I don't think it's disturbing because "clearly the top 2% of income earners should be entitled to housing," but because clearly everyone needs housing, and if the top 2% of earners can't even afford it, that means it's even worse for everyone else.
We know that any given habitat, like the Earth, has finite resources and has some upper bound to supporting life. This is how those pressures manifest. We can’t just keep growing the population and have everything be affordable. Surging food, energy and housing prices are the first feedback mechanism in this process.
If everybody can afford everything forever, we get infinite population growth.
Your characterization of bad things happening is exactly my point - you’re just failing to understand that I’m saying that’s the healthy part.
This is exactly backwards; both across and within countries, richer people have fewer children.
You’re pointing to a correlation which has no bearing on the future.
No, this is the point you’re missing: your presumption is predicated on being able to meet everyone’s basic needs cheaply. What I’m saying is that this is not possible, and that high prices are the feedback mechanism.
> I live in Los Angeles, where a "small place in semi-desirable area" gets listed for 1.5M and goes for nearly 2M. I'm somewhere in the top 5% of earners in California, but that $2M 1950s tract housing would be >50% of my post-tax income.
I think the obvious answer here is that people in the top 2% or top 5% are not buying houses... It's the people in the top 0.1%. Last time I was home shopping, we were regularly outbid by all-cash offers of 50%-100% over asking price, no contingencies. These competing bidders are not teachers and nurses. They're not even high-paid tech employees. Do you really think a Senior Software Engineer at Microsoft has $2.5M in cash sitting in his checking account to buy a home? No way. These are all businesses, investors, serial landlords buying their 60th house, hedge funds, 0.1% wealthy people--that's who's buying all these houses. Not us.
Income data always lags reality by a couple of years: in my experience, a lot of people have a lot more money than you'd think. The winners of the eight purchases I've attempted have been young dual income professional families.
For example: the bank will only loan you money up to the appraised value of the home, which is done after the deal is signed (banks won't send an appraiser to every house you make an offer on). If the appraiser says the house is worth 500K and you bid 800K, you need to find 300K some other way (usually cash) or the deal falls through.
And lenders that work in SF understand how this works and indeed can go through full underwriting without a property having been selected. Appraisal is the only thing that might matter which is why it is a good idea to hold back some cash.
Of course, but unless the amount you commit to bridge is unbounded, you're still contingent in appraisal price. And if you did commit to that, you're just making a cash offer with extra steps.
Deposits in my experience are token (around 2%). And usually sellers will verify that you have the cash on hand for no-contingency offers, since 2% is not worth waiting and then redoing the house selling process.
That's how I bought my house, and I earn less as a solopreneur than many FAANG employees in this community. My "cash offer" came with the standard proof of funds: a piece of paper the local Wells Fargo branch printed for me on their letterhead that said I have an $X balance as of that date, where $X was greater than the price I was offering for the house. I walked into the same branch and wired that cash to an escrow company a few days before closing.
> no one is buying a house with cash in their bank, not even rich people
They most certainly are. Tons of real estate sales here (Silicon Valley) are all-cash because the other people making offers are also all-cash, so the only way to make a competitive offer is if it is all-cash.
So regular people who need a mortgage are completely shut out of the market.
Getting a mortgage approved was also easier than I expected; when you move into Jumbo territory and have more than 20% cash to put down the bank seems to assume if you were industrious enough, lucky enough, or connected enough to come up with $500k, $1m, or whatever cash then you're probably good for the loan.
They also counted unvested RSUs as assets at a slight discount to the average stock price (I think it was the previous 90 day average?).
That's not "already secured" then, is it?
This means there is 0% chance of the deal falling through. Not almost no risk, none at all. Failure to follow through with the deal would be breach of contract and the buyer is liable for damages, up-to-and-including, being forced to hand over the money for the house.
It's not common, but definitely possible. E.g. if you were part of an acquihire. Or just got lucky somehow. I know a senior with a crypto portfolio worth more than that because he dropped a few thousand into bitcoin in the very early days.
The price continues to reflect the supply and demand of the houses. You’re either lucky to inherit the land, or you earn enough to outbid others for it. It might even be impossible to outbid those who are bringing inherited wealth to the table.
It might become a transient community, where you work and save and then leave to settle somewhere else.
Why would you suppose that? I don't really see what you're getting at, that's a very unintuitive assumption; it shouldn't happen if market forces are allowed to run their course.
My supposition was intentionally exaggerated to clarify what happens when you don't build enough housing: not to be pedantic, but understanding what happens in "extreme cases" is a common technique in math and physics to understand what happens in more common ones.
(Alternately, if no luxury unit is built, many of those buyers will be forced to buy the best-of-the-rest if they want to move in, putting more pressure on the middle, which in turn puts pressure on the affordable.)
The only place cheaper housing is being built are in developments on the far outer suburbs of flyover cities. But even those builders are having trouble with supplies and labor.
The pools are unused most of the time, but having a pool in the building increases the value estimated by property appraisals' checklists.
Apparently you haven't met my neighbors.
Japan's zoning is national and doesn't have this problem. Thus Tokyo is far more affordable than San Francisco, Mountain View, etc.
A thought exercise: suppose that no new houses are ever built and that housing turnover is nearly zero. What happens to the price of housing in that limit? Market forces do not necessarily entitle the top n% of the income distribution to housing.
I was a bit cynical about this too: I live in Los Angeles, where a "small place in semi-desirable area" gets listed for 1.5M and goes for nearly 2M. I'm somewhere in the top 5% of earners in California, but that $2M 1950s tract housing would be >50% of my post-tax income.