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I suspect that dual income families could be a contributing factor in increased home prices of single-family homes. Even 'worse' is dual income, no kid familie

• alexpotato 5y ago
  I've often wondered about this myself. E.g. it's a lot easier to have two working people in a couple make $300K total vs only one person making $300K. It would be interesting to go back in time and correlate the rise of dual working couples vs housing prices adjusted for other factors e.g. inflation
  • itake 5y ago
    At least in tech hubs, the "one person making $300k" is marrying up with another person that makes $300k, resulting in a $600k household and $1-3M home prices.
    • wombatpm 5y ago
      Which then leads to the dual income trap.
    • shados 5y ago
      Yup. Don't forget the whole "frequently choose not to have a kid" part, and it becomes extremely one sided. Dual income families aren't new, but 2 high earners professionals with no kids aren't just the occasional doctor/dentist/lawyer couples anymore. I'm a software engineer myself in one of the high paying tech hubs, and married the same. When we went to look for a home and toured open houses, all you saw were pairs of young couples wearing Google, Microsoft and Facebook swags. Sure, I didn't personally ask every single one of them where they worked, but I'd venture that a non-zero amount of these couples were "Tech DINKs", like us. The average person simply can't compete with that. Add that in the urban areas these folks are less likely to want a big car, some may be happier playing Final Fantasy 14 during vacations than traveling across the world (I know plenty of travelers, but there's certainly a lot of "low cost" vacationers in the industry), and some level of financial literacy (common for people who get compensated with RSUs), and it's absolutely one sided. With that said, median home prices have only increased a little faster than inflation. When you account for interest rates tanking + inflation, a median home in 2021 is the same price and sometimes cheaper than it was in 2005 (data for the last few months is harder to find, and there's been a unusual spike, so it may not be quite true right now, but it was just a few months ago). The bigger problem is that everyone wants to live in the same place (usually in urban centers, where the jobs are, and where you don't have to drive an hour and a half to work). So prices where people want to be have increased higher than median. I'd expect people are more ok with paying a larger portion of their income to live where they want to be. Even as extremely high earner DINKs, housing will eat up a good chunk of our cash flow if we feel like blowing it all to live in Manhattan in a condo that doesn't suck.
      • wyclif 5y ago
        What do you think are the best books to recommend to people who don't have enough financial literacy? This is a common theme in this kind of HN thread but I haven't seen many recommendations or lists of books that can help people level up in their financial wisdom. The bigger problem is that everyone wants to live in the same place (usually in urban centers, where the jobs are, and where you don't have to drive an hour and a half to work). I'm hoping WFH greatly disrupts this, opening up rural areas to tech workers. It won't work for everybody, but it does work for SWEs and many kinds of technology employees and contractors.
        • kjkjadksj 5y ago
          There are a lot more reasons to live somewhere than commuting convenience alone. The reports of the death of the city have been greatly exaggerated. It turns out city dwellers need a lot more infrastructure than just a local brewery. Namely a functional school district and a population that isn’t 97% white and strongly skewed conservative.
          • wyclif 5y ago
            Some people want a community that skews conservative, and don't want to live in a shithole hellscape like San Francisco or Portland, with overpriced housing, tent cities under every bridge, drug dealers on every corner, and human feces on the sidewalks. Especially people who have families with children.
        • shados 5y ago
          WFH only changes things in a small number of professions (hard to wait tables remotely, and sometimes doctors need to see patients in person). A large amount of people in those professions don't want to WFH (thus why a lot of big tech companies are INCREASING their real estate footprint rather than reducing it right now. Google, HubSpot, Spotify. Some of these are very open to WFH, but a lot of folks don't want to). It will make a difference, but it will be small. During that time, the rest of folks will still flok to cities. As to financial literacy, books tend to make things much more complicated than they are, and will be too focused. For a beginner, there's a few things that matter. First, the "flowchart". You can find a bunch of these online, but I like this one: https://u.cubeupload.com/demonlesondledon/FIREFlowChart.png https://u.cubeupload.com/demonlesondledon/FIREFlowChart.png This is so you don't fall in the trap of, let say, having a 5% investment while sitting on a 15% debt, or not use your employer 401k matching and invest the money somewhere worse. Then there's basic investment strategies to get started. Bogglehead gets you pretty far there: https://www.bogleheads.org/wiki/Three-fund_portfolio https://www.bogleheads.org/wiki/Three-fund_portfolio The next is understanding how the US market works. It averages 10% a year even if you include the great depression/recession and every other downturn. One day it could do like Japan and never recover/stay flat, but it has never happened in the US so far: https://advisor.visualcapitalist.com/historical-stock-market-returns/ https://advisor.visualcapitalist.com/historical-stock-market... Even for the great depression, while you'll hear that it took 25 years to recover, but that's based on the Nasdaq, which is a very small sample of stocks. The market in aggregate recovered much faster. Finally, you want to understand all the variables when comparing cost/return of home ownership vs renting. It's a LOT more complex than people make it sound. The NYT has a calculator that shows it, alongside a paywalled article: https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html https://www.nytimes.com/interactive/2014/upshot/buy-rent-cal... Bonus: a lot of it just comes down to internalizing the average market return and its risk, and comparing it against all the gains and leverage you can make in other ways. For example, with current interest rates, you probably want to pay your mortgage -as slowly as possible-, which is counterintuitive to most people.
