I have lived in Las Vegas for 7 years. In the last several years, the median price for a house has almost doubled. Now the big thing is expensive high-rise condos. This is in a service-industry dominated city where the majority of people are making about $9 an hour! My question is: where are working-class people supposed to live anymore? I’m sure this is a problem in many cities–any thoughts?
Real-estate investors are buying houses, and then renting them out to folks that make $9 dollars an hour?
are working-class people supposed to live anymore?
Utah? 
Data point for you all.
I’m on the verge of starting my own firm. Maybe 8-10 employees to start. It’s politics based but the cities I’m considering locating in are:
Lancaster, PA
York, PA
Gettysburg, PA
Hagerstown, MD
Winchester, VA
Front Royal, VA
Harrisonburg, VA
Charlottesville, VA
Roanoke, VA
Because I don’t think I’ll get happy employees actually near Washington DC. I want employees who aren’t constantly stressed because their house payments eat up 60%+ of their monthly income. It’s not worth it.
Not to mention that real estate prices also influence cost-of-doing-business.
The banks are working with the real estate guys to qualify just about anybody with a job, or assets, to buy a house. They give them an interest-only mortgage, or something like that, where the payments jump in five years or so. So all these house sales are going to be foreclosures in 3-5 years. Should be good times for anybody with money – like bankers and real estate brokers.
So people with $12/hour incomes are buying $200,000+ homes with nothing down, and paying less than what it would cost to rent a place half the size. But in a few years they’ve put nothing in equity into the place, and the payments double or triple.
Unless the market keeps going up (unlikely), or they are able to make significant improvements to the house (limited by the neighborhood average), it’s just not a good situation.
As far as low income housing, this is becoming a big problem nationwide. Many homeless people have jobs, just can’t afford a roof over their head. A large number of people are forced into long commutes – over two hours each way – from areas with cheap housing, into where the jobs are. This means more kids who spend less time without parental guidance, always a bad situation.
But, if you have money, these are truly good times. Lot’s of opportunities, and more coming up.
Well, a lot fo the people are coming from California(and other states) where the housing is so high it still makes Vegas look like a bargin.
I too live in Vegas and it is getting really insane. I know a bunch of people who are most likely going to be totally screwed in 3 or 4 years. I’ve had conversations with numerous people who are investing in the housing market out here who are convinced that the prices will never go down at all. These people, my friends, are putting everything into the housing market. If the housing market keeps going up they are going to be loaded. If it drops they are all going bankrupt. Sadly, none of them will even consider the idea that the market might drop. I am predicting a ton of bankruptcies in Vegas in the next couple of years*.
I have no idea how these people can afford to buy these houses. My income is above average for Vegas and I am no where close to being able to afford a house out here. Well, let me qualify that, I could buy a house but I’d have to put all my money into it and if something bad happened (lost job, missed work due to an accident, etc) I’d be instantly screwed.
But then again I could be wrong. If I knew for sure what the market would do I’d be rich.
Slee
*Sadly, I have encountered people who were gambling because they had to win to make rent. They said things like ‘I got to win my house payment back’ as they gave more money to the casinos.
I’m from California, and housing prices there are insane.
My friend bought the house I’m living in now (in Washington state) in 2001 for $60,000. He had the old shingles taken off the roof, and new ones put on. The plumbing was re-done. The electrical system was worked on. In 2003 he sold it to me for the appraised value of $95,000. That’s a 50% increase in two years! (Of course, the repairs had something to do with it.)
Up the street is a small, one-beroom house on a tiny little lot. It was listed at $125,000. I don’t know what the owners paid for it, but it sold. I’m looking at a postcard right now that came in the mail the other day. ‘2 bedrooms, 708 sq. ft., built in 1964. Open floor plan. Wood-burning stove. Covered front porch. Storage shed.’ This is a tiny cabin intended for summer holidays. My one-bedroom flat in L.A. wasn’t much smaller. It’s listed at $124,000.
That makes me think I got a good deal on my 3BR house on a quarter acre.
Wherever the working class people live, their neighborhood will soon be redeveloped into homes for the wealthy. And of course, there’s no such thing as new construction that can be afforded by someone making $12 an hour, except for with interest-only loans (or maybe if you are in a double income, no kids situation and you buy a little house).
As others have said, a lot of the investment is being done by investors from California and the east coast. To them, Vegas real estate prices (and Phoenix, where I am) are still a major bargain. Developers have begun trying to set limits on how many homes out-of-state investors can buy recently.
Some of us working-class (or in my case, pink-collar) folk live in the few remaining old apartment complexes or old mobile home parks, and pray that we don’t get redeveloped onto the streets.
