7 ms·

You need to earn over $200k to afford a typical home in these 8 U.S. cities

41 points by donsupreme 4y ago

chiefalchemist 4y ago
You singular? Probably not. You the household (of at least two earners)? That's the more likely scenario. The point being, as we've moved to the two incomes per household standard the price of things driven by demand (e.g., housing) has also naturally increased. In those 8 urban areas compensation is higher. It's not advance economics to understand that housing - especially when supply is limited* - is going to increase. And as a percentage of the entire population, these are outliers. We always have outliers. All that said, the better question is: As a percentage of salaries, which areas are most the most expensive? * There's a cost to NIMBY and these communities seem to be okay with that.
- ianceicys 4y ago
  * Two earners...until you have kids and look into the price of daycare for say 2 kids...then it literally makes $ sense to have 1 spouse stay home. The cost of daycare and childcare has significantly outstripped inflation since the pandemic.
  - almost_usual 4y ago
    Yep, paying $1900 a month for daycare for one kid right now.
  - drdo 4y ago
    Where do you live that daycare for 2 kids costs more than one full-time salary?
    - almost_usual 4y ago
      Really depends on what the spouse does for a living but in the Bay Area Peninsula two kids is easily $4000 a month for daycare. If you both are making FAANG comp sure, keep working. If your spouse is a teacher? Maybe not.
      - drdo 4y ago
        Given those numbers maybe the right move is to open a daycare!
        midoridensha 4y ago
        The right move for everyone is to stop having kids. Wait until things change so that it's economically comfortable to have kids, though this may take a generation or two.
        deleted 4y ago
        [deleted]
        nostrademons 4y ago
        Challenge is housing costs. A 3/2 SFH will run about $2M, which at current interest rates is about $12K. It takes childcare income from 6 kids just to pay the mortgage, and sole-proprietorship home daycares are limited to 8 kids total (less if some are infants). For people who already own their own home, though, it's a pretty attractive living if you like kids. Most of the home daycares we looked at are run by people who bought ~10-15 years ago, and they make a very good living, and oftentimes have the house fully paid off. Either that or they bought recently but are pooling resources from multiple family members to afford the house, and then have them helping out with the childcare.
    - francisofascii 4y ago
      The 2nd wage earner gets hit with the marginal tax rate. So you have to factor in roughly a 30% ish reduction of that 2nd salary, not to mention transportation and other expenses. And tech workers don’t always marry high salary tech workers.
  - chiefalchemist 4y ago
    That's the irony. Both parents work and the market swallows a good chunk of the second income. But now, simultaneously, there are two income households with zero kids. That's the new benchmark. I'm not going to judge / critique / question why it is, but the shift from one income per household to two has create economic chaos. Chaos we have yet to come to terms with. But more irony, from an economic POV there are couples opting out of families because of the costs. And the new benchmark nudges up...
    - almost_usual 4y ago
      My friends without kids typically find ways to spend money doing other things, people need to occupy time. They travel more, have memberships to wineries, and eat out multiple times a week. People without kids also tend to compete in different areas for housing. A place with a great view in a bad school district could be appealing. Where people with kids typically want a SFH in the burbs in a good school district. Really the strongest competitor in the housing market is the older generation with more disposable income and a house(s) already.
      - chiefalchemist 4y ago
        The age doesn't matter, more "disposable" income will drive up prices. A home here, a home there, comps. Poof! Prices nudge up. And you don't see the younger ones because, yes they still have economic headroom to travel.
- knubie 4y ago
  Elizabeth Warren wrote a book about this called The Two Income Trap [0] [0] https://a.co/d/iA9xxIX https://a.co/d/iA9xxIX
  - yuppie_scum 4y ago
    Fun fact, her Cambridge house is worth north of 3.1 million.
    - throwaway5959 4y ago
      She’s just like Bernie Sanders, a lot of talk about the poor and no action. Hypocrites.
      - Dylan16807 4y ago
        Having a house worth that much isn't evidence of inaction and it's definitely not hypocrisy. Their argument isn't "if you have 5 million dollars you're a bad person".
        cvwright 4y ago
        But that is their hypocrisy. If you have a thousand times more than most people, nbd. If you have a thousand times more than them, then that’s an outrage.
        Dylan16807 4y ago
        The outrage is not having that much money, it's that taxes are too low for those people. But also, those two are not that rich. The top 1% is the biggest net you could reasonably cast for "too much wealth", and they're below that $11M threshold. Another good reference point is "what would have gotten you called a millionaire around 1800-1930, before we had several decades of consistent inflation", and the answer is at least 25 million dollars today.
        4y ago
- 88913527 4y ago
  The market has priced in a move from 1 to 2 earners, which is reasonable given societal expectations around household formation. Given a move from 2 to 3 would be highly unexpected, ceteris paribus home prices could plateau.
userbinator 4y ago
Not surprisingly, 7 of 8 are in California. I'm more curious about the bottom 8 of the list, however; the cheapest cities in the US.
- headhasthoughts 4y ago
  It's significantly harder to calculate the lower end of the scale: You have to define what a city is to do it.
  - kylecazar 4y ago
