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Demographic and economic effects of domestic migration?
2011 Jun 22, 12:27pm 9,647 views 42 comments
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1) It’s all about jobs. If you notice, housing is generally expensive where there are high paying jobs regardless of weather. In my opinion, weather is just an added incentive. In the Bay Area, it’s ALMOST a guarantee that a professional couple with 5+ years of experience make north of $150k. Are there any other states that could ALMOST guarantee this a couple of professional with this kind of salary?
The median family income of the Bay Area is around $81,136 last time I looked. 3 times income equals to around $245,000. The median home price in the Bay Area is around $400,000 at this point. As we all know that number is only low because most sales these days are foreclosures. Realistically a house is around 500k for anything within striking distance of major job centers.
My Wife and I are one of those 6-figure earners. That said- we are basically in the upper 10% of the earning bracket for the area yet buying a house- even now- would eat up a significant portion of our incomes unless we just slapped down a huge amount of cash- which I don't want to because I value retiring earlier than owning a big Albatross of a mortgage.
So I would argue that no- wages are not really tied to home prices. If that were true then prices would be roughly $200,000 cheaper. As I pointed out and you agree with there are other factors such as NIMBYism playing a part in the reasoning behind lop-sided prices not tied to real incomes.
But getting back to the comment of where you can find other states that pay good money, well for example the median family income in Austin TX is $65,000. The median home price is $191,000- or about $10,000 below the national average. 3 times income for the area means $195,000 thus Austin is very slightly overpriced. But not to the extreme degree as the Bay Area.
You can't compare dollar amounts from one place to another. In TX $60k a year is more like $120,000 in the Bay Area. If someone were to swoop in and ask if I wanted to work at a job making 60k in Austin I would be packing bags tomorrow. Sure- it would mean a big cut in pay. But I would be able to live a lot better there in the end.
As far as the general comments about immigrants being attracted to SF, well there has been a number of reports lately showing that immigrants are increasingly shying away from traditional immigrant hubs like NYC, SF, LA, and so on and heading towards the interior because a lot of them- like me- realize that there is better value and perhaps better opportunities away from the coasts. This alone will probably play a significant factor in the economic growth of the 2nd tier, interior cities like Austin, the Southeast, and so on. Immigrants made this country and if they can't make it on the coasts they'll make it work elsewhere.
You can’t compare dollar amounts from one place to another. In TX $60k a year is more like $120,000 in the Bay Area. If someone were to swoop in and ask if I wanted to work at a job making 60k in Austin I would be packing bags tomorrow. Sure- it would mean a big cut in pay.
Some people I know at Yahoo were given a the notice of termination and let go, their jobs however went to Nebraska.
Like many not given a choice to relocate. Relocation package is rare these days.
So I would argue that no- wages are not really tied to home prices. If that were true then prices would be roughly $200,000 cheaper. As I pointed out and you agree with there are other factors such as NIMBYism playing a part in the reasoning behind lop-sided prices not tied to real incomes.
For decades prior to year 2000 prices were not disconnected from incomes.
So why now ? Whats changed?
Patrick
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2011 Jun 28, 9:12am
For decades prior to year 2000 prices were not disconnected from incomes.
So why now ? Whats changed?
John Talbott in his book "Sell Now!" argued that it's all about status and the increasing income inequality in the US.
He has some nice charts that show for every high-status good like elite housing, elite schools, and even yachts, prices have far outpaced general inflation as income was redistributed from the middle class to the top 1% by eight years of Republican economic policies.
So that 1% is vastly richer than it was, while the middle class and below are actually earning less in inflation-adusted terms. What do the top 1% do with all that money? They show off.
He has some nice charts that show for every high-status good like elite housing, elite schools, and even yachts, prices have far outpaced general inflation as income was redistributed from the middle class to the top 1% by eight years of Republican economic policies.
If we were talking about some glitzy places like Beverly Hills, Newport Beach, or Miami mansion, but we are not.
Patrick
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2011 Jun 28, 9:28am
If we were talking about some glitzy places like Beverly Hills, Newport Beach, or Miami mansion, but we are not.
Lots of the Bay Area is very glitzy.
You can also find run down areas in the far east bay, but prices there are actually pretty reasonable compared to rent.
I admit this does not explain some of the crappier areas on the peninsula that remain very overpriced...
Lots of the Bay Area is very glitzy.
LOL! Really! Not much of Menlo Park or Los Gatos has changed over the years. Reality is SFBA has been around for a very very long time. Natives like myself dont see the hype others claim.
The one neighborhood I can think of that has changed character significantly -- from working class to crazy expensive -- is Noe Valley in San Francisco. Other than that, what other towns or neighborhoods have changed significantly in character over the last few years? Sure, a few places have gentrified slightly, but I'm talking about big changes. Somewhere like Los Altos was always on the expensive side, although the housing value to income ratio was far lower than it is now.
I admit this does not explain some of the crappier areas on the peninsula that remain very overpriced…
What areas are you talking about, Patrick? Somewhere like Daly City where housing prices are still more than twice as much as national median?
Patrick
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2011 Jun 28, 10:45am
Not much of Menlo Park or Los Gatos has changed over the years.
What? Menlo Park, where I live, is in a continuous state of destruction of small cheap houses and replacment with large expensive houses. Though I agree that land is most of the cost now.
