5 ms·

I actually think we shouldn’t be surprised that the proportion of 25-year-olds that can afford to buy a house in the area they grew up in of some reasonable siz

by bhupy 6y ago

I actually think we shouldn’t be surprised that the proportion of 25-year-olds that can afford to buy a house in the area they grew up in of some reasonable size is about the same as it was for boomers. But the emphasis should be on in the area they grew up in, because in the 21st century we’re seeing a clustering of the economy in a few (predominately coastal) metros. A big part of the problem is that it’s difficult for a 25-year-old to afford to buy a house near their job in San Francisco, not that it’s difficult for them to buy a house near the middle-America suburb they likely grew up in. It’s also worth noting that the median 25 year old doesn’t live in San Francisco or New York. If that’s you, you’re probably in the top 2 quintiles in your age group. All that being said, the inflation-adjusted wealth of the median 25 year old millennial is about equal to the wealth of a 25-year-old Baby Boomer -> https://twitter.com/ernietedeschi/status/1308813020425007105 https://twitter.com/ernietedeschi/status/1308813020425007105 EDIT: to address the UK home-price-multiplier data This thread breaks it down in the US -> https://twitter.com/jmhorp/status/1221828310000271361 https://twitter.com/jmhorp/status/1221828310000271361 Outside of a few notorious coastal metros, the multiplier hasn’t changed all that much.

