Not to be snarky or obvious, but you should do what the people in the past did - find a better place to live that allows you to buy a home more easily.
That's one of the reasons why there was a big migration to places like LA. Lots of jobs and cheap land to build on.
To me, SF is like NYC. Unless you got in early or are one of the 1%, it's not a great place to try and build a life in (if you're looking to own a home).
Housing (and construction) prices have been ballooning out of control everywhere for the last several years. Both major cities (DC, Boston, Portland, Seattle, Chicago, LA, Denver, San Diego) and secondary cities (Boise ID, Grand Rapids MI, many more) are all totally unaffordable. I’ve spent hundreds of hours researching different areas over the last year. Looking at sold homes from just 2-3 years ago, many seem like a steal compared to what’s available now. It’s just extremely bleak.
Meanwhile, my landlord bragged about buying the house I live in with no money down and no income check during the subprime mortgage era, and has been renting it out since. Now he is selling it during a pandemic and I’m about to become a vagabond.
I do think the vacuuming up of affordable housing by real estate investors (perhaps many of whom accumulated wealth via the surging stock market) is at least part of the problem. Landowners have strong incentives to keep the housing stock low (and the rents high), or they get washed.
What data are you looking at? Median home price for Chicago (where I live incidentally) is 229,000, for Dallas is 225,000, for Houston is 197,000 according to this source [0] and those are the 3rd, 4th, and 5th largest metropolitan statistical areas in the United States and Dallas and Houston have both grown a whopping 19% in the past decade [1]. Trick is, they all still have plenty of land to build new homes on to keep up with demand growth.
The median home price doesn't mean much in Chicago. Most homes in the desirable neighborhoods are 1BR and 2BR condos and well over $300k or include outrageously high HOAs ($400 - $1K). There are thousands of sub $200k homes in the city but they're located in dangerous under resourced neighborhoods to the south and far west. In either case, you will pay 2% property taxes, which means comes out to $400 a month in property taxes -- about twice the amount you'd pay in any other part of the country. And that's in addition to 10% sales taxes and 4% income taxes. The only other places with property taxes that high have no income tax (Texas) or are near New York City.
Chicago isn't nearly as great a deal as it's made out to be.
"desirable neighborhoods" in Chicago is code for living in a bubble (should be very firmly noted that this is NOT race-related). Yes, you pay a lot more for that. There are neighborhoods in the city that have lower crime, faster access to downtown, higher median incomes, better-rated schools and lower house prices than many of the "desirable neighborhoods". The Near South Side is an obvious example.
However, you can look at the tax rates within Cook County and even compare them to the suburban counties [1]. The composite property tax rate is as low as it gets around here. Most cities are double or triple the Chicago rate.
It isn't as good of a deal as when I moved here, but if you've got a tech or other white-collar salary, Chicago is still a really good deal. It's your responsibility to consider cost when choosing a location within the metro area. If you ignore it, you shouldn't be surprised that you pay more.
EDIT - Illinois and Texas heavily depend on property taxes for local funding. The actual rates you pay have an insanely high variance from city to city. Some taxing districts don't align with city boundaries either, so one neighborhood may pay more than another. You can use it as a proxy for how well-run a city is, but on the other hand Chicago isn't a particularly well-run city - it just has a huge amount of high-value commercial and industrial property (which is taxed at double the rate of residential property). If you're going to live in either state, you really need to look at the hyper-local tax rates and put that into your decision matrix. The data isn't even hard to find.
Indeed, my shortlist is Chicago (and maybe Grand Rapids) at this point. I’ve always been in love with Chicago—such a gorgeous city. Housing wise, I’m enchanted by the industrial brick and timber loft condos that there seem to be a lot of for decent prices.
Can you recommend other neighborhoods besides Lakeview/Lincoln Park? Those are the only areas I’ve spent significant time in aside from downtown.
It really depends on where you plan to work, where your friends are, etc. I would recommend that you rent for a year or two and spend time exploring neighborhoods. You'll find a location you love eventually. There are definitely dangerous areas, but you're going to hear a lot of very outdated advice such as "never go south of Roosevelt" when in reality from Roosevelt south to Hyde Park has seen an incredible renaissance over the last 20 years.
FYI, brick and timber loft condos are super cool, but they usually have strange layouts and the buildings tend to require a lot of maintenance. Don't let me scare you off, but you're going to want to rent one for a year before buying one, just to make sure.
