The City (not SF, the real City) alone has 400,000 people in public housing:

http://www.nyc.gov/html/nycha/html/home/home.shtml

Those saps are a statistical anomaly.

income: $45,343 per the Census Bureau
home price (NY-North NJ-Long Island): $403,600

Makes the ratio 8.9

I think you guys are touching on the reason why the price/income ratio is different here (and in other high-priced areas like NYC). It’s two supply-side factors – a lack of land for additional housing and the restricted number of potential buyers. What I mean by “potential buyers” is that the high cost of entry limits buyers to the higher income households. In many areas that means prices need to really drop a lot. But here the number of housing units is restricted enough to give the higher prices support near those levels. It makes the ratio look way off because that includes ALL incomes and not the actual population that could buy.

Does that make sense or has my severe lack of sleep completely impaired my thinking skills? If I wasn’t so tired I’d look up the ratio for NYC – anyone care to take a peek?

There are all kinds of places to live where I probably wouldn’t be too happy, and I fail to see how it’s a character defect to choose one that I like.

SiO2, re: #73, I love the discussion here too. There’s been talk here in the past that Indians may be more likely to rent than Chinese, but that may be the short-termers. Plenty of both (owners) in my neighborhood. But there’s a huge apartment (not condo) complex at Stelling and Valley Green, must have thousands of people living there; I see lots of Indian families around the property whenever I drive by.

And yet it is, and has been for many years. That struck me when I moved here from the midwest 20 years ago, and it is still the case. It’s not a housing bubble phenomenon, the loose credit was available across the US. (uncited source alert, there was an article on money.cnn.com or finance.yahoo.com recently about predicting the end of the bust by looking at price/rent, and it had the price/rent ratio in SF area at some value that was higher than the other listed cities. Unfortunately I can’t put my hands on the article.)

So why is it? I have two theories, from reading this and other housing blogs.

1. prop 13 encourages people to hang on to houses to rent out, since they can keep the low tax base. And the cost of the house to such a person is less than it is for someone (like WGer) who buys a house specifically for renting out.

2. there’s cultural pressure for Chinese and Indians to buy instead of rent. There is for Caucasians as well but it’s more so for Asians. I know two guys who are getting married and ended up buying places under pressure from both families. Here and in China! True, two stories do not make a proof, but I believe that this is the case based on experience.

any other guesses? Gavin and Bob say that this should not be the case, yet it is and has been. Even pre-boom, as was discussed in a posting a few months back. So why should it be different here? Is it also the case in other larger cities, like Chicago or NY? It’s definitely the case in Chinese cities; Shanghai and Beijing are steeper than SJ on rent/buy. Around $350k (usd!!) for an 1200 ft apartment that would rent for about $900 usd.

one final note, you mention 1996-to 2005 time period. 96 to 00 was the tech boom. Lots of IPOs put lots of $ in people’s pockets. Sure, you can say that they were bogus, and many of the companies did fail. But the fact is that people made a bunch o $, and some of that went to houses. So the price growth up to 00 was justified in that people made more money. (again this probably won’t show up in median, since the income of the top 25% doesn’t change the median if the income of the bottom 50% is flat). And prices actually came down in 01 and 02. So the housing bubble in RBA really started in 02, in the sense that the prices grew in a way that was not connected to incomes.

good commentary. the exchanges here are far better than something like cnn.com where half the posters are barely literate. They must be from the midwest (no insult intended, really! I kid!)

“My theory is that people are willing to pay a higher percentage of their income for housing here than elsewhere. There’s many reasons for that, including the hope of punching the golden IPO ticket, weather, desire to live near immigrants from one’s mother country…”

But Bay Area residents are only willing to pay a higher percentage of their income to buy. They are not willing to pay a higher percentage of their income to rent. Also, you can punch the golden IPO ticket by renting, you can enjoy the weather while renting, you can live near immigrants from your mother country while renting.

When you mention “income distribution is more high-end weighted here than elsewhere” you are getting closer to reasons why the price/rent ratio should be higher in the Bay Area. At higher incomes the mortgage deduction is worth more so it is worth more to buy.

You can quantify the effect of proposition 13. You can also quantify the effect of the higher mortgage interest deduction but even with both these it is impossible to explain why the price/rent ratio in the Bay Area should be double what it is in other cities.

I also agree with you that the Bay Area saw smaller percentage increases in house prices than Stockton from 1996 to 2005 so it is likely to see smaller drops.

madhaus, I thought we already had these bay area haters pegged as similar to your neighbor who came up from San Diego and went back due to his dissatisfaction with his inability to live in an “executive class” house.

All these guys are basically the same- they come out from Minnesota where they are director of manufacturing at Cray corp or fill in the large corp name. They get here and for the first time in their lives they realize that middle management job is not a ticket to the high life in the actual big city. Too bad, so sad.

I actually think removing these middle management types from the bay area could be the secret to this region’s success. Most engineers I know don’t mind following directions from a talented CEO, but having to work in a place with a pecking order where they are below some other working stiff in the corner office who is just a middle manager is too much. In the bay area we really humiliate this group too, many middle managers are in cubes and have no admin support either. This group leaves the bay area with their tails between their legs.