It’s Not a “Housing Crisis” for Everyone

The demographic shift behind the high-rent phenomenon

Renters have long struggled with soaring rents in some of the top housing markets in the US. In San Francisco, it’s called the “Housing Crisis” because middle-class households, such as teachers, can no longer afford to rent – with the median one-bedroom apartment going for $40,000 a year and a two-bedroom for $56,000.

Similar but less crass scenarios are playing out in New York, Boston, and other top rental markets. But who is renting these high-dollar apartments? Isn’t renting supposed to be for folks at the lower end of the income spectrum, with higher-income folks buying houses and condos?

Not anymore. Homeownership rates in the US have dropped to multi-decade lows. As always, the millennials are getting blamed. Whatever the reasons and culprits, there’s a shift underway. An analysis by RentCafé of the Census Bureau’s 2015 American Community Survey shed some light on just how significant these shifts are.

Turns out more and more high-income households are choosing to rent, rather than buy. The number of households earning more than $150K a year that are renting has soared by 217% over the past decade, from 551,000 in 2005 to 1.75 million in 2015.

Over the same period, the number of high-income homeowner households has risen by only 82%.

Cities see an increase in renter households with incomes over $150,000 in two ways:

  1. A household that made a little under $150K one year and now earns a little more, enough to get pushed over the $150K line.
  2. An influx of high-income households, attracted by industries that pay well, such as oil & gas when it was booming, or tech, etc. Many of these households might have made less than $150K before they moved to the new city for their new jobs.

This trend has been particularly strong since the Financial Crisis. In 2010, the number of high-income renters rose by 7%. In 2011, it jumped by 16%. It has risen since then every year in the double digits. In 2015, it increased by 12%.

Here are the changes in 2015 of the number of renter households by income category. Note the only category of renter households that actually declined:

  • Over $150K: ↑ 12%
  • $100K – $150K: ↑ 9%
  • $75K – $100K: ↑ 7%
  • $50K-$75K: ↑ 4%
  • Less than $50K: ↓ 2%

But overall in the US, more than a third of households rent their homes, and the majority of them make less than $50K a year, according RentCafé, so below the median household income of $56K. This fits into the theme that renters earn less than homeowners.

But in big cities, the dynamics are changing for high-income renters:

“It shifts the focus on those who choose the urban high-rise living over owning a suburban home,” the report says. “Thus, we are more likely to see the affluent renters clustered in America’s largest urban areas, as Census data confirms. Here’s where the most renter households earning $150,000 or more live”:

  • New York City: 212,000
  • San Francisco: 57,000
  • Los Angeles 51,000
  • Chicago: 33,000
  • San Diego: 21,000
  • San Jose: 21,000
  • Washington DC: 19,000
  • Seattle: 16,000
  • Boston: 17,000

San Francisco is in second place, though its population of 864,000 is relatively small compared to some of the mega cities on this list. There are about 382,000 households in the City. So the 57,000 high-income renter households account for about 15% of all households (including homeowner households) and for 25% of renter households – which gives San Francisco “the largest share of rich renters in the country.”

The analysis explains the phenomenon this way: “San Francisco is officially a City for Rich Renters.” Our local term for it is “Housing Crisis.”

The number of high-income renters has been soaring – by 35% just last year – as highly paid workers were brought into the city, and as households already in the city but making less than $150K in 2014 got raised above the line in 2015.

At the same time, the number of households making less than $150K decreased. Some escaped – Oakland and other East Bay cities have become favorite destinations for high-rent refugees. Others got a raise and got nudged into the category of the lucky ones.

And so last year, something unique happened: the number of high-income renter households (56,591) surpassed the number of high-income homeowner households (54,445).

What San Francisco has going for it is a solid job market, with high-paying IT and finance jobs occupied by young highly-skilled professionals — a recipe for the typical profile of an affluent renter.

While San Francisco is at the bleeding edge of this shift to high-income renting, other cities too experience these shifts. For example, in Fort Worth, where homeownership dominates for high-income households, the number of high-income renters too is surging: From 2014 to 2015, it jumped by 77% to 4,858. This is still a small number for a city that is similar in size to San Francisco, but it is part of the national trend.

In Portland, the number of high-income renters jumped by 71% over the same period, “thanks to an influx of millennials attracted to its booming tech sector and strong overall employment in various fields.”

In Memphis, the number of high-income renters jumped by 51%, in Phoenix by 41%, in Chicago by 36%, in San Jose by 32%, in Austin by 31%, in Charlotte by 29%, in Detroit by 29%….

The attitude toward renting has been changing. The increased interest in renting among a population segment that is typically made up of homeowners comes in the wake of the housing crisis. For many it’s a matter of caution, a hindsight “lesson learned” behavior that keeps even people with high-paying jobs in the renting pool longer.