The Near South Side is a desirable neighborhood and the situation there is as I described. It's small condos with exorbitant HOAs. Do you mean Bronzeville?
I'm glad you think so; many northsiders do not! But you know that, for example, the Near North Side has an average price per sq foot that is $50-100 higher than the Near South Side.
I bought a 1700sq foot house that was ready to move in, in a pretty quiet and safe neighborhood, with decent (but not amazing) schools, in a suburb of Chicago for $230k with no HOA fees just 2 years ago. There are neighborhoods here that are really expensive, but others that are more affordable.
If I worked in the city I would have at least an hour commute each day, though, but it only takes me 30 minutes to get to the city outside of normal commuting hours.
Property taxes are kind of high around here though. I think I'm paying about what you're saying, and some of the homes I looked at (but decided against) were over $6000 a year in property taxes. Those were in areas with really good schools though.
Also Illinois as a whole as a state has one of the highest overall tax burdens in the country, because the state is pretty much broke, so that might be enough to stay out of Illinois.
You could actually find a place just over the border in Indiana, though, and have the same commute to downtown Chicago as I would have (about an hour) but suddenly have a much lower tax burden. I've worked with several coworkers in the past that commuted to the suburbs of Chicago for work every day from Indiana, it's doable.
The past few years have hit the construction industry hard, with the trade war spiking steel prices, the crack down on immigration combined with low unemployment reducing the workforce, and now there's a lumber shortage to go along with the pandemic. I built a house during the beginning of this mess and it was painful: it took 13 months to build a house that would normally take 8.
The cost of construction has risen such that I can't find a new construction house in my area for under $400,000 with the median on Zillow being $495,000. And this is for an area in the midwest that those reports you link report "median home price" of well under $200,000. If you can't build cheap houses, then soon there won't be cheap houses.
A lot of cities on that first list are reporting 10%+ YoY changes. That's significant. Those used to be numbers you'd see in Seattle Washington, not fucking Allentown Pennsylvania...
Here is some data backing up what I’ve been (mostly subjectively) observing. In particular, look at the skyrocketing median list/sale price (+10% YOY) and the YOY changes in sale price since ~2010. Also, medians are of course just an aggregate measure that does not tell the full story—low quality cookie cutter developments drag the medians down. Older homes in decent neighborhoods are even hotter.
Grand Rapids? Unaffordable? Are you looking at condos downtown? Here's[0] a 3bd/2br with 1800 sq ft that admittedly is outside of downtown a bit, but is under $1000 a month. This condo [1] is more expensive, but would be totally affordable if 2 people were able to pay $1250 in rent by themselves. Both of these were on the first page of Trulia results when I searched for Grand Rapids.
A condo in GR is a possibility for sure, though you have to admit the market there has gotten ridiculous in recent years. Most of the decent houses near downtown get multiple offers instantly (same in Kalamazoo).
Is $1250/mo a realistic amount to charge a roommate in GR?
If you really want that downtown life, then it may be realistic. It's definitely a lot cheaper than a corresponding condo of that size in a major city.
If you're considering Chicago unaffordable, I'm really curious what you think is affordable!
When I moved here, I was blown away that house prices where I live, about 30 minutes from downtown, are on average $150k, or less than 3x median yearly income here. This isn't actually drastically different from a semi-rural Missouri town I lived in for a bit.
Do you live in Indiana? Did you move ten years ago? I can't think of a single safe neighborhood in Chicago or its surrounding suburbs that are $150k today.
Now I don't really know anything about Rochester. But you would be hard pressed to find anything in a city for ~50-60k in Australia. Not comparing Apples to Apples, but the 1 bedroom apartment I bought in Melbourne suburbs in 2016 was AU$265k
If I look at somewhere like Bendigo (about 2 hours from Melbourne). The cheapest houses are about 250k.
Rochester is definitely cheap, but for a reason: It's a city on the down slope past its peak. It's a deindustrialized rust belt city with a population down 38% from its pre-WWII high. That goes a long way to explain why housing is so affordable. And I wonder what the tech job situation is like there (though that may matter less now, what with the pandemic increasing the acceptability of WFH).
It's hard to move somewhere for cheap housing where you literally wouldn't know a single person, though. Social life is important.
Also, there's the winter weather. I hope you like cold and snow.
> It's hard to move somewhere for cheap housing where you literally wouldn't know a single person, though. Social life is important.
