Why is housing near NYC far less expensive compared to towns in CA?
I saw in another post about how real estate in CA is super expensive because people there make a lot of money, with towns having median HH incomes of up to even 200k in some towns near Silicon Valley
This makes me wonder as there seems to be a lot of towns near NYC that have similar, if not much higher median income demographics, but compared to CA, housing around NY is relatively much less expensive. It looked like a very standard 2000 sq ft house out there could sell for nearly 3m, but a similar place would be about 1m or less in suburban towns near NYC.
Many towns in CA seem to be over $1000/sqft, but you rarely if ever see that anywhere near a 2 hr drive outside of NYC
Why is there such a large price/sq ft discount in NY compared to CA?
Is it mainly because it’s cold in NY for the majority of the year and there is more space to build homes but land is more scarce in CA, or are there other reasons?
Seems like a lot of people in NY, NJ, CT moved to FL these days
Genuinely don't know why you got MS, it's true. NYC metro area is seeing an exodus. People with families don't want to raise families in shit QOL areas. So they move. I myself am single, but am moving from NYC to Miami in a few days and don't intend on coming back.
If you're early career, NYC and other major hubs make sense for now. But a mid career professional who arguably is more valuable to the business, doesn't need to stay in a hub. Especially now with remote work.
But I'm also in sales so I work in the field, so I don't need to be in an office period. Same with vast majority of directors and MDs tbh.
Yeah by the same logic with high prices in CA being driven by high income and lots of people getting high pay, towns near NYC should also be much more expensive. Finance typically pays 1.5-2x what tech gets
I think it is partially that, but could there be something about the educational demographics of SF and NY that contribute to the pricing differences? I am not very familiar with either area, but I am guessing there could be a higher proportion of highly educated people in SF, versus in NY where there is likely a high number of highly educated people, but there could be a larger proportion of not-so-educated people comprising of the total population?
This could lead median incomes in the Bay Area to become much higher than in NY, so people in the Bay Area could afford more expensive housing
Cost of construction. At the end of the day, that is the real reason. CA is basically a fucking mountain range with some flatish land between the mountains and the water.
https://www.veranda.com/luxury-lifestyle/g1563/richest-towns-in-the-us/
The towns with the highest average household income above. Towns like short hills nj average 388k per household, which means lots of people there make way more than that too. Wondering why places like this have homes that barely push past $500/sq ft, but in CA nearly every town is easily over $1000/sq ft near both LA and SF.
I think it just comes down to more supply of homes and also more lots to build new housing versus its less available in CA, anyone able to confirm?
Property taxes are insanely high in NJ, over 2.5%. Helps keep a cap on values.
NJ property tax rate is 3x that in California.
Sure but CA homes cost 2-3x more for the same square footage so it’s still far more expensive and worse value in CA
This is not true when you are looking at apples to apples. West LA and the nicer neighborhoods of San Francisco are south of $1500 per SF for single-family assuming no view or very recent renovation, condos it is even less expensive per SF. Manhattan and Brooklyn equivalents are more expensive than this. Keep in mind those LA and SF properties do not have HOAs or maintenance fees above a 200-300 a month, if any (single-family usually none). They have parking included, more often than not two car tandem garage. The property tax starts at 1% of purchase price and is capped at 2% increases per year, if you hold long-term it will be pennies eventually.
Re: "value" I do not know where you are getting this.
Agreed, CA homes are quite overvalued compared to NY, or possibly NY is a bit undervalued. Random areas even in Georgia or Texas have gotten similarly as expensive for SFH
Nope, CA taxes are fixed to the sales price, NJ taxes are floating on market value.
I get CA has lower percentage rates, but when you look at dollar values for a 3000 sq ft suburban home, in CA it would cost easily around 3m+, and over 30k yearly in prop tax. Meanwhile in NY or NJ, 3000 sq ft would cost around 1m, similar yearly expenses maybe a bit less even.
But in California your property taxes can’t increase by more than 3% a year, even if your value skyrockets.
We’re just going to keep going with these threads, huh
I think it’s because there are a lot of nice towns in ny and ct so there’s a bigger supply of housing here compared to in west coast?
Tech people do not know how to value a home. They just have the money so they spend it. It is the only reason I can think of.
This is laughable. Go back to the drawing board and think of other reasons (like supply and demand) for the valuations. There aren't hordes of unsophisticated tech buyers overbidding for suburban tract houses.
Or perhaps it is because Silicon Valley harbors far greater wealth compared to Westchester or Bergen, experiencing higher demand from the wealthy and, consequently, rapidly escalating prices? After all, wealth is not just about salaries, but real estate, stocks, and equity.
I get this is an anonymous internet forum and the threshold for discussions and comments are not as high as real life. Having said that, the whole premise of the post is flawed. The ~$1000/ft pricing for single family homes holds true for the most expensive zip codes in the Bay Area. There are plenty of areas that in the Bay that are priced significantly less than that. I’m talking about within a 15 mile radius of San Francisco for example - not Sacramento.