For some it’s a lifestyle choice, as renting is more popular thanks to the high-end apartment market phenomenon that’s been spreading all over the US in the last couple of years. Or maybe it means that an increasing number of people believe that homeownership is not the only way to have a fulfilled and successful life.

The interactive chart below shows the percentage of renting households by income category. For example, in San Francisco, 38.6% of the renter households earn less than $50,000 a year, but nearly 25% of the renter households earn over $150K (hover over the columns for the specific data):

This income distribution of San Francisco renters is the reason why these ludicrously expensive rental apartments aren’t all vacant. At least during boom times. And it also underlies the upheaval of the “Housing Crisis,”  as people who are not among the lucky ones are getting knocked over by this wave of money.

But rents are now dropping sharply due to oversupply from a breath-taking high-rise construction boom that coincides with withering demand, not just in San Francisco, but also in New York, Boston, and other cities. Read…  What the Heck is Going on with Rents?

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  80 comments for “It’s Not a “Housing Crisis” for Everyone

  1. Chicken says:

    “What it is ain’t exactly clear. There’s a man with a gun over there. Telling me I got to beware. I think it’s time we stop, children, what’s that sound. Everybody look what’s going down!”

    • TJ Martin says:

      Beautifully played good sir !

      [ for those unaware Buffalo Springfield’s ” For What Its Worth “

    • Crazy Horse says:

      Everybody knows that the dice are loaded
      Everybody rolls with their fingers crossed
      Everybody knows the war is over
      Everybody knows the good guys lost
      Everybody knows the fight was fixed
      The poor stay poor, the rich get rich
      That’s how it goes
      Everybody knows

      Lyrics by Leonard Cohen
      Johnette Napolitano: Concrete Blonde

  2. subunit says:

    Well, at least some of the wealthy have some kind of idea what things are worth.

  3. David says:

    Data is missing. I moved to NYC in May 2016. I fit the statistics and not only do I rent but I rent a shared unit. I rent the second bedroom. We are in East Harlem just off 3rd Ave and between 116 and 125 (subway stops) and the rent is about $4k for a nice 2 bed unit that I understand is worth about $850k. Do the math. Maybe it makes sense with a real low interest rate on a mortgage but for me, after considering taxes, insurance, and condo fees, the IRR on this as an investment is poor. Hence I would rather pay rent and invest the variance as I believe the FV will be greater in some sort of sinking fund… my excess monthly goes into Amazon and two other stocks and I bet renting will end up a better investment than owning. I doubt I am alone on this thinking…

    • prepalaw says:


      you are allowing yourself to be screwed by the system. You have no tax deductions. You pay NYC, NYS and Federal Tax, totaling at least 45% of your income (including payroll taxes). The system works much better for homeowners. For a single family house or condo, you get to deduct your real estate taxes and mortgage interest. If you would do what I did when I was your age – about 27 – buy a duplex in the suburbs and commute 3 hours per day back and forth to the City. You live in one apartment and rent out the other. No tony deal – just something in a blue collar area of an excellent town. You are now in the real estate business. You fix up the building, making the renter’s space better than yours. Up the rent. Get tax deductions. Do other stuff, like looking for properties, etc. Get more tax write-offs. If you have spare change, make a no-risk investment by making extra principal payments on your mortgage. Honestly, you should not be investing in the stock market until you own your home free and clear and have at least one year’s worth of living expenses under the mattress in cash. I lived that credo. Am 73 years of age and have zero money problems. I wish I were 27 again to repeat the process. Nothing like getting paid by the Government to save money in real estate.

      • marty says:

        Prepalaw, you’re right David is not doing himself a favor, but there’s an even better answer.

        In the expensive housing cities, the rent to value ratio is terrible, meaning in effect your landlord is subsidizing your rent. The more expensive the house, the worse for the landlord.

        However, you’re correct that David needs protection from taxation. (If he were basing his decision on where to live based solely on taxes, it certainly wouldn’t be NY.) He needs the mortgage for the tax deduction and to protect himself from inflation.

        The answer is to take advantage of both situations at once. Rent in an expensive housing area to have the landlord subsidy, and buy rentals that cash flow elsewhere to get a good ROI, mortgage protection and the tax benefits of depreciation.

        Forget buying Apple stock. Their days are numbered. Buy some rentals in Memphis, Birmingham, Little Rock…

        And I’d get the h#ll out of NY. It’s cool for a while, but not worth it. Been there, done that. ;-)

        • TJ Martin says:

          If as most are assuming the entire real estate market is the Potemkin Village it appears to be … buying any property much of anywhere at the moment is more than likely to wind up money thrown down the drain .

