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How Many Years of Life Does That House Cost? (arcgis.com)
616 points by sndean on Sept 8, 2017 | hide | past | favorite | 332 comments

I liked the visualization and data, but I don't think it makes sense to compare home prices to wages w/o considering alternatives to home ownership. Home prices don't exit in a vacuum. That is, if a home is 10x the median salary, you can't really say "well, if I didn't buy a home I could work 10 years less." That's because the alternative to buying is renting, which is also expensive. So sure, a mortgage in SF is $6k/mo. But rent might be $6k/mo as well -- and you don't earn any equity or tax write-offs while renting.

I think what the alternative title to this blog post could be is: "How many years of life does that city cost?" What it's really comparing is the relative cost of having a roof over your head in different areas. Would you rather work 40 years and live in SF or work 30 years and live in rural Wisconsin? (I don't have an opinion on those two options. I'm sure there are many people in both of those places that are happy with their choices.)

You also have to factor in the opportunity cost of what you could've done with that down payment (e.g. What would a $100k downpayment invested for 30 years in the stock market be worth vs how much is that worth in your home in 30 years?)

The NYT has a buy vs rent calculator that helps make some of these decisions:


Another factor would be the opportunity cost of moving. With an apartment you're free as soon as the lease is up. With a house, even if you get a job across the country the mortgage must be paid. The time investment alone in preparing a house for sale/selling it is nothing to scoff at.

And of course the NYTimes calculator also factors in home prices appreciation. This is not really academic; it's fairly important. In cheaper housing markets with limited growth, it might be cheaper to rent because the expected cost of a major repair (and return on that investment) are both so low.

Of course, you can't ever recognize the value of your house unless you sell it and move somewhere cheaper (or buy a 2nd house and rent out the first one, but that's just another side of the same coin).

I think this highlights how expensive living is and how little income is. If we're going to have a "free economy" without an end of life safety net (i.e. Social security) then it has to be possible to work a lifetime and retire on savings made. But most indicators show little to no saving for most people. It sure seems something is deeply wrong.

There are most certainly many things deeply wrong.

Most people have negative savings every year. They have more debt. If one has bought a house, then it is very easy to go into more debt every year, when house prices are rising. Then they fall.

Since the beginning of written history (the first written records are records of debts) there are stories and parables about the evil of debt and the need for debt jubilees. Also the idea that lending with interest is immoral is found through out time. Having such easy access to debt/credit from strangers seems not to work well over the long term for human societies.

I mean, is it a good thing that one can get a "Rocket Mortgage" where you can "Get Approved Fast. Get an approval to buy a home or refinance your mortgage in minutes."? [1]

[1] https://rocket.quickenloans.com/

> Since the beginning of written history (the first written records are records of debts) there are stories and parables about the evil of debt and the need for debt jubilees. Also the idea that lending with interest is immoral is found through out time. Having such easy access to debt/credit from strangers seems not to work well over the long term for human societies.

I suppose shrimp and pork and beef are also unquestionably evil... Debt didn't historically work because property rights were poorly recorded. This meant enforcing one's debt involved mafia tactics. Modern debt is cleaner and subject to bankruptcy, a process that occurs on a case-by-case basis when it's needed, a far better solution than randomly cancelling debt every so many years.

Well, the trend is now removing bankruptcy on certain forms of debt as an option, replacing it with cancelling it after X years. This is student debt.

That isn't new and it only applies to very specific cases: student debt is one of a very short lists of debt that aren't cancelable via bankruptcy.

It is new.

Easy access to credit is an important component to a free market. Making borrowing illegal just leads to all sorts of inefficient contortions to do it another way.

For example, businesses often need to borrow money in order to get started.

For another, "bridge" loans and "revolving lines of credit" allow a business to operate when the timing of receiving payments does not line up with the timing of when bills are due.

Forgiving debts means that interest rates must rise to cover those losses.

I agree credit can be very useful and good, but most people are not using debt to try an investment that allows them to pay back the debt and make some profit. They are buying consumables: dinners out, clothing, gadgets, vacations, cars, even housing is really a cost of something you are using. A depreciating asset and not an investment. I think it would be really good to use some of this education everyone gets to get across the fact that consuming using debt with is very bad. Some counter to all the other marketing in the world that says, "Buy, buy, buy". Not immune to it myself.

The problem again is that consuming using available funds is not possible if you need to work 10 years of median salary for it - that in the more affordable states.

The figures mentioned use full salary, in reality you might get some 50% of that possible to allocate to paying off the debt. You still get to pay utilities, cost of life for the family, transportation, education and probably extras. Note I've even ignored any savings - and with high mortgage debt, you can be wiped out by any more expensive health problem.

True; house prices are crazy high in some areas. A decent 3 or 4 bedroom house can be built for 100-200 thousand dollars. In these expensive places, land is the major cost. People can bid up the land cost of housing because of loans especially ones with low down payments. If people had to have %50 down, like not that very long ago, buying a house would be much more inline with incomes. Anywhere where rent is much cheaper than house payment + prop tax + upkeep, the prices are being push higher by home ownership subsidies/lock out of one kind or another.

As a counterpoint Arab traders did very well for hundreds of years without interest (until Europeans came). Interestingly they are probably where our free market ideas come from: there should be no worldly market interference, the market is shaped by the invisible hand which means the rules given by god.

Interest based credit is important for capitalism (use money to make more money), but certainly not for market economies (Use money as a tool to exchange goods you want/need). Both are distinct and can exist independently.

Islamic banks are issuing loans without interest to this day. They have a clever fee schedule though, and I'm not sure it works out any differently for the borrower at the end of the day.

There was a Planet Money episode [1] where a bank setup a no-interest loan to a Muslim family because Islamic law prohibits charging interest.

In the end it was basically just a workaround that was effectively the same as charging interest and that same Muslim family ended up taking a conventional loan when they moved instead of an "Islamic-compliant" mortgage because it was a lot easier.

[1] http://www.npr.org/sections/money/2016/05/13/477956675/episo...

We no longer have a free market. Central banks print and buy stocks, bonds, and mortgage backed securities. China prints and their citizens buy homes in foreign countries.

> Forgiving debts means that interest rates must rise to cover those losses.

Exactly. Interests rates are way too low at the moment.

Most people I know that don't have white collar jobs don't have any expectation they will ever be able to retire. I'd be very surprised if the majority of americans were in a position to be able to retire.

A lot of people with white collar jobs don't have any expectation they'll ever be able to retire either. As much focus as there is on web development/software engineering/other tech related jobs with decent income possibilities, a lot of other white collar jobs don't pay all that well at all.

I'm in my thirties and work for a government funded research organisation doing work on a particle accelerator. I don't expect or want to retire, but then 'retirement' means different things. I would definitely want to retire if I worked as a brick layer.

Pensions are a Ponzi scheme, don't fall for it.


> Pensions are a Ponzi scheme, don't fall for it.

Pensions are mostly just highly tax advantaged wrappers for investments now. They are most definitely not ponzi schemes.

Your link is for a defined benefit pension, which is not typical anymore.

It may not be typical anymore but CalPERS is a defined benefit plan and the largest public pension fund in the US. [1]

The problem is they bump up those benefits when their fund is doing well but when it isn't doing well there's little or no adjustment. It's so big it's fund is influential in the market and also in politics.

[1] https://en.wikipedia.org/wiki/CalPERS

That's the point.

Large numbers of current retirees have been promised unaffordable pensions.

Telling people to "not fall for it" sounds like talking about what people will currently be offered. Given the level of misunderstanding about pensions generally I think just telling people this is dangerous.

Parent says "Pensions are a Ponzi scheme, don't fall for it."

While public pensions like social security have certain features of a Ponzi scheme, they can be sustainable forever, unlike other Ponzi schemes. In fact, they can be more efficient than everyone saving and investing for retirement themselves: https://www.economist.com/news/economics-brief/21727877-fina...

No, the math is very different from a Ponzi scheme. Pensions are awesome if you don't have kids.

Consider if you have a 5% chance to die at or before 65 who get's the money? Well what if you could get together with 10,000 people and split it with those who live. Now your investments are boosted by those who die and there is no downside as who cares what happens after you die.

Unfortunately, such schemes are illegal unless it's though a company. Because really the long tail is living to 120 which means you don't want to aim to be broke at say 95 then turn 95 and be in good health.

PS: Remember, returns after inflation can be <3% over 20 years. I want a hedge for that risk other than just having a massive amount of money I can't really spend.

I agree that private pensions are not necessarily Ponzi schemes. It is possible that they are operated that way. It is also possible that they are operated like an actual investment fund. Without looking at the books, it is difficult to tell.

However, social security and other government funded pensions are Ponzi schemes. The money you pay in is given to people who are retired at that time. The money you get out is paid by people who are working at that time.

Keeping retired people alive requires devoting some proportion of current economic output to their welfare. Whether that proportion is paid from private savings, public savings, or current taxation ultimately doesn't change the fact that it comes out of current production. You can't save (nice) food, health workers, winter heating, etc.

So the real fight is what proportion of current output goes to old people. Private schemes try to ensure wealthy old people get the biggest slice. Public schemes are more vote driven. It doesn't make them Ponzi schemes.

