
To Get a Home in San Francisco, First Get a $200,000-a-Year Job - anishkothari
http://blogs.wsj.com/numbersguy/to-get-a-home-in-san-francisco-first-get-a-200000-a-year-job-1375/?mod=WSJBlog
======
tomkarlo
This says more about the arbitrary nature of using city boundaries for
studying home pricing than anything else. San Francisco certainly has high
prices, but it also has one of the smallest footprints of any major city, and
has lots of nearly-indistinguishable residential areas that are adjacent but
fall outside its boundaries, particularly to the South and East. If you look
just at pricing within the city boundary, it's going to be inflated by the
fact that such a large percentage of that area is still relatively close to
the "city center" and benefitting from the value that creates.

Meanwhile, "New York City" (which ranked lower on median price) includes large
residential expanses that are much further away from the city center,
including Staten Island. (Not to mention Los Angeles, which is what, 50X the
size of SF proper?)

I'd like to see this comparison done for say, Manhattan island vs. San
Francisco - that would be a much more apples-to-apples compare.

~~~
bane
One of the interesting bits then is the differences between the common meaning
of a city and the statutory boundaries.

What people mean when they say "New York City" and what it actually is are
more or less the same thing (though most people are surprised at how big and
diverse the 5 boroughs actually are). People don't really count the NYC Metro
area in the equation. Nobody who visit Trenton or New Haven comes back home
and says "I went to New York".

When people say lots of other cities, they really mean the metro area.
"Washington D.C." refers colloquially to the 7th largest urban area in the
country. People can make regular repeated visits to Arlington, or Fairfax or
wherever and still go back home and say "I just went to D.C.".

I suspect SF is the same. People can visit anywhere in the Bay Area and go
back home and credibly say "I visited San Francisco" even if they never
actually stepped foot in the city proper.

 _edit_ I notice everybody who disagrees with this premise lives or is from
the Bay Area where these things matter. On the other side of the country, all
of California north of Monterrey is basically "San Francisco", most people
think Oakland is part of L.A. and nobody could pick out SV on a map if their
life depended on it.

~~~
maratd
> Nobody who visit Trenton or New Haven comes back home and says "I went to
> New York".

You're stretching things. Trenton is 2 hours from Manhattan by car. If you
stay in Northern New Jersey, you definitely "went to New York". I can get to
Manhattan within 15 minutes from Hoboken or Jersey City. When you're that
close, you're definitely part of the city.

~~~
bane
Trenton is considered part of the NYC metro area.

> I can get to Manhattan within 15 minutes from Hoboken or Jersey City.

As a figure of speech most people won't consider either of those NYC. Somebody
visiting Jersey City went to "New Jersey" colloquially.

Actually, I take it back, people who don't know NYC well "know" that
Manhattan, Brooklyn and the Bronx are "places in NYC" even if they aren't
quite sure what they are, I'm not sure Queens registers for most people, and
Staten Island, even though it's geographically one of the largest parts of the
city, may as well not even exist. People picture Manhattan in their heads
though and that's about all they ever visit. Some people might confuse the
name Yonkers as part of NYC because it's kind of a funny name like Brooklyn or
Bronx and they've probably heard it on NYC area TV shows and movies. But
nobody outside of the NYC area will visit White Plains, Paterson or Newark and
claim "I went to New York City".

Meanwhile, people who visit Palo Alto _definitely_ say "I visited San
Francisco". But I do agree with other comments that people don't usually
conflate San Jose or Oakland with San Francisco.

It's the colloquial semantics of place names that I'm referring to. It's a
little bit like how "Asian" means either East Asian, or East Asian + South
Asian depending on your dialect of English, but nobody who ever visited
Aermenia or Cyprus ever claimed they "visited Asia". Or people who visit Egypt
visited "the middle East" when really they visited Africa.

Part of it is name recognition. If I'm not from the Bay Area, "Belmont" or
"Millbrae" doesn't mean anything to me or to the people I'm talking to, even
if they're clearly distinct places well outside of SF. The identity of SF has
subsumed those other areas, at least in the geographic knowledge base that
people from outside the area walk around with.

Most people _know_ Jersey City is obviously not NYC. But most people from
outside of the D.C. area couldn't pick out Annandale nor does it have any
meaning to them. So people just say "I went to D.C."

This has some embarrassing and sometimes hilarious side-effects for out of
towners. Like for example, somebody visiting San Francisco proper, knows that
they have a buddy that lives near there (because in a past conversation his
buddy said "I live in SF" because it was easier than saying "I live in Emerald
Hills" and doesn't understand why it's not immediately convenient for them or
their buddy to just hop on a street car and meet up for a quick Coffee.

Or I know a company from the West Coast that set up shop in "D.C." expecting
it to be convenient to their Government customers, only to find out that none
of their customers would come to their office since it was a 2 hour drive in
traffic from the actual customer locations out in the larger Metropolitan
area.

------
mbillie1
I feel bad for the people who grew up in the area and feel connected because
of family or whatnot. As a software engineer NOT from SF, it's probably the
last place in the country I'd move to - we have such a relative abundance of
remote opportunities compared to other professions. I don't really see why I'd
be willing to pay maybe up to 4x+ my housing cost for perhaps a 15% increase
in pay. It's a nice place and all, but geez.

