I'd call that a seller's market. Houses may be selling quickly because of a lack of supply and elite buyers are moving asap. A buyer's market would be one where buyers are not in a hurry, one where houses stay on the market for a while, negating any need to bid high and fast.
I'm currently in the ultimate seller's market (Vancouver, north shore) with a <1% rental vacancy rate and houses selling within hours. I laugh a little at the prices in the OP. 1.7m won't get you much in my neck of the woods. Some 35 new apartments (2Br 2Bath) in west van just pre-sold for 7.5m each. And they haven't even broken ground on the building. The city/province is starting to take drastic steps as the young flee and shops close. The market is in a bit of a panic, but that is what drastic steps were meant to do.
$300,000 a year is $190,000 post-tax.
Assuming 20% down, a $1.7M home would cost somewhere in the range of $8,000 a month after factoring in the mortgage income tax deduction.
That leaves $94,000 a year disposable, which is a lot anywhere. This family can readily get a full-time nanny for the early children years, ensuring no parent needs to take time off.
Now make those salaries for the next 30 years.
Your point is valid in that as you make more money more of it can go to housing because a smaller portion is required for things like food, clothing, gas, transportation, etc.
3x gross income was the conventional rule of thumb but truthfully that was back when interest rates were 7% or so. However, just because you can afford something doesn't mean you should.
Usually when people mention foreigners in real estate, they are talking about nonresident investors (often Chinese citizens). Calling out mere ethnicity of homebuyers is weird.
That is true and one of my neighbors was a realtor for 20 years and has a number of friends who advertise in foreign countries that they can find you an investment property in California. Typically though, those buyers seem to be "status invested" rather than simply buying a house. So they look for places in San Francisco, or Palo Alto, or Saratoga (places where there is some status associated with owning a home there) rather than say Sunnyvale or Santa Clara.
That said, my neighbor came to the US on an H1B with his wife and daughter, is working for a local tech company, and his parents gave him the money for a 20% down payment on his house. That saved him the more typical path it seems of getting a starter house, building a bit of equity and then trading up to a larger house. I expect that being foreign nationals they don't have the gift tax burden that US parents do.
On the one hand that is foreign capital fueling higher house prices but at the same time my wife and I got a loan from her parents to help buy our original house, so I don't consider it out of the ordinary if the parents can help out.
And how many of them were engineers moving over for jobs? It's not just Californians relocating from nearby communities, sure -- I moved from Canada (via a few years in New York), for example. But it's unlikely to be some foreign absentee landlord.
In the DC area this results in a weird trend. There are almost no 3 bedrooms in Georgetown below a million. That'll buy you about 1,200 square feet. $2 million will buy you an actual urban mansion with triple the square footage and wood paneled walls. The price is entirely driven by what ~$300k HHI couples can "afford" maxing out their mortgage eligibility. Once you get above that, demand drops precipitously.
If you assume you shouldn't spend more than 1/3 of your gross income on a house, that would mean the homeowners should be making $325K/year (and already have $500K saved they can plow into a house).
Wow.
The seller who had originally owned our home sold for a ~20% loss over their purchase price (purchased in 2007).
That seems quite cheap compared to Manhattan[0][1][2][3], and only one of those is in an relatively desirable neighbourhood.
0. http://streeteasy.com/building/richmond-condominium/9a?featu...
1. http://streeteasy.com/building/439-east-51-street-new_york/6...
2. http://streeteasy.com/building/355-east-19-street-new_york/3
There are so many things that make this an apples-to-oranges comparison, the above list is not comprehensive.
I chose to buy my house in Sunnyvale because it was near the "center" of things (and for a time that was a bit more literal than I expected). Within ~30 minutes of downtown Sunnyvale by bike you can work at Apple, Google, LinkedIn, HP, Yahoo!, NetApp, Intel, AMD, and Amazon. Not walkable but not particularly bad either.
BTW, Manhattan presents something even better than single car friendly -- zero-car friendly. We only temporarily got a car once we had infants, since carrying around car-seats was a pain. Most other times, we've been just-in-time with Uber or just plain walking/subway.
However, there are a bunch of startups actually in San Francisco, Uber and AirBnB being ones that get a lot of airtime, and Twitter (which is no longer a startup). There are lots and lots of pre-revenue 2 - 15 employee companies there as well. YCombinator is in Mountain View which is right next to Sunnyvale, and about 36 miles from San Francisco.
