October 9, 2010

The Most Expensive Zip Codes, Second Tier

In a previous installment, we looked at the Bay Area zips on the 25 most expensive zip codes piece in Forbes magazine.  But how could we leave the other 475 of the top 500 alone?  (Other than all those TL;DR comments.)

Here’s what’s local that made the list, between 26-50.  Try to guess if any of your favorites made it.  Feel free to comment on any of these zips if you’re familiar with them, or even better if you aren’t.  Maps courtesy of Forbes.

image #30 – 94957: Ross, CA

Median Home Price: $2,519,269
Median Price Change: 1%
Average Days On Market: 120
Inventory: 26 properties
Median Household Income: NA

I’ve heard of Ross!  I think the San Francisco Chronicle used to put it in the local weather stats because it got so much more rain than anywhere else in the entire Bay Area.

And no, this is not Fort Ross.  This is a zip in central Marin County (that’s for those of you who can’t read a map or never left your town).

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image#31 – 94028: Portola Valley, CA

Median Home Price: $2,509,962
Median Price Change: 5%
Average Days On Market: 112
Inventory: 38 properties
Median Household Income: $164,479

Yay, back to the Real Bay Area!  And PV might be the only zip code, anywhere, to be shaped like the Roadrunner’s head.  If that doesn’t explain why their median income is so honking high, I don’t know what will.

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image #38 – 95030: Los Gatos, CA

Median Home Price: $2,293,268
Median Price Change: 39%
Average Days On Market: 105
Inventory: 53 properties
Median Household Income: $117,564

So far the Bay Area listings have either danced around the Stanford campus, or were located in Marin County.  Los Gatos is the first one within shouting distance of San Jose.

Los Gatos has two more zip codes.  Any suspicions when we’ll be seeing them?  (No peeking.)

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image #41 – 94062: Woodside, CA

Median Home Price: $2,228,269
Median Price Change: -8%
Average Days On Market: 152
Inventory: 63 properties
Median Household Income: $96,677And back to San Mateo County we go!
Don’t let the Post Office fool you.  94062 includes a slice of Redwood City, some of it practically on El Camino Real.  And if you haven’t ever driven El Camino all the way to SF, you may not know that in Redwood City, ECR is really, really, really close to 101.

Really!

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image #49 – 94528: Diablo, CA

Median Home Price: $2,111,588
Median Price Change: -20%
Average Days On Market: 133
Inventory: 16 properties
Median Household Income: NA

OK, who let the East Bay into the club?

I swear, you let a couple of them show up in burbed and next think you know they’re appearing on expensive zip code lists.  Fortunately, the market is reminding those upstarts why East is East, Best is Best, and never the twain shall meet.

Down 20 percent, yowza!

More good news.  The top 50 zip codes do not include a single flyover state.  Most are in California and New York, a couple in New Jersey, Greenwich, CT came in at #27, and somehow one in Miami Beach popped up. The only other West Coast zip not in California is Medina, Washington (#42).

Yes, we have 450 zip codes to go, but at after #50,we could stop providing these useless maps.  Or we could make them twice as big.  Anyway, please comment on these or any other expensive zip codes.  And if you hate, hate, hate this series, feel free to whine, whine, whine.

Next installment: The Also-Rans, part 37.

Comments (67) -- Posted by: madhaus @ 5:04 am

67 Responses to “The Most Expensive Zip Codes, Second Tier”

  1. RinkRat Says:

    Yep.. if you take RWC out of the 94062 numbers, then Woodside would be in your top 5, possibly #1 After all, Larry Ellison couldn’t settle living in an area that WASN’T #1, right?

  2. SEA Says:

    Are we there yet? Are we there yet?

    Oh, that’s right, didn’t we agree not to discuss P*** A***?

  3. madhaus Says:

    Any predictions on when some of our favorite locations will show up? Again, no peeking.