Does Prop 13 have anything to do with this? Or, is that not a consideration given you are only thinking about the property taxes when you buy the home?
Prop 13 disincentivizes long-term owners from selling (they are paying next to nothing in terms of property taxes). Few buyers are thinking about it when they buy, how many high-end buyers plan on staying in one house for 30+ years to really take advantage of the law?
To that end, wouldnt inventory remain low due to prop 13 and of course now buyers with low fixed rates? Why would I buy a new home after 10 years or even worse 30 if my property taxes have 2xd+?
Uh they absolutely are considering Prop 13. This is a state where the value swings are HUGE. It's not uncommon for a home to double in value every 3 - 4 years. The average stint of home ownership is like 6 years or so. That's a 50%+ reduction in potential tax expense.
Biggest reasons imo: 1) New York City proper is a much more desirable place to live than SF proper, anecdotally anybody who has money in SF gets out immediately whereas in NYC you can throw a rock and hit a $10M townhome. 2) In the bay Area, "the city" is much less of a destination in and of itself... in New York, everybody in industry is going to be in the city, whereas in CA it's not uncommon for large companies to be in suburban outposts (Palo Alto, Mountain View, etc.)
how does point 1 explain why SF prices are higher
More people want to live in the suburbs => higher prices in suburbs
Caters to a different subset of individuals. The pricing in SF is due in large part to investors. You have higly paid tech workers who can afford 6 - 10K rents for apartments even in their 1st year of work. The revenue potential rises, the prices follow suit. There are always going to be people who want to own homes in SF and they are now in competition with investors who have incentives to not sell due to tax reasons, both property tax and cap gains, so the inventory remians low.
That's probably the first decent reason I've seen on here on top of the prop 13 aspect likely lowering inventory / disincentivizing people from wanting to sell.
But then SF proper still has super expensive pricing, it's nearly on par with NYC proper, despite SF being far less appealing so I'm thinking either bay area + suburbs are just significantly overvalued or NY and suburbs are undervalued, the income demographics of income in these areas should be quite similar, if not higher in NY
A long time has passed since the question was asked, but I wanted to answer it anyway. Where you are mistaken is here: income and wealth are not the same thing. While incomes in New York suburbs might be high, Silicon Valley suburbs generally lead when it comes to top-tier wealth. (Statistically.)
That extreme wealth drives up prices through the "marginal buyer" effect, though, of course, supply constraints are another factor.
In short: supply constraints + marginal buyer effect = exorbitantly expensive homes.
Any comparative square footage analysis need to take into account land-parcel size, not just home size. Some CA homes may seem to have a high price per square foot, but that price is really driven by the lot they sit on. Furthermore, I'd imagine because of nimbyism, zoning laws and the like, the average CA house in certain areas is sitting on a larger lot size than the average NY one. It would be interesting to redo your analysis based on lot size instead of house square footage and see how it lands.
I think it has to do with the value of the land itself rather than the size of the lot. Reason why is because you can easily find homes on larger lots in westchester for example where tons of homes sit on over an acre compared to anywhere near LA or SF bay area (gl to anyone trying to find a home with half or even a quarter of an acre out there).
For some reason ca land is just expensive af, in SV you can have a tiny 2000 sq ft suburban house on 0.25 acres selling for 3.5m, or an empty lot of 0.25 acres selling for 3m
True, NYC is ~16% zoned single family whereas SF is essentially doubled at ~31%.
Property taxes are very low in California and very high in the NYC suburbs. That depresses values.
Moreover, show your work. Why are we accepting the premise that housing in Westchester or Nassau County are meaningfully lower than housing in Ventura County?
op is being incredibly imprecise, comparing general NY and CA prices is apples to oranges. If we compare the relative neighborhoods for extremely wealthy NYC and SF residents, say Marin County vs. Easthampton, median price per square foot is comparable (~930 for Easthampton and ~850 for Marin) with NY on the higher end, as expected
I would not call East Hampton either a neighborhood or a suburb of NYC. No one is commuting daily from the Hamptons to NYC to get into the office at 9am. It is a place where people have a second home.
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At least in San Francisco, the MLS listing shows the size of the house (# of bedrooms, sf) per the permitted area. However, the majority of homes have in-law units that are just not permitted and thus do not show up on the MLS. That can skew the price per sf.
For example: 2 bedroom / 2 bath row house in SF at 950 sf. In reality, that is a 3 bedroom / 2 bath because the downstairs in-law is not permitted to be counted as a bedroom for MLS, plus add 300 sf. Does it look like a room, yes. Estimated value: $1.3MM.
For entry level homeownership, San Francisco is actually pretty good value.