          But seriously … are you really aware of how the tax codes and deductions work ? Especially in NYC ? From your comment I pretty much doubt it . Suffice it to say when all the numbers are tallied when it comes to households of two persons or less … renters come out way ahead after all the expenses , maintenance taxes HOA fees are paid ( HOA fees in NYC are outrageous .. and then there’s parking which as an owner you pay out the nose for ] … 3-4 persons .. you barely break even .. four persons or more is when the tax breaks finally come into play in your favor when buying vs renting [ NYTimes WSJ MSNBC Financial .. our personal FA as well as CPA etc ]

          Which is to say not knowing Davids exact circumstances more than likely he is making the right decision to rent rather than buying into a house of cards .

          As far as getting outta Dodge [ NYC ] is concerned . It all depends on one’s circumstances . Suffice it to say when I lived there it was to my benefit financially and professionally to do so . Once my circumstances changed [ my professional status rising to the point of no longer requiring my living in NYC .. or any other city for that matter ] .. I left . So no over generalized advice if you please .

        • Crazy Horse says:

          Better yet, set up a Panamanian trust account and use it to avoid all taxes on your investments. That’s how the real players do it.

          ps: The US didn’t invade Panama and haul Pineapple Face off to a US prison for nothing. Come to think of it, that was the last war that the Army actually won—-.

      • David G LA says:

        But if David thinks real estate is currently over valued, and David doesn’t want to move to the suburbs, and David is single, and David has no interest in becoming a landlord, David is right where he wants to be.

      • Smingles says:

        50 years ago… get real. Today is nothing like 1960.

      • Ehawk says:

        LMAO… I am sure your college degree was very cheap too. Maybe you even worked part-time and friday and saturday to cover expenses !!! you could even afford to pay rent working part time much less college fee.

        Wake up mr. 73 years old.

        this is 2016… and the interest deduction now at a rate of 3.75% is not very beneficial in deductions.

    • interesting says:

      “my excess monthly”

      WTF is that? please, do tell. I have enough for a bottle of vodka at the end of the month which smooths over the nightmare.

  4. prepalaw says:


    I am a landlord and have owned rental apartments for more than 30 years. I am going to give you an example of a high quality tenant and why they can not “afford” to buy their own place:

    She earns $60,000 as a housekeeper for a wealthy family. Her husband earns $40,000 as a painter. Total = $100,000. They have no tax deductions. Payroll taxes are at least $7,500. Income taxes are at least $22,500. Tax total = $30,000. $70,000 left after taxes. They pay out $30,000 for rent ($1800/month for a 2 bedroom apartment) + utilities + cable tv + cell phones + 1 car payment.

    They now have $40,000 left to cover food, clothes, healthcare, entertainment and savings. That works out to $830 per week to pay all of that.

    This is a couple + one child. They make good money. But have nothing left over. They live in a nice commuter town 22 miles from NYC. These are ordinary people with ordinary tastes.

    Folks earning $150,000 are a different breed. They have expensive tastes. Rent a MB/BMW. Go out to eat twice a week. Take destination vacations. Lives in expensive apartments. Have no savings and are paycheck to paycheck people. It would be beneath their dignity to rent an ordinary apartment from me; drive a paid-for 5 year old car; skip the restaurant scene and forget about vacations. Frugality would translate into $50,000 cash savings and a serious down payment for a duplex in an ordinary neighborhood.

    They won’t do that. And, that is why they rent.

    • william says:

      One of my renter’s volunteers to pay an extra hundred now and then via late fees.

    • Anonymouse says:

      You’re making assumptions that you can not validate. I’m in the category of this article, i rent a room. Until recently was $900 a month. Don’t own a BMW, eat out rarely, vacations are modest at best.

      Nope don’t want to by a way over price property, don’t want to pay inflated property taxes, don’t want to deal with the new tenant laws, don’t want to pay a useless Real Estate agent… Property 30 years ago were a bargain, now its not as clear as to the future of property ownership.

      Times are changing and the formulas for success in the future might not be the same as those in the past. There are alternatives that are more liquid and less risky. Like stocks right now they are at their all time high. Buying now is like buying a stock at a double top. The probability is against you.

    • interesting says:

      “They make good money”

      that’s a joke, right? you simply can not be serious if you think this couple makes good money in 2016 America.

  5. EVENT HORIZON says:

    I chose to differ:

    “The demographic shift behind the high-rent phenomenon”

    “Income” is not a “demographic” and it is not behind the high-rent phenomenon.

    Something more simple and obvious is.

    • Wolf Richter says:

      The “simple and obvious” demographic shift behind it: millennials with good jobs who don’t want to buy a house but want to live in an apartment near the center. San Francisco has lots of them. And the article is clear about it.