Maybe people should just be more willing to relocate? There are plenty of places in the U.S. where real-estate is still dirt cheap.
Also, in places where it’s really expensive, salariesare often higher to compensate. Programmers in Silicon Valley make significantly more than the programmers in Podunk. But then, they pay half a million dollars for a bungalow that would cost $125,000 in Podunk.
A lot of people put up with this because their master plan is to sink their high incomes into their high-priced real estate, then retire young by selling the real estate and moving somewhere cheaper. Here in Canada, people retire in Vancouver, sell their $750,000 homes, and then move to Alberta or elsewhere and buy the same house for $250,000, and have a half million in the bank for their retirement. I believe Seattle has seen a lot of flight in recent years because of real-estate prices. I expect this trend to continue.
This is the market in action. When a desirable place to live opens up, people flock in. The place booms until it can’t expand much father, then real estate prices go up like mad. Eventually, the cost of real-estate becomes a limiting factor, and people stop moving into the area and others move out.
There’s no doubt that it’s hard on the poor and lower middle classes. But that’s just reality. You can’t ‘fix’ supply and demand problems with price controls or rent controls. That just creates shortages and mismanagement. And if you subsidize housing, you make the problem worse by choking off the natural market mechanisms that would limit demand.
Low-income housing is a problem here, too. If you rent an apartment, it’s almost a given that you need a roommate. If you can afford to rent an apartment by yourself, then you can probably afford to buy a house or condo. Many apartments have been transformed into condos and sold off, so the ones that are left have become overpriced. Housing prices have jumped, too. My parents’ house (a modest, 3 bedroom tract house) was purchased for about $50k in the late 70’s. Today, a comparable house would be $200k.
Unfortunately, I agree with Danalan and sleestak. If you’re looking to buy a house, wait a few years, and pick one up cheap from among the buttload of foreclosed properties that the banks will be sitting on 
And where real-estate is dirt cheap, there are few jobs. See the problem here?
I don’t understand how folks who make minimum wage here in Miami are able to live. Minimum wage here is the same as it is in Jacksonville or Bell Glades, but a Miamian’s $6.00/hour is going to get them much less than the others. Now, a person making minimum wage isn’t going to be buying a house, but they will rent an apartment. Rental costs down here are ridiculous, and I’m saying this as a person who grew up in Atlanta and spent several years in the metro NYC area. They SUCK!
There’s a lot of rampant speculation down here in South Florida. For instance, Homestead, a small rural town just south of Miami, has a booming market now. People are buying shitty cookie-cutter houses for $200,000 and upwards not so that they can necessarily live there, but so that they can get what they see as an eventual pay out. Meanwhile, previously pristine land is being overdeveloped, the town’s infrastructure is being stretched to the max, and farmers and long-time residents are being displaced because they cannot afford the property taxes. Are there any jobs moving down there? Hell no. It’s all artificial, IMHO, and there will be a lot of victims when the bubble bursts.
I work with guys in their 20s who make only about $25,000 a year and they’re talking about jumping on the house bandwagon because it’s become the “thing to do”. And really, who can blame them? Houses in Miami, even in little rinky-dink neighborhoods where no one speaks English, are going for upwards $300,000. That’s pretty seductive, especially if you don’t see all the risks involved. And these guys don’t.
I’m not advocating price controls or rent controls (I’m not against them either, I suppose), but why do you think it follows that they will create shortages and mismanagement? And why would subsidized housing make the problem worse? Wouldn’t it benefit an area to ensure that the bank tellers, short-order cooks, janitors, and daycare workers have safe, affordable housing? I don’t see how you else you could ensure this without having some kind of restriction or set-aside program.
Not dirt cheap in the burbs of Houston, but very reasonable compared to other locations. 3,000 sq ft homes - $200,000. This area also goes against the grain on your job theory. At least for technical / engineering ppl - the Houston market is hot and looks like it will remain that way for quite a while.
Edmonton has one of the hottest economies in North America, and also the lowest real-estate prices. They’re going up rapidly, through. This is a normal market reaction. We just tend to be really emotional about it when it involves our housing.
Because it violates the relationship between supply and demand. If you fix the price of something below what the market is willing to pay, you will get a shortage of that item. If you fix it higher than what the market is willing to play, you will create a glut of them. Have a look at what happened in New York when rents were fixed. Or the gasoline lines that resulted when gas prices were fixed.
Just out of curiosity, does anyone have any data on how many of the loans being given out these days are interest-only, as opposed to traditional 20-80?
We live just outside Seattle in Woodinville, WA. Housing prices out here are going up…and it is scary.