Regarding school districts. In SF, school placement is by lottery system (to provide more equitable access to the best schools). In the Bay Area cities, such as Palo Alto, the school placement is by district. This piles more homebuyers into a limited geography to attain top school district enrollment. It is a major consideration for SF families with young children to get into a public school of their desire, or look at private school options or move to a city where they know where their kids will attend school. Palo Alto has a great public school district, but other parts of San Mateo County doesn’t, so that piles people to limited areas.
A few questions:
- are you referring to SF city proper or SF suburbs?
- that same logic on MLS applies to NY suburban housing inventory so SF on a per sq ft basis still seems much more expensive in comparison especially in suburban areas
- also vast majority of listings would be the same size regardless, doubt many listings factor in any in law units or basement in sf
- Isn’t nyc public school placement similar? Meanwhile ny suburban school placement is determined by proximity to school and there tends to be fairly good public schools in these areas as well
How come these are considered drivers for why housing pricing is much lower in ny compared to ca?
Was this post meant for the other similar-sounding topic about palo alto?
California has less developable land. You have the ocean on one side and on the other side a lot of the land is mountainous so either undevelopable or expensive to build. Land around NY is a lot flatter
So it does kind of come down to land scarcity .. seems like it’s the land that makes CA so expensive, a lot of land could go for millions out there
Supply of land is a good point, however what about demand? SF has a metro population of 7.75M over 7,000 sq miles (1,107 people /sq mile) while NYC has a metro population of 19.6M over 13,318 sq miles (1,471 people /sq mile). Comparable but NYC is still 27% more densely populated, would that not reflect higher prices? Totally possible that I am either under or over thinking this as well.
OP is right, most of the suburban towns near LA and SF are priced at around $1000 to up to even 1500 per sq ft. This isn’t focusing on “only” the wealthiest areas like Beverly Hills, it’s just how homes are priced out there. Land is scarce.
I’ve been in NY for a couple years but haven’t seen prices like that anywhere in the wealthier suburban areas nearby, aside from 5 hours out in the hamptons
LA “suburban” real estate is priced much differently than SF and SV. Not many people want to live in downtown and there is a giant amount of urban sprawl. While I’m not an expert in LA area real estate, I know several people with homes there and they are priced well below $1000 sqft - more like $650 - $750.
The Bay Area has plenty of zip codes with comparable or lower pricing vs. the quoted LA range.
Comparing NYC suburbs to LA and the Bay Area requires a nuanced analysis. Many SFHs in California are within a short drive or even walk of zip codes with concentrated job centers, which results in higher prices. In the Bay Area for example, you have multiple parts of just SF with its own concentration of job centers with SFHs nearby plus entirely different cities and areas like Berkeley, Oakland, South SF (this is a diff. city), and Silicon Valley.
This dynamic does not exist in NYC except in Brooklyn. Manhattan has the lowest concentration of detached SFHs in the country.
for LA at least
1- people dont want to live in downtown/urban LA like they do in NYC area. suburbs are more preferable even for young people
2-Once you leave manhattan proper, the prices are cheaper to LA suburbs because the weather/scenery is way worse. people simply prefer to live in an LA suburb vs NJ/Long Island suburb. Period.
Manhattan is more expensive than downtown LA. Suburban LA is more expensive than suburban NYC.
So far I've gathered the following reasons:
- Warm weather year round in SoCal versus cold most the year in NY, and somewhat warm but not that warm weather in SF
- Prop 13 in CA dis-incentivizing homeowners from wanting to sell so inventory is always low
- Scarcity of land and area to build homes leads to significantly higher land prices there versus ample supply in NY
- LA city is undesirable for many so more people move to suburbs, versus in NYC lots of people want to live there (but when you ask why isn't NYC more expensive, people say its because there are other housing alternatives like moving to the suburbs lol)
- Schooling systems are a lotto in SF which make public schooling more equitable but that may drive more people out to suburbs, but could say same for NY?
I am from Silicon Valley. SF Bay Area real estate is so expensive for three reasons.
1) Ignore the income data, most wealthy people here (and this can include software engineers, individual contributors, etc. who got in early at tech companies) make their money on stock options. When Facebook, Google, Tesla, etc. go public, thousands of employees become wealthy. Even afterwards, at established public companies like Apple whose share price as increased exponentially over the past 20 years, there are many white collar employees with long tenures who have amassed 8 figure wealth riding that wave.
2) Very little supply is built in the SF Bay Area due to lack of land and restrictive zoning (this is changing). Check out Palo Alto, Menlo Park, Atherton, where the tech elite live. Menlo Park calls itself a "village", Atherton even says it has "rural character". Try to put multifamily or even attached townhomes and residents act like the end of the world. Seriously, some wealthy Atherton homeowners cried and were shaking with fear at a public hearing when the city proposed apartments next to their houses alongside El Camino (a major 6 lane road). They said they were from the "poverty pocket" of Atherton...their homes were only worth $5m, not $15-30m like some other parts of the town.
