By Morf Morford
Tacoma Daily Index
My wife never worked in real estate, but she is a hard core residential real estate nerd.
Her favorite weekend activity was attending open houses in our neighborhood.
For many years we would pull up in front of a house that was being shown and we would estimate the asking price; we would be within $5,000 probably ninety percent of the time.
A home’s asking price might be 30 – 40 percent greater than a year or two ago.
And bidding wars might raise that outrageous price by another ten, twenty or even fifty thousand dollars.
Or even more.
It’s not just here.
Nationwide, the number of homes costing over one million dollars rose by 81% in ONE year.
In my immediate neighborhood, two years ago, the baseline price for a home was $300,000. In 2021, it is $700,000.
In other words, two years ago, you could find a vintage home in a nice neighborhood for $300,000 or a bit more.
In 2021, good luck finding ANYTHING under $700,000.
And Seattle is worse.
More than 28% of homes in Seattle cost OVER one million dollars. (Statistically speaking, that’s almost one out of three).
That makes Seattle the seventh most expensive city, after San Francisco, Los Angeles, San Jose, San Diego, Boston, and NYC when it comes to real estate.
And, in 2021 at least, almost one out of four home sales in Seattle are all cash.
As in every other category, Tacoma is not Seattle.
“Only” 8% of homes in Tacoma are priced at one million dollars or more. (8% means eight out of a hundred – or one out of every twelve. Could one out of twelve homes in Tacoma really be worth a million or more?)
To see a ranking of not-so-large cities by the percentage of million dollar homes, prepare yourself and look here – https://infogram.com/luxury_30-small-us-cities-1h7g6k097nz5o2o.
For a little perspective, the median home price in San Francisco is $1.5 million. So it is no surprise that this city has the highest share of homes above $1 million and the highest percentage of high-end properties priced over $3 million.
Los Angeles dominates the ranking when it comes to the share of high-end homes for sale above $5 million.
And, besides Tacoma, at 8%, five mid-sized cities have a share of luxury (million dollar-plus) listings above 10%: Glendale, CA; Huntington Beach, CA; Oxnard, CA; Salt Lake City, UT and Frisco, TX.
Three big cities hold more than half of all available housing above $1 million: San Francisco, Los Angeles and San Jose.
Stepping up a bit, to the $3 Million dollar category, Boston takes the second spot, right after San Francisco and followed by Los Angeles. Two more cities, New York and San Diego, average prices of $3 million that represents more than 10% of the total available inventory of homes for sale.
Los Angeles is the only large market where more than 10% of the available housing inventory is at least $5 million.
Los Angeles suburb Glendora, CA stands out, with 41.2% of its available homes for sale with prices around or over $1 million.
If you’d like to confirm or see more on these housing value details, take a look here: https://www.point2homes.com/news/us-real-estate-news/luxury-homes-cities-ranked.html.
It’s difficult to look at these numbers and the seemingly relentless trends in the housing marketplace and not wonder where it is taking us.
Property taxes are based on selling prices of homes. What happens when property taxes become, even for a home that is fully paid for, a dominant expense?
And who could afford a massive mortgage payment AND a huge property tax?
Illness, loss of employment, divorce or a dozen other challenges (economic or otherwise) could lead to a housing crisis (at least in dollar value) like we have never seen before.
Builders, developers and even current home owners have an obvious stake in increased real estate evaluations, but for everyone else, the climbing prices are making home ownership an ever more difficult stretch – with many permanently excluded from what had been the ultimate benchmark of participation in the middle class.
In a cruel, and seemingly inevitable economic symmetry, as prices increase, so does the number of homeless.
I don’t know about other areas, but in Seattle and Tacoma, housing construction projects seem to be everywhere. And they sell almost immediately – often long before completion.
Who buys these places?
Who can, like one fourth of the buyers in Seattle apparently, pay all cash for a home?
Of if not, who can pay $5,000 (or more) as a monthly payment?
If housing costs should be one third of your income, that’s an income of, at minimum, $15,000 a month – which is about $200,000 a year.
How many young families can do that?
I used to believe that the traditional supply and demand formula applied to housing – and that more housing would by necessity, almost magically, lower the market price and make home ownership increasingly accessible to first time buyers.
Such is obviously not the case.
More housing is being built – and being sold (though not necessarily occupied) and the prices keep climbing.
It’s difficult for me to believe that more housing in the luxury category is doing anything to address any of our housing or social issues.
There is obviously money to be made in this market, but as with any “hot” market, the question must be, for how long?
And at what cost?
If my house ever passes the million dollar marker (not likely), then what?
A common statement by recent home buyers who bought homes a few years ago is that they could not afford their own home currently.
I could not afford my house at current prices. I just hope I can pay the property taxes a few years from now.