  6. Anvil says:

    You’re going to have to stop using teachers as your middle class example. Most of the teachers I know in California make over $100,000 for 9 months work with administrators earning up to and over $200,000. This is not as much as police and fire of course. Ran into a retired SF fire captain the other day with a $215,000 pension. He was 56 years.

    • Wolf Richter says:

      The teachers I’m talking about are active teachers, not anecdotal teachers. So here are some stats from the California Department of Education – so I don’t have to repeat it a million times :-)

      “Midrange” (not “beginning” and not “highest”) Teacher Annual Salary, in a small high school district = $64,314 a year, and in large high school district = $75,179 a year.

      So check it out and give me a break with your millionaire teachers :-)

      • walter map says:

        You’re welcome.

      • Modalita says:

        What gets interesting is when you pull back the onion of data a bit, there are pretty wide differences in teacher salaries, even in a single metro area. Check out my current town of Boston.

      • David G LA says:

        Hi Wolf. I have probably been guilty of exaggerating teacher salaries in some of my posts. I was a teacher in California for 8 years, both of my parents were and two of my siblings are teachers in California, along with a pile of friends. They make close to 100k a year. And their health care benefits are gold. 2-3 weeks off at Christmas, 1 for spring, 7-9 in he summer. They can retire at 55 or 60 and continue to draw almost their ending salary. And they get health benefits for life. Just my observations. Sure, this is California metro and not national averages. Agreed. Just saying the “salary” is not the whole picture.

      • interesting says:

        My X-wife went and got her masters and instantly got a $15K a year raise…….she was close to $90K last i checked.

        and fire or police….forget about it. For some reason teachers marry firemen and cops so over the years I’ve heard countless stories about the retiring at 50 with that last year of service being padded by taking all the vacation time in that year. It’s a scam if you ask me and as far as firemen are concerned, most of their time is at accidents, training and winding hoses.

        • Michael Fiorillo says:

          “… As far as firemen are concerned, most of their time is at accidents, training and winding hoses.”

          Yeah, until they have to race into a burning building that you are desperately trying to escape from.

          Clueless, absolutely clueless.

        • interesting says:

          Michael Fiorillo,

          damn dude I’m just telling you what I’m told and saw, my dad did the volunteer fire thing when i grew up and according to what I’ve seen and been told they can go months without a call and then have 3 in one month but RARELY are they running into buildings…..maybe turning off the TV might help.

          most calls are traffic/emergency related……

          you said something about clueless?

      • Ehawk says:

        Nope mr. Wolf. I have a friend who is a PE Teacher… Yes (Physical Education teacher) pulls close to 90K… it’s total lunacy here in california.

        we need a reform. because every county and city want more taxes to pay up these ridiculous salaries and pensions.

        • Wolf Richter says:

          I love these anecdotal teachers. I have a friend whose neighbor is a basket-weaving teacher in grade school who makes a gazillion…. Therefore all teachers are overpaid!

          However, I do think that retirement with full benefits for any government employee should start no sooner than 65, and with partial benefits no sooner than 62, same as Social Security. “Pension spiking” and other shenanigans should be made illegal. Pensions should be figured on base pay. Etc.

          But I’m dreaming.

  7. Sabbie says:

    These kids are making huge tech salaries, but since they’re spending a huge percentage on rent, plus overpriced mediocre small plates and $15 craft cocktails, they have no hope of ever saving up the $200k needed for the down payment on the median house.

    • Wolf Richter says:

      Correct. I did a report on this last year, looking at 30 cities, with the median household income in each city, to determine how long it would take to save up for the median house, assuming a savings rate of 5%, and a 20% down payment.

      San Francisco and San Jose are at the top of the chart, with about 37 years… so never. There are only a handful of cities on that list where it would take about a decade.

      (click on the chart to enlarge):


      • NotSoSure says:

        I wonder if perhaps the kids know that the future is bleak so perhaps they just spend it while they have it.

        The Facebook kids though are different. I am reading a book called Chaos Monkeys and the numbers are making me jealous. An ordinary programmer at Facebook back in 2013 would be given around 125 to 150K in salary + 500K in stocks vesting over 4 years. Given FB has quadrupled since then, that’s a ton of money. They definitely can afford buying a house pronto in the Bay Area even after 50% taxes. Given the number of programmers at Facebook (tens of thousands), that’s a ton of millionaires they are minting down there.

        • NotSoSure says:

          Never mind, I was mistaken. Facebook has 15,724 employees as of September 30, 2016. I had thought it’s a lot more than that.

        • Toddy says:

          $500k ISO plan? You’re misinformed. That kind of package is reserved for people with salaries that are $200-250k or someone with an exceptional specialty skill.

          Run-of-the-mill developers with no unusual pedigree get maybe $100k ISO, if that.