3) SF Bay Area has probably some of the best weather, geography, and scenic views. World class surfing, skiing, wineries all within a few hours car drive. Outside of SF however, the restaurants and culture scene is pretty weak...but that's true of all suburbs including Westchester Co, NJ, and yes basically all of Florida. So demand is super high and people want to live there.
Number 2 is the real answer. There is a lot less supply per capita in San Francisco and the subsequent Bay area than famously super dense NYC.
All true but number 1 is the most effective, especially considering that many startups and unicorns in the suburbs pay in equity rather than salary.
People live in CA for the weather and beaches. People live in NYC because the busy city and walkability. Move outside NYC and you no longer have that draw but the weather is great throughout California.
Lol I find this post to be kind of funny. I’m from San Diego so not exactly the same places mentioned here but similar housing prices in some areas.
I think it’s just because in CA you have limited land to develop on, coastal cities with beaches and oceanviews, nice weather all year round and lots of jobs in the tech and media field that attract many people to the state so housing continues to increase in pricing. Only takeaway here is: when in doubt, just buy waterfront lol
I’m not entirely sure on this but it’s possible tech ended up creating more millionaires and in a faster period of time than in finance, or people just spend more on housing in CA than they do in ny.
People want to live in California/SV/SF/LA suburbs more than NYC suburbs. This is a function of the layout of the cities too.
Supply and demand genius.
Its just bc CA is nicer bro that's all there is to it
Probably a correlation with density, nyc is very dense for the US and gets dramatically less dense outside city. LA is far less dense and is probably has a lower density slope as a function of distance from the city
Couple reasons:
Good points - perhaps there should be more offices in suburban ny
I think plenty of people retire in NY though - look at all the older people in upper east, in the suburbs around ny, and if they don’t retire there they surely go to southern Florida as an alternative (boca, delray, miami suburbs). Where else offers a similar quality of life in the US?
Lol what? Practically every other New Yorker retires out in Southern Florida or in NY
A few thoughts from someone who grew up and lived in both area for a good amount of time. I strongly prefer Southern CA over anywhere else in the country. The older I’ve gotten the more I’ve appreciated the NYC suburbs when I go back but they’re not even comparable to what living on the west coast is in terms of quality of life. The quality of life in Southern CA has deteriorated substantially from my parents generation to mine as it has in a lot of other places but if you make low to mid six figures you can still have a decent life.
I should also add that foreign billionaires don’t dream of living in Westchester County or Greenwich. They do dream of having estates on the California coastline, Napa, Hollywood Hills, etc. which could also explain some of the difference. Some Chinese billionaire isn’t going to buy real estate in Scarsdale when he can just buy in NYC.
Southern California (Lived here 15 years):
Pro’s:
Incredible Weather (I golf and surf 12 months a year)
Better Nature (Malibu, Big Sur, Napa and Wine Country, Tahoe, etc. all easily accessible with the Grand Canyon, Zion National Park, Sedona, etc. easily doable on weekend trips)
Better Weekend Trips: Vegas and Mexico accessible in under 90 minutes, British Columbia within 3 hours, and Hawaii in the same time it takes to get to NYC)
Better Winter Destinations: Breckenridge, Vail, Aspen, Telluride, Park City, Jackson, and Tahoe all are better than anywhere in the US for skiing (Whistler and Banff are much more accessible from CA). Even Mammoth is better than anywhere I’ve went skiing on the east coast.
Better Food Across the Board: Tons of high end and highly rated restaurants all over the area (NYC suburbs people have to travel into the city to get great food as most options are generic as hell in the suburbs with places like Chipotle, Panera, and Noodles and Co being popular)
Better Qualify of Life
Cons:
Traffic (spend an hour a day commuting and it’s worse if you don’t live somewhat near where you work)
Public schools are trash (need to spend $40-50K on private school as a result)
If you want to join a beach club or country club you need to be a big shot (you can’t be a nameless faceless wealthy person because there’s too much money out here)
Smaller Living Area
Pain in the ass to build
Influencer culture (its a small subset of the population but these people are insufferable)
Fewer Opportunities at the entry and mid levels but have tons of successful people on top of their game here (I could see it becoming more like Miami if AI leads to significant job losses in that it will just become a playground for the rich)
NYC Suburbs (Southport/Westport lived here for 10 years):
Pro’s:
Incredible public services (have elderly relatives that have access to a boat load of services from the town most people have to pay thousands per month for from nursing homes)
Solid public schools
More value for space (you can get a decent place for $1-2M with space, which is basically a decent house in a shitty neighborhood or shitty house that needs to be rebuilt in CA)
Its generally a pleasant place to live (coastline and Long Island sound are nice)
Easier Access to Country Clubs (you can be a generic run of the mill finance bro and get into exclusive clubs like Wingfoot, whereas places like Riviera and LACC require you to be in the top .1%)
Better place to scale career
Cons:
Long Commutes in less than ideal conditions (Closer to 75 minutes each way, which even if your company pays for a car service sucks and if they don’t you’re paying $500-600/month to take Amtrak)
Lacking Culture (very whitewashed, elitist, and insular (nobody ever leaves or travel anywhere other than Palm Beach or the Caribbean))
Local Travel Options and Weekend Getaways are pretty meh outside of the Hamptons and Cape Cod, which you only have access to for 3-4 months a year.
