6 ms·

> It's honestly quite scary how I'm in the top 2% of income earners in my generation and yet I could barely afford to buy a small place in a semi-desirable area

> It's honestly quite scary how I'm in the top 2% of income earners in my generation and yet I could barely afford to buy a small place in a semi-desirable area. I can easily see myself not being able to compete in algorithmically dominated markets flush with venture cash in the future and I earn more than just about everybody I know today. A thought exercise: suppose that no new houses are ever built and that housing turnover is nearly zero. What happens to the price of housing in that limit? Market forces do not necessarily entitle the top n% of the income distribution to housing. I was a bit cynical about this too: I live in Los Angeles, where a "small place in semi-desirable area" gets listed for 1.5M and goes for nearly 2M. I'm somewhere in the top 5% of earners in California, but that $2M 1950s tract housing would be >50% of my post-tax income.

thebean11 5y ago
> suppose that no new houses are ever built Why would you suppose that? I don't really see what you're getting at, that's a very unintuitive assumption; it shouldn't happen if market forces are allowed to run their course.
- kevin_thibedeau 5y ago
  New afordable housing isn't built. Everything is "luxury" so that developers can maximize profit. When someone tries to build affordable duplexes the NIMBYs say not in my town.
  - sokoloff 5y ago
    Even luxury units add supply to the middle and affordable parts of the housing stock. Today's luxury units are often bought and moved into by someone moving up from a mid-market place, the buyer of which is likely moving up from a 25 year old now affordable place. (Alternately, if no luxury unit is built, many of those buyers will be forced to buy the best-of-the-rest if they want to move in, putting more pressure on the middle, which in turn puts pressure on the affordable.)
  - mirntyfirty 5y ago
    I think many things are intentionally mislabeled as “luxury”. One can buy a simple refrigerator from Best Buy and claim that it’s stainless. I’ve seen listings brag about how the place has a Nest thermostat.
  - el-salvador 5y ago
    One trick they use in my country is adding a pool to apartment buildings. The pools are unused most of the time, but having a pool in the building increases the value estimated by property appraisals' checklists.
  - deleted 5y ago
    [deleted]
  - ffwszgf 5y ago
    Isn’t luxury the only thing that’s even allowed to be built in most NIMBY cities? Try building large “market-rate” housing in Palo Alto and see what happens (even within the confines of their already ridiculous zoning laws).
    - mywittyname 5y ago
      It's luxury almost everywhere. The only place cheaper housing is being built are in developments on the far outer suburbs of flyover cities. But even those builders are having trouble with supplies and labor.
- a1pulley 5y ago
  I was trying to draw attention to the fact that "I'm in the top 2% of earners but I can't afford a house" isn't surprising when legislative factors make it hard to add housing stock, when turnover is low, and when there's net population inflow. My supposition was intentionally exaggerated to clarify what happens when you don't build enough housing: not to be pedantic, but understanding what happens in "extreme cases" is a common technique in math and physics to understand what happens in more common ones.
- georgeecollins 5y ago
  >> it shouldn't happen if market forces are allowed to run their course. Apparently you haven't met my neighbors.
- wyago 5y ago
  Likewise, why would you suppose that market forces are running their course?
aksss 5y ago
Sounds like the logical thing to do is start desiring a different place with sounder housing/zoning policy. Voting with your feet is a thing when you can’t win at the ballot box.
- coryrc 5y ago
  I think this is another large flaw in our voting system, where things are too local (like zoning). You get a small community of rich people in Berkeley block any new housing, and you want to live there but have no influence on the zoning laws. Japan's zoning is national and doesn't have this problem. Thus Tokyo is far more affordable than San Francisco, Mountain View, etc.
lotsofpulp 5y ago
> What happens to the price of housing in that limit? The price continues to reflect the supply and demand of the houses. You’re either lucky to inherit the land, or you earn enough to outbid others for it. It might even be impossible to outbid those who are bringing inherited wealth to the table. It might become a transient community, where you work and save and then leave to settle somewhere else.
ryandrake 5y ago
> > It's honestly quite scary how I'm in the top 2% of income earners in my generation and yet I could barely afford to buy a small place > I live in Los Angeles, where a "small place in semi-desirable area" gets listed for 1.5M and goes for nearly 2M. I'm somewhere in the top 5% of earners in California, but that $2M 1950s tract housing would be >50% of my post-tax income. I think the obvious answer here is that people in the top 2% or top 5% are not buying houses... It's the people in the top 0.1%. Last time I was home shopping, we were regularly outbid by all-cash offers of 50%-100% over asking price, no contingencies. These competing bidders are not teachers and nurses. They're not even high-paid tech employees. Do you really think a Senior Software Engineer at Microsoft has $2.5M in cash sitting in his checking account to buy a home? No way. These are all businesses, investors, serial landlords buying their 60th house, hedge funds, 0.1% wealthy people--that's who's buying all these houses. Not us.
- lubesGordi 5y ago
  I'm under the impression that 'cash offer' just means that whoever is buying has already secured their financing. That means there's almost no risk of the deal falling through and the sale can go from contingent to pending immediately. This is better for the buyer because they sell faster. Senior software eng at microsoft can pull this off no problem (no one is buying a house with cash in their bank, not even rich people).
  - sib 5y ago
    No, there's still a distinction. Secured financing can still fall through.
  - karpierz 5y ago
    It means that they aren't using a mortgage to buy it. If there's a mortgage involved, then the offer becomes contingent on the bank's due diligence which can cause the deal to fall through in a variety of ways. For example: the bank will only loan you money up to the appraised value of the home, which is done after the deal is signed (banks won't send an appraiser to every house you make an offer on). If the appraiser says the house is worth 500K and you bid 800K, you need to find 300K some other way (usually cash) or the deal falls through.
tshaddox 5y ago
> A thought exercise: suppose that no new houses are ever built and that housing turnover is nearly zero. What happens to the price of housing in that limit? Market forces do not necessarily entitle the top n% of the income distribution to housing. I don't think it's disturbing because "clearly the top 2% of income earners should be entitled to housing," but because clearly everyone needs housing, and if the top 2% of earners can't even afford it, that means it's even worse for everyone else.
- a1pulley 5y ago
  Owning and having are not the same thing: you can have housing while renting it, receiving it as a gift from parents or your spouse, etc.
- qeternity 5y ago
  The reality that almost never gets brought up is that the other side of the coin is that these are natural pressures that are probably healthy. We know that any given habitat, like the Earth, has finite resources and has some upper bound to supporting life. This is how those pressures manifest. We can’t just keep growing the population and have everything be affordable. Surging food, energy and housing prices are the first feedback mechanism in this process. If everybody can afford everything forever, we get infinite population growth.
  - ohgodplsno 5y ago
    People not being able to own homes is not "healthy". Having to pay 50% of your salary to landlords is not "healthy". It is concentration of wealth, it is the very definition of precarity. Unless your hope is to see a collapse of societies, things go really bad when people can't afford fundamental needs.
    - qeternity 5y ago
      You replied without understanding my comment. Let me pose the question back to you: if everyone can comfortably afford food, housing and basic necessities, what is going to cause population growth to level off? Your characterization of bad things happening is exactly my point - you’re just failing to understand that I’m saying that’s the healthy part.