Social Security is running a ~$2.79 trillion dollar 'surplus' as they have collected more than they have paid out. Which means they have not been paying out 1:1 with money paid in.

It's also not just a pension fund as you can receive benefits well before 62. Death of spouse with under age children or permanent disability.

Now, this does not mean it's a great or even a good investment. But, the trade off of safety vs returns is not actually that bad assuming you live longer than average.

PS: Another way of looking at it is there are no 100% safe approaches to investing 10's of trillions of dollars. Your stuck leveraging GDP growth which is only slightly better than inflation and frankly that's what SS does.

Yes, pensions can be awesome. One of my colleagues is retiring soon with a very nice final salary pension the likes of which will not be seen by anyone starting now.

Most pensions also will not be enough to cover long term care costs if you are unlucky enough to get some form of dementia.

Pensions as a concept were a great idea when life expectancy was shorter and most people could mostly look after themselves in old age.

I don't think they can survive large numbers of people living until 90 -100 with dementia and needing 24h care. Lets hope the Ai/robotics gamble pays out.

Just curious - how many software developers would have retired by now? And at what age?

I don't get how this is supposed to fit in with the fact that discrimination against older workers is a big thing. Who is supposed to be hiring these 70 year olds with no savings?

I know a dude who makes $800k/yr and still lives paycheck to paycheck. Lack of savings is not necessarily caused by lower income. People tend to shovel money out the door as quickly as it comes in.

Wow, I wouldn't even know how to spend that much. If I made that much I'd retire after two or three years.

Maybe. Or maybe not.

I read a great article at some point that advised people who wanted to be writers to just go do that while they were young and poor and not wait until they had saved up money to finance it. Because the reality is that once you have the fancy high paid job and the fancy house, car and clothes that not only go with it but are essentially required, the amount you thought you needed changes.

For certain jobs, expensive suits and other things you might think are frivolous luxuries are nearly impossible to do your job without. It can be nigh impossible to unhook your income from this treadmill where the faster you run, the further behind you fall in certain metrics.

Millionaires are sometimes like the guy who needed the cart to carry cart repair supplies: Once you are rich and famous, now you need that mansion, not for the space or prestige but for security purposes, and you may also need a bodyguard, a bullet proof limo, etc.

Golden handcuffs

Lots of travel to exotic destinations, huge house in an expensive neighborhood, fancy car upgrade every couple of years, huge tax bill. All gone.

On Topic: is the house paid, rented or is he paying off a mortgage? :-)

Rented. He used to pay mortgage but felt too "tied down" and sold the house.

What does he do to make that kind of money?

Half expected he answer to be 'owns 20 other houses'

Manages about 20 people.

Many people simply spend what they make and live paycheck to paycheck, even when they make quite good money.

Maybe for SF. The article indicates that homes are quite affordable in much of the country.

I think you are having the wrong mindset. A stronger social net would not solve this problem of relative cost of housing. Already, there are many many homes that are very affordable for the median income.

Good thing that so many smart people are working so hard on this! /s

I have very little sympathy for the 40% or so of the population who could save for retirement but don't.

Citations for that number? Why don’t they save for retirement? Can someone on minimum wage with a family save for retirement?

Does someone who makes bad choices deserve to be homeless and destitute later in life?

>Does someone who makes bad choices deserve to be homeless and destitute later in life?

The rest of us don't deserve to pay for their bad choices.

I agree, but I think it's more expensive to figure out who has brought their fate upon themselves and doesn't really deserve the money and who genuinely just had bad luck. That's why I'm in favor of a universal social safety net, for example via a basic income.

Bad choices don't happen in a vacuum any more than good choices do.

I have other things I'd rather do with my money.

Suppose your odds of landing in that exact scenerio are .001%. If you are unlucky, should we pay for you? What about your kids?

It seems valuable to society to not have old, homeless people causing trouble. But that's just me.

That .001% is what charity is for.

Personally, I think people should pay the price for their stupidity. Subsidizing stupidity never works out in the end.

The problem is you're not thinking of externalities of homelessness, much like a functioning health system w/ insurance.

Ultimately, saying neither of these is worth spending communal government revenues on collapses down to "I'm okay with people dying on the street."

Which is not offered as a straw man, but because that's a very possible outcome. And given that, if we're not okay with that, then we're going to spend significant resources to keep that from happening (ER care, homeless programs).

Social security attempts to invest that earlier in a person's life, so that the money treating more dire circumstances can be saved.

... And also allows for some measure of human dignity for those who might not have been taught about compound interest at age 6.

Next time, please provide a source for your percentages.

Reverse mortgages are an option too, especially around retirement. I didn't do too much research and I'm sure on paper it's a scam, but with no kids and no one to really give the house to beyond charity when my wife and I kick the bucket, I am considering making my place part of my retirement plan.

Or just sell it to pay rent for the rest of your life. Either way it's a pretty big boon.

There's something called Bare Ownership sale that's popular among widows with no children here in Uruguay, that retain the right to use the property until death :

bare-ownership is a right of virtual ownership. For example, the bare owner of a property has no right to occupy it or rent it out. On the other hand, when the usufruct holder dies, full ownership of the property is carried over to the bare owner without any liability for inheritance tax. He can then dispose of it (by sale, gift, bequest, etc.) as he wishes.

The maximum duration of usufruct generally corresponds to the usufruct holder’s lifetime – in that case, it is called usufruit viager, or life usufruct. But it is possible to set a predefined term (10 years, for example), which is called temporary usufruct.




PARIS, Dec. 28— Andre-Francois Raffray thought he had a great deal 30 years ago: He would pay a 90-year-old woman 2,500 francs (about $500) a month until she died, then move into her grand apartment in a town Vincent van Gogh once roamed.

But this Christmas, Mr. Raffray died at age 77, having laid out the equivalent of more than $184,000 for an apartment he never got to live in.

To be fair: What were the chances, that this 90-year old women would become the Guinness Book of Records entry for "oldest person on the planet"?

Not really. End of life care can drag on and is expensive. Even if you're really lucky and net $1 million from your house a single illness could wipe that out quickly. Retirement homes cost much more than comparable rent/mortgages.

Those things can be mitigated with some smart financial planning. You can take your lump sum and buy an annuity and use those annuity payments for health and long term care insurance. I would also add long term care insurance is doubly important for the grandparent commenter who doesn't have children who could help care or support them if something goes wrong.

Annuities are mostly scams with so many knobs & levers that are designed to get unsavvy people on hook with weird mix of investment and insurance. best to keep them separate.

Old people have Medicare, they're almost completely insulated from healthcare costs.

Consider moving to a cheaper country.

Sell it and rent. The bank won't even come close to the true value of the home for a reverse mortgage.

Selling it means I can't live in it anymore. Renting is the ideal option, but if I'm 85 years old, maintaining a rental property or dealing with property managers would be tricky at best.

(My actual goal with my current property is to sell it once I'm having trouble going up the 3 flight of stairs leading to my unit and using the money to live in a much smaller place as people mentionned already)

IMO he meant sell the property and rent for Yourself. invest the proceeds.

The real opportunity cost is not living somewhere else. Run the math and SF is best avoided.

That's true in the US. In other areas, leaving the city might not be a realistic option.

Consider Hong Kong as an (extreme) example, where leaving the city means emigrating to another country with another language etc. (yes, HK is technically a Special Administrative Region of China, but can be considered standalone in this respect).

The median apartment price/income ratio here is 18, compared to a US average of 3.9 (the highest cities in the linked article are 13) [1].

These ratios also don't consider what you actually get. The average size of new apartments sold this year in HK was 610 square feet at an average price of US$1.8m and one new development offers apartments the size of Tesla Model X for ~US$500,000 [0].

If you want to go larger, the per square foot cost goes up. At the extreme end, consider a 4000 square foot townhouse that costs US$21,190/square foot [2].

A more ridiculous example is perhaps the sale of a car park earlier this year for US$600,000.

For reference, the median household income is ~US$38k. [1]

Unfortunately those with the most housing affordability issues are those that are least capable of leaving.

[0] https://www.bloomberg.com/news/features/2017-06-14/you-can-b...

[1] http://www.demographia.com/dhi.pdf


The real problem of HK's home affordability is the land release/auction system. It is a highly corrupted system controlled entirely by the local elites and major real estate developers backed by big banks. They managed to push average joes to the very limit when 90%+ of the land in HK is used for reserves/parks under the name of environmental protection.

What is worse, this cancer got exported to mainland China in the 1990s and it was systematically rolled out for all major cities there. $1.8m buys you an 80sqm new apartment in Shanghai in an below average location, when the median household income in Shanghai is definitely lower than US$20k.

It is lucky to be living in HK as there are still public housing options. In cities like Shanghai and Beijing, using the national household median income figure, a Chinese peasant needs to start saving the deposit from the Ming Dynasty (1368–1644) to be able to afford an average apartment there.

Sacrificing parks for more housing just creates more pressure for sacrificing even more parks.

I would really like to see similar graphics for Europe, Asia, Australia, and Canada. I don't know where to get the data though, and I don't think I could make such a beautiful visualisation as he did.