Our house, a typical Colonial layout (4 bedrooms, 2 1/4 bath, den, 2 fireplaces) on .8 acres cost us 345k in late 2001. It was a great house, but needed a lot of updates (25 yr old carpet, 70’s appliances, layers of wall paper, old hardware) but we saw the potential and do the work ourselves. Otherwise, we could have a “newer” house with a lot less land.
Friends of ours were also buying homes at that time, but went with a starter home (2-3 bedrooms, no backyard, smaller) with hopes of cleaning it up and selling–which is a good idea, however they now have no home to move into. Their 250k homes now went up 100k (about 40%), but houses like mine (larger, with land) have jumped about 50% or over 500k. They wouldn’t make enough money on selling their starter home to buy a traditional house on land.
One of my friends whom I thought had a brain in his head, had a traditional loan but now has an ARM (interest only)…and a HELOC (home line of credit) of ~20k to put in windows and new flooring. WTF? He has no interest in the house now and would get zippo if he sold, which he thinks he wants to do…that or build an addition onto the house that would be upwards of 50k. That’s like remolding a rental with your own money and asking the landlord to compensate you (in my eyes).
I live in rural/residential (thank my lucky stars) so there won’t be any huge developments in my area…everyone has at least 1/2 an acre, very woodsy and bang next to a small state park. But as we drive around other neighborhoods, we see houses piled on top of each other (reminds me of San Fran) for the price we paid or more.
We always have paid an extra 500 into the loan a month, but now I’m reconsidering doing this as I don’t intend on selling any time soon and could probably put the money toward retirement…
Not only is the housing much more expensive but it outstrips the higher salaries. In the SF Bay Area the median house costs over $550,000 and the median household income is only $75,000.
With 20% down (just try coming up with $110k cash!) and a 30-yr fixed mortgage at say 5.5% you’ve got a monthly payment of about $2500, 40% of your pretax salary. When I bought my house the mortgage broker said that banks generally get a little leery when you hit about 35%. If you don’t have expensive tastes, outstanding debt, a family, etc. then you can make it work but otherwise you’re going to be looking at renting, interest-only mortgages or ARMs, etc.
And at least out here those inflated prices don’t buy you much. I live in a nice neighborhood (it’s not chic/trendy/hot/etc) and the house right down the street is for sale. I dropped in last weekend to check it out - 1000 sq ft and needs a LOT of work. Not a big chunk of land, either. Asking price? $484,000.
So eventually, people will stop buying those houses and choose to move elsewhere. Then the demand will fall until those house prices reflect their true value.
Or perhaps they already do. When there is a finite amount of real-estate in a very desirable area, the market commands a stiff premium. Where I live, you can buy a lot for $40,000. But if you want the lot across the street, which happens to back onto a ravine or a lake, expect to pay 2 or 3 times that much. More desirable location, higher price.
Now imagine what would happen if the city decreed that this was not ‘fair’, and forced ravine lots to sell for the same price as others. There would instantly be a huge shortage of those lots, and the people who sit on them now would refuse to sell. This would make shortages worse, and would distort the market. Because normally, if someone values a ravine lot more than someone else, they will offer them a high enough price to induce them to sell. If you fix prices, you lose that information, and resources are allocated sub-optimally.
The insanity exists in “Podunk”,too.
A developer in Omaha is gutting a building due west of the County Jail with the idea of yielding 6-to-10 condominiums which he intends to sell for $75K to $300K.
Having seen the property in question, I can’t imagine that there will be secure space there for more than one car per unit. These people’s second cars had better be Yugos with the radios already crudely removed or they won’t exist for long on that street.
The nearest grocery store is 10 blocks west and 2 blocks south. You’ve got to do other shopping or attend a movie in Council Bluffs, Iowa or way out in the western part of Omaha.
$75K for a dinky one-bedroom in that s???hole? No thanks.
Yeah, but people like me will see “woohoo! $75k condo!” and move to a rotten area of Omaha, because the first signs of redevelopment mean that the area will hopefully soon be totally redeveloped and that $75k condo will go up in price.
Also, it’s not like there’s such a thing as a $75k condo in many places anymore.
Not much to add, but my agreement that the current housing market feels very “bubbleish.” I’m getting that feeling that the 1929 stockholder had who said he knew the gig was up when he got a stock tip from his taxi-driver.
Of course, I’ve had that feeling for about 2-3 years now. My fellow professionals believe that the prices will flatten out, but that they will not actually fall or remain completely stagnant. I simply do not understand how people are able to purchase $250,000+ “starter” houses here in Minneapolis ($2,000+ mortgages) on family salaries of $40-50,000.