~~~
downandout
_> I feel bad for the people who grew up in the area_

The people who grew up there (whose parents owned homes) are doing quite well
(at least their parents are) because of the vast appreciation of their homes.
Among some of my wealthy friends that have paid ridiculous prices for real
estate in SF, I have heard the rather condescending term "thousand dollar
millionaires" used to refer to these long-term homeowners that did nothing to
create a $1M+ net worth other than pay their mortgage and live in the same
place for decades.

Anyway, it's not the people who grew up there that you should feel bad for.
It's the people that need to be there for one reason or another and can't
afford a living wage with the incredibly inflated prices and taxes associated
with living in SF and California in general.

~~~
muyuu
Asset rich, when your asset is your home, is the worst kind of rich. Unless
you have something else very very compelling to back it up.

If you sell, then say goodbye to your city. If you don't sell, then you don't
have this capital, and you still live in a very expensive place.

You can mortgage it for a lot of capital, but this is a poisoned chalice.

Other means to actually realise any of that wealth is to try your luck and
speculate downwards, which is extremely risky if that's your only big asset.

Lots of people are "feeling rich" without being realistically able to realise
any of this wealth, since they cannot really move away from their city. This
is fictitious wealth that constitutes a massive burden to the city and
endangers its competitive place in the future.

It will pop sooner or later and its likely to cause massive social problems.
It's causing them already even before that happened.

~~~
tibbon
In fact, it can be even worse with rising property tax valuations. The home
you've owned forever might cost you more in taxes a year than a mortgage would
be in many places.

~~~
patrickyeon
My understanding of property tax in SF is that it is based on the price the
house was purchased at. This means that the home you've owned forever has had
a predictable tax based on that price, and only new owners you sell it to will
be paying the higher cost tied to higher property value.

~~~
bjt
That's all of California, thanks to Prop 13.

[http://en.wikipedia.org/wiki/California_Proposition_13_(1978...](http://en.wikipedia.org/wiki/California_Proposition_13_\(1978\))

~~~
Balgair
Really, the article left out that HUGE issue. If you grew up in the Bay, you
are very very familiar with this. I am surprised how many commenters here
claim to live in the Bay, yet don't understand property taxes in California.
It's a major issue in the state, not quite as big as water rights, but still
major.

~~~
tibbon
A good point. To be fair, I've only been to CA 3x and live in Boston.

------
biot
Still cheaper than Vancouver with a $922K benchmark house price[0] ($847K USD)
in Greater Vancouver area, or $2.1M in Vancouver West. Factor in Vancouver's
lower salaries and higher mortgage costs, and SF looks particularly cheap in
comparison!