For the data, the Demographia International Housing Affordability Survey provides affordability data for many countries and cities:


The top 10 least affordable with respect to median price/income ratios:

    China Hong Kong              18.1
    Australia Sydney, NSW,       12.2
    Canada Vancouver, BC         11.8
    N.Z. Auckland                10.0
    U.S. San Jose, CA             9.6
    Australia Melbourne, VIC      9.5
    U.S. Honolulu, HI             9.4
    U.S. Los Angeles, CA          9.3
    U.S. San Francisco, CA        9.2
    U.K. Bournemouth & Dorset     8.9

Wait... Bournemouth and Dorset!?!?

Yep, Sandbanks brings the average up http://www.rightmove.co.uk/house-prices/Sandbanks.html

"Sandbanks has, by area, the fourth highest land value in the world" https://en.wikipedia.org/wiki/Sandbanks

Seems like solid evidence that you can't simply "densify" your way out of high prices? Bloomberg says the reason is developers trying to cover the cost of land. Something doesn't add up...

Actually HK has plenty of buildable land in the New Territories and elsewhere, but the real estate tycoons that run the whole show obviously aren't going to allow competition without first getting their cut.

Also, doesn't HK have a policy against tearing down green spaces? Astonishingly, 70% of the dragon islands is forest, the last I read.

Which means that probably ordinary people left Hong Kong and commute to work there each day right? It became like Paris where mostly only upper class lives. Definitely a rent on a minimal $500,000 apartment will also be above median household income.

No, ordinary people live in government subsidized housing (about half the population), or bought their apartment (99%+ of housing are high-rise apartments) in earlier decades when it was a bit more affordable.

For household who already own, their existing apartment also appreciated, so what matters is the cost of trading up. The hardest hit group are younger people between 20 and 35 who are stuck in their parents house for probably forever. 3 generations under 1 roof is pretty common.

Depends of course. Despite the high cost, many live here because their salary is multiple times higher than they could get elsewhere.

It's not just the salary. It's also the opportunities to do things as in for the SF Bay Area we can go to wine country one weekend, go snow boarding another, sail, surf, hike; there's a lot of stuff to do here. I'm sure people can say the same for the NY metro and other similar places.

I've lived in cheaper but boring places. The financial tradeoff is fair.

Vs NYC there's also Tahoe, the ocean is surfable, there are beaches, it doesn't smell like trash everywhere, the climate is less extreme (less hot humid in the summer no snow), more access to fresh local produce more of the year, etc etc. It's not like rent in Manhattan is cheap, and you'd likely make less in NYC vs SF unless you work in finance.

I probably should have been more specific. People like NYC for different reasons, like the nightlife / club scene where the SF Bay Area doesn't compare at all. There's also culture that you wouldn't find outside NYC like the fashion industry and even art. That said NYC isn't for me either but it is for a lot of people, which is why people endure finance to stay there. Since we're on the subject, LA is another comparable place but not similar place. My point is that you can't these qualities in the boonies and that's why it's expensive to live in these places.

> My point is that you can't these qualities in the boonies and that's why it's expensive to live in these places.

But lots of people are plenty happy in the "boonies". They just have different interests, like doing more outdoor-oriented activities like hunting, hiking, fishing, or building their own workshops from scratch. Or maybe they're more cerebral and like the peace and quiet so they can focus on writing.

It's worth pointing out that far more people live outside of San Fransisco and New York (sure, throw in LA and Chicago, too) than inside those metropolitan areas.

Each of those cities is unique in different things. So they are part of the fatter part of a long thin tail. But that's not the same as "everyone wants to live here!"

> But lots of people are plenty happy in the "boonies". They just have different interests

I don't disagree. Different people want different things. I'm just pointing out 1. why people like living in big metros and 2. the flaw of basing where you live entirely on the cost of living and real estate.

>It's not just the salary. It's also the opportunities to do things as in for the SF Bay Area we can go to wine country one weekend, go snow boarding another, sail, surf, hike; there's a lot of stuff to do here.

You can do all of those same things just living an hour east of SF.

True with those examples. I live 20 minutes out of Seattle. I have hundreds of restaurants, every movie in theaters, hundreds of dance clubs/bars/social clubs within a 20 minute drive.

I can't get a well-paying job, or access to any of the above without being close to the city.

Can't you just commute the 20 minutes to a job in the city?

I thought that's what he just said he was doing.

Or rural eastern Washington, I moved to the bay area from there and other than good restaurants you could do pretty much everything else for less money and no traffic.

Doesn't the SF Bay Area include the cities an hour east of SF?

> Doesn't the SF Bay Area include the cities an hour east of SF?

No, an hour east of SF is deep in the Central Valley.

Could be wrong but I feel that's more than an hour east especially when you account for traffic - at least the cities that are actually inexpensive. Dublin, Pleasanton, and Livermore are no longer inexpensive cities with cheap real estate. Neither is Alamo and other nearby cities.

So the problem with living beyond Pleasanton is that you will spend most of your life sitting in traffic. Why do you need to sit in traffic? Because almost all the jobs are in the Bay Area. Maybe that won't be as big of a problem soon though once you have Level 4 autonomous driving. Personally I still wouldn't go for it with that.

Barely and only without traffic. It's over an hour to Tracy now without traffic and that's right on the Western edge of the central valley. Places "deep" in the valley like Stockton out Manteca are even further.

Everyone I know in my age group with a house got help with their down payment from parents. Either in the form of low/no interest casual loans or just substantial gifts. It's possible this money wouldn't have been available to them for speculation in the stock market.

Some of us don't have parents who have more money than we do.

Neither do all of my friends. All that's required is having parents that want to help you get a house.

For instance my girlfriend makes twice the money her parents ever did. She still couldn't have afforded the full down payment on her house without a 4% loan from her mother as they were entering retirement. This arrangement ends up being beneficial to all parties.

I wonder how common even that much help is. That would be completely unthinkable to anyone in my circle. I personally send about $400 per month on average to help my mother make ends meet. I'm certainly not going to be getting a several thousand dollar loan from anyone in my family.

For reference, this is in southern New Jersey and I'm on the older end of the millennials.

Might depend on your age group. If you were (un)lucky enough to be of home buying age during the 2005ish period, you could get a "NINJA" (No Income? No Job? Approved!) loan. This let you sneak around PMI and even having a down payment by using a 80% LTV conventional 1st mortgage, and a HELOC acting as 2nd mortgage based in order to reach full purchase price. Add in a 10 year interest only period, and you're good to go. What could go wrong?!

Speculation or saving for retirement.

There's also leverage. Banks are willing to loan you a million dollars to buy a house but not for investing in the stock market. (Barring catastrophe, over 30 years, there are usually gains.)

I think he was pointing out how out of reach buying is. I'm sure a lot of people would like to own that are renting in SF right now but that's just not possible. "Having a roof of your head" and home ownership is very different, offering different benefits. For someone with kids, who probably does not want to be moving, renting is a bad option but the only one in a lot of markets.

Often missing from discussions of lower CoL areas is risk from different job markets. This is harder to factor in, but since not everyone can work remotely, you need to consider job market liquidity.

If there is a recession can you easily find another job? Do you have a decent selection of local employers to ensure sufficient competition in terms of wages and benefits? Etc.

Living in a high CoL area seems to correlate with a healthier job market.

I'm not sure how true this is. My coworkers mention that during the 2007/2008 recession in SF they saw all of their coworkers/friends laid off and leave the Bay Area.

It took one of my coworkers a whole year to find another job during that period, even though he was in a high CoL area and initially had a "great selection" of jobs.

I don't know a single person that lost a job in 2007/2008. Everyone just hunkered down. Stopped job hunting, employers stopped hiring, everyone just stayed quiet.

Now, I know my anecdote doesn't mean much, because supposedly unemployment went up. Traffic certainly got better. But my point is, the anecdotes aren't worth a ton. I'm not making mine up -- I'm dead serious. Nobody I know got laid off, nobody I know left the area.

I also know far more people who have moved TO California than out of it, and the only people I know who moved out were a couple of people in the past 3 years.

The best bet for low risk, high employment, and CoL - https://en.wikipedia.org/wiki/Plano%2C_Texas#Economy

It costs much more than where I live, but it is still incredibly cheap compared to west coast.

He mentions a county in Texas as the most affordable — and yet Texas has relatively high property taxes (higher than California). So there's that.

And the more expensive homes will also be an income tap when you retire and sell the house (hint: anyone in the magenta can retire, sell and live out their lives anywhere in the green).

Texas also has no state income tax, though. And property taxes are based on the value of the home, so lower values means lower property taxes.

And land values are based on expected net income attainable from the location (whether imputed rent or actual rent). Higher property taxes thus reduce land values, making homes more affordable upfront.

My understanding is that state income tax can be deducted from federal income tax. Retirement income is usually pretty low as well.

Very few things are directly deductible from federal income tax. Most deductions are from the taxable income.

So if you pay X in state income taxes, you'd deduct X from your overall federally taxed income. You end up only saving your federal tax rate times X, not X in federal taxes. So if you're taxed at 13% state and 35% federally, you'd pay 13% to the state. Then you'd still pay (barring other deductions) your federal taxes on 87% of your income.