    • Ethan in Northern VA says:

      Stock grants could easily put $200K in their pockets in addition to their salary.

  8. RD Blakeslee says:

    Has there been a comprehensive study of the psyche of city dwellers?

    Is there a common thread in the minds of homeless persons, young black street smart denizens and the various higher-rolling folks?

    Lemmings come to my mind.

  9. Maximus Minimus says:

    Let me preface this discussion that nobody in their right mind would have expected a central banking incompetence of historic proportions and an ensuing housing bubbles which makes the discussion between owning and renting almost ridiculous (in some places).
    Excluding that, let’s consider the demographics. What percentage of the population is single, or separated? Does the quality of relationships inspire investing in big assets? What about the job situation? Do the jobs provide stability, or might require a quick relocation?
    Eventually, at long last, you probably settle down, and consider investing into the afore-mentioned housing bubble.

    • walter map says:

      “Eventually, at long last, you probably settle down, and consider investing into the afore-mentioned housing bubble.”

      Thereby achieving the American Dream, by becoming a debt peon, exchanging what’s left of your life for a home of your own, while buying a very much nicer one for your creditors.

      By that time your children are grown, because if you had waited until you could afford them you would be too old to have them. So you raised them in a series of flats as you chased one lousy job after another, or kept the one you had, in the hope of someday having enough money to achieve The Dream, so they grew up feral. And you denied yourself and made sacrifices for that hope year after year, and you did what you were told, and worked overtime and a second job, and avoided conflict, and kept your mouth shut, and your wife became a stranger, and sometimes your brother would like to get together over the holidays, and you rarely remember when you had friends.

      Like Mr. Carlin said, it’s called the American Dream, because you have to be asleep to believe it.

  10. Mark out West says:

    I’m an Aussie but read a lot about the high cost of higher education killing younger Americans, causing increased stress and job insecurity. Are these young yanks too indebted from the start to feel secure enough to take another loan???
    Not to mention your bizarre health system???

    • night-train says:

      Good points my Aussie friend. During the run-up of the 2000s housing boom, an econ professor at a small city college in my small US southern state had some excellent insights. He pointed out that many people were driving up housing prices by making very foolish bets. They were betting that they were exempt from all the human experiences that define us in industrialized societies. They were betting against job loss, divorce, health problems ect.

      Your suggestion regarding young folks’ indebtedness leading to insecurity is no doubt a factor in play. The health care system is a mess, but applies more to older folks. The young always believe themselves invincible, so healthcare isn’t a big concern. It is, however, a big factor in financial decisions for older cohorts.

    • MaxDakota says:

      We are Millenials, early 30s, dual income, no kids, zero debt. We have looked at houses and find them to be ridiculously overpriced. We have discussed with our financial advisor and accountant – mortgage tax deductions are a joke (really crunch the numbers, it “saves” you nothing, borrow as little as possible), and a low interest rate mortgage on a crazy inflated home is still a lot of money.

      So even if you can afford it, it seems like a sucker move to buy a house when you can rent a much nicer place for half what you would pay to buy it, plus you’re free to move whenever you want. I ran one of those buy vs rent calculators and assuming a $1M house (this is SoCal), if you can rent a similar place for less than $5K, it is better to rent. On a $750K place it’s trickier, better to rent under $3K, but you get a decent rental for $3K in LA whereas 750K buys you a crap shack!

      On a more philosophical note: my rule is if you have to borrow money to afford it, you can’t afford it. I’m not sure if other Millenials feel this way.

      Growing up in the 1990s and 2000s, it honestly feels like we were repeatedly fed the message that borrowing lots of money is a good thing. Can’t afford that graduate degree? Just borrow the 300K, you’ll be able to pay it back, be sure to ignore the job market conditions. Can barely afford the down payment for the house? No problem, you can “negotiate” a higher price with the sellers so they will “cover” your closing costs. What?? At some point in college, it dawned on me that all this sounds like crazy talk, so I’ve stuck to my no borrowing rule. Maybe other Millenials have had the same reaction.

      • Mary says:

        Crazy kids. How do you think our economy will stay afloat if you refuse to buy stuff?

        • The Cleanse says:

          Perhaps not, however there needs to be much more emphasis on savings and investing…not consuming.

      • Pedro says:

        Amén brother

      • Jock says:


        I was in exact same boat until 5 months ago (when our son was born; we made the decision for my wife to stop working altogether for the time being)

        But either way, zero debt is our motto as well – having learned hard lessons on my side of the family. Live in NYC.

  11. Petunia says:

    I have never set foot in San Francisco, but I know exactly why those techies are not buying, even with those great salaries. It is because the tenure of a techie in a job is tied to the projects they work on and not full time employment with the company. When the project is over, they may or may not have a job. The whole tech industry is that way, very short term employment is the average case. If you know you will on average be on a job 3 years or less, there is no point in buying. Plus renting gives you the option of choosing projects worldwide.