Shitty weather (winter is mild comparatively to other places but still snows and you have to wear layers)
NYC is the only game in town for pretty much everything regionally (New Jersey sucks, Boston is okay to visit, Philly is pretty mediocre, Hartford is awful, etc.)
People are cunty (these people think going to stay at the Four Seasons in Tuluum puts you at risk of being kidnapped by the People’s Liberation Army and forced to work in a cocaine trafficking operation or that having even a single homeless person in your town is evidence that the end of the world is coming)
Developing new supply in those areas is basically impossible to do around SF. Nothing is easily approved at all, due to local opposition. It’s literally very difficult to push through any new development in those areas.
Easily done in surrounding NYC, thus land is not as costly.
Two years have passed, but I wanted to explain this.
New York suburbs generally offer fewer job and networking opportunities. Most of the money is concentrated in the city.
On the other hand, Bay Area suburbs are incredibly wealthy and expensive because they host the headquarters of the world’s largest tech companies, offering far more career and networking opportunities than New York suburbs. The main reason is that many of these suburbs are closer to the Silicon Valley than city center, which attracts high demand.
The Bay Area has a confluence of super high-paying jobs / income opportunities (VC, finance, AI, tech, etc), education (Stanford, Berkeley, Santa Clara, others), lifestyle (coastal access, biking/hiking, skiing, etc...) drivers, and a lot of city + suburban living opportunities where the wealth is spread (encompasses Bay Area peninsula, Monterey, Marin, Wine Country, etc). The main reason why property values are so high, mostly on the SF peninsula is because the land is already so infilled, there is nowhere else to build other than up, so existing properties become highly sought after. And even if you want to build something in the Bay Area, good luck banging your head against the city permit counter for a decade to do so. The NJ/NYC suburbs surrounding Manhattan look like urban sprawl compared to the dense nature of the Peninsula, so peninsula land is expensive, replacement costs are even more (especially on bay mud or near fault lines), and thus values continue to climb. Rents are super high given the high barriers to entry, which similarly support commercial values. And the area has been such a historically safe-sound place to put capital that investors here have much lower return expectations compared to adjacent markets.
It's supply and demand.
CA suburbs has wealthier residents---> Real estate is more expensive than NY suburbs.
Before you say "there is wealthy suburbs in NY too" let me explain.
As for wealthy suburbs:
Suburbs like Scarsdale (NY) or Rye (NY) stands out in terms of annual SALARY. ($600k a year)
However, CA suburbs, especially around Silicon Valley, is full of people who don't receive monthly or annual salaries, yet own a high percentage of stocks or companies.
For example, according to Google & Zillow, an average mansion in Bay Area costs around $5-10 million (cost even way more in Palo Alto, Atherton etc) and in Scarsdale it costs $3-4 million. It means the wealthy living in Bay Area suburbs are much richer and can afford more. If their annual salaries don't seem as high as those in Scarsdale, their income is more likely from companies, startups or stock holdings, not yearly paychecks.
And if you're wondering why not just affluent suburbs but also average-income suburbs are expensive, there are two reasons:
1) They are influenced by the luxury segment.
(If people with one-two million dollars can't afford a house in an upper-class neighborhood in Bay Area, they'll go to a middle-class neighborhood and drive up the average price there.)
2) The sudden increase in wealth in the Bay Area.
The percentage of millionaires in Bay Area has increased by 94% in the last 10 years (for comparison, this rate is 44% in New York). This sudden increase in wealth has caused home prices to skyrocket.
So, there is two reason overall.
1-) CA suburbs has wealthier residents than NY suburbs. (By net worth, not salary)
2-) Tech's wealth boom.
Is there any evidence of this at all? I mean, in the context of this discussion? It seems pretty intuitive to me that NYC has more millionaires living in and around the city than any individual city in California.
Well... i explained it. The proof is the price of both average and luxury homes. Upscale homes in places like Scarsdale or Greenwich usually start around $3–5 million, while in Palo Alto they often start around $12–13 million. The reason is simple: demand from ultra-wealthy buyers is much stronger in Palo Alto, meaning the overall wealth of residents is higher. This pushes prices in the luxury segment several times higher than in places like Scarsdale.
And yeah, New York certainly has many wealthy people, but most of them are concentrated in Manhattan, which is one of the reasons prices there are astronomical.
