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Comment by _huayra_ | Hacker News Reader

I've seen two types of people here in Seattle in tech affected by these layoffs and Amazon and Microsoft:

a) living paycheck to fat paycheck because of how they decided to misuse their compensation, i.e. luxury cars, getting the maximum mortgage the bank would allow for them and buying a house in the past year because of FOMO, etc.

b) those who have years of runway, and are only upset because they may have to sell off some of their ETFs to make ends meet if they can't find something in >1 year

Unfortunately, I see too many of my fellow devs fall into category a) and are really up a creek. The best thing to do when one lands a highly-compensated tech job (in the future at least) is to treat the "extra comp" as that: extra. Just max out the "mega backdoor Roth IRA" instead buying of a custom-wrapped Tesla.

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Mostly agree but houses are really expensive around here, significantly more expensive than 10 years ago. If you have a family and need a decent amount of space then your options are either buy > $1million house (at minimum) or live very far away and have an in sufferably long commute. New grads are pretty fcked tbh unless housing supply increases fast or they just stay in apartments.

There is a balance between overspending and forcing yourself to live uncomfortably just to save money.

Maxing out roth ira isn't that helpful for this situation given there is a 10% early withdraw penalty

Rent is still less than 1/3 of post tax income most places if you have a high paying tech job. Also you can always downsize on stuff to save on floorspace.

Yeah I rent in a neighborhood and my rent is a third of the equivalent mortgage. The downside is that you miss out on the annual appreciation. If you invest what you save in paying down a mortgage the market you can actually make more than what you’d make on the rental appreciation. Still I think there’s an intangible value to owning your own house and keeping that in the family, especially once you have kids / grandkids.

Not to mention being in control of what you can do and when you move (if ever)

Yeah that's the point - new families now have to either: a) rent b) downsize significantly c) stretch their budget. While 6-10 years ago a house in Sammammish or Issaquah was easily attainable

Why should everybody get a house and not have a 2 hour commute? It was the norm for the past few decades, and so your post just reinforces the prior post, except the Roth IRA thing. You can save without an IRA.

Yeah, everyone sitting comfortably in their big house in a nice neighborhood close to work that they got when it was reasonable to do so can now sit back and lecture others: "why do you need such an expensive house and less than two hour commute?! Just don't have kids and rent an apartment!"

The real question is why can't we get much denser housing (e.g. condos) and a smaller commute.

At least for Seattle, it seems like the liability for the builder and the costs don't really justify building for less than some un-sellable amount (e.g. $1k / sqft) [0]

[0] https://www.reddit.com/r/SeattleWA/comments/wnkwvp/comment/i...

That is a good question. Not terribly hard to answer either. Things in America cost a lot. Labor costs a lot. Everyone needs a livable wage and good health care, even carpenters. Wood costs a lot, and it should because trees take a long time to grow and deforestation accelerates climate change. And regarding climate change, energy costs a lot and it should because if it didn’t, then there would be more even more climate change. So that’s the answer to the question of why can’t everyone own a home and not commute. It is because we care more about workers and the environment and have chosen to give those issues the highest priority. And if you don’t like that, it’s a free country; there is more affordable housing in states where people care less about workers and the environment. Ironically, many of those states are actually better places for workers and the environment, but that wasn’t the question.

If they built condos that were greater than 2000 sq ft regularly, that might be an attractive option.

The point is not that the roth ira is a useful savings vehicle for one's emergency fund, but that it's a good idea to think of the extra FAANG / MAGAM (whatever the acronym is now) money one gets on top of a non-MAGAM developer job should basically be treated as if it doesn't exist, and therefore socked away in the extremely useful retirement savings vehicle of the mega backdoor Roth IRA (which I know at least Microsoft offers). This treatment of the "MAGAM bonus" as such allows one to be able to downsize to a less-well-compensated dev job if one has to (e.g. layoffs, then go work for some non-software-first company like in automotive, consumer products, etc).

Most developer salaries put them well above the IRA limits, so having the option to save post-tax dollars in a Roth (which also has no RMDs, unlikely regular 401ks and IRAs) is a rare opportunity.

In Seattle where so many people have been earning so much this doesn't really work out unless you're a dual-income couple or don't have kids and don't need much space. The house prices here have been driven up so much even modest houses are going to be a good chunk of your income if you're a single earning household. You pretty much have to use your RSUs to get a downpayment.

That's true, any of my colleagues who have bought houses recently were dual-tech DINK and had to sell off a bunch of RSUs. Single-income folks just have to wait it out and hope prices come down, or just give up the narrow search and get some place in Tacoma :/

I dunno about the mega back door Roth part… unless you truly have tons of excess, I don’t wanna be old till I can enjoy my money

Housing is more expensive today than it was in the past. Sure they might have gotten an expensive mortgage but what's the alternative if you want to start a family? Shame on the boomer generation for continually prioritizing their generation over future generations. They deviated from the long outstanding trend to sacrifice today for the betterment of the future.

Boomers left us with a housing shortage, education decline, health decline, public-pension deficits, unsustainable government deficit, trade deficit, and so much more.

Hopefully the younger generations can look towards reformation that while maybe painful for us makes our childrens, and their children's life better.

Agreed that the past generation has made policy at the expense of their children/descendants. That's what taking on a higher debt as a percentage of GDP effectively is.

