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Jimbo,
I think you've got it backwards. Reality will have to adjust to the middle class's expectations, or else all the middle class families will eventually flee for greener pasture.
Yeah, just like happened in Manhattan. A similar thing is happening here.
Jimbo,
Manhattan is pretty small populationwise, and until recently, only a small portion of it was considered valuable - this dispite the fact that Wall Street has a lot more money floating around.
The equivalent would be to say that Pacific Heights will always be beyond the reach of the middle class. That's no big deal if the rest of BA drops back down to Earth.
Manhatten has over 1.5M people living there. Though I suppose you could say that it is the urban core of the area and that there is still some affordable housing somewhere in the NYC area.
I am actually not so sure of that. Joe's "affordable" NJ example has an average home price of $950k. Even in Queen's the average home price is over $500k!
We still have Vallejo...
Jimbo,
Until recently, only the Upper East Side and Gramercy was considered truly upper class housing. Lower Manhattan has become hot only in the last 10 years or so.
Same with LA. Before the recent run up, only Santa Monica, Malibu, Beverly Hills and a few areas of West LA would be considered truly unaffordable for middle class families.
If that's the historic norm (certainly seems likely based on housing affordability - most people living in BA cannot afford the house today, and America isn't creating so many billionaires that they'd look into $1.5M shacks in Marin or Palo Alto) returns, then most areas will be affordable while a small core may be reserved for the elite.
Astrid,
What percentage of the population in Manhattan are homeowners? Has that really changed that much over the years?
These are not rhetorical questions, by the way. I could not find the answer with Google. But I would guess that most Manhattanites have always rented because buying was too expensive.
I know that has been the case for a long time in San Francisco. I don't know anything about LA, so I will refrain from commenting.
It is kind of sad if all the big cities in America have basically priced out our young people. That obviously cannot continue forever... or can it? The increasing desirability of the urban core is going to make it more expensive, there is no way around that.
Jimbo,
I don't know an answer to that. I do know that prices have gone up by a lot since the mid 1990s. Long term rental often does make more sense than direct ownership, since professional RE managers would be more efficient than individual homeowners.
Another problem with direct comparison is that NYC housing situation is always iffy since much of the best housing stock are co-ops.
I don't see current trend continuing forever though, there's just not enough rich people to support the current price level for all of Manhattan or all of SF. At some point, some current owners will sell out and the prices start to normalize.
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One observation is that local markets under Google's "orb of influence" (Mountain View, Palo Alto, Los Altos) are holding up well but inventory is piling up in other markets (East Bay, South Bay). Anyone seeing the same thing?