[0] [http://www.theglobeandmail.com/report-on-
business/vancouver-...](http://www.theglobeandmail.com/report-on-
business/vancouver-housing-sales-rise-378-per-cent-in-october-from-a-year-
ago/article15243231/)

~~~
jmj4
Rent seems to be at least 50% higher in SF though[1]. How is that?

[1] [http://www.numbeo.com/cost-of-
living/compare_cities.jsp?coun...](http://www.numbeo.com/cost-of-
living/compare_cities.jsp?country1=Canada&country2=United+States&city1=Vancouver&city2=San+Francisco%2C+CA)

~~~
eigenvector
Both rent and home prices are driven by supply and demand, that is, what the
market can bear.

In both cases supply is the same, but for ownership, the market is global. You
can live on the moon and own property in Vancouver. The price of Vancouver
property is constrained only by the limits of how much foreign capital is
available to be safely parked in Canadian real estate, not by the population
of Vancouver. As you can imagine there is considered more of the former than
the latter.

However, the market for rentals is constrained by the number and salaries of
people who actually live in Vancouver. Nobody rents an apartment in a city in
which they don't actually reside. You can't charge $3,000/month for an
apartment in Vancouver because no one will be able to afford it. In Vancouver
a junior engineer earns $60,000/year.

Vancouver salaries aren't higher than anywhere else in Canada (in fact they're
lower than Calgary and Toronto, both of which have cheaper housing, and about
on par with Montreal which has MUCH cheaper housing), so despite the crazy
property market this keeps rents down.

SF's crazy rents are driven by the tech industry salaries that are much higher
than anywhere else in the country (or in the world for that matter).

------
martingordon
This doesn't take into account median salaries. It's possible that the median
salary in SF is $200k and everything is OK (it isn't $200k though). While it
doesn't really affect the results of this article, it's important to always
consider that like-for-like comparisons are being made.

Like I said, the numbers don't change much but if you're curious, here are the
results:

    
    
      San Francisco-Oakland-Fremont metro area    8.84
      San Diego-Carlsbad-San Marcos metro area    7.52
      Los Angeles metro area 		      6.98
      New York metro area 	                      5.87
      Miami (FL) metro area 		      5.25
      Seattle-Tacoma metro area                   5.11
      Boston metro area                           5.10
      Riverside-San Bernardino-Ontario metro area 4.71
      Washington (DC) metro area                  4.10
      Phoenix-Mesa-Glendale metro area 	      3.57
      Baltimore metro area 	                      3.52
      Philadelphia metro area 	              3.46
      Houston metro area           		      3.17
      Tampa-St. Petersburg-Clearwater metro area  3.06
      Chicago metro area 	                      3.05
      Dallas-Fort Worth metro area                2.99
      Minneapolis-St. Paul metro area             2.95
      Atlanta metro area                          2.48
      St. Louis metro area	                      2.41
      Detroit metro area                          1.29

~~~
daveslash
Interesting numbers (I live in San Diego-Carlsbad-San Marco metro). I make 3x+
the median income of my hometown in Maine, but here I only rent a single
bedroom in a larger house. I'd love to own....but I've known for a while that
my options are either move or make more.

Would you happen to have a source for the numbers? Thanks!

~~~
martingordon
I pulled the data from Wolfram Alpha (I searched for "median home prices [and
median household income] of top 25 metro areas in the US"; I couldn't figure
out the correct syntax to get it to compute the numbers for me).

~~~
daveslash
Thanks!

------
cantbuyahouse
Not SF, but my wife and I are trying to buy a house in Silicon Valley. I can't
imagine how this market is sustainable, but all the evidence is that there is
no hope for improvement. It's disheartening to say the least.

My wife and I are ~30 years old, have $500k in cash saved, and our combined
salary is ~230k. So we are in the upper upper range of earners, and not
looking for sympathy. But even with that, we are unable to buy a house or
townhouse in mid-range neighborhoods here. The houses all go for 1.3-1.5 M. I
don't see that ever being feasible for us.

I don't know that I have a point, other than an anecdote of what this looks
like on the ground. I know we could commute or move to a lesser area, but how
are there enough people to maintain the volume of ongoing purchases of all
these $1.5M houses?