    Tech work in the financial industry is more stable and long term, but there as well, you are tied to the projects you create and maintain, as long as they exist.

    To the poster that mentioned the book “Chaos Monkeys”, the author was eventually fired from his job at FB because another project was chosen over his. This is the way most tech jobs end. I encourage everyone interested in the tech startup business to read it.

    • Chicken says:

      That’s correct Petunia.

    • CrazyCooter says:


      And it is all becoming a commodity – that will purchased by the unit, in economic increments – and the gravy will have long been squeezed out.

      Anyone who is 30 something in tech and thinking they can ride this train to eternity is a fool.



  12. Ptb says:

    Having been in the tech sector of Silicon Valley from 1991 to 2005, I can tell you that job insecurity is the norm. Few people are at a given company for more than 3 years. Quite often the tenure is much shorter. Many people count on the industry as a whole growing because they will switching jobs frequently.
    This does not foster a desire to take on a 30 year mortgage. It’s basically how I fell into flipping houses in the SF Bay Area. Take the tax free gain every two years and get out of the debt.
    I can understand how people that grew up seeing the markets crash and have college debt….would be even more hesitant to take on a huge mortgage debt despite their high incomes.

  13. Ivy says:

    What percentage of upper income renters may be represented by people concerned about the RE bubble deflating suddenly? They may not want some material portion of their net worth tied up in illiquid assets, having seen the devastation to equity in the aftermath of prior run-ups.

    • Captain KurtZ says:

      Lemme answer that question, from an upper income renter, here in MASSIVELY overpriced Seattle.

      First, low interest rates, over thirty years, on a High-priced property, is the worst scalping one could ever take, even without the threat of equity loss.

      30yrs at 3.5% on a $ Million loan, with say 20% down… and you are gonna pay something like $2.6 mil over the lifetime of the loan. That’s the real price, damn the tax breaks and all. You ARE a bagholder when you sign up for that kind of debt servitude.

      Remember my frugal mother being outraged back in the 70’s when they started offering 30yr mortgages…. Cuz she knew the real price of money.

      In our bucolic neighborhood of Queen Anne, almost 40% of the houses went into foreclosure after 2008. The hedge funds charged with propping up the prices, came in and bought out all of this inventory in after 2010, at 100 cents on the dollar. We never got a real price discovery.

      Over the last fifteen years, we have rented places around the Hill. Half the time my wife kicked my ass cuz we didn’t own…. the other half of the time, I look like a genius, since we never bought into the bubble.

      This Amazon bubble will blow away soon, but not soon enough.

      • Toddy says:

        Sinner than you might think. Once the gambit is up, money can move in an instant. And when that happens it will be done and over before you read about it on Bloomberg.

      • Albert E says:


  14. mvojy says:

    Maybe the high rents are the result of the rise in investor-owned properties these days. They are putting up new buildings every day with the intention of renting them out rather than selling the spaces inside. Real estate investors are gobbling up property in up and coming areas just to capture the income of the high earners that are running out of housing stock to choose from.

  15. Albert E says:

    “…my rule is if you have to borrow money to afford it, you can’t afford it. I’m not sure if other Millenials feel this way.

    Growing up in the 1990s and 2000s, it honestly feels like we were repeatedly fed the message that borrowing lots of money is a good thing. Can’t afford that graduate degree? Just borrow the 300K, you’ll be able to pay it back, be sure to ignore the job market conditions. Can barely afford the down payment for the house? No problem, you can “negotiate” a higher price with the sellers so they will “cover” your closing costs. What?? At some point in college, it dawned on me that all this sounds like crazy talk, so I’ve stuck to my no borrowing rule. Maybe other Millenials have had the same reaction.”

    Maybe humanity has a chance ;-)

    Yep home ownership the (late) 20th century way is a con.

    My family has done well in property but all based on cash purchases, working our way up from the bottom. And looking back it was a lot to do with the Zeitgeist.

    And we do have the central bankers’ inflationary policies to thank of course

    Bricks and mortar are safe and tangible but not if what you own is a pile of debt

    And when the crisis hits next time and beyond me thinks we will realise that even cash investing in property cannot be seen as a sure way to make money

    Yep keep debt low and you’re on to a winner, or rather less of a loser in the modern financial world

    Or as pedro says…

    Amen brother

  16. Z says:

    Great article. Explains a lot. So again who is buying the inflated Bay Area houses if more $150k earners are choosing to rent? I’m interested in knowing about that puzzle piece.

