford 4x(!) the rent we did previously. We're bidding against everyone else who wants what we want, so it's no wonder housing is insane in the Bay Area, since household incomes are so much higher.

neilparikh 6y ago

> But unless you have the potential to become an L8 at Google (or equivalent), it makes no financial sense to choose to live in the Bay Area instead of Raleigh. It's like somebody who works as a back office bookkeeper insisting on buying custom tailored Seville Row suits for his work attire, then complaining that the costs of clothes has gotten out of hand. Buying a custom tailored suit requires extra/better labour and materials, so it makes sense that the costs associated with it would be higher. For this analogy to apply to housing, the cost of constructing and maintaining housing should be higher in the Bay Area too. However, almost all the increases to rent in urban areas has come from increased land values. This isn't a result of the landowner putting in "extra work" to make it better; they get to extract the added land value that the community created while putting in no extra labour or capital. The fact that private landowners capture all this extra value the community created is not inevitable! It's entirely a result of the economic system we've chosen to stick with. There are solutions that are both more fair, and economically efficient [0]. [0] - See https://en.wikipedia.org/wiki/Georgism https://en.wikipedia.org/wiki/Georgism and https://en.wikipedia.org/wiki/Land_value_tax https://en.wikipedia.org/wiki/Land_value_tax

charlesu 6y ago
Not sure that's true. L8 at Google is a total compensation of >$500k. You can afford to live on that in the Bay Area. If you leave Google for a job in Raleigh, you're probably going to take a massive pay cut. Remember, the average SWE makes like ~$100k. It's not nothing but it's not that great either after you factor in a mortgage, car insurance, gas, utilities, food, retirement, and increased healthcare costs due to being on an inferior health insurance plan. At a certain point, you're better off at Google.
- beefalo 6y ago
  L6 at google is >$500k for engineering... L8 should be $1M+

sanp 6y ago

Cost per sq. Ft. may not have gone up significantly (adjusting for inflation) but if all you can get are larger houses (i.e., builders are not making 1300 sq. Ft. houses like they used to) then it really doesn't matter. See https://www.manhattan-institute.org/reevaluating-prosperity-of-american-family https://www.manhattan-institute.org/reevaluating-prosperity-...

thescriptkiddie 6y ago

> Adjusted for inflation the median cost per square foot of new housing is almost exactly the same as it was in 1990 Now go back to ~1970, when real wages stopped keeping up with productivity, and old housing started to increase in value instead of depreciating.

mixmastamyk 6y ago

Those points are not wrong per se, but you don't mention them being a result of the NIMBY phenomenon, supported and enshrined by law. If we built hundreds of Tokyo-sized apartments over every metro station, the housing shortage would be over.