I lived in San Francisco selling software to Venture Capitalists, Buyout Funds and Limited Partners. When I moved there in the spring of 98 you could buy a 2bdrm attached row house with no front yard (the concrete sidewalk) in the foggy area of town where the fog rolls in incessantly and because the houses were built in the 1950s the streets were built double-wide due to nuclear war fears. (They wanted wide roads to be able to easily haul the carnage out after an attack. Lovely) This is the 'Sunset' area because the sun only comes out at Sunset when the fog goes out to sea.
1998 house price: $225,000
2002 I left San Francisco: $500,000
Now: $550,000
Who buys?
Two homosexual male or females-DINKS, with no kids (so throw away the cost of children in the median income analysis) and with a median household income of about $75,000/yr in San Francisco. So, these houses are not Ttat expensive. Take the Muni (above-ground rail system, not the cable cars or BART) in and you don't run two cars-saving $10,000/yr.
They are cash-rich.
Then I stayed in Riverside, CA (The Inland Empire-the fastest growing part of CA, adding over 100,000 people/yr and most of the new housing in CA) March-April 2002. Houses there are still in the $200k range, so there are lots of families. The commute to LA is 90mins each way and rush hour starts at 6am. The towns in the Inland Empire are packed with Buffet-style restaurants, where the exhausted mums and dads take their kids in after their gruelling commute and they have burgers, spaghetti, fish and chips, pork chops, fried chicken all at a fixed price per person. Mom has a salad, dad has chicken the kids have spaghetti. That's why places like 'Hometown Buffet' are so popular. They go there every weekday night.
They are cash rich despite the exhausting travel schedule into LA.
Remember, the median CA house price includes the very expensive inner city San Francisco and LA houses. In East Hollywood and San Francisco DINKS don't worry too much about housing prices.
People in most CA urban areas trade commuting time for house price. The median house price is still much lower in the Inland Empire than in central LA, so people willing to commute get the LA median income and the Inland Empire median house price. For the incremental house price look at the Inland Empire.
Then there's the immigrants, the Koreans bringing lots of cash in to LA to start a business and buy a home. With tax rates lower in Korea they arrive cash rich.
Finally, there is the underground economy. One of the reasons for CA's top marginal state income tax rate of 10% (here in WA state where I live there is no state income tax) is that the est. 5-6m illegal, mostly Hispanic/Mexican workers in the farms of the Central Valley (the food breadbasket of the US) and places like the Napa & Sonoma Vineyards and the textile factories of LA pay no taxes and the border towns (National City, San Ysidro) of San Diego (there is another US immigration 30mins N of San Diego on I-5-all cars must stop-to keep out illegal immigrants out AND to keep illegal workers in the US-side bordertown factories from migrating N on I-5), the state gives them a drivers license no questions asked, they visit ER and get free medical when they get sick (this is where part of the 10% state income tax goes-the hospitals can bill/write off with the state).
The statistics don't tell you this. |