    I can’t quite figure out if Forbes separated out one city from another when two share a zip code. The top list already had Belvedere vs Tiburon (with different medians), and Los Altos Hills vs Los Altos. I suspect they did but that Woodside inventory seems high. And there is no way Hillsborough has 131 properties in inventory. So maybe the medians are correct but the other numbers are for the entire zip?

    The data came from Altos research. The houses for sale in the wrong cities were entirely Forbes’ screwup.

  4. SEA Says:

    madhaus- It had to be in the top 10, but it wasn’t mentioned… You know, unmentionable.

  5. Ben Says:

    What’s the deal with the median household incomes versus the median home price. Portola Valley median price $2.5M, median *household* income $164k? 94062 median Price: $2.2M, median income $97k? Even with a %50 down payment, there is no way the median person could afford his/her own mortgage payment. Have house prices really increased that much faster than wages? Can anyone help explain this?

  6. SEA Says:

    “Have house prices really increased that much faster than wages?”

    Imagine what the median income would be if the homes were not doing all that work for all those owners!

  7. DreamT Says:

    Ben – you’re confusing median property price and median mortgage on the property.

  8. SEA Says:

    DreamT- We all know that it’s a great idea for households earning under $100k to be living in $2M homes, even if the mortgage balances are small.

  9. DreamT Says:

    SEA – Are you blaming folks who purchased 30 or 50 years ago for the current value of their property? That’s nonsense.

  10. SEA Says:

    While generally speaking I’d suggest it’s not a good idea to live in a place that’s over 20x the household income, those who have lived in the same place for 50-30 years might be excluded from this generality under certain conditions.

    That said, what’s the median duration of ownership. I highly doubt it’s close to 30 years, and in fact, it is much less than 30. Let me go check a few of those last sold dates and see how many I find over 10 years, much less over 40 years.

    The mentality of being house equity rich and cash poor (read: liquidity problems) has gotten many seniors in cash flow problems, and we have seen examples of such here on burbed.

  11. anon Says:

    SEA, I’m curious – what is it that makes you say you wouldn’t suggest living in a place where the median income is over 20x household income?

  12. DreamT Says:

    SEA – Let me know what stats you pull out. If you can’t access median duration of homeownership, you can probably extrapolate based on comparative turnover/year vs total inventory. Or a blanket analysis of the tax base value per Portola Valley property.
    The majority of the properties on my street have been owned for > 15 years, and I have two *immediate* neighbors that have purchased 35 years ago. Turnover is exceedingly low. People who actually care about cashing in have cashed in long ago. The majority sells for reasons other than greed – be it job in another county/state, death or building a house in Colorado. Prop 13 is a great disincentive to sell, people like their low tax and most are satisfied about where they live – it’s mostly the youngsters like you who have this wealth inferiority complex.
    I’m actually furious when I hear the snobbish ‘equity-rich/cash poor’ applied to people who retired 20 years ago. Either they reverse-mortgage their property to take advantage of the equity gained since they retired, in effect mortgaging their offsprings, or they don’t and remain normal folks who happen to live next to new-rich new neighbors.
    And whomever you are, I doubt you have earned the right to give lessons to people you don’t know on where they choose to live.

  13. SEA Says:

    DreamT- The last time I did a survey my methodology was a bit different. I went to the county and looked at the sales that were recorded in a month, and then I paid those sales with the last sale date. The difference was the duration of an individual property. I summed the individual durations and divided by the total number of properties for the arithmetic mean. Every time I have done this, the average is under 10 years, usually between 4 and 7 years, depending on the sample, county, and probably other factors. I should also say that I attempted to identify owner-occupied homes. This was done by excluding properties that were owned by a corporation, properties that I could easily identify as rentals, but my methodology probably let a few rentals slip though.

    So when I read this: “The majority of the properties on my street have been owned for > 15 years, and I have two *immediate* neighbors that have purchased 35 years ago. Turnover is exceedingly low,” it reminds me of the RBA. Sure your little area might have a long duration of residency, but that’s not what I find when looking at an average property that is offered for sale or has sold.