  17. TJ Martin says:

    …. and then there are those of us in the $150k + category and over age 50 that by luck of the draw [ sold and moved just before 2008 sunk in or got out when the crash became obvious ] have become OWMNB’s [ a Harvard School of Business term ; Out With Money Not Buying ] renting in the ‘Burbs out of convenience and short commutes all but refusing to buy due to our assumptions that the economy at present is a Potemkin Village and not wanting to be caught out when the current real estate house of cards all comes tumbling down . FYI ; According to the Harvard School of Business as well as the ESJ etc … there are a whole lot more of us OWMNB’s than either the real estate or financial industry wishes there were .

  18. Larry says:

    We sold our house and rent because we no longer want to be anchored to a house in a community with a POA and almost bankrupt golf course. Our longest obligation is one year now.

    Does it suck moving often? Yep.

    Does it beat being underwater on a mortgage and paying crooked Wells Fargo interest? Yep

    Would I rather not pay the crooked government the extra taxes? Yep

    It’s called a compromise. The days of buying a home and dying there are over.

    • Crazy Horse says:

      Speaking of anchors, living on my 50′ sailboat with a power windlass it only takes less than a minute to pull it up. And its only three weeks doing my favorite thing– sailing on the open ocean — to move my home to Tahiti or hundreds of other beautiful places in the world. Which I’ll be doing this spring.

  19. Maximus Minimus says:

    Just want to throw up another question: “Does the housing bubble contribute to the decline of the real economy”? In other words, money tends to flows in the direction of the easiest and safest returns (and which has government backing) to the detriment of everything else.

    • Wolf Richter says:

      A housing bubble BOOSTS the economy. It’s good for nearly everyone. When it deflates, it kills the economy, and then it’s bad for nearly everyone.

  20. S1303 says:

    I fall into this group. My partner and I are in our early 30s, with a combined annual pre-tax income in the $325-350k range. We live in a downtown high rise apartment in a desirable tech city that we rent directly from the owner. Rent is $2800/month and hasn’t changed in the last 3 years.

    We often talk about buying a condo rather than continue renting, and we could afford it, but it just doesnt make sense to us. Buying something similar would run us in the $750-800k range: with mortgage, taxes, HOA dues of $500-600/month, and other unforeseen future fees/charges – we’re probably being subsidized to stay put and continue renting. I also think the RE market is significantly overvalued, and I know a number of couples that’ve bought places that I know are a stretch for them. We’re going to continue renting and saving, we like our place. I’ll be happy to buy once RE here corrects 30-40%.

  21. El Katz says:

    East Bay SFO.

    Purchased a house for cash in February 2010 for $345K. Daughter received first time buyer credit of $8,000, so actual cost was $337,000. Also received tax break on income tax (went from paying yearly to refunds). All told, paid in @ $24,000 in property taxes, $92,400 in mortgage payments. Insurance was another $7,000. All in, $124K. I left $121K invested. Total $245K cash/holding costs. Maintenance and improvements were negligible (the house was a foreclosure that the people had just remodeled prior to losing it).

    Sold for $600K (closed sale). She walked away (as it was her primary residence) with (after selling expenses) $225,000. I got my $121K back. She kept her entire profit per current tax law.

    Keep in mind, she was paying $2,800 a month for an apartment (2 bedrooms / 900 square feet) that is now over $3,000 in a similar neighborhood. She would have paid out $235,200 in rent with zero recovery.

    The cost of renting eclipsed the cost of ownership. She walked away with $225,000 in profit. I broke even (which was all I wanted).

    So explain to me how ownership is a bad thing? The comment against the older gentlemen with the guffaws about “50 years ago” no longer applying shows fairly narrow thinking. Go back through any economic turmoil and it was always those who owned real estate (and were able to keep it) that came out the best. Those that owned stocks and bonds got fleeced.

    My barn is on the market. I stand to walk away with $900,000 in profit on an initial $250,000 cash investment plus mortgage leverage. My payments and taxes are about $1,800 a month. The house next door to me rents for $4,800 a month. So tell me, again, how that’s a bad deal? And I get to invest that $3,000 a month elsewhere.

    • CrazyCooter says:

      When I drive my car, I use my rear view mirror.

      Best of luck in your driving career.



    • Albert E says:

      Like us you made the best of the later 20th century housing booms. You also subscribed to the ubiquitous debt is money paradigm. I’d sell the barn quick ;-)

  22. Ehawk says:

    When the Start up companies go belly up. A lot of those 150K households are going to disappear.

    By the way in SF. Fitbit stock just plummeted today 33%. HQ in SF.

    Looks to me like a lot of six figs jobs… will go poof once the charade stops.

    fitbit actually has a product… unlike Twitter… Apparently the apple watch low sales that Wolf reported was a sign!

    • CrazyCooter says:

      Twitter has a product – just not tangible in the physical sense – knowing what people want to hear, and if they respond negative/positive to information is valuable in a marketing sense.

