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Comment by cylinder | Hacker News Reader

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.

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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/

> 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.

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.

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.

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