~~~
poulson
Was there a typo in your message? Why would you be unable to afford a home
that you could immediately put down a 33% down payment in cash for?

~~~
cantbuyahouse
That would work out to $6600 a month for mortgage, insurance, and property
tax. Or over half of our take home pay.

------
pdx6
You don't need a 200k a year job to buy a house here. What you do need to do
is be practical about where you are buying and have about 10% of the purchase
price in your savings account. For someone in the low six figures, it is
possible to buy, but it will be in the up and coming parts of town, like
Ingleside, Bayview, and Visitation Valley.

There is also a reverse advantage of making too little. The mayor's office of
housing offers first time buyers condos below market rate. The cap is about
90k for a single person, depending on the property, and works out to about 33%
of that person's pre-tax income for a mortgage payment plus HOA dues. There is
a lotto to get in on this deal, and there are some steep re-sell restrictions,
but for those who want to own it is a real option. For those who make even
less, under 60k, the city will help out with an interest free loan up to 100k.

Owning in SF is very possible for those who are willing to put in the work and
deal with the red tape.

~~~
the_watcher
Wait, there is really a way to get an interest free home loan to buy in SF?
What are the criteria? Do the terms change if your employment status changes?
This screams manipulation to me: Take a $59K job no matter what your
qualifications. Get the home loan. Buy. Begin applying for better jobs. Even
if you can't resell, a below market home and an interest free loan is
incredibly valuable, and if it's in an area you don't want to live, just rent
it (under the table if need be).

Do you have a link to the details on this? I'm curious.

~~~
duderific
It's a lottery process, so there's no guarantee you'd get the below market
home, even if you went through all the red tape.

~~~
pdx6
The chances are higher than you would think. A lot of folks who took the class
and apply for a unit fail to meet the application deadlines or fill out their
paperwork wrong. Others win a unit that they don't want, and drop out so they
can try in another building.

~~~
rdl
Seems like an easy scam to defer most of your compensation/take high equity at
a startup, then do this. I assume the average 200k market rate tech employee
remains more capable of successfully completing paperwork even when making 60k
than most 60k earning people. Are there people doing this?

------
aresant
Not to mention the likely minimum 20% down payment of ~135,000 (20% of the
median 679,800).

~~~
duderific
Yep. Almost everyone I know who has bought in the Bay Area (including myself)
has gotten help from relatives to come up with the down payment.

Nowadays, you pretty much need all cash to have a chance at a decent place;
money is flowing in from China and investment firms like Blackrock, who are
buying up all the properties they can get and turning them into rentals.

~~~
phamilton
I'd also say that 20% down on a first home is also rare. Interest rates are
low enough that PMI isn't a deal breaker, and salaries are high enough to make
it easy to qualify with 10%.

------
minimaxir
The calculations assume you're buying a house _alone_. If you have two income
providers, the math is slightly more sane.

~~~
melling
Shouldn't you be able to buy a house alone? And shouldn't you be able to work
part-time and pay for college? What you're missing is that you used to be able
to do these things but inflation has far outpaced income in certain areas of
the economy, and now it's much harder.

The water is getting hot slowly and the frogs can't tell that the water is
starting to boil.

~~~
eshvk
> Shouldn't you be able to buy a house alone?

> The water is getting hot slowly and the frogs can't tell that the water is
> starting to boil.

In one of the most expensive cities in the world? Hyperbole, apart,
irrespective of how amazing the economy does, there will be places which will
be expensive as shit.

~~~
001sky
It's not the expensive as shit part, as much as it is the lack of variation.
Once you get realy expensive, the place gets lame. It already happened to
(much if not all of) downtown NYC and central london.

------
free2rhyme214
Why buy in SF when you can rent? I don't see the point and honestly it depends
on the size of the property.

~~~
bicknergseng
I don't really think throwing away $3k+/month for a small 1 bedroom is a
better option. At least have that money go towards a mortgage and get the tax
deductions on interest...