And this is fine, but it seems very disingenuous to say that it's a crime that you can't afford to buy a home when you refuse to move out of arguably one of the most expensive cities in the country. It's equivalent to crying about not being in the 1% when you're in the top 1.5%, and you could move if you wanted to.
There's nothing wrong with wanting to live in San Francisco, but expecting to buy a home a few years after graduating from college is ridiculous in my opinion.
This tale does not reflect reality when you look at the numbers. Housing prices have more-or-less always gone up, especially on time scales long enough to spread out market corrections. If housing prices 2-3 years ago "seem like a steal" (they don't), and the same has been true every 2-3 year cycle (it hasn't), an FHA/USDA mortgage with 3.5-5% in basically every market other than San Francisco and NYC makes sense, and if you're making software developer salaries it should take less than a year to save up 3.5% of a home you can afford (again, other than NYC and SF which are outliers).
Since you're spent a lot of time researching this: have you ever found a way to correlate 3rd-tier and below cities with fiber internet speeds and infrastructure? Seems like that info would be useful to a lot of people here, who are looking to move to a more rural area but are working tech jobs remote long term or even permanently and need fast internet.
By “research” I really meant “searching, then searching again...and again”, not actual research. Word choice is important in HN comments because you all are too sharp.
I haven’t looked at that, but I have wondered how universal satellite internet coverage and the more permanent (?) move towards remote work will affect rural areas. It is an interesting trend to keep an eye on.
I live in a small town, about 20min away from the larger city, with FTTH and reasonable cost of living. There are disadvantages to living in the country (you have to drive everywhere), but it's just a balance.I definitely enjoy zero crime, no traffic, fresh air and a large lot so I am not crammed with my neighbors. The downside is that I can't walk everywhere, but that is fine.
We are having precisely the same convo in my family, in the Czech republic.
My wife is from Prague. A gem of a city, but unaffordable. Too much speculative capital from Russia, China etc. Being a slave of a mortgage until 70 is a ghastly prospect.
I am from Ostrava, a post-industrial city where property prices are about a third of Prague level. Incomes are lower, but not that much lower. For an accountant (my wife is), the difference is about 10 per cent. Overall, much easier to sustain middle class life standard.
She does not like the idea of leaving her native city, but if we manage to have a child (still a very open question), we will have to, at least for a few years.
If you can rent significantly cheaper than total cost of servicing loans etc, consider investing the difference in index funds and rent as cheap as you can.
It might be a good bet, especially if speculation in housing is slowing down compared to the last 20-30 years.
It's possible the problem isn't speculation, but the rate of return on capital vs the rate of return on labor.
If capital dominates, you're going to run into scenarios where it's fundamentally impossible to ever afford scarce goods that generate returns, because someone who started with more capital will now have an even larger delta with you, and is therefore able to outbid you.
Well said. Another way of looking at it: in the long term return on investment (r) > economic growth (g) because “everyone” gets g but people with capital also get r.
Not all capital generates the same returns. Index funds have virtually no gatekeeper—you can open a brokerage account, toss in $10, and be an honest-to-god capitalist. And stocks tend to outperform real estate by a hefty margin. So catching up is possible.
"Extremely supply-limited cities" could just mean outliers like NYC or SF, or it could mean literally every city in the country, depending on your definition. And by definition, isn't it impossible to have an extremely supply-limited city with very little barrier to home ownership?
Historically, equity markets and housing provide similar returns when you factor in rent according to this super interesting harvard paper on "The Rate of Return on Everything, 1870–2015" and the corresponding HN discussion [0]. Far less liquid and actually more stable though according to the paper.
I would think the stability is in part due to its illiquidity. If the market drops 10% and you've "heard" it's going to drop another 40%, you might dump everything. If you don't get back in at the right time you can lose even more than if you had just stayed in throughout the drop.
It's rare for folks to immediately dump their investment properties because the housing market has cooled off.
I honestly don't think "tossing in 10$ to an index fund", i.e literally pocket change, makes anyone a /capitalist/. This is not an argument in good faith relative to the reality of capitalism we live in.
It was in good faith, I promise. I think there are multiple definitions of capitalist that are broadly used. I meant it in the “investor in a business” sense. Also, it may be important to reiterate: the idea isn’t to just invest $10 and be good to go. It was just meant to highlight the low barrier to entry, which is very different from buying a home.
This is a side effect of urbanization. Economic opportunity is increasingly concentrated in cities and the increased demand inevitably increases the cost of housing.
If that cost becomes too high relative to the income increase gained by living in, say, SF, people will certainly move elsewhere. But they'll still largely move to cities, and the cycle will just repeat there.