Again, is this true? The word "upscale" is doing a lot of lifting here, for example. Also, you sort of bring up one of the weaknesses in your argument: there are a lot of wealthy suburbs of NYC. A lot of supply. If there are only a handful of nice suburbs of San Francisco, then it shouldn't be surprising that there is upwards price pressure there.
As I said above, that applies to a single suburb, not all suburbs. It feels intuitive to me that there are more millionaires in and around NYC than there are in a given city in CA. The total in CA might be higher, but they're spread across several large, desirable places to live. For NYC, that's it - a wealthy New Yorker or New Jerseyite is far more likely to be concentrated in and around NYC than an equivalent Californian, who has two and maybe even three major metro areas to choose from (depending on the desirability of San Diego).
I mean, yes, several years ago the point was made upthread that one potential reason for NYC having less expensive suburbs is that most wealthy New Yorkers want to live in Manhattan, whereas essentially no wealthy Californians live in downtown LA or SF.
I just object to the idea that because wealthy Californians self-select themselves into a tiny number of wealthy enclaves, that implies there are more wealthy Californians in a given area. If there are a dozen fancy suburbs of NYC, and only 2 for SF, then it isn't surprising that the home prices in those two are vastly higher. It's a function of constrained supply, not the buyers themselves
Oh, wait. I understand what you mean.
First of all, I should have specified the Bay Area suburbs rather than California suburbs. When I said, “There are wealthier people in the California suburbs,” it may have sounded like I was referring to all suburbs in California, but I was generally talking only about the Bay Area suburbs.
Second, if you think New York suburbs are cheaper because the supply is more spread out, sorry, that’s not entirely accurate. In the Bay Area, residents are also distributed across a very large area, with some suburbs hours apart. Even homes far from Silicon Valley or San Francisco, sometimes two or three hours away in heavy traffic, are still quite expensive. This shows that people who are willing and able to pay these prices are spread across the entire region, not just concentrated in a few towns around Silicon Valley or San Francisco.
Furthermore, when I say that the wealthy living in California suburbs are more affluent, I mean that many tech billionaires and multi-millionaires own homes in Silicon Valley. On the other hand, although there are exceptions, New York suburbs tend to cater more to high-salaried professionals, such as a doctor in Scarsdale who earns $600k a year.
(And another indicator is the concentration of centi-millionaires in Silicon Valley suburbs, which is significantly higher than in most New York suburbs.)
PS: There is also a point where you contradict your own argument. You yourself said that millionaires in California are spread across various suburbs (Los Angeles, the Bay Area, Orange County, etc.), right?
Even though millionaires are far more geographically dispersed than in New York suburbs, house prices in California suburbs are still higher. That suggests the reason is not the dispersion of wealth, but rather how large their net worth is and how much they can afford to pay for a home in competition with other wealthy buyers.
In summary:
I think the common consensus is that this is the real explanation.
I was more making the point that wealthy New Yorkers are spread across a wider range of desirable suburbs. The Bay Area may be substantially larger than the New York Metro Area (and indeed is about 50% bigger according to Wikipedia), but there are a lot of really affluent enclaves around NYC.
I confess that I am not an expert on Bay Area real estate, but I do know that there are at least a couple dozen very, very wealthy towns in the NY area, so there are many options. That may be true in San Francisco too; maybe it is simply that Palo Alto gets all the press. However, you mention the number of centi-millionaires, and I think there is something to that - there are fewer very wealthy people (even considering the smaller population), but the wealth is more concentrated at the higher end. That would naturally lead to extravagant prices for the very upper tier homes, with a missing middle of sorts. You'd expect the most expensive suburbs to have huge pricing gaps with "average" ones, as the ultra rich self select themselves into a couple of enclaves. Whereas in NY, there is a broader and deeper pool of "rich" towns for people to live in.
The New York metropolitan area has a population of 15 million (or maybe more) while the San Francisco metropolitan area has 4–5 million. Isn't it natural for there to be more affluent towns in and around New York, given that the population there is so much larger? "There are lot of wealthy towns around NY" yeah, cause almost 20M people lives there.
"There are fewer very wealthy people (even considering the smaller population.."
That's not true at all. According to the Silicon Valley Index, the total liquid wealth in Santa Clara and San Mateo counties amounts to $1 trillion. (This figure excludes the wealth of billionaires.)
Furthermore, it does not account for non-liquid assets such as homes, cars, land, or shares in companies/startups that have not gone public.
On the other hand, in Westchester—the wealthiest suburb of New York—financial studies and data indicate that liquid wealth ranges between $200 billion and $300 billion. (While a more comprehensive study would be required for a precise figure, this range is financially plausible.)
In short, your entire premise is incorrect—with the exception of the point regarding limited supply. Supply is really low in CA, that's right. But this is not the only reason. There are literally trillions of liquid (1.1T) + illiquid household wealth in Santa Clara + San Mateo, over $2T if you include centi millionaires/billionaires' net worth as well.
There is, actually.