    I think the census bureau has formal definitions at least here in the states
    - trinovantes 4y ago
      Page 3 of this doc [1] lists the definition of city by state Apparently most states recognize a place as a city if it just has a few hundred residents/voters. There's plenty of abandoned houses (thus $0 homes) in places that fit these definitions. [1] https://www2.census.gov/geo/pdfs/reference/GARM/Ch9GARM.pdf https://www2.census.gov/geo/pdfs/reference/GARM/Ch9GARM.pdf
    - stouset 4y ago
      Okay, but it's still likely uninteresting because of the Sorites paradox. There's an arbitrary definition of when a town becomes a city because there has to be some threshold, and the list of cheapest cities is probably mostly indistinguishable from a list of cities that were the closest to being towns. What would be interesting (to me anyway) is a list of some cities who are disproportionately cheap related to their density.
- yucky 4y ago
  Detroit is pretty cheap, as is most of the rust belt. Not just the city proper either, but many of the suburbs. Right now you can go on Zillow and find hundreds of houses for less than $100k in Oakland & Macomb county, just north of Detroit, within the metro area. Same goes for Cleveland, Cincy, Pittsburgh, St Louis, Milwaukee etc. The problem is, younger generations all want to move to the same handful of cities and wonder why pricing is so high in those cities.
cersei 4y ago
How is it a housing "shortage" if there is no population growth? (The population has declined due to the pandemic). I think it's obvious that it's not a shortage driving these prices.
- nostrademons 4y ago
  The population that matters is the population that would otherwise be FTHBs, roughly 25-35 year olds. That population has grown like crazy as Millennials come of age. Most of the pandemic deaths were Silent Generation, and many of them were already in nursing homes, not occupying detached SFHs. https://www.populationpyramid.net/united-states-of-america/2020/ https://www.populationpyramid.net/united-states-of-america/2... Things will change in ~10 years as baby boomers start dying off (or at least vacating their homes for senior living) en masse and are replaced by the relatively tiny Zoomer generation, but things are going to be tight for the next decade or so.
- closeparen 4y ago
  Human geography changes over time. People move for economics, relationships, preferences, etc. There are shortages in the destinations and vacant properties in the origins. (Destination populations don’t necessarily change much either, but that’s because population is bounded above by housing capacity… question is what would population be if they made room, how competitive it is to get or keep a slot). Household size also changes. People are forming families later or not at all, so spending more time living alone. Empty nesters are staying in the houses they raised children in instead of downsizing, for various reasons, but especially a lack of smaller places to downsize to. The mix of apartments, houses, townhouses, and bedroom counts needs to be flexible and respond to population over time. It’s simply not the case that the living arrangements that were in place when we froze everything in amber just keep working for us indefinitely into the future. Needs change!
tayo42 4y ago
At this point I can't imagine not living in California. Lifestyle is to nice, where else can you go. Only real option is out of the US I think.
- halpmeh 4y ago
  You could go to Seattle. You could go to NYC. You could go to Austin. You could go to Boston. You could go to Washington DC. You could go to Boulder. I guess it depends what you like about living in California.
  - tayo42 4y ago
    Weather, access to beaches, surf, outdoor lifestyle, mountains, world class food, fresh seafood and great produce, overall liberal, Marijuana is legal, fairly diverse, laid back work culture, though less important with remote now. That's off the top of my head. If only the cities were walkable here, it might be perfect then.
    - autotune 4y ago
      > fairly diverse You and I must have lived in two very different cities in California. The Bay Area, at least, is one of the least diverse cities I have ever experienced, when it comes to jobs and hobbies/culture.
      - tayo42 4y ago
        I lived in sf for a few years, the bay area is what you make of it. If you think everyone was the same that says more about you then anything. You think everyone worked in tech or something and only rock climbed? Diverse for me means I'm not the only dark skinned person
        autotune 4y ago
        > You think everyone worked in tech or something and only rock climbed? That you mentioned the cliche before I had to says more about the city itself than anything. > Diverse for me means I'm not the only dark skinned person I would have difficulty relating with anyone if all I cared about was race but hey you do you. It's only considered racism if a white person does it right? Imagine someone like me moving to a place like India, and one of the top pros I could say about it was "you know what, there are a decent amount of other white people here." It would very likely not go over well.
thunky 4y ago
A home in a location with a median price of $1,497,000 is not a "typical" home.
throwaway22032 4y ago
I think that the headline is misleading here. I don't think that this is how the housing market is driven in these places. If I choose a random street in inner London (UK) then homes on that street are worth approximately £1 million. One way to buy one of those houses would be to have a deposit of around £100K, taxes of about 50K (very rough estimate), a mortgage of £900K, and an income of around 200K at a 4.5x multiplier. But I don't believe that the majority of purchases in that part of the market function in that fashion. Instead, full cash purchases or >50% deposit purchases are fairly common. The money comes from savings and investments, either inherited or via saving for tens of years, trading up from a smaller place or in a different area, homes bought decades earlier, etc.

