High-income job losses are cooling housing demand

The current housing costs (price + interest rate) just seem so out of line with the average household income it boggles my mind it hasn't cooled alot more already.

At $84k average household income, assuming 1/3 going to a mortgage would give you $2.3k a month to work with. At 6% interest rate, assuming 20% down payment of $70k, you can just manage a $350k home and that is ignoring taxes, not adding other closing costs, not considering utilities, assuming an interest rate on the lower side and assuming a 20% deposit.

Add tax and that gives you around $1.7k to work with. Assume only putting down 10% and adding in $400 a month to cover utilities then you can manage around $175k home. That rules out buying a house in alot of the US.

And yes, households in more expensive areas make more but if you are buying the average house, that costs $410k you need to be making like double the national average income to stick to the 1/3 rule. How many households are earning $170k where houses are $410k?

Are people just devoting 50%+ of their income to housing? Everyone buying a house with the help of mom and dad? I just really don't get it.

Can confirm via my own experiences. Had a job in a SV firm, and paid just barely enough to try and get on the housing ladder. Four years and a 40-60% price increase later, and I got laid off without managing to successfully buy a home.

Since the layoffs, I’ve taken a sizable paycut (~$75k TC) to make ends meet with whatever I could find, but kept a pulse on the market in case things turned around. Locally, rents have gone down by ~$100-$500 a month (depending on when you renew) with one to two months free rent, while home prices have finally stopped rising. Homes are staying on markets longer, and bidding wars have dried up. I get about one to three price cut messages a day from Redfin, though nothing in my area or price range post salary cut.

Unfortunately, I don’t expect this trend to continue. My landlord just introduced a new RealPage-alike to keep rents high, local developers have put a hold on new housing construction as resources get consumed for AI datacenters, and the same old red tape blocks meaningful progress in addressing availability gaps. The only real bright spot is that renters are pushing for statewide rent caps and controls with better progress than ever before, so there might be some relief in sight next election.

It’s bad out there, ya’ll.

I've had a high-income job (career?) for two decades... and while I'd love a house, the realized demand is zero. The thumb remains. Case in point, the RTO fad. No certainty. I know at least three executives who were forced to move after building new homes.

Boston is seeing some headwind especially from slowdown in biotech, the main driver of growth over the past decade or so. Rents are also down. However, worth noting supply is still constrained especially if you exclude replacement-ready homes.

I'm teetering on the edge of being able to afford a small condo (a small SFH would be nice but not as much supply) in the Bay Area (SF).

However, I keep thinking about how someone I know was laid off last year only two months after buying their first home.

I'm a SWE making OK money here but not FAANG/unicorn-level, so it's tough to imagine buying and then being on the hook for a mortgage without a job even with some savings.

Sad to see Healthcare and government employment growth outpace everything else. If we're all nurses or regulators who will build our country?

Recently sold a condo I had in NE California. When I first bought there ~8-9 years ago, a town near by had old railroad cabins for ~100k or less. As the housing / migration boom to Reno took hold, those cabins are now in the 2-250k range. The median income in the county ~40k.

The town I was in saw prices for something that was ~175-200k 7-8 years ago peak at around $425k in 2023/2024 and now "cratering" into the low to mid $300ks. Median income hasn't changed, just people with 2nd/vacation homes and wanting to offload them due to the economy.

From the article:

> The Bay Area continues to lose jobs across high-income sectors (-0.4% YOY), driving modest overall employment declines. These job losses have slowed compared to a year ago but remain negative YOY. Despite generating substantial spending and wealth, the AI-driven tech boom hasn’t added meaningful employment to the region.

40 percent of transactions in NYC were done with no finance contingency ("all cash") in the last year.

That's a record and it's vastly more than years past. We live in a world where people with vast assets are beating out people who rely on job income for things like housing.

The stock market exploded the past year, and there's your bifurcation: those with assets and those without - getting worse.

The post doesn't have housing data to back up the claim, but the job growth by city is interesting. HCOL cities like DC and SF in the red, as you would expect. Government jobs down in DC is expected, but mostly green in other cities? What is Philly and New York doing right?

But will lower demand coupled with still high interest rates actually lead to reduced housing prices?