There's a degree of purpose to artificial scarcity though. If construction is completely unchecked, then the demand, and load on infrastructure can reach a point where it becomes unusable to everyone,old and new residents.
I've lived in Toronto for a long time, and after pockets of th city got rezoned and high-rise construction was allowed, it created a situation where it was not possible to get onto public transit during peak hours, and people resorted to walking to work for 45 min instead of their planned 15 min commute when they brought their condos pre-construction. Similarly the growth of immediate Toronto suburbs has been so immense, that it is not possible to get a seat on the subway if you don't board at the terminus station (as suburbanites fill them). The city is addressing these problems through transit expansion, but it is taking decades for each project to complete (example https://en.m.wikipedia.org/wiki/Line_5_Eglinton).
The main point is, zoning in a vacuum is not evil, or if more palatable, a necessary evil.
Not just surrounding cities - to your point, above them. All those single family neighborhoods. All those new buildings built to 6 stories instead of 60.
In Seattle, basically every building built is built to the maximum zoning allows. And it’s all arbitrary - purely about the whims of the local homeowners.
My parents moved to Charlotte, NC in 1999. It amazes me the sheer growth in HOUSING in city center. There are several new buildings well beyond 6 stories. There are even more new buildings in the 3-8 range in areas like South End. There are even more single family homes further out of the city.
It may not be perfect, but it's seriously beautiful and developed nicely in the last 20 years.
It can't be understated what a huge impact the Lynx Blue Line (light rail) had on Charlotte's ability to shape and concentrate their growth in the past 15-20 years. Developers started planning and building around it well before it opened. Strong transit can make a huge impact on affordability, especially if it frees families up from the burden of car ownership (expensive depreciating assets with large operating costs).
There are drawbacks. But find a lower cost of living city and the savings on housing means you could probably fly back home once a month and still be ahead.
Eating your cake and having it too is literally impossible, but having affordable housing absolutely isn't impossible. We just need to go back to the more permissive housing construction days of yore when we actually built enough housing supply to satisfy rising demand. That's why housing was so affordable until just the past few decades. We could have that situation again; it's not literally impossible.
I think you’re romanticizing the prior generation. Sure they could buy a house with a blue collar job, but they weren’t doing that in NYC or other top tier cities and they often lived in much smaller home. Maybe 2bed/1bath 1000 sq ft house for a family of 5.
My entire extended family struggled a lot when growing up in the 50-70s.
It’s easy to look back at those that lucked out and bought a house in a prime location in CA (before it was prime) and say how easy they had it. You’re just ignoring all those people who did the same in Ohio and Michigan and lost their jobs and have houses worth about the same as when they bought it (adjusting for inflation).
There are extremes at both sides of the spectrum - Detroit real estate plummeted, San Francisco real estate skyrocketed.
You're right to point out that there isn't one narrative that defines the prior generation. Some people lucked out, others didn't, but the reality is that on average (both median and mean) home prices have drastically outpaced wage growth for the past few decades, which is obviously unsustainable.
The best the younger generations can hope for is to eventually have enough wage growth to afford a home that hopefully holds its value.
Worth noting that [in the US] a large part of the previous generation ended up living in cheaper suburbs because of flight from urban areas, which also made those urban areas cheaper.
I mean this is an excellent point. There was a reason they built semiconductor facilities where Silicon Valley now is, and why all the housing is so drab. It was not a highly desirable place to live back then. At today’s prices, my parents couldn’t have afforded to live in the drab DC suburb where I grew up. But there were almost no jobs paying six figures in the area back then, nothing like today.
> Unless you got in early or are one of the 1%, it's not a great place to try and build a life in
I mean, even if you got in early, you're still locking up lots of wealth in housing, an opportunity cost that could be differently spent.
For example, suppose you bought a place in NY in the 80s for 200k that's now $3m. Sure, you got in early and your mortgage has been paid off and you live without any housing expenses (outside of taxes, hoa etc, let's for the sake of argument ignore those). Let's assume we consider this to be living in 'free housing'.
But the S&P500 does 10% a year on long-term averages. It is still fully up to you to say, I like living in NY so much, that I want to forgo selling my home for $3m, putting it in the stock-market, and earning a passive average $300k a year (which compounds if left (partially) unspent, for example it'd turn into $770k a year after 10 years if not spent).