Federal taxes don't work as a bare percentage, though. You pay a lower percentage on everything up to some number, then progressively higher percentages on brackets of your income up to your maximum tax rate. https://taxfoundation.org/2017-tax-brackets/

The higher property taxes are the more speculation is suppressed due to the high cost of carry.

>Texas has relatively high property taxes (higher than California)

Compared with most other states, California has lower property tax rate. Since Prop 13 passed in the 70s, the tax rate has been fixed at 1% of assessed value (with maximum yearly increments on the assessed value capped at 2%).

A lot of these calculators seem to miss changing costs to.

Ten years ago, I rented a small apartment for $350 per week. Now a literally identical apartment, 20km further from the CBD is going for $600 per week of rent. (I'm not in the US).

Mortgages don't consistently go up in a way that meets these sorts of increases.

You can sublet and pay people in cash for a lot less than the official renting price. This is particularly true in places with high real estate prices like LA, NY, NJ and SF where there is rent control. Thus it incentivizes long-term tenants to sublet for a sub-market price.

You can't really buy a house in such a fashion though.

FYI, mortgage qualification needs a years rent payment proof, ideally in form of bank transfer or bank check entries. If you pay cash and want a house soon, make sure to get written recites for those cash payments.

>That is, if a home is 10x the median salary, you can't really say "well, if I didn't buy a home I could work 10 years less."

Yes, but what you can say is "If I move to this other place I can work ten fewer years for my house even if I make less money."

There are more alternatives: work remotely, live in cubicle under table, live in a car...

What I do: Land a Silicon Valley tech job but work remotely from the Midwest. I make almost double the median income for my area and I live in the white zone. My employer can pay me 60-70% of the salary they would pay for someone in San Francisco to do my job and I still earn way above median for my area.

I could buy a really decent home here (Southern Missouri) for somewhere between 0.5 to 1.5 times my yearly salary. There are many factors affecting that price but there are some really decent houses at the low end of the price range. Extra bonus: property tax, income tax and sales tax are all relatively low. Unfortunately that doesn't apply to the entire region; some neighboring counties have ~8x higher property tax than where I live.

> I live in the white zone

What is the white zone?

It's the areas on the map in the article where prices are average.

Oh, I thought it was referring to some kind of planning zone (and not, as some might have misread my question, as a racial zone).

I mean also roommates, the classic way to cut costs. I think it's interesting because most New Yorkers I know have roommates into their 30s, 90% all of my SF friends don't.

> So sure, a mortgage in SF is $6k/mo. But rent might be $6k/mo as well -- and you don't earn any equity or tax write-offs while renting.

When you rent, your money is gone. When you buy, you normally get most or all of it back later. There's barely any economic comparison between renting and ownership. The tax write offs is the one of the least of your concerns.

People go completely and absolutely nuts when they end up "underwater" with mortgages, which means the sale price of the house at some point becomes less than what you bought it for, or worse, less than the remainder of what you owe. It's an utter and total disaster if you can only get back 80% of what you paid. And yet nobody blinks an eye about sending 100% of their money down the rental drain.

With ownership, you add to the value/legacy that you can pass to your family when you die. As a renter, you add nothing.

When renting, people often get priced out of their apartments, or evicted for circumstances beyond their control. With ownership, the sale price is once, and generally only rare major disasters can push you out. The risks to renting are greater than the risks for home ownership.

These things are why it's so incredibly important that home ownership is affordable across the country. If it goes out of reach, we will have a huge economic problem with large consequences.

When I sell my house I'm not getting back all my property taxes paid, interest paid, closing costs, inspection cost, realtor commission, insurance payments, and routine maintenance costs.

Interest is a good point. But taxes are in the noise where I live, as is all the rest of your list.

Either way, we could debate a whole bunch of minor costs, and it's obviously not the same for everyone. But that would be missing the point completely.

If you sell your 500k house for a very very bad return of 125k, you will be 125k ahead of where a renter is. Renting returns nothing. Whether or not I get back 100% of what I put in, the point is when you rent you get nothing back.

I think this is an unfair comparison, because by choosing to buy a house rather than rent, you need to account for the opportunity cost of not investing the money you're paying into the mortgage in a stock market. Using the calculator here, over a period of 10 years with a measly S&P 500 annual return of 4.66% if you started out with 125k down payment and invested a mortgage payment of $3125 each month, you would have ended up with 927k. It seems to me that what you ought to be comparing is the growth of index funds (what most people should be investing in), and housing market in your area.

Regarding the example of people losing money selling a house in Detroit, it seems to me that by renting and investing the money you would have been putting into the mortgage, you are better able to diversify the risk of your housing area depreciating in price. However, there are areas that experiencing housing price growth better than stock market return, so there are advantages and disadvantages to renting vs. buying a house. By no means is it as clear-cut as you portray.

[1] https://dqydj.com/sp-500-dividend-reinvestment-and-periodic-...

It takes a pretty good return on an investment to make back what you lose on rent.

The point I'm making is that buying a house is an investment, and renting is not.

I've done both, I've rented for long periods of my life. In San Francisco, among other places. I've also bought two houses.

I wish I had seen the economics of buying much sooner, because renting is throwing money away. When I was younger I was comparing mortgage payments to rent, and it didn't seem to make much difference. But if I'd realized that rent is gone and mortgage payments come back, I'd have tried to buy much sooner.

Renting is more expensive than buying in every county I've ever lived, including SF. So the argument that you could rent and invest instead of buying doesn't make sense to me. If you can rent and invest, then you can buy and invest. As long as you can afford the down payment, which is the main barrier to entry.

In your example, I could end up with 927k, but you have to subtract your rent. If your rent is 3k/mo, then you'd have spent 375k on rent for a net return of 550k. And you had to pay both the 3k/mo investment and 3k/mo rent at the same time.

Chances are pretty good in some places that if you buy a house for 350k, after 10 years it will sell for 550k, and you could still afford the side 3k investment per month and get the 927k on top of it, for a total of ~1.4M.

It still seems really clear cut to me.

"When I sell my house I'm not getting back all my property taxes paid, interest paid ..."

Perhaps not - but you are deducting those from your taxes the entire time.

I have no comment to make about the appropriateness of the mortgage interest tax deduction. It exists and should be factored into your economic models.

Or the dividends from keeping your down payment in the stock market.

> When you buy, you normally get most or all of it back later.

Whoa! No, not even remotely close.

Oh really? Please explain. I have sold a house before, and I got back more than I paid, after taxes and agent fees, after maintenance and repairs.

*keep in mind that "most" means better than 50%. Are you claiming that the average house sold in the US gets a worse than 50% return?

If we are using "anecdata" then I can say you'll never get your value out of your house - I personally know people who have sold their house for $5K, $20K, $30K, and $50K less than they bought them for. Hell, the entire city of Detroit, Flint, etc. has seen prices plummet so hard they are practically giving away houses and there is a huge arson problem - people are burning their houses for insurance money en mass.

In your "example", if you're very lucky and both buy and sell at the right time during a housing bubble then relocate to an area not experiencing a bubble, then maybe. (I believe you are severely underestimating the carrying costs of a typical house though, it's not just the big stuff.)

However, that's not even remotely close to the typical case. House prices rising fast enough to cover all those costs is indication of an unsustainable bubble.


>We can see that if you had bought a house at the peak in 1980 you would have lost purchasing power if you had sold in 1985 (not to mention transaction costs). And then for a little while around 1990 you would have been slightly ahead, but then through most of the 1990’s you would actually be losing money once again. So you’ve paid off half of your 30 year mortgage, you’ve paid taxes, insurance, maintenance, etc. and your house has not kept up with inflation!

You also have to keep in mind the economy of most towns and some cities is very, very volatile and depends heavily on 1-2 employers or industries. Those go away and there's economic collapse. When there's large economic collapse then buy buy home value.

(It's personal preference but I disagree with the idea of leaving family [besides spouse] any significant amount of money/assets when you die - most of my estate is going to charity upon my death)

I'm not sure what your point is. I claim that you get back more than 50% of your money more than 50% of the time. I believe the historical data nation wide agrees with that. When you rent, you get 0% of your money back. 0% is a worse return than x% where x > 0. 0% return is a lot worse than 50%. And there are plenty of people who get better than 100%, I'm not saying it's everyone, but it's a fact that it's common.

So which would you rather have? A 50k loss on your house after 10 or 20 years, or have spent 600k renting a place in San Francisco for 10 years and having 0 dollars back?

There are good reasons to rent, but the long term economic benefits are not one of them. There's just no comparison, and bringing up taxes and fees and repair costs and whether inflation matches, none of that makes a single bit of difference.

I think the point they were trying to make is that, even if you get a large portion of the sale price back, you don't generally end up with much more than if you had rented. Even if you make more than 50% of your money, as you claim is usually the case, this can be very comparable if not less than renting and investing the down payment in index funds.

If you can rent and invest, you can also buy and invest, right? The only way that renting is an investment advantage is the down payment, but you have to subtract your rent from your returns to see if it makes sense. In the example at the top of this thread, 6k/mo rent is 750k over 10 years. You have to have a very large down payment and very good returns consistently for 10 solid years to make that back.

