I grew up in a place where no one I knew who actually worked there made over $10/hr at the time, but a housing boom resulted in many $1 million+ condos and houses for vacationers and people who inherited money (mostly). The thing was (this was about a decade ago), many of the developers were off on the timing and a lot of units went unsold and people lost millions. I knew a very successful builder who lost everything and ended up with a bad opiate addiction. 30 years earlier, in the same place, my Grandfather saw a 93% reduction in his yearly income when THAT building boom busted. Stuff goes in cycles. Is it time again? I guess it’s always that time somewhere.
You guys have no idea how cheap some of the houses you’re talking about are. I am green with envy.
300K for a five bedroom house, my CHRIST. Here there are no detached homes for 300k. Not a few, not one in bad shape; none. Not unless you drive into the boondocks. 300k gets you a decent two bedroom condo.
I’ve found a way to anger visitors from each coast is to drive around Overland Park and the Kansas City area in general and show them real estate prices. Kansas City is very affordable and even actors working in theater can afford homes.
We do get the occasional west coast transplants who sold a house in say Los Angeles and now can afford a palace here. You can tell them by their driving. I find that transplants from the east, with them this is often their first time owning a home and that is often a difficult transition from growing up in an apartment to owning a home.
Unfortunately, the answer to your questions is that we are in the housing bubble, part 2. Within the last year, prices are up 7% nationwide, and much more than that in certain states and cities. During the last housing bubble, loans with ridiculous terms were offered to people who never, ever should have gotten any loan.
Today the most ridiculous and abusive types of loans have been outlawed. However, the industry has not returned to the basic guidelines that it ran by for generations before the first bubble. When my parents shopped for their first home (1977), it was simply an accepted fact that a 20% down payment was required. Today some buyers get in with down payments of 3% or 5%. That creates danger. Throw in foreign investors and anyone trying to get rich by flipping houses, and you have the recipe for a second bubble.
It’s getting pretty ridiculous in Australia. My dad bought his 3 bedroom Melbourne house in 2003 for 650,000. It sold this year for 2,000,000. No improvements were made to it.
We have a ~1,100-sq.-ft. 2BR, 2BA house in southeast Denver (the city proper, not a suburb) we bought for just over $200k 15 years ago; Zillow puts it around $330k now. Houses are still on the market in Denver for matters of a few days, if not hours. Those prices are still a bargain to someone coming from either coast; my parents in rural eastern Colorado would be absolutely shocked to find that their son lives in a $0.3-million-dollar home (as is their son – the house is absolutely nothing special).
300K is a down payment.
I remember one of these couples being interviewed on “60 Minutes”. They purchased (and quickly lost) a $400,000 McMansion in an area with reasonable home prices, and at first, it sounded like they owned a chain of day care centers. Nope; they had an in-home day care, and that was their sole source of income, and on top of that, maybe there was some creative editing going on, but they both appeared to have mild mental retardation. 
No, a lawyer never looked at the papers, either. They didn’t know they needed to hire one. Among other things, I hope their Realtor lost his or her license for being so unscrupulous.
United Health operates in Overland Park. I can see dinkies living there, so making 200,000 a year for a couple and buying a less-than-million dollar home. Doable.
Guess my question, is how does the average person afford a home in California? Silicon Valley? Wasn’t there a blogger who says he lives in a van (down by a river?) in Palo Alto?
Answer 1: They don’t. Lots of renters and lots of condos. Not everyone needs a home with a yard.
Answer 2: Salaries are significantly higher than the rest of the country. Median salary is $77k in San Jose, as compared to $51k for the rest of the country.
Answer 3: Because salaries are higher, people can afford to put a higher fraction of income towards their house.
Answer 4: Also because of the high salaries, the mortgage interest tax writeoff is higher (since it’s coming off a higher tax bracket).
A $1.5M mortgage is ~$84k/yr in mostly pre-tax money. That’s a lot, but just means that a couple making a combined $250k can afford it fairly easily, even with kids. That’s not an unusual household income at all if at least one of them has a tech job.
The tax writeoff goes down as time goes on, but the expectation is that salaries go up as well…
To us New Yorkers, 3500 sq ft sounds like a mansion!
Now maybe NY has warped my perception such that I feel like a hobo because I don’t earn $500k a year or more. But $200k a year is not that uncommon for a duel-income professional household.
Looser now? They were are tighter than (insert adjective if that is what it is)
I dont think so but what do I know
All I know these huge houses are built with 10 bedrooms or some such. Who has families that big anymore?
Cant be that many people with those circumstances??
there you go. Foreigners are buying not only homes but businesses. Farms up here are being bought and expanded exponentially.
I wouldnt doubt that at all.
People are still living above their means and their jobs are not forever. Unless you or they have a great deal of investments/savings, you’re going to be out of your expensive house in the distant future.
Oh they buy those expensive houses are trying to keep up with the Jones.