jlokier 6y ago
> A big part of the problem is that it’s difficult for a 25-year-old to afford to buy a house near their job in San Francisco, not that it’s difficult for them to buy a house near the middle-America suburb they likely grew up in. I think both are problems, because if they remain in the middle-America suburb, salaries are a lot lower. A 25 year old living where they grew up often doesn't earn enough to buy the local house either.
- bhupy 6y ago
  Salaries are indeed a lot lower, but the multiple of the median salary required to buy a home is a lot higher in the coastal metros. In other words, the salaries are nominally lower, but in real terms they’re actually higher. This thread actually breaks it down by metro -> https://twitter.com/jmhorp/status/1221828310000271361 https://twitter.com/jmhorp/status/1221828310000271361 The home-price-to-income ratio has remained mostly unchanged for all metros except for the infamous coastal ones. At this moment, here’s a quick breakdown of the salary necessary to buy the median home, by metro -> https://www.hsh.com/finance/mortgage/salary-home-buying-25-cities.html https://www.hsh.com/finance/mortgage/salary-home-buying-25-c...
  - lotsofpulp 6y ago
    But volatility of income is higher, or at least it’s perceived to be. If you think the future is volatile, you need to be in a place where you have multiple options for income as backup, and that is why people will put up with cities even if they prefer other places.
    - bhupy 6y ago
      Do you have a source for income volatility per metro?
      - lotsofpulp 6y ago
        I do not. I imagine it's pretty difficult to quantify, but given the economic stagnation of many rural areas that depended on one or a handful of manufacturing or natural resource extraction facilities, I imagine many people can see and feel it. It sort of makes sense with cheaper labor abroad and cheaper transportation and cheaper communications that money can move very quickly to take advantage of arbitrage. Unfortunately, for people with families, that isn't as easy, so next best solution is to live somewhere with lots of employers, and is experiencing growth.
        bhupy 6y ago
        Then I'm not sure that you can definitively claim that income "volatility" is necessarily higher outside of {list of expensive coastal metros}. It could be higher, but there's no information to suggest that to be case. > given the economic stagnation of many rural areas that depended on one or a handful of manufacturing or natural resource extraction facilities, I imagine many people can see and feel it. Rural areas have almost never been economically dynamic, in any society (outside of agriculture, at least). Nobody is arguing that one ought to live in a rural town — but there are a ton of tier-2 and tier-3 cities, and suburbs of tier-1 cities where gainful employment is within reach, especially for wage earners in the bottom 3 quintiles. This includes Pittsburgh, Atlanta, Omaha, Little Rock, St. Louis, Milwaukee, Madison, Nashville, Salt Lake City, Minneapolis, Philadelphia, etc etc etc. Even Chicago, a tier-1 city went from having an income-to-home-price multiple of 2.45x in 1984, to 3.55x in 2017.
quietbritishjim 6y ago
> Outside of a few notorious coastal metros, the multiplier hasn’t changed all that much. Interesting you put it like that. I looked at the same graphic and thought "ah, apart from the sparesly-populated central areas, the multiplier has changed radically, similarly to the pattern in the UK". At the end of the day, the conclusion is that the pattern is commonly reflected in (sub)urban areas and not in rural areas - and neither of those facts is more important than the other.
- bhupy 6y ago
  It's not just sparsely populated areas. The tool lets you see it on a per-MSA level. Here's a list of the most populated metropolitan areas in the US -> https://en.wikipedia.org/wiki/List_of_metropolitan_statistical_areas https://en.wikipedia.org/wiki/List_of_metropolitan_statistic... Among the top 10, only 3 experienced a substantial multiplier increase (New York, LA, Miami). Among the top 20, only an additional 4 (San Francisco, Seattle, San Diego, Denver) That means only 7 of the top 20 most populated MSAs experienced a substantial multiplier increase. It's largely dependent on local land use policy.
notacoward 6y ago
> the proportion of 25-year-olds that can afford to buy a house in the area they grew up in of some reasonable size is about the same as it was for boomers OK, first, boomers aren't relevant here. The people buying houses in anything like OP's timeframe were GenX, not boomers, and I'm going to stick with that timeframe. Second, I just don't think your claim is true. For example, in Massachusetts (where I live) median income in 1990 was $62K and median home price was $162K for a ratio of 2.6:1. Today those numbers are $77K and $408K for a ratio of 5.3:1. That's all of Massachusetts, not just the high-demand areas. Even your source admits that Seattle, Portland, and Ft. Lauderdale show much larger ratio increases, but casually dismisses them as anomalies instead of considering that they might be the tip of the real iceberg. I believe that any scientific sample would show a very different picture than that derived from cherry-picked extremes. It's practically all because of wage stagnation BTW. That's a 3.1% annual increase in home prices, vs. a paltry 0.7% for wages.
- missedthecue 6y ago
  houses have gotten much larger since 30 and 40 years go. They've almost doubled in size since 1980, but adjusted for inflation, are now cheaper per sq ft
  - notacoward 6y ago
    That's true, and interesting, but I'm not sure it's relevant. People have to buy the houses that are on the market, and smaller houses tend to get torn down to make way for larger ones. Why tweak the numbers that way and not others (e.g. to account for student-loan debt)?

by bhupy 6y ago

jlokier 6y ago

> A big part of the problem is that it’s difficult for a 25-year-old to afford to buy a house near their job in San Francisco, not that it’s difficult for them to buy a house near the middle-America suburb they likely grew up in. I think both are problems, because if they remain in the middle-America suburb, salaries are a lot lower. A 25 year old living where they grew up often doesn't earn enough to buy the local house either.

