5 ms·

> The Californians, after years of having higher salary, more savings, and a job that lets them move, goes to Texas and offers $400k for that same house. The Ca

by avl999 6y ago

> The Californians, after years of having higher salary, more savings, and a job that lets them move, goes to Texas and offers $400k for that same house. The Californian thinks it's a great deal, because they get the same size house they previously lived in for only half the price! And the seller thinks it's great, because he now suddenly gets a huge premium on his previously-valued-at-$250k-house. All of the real estate responds in kind, expecting to get $400k+ from all the Cali transplants. However, the average Texan, who doesn't have that high paying salary, gets priced out and can no longer afford a house in their city. That makes no sense. If the housing prices in a market go up, it is because there is more demand without an increase in supply. Not because a certain group is paying almost double the market value for absolutely no reason.

tidepod12 6y ago
The supply of housing isn't a problem in Texas, but "supply and demand" isn't the end of the story. When two Texans want the same house, a bidding war is artificially capped (at, say $300k) because that's all the average Texan can afford. But when a Californian moves in with high net worth and a higher paying job, they can bid much higher, and they don't mind doing so (the mindset I have personally heard from most CA transplants to Dallas is that they don't care if they paid more than the average Texan pays, because at the end of the day they're still paying less than half what they were paying in CA). And then there's the issue of property taxes. A Texan lives in his nice $250k house and pays $X/year in property taxes. Then someone comes in and buys the house next to them for $400k/yr. Suddenly this neighborhood is now appraised at a much higher value than before, and the Texan's property taxes are now twice as high, bordering on the edge of unaffordable. I've personally seen several people be priced out of an area due to this.
- ntsplnkv2 6y ago
  > And then there's the issue of property taxes. That seems like a Texas problem being blamed on Californians. I'm sure a lot of Texans are very happy that their houses have shot way up in value.
- sbeller 6y ago
  > I've personally seen several people be priced out of an area due to this. Ask a Californian about prop 13 ;-)
  - xxpor 6y ago
    Which is the root cause of the majority of urban/suburban California's issues. Texas won't become California, even if 100% of CA's population moves there, because they don't have the same pants on head dumb proposition system.
    - ericmay 6y ago
      From the outside I like the proposition system, but not prop-13 specifically.
- throwaway201103 6y ago
  > they don't care if they paid more than the average Texan pays, because at the end of the day they're still paying less than half what they were paying in CA I don't understand not caring about 6 figures of money. Is that really the outlook of the average California tech worker?
  - ctheb 6y ago
    The average California tech worker maybe not, but plenty of them are sitting on $500k+ in cash with yearly incomes in that same range. At that point what does $100k mean? $100k makes no difference in the person’s day to day life. If you like the house and you end up in a bidding war, the $100k is more than worth it.
- stdgy 6y ago
  Feels like the solution here is to pay income taxes instead of property taxes. ;)
  - lotsofpulp 6y ago
    Yes, all the no income tax states are severely regressive and are bad for people with low incomes and good for people with high incomes, obviously.
- avl999 6y ago
  Individuals overpaying is not enough to raise average values of houses in a market. In you example the person who owned the 250k house got a nice windfall selling their price above market value but that is not enough to raise the value at large of houses in that market. It would take people systemically overpaying and overpaying in large volume for it to affect housing prices and there's simply no evidence of that.
Xenograph 6y ago
The real estate market (and well, most real markets) cannot be completely explained by simple supply/demand calculations covered in a high school economics course. Nor can they be entirely explained by a highly-trained economist. There are many factors at play that complicate matters.
- raziel2701 6y ago
  Like what?
  - barcadad 6y ago
    For example, Prop 13 in CA caps property tax increases on primary residences, which keeps people in their homes longer than they would otherwise stay, which in turn reduces the for sale inventory. Another example is Trump's Tax Act, which capped "SALT" deductions (State and Local/Property Taxes). This impacts housing prices relative to rents because you can't deduct the full amount of your property tax in high value states like California. These are two examples...
ralph84 6y ago
Only a very small fraction of the housing supply is up for sale at any given point in time. Prices are set at the margin.

by avl999 6y ago

tidepod12 6y ago

The supply of housing isn't a problem in Texas, but "supply and demand" isn't the end of the story. When two Texans want the same house, a bidding war is artificially capped (at, say $300k) because that's all the average Texan can afford. But when a Californian moves in with high net worth and a higher paying job, they can bid much higher, and they don't mind doing so (the mindset I have personally heard from most CA transplants to Dallas is that they don't care if they paid more than the average Texan pays, because at the end of the day they're still paying less than half what they were paying in CA). And then there's the issue of property taxes. A Texan lives in his nice $250k house and pays $X/year in property taxes. Then someone comes in and buys the house next to them for $400k/yr. Suddenly this neighborhood is now appraised at a much higher value than before, and the Texan's property taxes are now twice as high, bordering on the edge of unaffordable. I've personally seen several people be priced out of an area due to this.

ntsplnkv2 6y ago
> And then there's the issue of property taxes. That seems like a Texas problem being blamed on Californians. I'm sure a lot of Texans are very happy that their houses have shot way up in value.
sbeller 6y ago
> I've personally seen several people be priced out of an area due to this. Ask a Californian about prop 13 ;-)
- xxpor 6y ago
  Which is the root cause of the majority of urban/suburban California's issues. Texas won't become California, even if 100% of CA's population moves there, because they don't have the same pants on head dumb proposition system.
  - ericmay 6y ago
    From the outside I like the proposition system, but not prop-13 specifically.
throwaway201103 6y ago
> they don't care if they paid more than the average Texan pays, because at the end of the day they're still paying less than half what they were paying in CA I don't understand not caring about 6 figures of money. Is that really the outlook of the average California tech worker?
- ctheb 6y ago
  The average California tech worker maybe not, but plenty of them are sitting on $500k+ in cash with yearly incomes in that same range. At that point what does $100k mean? $100k makes no difference in the person’s day to day life. If you like the house and you end up in a bidding war, the $100k is more than worth it.
stdgy 6y ago
Feels like the solution here is to pay income taxes instead of property taxes. ;)
- lotsofpulp 6y ago
  Yes, all the no income tax states are severely regressive and are bad for people with low incomes and good for people with high incomes, obviously.
avl999 6y ago
Individuals overpaying is not enough to raise average values of houses in a market. In you example the person who owned the 250k house got a nice windfall selling their price above market value but that is not enough to raise the value at large of houses in that market. It would take people systemically overpaying and overpaying in large volume for it to affect housing prices and there's simply no evidence of that.

Xenograph 6y ago

The real estate market (and well, most real markets) cannot be completely explained by simple supply/demand calculations covered in a high school economics course. Nor can they be entirely explained by a highly-trained economist. There are many factors at play that complicate matters.

raziel2701 6y ago
Like what?
- barcadad 6y ago
  For example, Prop 13 in CA caps property tax increases on primary residences, which keeps people in their homes longer than they would otherwise stay, which in turn reduces the for sale inventory. Another example is Trump's Tax Act, which capped "SALT" deductions (State and Local/Property Taxes). This impacts housing prices relative to rents because you can't deduct the full amount of your property tax in high value states like California. These are two examples...

ralph84 6y ago

Only a very small fraction of the housing supply is up for sale at any given point in time. Prices are set at the margin.