    “Prop 13 is a great disincentive to sell, people like their low tax and most are satisfied about where they live – it’s mostly the youngsters like you who have this wealth inferiority complex.”

    I’d like to see the computation of this disincentive in a down market. Looking at some of the price reductions of 50% or more, I hope the disincentive is larger than the market value losses. What’s the discount rate?

    And I thank you for calling me a youngster; that has not been done in many years.

    As far as the ‘equity-rich/cash poor’ issue, there are plenty of people who retired 20 or more years ago (or fewer) who are not ‘equity-rich/cash poor.’ That said, instead of concentrating on those who don’t have a problem with such issue, let’s look at those who do–what went wrong?

    “I doubt you have earned the right to give lessons to people you don’t know on where they choose to live.”

    After choosing to live in a too expensive home, so many are being tossed out. Oh well.

  14. DreamT Says:

    SEA – My immediate area’s median property price is about 8x median income. You were initially posting about 20x ratio, but now you dismiss my example as RBA-grade (which by the way it’s not). You just gave me a case of whiplash.
    The reality, SEA, is that you’ll find the folks who are “tossed out” almost exclusively in lower median income/property value ratios, not higher.
    Why? because the turnover is so much higher and therefore the median mortgage is much higher, and what matters is the ratio median income/median mortgage, as I mentioned in #7.
    So your focus on the 20x ratio is misguided.

    As for the methodology you explained in #13, I presume you interviewed each of these new homeowners and asked them their income, yes? As opposed to going by the median income on the zip, which even bob wouldn’t do.

  15. Ben Says:

    I appreciate everyone’s input, and I didn’t mean to start a big argument. At first I thought the median income figures for these areas were erroneous, or perhaps “per person”, not “per household”. I am surprised to learn that many residents have lived there for a long time and gained much of their wealth through the appreciation of their house value.

    I recently bought a house in 94063 after searching for about 1.5 years. The competition for houses is still quite fierce all over the Bay Area. There are many first-time homebuyers (or couples) that can afford $1M homes with normal 20% down, 40% debt ratio, 30-year mortgages. After seeing lots of houses sell for these huge amounts of money, I just assumed that the median income in 94062 and other expensive areas was over $200k/household.

  16. SEA Says:

    anon- “SEA, I’m curious – what is it that makes you say you wouldn’t suggest living in a place where the median income is over 20x household income?”

    If somehow we know the home values are going up, above the discount rate, I’d suggest owning the highest valued home possible.

    What DreamT points out, correctly, is that there are some people who changes in market value do not impact. If you enjoy living in the home, no matter its relative value, and it’s worth it to you to give up the financial gain, so be it.

    When the market value goes down, you suddenly take a financial hit that was not expected, but please realize that at 20x, the market only needs to go down 5% to wipe out a year’s worth of gross earnings–for some this won’t ever matter. But what about the others?

  17. DreamT Says:

    Ben – SEA and I like nothing more than a big argument. Thanks for the opportunity.
    A lot of older homeowners aren’t wealthy at all, and they’re the majority around here. But they also don’t need much of an income with a mortgage-free house, for example $50k/year is plenty enough to pay property tax in a $1M neighborhood for a tax-base below $100k, plus food, transportation and some very light entertainment. Insurance, that’s a different story…

  18. SEA Says:

    Ben- Please continue to post! This is actually quite spirited. Usually we have our favorite poster entertaining us.

    DreamT- “I presume you interviewed each of these new homeowners and asked them their income, yes?”

    Typo: Replace paid with paired. I paired sales dates together. I didn’t care how much was paid, if it was a cash sale, or the level of household income. The idea was to identify owner-occupied homes that sold and look back to the last sale date. The average holding period was much less than what some people suggest. Again, this was done at the county level. Yes, I found some sales where the owner had died in the property after living at the one address for 50+ years.

    The 20x came from Ben’s observations. Ben said, in part, “94062 median Price: $2.2M, median income $97k.”