41 points by donsupreme 4y ago

You singular? Probably not. You the household (of at least two earners)? That's the more likely scenario. The point being, as we've moved to the two incomes per household standard the price of things driven by demand (e.g., housing) has also naturally increased. In those 8 urban areas compensation is higher. It's not advance economics to understand that housing - especially when supply is limited* - is going to increase. And as a percentage of the entire population, these are outliers. We always have outliers. All that said, the better question is: As a percentage of salaries, which areas are most the most expensive? * There's a cost to NIMBY and these communities seem to be okay with that.

ianceicys 4y ago
* Two earners...until you have kids and look into the price of daycare for say 2 kids...then it literally makes $ sense to have 1 spouse stay home. The cost of daycare and childcare has significantly outstripped inflation since the pandemic.
- almost_usual 4y ago
  Yep, paying $1900 a month for daycare for one kid right now.
- drdo 4y ago
  Where do you live that daycare for 2 kids costs more than one full-time salary?
  - almost_usual 4y ago
    Really depends on what the spouse does for a living but in the Bay Area Peninsula two kids is easily $4000 a month for daycare. If you both are making FAANG comp sure, keep working. If your spouse is a teacher? Maybe not.
    - drdo 4y ago
      Given those numbers maybe the right move is to open a daycare!
      - midoridensha 4y ago
        The right move for everyone is to stop having kids. Wait until things change so that it's economically comfortable to have kids, though this may take a generation or two.
        deleted 4y ago
        [deleted]
      - nostrademons 4y ago
        Challenge is housing costs. A 3/2 SFH will run about $2M, which at current interest rates is about $12K. It takes childcare income from 6 kids just to pay the mortgage, and sole-proprietorship home daycares are limited to 8 kids total (less if some are infants). For people who already own their own home, though, it's a pretty attractive living if you like kids. Most of the home daycares we looked at are run by people who bought ~10-15 years ago, and they make a very good living, and oftentimes have the house fully paid off. Either that or they bought recently but are pooling resources from multiple family members to afford the house, and then have them helping out with the childcare.
  - francisofascii 4y ago
    The 2nd wage earner gets hit with the marginal tax rate. So you have to factor in roughly a 30% ish reduction of that 2nd salary, not to mention transportation and other expenses. And tech workers don’t always marry high salary tech workers.
- chiefalchemist 4y ago
  That's the irony. Both parents work and the market swallows a good chunk of the second income. But now, simultaneously, there are two income households with zero kids. That's the new benchmark. I'm not going to judge / critique / question why it is, but the shift from one income per household to two has create economic chaos. Chaos we have yet to come to terms with. But more irony, from an economic POV there are couples opting out of families because of the costs. And the new benchmark nudges up...
  - almost_usual 4y ago
    My friends without kids typically find ways to spend money doing other things, people need to occupy time. They travel more, have memberships to wineries, and eat out multiple times a week. People without kids also tend to compete in different areas for housing. A place with a great view in a bad school district could be appealing. Where people with kids typically want a SFH in the burbs in a good school district. Really the strongest competitor in the housing market is the older generation with more disposable income and a house(s) already.