According to Silicon Valley Index, Santa Clara + San Mateo holds $1.1 trillion in liquid household wealth. (and the source itself explicitly states that it does not include the wealth of billionaires and their local investments.)
This figure also excludes startup/unicorn equity, houses, and land, since they are not liquid. Including non liquid assets and billionaires' wealth/vc investments, total wealth there is easily over $2T, likely to be even more.
Let me also add that there is no definitive household wealth figure for Westchester, Bergen, and Nassau; however, based on financial calculations and datas, it is reasonable to estimate that each falls within the $400-450 billion range. (You can check yourself if you want to.) Not even close to Santa Clara or San Mateo.
So yeah. There is a study. Household wealth is higher in Bay Area suburbs.
And as for the points you raised in your comment:
1-) Bringing up the number of millionaires in NYC is pointless, because the OP is not talking about NYC itself, but rather the New York suburbs. I mean..there is a difference between the city and suburbs, right?
2-) It is perfectly natural for New York City to have a large number of millionaires. We are talking about a megacity with a population of 8 million; therefore, it is entirely normal for it to have more millionaires than a city like San Francisco, which has a population of 1 million. It is simply a matter of mathematics.
This is akin to comparing California (38m population) and New York (20m population) state and pointing out that there are way more millionaires in California. Yes, there are more millionaires in California, because its population is larger.
I understood the point you are trying to make but you are conflating concepts and drawing incorrect conclusions, this is the case in many of your responses. And mate, why do you keep specifying “individual city”?
When comparing two affluent areas, let's say Hillsborough and Scarsdale, what matters is the wealth of their residents, not which city's metropolitan area they belong to. E.g. Indian Creek and Palm Beach are among the wealthiest suburbs in America, even wealthier than most of those in California or New York. The fact that they are part of the Miami metropolitan area rather than the New York or LA metropolitan area does not make them any less affluent. What matters is the wealth of the households living within them.
Or think about Hamptons. It’s considered outside the New York metropolitan area, yet it is wealthier than many New York suburbs. So if you’re looking at the concentration of wealth in a given area, it doesn’t matter which city's metropolitan region it belongs to; what matters is the wealth of the people who live in that little town or suburb.
And it's a known fact that significant portion of New York’s wealth is concentrated in Manhattan and Greenwich, and the surrounding suburbs aren’t automatically wealthy just because they’re part of the same metro area. This is the main thing that you need to understand.
Your argument that the New York metro area is wealthier because it has more millionaires doesn’t make sense either. With a population of around 20.11 million, it will naturally have more millionaires in absolute numbers. By that logic, California or Texas could also be considered wealthier than entire New York, (because both TX and CA has way more millionaires than NY. Not just the NYC but entire NY.)
So, if we look into it, New York metro area has roughly 750,000 millionaires, nearly 400,000 of whom live in NYC proper. That leaves around only 350,000 millionaires across the surrounding suburbs and wider metro area, with roughly 12 million residents.
Silicon Valley, by contrast, has around 200,000 millionaires among just 3 million residents. Its millionaire concentration is significantly and statistically higher.
PS: One more thing is that, Silicon Valley contain far more centimillionaires than the suburbs of New York. This can directly drive up housing prices. Areas with lot of centimillionaires attract significantly more demand from millionaires. Most millionaires prefer to live near (or even in the same neighborhood as) centimillionaires, seeking opportunities for networking, partnerships, and investment. This creates competition among millionaires for the available housing in those areas.
So, top-tier wealth such as billionaires and centimillionaires, attracts millionaires. This has always been the case.
It is also known fact that the suburbs of Silicon Valley contain far more billionaires and centimillionaires than the suburbs of New York.
"NY has more millionaires so its richer" I think that argument is completely wrong. NYC has 8m people, New York metro area has around 20m people, so of course it's going to have a huge number of millionaires. That's only natural for NY's massive population. By that logic, every town in California should be richer than NY, because California is the wealthiest state by number of millionaires and no other state is close to CA's wealth. Do you see how misleading it is to compare the number of millionaires without taking the population difference into account?
You should look at millionaires per capita, not total millionaires. If we're talking about total millionaires, NYC and NY metro is rich but CA simply has way more wealth overall.
PS: Also, both in NY and CA, you’d be considered a millionaire if you own a single family home and a car. so wealth isn’t measured solely by the number of millionaires.
All we know is that Silicon Valley is a +$10T dollar worth global hub, this means that the region is fueled not only by W-2 salaried employment but also by global investments, which leads to a greater accumulation of wealth, (much like in NYC's Manhattan, which is also fueled by global investments, not salaries.)
The suburbs of New York, however, settle for only a portion of the global capital that flows into Manhattan; they do not attract the same level of investments from other countries/global elites as Silicon Valley does. It's like we are comparing a 10 trillion dollar worth global hub with some high income suburbs, which one you think has more capital in it, considering all the global money too?
