>Joanna wrote
>
>How come, when my dad bought a house in the middle of LA in 1971, for 
>$26,000, it represented about 1.5 times his salary as a unionized 
>billing clerk (Teamsters); but, if I wanted to by a comparable house in 
>the bay area today at about 500,000, I would be paying five times my 
>annual salary as a bleeding edge/hi tech/ tech writer?
>

To be glib, I would say because there's a housing bubble and people 
are acting irrationally.  But here are some more specific suggestions:

There is a secular trend for house price inflation to outpace wage 
inflation because basic essentials (food etc) tend to become 
cheaper as production becomes more efficient. People are therefore 
willing to devote more money to housing because housing costs do not 
fall like, say, food costs or consumer durable costs because we spend 
more money to make our houses nicer (bigger, air conditioned etc), and 
because land in desirable areas is scarce and people have more 
disposable income to devote to securing it.

But that doesn't explain the extent of recent change.  This is 
because there is a lot of liquidity in the market - people can get 
mortgages much more easily, and there is lots of capital searching 
for profitable investment opportunities. Sentimentally, people are 
confident that housing won't lose its value, and that they will 
continue in gainful employment so that they can repay their huge 
mortgages. 

In the UK there are demographic and planning factors underpinning 
price growth, but I don't think that they are so prevalent in the 
US. But I understand that SF prices are relatively higher than 
much of the US? In London, a lot of mortgage lenders will lend a 
higher income multiple in recognition that people living in London 
have to devote a higher proportion of income to housing than 
elsewhere, which is reflected in London pay. Is this true in SF?

Added to that, low interest rates means that the actual monthly 
cost of a $500k house is lower than it has been historically.

--James