    I rounded the income to “under $100k” and the purchase price to $2M. Thus 20x income.

    Let’s get to this:

    “what matters is the ratio median income/median mortgage”

    It’s true that on a cash flow basis, the ratio of income/mortgage is important. That said, this completely ignores the risk of the 20x property going down in value by 5%, or the 8x property going down in value by 12.5%.

    I know a gal who suggested that she could afford her Phoenix home in addition to her new Portland, Oregon home. Similar homes sold for $700k in her Phoenix neighborhood back in 2006. She’s been paying on it for the last two years, yet the value continues to go down. She estimates the value in 2008 was between $350k-$400k. This year she finally admits that Phoenix probably isn’t going to simply bounce back up. The value has gone down significantly since 2008. She only held because she didn’t want to sell so cheap. The Phoenix mortgage is relatively small. Her income/mortgage is ok, but she’s taking a financial blood bath. Oh well.

  19. DreamT Says:

    SEA – The context of my comments is exclusively primary home ownership. They don’t apply to investment properties/secondary homes/rentals as landlord. If I were to invest, I’d personally look only at positive cash-flow from rent as opposed to equity gain potential – I’m conservative that way, but everybody’s different and there’s not one good or bad approach.
    The risk of a 20x property going down in value by 5% is only significant if you’ve tapped into these 5%, if you purchased recently or if you plan/must sell soon. To go back to what I know first-hand, in my street, 70 properties or so, that applies to exactly 0 properties. Of the few that sold since 2005 (we peaked in 2008 here), all are primary residences/owner occupied, all by youngish families (30s), and nobody plans to sell (that’s also the properties with the nicer cars, so you can tell that the recent buyers are the ones who are definitely not cash-poor). Of the others, a cursory scanning on zillow of last sale date is revealing of turnover. Again, different psychology applies in areas with mostly investment residences.

  20. anon Says:

    “Let’s get to this:

    “what matters is the ratio median income/median mortgage”

    It’s true that on a cash flow basis, the ratio of income/mortgage is important. That said, this completely ignores the risk of the 20x property going down in value by 5%, or the 8x property going down in value by 12.5%.”

    What risk are you referring to? Many of these people have been there for multiple decades. This isn’t a situation like, say, real estater’s where he bought in the middle of a massive, well-known and obvious property bubble. If someone paid 200k for a home in the 70s what difference does it make if the “value” of their home goes down by 400k a year even if they only make $100k a year? Sure – if they want to cash in on the house, they will have to sell it but it doesn’t necessarily mean that they can’t afford to stay there. So, again, I ask – why would you not recommend people to buy there if they can afford it and they get a reasonable deal?

  21. SEA Says:

    anon- Your question, as answered, was this: “what is it that makes you say you wouldn’t suggest living in a place where the median income is over 20x household income?”

    You’ve changed the question.

    “…if they can afford it and they get a reasonable deal?”

    No further answer required when you add that qualifier.

  22. SEA Says:

    DreamT- “The risk of a 20x property going down in value by 5% is only significant if you’ve tapped into these 5%, if you purchased recently or if you plan/must sell soon.”

    Just how soon is soon? That poor gal in Phoenix, who along with her husband, built their dream home, had four children, and then in 2008 his employer informed him that he’d be reporting to work in Portland, Oregon. She knew she didn’t have to sell ‘soon,’ since she could pay for a couple years while the market recovered.

    One thing that is true: Market values do not matter if you are never going to sell.

    Let’s get back to that question: How soon is soon.

    My basic idea was not to look at the people who won the lottery, but rather all the ticket buyers. There are so many times when I have heard people suggest, “I just married the person that I plan to stay with forever.”

    So while the 70 people in your area may plan to live in the properties for longer than soon will last, what about all the others? This is where your 70 people sample becomes like the RBA.