      And it takes “big data” to process all this stuff and produce a product – which to be honest is the user – and sell it to advertisers/politicos/marketers.

      Same line of thinking applies to cell phones.



  23. CrazyCooter says:

    The biggest presupposition in this whole debate is do the high wage earners emigrate before it is all said and done.

    To be clear, this can be on a “state-to-state” level in the US, which is pretty common (i.e. folks leaving CA, IL, NY for TX, FL as an example), but it could be national too – which will become more common when it makes economic sense.

    I think folks who own property and think the future looks like the past should pay more attention.



    • Albert E says:

      ‘I think folks who own property and think the future looks like the past should pay more attention…’


      What consoles me is that our millennial poster seems to have a lot more sense than the baby boomers.

      Sure lots of us have done well out of property.

      But that’s because of the wizard.

      Don’t play their money is debt game.


  24. Coaster Noster says:

    I am an East Bay (SF) renter, but not because I want to be renting. El Katz is correct about the East Bay; it makes more sense to buy IF YOU CAN. Cannot comment on places such as New York, but here the rental rates are rising at a phenomenal rate! I have read, up nearly 100% since 2009.

    Anecdotal stuff is worth only so much, but..

    …it is common here for “all cash” to be the winning purchaser of tiny, modest homes costing $800K. The money pouring through the spigot from Asia, IMO, has not really diminished. A huge influx of Chinese in the last 20 years. And they bring their parents, so was admitted to me by a longtime acquaintance. Fixer in Oakland bought by my sister for her 30 yr old son, who must rent half of it to pay the mortgage.

    In an alternate reality, I would have stayed in that Santa Barbara bungalow I bought for $17k in the early 70s. The older couple across the street at that time, sold their house for $34k, thought they’d died and went to heaven…instead they moved to Arkansas…from Santa Barbara!

    We always assume what’s before us, will remain stable for two or three years. It never does, and seldom do we learn.

  25. Julian the Apostate says:

    I personally have never benefitted from owning a home. The most stable two years I spent was renting a 3 bedroom apartment for $275 a month all utilites paid. I had a good relationship with the landlord, it was a win-win. Then the ex started to lobby to buy. She settled on a trailer that was roomy due to add-on bedrooms. We had to pay lot rent, and because of the add ons the house couldn’t be moved. I lived like an ant on a hot rock that the trailer court would change hands and I would be told to move it. We got it paid off and that wouldn’t do, she wanted to move back to town. I came home off the road to discover she’d moved us lock stock and barrel to a 2 bedroom house in town. It was a land contract, and I was still paying lot rent on the other place. We ended up taking a 5k drubbing just to get out from under. Right in the middle of the whole damn show we had to replace the furnace. Paid that one off. Got remarried. Same show, though we were able to pay cash for the house it didn’t matter the place was a money pit. Men buy houses because their women are nesters. If you Millenials have dodged this particular bullet you’ve got my vote. Listen to advice, yes…don’t necessarily blow off advice from older folks – one day you will be old and shake your head at the kids. But your decision must be your own you are dealing with the facts on the ground. If you’re in a relationship make sure you’re both on the same page. If you’re good at the real estate biz knock yourself out, keeping an eye on your escape route when things go belly up. If you can live without debt you are not living some newfangled revelation you are echoing Ben Franklin. Nobody listened to him either.

    • Albert E says:

      ‘If you’re good at the real estate biz knock yourself out, keeping an eye on your escape route when things go belly up. If you can live without debt you are not living some newfangled revelation you are echoing Ben Franklin. Nobody listened to him either.’
      As Pedro says…
      Amen, Brother

    • Petunia says:

      I have owned 4 houses and only made 12K on one back in the 80’s. Overall they weren’t good financial decisions. I liked the freedom to decorate but I’m now over that. I don’t see myself owning again.

      Most people only compare the price they paid to the price they got on exit. They forget to include the excess expenses like insurance and upkeep which are much cheaper when you rent.

    • kitten lopez says:

      Julian the Apostate–

      huuuge smile to you. that was beautiful. i laughed at that nesting reality because my James makes me giggle when he unapologetically rants about the state of the world which he blames on women behind the scenes still pushing their men to get more and more ambitious crap.


    • andy says:

      Thanks for the advice, that was great!

  26. andy says:

    Well, it’s very simple really. When you make 150+K, you can rent for 3K and walk to work, or you can buy or rent for 2K + 2h/day commute to work for $300.

  27. ML says:

    Here in the UK residential property prices and rentals and issues around affordability seem to be similar to what the US is experiencing.

    Your comments remind me of the joke about the wife who told the landlord she wished that she and her husband could live in a more expensive part of London.

    So the landlord put the rent up.

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