That $3m property, then, is at times a greater portion of someone's income than their own salary. I know some old people (50-60) who have nice careers, make $150-200k, yet live in a property in which $200-300k of annual investment income is locked-up. In a way, these people are 'spending' $200-300k a year on housing, while an alternative housing choice (e.g. renting a place for $3k somewhere else and selling their home and investing it long-term) would cost maybe $30-40k.
You can argue the details like whether the $3m or 10% stock return is accurate, they're just examples. But the point still stands, even those who got in early and continue choosing to live there, are continuously forgoing a lot of money (which can translate into a very high quality of life elsewhere).
I live in the capital of a EU country and own a home outright. In terms of monthly cashflow, housing is not a big deal as I just pay some taxes. Yet it's starting to weigh more heavily on me whether to stay here, or whether to sell my home, take all that money and enjoy a much higher income/consumption level elsewhere.
I used to really enjoy the city and all that it had to offer, but sometimes I now find myself just working all the time, with barely any energy, time or motivation to make use of it to its fullest.
I don't think enough people consider that you can be so called 'house poor', while owning an expensive home without a mortgage.
I’m not sure about the EU, but in the US you could do a cash-out refinance. Effectively, liquidate your equity in the house in exchange for interest payments that go to the bank (~3%), then invest that cash elsewhere.
The problem is that at the same time, the good jobs are being concentrated in a small number of cities.
Even if someone is willing to move to a cheaper place, they find that relative to the employment available, it isn't much better.
In the end, they realize that no matter what they choose, they need to struggle incredibly hard just to get a similar quality of life to what a baby boomer was able to achieve with a high school diploma and a manual labor job.
More difficult than the baby boomer generation most certainly, but not impossible.
You could take the arbitrage further by increasing upfront and post move earnings and decreasing future expenses:
- Save up "no thanks" money at the high cost of living place. Not "f* y" money, but a significant sum.
- Ideally, find a remote job at the hight cost of living place.
- Relocate to a low cost of living place with decent socialised medicine. This can lower provisions for future expenses _a lot_.
At least in the EU, there are nice and safe places with very low real estate prices, quite decent socialised medicine, very low taxes and easy cheap transportation links around the continent.
Nice and safe places in the EU are expensive and there is not much space. The ex USSR countries are cheaper but I wouldn't recommend moving there.
In western europe:
Real estate is more expensive than the US, public health care is a bad joke at the expense of the taxpayers and whenever you need something more than "I have a stomach ache", you go private. The main difference with the US is that our government doesn't intervene in the health care market (too much) which means our private health care is quite affordable.
Taxes are generally on par with the USA in most countries.
Fuel costs more but few over-expensive cities (eg London, Paris) have barely decent public transport (not that cheap though).
Some countries have it better than the US but the jobs pay significantly less.
I would say the UK is a good compromise in terms of costs of living, low taxes, high salary and weather. Even though tax-wise things may change for the worse, given the cost of covid's lockdown.
Another approach would be to look into some poor islands or places with special tax regimen and being able to command a high salary remotely because of your experience. I'm not sure how much more this strategy is going to work in the future, though: if everyone is remote, wages should go down / be linked to where you live.
Overall, I'd say a few countries are better than the USA, but most of Europe has several disadvantages.
I have some friends who found happiness in South Asia, but that's a completely different mentality.
It would be great if people would make more videos about this and spread them around so Americans (I'm one, this is not a put-down) would know more about how life actually is in the rest of the world. (I don't know that much about the rest of the world either and would watch.)
I mean, actual honest comparisons of health care systems, police, judicial system, politics, and so on.
For example, most Americans who don't have friends from other countries might not be aware how absolutely insane the prices for cars are in some countries.
"At least in the EU, there are nice and safe places with very low real estate prices, quite decent socialised medicine, very low taxes and easy cheap transportation links around the continent. "
For solo developers or childless couples, Riga, Latvia is not too bad if you can stand the long winters:
- The socialised medicine is not as bad as one would think. If that doesn't suffice, additional private medicine is affordable.
- The tax regime is simple. Rates are relatively low.
- Transport. Within the city, public transport is not too bad and taxis are very very affordable. In non-covid19 times, all of Europe is one cheap flight away.
Oh, the irony of writing this from overpriced Leuven, Belgium :-)
That's one of the reasons why there was a big migration to places like LA. Lots of jobs and cheap land to build on.
To me, SF is like NYC. Unless you got in early or are one of the 1%, it's not a great place to try and build a life in (if you're looking to own a home).