"If you can rent and invest, you can also buy and invest"

Not necessarily, the less you put into the downpayment the more you pay in interest, the less the calculation makes sense.

I'm not disagreeing that there are many scenarios, likely including the 6k/mo example, that buying makes sense. What I take issue with, and I imagine other commenters did as well, is the idea that "When you rent, your money is gone. When you buy, you normally get most or all of it back later." This is far too simple, and there are many cases where the two are equivalent or renting comes out on top. It's easy to find such scenarios in the NYT calculator [0], even when you assume your house goes up in value.

[0] https://www.nytimes.com/interactive/2014/upshot/buy-rent-cal...

I hear you, that's fair. Cheers!

The visualizations were great and I think his point was to drive home how long it would take to own a home in the optimal case. In reality you should take his metric and multiply it times 6 or 7 minimally. You're still going to have to pay at least the sale price of the house if you intend to own it free and clear. Also, since banks in the US don't create mortgages for longer than a 40-year term (I believe that's the max), if your value in his metric is greater than 5, and using my 6-7 multiplier, then you're never going to own a home in that location.

That being said, a better metric might be the time to save up for a down payment that brings the mortgage and fees into a reasonable range for your salary. However, that calculation is much more complicated.

Edit: I live in SF and I accept that I will never own a home free and clear here, unless I get exceptionally lucky. My plan is to get a mortgage in SF and eventually sell the place and use the equity to buy in a more affordable market.

A lot of these places are so insane, that insane places like New York look like values by comparison.

My taxes are 75% of my mortgage, but it's still worth 1/3 the salary to pay 1/7 the cost vs living in The Bay Area.

I don't think the point of this was to compare rent vs buy. It was to give information for people who want to own a home where the cheapest place to do so is.

This is an awesome site, visually depicting how unaffordable housing has become in so many parts of the US.

It's truly amazing how much the Fed (with perpetually low interest rates) and local restrictions on building (making it more expensive or impossible to build) have increased the cost of home ownership over the past 60 years.

Anyone who's seriously considering purchasing a home should read The Housing Trap by Patrick Killelea, it's a short, amazing overview of how we arrived in the situation we're in as well as a practical guide for when to buy vs rent housing.


That's funny, my takeaway was that the vast majority of the US has incredibly affordable housing.

But I suppose if your call center employees simply must be living in downtown S.F. the answer must be that we just need lax zoning and higher density!

> But I suppose if your call center employees simply must be living in downtown S.F. the answer must be that we just need lax zoning and higher density!

The call center employees living en masse in SF is a very far fetched claim that requires strong evidence here, along with the implication that they are what necessitates higher density.

This framing is insensitive to both call center workers who likely could never afford to live in SF and those who are paying the price of anti development NIMBYism in the Bay Area housing market.

Hmm... I never said anything about "en masse". It was a reference to the Yelp/Eat24 call center employee controversy from last year. [1] In cases like these, I think it's very reasonable to question why those kinds of jobs should be the ones increasing demand in SF and, therefore, driving up prices for everyone else.

If you think my framing is insensitive to call center employees, I think you may have misunderstood me. I was condescending to the call center employers who are causing undue financial stress on their employees by making S.F. relo a job requirement for what should be a satellite office, if not remote work, position.

My point is also that people who struggle to afford the high cost of living in the "Real Bay Area" [2] -- of which I was one -- should perhaps consider, I don't know, moving -- which I did.

The idea that SF should be redesigned and reconstructed until such time as supply is so plentiful as to bring down prices an order of magnitude, to me that's the offensive bit. I think the property owners of SF are well within their rights to tell people who want to build affordable housing towers to get lost.

[1] - https://www.washingtonpost.com/news/the-switch/wp/2016/02/23...

[2] - See: http://www.burbed.com

P.S. If this comes off as a little combative, I apologize, my dad is in a house on the canal in Cape Coral, FL right now and refusing to evacuate.

> The idea that SF should be redesigned and reconstructed until such time as supply is so plentiful as to bring down prices an order of magnitude, to me that's the offensive bit.

Not sure where you get the idea that it should be redesigned, but I do think that incremental [1] upzoning in places where demand exceeds supply of housing (in SF and beyond) makes a great deal of sense.

[1] https://www.strongtowns.org/journal/2015/12/16/incremental-d...

> I think the property owners of SF are well within their rights to tell people who want to build affordable housing towers to get lost.

And that is the problem!

The concept of property ownership is crucial when it comes to NIMBY vs. YIMBY. Because with politically entrenched tight zoning, property owners can tell others what to do with their property too.

Whereas in cities with lax zoning you effectively get stronger property rights. And in countries which constitutionally protect property ownership you basically see a very elastic housing market and thus not as much gentrification/housing-shortages.

> I think the property owners of SF are well within their rights to tell people who want to build affordable housing towers to get lost

Technically correct, first amendment and all. But really you are pro-NIMBY?

It does seem pretty fundamental to me. I do think communities should be allowed to organize themselves in basic ways that are not discriminatory against protected classes.

Zoning is pretty important. A neighbor recently subdivided his large lot into 3, and having enough frontage on the street meant they could do it without zoning board approval. The houses they are building were designed precisely to push to the max against every possible zoning bylaw; setbacks 1 inch above the minimum, building height-above-grade 1 inch below the maximum, lot coverage ratio 1% below the maximum, etc.

Then their proposed septic failed perc testing at ground level, and since they didn't want an "unsightly mound" in their backyard, they brought in about 80,000 cu yards of dirt and raised the whole lot up by ~20 ft! Because the bylaw was written as building height calculated against finished grade, not natural grade there was nothing stopping them from creating their hill. Well, they did have to build a substantial drainage system around the perimeter because it's illegal to increase stormwater runoff from a lot in the natural vs. finished state, but we'll see how long that lasts...

Builders will cut every corner, push every limit, and develop to the absolute highest density to maximize profits. Of course building codes and zoning bylaws make housing more expensive to build. Getting a glimpse at what builders will do given the chance, to literally my back yard, I really, really wouldn't want to see what would happen if zoning boards could be overridden by outside developers wanting to "increase supply".

For example, most of the new construction in SF is rental units. You can't buy it, you can't own it. It's going to be mostly corporate housing, run by corporate property managers, with cookie-cutter units, probably poorly run and poorly maintained.

I've been on a condo board for ~10 years. Building a community is hard work! But as the rental ratio in the complex climbed from 0% to 32% over the last 10 years, there's a stark difference between renters and owners in how people treat the units and common areas, treat their neighbors, and the level of involvement and care they have for the complex itself. Certainly some owners create problems, but having a vested interest makes a big difference vs. certain renters who could give a shit. And, problematically, when the owners move away and decide to rent, they usually stop giving a shit too.

> This framing is insensitive to both call center workers

Capitalism is a ladder (To paraphrase a certain GoT character). No one has to be a call center worker till the end of their days, it's just stuff you do until you can find a better job (perhaps after attaining some extra training in your off-hours).

Ha, well in non-major cities you're right, but all the major cities cost an arm and a leg for the most part!

In addition to less expensive cities, in many in-demand cities (SF not so much), it's actually possible to live in many nice suburbs/exurbs for a lot less money. That's often even where most of the tech jobs are.

Boston/Cambridge? Expensive. But 45 mins or so out? Far less so. And you're closer to where most of the jobs are anyway. The urban cores may be a lifestyle choice. But it's a luxury choice in many cases. Not a place that someone actually has to live if they want to work.

Leave the coasts and you can find all sorts of multiple-million-people cities with far cheaper housing.

Are you sure about that? There are only a couple cities in the US other than NYC and LA that have populations of 2M or more, and only 10 cities total with populations above a million in the last census.

If you count entire metro areas, there are at least 50.

Well the only way to drive down price is to either increase supply or decrease demand. So make cities shitier and denser.

Is this a case where a small increase in supply would decrease the price significantly? I doubt it.

So, is there some reason we (as a nation) need to double population density of our largest cities? With the huge advances we are likely to see in autonomous zero-emission delivery infrastructure and remote communication over the next 20 years, not to mention the increasing likelihood of natural disasters and WMDs hitting these cities, I really don't see the point of pushing for so much urban growth.

Because I keep seeing articles pop up over the last few years trying to convince me that suburbs are basically evil incarnate for some reason. It gets to the point where it feels like a political platform.

There's definitely a political platform here. Economic models claiming suburbs are beyond bankrupt and destined for failure. [1]

Apparently my property taxes can't even cover the cost of pavement and water mains, and yet we just built a new school, and are in the process of planning a $20 million library.

[1] - https://www.strongtowns.org/journal/2017/1/9/the-real-reason...

> Apparently my property taxes can't even cover the cost of pavement and water mains, and yet we just built a new school, and are in the process of planning a $20 million library

From the link: "If they operated on accrual accounting -- where you account for your long term liabilities -- instead of a cash basis -- where you don't -- they would have been bankrupt decades ago"

The PF analogy to what you're saying is "yeah I'm dipping into savings to make mortgage payments and need to replace my roof next year and repair a major crack in the foundation. But they let me open a credit card and get a loan for a car, so what's the problem?"