    In the RBA property values only go up. In your area people always stay the long-term. If a buyer wants to make sure he or she will stay for the long-term, the buyer better buy in your area, since the other areas don’t reflect the same duration of stay, based on my somewhat scientific historic sampling. Please note: Unlike Real Estater I am not claiming that past performance (duration in this case) is indicative of future performance. Just like a high divorce rate does not suggest that any single marriage will fail, yet if the ~2/3 California divorce rate continues into the future, there will be some marriages that end in divorce, but how can I identify which one will fail before the failure point? I’m sure we’ve all seen the train wrecks, in both marriage and housing.

    In the end I will give you this: If we play a game were home holding time is infinite, and cash income will always exceed cash expenses, then the current, past, and future market value of the home is of no consequence. The market value is only critical when one seeks/wants/needs to sell, and in this case that’s never.

  23. anon Says:

    “anon- Your question, as answered, was this: “what is it that makes you say you wouldn’t suggest living in a place where the median income is over 20x household income?”

    You’ve changed the question.”

    Alright, well can you answer the first question?

    Isn’t the first qualifier “if they can afford it” a given? And the second qualifier “reasonable deal” also a given? The question isn’t any different.

    You said that you wouldn’t recommend it without any qualifiers which means that you wouldn’t recommend it under any circumstances. Why you would say that, I cannot comprehend. Please help me out.

  24. SEA Says:

    anon- Read what I wrote to DreamT.

    Beyond that, we’ll need to carefully define “afford it” and “reasonable deal,” and the definitions should be on a risk-adjusted (actuarial) basis.

  25. DreamT Says:

    SEA – Regarding “what about all the others? “: I take my street sample not as a hypothetical situation or an exclusive, irrelevant RBA enclave. It’s a real-life Santa Clara neighborhood – a city where people typically don’t buy if they can afford Palo Alto, Cupertino or even Sunnyvale, and where you don’t find neighborhoods above $1M median value. So, I take my street sample as representative of middle-class neighborhoods throughout the bay area, which is what most people buy. Middle-class means some couples working two management jobs, many retired households, and many families with one main breadwinner, getting by just fine. I suspect Ben’s neighborhood is mostly identical in composition. How about yours? Do you actually know all your neighbors, and have you talked with them?

    Regarding “how soon is soon” – I’ll give you Real Estater’s answer to this question: 15 years is quite safe, no matter when you buy, assuming you don’t tap in your equity. 10 years is a good horizon as well, I’d wager, unless you purchased at the top of the bubble, and even then prices are really sticky here.
    But again, it would seem that the pricier the house, the more cash the buyers have left, and the less the worry about a 5% drop.

    I’m not familiar with Phoenix and Portland. I do know some areas of East San Jose gained 5x in value while my area only doubled in value (1995-2005). So I do think your examples, at least need to be qualified based on neighborhood composition and historical price movements, and at best need to remain within the peninsula/south bay which is the area we are all familiar with.

  26. SEA Says:

    DreamT- I’ll say it one last time: My examination was done at the county level, so the “neighborhood composition” reflects such. The average has been 4-7 years, no matter what county. The Bay Area counties, flyover county counties, other counties–it always has been between 4-7 years. It’s an incredible amount of work, and I’m just plain lazy these days.

  27. SEA Says:

    Oh, one last comment: I concentrate on urban/suburban counties. My guess is that rural counties probably have longer durations.

  28. DreamT Says:

    SEA – I’ll only suggest that, should you ever purchase a house, you don’t base your offer on that work. Should you not, the work looks even more pointless. Some might call it intellectual masturbation – your brain must be sore by now.

  29. Doug Borden Says:

    I am always looking for people who like to see things organized by Zip Codes. If you do too, please check out http://www.ZipCodeEDo.com and post some information about your Zip Code today. It’s free and Easy!

  30. SEA Says:

    DreamT- I’ve purchased several homes in the past, and I’m sure I’ll buy more in the future.

  31. DreamT Says:

    SEA – Yes, I believe you. Because everything you read on the Internet is true, and you sound like you know what you’re doing, and you’re prolix with credible and verifiable personal details.

