Seattle Is a City With Hella Broke People


Balk's column was very interesting. I had two queries about all this:

* One is a nit: if the average rent was $1000 in 2011 and went up 57% in the past six years, how is the average rent now $1749? Isn't that a 74.9% increase?

* I wonder how many of the $50,000/year and under people are retired people, living on investment income, who fully own their homes? These people will get priced out by property tax increases, among other factors. Then their old, sometimes run-down homes will be bulldozed and magically sprout new, expensive houses instead of being sold to other lower income people.

Anyway, it's a thought.

Possibly that 57% increase has been adjusted for inflation?
Compound interest. At 9.5% per year it ends up at about $1750.
This all makes a lot more sense once you add back in the number Charles seems to have forgotten about: Seattle's median household income (perhaps he can ask Heidi about it, if he can remember where her desk is). This number is now above $80,000. 50% of Seattle's households are earning more than $80,000 per year.

Recall that it is the household on which the housing cost falls, not the individual. Now combine the median household income with the new tax return study to mathematically derive fact that Seattle has a lot of people in multi-income households filing singly, instead of filing a joint return for all earners.

This is a much less alarming conclusion, though. It adds up all too well. It is a molehill that is much harder to pile up into a mountain. Armed with this much more boring news, it will be that much harder to persuade the proletariate to rise up and make your socialist revolution for you.
The Bay Area is hella broke. Seattle is very broke.
@1 You're right. The correct increase is 74.9%. The error made is common and one of the reasons some do poorly on GMATs.
@6 - you just warmed this English major's heart :) I don't EVER get math questions right!

I think you mean Seattle is super broke.
#4 Looks like your capitalist paradise isn’t doing so well. Socialism is about sharing not too difficult to understand.
@4, if you had actually read Gene Balk's article, a quick glance at the individual and household income distribution graph would have nipped your baseless criticism of Charles' article in the bud.

A city of riches? Most Seattle filers make less than $50K, IRS data show…
There is clearly a huge demand for housing that matches middle- and working-class wages, but it's not being supplied.

Right, that is because the zoning laws limit the ability to meet the demand. Think of it like a cartel. Artificial limits are being placed on the production of new homes. One classic case is what happens when a housing lot opens up in a single family neighborhood. The demand is for middle and working class homes. This should lead to small houses on small lots, row houses, apartments or condos. But none of that is being built, because all of it would be illegal. In my neighborhood, where dozens of lots have become available, the maximum lot size is 7200 square feet. The builder builds as much house as will fit the lot, and that is a very big house. So rather than building a dozen apartments, or a half dozen row houses, or three small houses, they build one gigantic house, worth a fortune. That is all they are legally allowed to do. Artificial scarcity has lead to very high prices.

And at the same time, home prices are entering a sphere that's easily accessible to only about 4000 people.

You are forgetting the difference between wealth and income. Very few people can afford a half million dollar mortgage. They lack the income. But most of the home owners in this city don't have huge mortgages. Most of them have owned their homes for years. Many of the new buyers have sold their house in a different part of town, or a different part of the country, that saw similar price increases. Wealthy relatives or friends may help buyers, by chipping in as well.

There are also a lot of middle income people that are simply paying a much higher percentage of their income on rent or a mortgage. Just like people all over the world paid a lot more for gas when OPEC limited the production of oil in the 1970s.
Charles "the only good white man is a dead man" Mudede.

The chart in Balk's article compares single filers to joint filers, not individual income to household income. That data, combined with Seattle's median household income, is the basis of the observation I am making. Perhaps you should read it again, taking more time to consider the numerical reasoning presented.
It would be interesting to ask Gene Balk if there is a great deal of difference between joint filers and household income. I suspect there is not, especially in Seattle which has a huge percentage of single people and small families.

"Many of the new buyers have sold their house in a different part of town, or a different part of the country, that saw similar price increases." That doesn't appear to be the case in MY neighborhood, where almost all of the people buying brand-new $700K-plus homes are in their late 20's to early 30's.
@1 "These people will get priced out by property tax increases, among other factors."

If you're sitting on a million in real estate (or whatever) and can't scrape together the $900/month (or whatever) for property taxes, you'd be an awesome candidate for a reverse mortgage. You could get like 50% of the value of your house, which should cover those increasing property taxes for a dozen or more years.
"There is clearly a huge demand for housing that matches middle- and working-class wages, but it's not being supplied"

The fact that it (ie scale multi-family housing) is illegal on a majority of the city's residential land probably has a bit to do with this.

Seattle's median household income is $80k. I didn't invent that number, it comes from very reliable government data.

There might be other ways to reconcile that demographic fact with the tax return study, but the one I have suggested seems most likely-- that Seattle has many households with multiple earners filing separately.
Is there a city, in the world, that is as big as Seattle and has *fewer* broke people? I mean maybe Stockholm or something. That's about it!