Categories

A sample text widget

Etiam pulvinar consectetur dolor sed malesuada. Ut convallis euismod dolor nec pretium. Nunc ut tristique massa.

Nam sodales mi vitae dolor ullamcorper et vulputate enim accumsan. Morbi orci magna, tincidunt vitae molestie nec, molestie at mi. Nulla nulla lorem, suscipit in posuere in, interdum non magna.

Reality Check

I was just reading an article on Oakland’s Temescal District (a place I happen to love from the few restaurants I have visited and the neighborhood’s role in a very important road rally win), when I came across these priceless lines. This is from the “Wall Street Journal – San Francisco Bay Area”, and could not summarize more aptly, at least to my thinking, the difference between coastal California and the rest of the world:

The median home price of $620,000 attracts first-time buyers. Rooms for rent cost as little as $500 a month, compared with double that in Berkeley and many parts of San Francisco.

While both of those sentences are probably based in fact, I wonder what percentage of people, anywhere, would find them to be applicable. What percentage of first-time buyers can pay $620,000?

Assuming one could pony up the necessary down payment of $124,000 (20%), one would then need to pay $2,662/month for 30 years for the mortgage, $517/month in property tax, and insurance and maintenance for a total monthly payment of, let’s say, $3,400. This should, if the banks have learned their lessons, require a gross income of $11,333/month or $136,000/year. Using this estimate, that income or higher is obtained by approximately 11% of all households in the U.S. The most recent census estimates show that ~88% of this group are homeowners already. To answer my own question, then, around 1.3% of first-time buyer households in the U.S. can afford to pay $620k for a home.

I realize that my repeated use of numbers in the previous paragraph may have gotten a little out of hand, but basically: who is writing this article, and who is their intended audience??? Perhaps I have not been in California long enough to absorb the necessary assumptions about wealth and success, but it seems that something economically, politically, culturally, something is wrong when a median home price that is affordable to less than 1.5% of first-time homebuyers is cause for celebration.

Comments are closed.