  32. SEA Says:

    Glad to hear we’re on the same page!

  33. anon Says:

    “anon- Read what I wrote to DreamT.”

    Nice usage of a real estater tactic. You should have written: “This question has been answered because I already answered the question in another post.”

    I like math also but the thing is that there are certain situations where one should apply a calculation and there are certain situations where one shouldn’t. The key is to distinguish between these. In many of your posts, you are blindly applying mathematical calculations to situations where they do not apply. We all (rightly so) make fun of real estater for his inability to apply logic and math. At the same time, always applying math does not make sense. For example, what if someone obtains a windfall of several million dollars in a year? That won’t show up in the average but it makes these homes easily affordable. You can’t apply standard accounting practices to every situation and assume that they apply. To do so is to be just as oblivious as real estater. And nobody wants to do that…

  34. SEA Says:

    anon- This is what I wrote: “generally speaking I’d suggest it’s not a good idea to live in a place that’s over 20x the household income,”

    yes, there are outliers.

    “In many of your posts, you are blindly applying mathematical calculations to situations where they do not apply.”

    Maybe it’s from a few too many calculus proofs? (lol)

    More seriously, I didn’t realize I applied mathematical computations to inappropriate situations. Any examples you could point out?

    “You can’t apply standard accounting practices to every situation and assume that they apply.”

    Well, I’d go a slightly different path. I’d suggest the standard accounting (GAAP) is required by certain organizations. Understanding the accounting standards is necessary to understand what is being represented. For example, the fact that some mortgage backed securities that are basically worthless can be held at a much higher value must be considered… Of course one must, as pointed out in #31-32, consider issues of fact too (i.e. have the standards in fact been adhered to).

  35. anon Says:

    “anon- This is what I wrote: “generally speaking I’d suggest it’s not a good idea to live in a place that’s over 20x the household income,””

    Again, I ask (and you haven’t answered): what makes you say its a bad idea to buy there? Are you worried of a sudden collapse in value? Too many broke people? What makes you “suggest its not a good idea to live in a place that’s over 20x the household income”?

  36. SEA Says:

    Are you asking what’s special about 20?

  37. anon Says:

    I’m asking what makes you say “I’d suggest it’s not a good idea to live in a place that’s over 20x the household income.”

    Is it the number 20? Would it be ok if it were 19?

  38. . Says:

    #20 – 94010: Hillsborough
    Median Home Price: $2,948,423
    Median Household Income: $82,188

    i make more than the median.
    i’m moving to hillsborough bitches.

  39. SEA Says:

    anon- I wouldn’t suggest that it’s Boolean, but if you question is if the number 20 is the correct point, that’s just the approximation from the $2M and $100k.

    You are not suggesting that a upper limit to a reasonable multiple does not exist, right? I know there are some assumptions that have not been outlined, but do you agree that there is some multiple that’s too high?

    Now if you want to discuss whether it’s 20 or 20.2 or 22 or 25 or 19 or 19.5 or whatever, just name your number.

  40. DreamT Says:

    “You are not suggesting that a upper limit to a reasonable multiple does not exist, right?”

    That’s exactly what I’ve been arguing all along. Household income and property values are no longer tightly correlated above certain values (when income no longer tracks a predictable base salary) and under a certain minimum inventory turnover. So an upper limit on a meaningless number only exists in your imagination.

  41. SEA Says:

    DreamT- Given high (near infinite) house value/income multiples, let’s consider the balance sheet.

    When there is no upper limit on that house value/income multiple, is there a limit to house/total assets? As always, to avoid the arduous process of defining accounting standards, GAAP must be used.

    If there is some amount of other assets that is necessary, what is a reasonable opportunity cost?

  42. DreamT Says:

    SEA – I take it from your wording, lack of genuine first draft, history of arduous yet irrelevant calculations and nobody-knows-you’re-a-dog approach that these are simply rhetorical questions. Or, to monkey your post:

    When there is no first draft on that prompt for calculations, is there actual intent to get an answer? As always, to avoid arduous thinking, generalities will be conveyed as a response to whatever DreamT posts.