> Well the only way to drive down price is to either increase supply or decrease demand. So make cities shitier and denser.

That's just, like, your opinion, man. I prefer living in denser environments.

Shitier may be orthogonal to denser.

But to your point, if denser is so much better, will increased density lead to lower prices, or just create more demand and keep prices the same?

You clearly don't know what it's like to live on minimum wage right now. It's extremely difficult to live anywhere even close to the Bay area on minimum wage, which let's be real, a call center employee would be on. Public transportation options get figured in there too. I'm very fortunate to have a good job now, but it wasn't all that long ago I was scraping by on near minimum wage.

No, I understand exactly and I think we are in violent agreement.

One cannot afford to live in the Bay Area on anything near minimum wage. So fuck "The Real Bay Area" and live just about anywhere else in the continental US.

Median wage is 2-3x the minimum wage.

So housing affordability on minimum wage in most of the US is closer to California at median wage than it is to most of the US at median wage.

TFA shows that in well over 50% of the land mass of the continental US, houses can be bought for 1 year of median wages.

Living on minimum wage is hard anywhere. The question is -- is it OK if there is 5-10% of the continental US where it's impossible to live on minimum wage? I think that yes that's probably OK...

Is it OK that for some [relatively small number of] cities, that median wage feels like minimum wage? Why is that a problem when people have the choice to live there or not?

The point of the parent post is the vast amounts of land that contain cheap housing.

Of course, it doesn't address how easy it is to find a job in the first place in those locations, but it's a great point nonetheless.

This is one of the reasons companies have a strategic advantage when they let their CS folks work remotely.

I think it's probably extremely hard to live nearly anywhere in the U.S. on minimum wage.

> That's funny, my takeaway was that the vast majority of the US has incredibly affordable housing.

What are you comparing against? In the US, the old rule of thumb (up until the ~1990's) was that you shouldn't buy more house than 2X your income. That's more affordable than what is depicted here.

EDIT: I've added link to a Calculated Risk post on the ratio between US house prices and median income since 1976 [0]. By their estimates, the typical ratio has been 3X, low by your standards.

[0] http://www.calculatedriskblog.com/2017/07/house-prices-to-na...

I cant help but notice in the OP visualization, the houston area is cheap - a year of work, and reputed to have little regulation - like zoning regs for flood watersheds, or regulatory oversight over chemicals stored in warehouses...

Cockroaches are rampant in larger apartment complexes. If you go to poorer or less well maintained places and restaurants, the things are literally crawling over everything - it's hard to believe it's America. Mosquito breeding areas in all the ubiquitous slow winding bayous and creeks. The one month or so of winter cold enough to freeze results in sleet not snow most of the time due to prevailing atmospheric conditions. The rest of the year feel the need to take a shower after spending 15 minutes outside due to humidity.

I lived in Houston for a few years and I'd take its flaws over being house poor in a coastal city.

That's fair - just pointing out if one hasn't lived there there are some signficant downsides not included in the housing comparison. Grew up there and worked and lived there a few decades later.

This more-so shows how affordable lots of the country is!

You guys may have this or that problem in the US, but the fact that you have people like this author who put so much effort into communicating the problems and who care this much, that makes me envious of you all. You'd be really hard pressed to find a good number of people in my country who cared as much about the welfare of the rest of the people.

Sorry to hear that, just out of interest which country are you speaking about?

Many, perhaps most.

Cool visualization, but kind of a useless statistic. The question that matters is: How many years will it take me to pay off my mortgage after my expenses (food, transportation, housing maintenance, utilities, taxes) are taken into account?

It doesn't matter how cheap a house is if you can't save any money.

how many years will it take to pay off your mortgage? thats done for you, about 15 or 30.

how does other factors like food/transportation/taxes factor in? though not always, but they tend to go hand in hand no?

the cost of real estate is factored into much of what we buy / spend money.

There's a big difference between 15 and 30, and the choice between those comes down to all those other questions. Anyway that number is just a maximum.

It is honestly worth your while to pay off your mortgage as soon as humanly possible.

This is an oversimplification. The average household has several kinds of debt, and generally debt should be paid down in descending order of interest rate.

More significantly, investment income opportunities need to have their interest rate (or equivalent) assessed. For example, in the past 12 months, the DIA has risen 18%. Thus, if 12 months ago I had money to spare, it would have been better to put the money into DIA rather than make an extra principal payment on the mortgage, unless my mortgage is 18% or more.

With the exception of bonds and CDs, it's not possible to know the investment growth in advance, so that creates some risk of course.

Further, because of the amortization schedule, applying that extra principal payment only shaves off the last month of the amortization schedule, which is the smallest fraction of interest of all payments.

One would still be better off investing that money in something until that last month, then apply the payment to save the very small amount of interest.

This assumes the mortgage is like most (all?) mortgages out there that follow an amortization schedule -- which are unlike credit cards or student loans, where early payments have a big benefit.

Not necessarily – interest rates are exceptionally low in places. My own mortgage is around the 1% mark – it's more efficient to invest the money that would otherwise be used to pay it off.

(That's not to say that there are no other reasons to pay off the mortgage – owning a home outright is a great security to have.)

1% is incredibly low. Where do you live, when did you take out the loan, and what are the terms? According to this[1] chart, the lowest 30 year mortgage rate in the past 40 years was about 3.5%. I'm curious how you got a loan with such a low rate.

[1] https://fred.stlouisfed.org/graph/?g=NUh

The UK. The mortgage market is different; terms are rarely 30 years, but rather homes are often refinanced every 2-5 years for a fixed mortgage rate, which reverts to a higher variable rate after that period.

Of course, this means that if interest rates suddenly spike then my mortgage payment will go up. But it does mean that in the short term it would not make sense to pay more off.

In Sweden the interest rates are around 1% (I don't know where the OP is from, just giving some context). I think the average is around 1.5% for all home owners and it's not unheard of for people with good jobs and not too big mortgages to have interest rates at the 0.5-0.75% mark.

This just isn't always the case, as others have said. Particularly with interest rates as low as they have been, it's often completely rational to pay off your mortgage as slow as you can.

Also, you might not want all your money tied up in your mortgage: Buying a second home, too much risk for your taste in real estate market, etc.

Besides investing in something with a better rate like others have said, you can also buy a boat and enjoy it while you're young then pay for it later when your salary is higher - even if it only grew to match inflation, that cancels out part of the mortgage interest.

Mortgages tend to have fixed durations, and the amount you'd want to overpay to pay it off earlier depends on so many personal factors that you can't really generalize it in a map like this.

Be my hero and compile a similar map for the EU, from Eurostat data. One possible starting point:


A better metric I like to use: how many extra years of work before retiring will this large expense cost me? (Admittedly: this does not work the same for housing for lots of obvious reasons).

An example: a friend of mine is renovating the exterior of his house for $100,000. He plans to live there until he dies (it's a lovely house), so he'll never see that money again. He'll just have a nicer house. My alternative option for him: retire 4 years early instead.

If you invest $1 now, you can expect it to double in about 14 years, give or take. So since he has more than 14 years left until retirement, that $100,000 would be $200,000. If he plans to live off $50,000/year, then he's giving up 4 years of retirement for the sake of his house looking nicer. If he plans on living off $30,000, then it's nearly 7 years early retirement.

It's not exact math, but it's a good metric to put things in perspective.

Your friend is right. You can't put a price on the feeling that you live in the house of your dreams.

I'm not saying he's wrong. I'm saying it's worth comparing to other options.

And yes, you can put a price on a feeling. If it was $1,000,000, he wouldn't do it and neither would you.

It goes to show that it's not construction costs that account for variances in home prices, but rather something location based: land values.

Policies that will work to drive down land values (and utilize land values to fund public infrastructure instead of private land speculation) would be very useful in many overheated land markets.

> Policies that will work to drive down land values (and utilize land values to fund public infrastructure instead of private land speculation) would be very useful in many overheated land markets

Supply and demand. Allowing builders to build higher, thereby increasing density, amortizes the land's value across more living space. Turning land into parks is nice, for people and property values, but does nothing to reducing housing prices nor rents. (If anything, by yanking land supply off the market such policies could actually exacerbate the problem if carried out in a vacuum.)

Land value does not stay constant as density is increased. It goes up.

Sellers are not dumb. If land is the limiting factor, increasing the density of the buildings on the land by 10x will increase the value of the land by 10x as well.

> Land value does not stay constant as density is increased. It goes up.

True. But when you measure the price elasticity of land you find that density doesn't increase land value as fast as it creates space.

This occurs independently of the value of the new units. Consider a town with three occupied units: one for $5,000, one for $4,000 and one for $3,000. A new unit is built for $6,000. A simple example would involve everyone trading up, thereby leaving an unoccupied $3,000 unit on the market, but let's be more realistic. The person in the $5,000 unit doesn't budge, so the $6,000 unit gets discounted to $5,500. Our top-tier renter moves, leaving their $5,000 unit open. This must now compete for the other two renters, and so on, and so forth.

