One of the great benefits of being an investor is that sometimes you can earn more from your investments than you do from your day job. After doing this for several years, you may even begin to wonder what the point of so much work is!
According to Zillow, home value appreciation in 2021 exceeded median wages in 25 of the 38 major metropolitan areas. In 11 areas, house price appreciation was greater than $100,000.
With millions of homeowners making more from their homes than their salaries during the pandemic, we may be able to avoid a recession after all.
Metropolitan areas with the largest rise in house prices above wages
The largest house price increase in absolute dollars came from the San Jose-Sunnyvale-Santa Clara region: $229,277. Not bad compared to the median pre-tax income of $93,000 based on data from the Current Population Survey Annual Social and Economic Supplement.
It is not clear whether the median pre-tax income is per person or per household unit. Probably the latter. According to the US Census Bureau, the median household income in San Jose was $117,000 as of 2020. Meanwhile, 23-year-old graduates will receive a $150,000 compensation package from big tech.
While many people think San Francisco is dead or dying, the San Francisco-Oakland-Hayward area did just fine in 2021, with home prices up $204,914. The median pre-tax income in 2021 was believed to be just $75,000, which also seems very light. If the data had focused only on properties in San Francisco, the absolute appreciation of the dollar amount would have been higher because the median price is much greater than in Oakland and Hayward.
It’s good for San Francisco to be in second place because nobody cares about second place, only first place. The city becomes more stealth. If you’re an existing homeowner, you don’t want nationwide publicity. Otherwise, politicians will be pressured to do more to improve affordability, for example by raising property taxes, streamlining permits, boosting construction, etc.
As a homeowner, you want your politicians and the people who work in the construction department to be inefficient. You may even want some corruption to set in to really slow down the permitting and building process.
The more difficult it is to get a permit for your renovation or new construction, the less housing supply there will be. Politicians and city officials have done a great job suppressing the supply.
Growth chart for home value in the metropolis
Overall, the median home value in the United States grew $52,667, or $2,667 more than the assumed median pre-tax income in 2021. Meanwhile, the median rent grew ~16% or $3,072 in 2021. So if you are a real estate owner or investor, you benefited from both sides.
Below you will find more details per urban area. Tampa-St. Petersburg-Clearwater showed the highest absolute rent increase in dollars at $5,292. That’s impressive, considering the average house price in Tampa, Florida in 2022 is only about $375,000.
Therefore, if you follow the BURL rule for investing in real estate, you must put the Tampa area on your list to invest.
Metro Area Home value growth December 2020 – December 2021 Median pre-tax income, 2021 Home value growth minus median income2021 Full year increase in rental payments Occupation that yielded income closest to 2021 Home value growthUS$52,667$50,000$2,667$3,072Directors, religious Activities and EducationNew York– Newark— Jersey City$63,928$60,000$3,928$4,656Criminals Los Angeles–Long Beach–Anaheim$131,979$50,000$81,979$3,ville–Elgin$34,918$57,000-$22,082$2,028Other Protection WorkersDallas–Fort Worth– Arlington$69,488$50,000$19,488$3,156Human Resource SpecialistsHouston– The Woodlands–Sugar Land$45,250$50,000-$4,750$2,004Dental Lab Technicians$56Washington,$75,000$adington, $75,000 Arlington Operators, Underground MiningMiami–Fort Lauderdale–West Palm Beach$40,000$32,053$40,000$32,053$ specialistsPhiladelphia– Camden– Wilmington$39,994$60,000-$20,006$2,160 Food Preparation Supervisors and WaitstaffAtlanta– Sandy Springs– Roswell$73,036$450,000$Scottsdale$103,470$52,000$51.4 70$4,644Educational Administrators, K–2Boston–Cambridge–Newton$76,616$66,852$9,764$3,948Arbitrators, MediatorsSan$5,740$129.9,CA,740$129.9, CAwardHayFrancisco-Oakland Ward,740-Oakland Ward internal medicine physiciansRiverside–San Bernardino, CA145,000$-111,6060 transportation workersDetroit-Warren-Dearborn, MI$29,675$57,000-$27,325$1,644Gambling workersSeattle-Tacoma-Bellevue, WA$131,129$65,000$66,129$3,816-Stuter- and Information-Researchers . Paul–Bloomington, MN-WI$39,942$60,000-$20,058$1,020Gambling OfficersSan Diego–Carlsbad, CA$160,493$54,703$105,790$4,932Computer and Information Systems AdministratorsTampa–-St. Petersburg–Clearwater, FL $74,754 $46,000 $28,754 $5,292 Criminal Justice Teachers, Postsecondary Denver-Aurora-Lakewood, CO $108,922 $65,000 $43,922 $2,928Electrical EngineersSt. Louis, MO-IL $27,741 $50,000 – $22,259 $1,428 Cooks and Food Preparation Workers $20,254$4,380Set and Exhibition