Recent Reads

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.

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