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Comment by drewblaisdell | Hacker News Reader

> This is why I always cringe at articles that say "Nobody can afford to live there." The reality is that lots of people can "afford" to pay these prices, more than there are homes, hence the high prices.

A classic example of engaging with semantics over sentiment. "Nobody" is clearly just a hyperbolic proxy for "only a relatively small number of people".

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I think more accurately "Nobody" is a hyperbolic proxy for "me". Given the housing supply m the number of people who can afford to live here is demonstrably n which is >> m.

If most people in an area have owned their homes since back when they were cheap, and say only 1 house out of 1,000 comes up for sale per year with a high asking price, it's possible for "nobody" (99% of people) to be unable to afford to buy a home at current asking prices and yet for prices to sell high and for lots of people to be living in an area.

This is why comparing home prices to average income of the entire population is a fallacy. Not every home comes up for sale at any given time.

What matters is the sale price of recently sold houses to the incomes of those actively searching to purchase a new home as well as how many such people there are in the market.

Older established residents in an area can be earning $80k/yr and be fine since they purchased the house cheaply and have paid it off. That doesn't mean you can afford to buy their house on an $80k income.

I'm not going to argue with you but I'll point out a hole in your logic here:

What matters is the sale price of recently sold houses to the incomes of those actively searching to purchase a new home as well as how many such people there are in the market.

I agree with this statement, and as I see it, if the houses that were offered for sale were "unaffordable" then they would stay on the market for sale waiting for that special person who could afford them. Instead, what we're seeing is that houses sell, on average, in less than 30 days. So as callous as it might sound, people looking for homes are finding them and buying them. In Santa Clara county at a rate of about a 1,000 a month or 12,000 a year[1]. There are some interesting differential equations you can write that describe how quickly every home in the county will have changed hands at least once, but suffice it to say the narrative that a bunch of "grey hairs" who have bought and paid off their houses are just sitting in them is inaccurate.

As someone who lives in a home and neighborhood built in the 60's I can tell you, nothing motivates Grandma to move to Arizona faster than being able to cash out a million bucks into the savings account. We have exactly one original owner in the neighborhood and they are here because their kids (and grandkids) are also in the neighborhood, otherwise they would have moved as well.

[1] There were 482 homes sold in Santa Clara County last month. The average since 2000 is 987. -- https://urban.realtor/market-trends-report/

When people say housing is “unaffordable” they don’t mean literally no one can afford it. Obviously there is a lot of demand for housing and some people are willing to pay quite a lot for it.

> We have exactly one original owner in the neighborhood

This is not a good thing. Having whole extended families get priced out of a large region and only the wealthy or well-paid professionals able to move in, so that people performing all manner of support jobs need to commute from further and further away and live more and more precarious lives, is inefficient, socially/environmentally destructive, and makes the place less pleasant for everyone to live in.

The whole Bay Area would benefit from housing prices coming down quite a bit after building a whole lot more housing units and transit.

Though, ironically, the migration might be the only thing that keeps the schools running, because it results in more Prop 13 reassessments.

> As someone who lives in a home and neighborhood built in the 60's I can tell you, nothing motivates Grandma to move to Arizona faster than being able to cash out a million bucks into the savings account. We have exactly one original owner in the neighborhood and they are here because their kids (and grandkids) are also in the neighborhood, otherwise they would have moved as well.

Well, the effective property tax rate in SF is 0.68% out of a nominal 1.19%, due to Prop 13. That indicates an awful lot of people who have held onto their houses for a long time.

How did you arrive at 0.68%? I pay a lot more than that.

It's the effective tax rate you arrive at when averaging over the fair market value of all houses. It's much lower than the tax you or I pay due to Prop 13.

The figure is from https://smartasset.com/taxes/california-property-tax-calcula...

Yeah well that stat isn't relevant because that's not the rate I actually pay. Literally couldn't care less what others pay. All stats are local.

Using data from here: https://www.bayareamarketreports.com/trend/bay-area-market-s...

It looks like ~3% of the housing units in the greater Bay Area sell on an annual basis so if the top 3% of income earners can afford today's prices the liquidity cliff can hide.

That's actually a really good way to look at it. If turnover is really small, you only need a very small number of wealthy buyers to keep driving the price higher. Everyone else kind of doesn't matter.

Using the rule of 72, every home turns over every 24 years.

The top 3% aren't buying homes every year.

Not only that, but because of the California tax code, they probably can't afford to sell their house and buy one for a similar price.

Or you add on to a starter home making it no longer a starter home for the next owner. But current owner keeps the lock on property taxes.

A major renovation like this on a starter home would likely trigger a reassessment.

I've heard if you keep one foundational wall even for an otherwise complete teardown it is beneficial from a tax standpoint. I'd love to know more details about how that works.

One problem is that quite a few people (myself included) have entirely written off the idea of "actively searching to purchase a new home" in the Bay Area because the prices are so insanely high even for the "affordable" properties.

Maybe the most accurate & sympathetic interpretation is "me and everyone I know". In other words, the people inside your bubble who also can't afford it, and reinforce your perception.

Nobody: middle class Americans

This is completely ridiculous. Housing is usually 33-60% of most people's discretionary budget.

The cost of housing can be drastically different depending on when you bought a house. And ESPECIALLY with prop 13 in California.

If n people live in an area, it doesn't mean n people can afford to live in the area at the CURRENT housing rate.

I think a lot of frustration comes from how insanely different 50% of your COL can be in the course of 3-5 years.

More money is wasted on credit cycles than any other human activity. Pretending everything is demonstratably fine is a joke.

> Nobody goes there anymore. It’s too crowded.

wasn't that a Yogi Bera quote.

The Yogi Book. New York: Workman Publishing. 1997

https://www.amazon.com/Yogi-Book-Berra/dp/0761154434

>relatively small

But I think part of grandparents point was that there enough people willing to meet the price that sellers aren't left with an unsold home, meaning that relatively large numbers of people if you consider it relative to the number of homes for sell. You could use a different measure for the relativity, but the ones I considered (for all of two minutes) don't seem as informative as the one grandparent used.

Right: the problem here is that there aren't enough homes (Prop 13 + local zoning + high cost of construction), not that the ones that exist should be cheaper.

In the past, it was easy to point at prop 13. With the new tax regime, that's less of a thing.

It’s still easy to point at prop 13. It prevents all manner of people from moving or do other things so they can keep the current tax rate. I would love to move from our smallish home, but our current effective tax rate is 0.70% dropping since we purchased 5 years ago. Our property tax would practically double if we moved so best we can do is expand the home. But in doing this I have now priced my smaller home into a bigger home taking it out of reach of someone wanting a smaller home.

You can afford to pay more for a larger home but can't afford double the tax? That doesn't make sense. The mortgage jump should be a bit a lot more than the taxes considering market moves.

I think the new tax regime has more to do with tax unaffordability than the actual tax rate.

"Nobody goes there any more. It's too crowded." -Yogi Berra

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