San Francisco and Manhattan (as well as most of Western Brooklyn) are almost exclusively for those who the media would call “elites”. This wasn’t always so. Go back to the 90s, 80s, 70s, and 60s and the population of these areas is much more diverse. You’d think prices can’t possible go higher, but income inequality is actually increasing—so they can. In 10 years there will probably be zero market rate properties in either San Francisco or Manhattan under $1 million. It’s already a rarity, but soon it will actually be non-existent. And unless things change in another decade that bar will be $1.5 million, and so on.
The Houston metro area:
* Population: 6.3 million
* Land Area: 10,000 sq. miles
* Average wage: $25.87/hr
* Average 1 bed rental rate: $967/mo
* Wage/rent ratio: 22% monthly income.
* Population: 8 million
* Land Area: 7000 sq. miles
* Average wage: $37.19/hr
* Average 1 bed rental rate: $2500/mo
* Wage/rent ratio: 39% monthly income.
What they really need are good services, an educated workforce and a place their workforce wants to live.
Elites need the high end of resources for the winner to take the lions share - otherwise they would be one among many and not elite because many can do it. In this case talent is the resource they must seek.
They tend to want to live in an area with plenty of alternative jobs and like minded people. Those two tend to self perpetuate. Since demand is high and working in a hot area is good for advancement, makes them look good and helps boost salary expectations combined with a desireable place to live the demand stays high unless it is a bubble and it bursts.
Additionally, I don't have numbers but Houston does seem to have much lower income inequality for the bulk of the population. The SF Bay Area is really good at churning a lot of moderately wealthy people through the tech industry, who far outearn anyone else, and end up bidding against each other for the available housing. I imagine Houston's energy industry creates far fewer moderately wealthy people who outstrip everyone else in income to this extent.
Finally, one big thing that Texas does very right is having strong property taxes instead of state income taxes. You don't have early homeowners holding on to their feudal properties while new workers struggle to make ends meet, as you do in California.
Median salary for Houston: $61,708. Median salary for SF: $77,734. Does a 26% increase in salary explain a 250% increase in rents?
I like the city, lots of good stuff there. It has essentially nothing bounding growth, and that helps keep real estate and rent down I suspect.
The "elites" like demonstrating that fact by collecting scarcity. There really isn't much to be had in Houston from a real estate point of view; there isn't even much in the way of fancy neighborhoods. I mean, they exist but they aren't anything special. Partially perhaps because the whole area is pretty homogeneous, there isn't a part of it that is clearly advantageous in the same way, say, NYC, SF, LA, Chicago has. I suspect this is self fulfilling .
Why would wealthy people want to move to a place like Houston? They are already rich. They don’t care about low taxes and regulation.
It’s like somehow you missed the whole point. Houston is very attractive to people who aren’t wealthy.
Start defining your perimeters and we might be able to get an answer to your first question.
Houston wages [1].
SF wages [2].
Houston rents [3].
SF rents [4].
San Jose rents [5].
Houston wiki [6].
Bay Area wiki [7].
The total geographic area as defined by the city or region's CSA.
> what does it include relating to uninhabitable/unusable space?
Examines land area without regard for zoning or habitability.
> Is average a mean or median wage?
Average means average. Mean.
> What are the rates of poverty in both regions?
Irrelevant.
> What the hell is an "elite of the world" defined as?
Don't know that's why I requested more information from the OP.
1. https://www.bls.gov/regions/southwest/news-release/occupationalemploymentandwages_houston.htm
2. https://www.bls.gov/regions/west/news-release/occupationalemploymentandwages_sanfrancisco.htm
3. https://www.rentcafe.com/average-rent-market-trends/us/tx/houston/
4. https://www.rentcafe.com/average-rent-market-trends/us/ca/san-francisco/
5. https://www.rentcafe.com/average-rent-market-trends/us/ca/santa-clara-county/san-jose/
6. https://en.wikipedia.org/wiki/Greater_Houston#Metropolitan_Statistical_Area
7. https://en.wikipedia.org/wiki/San_Francisco_Bay_AreaThe Bay Area has a number of different independent cities that are geographically isolated, and connected by limited infrastructure (e.g. the bay bridges and a few congested highways). You can debate the latter point, but realistically, large parts of the Bay Area are impractical commutes from the major tech centers. Even getting between SF and silicon valley is a miserable daily commute -- I wouldn't want to do it from Berkeley.
A more realistic comparison would be Houston vs. San Francisco County, or Houston vs. Silicon Valley.
The New York CSA spans into upstate New York and Pennsylvania. It isn't reasonable for normal people to make a daily commute from upstate New York.
...
"I don't know what the reason is, but I would love to read a truly satisfactory explanation for this."
Well, it did just happen ... bay area housing, for instance, plummeted from 2007 to 2011. This was neither a slight blip or a "slowdown":
https://www.bayareamarketreports.com/trend/case-shiller-refl...