thebean11 5y ago

> suppose that no new houses are ever built Why would you suppose that? I don't really see what you're getting at, that's a very unintuitive assumption; it shouldn't happen if market forces are allowed to run their course.

kevin_thibedeau 5y ago
New afordable housing isn't built. Everything is "luxury" so that developers can maximize profit. When someone tries to build affordable duplexes the NIMBYs say not in my town.
- sokoloff 5y ago
  Even luxury units add supply to the middle and affordable parts of the housing stock. Today's luxury units are often bought and moved into by someone moving up from a mid-market place, the buyer of which is likely moving up from a 25 year old now affordable place. (Alternately, if no luxury unit is built, many of those buyers will be forced to buy the best-of-the-rest if they want to move in, putting more pressure on the middle, which in turn puts pressure on the affordable.)
- mirntyfirty 5y ago
  I think many things are intentionally mislabeled as “luxury”. One can buy a simple refrigerator from Best Buy and claim that it’s stainless. I’ve seen listings brag about how the place has a Nest thermostat.
- el-salvador 5y ago
  One trick they use in my country is adding a pool to apartment buildings. The pools are unused most of the time, but having a pool in the building increases the value estimated by property appraisals' checklists.
- deleted 5y ago
  [deleted]
- ffwszgf 5y ago
  Isn’t luxury the only thing that’s even allowed to be built in most NIMBY cities? Try building large “market-rate” housing in Palo Alto and see what happens (even within the confines of their already ridiculous zoning laws).
  - mywittyname 5y ago
    It's luxury almost everywhere. The only place cheaper housing is being built are in developments on the far outer suburbs of flyover cities. But even those builders are having trouble with supplies and labor.
a1pulley 5y ago
I was trying to draw attention to the fact that "I'm in the top 2% of earners but I can't afford a house" isn't surprising when legislative factors make it hard to add housing stock, when turnover is low, and when there's net population inflow. My supposition was intentionally exaggerated to clarify what happens when you don't build enough housing: not to be pedantic, but understanding what happens in "extreme cases" is a common technique in math and physics to understand what happens in more common ones.
georgeecollins 5y ago
>> it shouldn't happen if market forces are allowed to run their course. Apparently you haven't met my neighbors.
wyago 5y ago
Likewise, why would you suppose that market forces are running their course?