    - chiefalchemist 4y ago
      The age doesn't matter, more "disposable" income will drive up prices. A home here, a home there, comps. Poof! Prices nudge up. And you don't see the younger ones because, yes they still have economic headroom to travel.
knubie 4y ago
Elizabeth Warren wrote a book about this called The Two Income Trap [0] [0] https://a.co/d/iA9xxIX https://a.co/d/iA9xxIX
- yuppie_scum 4y ago
  Fun fact, her Cambridge house is worth north of 3.1 million.
  - throwaway5959 4y ago
    She’s just like Bernie Sanders, a lot of talk about the poor and no action. Hypocrites.
    - Dylan16807 4y ago
      Having a house worth that much isn't evidence of inaction and it's definitely not hypocrisy. Their argument isn't "if you have 5 million dollars you're a bad person".
      - cvwright 4y ago
        But that is their hypocrisy. If you have a thousand times more than most people, nbd. If you have a thousand times more than them, then that’s an outrage.
        Dylan16807 4y ago
        The outrage is not having that much money, it's that taxes are too low for those people. But also, those two are not that rich. The top 1% is the biggest net you could reasonably cast for "too much wealth", and they're below that $11M threshold. Another good reference point is "what would have gotten you called a millionaire around 1800-1930, before we had several decades of consistent inflation", and the answer is at least 25 million dollars today.
        4y ago
88913527 4y ago
The market has priced in a move from 1 to 2 earners, which is reasonable given societal expectations around household formation. Given a move from 2 to 3 would be highly unexpected, ceteris paribus home prices could plateau.

userbinator 4y ago

Not surprisingly, 7 of 8 are in California. I'm more curious about the bottom 8 of the list, however; the cheapest cities in the US.

headhasthoughts 4y ago
It's significantly harder to calculate the lower end of the scale: You have to define what a city is to do it.
- kylecazar 4y ago
  I think the census bureau has formal definitions at least here in the states
  - trinovantes 4y ago
    Page 3 of this doc [1] lists the definition of city by state Apparently most states recognize a place as a city if it just has a few hundred residents/voters. There's plenty of abandoned houses (thus $0 homes) in places that fit these definitions. [1] https://www2.census.gov/geo/pdfs/reference/GARM/Ch9GARM.pdf https://www2.census.gov/geo/pdfs/reference/GARM/Ch9GARM.pdf
  - stouset 4y ago
    Okay, but it's still likely uninteresting because of the Sorites paradox. There's an arbitrary definition of when a town becomes a city because there has to be some threshold, and the list of cheapest cities is probably mostly indistinguishable from a list of cities that were the closest to being towns. What would be interesting (to me anyway) is a list of some cities who are disproportionately cheap related to their density.
yucky 4y ago
Detroit is pretty cheap, as is most of the rust belt. Not just the city proper either, but many of the suburbs. Right now you can go on Zillow and find hundreds of houses for less than $100k in Oakland & Macomb county, just north of Detroit, within the metro area. Same goes for Cleveland, Cincy, Pittsburgh, St Louis, Milwaukee etc. The problem is, younger generations all want to move to the same handful of cities and wonder why pricing is so high in those cities.

