[nostrademons]

The FTHBs of today got into the hot growing fields in 2011-2015 (tech, finance, solar, renewables, payments, artificial food, etc.) and have been saving large portions of their paycheck over the last 5-10 years. 5 years ago you'd hear about Millennials that all live the same lifestyle, but some were making $50-70K/year in "old line" professions and others were making $200K/year in tech. That adds up over time, but you generally won't hear about it if your friend is sitting on a million in index funds or cryptocurrency. They now get to trade inflated financial assets for inflated home prices.

In my experience people aren't paying beyond their means, but their means are high, and have been for a while. Where I live, in a small suburb of Silicon Valley, new FTHBs have been 100% tech for about the last 10 years.

[jazzyjackson]

"First Time Home Buyers", to save others from looking it up

[bradknowles]

Techies as FTHBs, because no one else can afford to buy a home. Or they already have one -- like the lawyers and doctors, or they already have several -- like the CEOs.

[closeparen]

To what extent are prices driven by first-time buyers? I would expect it's mostly people who experienced the extreme home-price appreciation of the last 10 years, trading with each other.

[nostrademons]

It's mostly FTHBs, investors, and purchasers of second (+ more) homes. Existing homeowners who are trading one home for another net out of the supply and demand calculations - for every house they take off the market, they add one back in. They also tend to net out financially as well: if home prices are high, they receive a lot for their home but have to spend a lot to get a new one, while if prices are low, they won't get a lot for their home but can buy a new one cheap.

Existing homeowners have a pretty critical role in spreading high prices throughout the country, though. If nobody traded out of their existing homes prices would be sky-high in the Bay Area and Seattle, like they were in 2018, but this pool of buyers would have little effect on Boise and Charlotte. But because someone in the Bay Area can get $2M for their home and now has it available to retire to Boise, prices in the Bay Area end up marginally lower and prices in Boise go through the roof.

[closeparen]

San Francisco has about 400,000 homes. Suppose they are each worth $100k.

Only about 5,000 of them sell in a given year. Suppose Facebook shows up all at once, with >5,000 new millionaires from the Midwest. They run an auction with each other for those 5,000 homes. The price they settle on is $1.5 million. This becomes the comparable for every existing home.

So the system started with $40bn in home equity value. We injected $7.5bn worth of tech money. And we wound up with $600 billion in home equity value. 395,000 people got $1.4 million in home equity out of thin air. And they can use it to trade with each other, generating many more than 5,000 transactions at the "Facebook millionaire" price.