The Census Bureau released data from the 2014 American Community Survey last week, including estimates for how people get to work, how expensive housing is, and how much money people earn. I’ll get to commuting data later this week, but today I’ll look at home prices and incomes. The 2014 American Community Survey is based on reports from more than 2.3 million households.
I’ve downloaded the tables showing median home values (B25077) and median family incomes (B19113) for states, urbanized areas, and the nation as a whole. To save you time, I’ve combined them into two spreadsheets: one showing both values and incomes for urban areas, and one for states and the nation.
Median home value divide by median family income is a standard measure of housing affordability, which has become an important issue again in Portland, San Francisco, and other cities. A value-to-income ratio of less than 3 is fairly affordable, as someone with a median income can buy a median home and pay off the mortgage in less than 20 years. Ratios above 3.5 are becoming unaffordable and above 5 are quite unaffordable.
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Nationally, this number grew slightly from 2.72 in 2013 to 2.75 in 2014. Hawaii is the least-affordable state at 6.7, followed by California at 5.8. The District of Columbia is also 5.8. Massachusetts and New York are well below those numbers but still pretty unaffordable at 3.9, followed by Oregon at 3.8 and Washington at 3.6. At the other end of the scale, Kansas, West Virginia, and Iowa are all less than 2, while Texas is 2.2 and Georgia is 2.5.
Among major urban areas, Santa Barbara is the least affordable with a value-to-income ratio of 9.6. Los Angeles is 7.4, San Francisco-Oakland is 7.0, Honolulu is 6.9, and San Jose is 6.8. Boston is 4.0; Seattle is 3.9; followed closely by Portland and Washington DC at 3.8. Dallas-Ft. Worth is 2.3 while Houston is 2.2, while Austin has made itself the least affordable urban area in Texas at 2.8.
Unfortunately, too many want to blame the wrong culprits for regional affordability problems. Planners insist that building denser housing will make it more affordable, when in fact density increases in the Bay Area, Portland, and Seattle have all been accompanied by declining affordability. The only real solution is to get rid of urban-growth boundaries and other restrictions on housing supply.
“…and above 5 are quite unaffordable.”
That depends on many things, doesn’t it? How much equity you already have amassed, the interest rates, your outgoings.
I live in a £200,000 house ($300,000) which I own outright without a mortgage. My income is £30,000 ($45,000) a year before tax. I just prioritised paying off my mortgage above fancy holidays, fancy cars, and all the other things which are apparently ‘essential’.
“The only real solution is to get rid of urban-growth boundaries and other restrictions on housing supply.”
I’m curious. How does the Antiplanner explain the higher cost of his house? (It’s certainly valued much higher than a house in Kansas, where one can purchase 180 acres along with a house for the same price. It’s certainly valued much higher than a comparable house in Medford or Klamath Falls or Pendleton.) Does Camp Sherman have an urban growth boundary? Is there a restriction on housing supply there (other than the fact that it’s surrounded by public lands)?
Or could it be that housing is more expensive because of demand and nearby amenities (such as being on a beautiful river, in a beautiful forest, having views of Mt. Jefferson, Three Fingered Jack, Black Butte, etc.)?
Good point Frank. I don’t comment as often anymore because let’s face it, these posts aren’t exactly fresh. I’ve been arguing Mr. O’Toole on his absolutist housing affordability stance for the better part of a decade now. We never see Antiplanners walk the affordability walk because most of Texas, West Virgina, Iowa and Georgia aren’t very nice places to live.
As I’ve said many time here, I will not argue that planning does not impact real estate values. However, I disagree vehemently that planning is THE reason for increased property values in America.
Frank and Bennett,
It is more than an axiom that if supply is constrained, or less than demand, ceteris paribus, prices will rise. If the Antiplanner’s home is more expensive than similar ones in other parts of the country, then the cause is likely that demand for that type of home, locally, is greater than supply for that type of home, locally. QED The causes of the suppy constraint are unknown to me, but the dynamic is truly that simple.
The Antiplanner makes a valid point that building denser within an urban growth boundary will not necessarily alleviate demand pressure and rising prices, especially if the demand is for free standing, single family housing on its own lot and not multi-family/higher density housing. Urban growth boundaries cause a shortfall of the type of housing people demand, free standing, single family houses.
Finally I address Bennett’s slur against TX, WV, IA, and GA. Economists say that there are two types of preference in human action: the stated preference and the revealed preference. The stated preference is just that, merely words. The revealed preference is what people actually do. The revealed preference about TX, WV, IA, and GA is that people move there and stay there at greater rates than places like Oregon, New York and California. The inference you can make is that for the value systems of those moving and staying there; TX, WV, IA, and GA are nice places to live. There is no accounting for taste.
Typo in the first sentence above, should read, “It is more than an axiom that if supply is constrained, or greater than demand, ceteris paribus, prices will rise.”
Believe me, as a Texas resident, I know. But “revealed preference” is based on the illusion of choice, much like Tiebout sorting. I’m stuck in Texas, I don’t prefer to be here. Seeing as so many Antiplanners live in Portland and not Houston, I suppose the “revealed preference” is that they actually love what heavy handed top down government planning creates.
