ERICOPOLY

What houses follow isn't inflation. It is supply and demand that it follows. If wages follow inflation to some degree then inflation is to some degree a component of demand.

Yes nothing says housing doesn't follow inflation better than abandoned houses that have not followed inflation.

That's brutal that you can't lock in longer than 5 yrs. This summer I took $375,000 cash-out by refinancing to a 30 yr fixed at 2.8% and $880,000. I have an Aunt in Australia who lost her property when her rate reset in the 1980s. It's sad and she was never able to buy again. They don't have 30 yr fixed rate mortgages either (or she wouldn't have lost it).

And there is no way this is caused by a drop in interest rates because lower interest rates don't help renters: "Similarly, rents have grown more expensive, with the gap between the coastal metros and the rest of the country increasing threefold since 1970"

Gmthebeau's comment that SF price outperformance vs the US began only after a 2012 tech boom still blows me away... been living under a rock or something.

Interesting charts going back to 1960: https://wolfstreet.com/2019/07/12/changes-in-house-prices-rents-and-household-incomes-since-1960-in-the-us-by-region-and-major-metro/ Shows that the early 1980s when interest rates were peaking was actually a time when median house prices were truly soaring relative to incomes like never before.

IMO, nowhere else in the country can you find a climate like that of Coastal California. It's not so friggin hot during the summers and not so friggin cold during the winters.

Figure 5 shows the drop in building rates Coastal California from the 1940s onward. Far more extreme decline than in the rest of the US. https://lao.ca.gov/reports/2015/finance/housing-costs/housing-costs.aspx Jump in California Housing Costs Occurred as Building Slowed. A look at housing costs in California’s coastal metros in recent decades shows a connection between the slow rate of building and higher housing costs. The slowdown in building in California’s coastal metros corresponded with a substantial rise in housing costs relative to the rest of the country. In 1970, home prices in the state’s coastal metros were about 50 percent more expensive than in the rest of the country. This gap has widened considerably since that time. Homes in the coastal metros are now more than three times more expensive than the rest of the country. Similarly, rents have grown more expensive, with the gap between the coastal metros and the rest of the country increasing threefold since 1970 (from 16 percent more expensive to around 50 percent more expensive).

The reason my father was able to negotiate a "good deal" on the home he purchased was that interest rates were 9% at the time and had recently shot up. The market was in a bit of affordability shock. By 1979 the rate reached 11% according to this link: https://www.rocketmortgage.com/learn/historical-mortgage-rates-30-year-fixed But what I've heard about the truly absurd rates in 1981 is that transactions dried up because people couldn't afford to sell and purchase elsewhere. So they stayed put and continued paying their lower rate mortgage.

Many if not most city dwellers do like being in cities. The area I live in is in between and it's like living inside the game Far Cry 5 but without the shooting: all these white guys driving exaggerated white pickup trucks around inside of some political cult.

You must be thinking of my parents' neighbors. There's no reason for what they've built -- however they are from Asia and much of what they've purchased is for show. I've never even seen them on their tennis court.

Obviously rates matter. 500,000 loan at 6% for 30 yr term: 2999 per month payment 500,000 loan at 3% for 30 yr term: 2108 per month payment

Montecito real estate is a good one. As the country exploded in population size and the ranks of the wealthy grew, the desirable areas face price competition. You have wealthy people from Chicago owning second homes in Montecito to get away from the harsh climate.

It is supply and demand economics. The US in the aggregate has a lot of supply. But in desirable areas not so much.

If you look around the US there is a lot of open space and lots are dramatically cheaper in areas where there is availability versus in areas where there is not. How much does a lot cost in Santa Monica versus in Bakersfield? Desirable areas where there is no available land and there is a lot of density leads to high lot prices.

Another factor not yet mentioned is that Bay Area tech workers (and likely others) simply make more money. Businesses will literally pay people more to compensate for the higher cost of living. And that drives it higher still.

So really, talking about building costs is missing the picture. My parent's home is priced assuming a teardown. I've seen so many homes like theirs that were well maintained and just get torn down. People who want a big custom home built seek out houses like this so they "don't have to overpay" for what they plan to tear down. LOL.

That picture is Silicon Valley in the 1950s. The prices of lots exploded as land ran out. There were still open fields all around my parents’ home when they purchased. I can recall watching the houses being built as all of those fields disappeared. My parents’ home is all land value. Most would tear it down because it isn’t impressive enough.

I'm saying it's a bidding war and desirable areas are driven by increasing population density -- the rest of it is fuel. Check out this picture: https://www.etsy.com/listing/1012638388/ansel-adams-orchard-santa-clara?gpla=1&gao=1&&utm_source=google&utm_medium=cpc&utm_campaign=shopping_us_ps-a-home_and_living-home_decor-wall_decor-other&utm_custom1=_k_Cj0KCQjw8eOLBhC1ARIsAOzx5cGKUcih8Dwpj4AHSAZ3B1p73hd71ZaI7Y8_q5TPYPL7FDmTmB100P0aArGSEALw_wcB_k_&utm_content=go_12567673668_122422048791_507253757890_aud-459688891595:pla-307501513391_c__1012638388_498908644&utm_custom2=12567673668&gclid=Cj0KCQjw8eOLBhC1ARIsAOzx5cGKUcih8Dwpj4AHSAZ3B1p73hd71ZaI7Y8_q5TPYPL7FDmTmB100P0aArGSEALw_wcB

I mean.. in a 2 income household the first income can spend the historical amount and still have the remainder of the income to cover food and diapers. Same as always, right? Let's call that 25% on housing. Okay, that second income? Well, the first income covered everything. Let's say the second income can go 100% to housing in that case and they still have food and diapers? Why not?

Curious as to the pay of a software engineer in 1930. I think that as the economy has evolved it has affected income levels.

If you were to consider the gender pay gap you can still have tailwind effects as the gap closes over time. But then there are other factors: Interest rates. Credit availability. Population growth. New household formation rates. Building codes and land use restrictions. And education levels: I understand that software engineering pays better than picking lettuce. A lot of factors. You could also measure the price of raw land when Manhattan was purchased versus today to see the effects of population density. Or the Louisiana purchase and see how population density has effected land prices. Etc...

If women's participation in the workforce went back to 1974 levels and never came back again... and if the 1974 pay gap between men and women returned... and if we went back to 1973's laws where men were required to cosign for women in order for a woman to apply for credit... What would that do to housing prices?

Two incomes.

OMG people: https://www.brookings.edu/essay/the-history-of-womens-work-and-wages-and-how-it-has-created-success-for-us-all/