San Francisco is urban and hip and all of that, and a lot of people want to live there. Then they take bespoke busses and ride down the peninsula to places in the "south bay" (the collective term for the communities at the southern end of San Francisco bay). That is part of the issue that SF residents have, which is people who live in SF but work somewhere else, they are able to pay higher prices and the bus eliminates the commute disincentive.
On either side of the bay between these two loci are a number of vibrant and interesting places as well, on the west side you have the peninsula cities of Burlingame, San Mateo, Redwood City, San Carlos, and on the eastern side you have Oakland, Hayward, Berkeley, and Richmond.
Somewhat remarkably they have their own micro-climates so you get different weather depending on where you are.
Cities in the north and on the east of the bay have BART service, cities on the south and west of the bay have CalTrain service. There are three major airports one east (Oakland), one south (San Jose), and one west (SFO). Efforts to turn Hamilton Air Force base in Marin county into a northern airport have been rebuffed several times.
If you are not working at a company that is actually located in San Francisco you will have a shorter/easier commute if you live outside of San Francisco (typically on the east or west side of the bay that your company is on). You will also pay less for an apartment/house.
[1] Which is nominally the Santa Clara Valley where all of the semiconductor companies were located.
Depends on your definition of fun - being harassed constantly by both homeless people and SFPD? If so, then a paradise awaits you.
I wouldn't call them either of those things; they're very nice suburbs on the Peninsula (west side) and less nice suburbs in East Bay. The northeastern ones (Danville, Oakland, Berkeley, Richmond) are too far to commute to South Bay from. And none of them are interesting.
There's also public transit up and down the Peninsula but it's very unreliable because the governments here refuse to invest in anything, or build anything, in the hopes it'll make everyone leave again.
I now have a longer drive and I am much happier. Having been to Manhattan I doubt walking there is much more pleasant either. Walking in a small town would be nice. Not in big cities.
I find driving relaxing, it's got just enough attention to be a distraction from the stray thoughts, and with music, enjoyable enough to work past any driving frustrations.
i live in sunnyvale. along the ~0.6mi route between my house and the kids' school, 3 houses in past month or two come to market and each sold after just a single weekend of open house. i've actually been surprised at the speed of sales in recent weeks.
> Sunnyvale has a ballot measure (https://sunnyvalepubliclandsact.com/) that is seeking to limit how the city can transfer park land to developers to turn into houses (or hotels, or office parks). That measure is an artifact of all the building that is going on.
kinda. this is more about what happened w/ raynor park after selling the adjacent school, but there are a few other deals in sunnyvale (e.g. city buildings). i spend a lot of time over at raynor with our little league, and my biggest issue is that a private school now has priority use of the fields during specific hours. oh, that and they paved over one of the baseball fields (well, backstop + grass) after the city gave away the small strip of land along the school. over in santa clara there's been some f'd up tactics around Levi's stadium to get park land (using term loosely) developed. BMX track and soccer fields will be missed.
Christ, are they already doing that?
The answer was couples where both parents worked in the tech industry with a combined income of over $300,000. Usually one child and often one on the way, many have houses already further away (Livermore, Gilroy, Morgan Hill) that they are selling.
Now that is unscientific, it is the experience of one broker who is sitting in one open house, showing the house to prospective buyers and gently quizzing them on their financials in order to understand if they are good prospects or not. But I can see other evidence that its probably accurate, the folks moving into my neighborhood fit that profile. A lot of people looking for "good schools" because if you don't pay private school tuition that saves you $15,000 per kid per year you can put into house payments.
My point being that the houses are being listed and sold in a short time frame. That suggests that the housing market is pricing appropriately for the buyers. That there are more buyers than houses pushes up the price and pushes out the buyers who do not earn as much. However, unlike San Francisco, there is a lot of residential building being put up on the peninsula and south toward San Jose. Across a wide spectrum from apartments to condos to single family attached, and single family detached. Sunnyvale has a ballot measure (https://sunnyvalepubliclandsact.com/) that is seeking to limit how the city can transfer park land to developers to turn into houses (or hotels, or office parks). That measure is an artifact of all the building that is going on.