  43. SEA Says:

    One of two things are needed:

    1. Income
    2. Other assets

    If the person has other assets, these should be producing income–at some rate of return.

  44. SEA Says:

    Also, let’s avoid having to define accounting standards when GAAP is already established.

  45. DreamT Says:

    SEA, that’s income of NON-LOCAL residents since buyers are typically from elsewhere, and locals don’t need or plan to buy their next door neighbor save for a couple of statistically insignificant cases.
    Also high value/income ratio neighborhoods are move-up neighborhoods where existing equity, cash, stocks etc. are used to trade up.
    In both cases, your house value/income is irrelevant.
    Off topic.
    Comprehension fail.
    There’s no way you’re older than 30.

  46. SEA Says:

    “There’s no way you’re older than 30.”

    Thanks again!

  47. DreamT Says:

    I was indeed being charitable. You make Real Estater look mature and wise.

  48. SEA Says:

    I doubt Real Estater would suggest it’s a good idea to live in a $2M home with no other assets and no income.

  49. anon Says:

    of course he would. real estater has said time and time again that the home is the income.

  50. SEA Says:

    Thanks anon. I’ll put DreamT and Real Estater in the “income and assets don’t matter as long as you have a house” category.

  51. madhaus Says:

    SEA: Mind the GAAP.

    Actually, don’t. What GAAP has to do with home value to income ratios in upper tier neighborhoods still isn’t clear, because you haven’t explained why it’s relevant. When people buy a family home, they do not check if GAAP was observed. They decide if they can afford it. Failure to do so explains some of the property and credit bubble, but the backslide hasn’t brought in GAAP.

    Your take on this discussion reminds me of the racehorse breeder who hired experts in every field to help him develop faster stock. When the physicist made his presentation, he began with, “Now assume the horse is a sphere of radius r.”

  52. SEA Says:

    madhaus- The next discussion, as anon pointed out, is what is “income,” then comes what is an asset, what is a liability, what is equity…

    In part this discussion has a standard GAAP problem: historic cost versus mark to market.

    DreamT has suggested that historic costs and current operating costs might be very low, so who cares what the home is worth today. Certainly these people are not living like the Donald.

    Then there is the basic observation that people with a median household income of less than $100k are living in $2M+ homes.

  53. DreamT Says:

    #50 – Post #17 and #45 illustrates how abysmal your comprehension problems are.
    Everybody else will agree, you sound very much like someone fresh out of some elementary arithmetic class who never dealt with real-world decisions such as a house purchase. I’m afraid at this point it’s on you to convince anybody else of the opposite.

  54. madhaus Says:

    SEA, I am beginning to wonder what’s up with you myself. It doesn’t have to be an age thing, but your perseverating on this point suggests something isn’t quite right.

  55. ROI Says:

    How are they getting the figure for median household income? There are numerous ways to fudge that number. I doubt they were looking at paychecks.

    People who live in higher priced areas are more knowledgable about sheltering income and taking deductions.

    Until I know what their methodology was I can’t make a judgement.

  56. Petsmart Groomer Says:

    > How are they getting the figure for median household income?

    They take the actual median household income and adjust it downward for the Dunning-Kruger effect.

  57. Real Estater Says:

    madhaus says,
    >>SEA, I am beginning to wonder what’s up with you myself.

    You have to admit, a bunch of folks on the other side of home ownership are loonies.

  58. nomadic Says:

    #55, I wonder if they’re using AGI from tax returns.

  59. SEA Says:


    “A $510 million trailer park”

    Remember when 20% in the trailer park voted down the million dollar sales?

