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Comment by tomrod | Hacker News Reader

Yeah... that's not going to be sustainable.

I know folks like to point at the big techcos in the area being flush with cash as evidence this can continue a long time. And in a vacuum, wage growth in tech could continue to keep pace, perhaps. But that is 300k in appreciation a year.

How far out will school teachers, janitors, chefs, mechanics, city employees, and similar need to live before their not-quite-as-quickly-increasing salaries fail to keep up, and they leave the area en masse?

Cut the NIMBYism and you might see some improvement, but only as fast as the city can approve permits.

As Buffett likes to point out: be "fearful when others are greedy and greedy when others are fearful".

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>I know folks like to point at the big techcos in the area being flush with cash as evidence this can continue a long time. And in a vacuum, wage growth in tech could continue to keep pace, perhaps. But that is 300k in appreciation a year.

It's not even about people on tech salaries at this point. Those people are being priced out of the market, too. It's an issue of foreign investment mainly from China either speculating on the market, or investing their money in the only way they can given that personal property does not exist in their country.

Have evidence of this?

You will find it hard to unearth genuine evidence to either support or disprove this hypothesis. Got anything against?

Usually you will find the data you might want is "not collected".

It is not in anyone's interest to figure out how much bubbles are propped up by foreign money.

> Got anything against?

I live in San Francisco. No one I know has any belief about any units being unoccupied. All the Chinese people I meet here are working.

It is unlike the anecdotes I hear from friends living in Vancouver.

> All the Chinese people I meet here are working.

To be fair, you wouldn't see Chinese individuals "unoccupying" units.

I mean to contrast with the Vancouver experience - lots of empty units, or units empty for many months of the year. When they go to Vancouver to visit, it's just for fun. They don't need to work, and don't work. You might meet them in public spaces and make friends with them, and find it surprising that they have so much money without needing to work.

(Not the same person, but:) if you want to look into this, vacancy rates are probably the place to start.

In Vancouver, for instance, it's very clear. ~280,000 housing units, of which ~25,000 were recently found to be owned-but-unoccupied. Which doesn't mean international owners, but does mean housing is being used not to live in, or even to rent, but as a pure investment - with obvious consequences for the people actually living there.

A very quick look doesn't turn up this number for San Jose, but it's the most obvious way to distinguish price hikes driven by capped housing and rising salaries from those driven by outside investment.

There are some recent articles about California in general: https://www.sfgate.com/business/article/Chinese-investment-i... and inexpensive areas in California being bought up for mafia marijuana grow houses (which seems incredible in that it's much cheaper in the midwest to buy homes but here we are) http://www.sacbee.com/news/business/article207938184.html

Won't school teachers' salaries grow in presence of diminishing supply and stable demand?

Proposition 13 imposes a fairly hard upper limit on the growth of teachers' salaries.

Not at all.

Prop 13 only has effect when houses do NOT sell. Whenever a property changes hands, which is the only event that matters wrt demand, it is assessed at current market value.

Prop 13 does have an effect but only in the manner in which it supresses sales.

It limits property tax to 1% which I believe is pretty low compared to other coastal states. Coincidentally, California's public schools have fallen down the rankings since it passed.

> Coincidentally, California's public schools have fallen down the rankings since it passed.

Last we checked, per-student spending in public schools was negatively correlated with student achievement, so the hypothesis that funding levels are unrelated to performance would appear to be on pretty strong ground.

I'm not an economist but if property tax growth is effectively capped at 2% and teachers are paid out of property tax then any time housing price grows by more than 2% teachers are at a disadvantage to buy a house.

It’s not tho. It adjusts to market at each sale. In between sale it moves slower but then it readjusts.

Does the new buyer pay the tax on appreciation in all the previous years? If not teachers are getting screwed twice.

If a house is appraised at $10,000.00 in 2000 and doesn’t sell for 10 years it pays $2000.00 in taxes. Since teachers are paid out of this tax their salaries increases are capped at $2,000.00. If wages (and housing prices) in general went up at even 3% per year then teachers have to compete against other buyers with double the cash.

The only way teachers aren’t getting screwed here is if every house sells every year.

Again, I’m not an economist and these numbers are obviously a gross oversimplification.

Prop 13 is about property taxes, not teachers' salaries.

https://www.californiataxdata.com/pdf/Prop13.pdf

What do you think funds teacher salaries?

In California it mostly comes from the States general fund. Income tax and sales tax. Most of the local property tax also goes to the state to be sent back to the schools on a per student basis, but this is about 25% of the funding. See here [1] for a good explanation of all the crazy details of California school funding and its history.

Prop 13 limited prop tax to 1% of the assessed value (actual property tax also includes many parcel taxes). About 100 school districts out of about a thousand in California have such high property values and/or low number of students that the 1% tax is enough to fund the schools at a higher per student rate than the standard for California. These rich areas are called "basic aid" districts and don't give their prop tax to the state, keeping it local and funding schools at a higher level.

[1]https://ed100.org/lessons/whopays

It's not.

Speaking from a city (Auckland) where house prices have sky rocketed this hasn't happened yet.

Prices in the area I live in use to be $100k-ish for a 3 bdrm home 10 years ago. Now they're $760k and I live >30 miles from the CBD.

Teachers salaries have continued to get "cost of living" increases and we have news stories like this popping up all the time: https://www.stuff.co.nz/national/education/102707618

My home state is something like 48th in education spending and considers it a point of pride because it "makes educators work harder". It was normal for every student to be asked to bring a box of kleenex to school every year because there was no budget to provide that resource.

It terrifies me to see how poorly we treat educators and education in general. As a highly developed nation our only chance for the future is to maintain our edge. We are borrowing against the intellectual (and in the case of public university tuition, also the financial) capital of the future and I'm not even sure what we are doing with the money.

Yes, and also school age families will keep moving out.

Only after a protracted period of kids being stuffed into oversized under-resourced classrooms and suffering for it.

Until supply and demand increases their salaries as well.

>As Buffett likes to point out: be “fearful when others are greedy and greedy when others are fearful”.

So...since you’re fearful, I should invest in San Jose real estate ASAP? ;)

Subprime loans FTW(&L)

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