New renters will enter the market, but there is scant evidence that people move to cities to move into specific units. Instead, people choose and city and then find a place. New units more-efficiently use limitedly-available land. The other benefits from density, e.g. environmental efficiency, faster exchange of ideas and the resulting productivity boost, et cetera, are just cherries on top.

"But when you measure the price elasticity of land you find that density doesn't increase land value as fast as it creates space."

[citation needed]

Scrolling gets really messy on mobile but otherwise a neat way to show the visualizations.

Still can't be assed to read it fully though with my scroll being screwed by intermediate textboxes though.

As I understand it, this type of scrolling map visualization is something designed and implemented by Esri specifically for arcgis.com. See https://storymaps.arcgis.com/en/ for more examples and details.

It may be that the author of this article on housing developed the analysis, maps, and text but not the actual web UI. That might be something provided by Esri that is common to all of these "story maps".

The map stopped working for me about 2/3 of the way down the page... Divs started getting resized incorrectly.

That was a really nice overview. One thing to consider though, when you gain more expertise through experience, you typically gain more income. Of course, most of the time, homes tend to appreciate as well.

But to the point, it's best not to burden yourself too much with a home. I bought mine in my late 20s. My criteria was that I didn't ever want to move again (and could fit a pool table), so I bought a house big enough for a family to live comfortably that I could reasonably afford in my late 20s. It's worked out so far.

> bought a house big enough for a family to live comfortably that I could reasonably afford in my late 20s.

Well, we'd all love to do that, but where? (That was a rhetorical question, I personally moved to Edinburgh and bought an affordable family house in my late 30s)

I remember a website tracking London affordability that pointed out that in some years price appreciation made it literally impossible to save for a house: the value (maybe even the minimum deposit) went up faster than average income.

Even if house values (or even 20% deposits) are going up faster than incomes, you can still save towards a house.

Imagine a $1MM house, with a $200K minimum deposit, $135K of household income. If that house goes up by 5% per year ($50K, $10K deposit), your income never goes up, and you save 8% or more of your income towards a down payment, you are still making headway towards the down payment. If you save 15-20% of your income, you are making substantial progress towards the down payment.

Scale the numbers up/down as you wish to fit your particular area/situation, but if the house is affordable by traditional mortgage underwriting requirements, it seems like it's possible to save for the downpayment in scenarios that I explored.

Ah, here we go: https://www.theguardian.com/business/2017/may/01/smaller-dep...

"The average length of time for a single first-time buyer to save a 15% deposit in the fourth quarter of 2016 was a whole year longer than in the fourth quarter of 2015"


It probably is doable, but at median incomes of £29k most people are barely keeping up with the rent in London and making zero savings.

I think what you've said is only true asssuming that you can always afford to increase the portion of your income that you spend on housing.

If housing prices increase faster than your income does, there will come a time when you must spend 100% of your income on housing. If prices increase further, you will be unable to pay. In practice, you will be unable to pay long before then.

Nowhere! If you're in SF, move out to the east bay

Besides that, hope residents use legislation to balance out the market... progressive taxes in aesthetically pleasing areas, education/public transportation in economically competitive areas, condos/up-zoning in popular urban areas.

Rental prices in the Excelsior district seem comparable to many neighborhoods in Oakland.

Is Oakland OK or is it really sketchy? Getting mixed messages.

I live in Oakland. Oakland is composed dozens of distinct areas, with wildly varying crime rates. Adjectives like OK and sketchy don't begin to describe its complexity.

If crime is your major fear there are several places with crime rates that are low. Conversely there are areas with very high crime rates.

If you don't know which is which, ask a local whom you trust for advice and maybe a tour. It's an incredible place to live but one that will challenge any simplistic description.

I always wonder why it is an unknown fact for many that in Texas houses are still very affordable, even in metropolitan areas. I follow the market there closely, and you can get quality homes for the cheap. Is it that the high property taxes work their magic in that they hold the upfront purchase price low? It would have pros and cons - while keeping your house when retired gets more difficult, buying one when still young gets a lot easier.

I'm not sure. I know a guy in the Dallas area that works in finance, who keeps dragging his heels because he thinks a $300k place is so unaffordable. I don't get the dynamic -- it seems cheap to anyone in the Bay Area (Or San Diego, or Portland, or Seattle, or LA, or New York City, or.. most cities on the eastern seaboard). My understanding is that pay is fairly decent in Dallas. I don't get how $300k is anywhere near burdensome.

And yet, here I am in one of the most expensive markets in the world, and I can swing housing, but he cannot bring himself to do it. That's not to say it's less affordable there; it could be a matter of personal psychology, but regardless, I don't get it.

All I know is that I've noticed over the past decade or so, everyone who argues that they can buy property far cheaper in XYZ location far away from the bay area, and live like kings... somehow... don't.

Yes it's due to high property taxes. Keeps the speculator scumbags out.

Oh it's quite known as the population growth rate (especially from interstate migrants) shows over the past several years. Granted life affordability is only one of many reasons.

They build a lot, and the flat cheap land goes forever..

High-cost cities get their high property values via network effects -- it's the proximity of other people that makes the land valuable. I wonder if a good way to circumvent high home prices is to create new cities deliberately in rural land.

For instance, get a few thousand people to agree to buy a large plot of land in a sparsely populated area. All the early-adopters get a cheap plot of land to build a house on, with most of the lots left unclaimed and managed by a non-profit. As people move in, the value of the land rises and the non-profit generates revenue and pays for infrastructure by selling the remaining lots. In the end, the citizens and town are better off financially because collectively they only paid rural-land prices for high value urban real estate.

This would be more practical if it's near an existing town (for basic necessity, schooling, proximity to hospitals, etc..), and could perhaps be helped along by partnering with a university or large employer wishing to establish a new campus.

There's a lot of ways this could fail, but it seems at least plausible that it could work. There's a lot of mostly-empty land, especially in those west-coast purple areas shown on the map on the linked page.

This has been tried. Check out California's 3rd largest city (by area):



Turns out it's pretty hard to create a critical mass of population.

I would expect most attempts to do this as a get-rich scheme would either fail outright or not become the kind of place people would want to live. If done as more of a crowd-sourced community-driven non-profit project, at least you have everyone's interests more-or-less aligned and some basis of trust.

Canberra[0] and Brasilia[1] were both created to be the capital of their respective countries, but I'd imagine it's easier when you're the government. Ireland did the opposite and tried to decentralise the government among existing towns and cities in an effort to boost local economies.



I always wondered why I send official forms off to random places like Carrick on Shannon (PPS no) or Letterkenny (Child benefit reg)...

Add in some gambling and I think you're onto something :).

The article looks at the cost to buy which is high in places like SF but not total cost of ownership including change in value over the time of ownership. I bought a place in London and the initial cost was >10 wages but then it's gone up by 1 or 2 wages per year so the TCO is negative - it pays me to own it. It can be a mistake not to take that stuff in to account.

Nice visualization.

I've mentioned the median house price to median income ratio many times before, usually in the context of "how close are we to the bubble collapsing". Around 4:1 is about as high as it gets before something gives. It would be nice to see that map over time.

Is it really necessary to own a home if your mortgage is going to be 20 years long?

I get that renting is like throwing money in a hole, but people are so much more nomadic these days. What's the big deal in moving once every 10 years once rent gets unbearable?

Do you want to have pets?

Do you want to redecorate to your own taste?

Can you even find anywhere to rent? Not everywhere has a liquid rental market.

Moving only once every 10 years sounds great. Renting means maybe having to move on notice as short as one month. Back when I was renting I moved about every 3 years, although that was also house-sharing with other young professionals.

Rent is usually more expensive than mortgage payments, and house price appreciation is your only chance to make a leveraged investment that pays roughly 7% annually.

Edit: also, obviously, after 20 years you have no more payments. Frees up a whole lot of cashflow. Would you really want to go into retirement on a fixed income with a variable rent payment?

Note that a "20 year mortgage" just sets the amortisation rate of the payments; you can accelerate it, and usually will end up re-mortgaging every 3-5 years to get better rates.

> also, obviously, after 20 years you have no more payments.

You have maintenance. And if something bad happens with the foundation, that's very expensive to fix. Unless you just plan to die and have the house demolished and the property sold (which is honestly preferable in some cases of inheritance).

I had to pay $25k to have supports installed in the crawlspace and other mitigation to avoid foundation work. I might have gotten ripped off, and the annoying thing is that I can't know for sure because I'm not informed about foundation work, structural engineering, or other principles.

Simply inheriting a house and trying to sell it turned me off from owning a home in the near future due to the arduous process of paperwork, red tape, maintenance, and a low-liquid market. I'll take a comfortable living van/RV over dealing with real estate again if it means I can reduce the risk of dealing with those things to zero.

(Full disclosure: Bay Area homeowner here)

I can stomach the idea of renting for the rest of my working life. My renting life was good, had more cash to spare, good landlords, etc.

What terrifies me is the idea that I'd have to keep paying rent when I retire.

True but when you retire, you're not bound to a job and you can live in a cheaper place.

Real estate probably won't be a part of the post-scarcity economy, otherwise I'd bet on just buying a home in 30 years while forgetting what a mortgage was for.