cersei 4y ago

How is it a housing "shortage" if there is no population growth? (The population has declined due to the pandemic). I think it's obvious that it's not a shortage driving these prices.

nostrademons 4y ago
The population that matters is the population that would otherwise be FTHBs, roughly 25-35 year olds. That population has grown like crazy as Millennials come of age. Most of the pandemic deaths were Silent Generation, and many of them were already in nursing homes, not occupying detached SFHs. https://www.populationpyramid.net/united-states-of-america/2020/ https://www.populationpyramid.net/united-states-of-america/2... Things will change in ~10 years as baby boomers start dying off (or at least vacating their homes for senior living) en masse and are replaced by the relatively tiny Zoomer generation, but things are going to be tight for the next decade or so.
closeparen 4y ago
Human geography changes over time. People move for economics, relationships, preferences, etc. There are shortages in the destinations and vacant properties in the origins. (Destination populations don’t necessarily change much either, but that’s because population is bounded above by housing capacity… question is what would population be if they made room, how competitive it is to get or keep a slot). Household size also changes. People are forming families later or not at all, so spending more time living alone. Empty nesters are staying in the houses they raised children in instead of downsizing, for various reasons, but especially a lack of smaller places to downsize to. The mix of apartments, houses, townhouses, and bedroom counts needs to be flexible and respond to population over time. It’s simply not the case that the living arrangements that were in place when we froze everything in amber just keep working for us indefinitely into the future. Needs change!

tayo42 4y ago

At this point I can't imagine not living in California. Lifestyle is to nice, where else can you go. Only real option is out of the US I think.

halpmeh 4y ago
You could go to Seattle. You could go to NYC. You could go to Austin. You could go to Boston. You could go to Washington DC. You could go to Boulder. I guess it depends what you like about living in California.
- tayo42 4y ago
  Weather, access to beaches, surf, outdoor lifestyle, mountains, world class food, fresh seafood and great produce, overall liberal, Marijuana is legal, fairly diverse, laid back work culture, though less important with remote now. That's off the top of my head. If only the cities were walkable here, it might be perfect then.
  - autotune 4y ago
    > fairly diverse You and I must have lived in two very different cities in California. The Bay Area, at least, is one of the least diverse cities I have ever experienced, when it comes to jobs and hobbies/culture.
    - tayo42 4y ago
      I lived in sf for a few years, the bay area is what you make of it. If you think everyone was the same that says more about you then anything. You think everyone worked in tech or something and only rock climbed? Diverse for me means I'm not the only dark skinned person
      - autotune 4y ago
        > You think everyone worked in tech or something and only rock climbed? That you mentioned the cliche before I had to says more about the city itself than anything. > Diverse for me means I'm not the only dark skinned person I would have difficulty relating with anyone if all I cared about was race but hey you do you. It's only considered racism if a white person does it right? Imagine someone like me moving to a place like India, and one of the top pros I could say about it was "you know what, there are a decent amount of other white people here." It would very likely not go over well.

thunky 4y ago

A home in a location with a median price of $1,497,000 is not a "typical" home.

throwaway22032 4y ago

I think that the headline is misleading here. I don't think that this is how the housing market is driven in these places. If I choose a random street in inner London (UK) then homes on that street are worth approximately £1 million. One way to buy one of those houses would be to have a deposit of around £100K, taxes of about 50K (very rough estimate), a mortgage of £900K, and an income of around 200K at a 4.5x multiplier. But I don't believe that the majority of purchases in that part of the market function in that fashion. Instead, full cash purchases or >50% deposit purchases are fairly common. The money comes from savings and investments, either inherited or via saving for tens of years, trading up from a smaller place or in a different area, homes bought decades earlier, etc.