How does housing costs and wages relate across the country?

Question

Hello,

It's well known that prices of houses are very different in various parts of the country.  It seems like houses are cheaper in the Southeast of the US, but wages are also lower in general in those areas.  My understanding is that places like New York are expensive but wages are also higher there.  I make sense of this by thinking the same percent of your job wages are going to housing, so in a way it all equals out in the end.  Assuming that was the case, it always made more sense to live in a place with high wages and high cost of living because if the same percentage of your wages went to savings, you would have more savings. It makes sense to me to retire in the Southeast of the USA like Florida because houses are cheaper and since you are no longer working (retired) your money simply goes further there.  If you have no money coming in, just live in the least expensive state, makes sense.

I don't understand why Florida has inexpensive housing if it's bases on supply and demand.  They have a high population density.  Wouldn't a high population density show demand and therefore raise the cost of housing?

More confusing is that the relationship of high wages/high cost of living  and low wages/low cost of living simply does not happen in a ton of places? Most places?  Its confusing as to exactly how this works out.  I currently live in Minneapolis and I like the idea of moving to Denver.  The current average house in Denver is about 200k more than Minneapolis.  Also, I'm a plumber and when I look up average wages of plumbers, they make like 7 dollars less per hour in Denver.  If I moved there, it would be a negative in the both ways.  I feel like I've never truly wrapped my head around this concept.  I can understand that more people want to live in Denver than Minneapolis so it has a higher "demand." But where it gets confusing how this all works out big picture over time is that you need a large percentage of low wage and medium wage workers to make your city function. Logically, more of your wages are now going just to housing, so you won't be able to spend money on other things, so it would seem logical that certain not as essential businesses won't exist in that city.  Also it would make sense you won't be able to save as much money because all that is now going to the cost of housing.

I could move to San Diego and be even worse off.  I could buy 3 houses in Minneapolis compared to the price of 1 in San Diego, and to add insult to injury make the least at my job.     Somebody must be gaining for this?  Are the people who really profited from the this the original buyers of the property before it skyrocketed in value?  Does the disparity between rich and poor grow that much more in places with low wages and high cost of living?  I've been confused on how this all works.  I've never really understood how most people ever buy a house in California.

Thanks

Dan H. · Answer

San Diego definitely does not have high incomes.   I suspect our income is close to Minneapolis income but I am too lazy to look it up.   In San Diego, we refer to the local disparity of income to housing costs as the sunshine tax.   For marginal income occupation (I do not consider plumbers marginal income), they sacrifice to live in San Diego.   Those occupations often live at higher densities.   It is not unusual to see occupancies greater than 2 per BR for these marginal income people.   Some do not have cars.   Their savings is small or non existent.  They do not have an easy life, but they choose to live in San Diego and suffer the sun shine tax.

Our units we require 3x rent to qualify because we do not want the tenant to be so on the edge of what they can afford that if anything goes wrong they are deciding between paying the rent or purchasing necessities like food.  What we see sometimes is that it takes more than 1 income per BR to meet this income limit.   Example a 2 BR at $2k rent will sometimes require 3 income producing residents to have verifiable income above $6k.   These are people like gardeners, maids, retail sales.   They are paying the sunshine tax.

San Diego is not the place to move if you want a high ratio of income to housing costs.   if you want outstanding weather, diverse environments within a 1.5 hour drive, beautiful ocean, beautiful mountains, beautiful desert and are willing to have low income to housing costs for these items (the sunshine tax) then San Diego could be for you.