~~~
winterchil
If you're buying something comparable it's not $3k/month, it's $5k/month +
$900/month in property taxes + all maintenance and expenses + the lost
opportunity cost of investing all that money in diversified assets.

~~~
mikeryan
I have to call bullshit on that. You're not renting in SF what's equivalent to
a $1.5M home (which is roughly what 6k a month in mortgage + taxes + etc will
get you) for 3k a month.

This excess for investing doesn't exist. Its in fact cheaper to buy in SF
every month then it is to rent.

Trulia has a really cool tool where you can mess with the numbers yourself

[http://www.trulia.com/rent_vs_buy/](http://www.trulia.com/rent_vs_buy/)

~~~
winterchil
You're welcome to call bullshit but it's not and here's why.

First $6k/month will not get you a $1.5MM home unless you had a down payment
of $500k and even then it would not cover your taxes and other expenses. A
general rule of thumb for someone with good credit is a monthly payment of $3k
will let you borrow $500k on a 30-year fixed mortgage. You can check this
yourself here:
[http://www.mortgagecalculator.org/](http://www.mortgagecalculator.org/) (or
use Trulia's).

The problem with Trulia's "really cool tool" is unless you use the advanced
version all the inputs are wrong. For example, its tax assumptions are less
than half of real cost for SF. A more sophisticated tool is available from the
NY Times ([http://www.nytimes.com/interactive/business/buy-rent-
calcula...](http://www.nytimes.com/interactive/business/buy-rent-
calculator.html?_r=0)).

Of course getting an apples to apples comparison is pretty hard unless you're
talking about buying a condo vs. renting a condo in the same building. Yes, it
would be cheaper to buy a 1 bedroom in Bayview then rent a 3 bedroom in
Pacific Heights. If you're looking at starter homes in a decent area, say, Noe
Valley and compare those costs to renting something similar in the same area
renting is generally cheaper.

The "excess for investing" DOES exist, at a minimum in the form of the down
payment you did not spend. The good news for home buyers is that you get
leverage on that return if the market keeps going up. The bad news is that
it's illiquid and we don't know whether that's a better investment than the
stock market or one of the companies we see on the front page everyday. In
short, if you're never moving again buying is likely cheaper. Otherwise, it's
complicated.

TLDR: It's complicated, and most calculations downplay other buyer costs and
ignore other renter opportunities.

------
ThibaultB
I see a lot of posts about 'incredible' prices in SF and The Bay. But I'm
living in Paris and a medium apartment (1400-1600sq ft) here is around €800-1M
(±$1-1.3m). And we have 45% taxes ...

------
marc0
... and I did think SF is expensive ... average semidetached house with small
garden in a suburb of Munich, Germany (1h commuting): 950k USD, quite an
average price here. And the salaries are lower than in SF while cost of living
is higher. 770k USD in SF looks like a bargain :-)

------
buckbova
Live in Hayward by the train. Problem solved.

------
jgamman
seems downright cheap to me here in Auckland NZ

------
puppetmaster3
Eng. out of school w/ 0 experience are get $135K+.

I don't see a problem here.

~~~
minimaxir
Please don't feed the troll. (see puppetmaster3's comment history)

~~~
puppetmaster3
Name calling is not cool. If you have an issue w/ a comment of mine in
history, other that they are not liberal or aligned w/ your POV, ping me
offline w/ a reference to it. This down voting because you disagree is also
not cool. Look at how other websites only have 'like'. Plus you only give some
people down vote, and you can go and down vote each of my comments. hth.

Prices of everything should be relative, else it does not work. Someone is
buying those homes.

------
omilu
$200,000 seems low for a place like san fran. Unless you want to take on some
serious mortgage debt.

~~~
rorski
On top of that, good luck buying a place with a mortgage/20% down payment. A
friend of mine was turned down multiple times trying to buy a condo last year
because the sellers were only accepting all-cash offers.

~~~
dataminer
What difference does it make to the seller if its a all-cash?

~~~
dragonwriter
> What difference does it make to the seller if its a all-cash?

A mortgage requires approval by the lender _after_ the terms are settled with
regard to the _particular_ property (often including a third-party appraisal
by someone approved by the lender to validate that the value of the property,
rather than merely the sale price, has the correct relationship to the loan
value), which means that an offer contingent on a mortgage can fail, whereas
an "I have cash right here to pay now" offer cannot fail.