And I don’t disagree that planning that restricts the supply of housing will result in the increased cost of housing. Nor do I believe increasing density will result in lower real estate prices (or less congestion). However, in many instances planning planning increased demand as well. It’s the biggest obstacle Antiplanners have to face. Despite all the anti-government harrumphing, people (particularly conservatives in the burbs) like things like zoning. It protects their vision of big houses on big lots from the like of Andres Duany. Mr. O’Toole’s argument can be flipped on it’s head with a little semantic trickery. You say “tomaaato,” I say “tomato.” You say “planning make housing less affordable,” I say “planning increases property value.”
“Good point Frank. I don’t comment as often anymore because let’s face it, these posts aren’t exactly fresh.”
Thanks. And you’re right. I’m just hoping one day, my questions will be answered by the author, so that’s why I keep asking—not to be snarky, but because I really want specifics.
“If the Antiplanner’s home is more expensive than similar ones in other parts of the country, then the cause is likely that demand for that type of home, locally, is greater than supply for that type of home, locally.”
OR the demand for the LAND upon which the house is built is greater than for land elsewhere. In other words, there is a higher demand for LAND on the sparkingly blue beautiful waters of the Metolious River with a view of a snowcapped 10,500 foot volcano than on the muddy and feces filled waters of the Kansas River with a view of nothing because it’s so flat there.
Again, nearby amenities seem and proximity to labor markets seem to affect land prices far more than government planners; and I agree with Bennett that there’s an effect, but UGBs have not been conclusively shown to be the largest effect. In the short term, I’d argue—again—that the number one influence government has on land and housing prices is through easy monetary policy.
“Despite all the anti-government harrumphing, people (particularly conservatives in the burbs) like things like zoning. It protects their vision of big houses on big lots from the like of Andres Duany.”
I’d argue that people, particularly statists (those who support government intervention in the economy, whether it’s in the defense market or education market or housing market or…), like zoning. Particularly in places like Portland where people go nuts when a developer wants to infill his private property and in the process gets permits to remove three 80-year-old giant sequoias (non-native to Oregon), two of which will have to be removed soon because they were planted way too close together.
Anyway, people want to tell other people in their neighborhood what they can and can’t do with their property. Does this increase property values? Maybe. But it’s an affront to private property rights, and IMO, these people should live in a private gated community.
Sorry for the tangent.
So why do you continue to live in Texas if you don’t prefer it Bennett?
I have this neighbor, a native Dallasite, she went to UT and then lived in Boston with her husband for ten years before moving to Houston. All she ever does is bitch, bitch bitch about living in Texas and hating it here. I ask her why do you persist here if you hate it so much? She says. “Well, my husband couldn’t get steady work as an architect up there. I found it really difficult to operate my business up there. We couldn’t afford to rear two kids and have pets in a decent sized home up there. And you know…., you have to worry about schools….” Why do you love Boston so much? She says, “They have four seasons and there aren’t any Republicans.” The problem with my neighbor is that her revealed preferences and her stated preferences are not aligned. The things that made her move to Texas are actually the things that she most prefers and prioritizes first. They are also what make Texas a nice place to live, for her, even if she does not realize it.
Once the Mrs. is done with grad school me and the fam are outta here! And you better worry about the TX schools. They just took Thomas Jefferson out of the history books down here.
Jardinero1, If I may interject. I don’t like where I live (Seattle) and would prefer to live in the country as I don’t like traffic and density. These realizations really hit me only after living here a few years. However, neither my wife nor I have been able to find work in the country.
As for Bennett, maybe he and I should switch places 🙂
Frank, an economist would say you have a higher revealed preference for your chosen line of work over where you live. Same for Bennett. He has a higher revealed preference for meeting his wife’s revealed grad school preference over where he lives.
Man, my experience is 180° from yours. I’m surrounded by kind, decent Obama supporters who want the local government to micromanage everything real property related, including paint colors and window types. The local community organization’s mission statement sums up this attitude quite nicely:
God help you if you want to tear down a 2BR/2BA “older home” and put something more modern and spacious in its place. And it’s ironic because their valuing of “older homes” and “stability” have forced out anyone with skin pigmentation darker than pinkish-beige (maybe pale yellow, too) from the neighborhood. 25 years ago it truly was a racially diverse neighborhood. Now it’s lily white, albeit the lily white who consistently pull the “D” lever every election. ‘Cause they’re so darned open minded and liberal. And rich.
“an economist would say you have a higher revealed preference for your chosen line of work over where you live.”
I guess. There are no positions open in my chosen line of work where I want to live. In fact, one place I’ve considered living has few jobs at all, and of the ones I might be able to land (I would be interested in being a server but have no experience and those jobs are competitive there), the pay is 30% of what I currently make. So I do prefer: to have a job and to have a full-time job above minimum wage.
”
We never see Antiplanners walk the affordability walk because most of Texas, West Virgina, Iowa and Georgia aren’t very nice places to live.
”
~bennet
Well, sheeeeet, if having a pretty view is driving housing prices than Appalachia would be right up there gradation away from Santa Barbara.
The “Community Survey” government program is valuable to social scientists, but is a civil rights tragedy. I would like to see a debate about whether the US Government can mandate that people answer questions — it is far from being a “census”.
By the way, I lie when I respond, so I wouldn’t take this mandated survey as “gospel truth”.