Note that mid-range homes dropped, in their index, from "220" to "125" (give or take).
How long have you been an adult ?
Thanks for showing some data!
It's pretty interesting that the recent changes in the tax code have had the effect you'd predict: since you can't deduct property taxes and interest off your federal taxes in the same way as before, real estate has defacto become more expensive.
I haven't closely studied Tokyo real estate values, but I remember at one point Tokyo's real estate was worth more than Japan's GDP or something absurd like that. I think that bubble eventually normalized. https://en.wikipedia.org/wiki/Japanese_asset_price_bubble
California has high state income tax but low property taxes.[2]. 0.625% in SF
The worst is New York. NY has high state income tax and high property taxes[3]. 1.925% in nyc. That is insane. I just don’t get how people put up with this and where all that money is going to
[1] https://smartasset.com/taxes/texas-property-tax-calculator#I... [2] https://smartasset.com/taxes/california-property-tax-calcula... [3] https://smartasset.com/taxes/new-york-property-tax-calculato...
They don't. In the past couple of years staples of the Northeast such as Wawa and Yuengling can be found in places as far away as Florida. The reason for this is because of the number of people leaving the Northeast due to the fiscal pressures that you describe.
Also, NJ is just as bad as NY when it comes to taxes. My parents live in Central Jersey, and their property taxes are insane.
Except midwest housing prices are constantly rising too. Obviously not anywhere near coastal cities, but Midwest city housing prices keep going up even as the manufacturing economy there supposedly shrinks.
I think the missing component of the demand side is the prices of these places. Even with bank bonuses, the numbers are so astronomically high you have to wonder how so many people can afford them.
There seems to be a global undersupply of housing development in the largest cities.
My guess would be that the growing information economy has meant a much denser concentration of well-paying jobs in a small fraction of cities (farming was obviously very spread out, and industrialization somewhat spread out as well, since factories naturally require space), coupled with the double populaton bulge from baby boomers and their children, the millennials. Additionally, outside East Asia, communities seem to have become increasingly unable to dream big and invest in large scale development.
Wealthy Chinese families want to get their money out of China, and thus, overseas real estate is a good way to bank that money outside of the Chinese economy. Couple that with the fact that foreign investors bringing over $500,000 to the United States basically buy citizenship. So, if you're a Chinese family with a factory, and you want your kids to move to the US, go to American colleges, etc. You buy a $650,000 property in Vegas, or SF, or wherever, you send them over, they reap the investment benefits, and get fast tracked to citizenship. Plus, your investment always goes up because the American real estate market always goes up, right?
Well, tariffs and the coming trade war mean those exact types of investors are now pulling out, selling, leaving... That sort of behavior ran us right back to the brink of another bubble bursting, but it slowed a year or two ago and now we're seeing the resulting cooling of real estate markets.
This citizenship loophole was what Jared Kushner's people were giving seminars on in China, presumably to help sell newly made suburban homes over $500,000 to foreign investors. ( https://money.cnn.com/2017/05/06/news/jared-kushner-nicole-f... )
Some cities have woken up to this and are imposing taxes to curb these "investments". As the world population grows and more people move from rural to urban areas, housing problems are only going to get worse.
It's the inevitable result of constricted supply and growing demand.
And in addition, SF home prices dropped ~30% only 10 years ago during the financial crisis.
The truth is that real estate in the big urban centers will likely always be more expensive than the average American home, but there is no reason why NYC and SF couldn’t see a big reset with people losing a ton of money.
If SF real estate drops 20% and you bought a home for $2M, that’s a major loss.
There's too many of us. And most of the good land has been taken and/or ruined.
Chinese and Saudi Arabians own a very large portion of our country.
This is for several reasons:
1. Saudis feel quite unwelcome in the US, and prefer to buy homes in London.
2. New York is so far that a Chinese billionaire would prefer something on the other coast. Especially in Canada where they don't have to pay taxes on worldwide income if they establish residence.
And without data, this is just an impression based on fragments of articles. I still haven't seen data for the Chinese buyers in Vancouver, and that is a far easier case to make.
Good luck. Link it if you find it.
Really made the area's uncomfortable relationship with wealth very clear to me, and easily ignorable when the information is so bad.
"Why exactly do you want me to come to this housing protest again? Because our tour of the 2 bedrooms are scheduled at the same time?"
Another major factor is that zoning laws make it more difficult to build new housing in most cities than it used to be.
Zoning restrictions are combining in a bad way with another major economic trend: the increasing centralization of good jobs in large coastal cities. Those cities are experiencing high population growth and the housing supply is not growing enough to meet the new demand.
I assume this myth has been around much longer. Perhaps people know what was being said or written in 90s, 80s, 70s and 60s.
But in spite of all this, in spite of temporary slow downs and slight blips, the broader market just becomes more and more expensive. Numbers that seem to make no sense, or seemed absurd even 5 years ago get blown past.
I don't know what the reason is, but I would love to read a truly satisfactory explanation for this.