DesignersSan Antonio–-New Braunfels, TX$54.769$46,966$7,803$2,292ConsultantsPortland-Hillsboro-Vancouver-Hills$20$82.83$6WA$82.83. -language-3,837. City, MO-KS$40,846$50,000-$9,154$1,368Mixing and Mixing Machine Operators San Jose–Sunnyvale–Santa Clara, CA$229.277$93,000$136,277$3,108Oral and Maxillofacial SurgeonsNashville-Davidson-–-Murfreesboro,350,000$84,395,37TN .37TN executives Providence-Warwick, RI-MA $66,657 $55,000 $11,657 $2,364 Court reporters and concurrent closed captioners Oklahoma City, OK $26,866 $44,044-$17,178 $1,584Food Preparation WorkersNew Orleans–Metairie, LA$31,945$47,000-$15,055$2,628Textile Machine occupiers, operators, and tendersSalt Lake City, UT$119,539$53.638$65,901$3,156Computer Network ArchitectsBirmingham-Hoover, AL$31,968$50,000-$18,032,4138$50,000-$18,032-$1,476HIBan Workers $2,820Operational Specialty Managers-A-$1. , NM$47,215$45,000$2,215$2,736Education & Librarians, All OthersBoise City, ID$124.979$50,000$744,979
Percentage of individuals and households earning more than $100,000
Despite inflation, six figures a year is still a good performance. In 2014, an individual’s income of $100,000 meant earning more than 92% of the population.
According to IBISWorld, a data industry research group, about 34% of U.S. households will earn more than $100,000 by 2022. Regardless, in America, only a minority of individuals or households earn more than $100,000.
That’s why it’s quite an achievement to make $100,000 or more from your primary residence alone! So let’s rank the metropolises where house prices rose by more than $100,000.
Metro areas that saw more than $100,000 in home price appreciation in 2021
These are the 11 metropolitan areas where home prices have increased by more than $100,000 in 2021.
1) San Jose-Sunnyvale-Santa Clara: $229,277
2) San Francisco-Oakland-Hayward: $204,914
3) San Diego–Carlsbad, CA: $160,493
4 Los Angeles–Long Beach–Anaheim: $131,979
5) Seattle-Tacoma-Bellevue, WA: $131,129
6) Honolulu, HI: $138,254
7) Boise, ID: $124,979 (+24% yoy)
8) Salt Lake City, UT: $119,539 (+24% yoy)
9) Riverside–San Bernardino–Ontario, CA: $111,014
10) Denver-Aurora-Lakewood, CO: $108,922
11) Phoenix–Mesa–Scottsdale: $103,470 (+30% yoy)
Of these metropolitan areas, housing price growth in Phoenix, Boise, Salt Lake City appears to be the most unsustainable. Annual house price growth over the past 10 years has been closer to 5%. Furthermore, there seems to be sufficient land for growth of the new supply.
The San Francisco-Oakland-Hayward metro may have seen a $204,914 increase in the median real estate price, but the median home price in San Francisco is between $1.55-$1.9 million, depending on which source you use. In addition, income levels are also much higher. As a result, the rise in property prices is much healthier.
The appeal of living in the Sunbelt may diminish with a 20% rent increase in Jacksonville, Florida and 40% in Austin, Texas. Meanwhile, the allure of life in a large coastal city can once again increase. Working in offices is coming back.
Median house prices continue to rise
If my 2022 home price forecast proves correct, the median home price will grow another $35,000 – $40,000. This price increase will be a delay from 2021.
To calculate how your metropolitan area will perform in 2022, take the house price increase in your metropolitan area in 2021 and multiply it by 70% – 80%.
Given that approximately 68% of Americans will own a home in 2022, the majority of Americans should feel richer in a year from now. That’s why we might believe the Federal Reserve board when they say we won’t go into recession after all. Even if we do, it probably won’t be that long or painful.
Of the ~32% of people in America who rent, some rent by choice. Other renters may have parents who own one or more properties that they will pass on to their children. As a result, the rise in house prices will continue to be an important contributor to the creation of American wealth in generations to come.
Saving and investing The difference is a must
If you can’t or won’t buy, you should keep saving and invest the difference in stocks and other assets. It can be challenging to keep up, as the median home price is much higher than the median salary. However, you should try it. Otherwise you may end up being priced.
If you are a parent of young children, you may want to build a rental portfolio today. In 20+ years, when your kids are in their family building years, they will likely appreciate the foresight you had today.
Readers, how did your metropolis fare for 2021 with the rise in house prices? Do you think it is unfair to compare the median home price increase to the median pre-tax income, since the average income earner is usually no longer the one who buys the median home? What are some disadvantages of such a rise in house prices?
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This post Getting more out of your home than your paycheck makes life easier
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