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.
* 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.
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.
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.
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.
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...
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.
Not a bad person...but to say,"we need to help the poor" and then to have a home value that could buy 10+ homes (in most areas) certainly feels askew.
Nothing stops her and similar from donating a higher percentage of their wealth to non-profits. She could have brought a $2M home - and lived quite well - and donated $1M*. But she didn't. What are we to make of that, if not hypocritical?
* I understand it's a mortgage. But she could have went smaller and donated the difference monthly.
In many instances owning an expensive house is just a matter of time and location. My parents have a $2M home in NYC. They struggled to buy it for $30k in 1980.
In all instances, it's a matter of time and place (moreso the former than the latter); we can see huge generational divides in homeownership rates by generation.
ah yes. anyone who is poor is jealous, and anyone who is rich is a hypocrite! How dare they espouse values like...
the betterment of society?
sick burn!
>and anyone who is rich is a hypocrite! How dare they espouse values like... the betterment of society? sick burn!
This is funny to hear after a few days of FTX/SBF threads, where a common talking point was how SBF's activities in effective altruism (aka. "espouse values like... the betterment of society") was some sort of selfish ploy to improve his public image.
“These statements reflect an apparent disregard for the livelihoods of millions of working Americans, and we are deeply concerned that your interest rate hikes risk slowing the economy to a crawl while failing to slow rising prices that continue to harm families.”
She's a populist. Say whatever get the masses riled up with no regard to actually making sound decisions.
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.
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.
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.
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.
> The problem is, younger generations all want to move to the same handful of cities
Because that's where the jobs are?
Perhaps the real problem is that the jobs are concentrated in a handful of cities (and those cities also host a high concentration of NIMBYs who refuse to build more housing).
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.
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.
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!
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.
Perhaps. But it doesn't help that instead of paying taxes many don't donate significantly on their own.
The argument against taxes is that the government will squander it. It is, in the context of history, a solid argument. Futhermore, much of such wealth is via capital gains, not income. Are we going to discourage investing? (Maybe we should, but it's a complicated answer compared to upping income taxes).
It's strange the Warren and her ilk could be a model for such a path, and yet refuse to do so. *Nothing* is preventing them, not even the tax code (as they could often make such donations tax deductible). But maybe they need that bigger more expensive home? The rest of us don't understand where that is.
Donating a significant fraction of their money is not a model for how higher taxes would work. At best it shows they're 110% serious, and at worst it encourages the "all welfare should be based on donations" crowd.
According to this article from a couple years ago, "Elizabeth Warren and her husband have contributed about $420,000 to charity since 2008". That's not a huge percent of her income but it seems like a solid amount to me, depending on which of these wealth estimates is actually correct. So sure "nothing" is preventing them from doing more, but there's also no big pressing reason to do so. It's not like she doesn't donate at all, and if she's actually in the 99% then whatever that's enough of a donation. And Bernie's definitely in the 99% and donated a hundred thousand over the same time period.
> Futhermore, much of such wealth is via capital gains, not income. Are we going to discourage investing?
I feel like "discourage" is much too strong of a word here. Capital gains taxes could be 80% and people would still invest their money. What else are they going to do with it?
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.
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.
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.
> 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.
> I would have difficulty relating with anyone if all I cared about was race but hey you do you.
The person you replied to listed 10+ other reasons, of which diversity was buried in the middle. You asked for a clarification specifically on diversity, then leapt to an unfounded judgment implying that that’s all they care about.
That sequence of events seems like an entirely unnecessary and counterproductive provocation.
Seattle basically could be in CA, and NYC is kind of worse in a lot of respects, but I don't think it's so different or worse that leaving the US would make more sense than living there...
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.
56 comments
[ 3.8 ms ] story [ 106 ms ] threadThe 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.
If you both are making FAANG comp sure, keep working. If your spouse is a teacher? Maybe not.
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.
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...
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.
And you don't see the younger ones because, yes they still have economic headroom to travel.
[0] https://a.co/d/iA9xxIX
Their argument isn't "if you have 5 million dollars you're a bad person".
Nothing stops her and similar from donating a higher percentage of their wealth to non-profits. She could have brought a $2M home - and lived quite well - and donated $1M*. But she didn't. What are we to make of that, if not hypocritical?
* I understand it's a mortgage. But she could have went smaller and donated the difference monthly.
And would donating 25% of her wealth make people stop complaining? I doubt it. But it's more of an increase than any tax proposal I've seen.
Sometimes I agree with them, and sometimes I don't. But it's lazy to label them hypocrites.
This is funny to hear after a few days of FTX/SBF threads, where a common talking point was how SBF's activities in effective altruism (aka. "espouse values like... the betterment of society") was some sort of selfish ploy to improve his public image.
https://finance.yahoo.com/news/disregard-livelihoods-million...
“These statements reflect an apparent disregard for the livelihoods of millions of working Americans, and we are deeply concerned that your interest rate hikes risk slowing the economy to a crawl while failing to slow rising prices that continue to harm families.”
She's a populist. Say whatever get the masses riled up with no regard to actually making sound decisions.
I'm more curious about the bottom 8 of the list, however; the cheapest cities in the US.
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
What would be interesting (to me anyway) is a list of some cities who are disproportionately cheap related to their density.
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.
Because that's where the jobs are?
Perhaps the real problem is that the jobs are concentrated in a handful of cities (and those cities also host a high concentration of NIMBYs who refuse to build more housing).
I think it's obvious that it's not a shortage driving these prices.
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.
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!
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.
The argument against taxes is that the government will squander it. It is, in the context of history, a solid argument. Futhermore, much of such wealth is via capital gains, not income. Are we going to discourage investing? (Maybe we should, but it's a complicated answer compared to upping income taxes).
It's strange the Warren and her ilk could be a model for such a path, and yet refuse to do so. *Nothing* is preventing them, not even the tax code (as they could often make such donations tax deductible). But maybe they need that bigger more expensive home? The rest of us don't understand where that is.
According to this article from a couple years ago, "Elizabeth Warren and her husband have contributed about $420,000 to charity since 2008". That's not a huge percent of her income but it seems like a solid amount to me, depending on which of these wealth estimates is actually correct. So sure "nothing" is preventing them from doing more, but there's also no big pressing reason to do so. It's not like she doesn't donate at all, and if she's actually in the 99% then whatever that's enough of a donation. And Bernie's definitely in the 99% and donated a hundred thousand over the same time period.
> Futhermore, much of such wealth is via capital gains, not income. Are we going to discourage investing?
I feel like "discourage" is much too strong of a word here. Capital gains taxes could be 80% and people would still invest their money. What else are they going to do with it?
If only the cities were walkable here, it might be perfect then.
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.
You think everyone worked in tech or something and only rock climbed?
Diverse for me means I'm not the only dark skinned person
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.
The person you replied to listed 10+ other reasons, of which diversity was buried in the middle. You asked for a clarification specifically on diversity, then leapt to an unfounded judgment implying that that’s all they care about.
That sequence of events seems like an entirely unnecessary and counterproductive provocation.
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.