But there is no housing shortage. There was a shortage of listings for a period of time, not a structural shortage. Number of housing units per household is same as it was 20 years ago. 1.1:1

[Different metric, but gives an idea] https://fred.stlouisfed.org/graph/?g=MvZv

Prices in previous tech hub areas will fall drastically if remote work sticks, so won't be a problem for future residents of SF/Bay/Seattle/Austin.

With real estate management software enabling the market to act as a cartel you can have an 'excess' of housing yet maintain an apparent shortage and extract monopoly rents.

True, though I question how effectively a cartel on rents can be formed in practice.

I believe that specific piece of software is already being investigated by the Government for anti-competitive, price fixing like behavior

Effective enough to elicit government investigation. There is a huge industry of data aggregators and managers for which this cartel like emergent behavior is the primary value offering. My current rent is managed by it and I can presume at least 10% rent hike every year. The entrenched money benefits from this status quo so without an establishment threatening crisis I doubt much would be done about it.

Rents are declining nominally right now, not rising. If you look at recent MoM data. The software can't just tell companies to raise rents 10% if the market doesn't bear it.

It would require a unilateral cartel without meaningful supply outside of that agreement to actually fix prices.

That being said, this kind of behavior should be subdued as much as possible, within reason

They would be declining more without the software, you can still extract monopolistic rents in an economic downturn. Just because the rents have declined does not mean they’re not monopolistic.

A lot of this is geographical monopolies and actual liquid stock is often quite limited, so long as price is set at the margin and the managed property is on that margin they can elevate the price. This is easy enough to do as low rent options don’t stay on the market. Plus non-managed properties will benchmark themselves against the market which includes the managed properties allowing for price leadership.

There is a whole zoo of anti-competitive behavior strewn through business that is tolerated due to the immense amount of money that is made that is beneficial to governments who tax it and politicians who receive donations. I don’t know how to fix it, step 1 seems to be fix political corruption and that already seems impossible. Once something becomes corrupted it’s very difficult to un-corrupt it.

> there is no housing shortage.

you are factually inaccurate there, for most US metropolitan areas on the East and West coasts. In particular, the San Francisco Bay Area for sustained decade+, had several hundred thousand more available jobs than available places to live.

source: professional Urban Planners in California

I'm talking nationally. There are going to be outliers you can cherry pick for local concerns. The national data is quite clear on this, reference any stats you want on FRED or otherwise

And those jobs in SF are likely to go remote in large part, as we've already seen a strong transition towards. It's not very economically efficient to make employment contingent on location, so I'm doubtful that will continue to be the baseline model for white collar work.

Home prices in the Bay Area are driven by local employment, yet I can take the same job now and move to Texas and buy a 300k house rather than 3 million. The amenities and culture will develop over time.

Doesn't seem to be a very favorable outlook from a fundamental perspective for BA RE prices to me

And Silicon Valley is uniquely messed up by Prop 13 and NIMBYs, not to mention the fact that there is no room to sprawl out like midwest cities given the geography.

That's not to say that other cities don't have a similar mix, but those other cities are not home to the headquarters of highly-paid software folks who all compete for housing. Even Seattle folks priced out can possibly afford places way up north in Everett or down south in Tacoma, if one absolutely must have a house for whatever reason. Even cities that are a heinous commute to Silicon Valley (e.g. Santa Cruz) are still wildly expensive.

Note that "total housing units / working age population" is the wrong metric. Many baby boomers are choosing to stay in their houses long after they have retired, and retirement lasts longer because life expectancy is now ~15 years past retirement (more in many of the blue states that are the most housing constrained).

The proper metric would be "population entering peak home-buying & child-rearing years / (deaths + population entering senior homes + new home construction)". I'm pretty sure that metric is pretty bleak just looking at the U.S. population pyramid:

https://www.populationpyramid.net/united-states-of-america/

I gave the "housing units to households" metric, which is the one that matters most.

It's 1.1 housing unit to 1 household, same as it was in 2001. You can corroborate with FRED data for total households vs total housing units

Demographics were favorable for demand for the past few years due to millenials reaching homebuying age, but they quickly shift against demand over the next decade due to large elderly population passing on and lower population growth. Not even considering that homebuilding is at an all time high

https://fred.stlouisfed.org/series/UNDCONTNSA

At least when they die we will get their stuff

Most won’t. The assisted living centers will, and the workers at the facilities.

Assisted living is a money pit, and most boomers aren’t sitting on massive amounts of wealth.

The owners of the assisted living facilities will. The workers there will presumably continue to be paid peanuts.

There has also been a change in people in younger professional demographics actually wanting to live in (certain) cities which was mostly not the case 25 years ago. When I took a job in the MA computer industry out of grad school, I don't think anyone in my class actually lived in Boston/Cambridge.

(And all the computer companies were out in suburbs/exurbs anyway though finance was downtown of course.)

Don’t blame boomers, blame knowledge economy industries and the unbalanced and concentrated rewards they produce (not just at the top, but all the way down the line). When we came to America we moved to Northern VA, and we’re able to afford a nice house in a good school district even without my mom working. Subsequent waves of mg family are moving to places like Texas for the same reason.

To get housing prices under control, it’s not going to be enough to tackle the supply side by building more housing. You also need to tackle the demand side by heavily taxing those knowledge workers so they have less disposable income to spend on housing.

No. The “good school district” in your comment is the tell. As long as access to good education is gated by housing, parents will plow any salary gains back into bidding up homes in “good districts.” See “The Two Income Trap,” two decades ago.

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