There's an interesting housing arbitrage happening right now. Townhomes are still selling for over asking, but single family homes -- ones that older, middle-management types would live in -- aren't receiving competitive bids.

We (me and my spouse) made an offer for a small condo and then next week company started the layoffs. Luckily we were not in that position where we spent all our savings and ended up in a position where paying mortgage would have been a huge challenge. It's been a year, have a job but uncertainity is very high. Loosing a job now means finding the next one is not very easy and no certainity that it can be a matter of month or two. We made a decision that since we have enough to pay for the downpayment and enough to pay a year of mortgage, we would not go and buy a house in Southern California. It is better to live in rented property but not safe to be in a position where you loose the property.

We're in a recession.

Stating a 20-year trend like it's a new development :P

Any evidence if this is global trend in developed countries?

Anecdotally, in my corner of the Silicon Valley, I've been looking to trade up homes from my 7/10 district to a nearby 10/10. Over the last year, I've seen the comparable properties in 10/10's rise about 10%, while my 7/10 has gone down about 5%. Both areas are very short commutes to high tech.

If this - "High-income job losses are cooling housing demand" is true, doesn't this mean UBI would never work?

The illustration is misleading because it forces things into three buckets, two of which are colored to indicate "not good". But still, that bottom right corner of the graph is telling.

Also pretty disgusting to me that healthcare is "growing faster than normal" across the board. You'd think it'd be "growing the normal rate" at least somewhere. It's not like population is growing faster than normal across the board. Isn't 20% of the GDP enough for an industry that's fundamentally a cost center of society? Wars have been fought over less.

Crashing the economy is of course going to have knock on effects. I don't think anybody should be surprised by this?

Housing is essentially a bottomless pit when the economy is good, it can sink any amount of money because it is an absolute necessity. So when people have money they'll use it to bid against each other for a scarce resource. But when the economy pauses or even starts to shrink then that surplus evaporates and one of the first indicators that this is happening is the demand for housing. Usually the result will be some price adjustments and after that it is business as usual. But if the cuts go deeper then there may be more substantial effects.

The only thing that is holding the US economy afloat right now is the fact that there are still a couple of levers of power that Trump hasn't gotten his fingers on. When and if that happens I fully expect things to go into freefall.

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why am I getting more "403 forbidden" responses from websites as time goes on? at some point "website protection" stops adblocking users.

A drop in housing prices might be the only silver lining if an actual recession hits (whether the official statistics will actually admit to a recession is debatable of course).

That said, even if housing prices drop materially and eventually bottom it will provide little opportunity for "normal" folks to buy in if they're jobless. Will be interesting to see if Fed interest rate cuts translate to mortgage rate cuts, and whether those rate cuts lessen any price drops.

I've said this before on here, but the historical price-to-income for housing has been something like 4x. Today it's 7x (that is as insane as it sounds). A long way to revert to the mean unless you really think "this time is different."

Shame we can't lower prices because people who "buy" things are leveraged out of their minds. Sounds like a pretty stupid way to do things.

My parents and grandparents were decidedly blue-collar and new middle class from the late 60's to mid 90's, and my grandfather, a mechanic, bought a new home on the Los Gatos border using the GI bill. It requires an income of about 600k USD to afford to buy housing where I grew up. I'm basically solid lower class in the southwest corner of the Texas Triangle now.

The main problems, as I see them, are the protectionist limitations on new supply, unfair importation of immense overseas' and out-of-state wealthy individuals' wealth causing gentrification, and the absurd inequality of wages into extreme power law distribution by the cheapening and decline of labor due to under-restrained capitalism.

I hate it when Trump or whoever touts all the jobs created because I'm sure most of those jobs are of the low-wage variety and aren't really helping anyone. It doesn't matter if a bunch of part-time, crap jobs get created while high paying roles are headed to India or just disappearing.

The government does nothing but lie to our faces.

As far as housing goes, if we do managed to deport 20 million non-citizens, that should at least help some. Oh yeah, yeah, it's so inhumane to disinvite all those folks whom the NGOs and mega-church charities took advantage of and trafficked here. Every one of those people had dollar signs on their backs for someone else. Now we have an affordability crisis caused by government fiat printing and these never-ending scams moving people around the globe. Good times.