'post-scarcity economy'

Hahahaha. Ha.

There's going to be plenty of scarcity to go around for the rest of our lives. And unless you're already in the top 1%, or unless you believe full-on socialism will ever catch on in a country run by and for the benefit of capitalists and corporatists, you can personally expect to see a lot more of it once everything worth doing has been automated.

Don't forget the roof that needs replacing every 15 or 20 years. Appliances. Furnace. Plumbing. Septic tank. Water lines on your property. Tree removal. Re-decorating and re-modeling. Replacing windows.

I think people generally maintain the homes they own to a higher standard than the ones they rent out. It's not equal in home ownership vs renting. The place I rent has the cheapest appliances possible, paint mostly chipped off on the steps, the flooring is from the 80s, etc.

If you look down a street where I live (Boston area) you can likely guess which units are rentals and which are owned.

I thought that, too... until it was time for me to buy a house. Then I discovered most home owners are just as miserly as landlords. Hacky, quick DIY fixes? Check. Cheapest possible repair/replacement option chosen every time? Check. Obvious concern for only things that "increase resale value" over things substantially more important to the house's long term well-being? Check.

I can't tell you how many houses I looked at with peeling, worn roof shingles, but a bangin' dishwasher and stove.

If your roof needs replacing every 15 years then there is something seriously wrong with the structural integrity of your house.

Shingles roof is replaced every 15 years, if you have more expensive metal roof it's every 50 years

In the Uk you'd be looking at replacing a roof after about 100 years, costs about £6k ($8k), not exactly a major cost.

Composite shingles are more like 30 years.

My brother, only a few months after buying his first house, had a tree in the backyard get struck by lightning, break in two and crush his neighbors garage.

The neighbors insurance paid for that, but then he still had to pay almost $3000 right away to get the rest of the tree removed from his backyard, because it was still in bad shape. Was an unpleasant introduction to the wonderful world of home ownership.

It's not like you avoid these expenses by renting. They're just rolled into your rent. You get to avoid thinking about them, of course.

Although there is an economies-of-scale advantage to maintenance on multi-family dwellings.

Yeah, it's basically like insurance. You're not hit with a sudden $10k+ bill, you just have a rent that has ~$100 a month factored in for maintenance costs.

Also with renting, one should be careful to avoid arguments at equilibrium. E.g. not all landlords seek the same profit margin and rent increases don't track improvements perfectly. Comparison shopping and moving opportunistically, one can stay ahead of the curve. Other people already financed the improvement ts you're enjoying!

The property group takes on risk if something like a roof needs replacing unless they just keep a lot of cash sitting around for just such a thing. They may also have access to better loans but I have no idea for sure.

I don't want to keep a pile of cash around waiting for housing emergencies (personal emergencies are a different thing), and I certainly don't want to sell stocks to fix a roof if my roof fails during a recession.

What is it with US roofs? Are they really all terrible, you're the third person in about 10 posts to be scared about massive costs to replace a roof.

setting aside trees, fires etc it hadn't even occurred to me that a roof may need replacing, aside from maybe the occasional tile.

Many US dwellings use asphalt shingles, which wear out. Slate roofs may last for hundreds of years, but they are pricey and I'm not sure how they stand up to golf ball hail.

A 15 year roof replacement is BS. It's more like 30.

Not that I'm helping, but I think you were definitely ripped off. Those supports cost about 20 dollars each. I had a company do one part for 3k, and did the rest myself. 25k should have been a big red flag.

> after 20 years you have no more payments.

You have no more principal and interest payments. You still have property taxes (~$1000/mo for me) and most will pay insurance (~$300/mo) and you'll have on-going maintenance; I think it's wise to ballpark the last at 1% of the house market value.

I'm a two-time homeowner and it absolutely fits my family life situation very well, but it's a common fallacy that housing costs go to zero when the mortgage is paid off.

Ah yes; I'm in the UK where local taxes are levied on the occupant not the owner, so you have to pay them even if you rent.

Interesting. TIL this; thanks.

I like that approach as it makes clear the financial flows and put the tenant in the logical frame of mind of "am I getting what I'm paying for?" when considering new civic projects or other budget items.

It would be nice if it worked that way, but local tax rates tend to be a matter for national politics, resulting in all sorts of messed up incentives. National government imposed a freeze on council tax increases for a while. The council tax system also has not had a house revaluation for two decades and the upper "band" is quite low, so it's regressive at the high end.

> Do you want to have pets?

At least in the competitive housing markets of San Jose and Seattle this is not much of an issue as every apartment I've visited allows pets and most even have accommodations for them as perks. I suppose there are limits though so maybe if you wanted to have 4 dogs that might not be allowed

I rented in Seattle with a pit bull that we adopted and it was challenging to find a place that would allow us.

We couldn't find a decent place in New Jersey that would take our Labrador. Even the place we have now had to be talked into letting us have one of my cats. :|

Ah good point! I forgot that sometimes they don't allow some breeds of dogs as I have cats..

Rent is NOT throwing money away, it is HIGHLY dependent on where you're living. There are MANY sunk one-time costs you have to pay when buying a home, including:

--realtor commission (averages 6% of home price, or approximately 1.5 years of 30 year mortgage payments)

--title fees (frequently 1% of purchase price)

--other legal and bank fees

The NYT has a buy vs rent calculator that helps make decisions like these:


The one time costs involved in buying a house do not refute the idea that renting is throwing money away.

A mortgage is just renting the money instead of the house. In both cases you're paying for the time value of money. It's just that in many (but not all!) cases you can get a much better deal renting the money than renting the house.

Technically correct, but my point is that these costs are frequently ignored and in order to make home ownership more profitable than renting these costs must be amortized over a very long period of time.

No, but it highlights the fact that even when you own a home you're still "throwing money away".

You are not throwing it away. You are exchanging money for a place to live.

As opposed to exchanging it for a place to live, and getting some of that money back when you sell.

The ability to repaint and punch holes in your walls. Having a lawn and some privacy from the neighbors. Not everyone is nomadic.

Also, don't forget outbuildings like garages or workrooms for all the maker hobbies.

Or having certain pets. I had to buy in Tampa because no one would rent to me and my Great Dane, regardless of amount I was willing to part with as a pet fee (I offered extra insurance and $1000 and was still declined).

There are plenty of houses for rent. Rent doesn't imply apartment.

Moreover, talk to the person managing your apartment.

In my apartment (managed by a property management company at that), they allowed me to repaint some walls, bring in three appliances of my own (washer/dryer and dishwasher), completely customize a closet, and replace a light fixture. Took a week for the business manager and corporate to sign off on the modifications, but they felt the requests were entirely reasonable.

This happened because of two reasons: 1) I asked. 2) I agreed to pay a very modest additional deposit for the modifications ($400 total), and used suitably insured vendors of their choosing to have the appliances and light installed (they let me do the closet myself, as the paint with just a $100 deposit to cover changing it back), at a total cost of about $300.

To get this stuff elsewhere I would've paid FAR, FAR more in rent (+$1000-1500/mo, easily). Though I asked, was very reasonable, and made it clear that I wasn't looking to half-ass anything.

At the end of the day the new apartment was a tactical downgrade ($700/mo savings) from where I came from. With the new stuff I got approved I have "broken even" on my changes after 7 months. Now for the next 4-5 years that $700/mo savings just goes in my pocket, the apartment is now barely a downgrade from where I was prior, and I have top-notch appliances that most luxury rentals in the city don't even offer. Moreover, when I move out those appliances come with me -- I should get a good 15-20 total years out of them with proper care.

Rent gets unbearable way faster than every 10 years. My first place in the Bay Area had rent jump from $1800 (uncomfortable but doable), to $2300 per month. This was after just one year of being there, and since then I've noticed that 4 years later rents in that neighborhood are now at $3300 a month for a one bedroom.

And if it gets unbearable after 10 years, it's because the market went up, not because your unit went up. You can't just move to a different property in the same area and start back where you were from a rent perspective.

OTOH, I lived in Belmont CA on $2000 rent for a whole house blocks from caltrain for over 3 years, no adjustments.

> people are so much more nomadic these days

I think you have a bit of a skewed view of reality there - people in the US are far less likely to move for work than in past generations. You may be surrounded by a bubble of digital nomads, but it’s far from common.

I guess it depends on where you live and what you're looking for. When we where looking for a house there simply wasn't anything to rent long term that matched our requirements. So the option simply wasn't there. It was buy or nothing.

I'm going to offer an alternative idea on the rent-vs-buy discussion that I never hear. In most sane countries (not the US) you can achieve non-resident status and not have to pay taxes. In Canada this is possible if you rent, but not as a home-owner. You have to be out of the country at least six months a year and you lose your health coverage.

What you gain is not having to pay taxes. If you're working remotely on a software engineer's salary, that can free up over $50K a year. That's enough to pay your rent, and likely also your food, for a small family even in Canada's most expensive cities.

Taxes are also throwing money in a hole.

I think most people couldn't do it because they have kids (and don't want to homeschool), or one or both spouses have jobs in a physical location, or they just don't like nomadic living. But it's an interesting idea.

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