    “A former insurance sales manager, Byrne, 68, retired to Briny from Long Island eight years ago with his wife, Maureen. Now widowed, he stands to get $1 million in the sale, or about seven times what he paid for the home he bought here two years ago. But Byrne, whose salt-and-pepper beard and barrel chest make him a sure winner in any Ernest Hemingway look-alike contest, opposes the sale. He spent the weeks leading up to the Jan. 10 vote handing out buttons that read SAVE BRINY. “My wife died here, and my sister’s ashes were spread on this beach,” says Byrne. “I want to die here too.”

    You best believe that if someone offered me $1M for a trailer that has a market value of less than $150k, I’d be first in line to sell.

  60. madhaus Says:

    #59, at least these people owned their trailer park land so they got the payouts rather than it going to a landlord. The article said the place was a co-op which means the residents own the land jointly.

    Imagine if a developer wanted to buy the trailer park land that Owner lives in (or at least still has failed to sell for his wishing price) and made it worth the landowners’ while. Owner and his neighbors would all find themselves with unrenewable leases and maybe enough payoff to move their homes-without-wheels-needing-wheels to another park, if they could find one with space available. But probably no payoff at all, given what bastards we know that mobile home community owners are.

    The Briny Breezes people really ought to stop their whining. Much cheaper land is available outside of Palm Beach County and it was put up to a vote of the residents, not a corporate fiat.

  61. SEA Says:

    Owner hasn’t reduced his asking price. How bad do you think he really wants to sell? I’m thinking he really wants to sell at his asking price…

  62. A. Lewis Says:

    Just to make things worse, I think SEA makes excellent points.

    Coming late to this thread, and reading it in it’s entirety just now, DreamT comes off like a real jerk towards SEA. Why all the personal attacks? Can’t you see he’s trying to engage in logic-based debate? It’s clearly making you angry – that’s a warning sign that his logic is trumping yours, and in desperation you substitute bile for a good point.

    Sorry, SEA’s arguments are the soundest in this thread.

  63. DreamT Says:

    A. Thanks for posting an engaged opinion on yesterday’s discussion. Good to know your outlook on it. I’m not sure where my logic and good points failed, as you did not point to specific examples. No doubt you’ll remedy to this shortly, lest we think you were merely after more “angry” posts?

  64. SEA Says:

    DreamT- Maybe you should review what you wrote, starting with, “Everybody else will agree, you sound very much like someone fresh out of some elementary arithmetic class who never dealt with real-world decisions such as a house purchase. I’m afraid at this point it’s on you to convince anybody else of the opposite.”

    lol

  65. madhaus Says:

    Can we go back to not talking about Palo Alto now?

  66. Pralay Says:

    Thanks god the weather was great last weekend. After coming back from Mendocino, I was hoping to read some outrageous comments and some “good news” from Real Estater. Instead I am reading debate about median income. That’s not true real Bay Area spirit.

  67. bob Says:

    Wow. Quite a volley of chatter above. I didn’t read all of it but it sounds like there were several broad discussions.

    A: People don’t stay in homes that long
    B: The income to home cost ratio is out of whack.

    Simple answer: Yes and yes.
    Last time I looked up any stats on the average time a homeowner stayed in a home was about 5 years. I imagine that time period has gone up slightly since the recession since many can’t as easily sell. If my neighborhood is any indication then it represents this factoid quite well. On my street alone about 50% of the homes have been put on the market and sold in the 7 years I’ve rented here thus far. One home sold twice as a matter of fact and just this weekend a new house went up for sale.

    I grew up in the sticks where families tended to not only stay in the same homes they bought when they got married, but also tended to hand it down to their children. After living in two major metros it really struck me as odd that people would go through the trouble of buying a home because it seemed like nobody ever stayed put for very long. This cycle seems even more extreme in the Bay Area.

    As far as local incomes matching or even coming close to a healthy income to home cost ratio and what old people have to do with it, well that’s a no-brainer. Everyone knows using that as rule in the Bay Area is useless since we jumped the track on that years ago. I would agree that older folks likely have much to do with it too. I’m quiet familiar with the older residents on my street and none of them would ever be able to afford their home today- none.

    Oh well. I’m sure people will disagree.


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