aksss 5y ago

Sounds like the logical thing to do is start desiring a different place with sounder housing/zoning policy. Voting with your feet is a thing when you can’t win at the ballot box.

coryrc 5y ago
I think this is another large flaw in our voting system, where things are too local (like zoning). You get a small community of rich people in Berkeley block any new housing, and you want to live there but have no influence on the zoning laws. Japan's zoning is national and doesn't have this problem. Thus Tokyo is far more affordable than San Francisco, Mountain View, etc.

lotsofpulp 5y ago

> What happens to the price of housing in that limit? The price continues to reflect the supply and demand of the houses. You’re either lucky to inherit the land, or you earn enough to outbid others for it. It might even be impossible to outbid those who are bringing inherited wealth to the table. It might become a transient community, where you work and save and then leave to settle somewhere else.

ryandrake 5y ago

> > It's honestly quite scary how I'm in the top 2% of income earners in my generation and yet I could barely afford to buy a small place > I live in Los Angeles, where a "small place in semi-desirable area" gets listed for 1.5M and goes for nearly 2M. I'm somewhere in the top 5% of earners in California, but that $2M 1950s tract housing would be >50% of my post-tax income. I think the obvious answer here is that people in the top 2% or top 5% are not buying houses... It's the people in the top 0.1%. Last time I was home shopping, we were regularly outbid by all-cash offers of 50%-100% over asking price, no contingencies. These competing bidders are not teachers and nurses. They're not even high-paid tech employees. Do you really think a Senior Software Engineer at Microsoft has $2.5M in cash sitting in his checking account to buy a home? No way. These are all businesses, investors, serial landlords buying their 60th house, hedge funds, 0.1% wealthy people--that's who's buying all these houses. Not us.

lubesGordi 5y ago
I'm under the impression that 'cash offer' just means that whoever is buying has already secured their financing. That means there's almost no risk of the deal falling through and the sale can go from contingent to pending immediately. This is better for the buyer because they sell faster. Senior software eng at microsoft can pull this off no problem (no one is buying a house with cash in their bank, not even rich people).
- sib 5y ago
  No, there's still a distinction. Secured financing can still fall through.
- karpierz 5y ago
  It means that they aren't using a mortgage to buy it. If there's a mortgage involved, then the offer becomes contingent on the bank's due diligence which can cause the deal to fall through in a variety of ways. For example: the bank will only loan you money up to the appraised value of the home, which is done after the deal is signed (banks won't send an appraiser to every house you make an offer on). If the appraiser says the house is worth 500K and you bid 800K, you need to find 300K some other way (usually cash) or the deal falls through.

tshaddox 5y ago

> A thought exercise: suppose that no new houses are ever built and that housing turnover is nearly zero. What happens to the price of housing in that limit? Market forces do not necessarily entitle the top n% of the income distribution to housing. I don't think it's disturbing because "clearly the top 2% of income earners should be entitled to housing," but because clearly everyone needs housing, and if the top 2% of earners can't even afford it, that means it's even worse for everyone else.

a1pulley 5y ago
Owning and having are not the same thing: you can have housing while renting it, receiving it as a gift from parents or your spouse, etc.
qeternity 5y ago
The reality that almost never gets brought up is that the other side of the coin is that these are natural pressures that are probably healthy. We know that any given habitat, like the Earth, has finite resources and has some upper bound to supporting life. This is how those pressures manifest. We can’t just keep growing the population and have everything be affordable. Surging food, energy and housing prices are the first feedback mechanism in this process. If everybody can afford everything forever, we get infinite population growth.
- ohgodplsno 5y ago
  People not being able to own homes is not "healthy". Having to pay 50% of your salary to landlords is not "healthy". It is concentration of wealth, it is the very definition of precarity. Unless your hope is to see a collapse of societies, things go really bad when people can't afford fundamental needs.
  - qeternity 5y ago
    You replied without understanding my comment. Let me pose the question back to you: if everyone can comfortably afford food, housing and basic necessities, what is going to cause population growth to level off? Your characterization of bad things happening is exactly my point - you’re just failing to understand that I’m saying that’s the healthy part.