(Greenwich is an exception. It's the only suburb in the New York metro area with its own major hedge funds, VC hubs and investment activities. That's why the average home price is at least $2.5 million, similar price with Silicon Valley.)
Quite a bit of time has passed since OP asked this question, but I wanted to answer it.
It is true that supply constraints affect housing. After all, California has very mountainous terrain, making it difficult to build homes.
However, there is a factor no one considers: total wealth.
Salary and wealth are not the same thing; while New York suburbs (Westchester, Bergen, and Nassau) might stand out in terms of average salaries, Bay Area suburbs—especially Silicon Valley—are far ahead when looking at top-tier wealth.
If there is an extreme concentration of wealth in a region and supply is limited, prices inevitably skyrocket. (In economics, this is known as the "marginal buyer effect.")
So, how do we know there is such immense wealth in Silicon Valley? Well, the combined wealth of the nine richest individuals in the region is $650 billion. That figure applies to just nine people; just imagine the total wealth across the entire region. In contrast, no New York suburb holds that level of accumulated wealth; such wealth is concentrated in Manhattan, not in Westchester, Nassau or Bergen.
For a similar comparison: the combined wealth of the ten richest residents in NY suburns is around $100 billion—keep in mind, the figure for Silicon Valley was $650 billion.
Of course, one cannot analyze the entire region's housing market based on just nine or ten individuals. However, this statistic offers a clue: even if average salaries in Silicon Valley appear similar to NY suburbs, the wealth is more concentrated at the very top, driving up prices through the marginal buyer effect.
Instead of downvoting, you could have just asked AI or Google if i were right, lol.
It is surprising that almost no one has given the real answer since 2023.
Yes, geographically, California is a mountainous region, which limits housing supply. However, there is another crucial factor: extreme wealth.
According to the data, the top 10% in Silicon Valley hold more than $700 billion in liquid wealth. That doesn't even include stocks or other illiquid assets, just liquid wealth.
As for the available financial data, the total wealth of Westchester County, one of New York's wealthiest suburban areas, is estimated to be around $700 billion.
So, the bottom line is this:
The wealth held by the top 10% alone in Silicon Valley exceeds the total wealth of all of Westchester County.
This illustrates the sheer magnitude of extreme wealth concentrated in Silicon Valley.
And when you look at New York suburbs that are less affluent than Westchester, such as Bergen or Nassau, the gap becomes even wider.
So, when comparing real estate markets, average salary isn't the only factor that matters, because wealth encompasses much more than annual income. In areas where extreme wealth is concentrated, like Silicon Valley, and housing supply is limited, it is natural for real estate prices to be extremely high. We see this not only in the SV, but in many other places as well.
The bay area prices are driven by a mix of prop 13, h1b culture (who buy at any price to show relatives back home) and random corporate/back office jobs (not just engineers) paying much more than NYC. The same firms offer much more RSU in that area than NYC, where they mostly compete with banks.
In Manhattan the prices are driven up by wealthy investors (both local and foreign) who don't work in jobs and sometimes don't live there, not by the local labor market. They also bid up prices in specific hotspot suburbs like Greenwich or Alpine, but not in random suburbs. It's worth comparing to Boston, DC and Miami where the home prices are pretty close to NYC but these random jobs pay far less. The money comes from wealth, not from local incomes. For foreign investors it's also a good way to evade taxes in their home countries.
That is a valid proposition. The impact of RSUs (Restricted Stock Units) cannot be overlooked.
And the household wealth also matters. The total liquid wealth in Santa Clara and San Mateo counties amounts to $1.1 trillion. According to the source, this figure does not even include the wealth and investments of billionaire class. When you add liquid assets, non-liquid assets, and the wealth and vc investments of billionaires, the total private wealth in the region easily -exceeds- $2 trillion.
No suburb of New York (such as Westchester, Bergen, or Nassau counties) possesses this level of household wealth. Westchester, for instance, may be an affluent area, but its total wealth, based on financial data, is around $400–450 billion. It simply cannot be compared to San Mateo or Santa Clara.
Actually, there’s a super simple answer.
Wealth and salary is not the same thing.
According to Silicon Valley Index, Santa Clara + San Mateo holds $1.1 trillion in just liquid wealth. Also, the source itself explicitly states that it does not include the wealth of billionaires.
This figure also excludes illiquid assets (startup/unicorn stocks, houses, shops and land.) Including liquid, non liquid assets and billionaires' net worth/vc investments, total wealth there is min $2T and max $3T.
There is no definitive household wealth figure for NY suburbs like Westchester, Bergen, and Nassau; however, based on financial calculations and datas, it is reasonable to estimate that each falls within the $400-500 billion range. Not even close to Santa Clara or San Mateo.
And one of the other factor is that the Silicon Valley is minting new millionaires much faster than New York, statistically. This sudden demand puts further strain on an already extremely limited supply.
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