• brendoelfrendo 5y ago
  This is something that Elizabeth Warren and her daughter Amelia covered in their book "The Two Income Trap." I'm aware that recommending a book by a political figure is fraught, but I'm not aware of any economists who took umbrage with the claim, either. They make the observation in chapter 1 that "Even as millions of mothers marched into the workforce, savings declined, and not, as we will show, because families were frittering away their paychecks on toys for themselves or their children. Instead, families were swept up in a bidding war, competing furiously with one another for their most important possession: a house in a decent school district." Housing is a great way to establish a level of security for your family and kids; but there's a finite number of houses with proximity to good schools, jobs, and other necessary resources, and so families needed to dedicate larger and larger portions of their income to compete against other dual-income families that were bringing new money to the housing market.
  • shados 5y ago
    I've thought about this a lot, though if you google around you'll find people who dispute this claim. Still, it makes sense to me. If you have single income households, and all of a sudden everyone's a double income households, you're not any better off. You'll get inflation, especially in housing. People will point out that stay at home moms weren't THAT pervasive, even decades ago (not as pervasive as us younglins would think), and that may be correct, but double professionals as a common thing is still more recent. We're making some (slow) progress toward wage equity on top of all of it too. That's a good thing, but it doesn't change much when people are bidding against each other. But all things are not equal: It's not as simple as "back then it was 1 income families against 1 income families and now its 2 vs 2". Not at all! Now you have 1 income families, 2 income families, 2 income families with no kids, 2 income families where both are software engineers, etc. All of these always existed in some form, but now it's very visible. If my partner and I (we're DINKs, both in software engineering and highly successful) go to bid on a home, and a single working parent with a partner who stay at home, and 3 kids, try to outbid us... Well, let's hope for them that the single earner is a world famous neurosurgeon, else they're not getting that home.
    • fancifalmanima 5y ago
• mywittyname 5y ago
  The amount a household can spend on housing scales at a faster rate than income. Say, a family is making $2000 a month with one person working, and spending $800 on housing. If another person goes to work making $2000 -- spending, maybe $300 in work-related expenses, gas and such -- that household now has $800 + $1700 = $2500/mo available to spend on housing, while maintaining an otherwise similar standard of living. So doubling of income tripled the amount that could be spent on housing. But wait, there's more. People buy housing with debt, and a doubling of the monthly payment on a mortgage more than doubles the price that can be afforded. So that household paying $800/mo could move from their $195k house into a $600k house with a $2500/mo payment. So, a doubling of income has the potential to increase the amount of house a household could afford by six. Granted, this ignores things like taxes, and most people don't spend their entire raise on housing. But this fact is probably what helped drive prices in places like California into the stratosphere. The crux of the problem is probably that income follows a roughly pareto distribution. When housing is limited, the poorest households drop out of the market. And when populations grow but a town doesn't, housing gets bought by people higher up in the income distribution curve. And past median, incomes climb quickly. If you have 30k houses, in a town with 60k people, then housing will be affordable to a median income. But if the population grows to 120k, but housing doesn't, then only the top 75% of households can afford a house. Median income, to top 75% is a huge jump.
• marcusverus 5y ago
  This seems unlikely given that the share of dual income households has been flat for 30 years. https://www.pewresearch.org/ft_dual-income-households-1960-2012-2/ https://www.pewresearch.org/ft_dual-income-households-1960-2...
  • whimsicalism 5y ago
    Seems dumb to be conditioning on married couples. My parents were unmarried dual income earners. I likely will end up being the same. Given that long-term unmarried couples are both increasing in number and (I believe) more likely to be dual income, this tells the opposite picture.