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["Thomas C. Meggs" <tom AT plik.net>]

Michael Czeiszperger wrote:

> Comfort, as they say, is relative.  The number reported above was
> calculated by Monster, and doesn't seem out of whack to me. I refer 
> you  to a study published today in the New York Times comparing the 
> rise in the cost of housing compared to the rise in salaries:
>
> http://www.nytimes.com/2002/11/04/business/04REAL.html
>
> "Throughout much of the rest of the country, particularly in the South
> and Midwest, the decline in mortgage rates has kept first homes as
> affordable as they were in past years. [...]  home prices and incomes
> have grown at roughly the same rate, making the typical home
> effectively less expensive today than it was seven or eight years ago,
> once mortgage rates are taken into account."
>
> "But in California, the Northeast and other hot housing cities like
> Denver, renters say they feel some of the same pangs of regret that
> were common among investors who missed out on the run-up in stock
> prices during the late 1990's."
>
> Check at the chart of the median home prices v.s. median income over
> time. The largest differences between housing prices and salaries were
> in San Jose and San Francisco, where the average home price has almost
> tripled in the past 10 years, while salary increases have been
> comparatively modest. Considering that home prices in those areas
> started from a point where home ownership was out of reach for most
> people even making technology salaries, the almost tripling of median
> home prices has made that area of the country unlivable in my opinion.
>
> The recent tech. depression should cause housing prices in SF to fall,
> but so far that hasn't happened, but even if prices do fall, what
> difference does it make if a house costs $650K or falls to $600K-- its
> still can't be purchased on the median $100K salary.
>
> While housing is not the only factor in the cost of living, its the
> largest, and everything else in the SF area is more expensive as well.
> Since the salaries are higher, you'll be paying more taxes in a higher
> tax bracket, as well as higher overall taxes.
>
> Why not just live in an apartment and not worry about owning property?
> The reason is the single biggest factor on your net worth down the road
> will be how soon you invest in real estate. Compared to any other
> investment you could make, its relatively safe and gives a big tax
> deduction. What about the stock market? No one can predict the future,
> but even over a long period of 17 years between 1964 and 1981, the down
> rose only one point:  http://www.fortune.com/
> indexw.jhtml?channel=artcol.jhtml&doc_id=209842&page=2
>
> Consider "a recent study by economists Andrew Holliday and Eliot
> Eisenberg of the National Association of Home Builders. They compared
> the return on residential real estate with the broad equity market and
> government bonds over the 25 years through the third quarter of 2001.
> In any three-month period, the chance of wealth loss in a single-family
> home was a minuscule 0.26%. For stocks, it was 32.3%."
>
> http://www.fortune.com/sitelets/retirement2002/realestate_sleep.html
>
> Note that the research was done by researchers working for the real
> estate industry. Biased? Perhaps, but not any more biased when you
> consider most of the statistics you read about the relative performance
> of the stock market is from people who are paid by brokerage firms that
> make their money from selling stocks.


It would seem to me though the only issue you are driving here is the 
cost of purchasing housing. Realistically, how many people right out of 
school jump into building equity in a house? And the cost of renting 
places in SF _has_ gone down, I can assure you that. I didn't say he 
should live in San Francisco forever, I said I'm sure being right out of 
school he would enjoy it a lot.

Regards,
Tom

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