What areas are you talking about, Patrick? Somewhere like Daly City where housing prices are still more than twice as much as national median?
Yes, for example.
Yes, for example.
I posit that at least part of that comes down to land use. There is plenty of land in the Bay Area, but you can't build on most of it. Compare how much land area is between 280 and 101 on the Peninsula between 380 and 92, and then compare how much land there is between 280 and the coast in the same area from north to south. Granted, some of this latter land is not buildable because it's mountainous, the fact that this will forever be open space makes a huge difference. Some of that is prime land in relatively easy commute distance to San Francisco or Silicon Valley.
Look at Marin County. The Marin Headlands area was once to be a town called Marincello. They were targeting housing for only about 30,000 people. Could you imagine if that land, about 2000 acres, which is prime commuting distance to San Francisco had been developed at the density of Daly City? 2000 acres is a little over 3 square miles, and Daly City is over 13,000 people per square mile, so it would have been over 40,000 people. The whole of Marin County's 520 square miles of land area has only about 250,000 people currently.
During the housing boom, this left places like Morgan Hill and Antioch as the overflow housing areas essentially, because the rest of the Bay Area that can be built on is so built up, but these are in some ways exurbs with no big job base. The biggest employer in Morgan Hill is Morgan Hill USD, and Target and Safeway are 12 and 13 with about 150 employees each, although there are a few companies with outposts there of 200-500 employees.
Antioch, with over 100K people, at least has some jobs because of its hospitals, but the top 5 list is as follows:1 Kaiser Permanente 2,070, 2 Antioch Unified School District 1,786, 3 Sutter Delta Medical Center 891, 4 Contra Costa County Social Services 427, 5 Wal-Mart 318. Government and Walmart doesn't an economy make.
The topic of "why are housing prices disconnected from incomes" is a curious one for me as well. I have my own uneducated thoughts about it. My take is that we experienced a dramatic yet for some reason unnoticed shift with the socioeconomics of the country- most notably in the bubble-zones like the Bay Area. To put it plainly, the middle class is now the working class and what used to pass for upper middle is now lower middle. All those folks working as engineers making what should be more than sufficient wages- or wages that just a few years ago gave you financial security- are now more or less lower middle class: The struggle to slap down a 100k down payment on a house that at one time was probably owned by a plumber, car salesman, or teacher.
I say unperceived because I don't think many people who wind up buying some tiny little house for 500k realize the irony. They're paying more to live in less.
I used to work not too far from Menlo Park by the way. Communities like that give a whole different meaning to the term "Overpriced housing". Tiny little houses with 1 million+ asking prices. Its pretty unbelievable. After having spent years living in the East Bay and commuting to Silicon Valley, it seems that many SV communities are in their own little overpriced world.
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This I imagine has been talked about a lot on this site. But as I am a newer member, I'm curious what others here think since this particular subject is interesting to me.
As someone who grew up in the South in the 80's things were not all that fantastic economically. A good chunk of the region was economically depressed and the cities were relics. The city I grew up in NC was typical of most Southern cities: Everything closed shop at around 5:00. The only places to eat were chain eateries. I moved out of the area when I was 20 to go to college in Boston. That was sort of my first wakeup call as to the extreme differences in the cost of living between different regions.
We've talked about this before but after a few years in California I thought of the idea of moving back. Here's the thing though: A LOT of people-seemingly from the coasts- were and are doing the same thing. A quick look on just about any relocation or city site is crammed with people moving South and to TX. The most popular being the NC, TX, and GA based forums. The lion's share of relocatees are as mentioned- from the coasts with a fair chunk of Midwesterners too.
Over the past 7-8 years or so I've watched the area I grew up in dramatically transform. 5 years ago if you wanted a beer- well your choices were limited. Typically crappy mass-produced swill. Now you can get just about all of the same microbrews you can here in Cali. A few years ago downtown was shuttered at night. Now there's a whole ton of new restaurants, clubs, and other places and you'd be hard pressed to find parking. There are whole chunks of town and the surrounding area that has been restored or built new.
Not all of this in my view has been positive. With this growth has come a tremendous amount of sprawl. A lot of it is rather monotonous with the same exact big box stores, fast food joints, and boring vanilla Mcmansion subdivisions. The level of traffic has also increased 5-fold. I used to be able to drive down the freeway unimpeded all the way to town. Now there's actually traffic jams. The people have changed too. Not everyone has a southern accent. In fact it seems that southern accents are now in the minority there.
I'm not saying this change is good or bad. Populations grow. Places change. But the one thing I wonder about is what sort of long-term economic, demographic impact will this have on different regions and states? My own uneducated guesses are that Texas will probably replace California as the "go-to" state for the middle class and this in turn could mean its economy becomes increasingly diversified and thus perhaps on par or greater economically than California. There seems to be a slow drain from former industrial/economic powerhouse states to newer states that have had less of a history with diversified, industrial, economies.
I imagine a lot of this growth has to do with housing prices. As numbingly discussed here, its a hell of a lot cheaper in other places beyond the coasts. I remember seeing houses- nice old houses in the arts and crafts style- back home for 150k or less. This is extremely appealing to people with kids and whom are squarely middle class. I've had this thought of if the trend continues and the middle class continues vacating the coasts, will this in turn add one more factor in tampering dramatic home price appreciation on the coasts?
Anyway, I know this is not a very original topic. But I'm just curious what your all's thoughts are.
#housing