bhupy 6y ago
Salaries are indeed a lot lower, but the multiple of the median salary required to buy a home is a lot higher in the coastal metros. In other words, the salaries are nominally lower, but in real terms they’re actually higher. This thread actually breaks it down by metro -> https://twitter.com/jmhorp/status/1221828310000271361 https://twitter.com/jmhorp/status/1221828310000271361 The home-price-to-income ratio has remained mostly unchanged for all metros except for the infamous coastal ones. At this moment, here’s a quick breakdown of the salary necessary to buy the median home, by metro -> https://www.hsh.com/finance/mortgage/salary-home-buying-25-cities.html https://www.hsh.com/finance/mortgage/salary-home-buying-25-c...
- lotsofpulp 6y ago
  But volatility of income is higher, or at least it’s perceived to be. If you think the future is volatile, you need to be in a place where you have multiple options for income as backup, and that is why people will put up with cities even if they prefer other places.
  - bhupy 6y ago
    Do you have a source for income volatility per metro?
    - lotsofpulp 6y ago
      I do not. I imagine it's pretty difficult to quantify, but given the economic stagnation of many rural areas that depended on one or a handful of manufacturing or natural resource extraction facilities, I imagine many people can see and feel it. It sort of makes sense with cheaper labor abroad and cheaper transportation and cheaper communications that money can move very quickly to take advantage of arbitrage. Unfortunately, for people with families, that isn't as easy, so next best solution is to live somewhere with lots of employers, and is experiencing growth.
      - bhupy 6y ago
        Then I'm not sure that you can definitively claim that income "volatility" is necessarily higher outside of {list of expensive coastal metros}. It could be higher, but there's no information to suggest that to be case. > given the economic stagnation of many rural areas that depended on one or a handful of manufacturing or natural resource extraction facilities, I imagine many people can see and feel it. Rural areas have almost never been economically dynamic, in any society (outside of agriculture, at least). Nobody is arguing that one ought to live in a rural town — but there are a ton of tier-2 and tier-3 cities, and suburbs of tier-1 cities where gainful employment is within reach, especially for wage earners in the bottom 3 quintiles. This includes Pittsburgh, Atlanta, Omaha, Little Rock, St. Louis, Milwaukee, Madison, Nashville, Salt Lake City, Minneapolis, Philadelphia, etc etc etc. Even Chicago, a tier-1 city went from having an income-to-home-price multiple of 2.45x in 1984, to 3.55x in 2017.

quietbritishjim 6y ago

> Outside of a few notorious coastal metros, the multiplier hasn’t changed all that much. Interesting you put it like that. I looked at the same graphic and thought "ah, apart from the sparesly-populated central areas, the multiplier has changed radically, similarly to the pattern in the UK". At the end of the day, the conclusion is that the pattern is commonly reflected in (sub)urban areas and not in rural areas - and neither of those facts is more important than the other.

bhupy 6y ago
It's not just sparsely populated areas. The tool lets you see it on a per-MSA level. Here's a list of the most populated metropolitan areas in the US -> https://en.wikipedia.org/wiki/List_of_metropolitan_statistical_areas https://en.wikipedia.org/wiki/List_of_metropolitan_statistic... Among the top 10, only 3 experienced a substantial multiplier increase (New York, LA, Miami). Among the top 20, only an additional 4 (San Francisco, Seattle, San Diego, Denver) That means only 7 of the top 20 most populated MSAs experienced a substantial multiplier increase. It's largely dependent on local land use policy.

notacoward 6y ago

> the proportion of 25-year-olds that can afford to buy a house in the area they grew up in of some reasonable size is about the same as it was for boomers OK, first, boomers aren't relevant here. The people buying houses in anything like OP's timeframe were GenX, not boomers, and I'm going to stick with that timeframe. Second, I just don't think your claim is true. For example, in Massachusetts (where I live) median income in 1990 was $62K and median home price was $162K for a ratio of 2.6:1. Today those numbers are $77K and $408K for a ratio of 5.3:1. That's all of Massachusetts, not just the high-demand areas. Even your source admits that Seattle, Portland, and Ft. Lauderdale show much larger ratio increases, but casually dismisses them as anomalies instead of considering that they might be the tip of the real iceberg. I believe that any scientific sample would show a very different picture than that derived from cherry-picked extremes. It's practically all because of wage stagnation BTW. That's a 3.1% annual increase in home prices, vs. a paltry 0.7% for wages.

missedthecue 6y ago
houses have gotten much larger since 30 and 40 years go. They've almost doubled in size since 1980, but adjusted for inflation, are now cheaper per sq ft
- notacoward 6y ago
  That's true, and interesting, but I'm not sure it's relevant. People have to buy the houses that are on the market, and smaller houses tend to get torn down to make way for larger ones. Why tweak the numbers that way and not others (e.g. to account for student-loan debt)?