200-300K? Try 40-65 k. I live squarely in the midwest. 150k will get you a near mansion. If you don’t mind a little work and 4-5 k in improvements you can easily get a decent home for around 30k. We paid 31k for our house a little less than 2 years ago. The most expensive house in the town where I lived 2 years ago sold for 500K, and most of the people agreed that the owners were idiots to pay that much, because the house had been sitting on the market for several years with no lookers.
This is largely not true. Houses are torn down (we say “scraped”) all the time. The trick is, you often don’t want to tear down the house because then you are dealing with a “new build” and all the new code applies. If you can meet the requirements for a “remodel” instead, you don’t have to do things like put in fire sprinklers. But often those rules are superficial, and what you are doing is making a brand new house even though you technically didn’t.
As an example, you will need to “save” a certain amount of the original walls to make it a remodel. But you can cover those walls with new siding material, as long as the old stuff is still there, underneath. Crazy.
You think the houses in the photos are dilapidated shacks? You wonder if folks could live in them? Wow. Just wow.
The value of the house is usually irrelevant in areas like that. You’re paying for the land. Our very small bungalow is presently valued at over $500K because it’s becoming more desirable to live in Portland. The value of the house itself has not changed much; it’s just that the location has become more valuable, especially to developers.
Yes, but it’s still funny for us folks in the Bay Area to watch shows like Fixer Upper, and see what it costs to remodel a home in Texas vs here. Prices are easily 1/2 to 1/3 the cost.
What are they doing with them? They are selling them when they retire at 50 and moving up to my part of the country and buying a $500K beautiful house with 5 acres and then banking the rest of the money.
See Greg Brown’s “Boomtown” for a more thorough explanation. 
There was an article in the paper the other day (it might actually have been the NYT), and it started off by saying: Silicon Valley is the only place in the world that isn’t trying to be Silicon Valley. Or something along those lines. It was actually a bit of a negative article, talking about how it’s a mistake to be building these corporate headquarters like what Apple and Google are doing.
Anyway, I thought that was a clever and interesting line as it’s certainly true that Silicon Valley is organic in nature-- it really just happened due to a lot of different factors and no one was really "behind’ it becoming what it is.
The appraised value for taxes is $210,000 (up from $126,000 in 2001). Taxes are less than $300/month.
When it is sold and you purchase a different home, both go up. A similar home, 3 houses down the street sold in 2015 for 2.05M - taxes are now $2,000/month for that home.
Thanks Prop 13
I wouldn’t think of it as “so many people” spending that much on (relatively) crappy homes. There is a such a chronic undersupply here that a small number of rich people can sustain the market. Because of Prop 13 + rent control, nobody is moving. I know a lot of middle-class people who are trying to leave and go to Portland or Seattle. Maybe Austin.
I have relatives that kept a door frame. So dumb the hoops that need to be jumped through.
This is my plan, except instead of 5 acres I want 50.
The problem with this, is that who wants to live in Dallas? I mean, there’s nothing wrong with Dallas and I’m sure it’s a fine place, but it doesn’t compare to the Bay Area, not even close in my totally subjective view.
And houses selling for over asking price is not indicative of anything per se. Certain pricing strategy will have sellers list their property for significantly below market in order to generate multiple bids, bidding wars.
The political impossibility of building dense housing is what drives the insanity in the Bay Area.
At least here in Seattle they’re building high-rises as fast as possible to stuff in all the Amazon employees.
Can you elaborate? My first thought is that’s nonsense, but maybe I’m misunderstanding you. Also, clarify if you’re talking about SF or the SF Bay Area. The latter is huuuuuuuuge, with wildly different zoning rules depending on where you are.
Where do all the people who work lower paying jobs in these towns live? Do they all commute in from more affordable cities? I mean, if you’re working at a convenience store or a Subway or something, is it really worth the hassle to deal with the drive and the traffic to work at a lower wage job?
We were driving by the Spaceship a month or so ago (spouse works at Apple) and I noticed an apartment complex right next door so I Googled it to see what the rents were. You can get an 875-square-foot 1-bedroom apartment with a parking space (though residents on Yelp were complaining that you often have to park far away from your apartment) for the low-low price of only $5,200 a month.
To rent.
An 800-square-foot, 1-bedroom apartment.
It’s crazy around here. I’m just glad we bought our place in 1999. Our plan is to keep it until we retire, then move someplace cheaper and buy something outright that will certainly be bigger and nicer than what we have now.
They either commute in from cheaper suburbs or they live in the city with like five roommates (no joke). Or if they’ve lived in SF a long time, they may be living in a rent-controlled apartment for which they are paying way under market rate.
Yeah, it is to laugh. Last study I saw in 2014 said over 50% of Bay Area residents paid more than 30% of their monthly income on housing. More than 20% paid more than 50% of their monthly income. House poor is quite common in the Bay Area, where you have the phenomenon of people making six-figure incomes feeling locked out of the housing market and people making less than six figures ( but still good money ) struggling to afford places near where they work.
I love the Bay Area in a lot of ways, but nobody but the 1%'ers loves the real estate market out here.
I bet you’re talking about those “Hamptons” apartments. The owners wouldn’t sell, and now the site is kind of embedded in the new Apple Park campus. I wondered how much rent they would eventually command. No doubt they’ll be popular with Apple bigwigs who want to walk to work.
I think so, though I just checked their website and they’re a lot cheaper than what we saw now. Weird.
For people not familiar with California’s weird property tax rules, under prop 13 your house value for property tax purposes is based on what you paid for the property plus up to 2% annual growth for inflation. Housing prices go up far more that 2% per year in California, so you get the situations where one neighbor is paying 10% of what his neighbor is paying in property taxes. It also means that businesses can hold onto property for decades and still pay early 80s property tax rates. The value of a property is only updated whenever it is sold or transferred. After 10-15 years people tend to get locked into their homes.
To summarize:
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Supply is low, because of geography but also because of restrictions that prevent the replacement of low-density housing with high-density housing.
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Demand is high: the economy is good, there are jobs that pay tremendously high salaries, and if you are in the tech industry and want to have a future, you want to be where the action is. There are plenty of studies showing that Solicon Valley companies prefer to hire and investors prefer to invest in people who are physically located near them.