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
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.
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
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.
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:
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