Who are all these rich people?
April 22, 2021 3:04 PM   Subscribe

I live in an area (Brownstone Brooklyn) where many people own homes that cost $3 or $5 million dollars. I know nobody that lives in these houses, outside of some people who've lived there for many years and didn't pay 7 figures for these houses. What do these people do to afford these houses? Other than "works in Finance". How can I learn more about the people who live in these houses? (census stats, etc)

I'm still a little staggered by the wealth. Where I grew up, the only people who were rich (6 figure incomes) were self employed (doctors, dentists, lawyers, real estate, small business owners). While I am in that bracket now, I am not spending $10,000 a month on housing.
posted by sandmanwv to Work & Money (27 answers total) 15 users marked this as a favorite
You could easily spend $10K a month on housing if you made $20K a month and were married to someone who also made $20K a month. Which isn't unreasonable for a lot of professional couples in their peak earning years. It's basically the same people you're talking about, with the addition of software engineers and entrepreneurs of course.

Real estate agents in particular can have staggering earning power in New York City because their commission is a percentage of selling price, and they've somehow managed to maintain the percentage even as prices have gone up like a hydrogen balloon. They can earn a six figure commission for selling one house in your neighborhood.
posted by kindall at 3:11 PM on April 22, 2021 [4 favorites]

Best answer: As a starting point, I think you might be interested in the Census Bureau's Narrative Profiles, which let you get a demographic profile of a small, granular area like a Zip code or a census tract (PDF map of Brooklyn CTs). I would recommend having two parallel tabs on the screen, one with your area of interest and one with the profile for all of Kings County, or all of the NYC metro, just to get a sense of what's different from "normal".
posted by Superilla at 3:19 PM on April 22, 2021 [11 favorites]

It’s a combination of dual income white collar households, prices as recently as 10 years ago being 1/3rd the current prices and most of the housing stock not actually being single family, but multi family (single family is less than 3%).

The Demographic data for Brooklyn heights is pretty interesting if that’s your thing.
posted by larthegreat at 3:20 PM on April 22, 2021

I know people who live in some of those houses, as co-ops, as larthegreat says. They're tech people, or media people. They are dual-income earners and their kids, if they have any, go to public school. Many of them have been living there for 5-10 years so the houses would be expensive but still affordable with a mortgage and a decent down payment which you could have gotten selling a house in an up market in another city. Tech people get paid a lot, some of them, and there are many Google employees, among other big tech firms, who live in NYC. And this means you wind up getting people who are making enough money to afford a fairly pricey house, but also seem young and "where did you get that kind of money?" sorts of people if you're more used to being somewhere where only doctors and lawyers had that kind of money, which is definitely where I grew up. Other people have given you places to start with demographics, you can check with Brooklyn Public Library also if you want stuff that is more specific.
posted by jessamyn at 3:22 PM on April 22, 2021 [12 favorites]

I'm too conservative with my money to spend that much on housing, and I don't live in NYC. But if we were willing to max our budget, we could spend $3M on a house, maybe $4M. My spouse and I both work tech jobs that pay well, especially when you take stock into account, and we have a lot of equity in our current house. We bought a modest house when we first got married, with 0% down. We lived there for several years, and then sold it with enough profit to combine with a small amount of savings for 20% down on a house that was 3X as expensive. That house then grew in value about 50%, while we were also paying down the mortgage. So we could roll that into a much more expensive house (and our pay would support it) if we wanted to.

So in short it's a combination of two people with high paying (but not like 7 figures or anything) jobs, and luck with the value of our prior houses growing and giving us increasing amounts of equity to use.
posted by primethyme at 3:26 PM on April 22, 2021 [6 favorites]

It's fairly easy to look up real estate transactions. Transactions, in general, are recorded by your county/state, and the ownership of real estate parcels is a matter of public knowledge. Some number of people hide behind trusts/LLCs. Once you find a person's names, you can do basic Googling to find information about them.

There are a number of "rules of thumb" about what percentage of income people should spend on housing. These rules of thumb become inaccurate as income goes up. Once a person is able to handle their day-to-day expenses, food, taxes, retirement savings, etc, essentially the remainder of their income can go to housing if they want to. So, put quite bluntly, some people really do spend a massive amount of money on housing. It's not necessarily a bad plan. So long as house prices don't go down, the only real "cost" of a mortgage is the interest paid on it since the principle of the mortgage is recovered when the property is sold. Interest rates are really low now, so that cost is not particularly high.

Depending on the industry, people may not be buying houses from earned income. If someone has an equity share in a company they work for and that equity share grows in value, it's quite plausible a person may be able to afford significantly more than their earned income would otherwise suggest.

After all of these options - basically some people just pay the money. A $3M mortgage on a $4M place is quite plausible, and "only" costs $13K/month right now with reasonable credit. Say a couple earns, say, $500K/year as a combined doctor and lawyer - which to me seems a bit low for NYC. They'll be paying 25-30% of their money in taxes (rough estimate), leaving $375K-$350K/year for other expenses. Even with a $13K/month mortgage (again, some of which gets returned to them when they resell the property), they're left with $194K/year-$219K/year to cover the rest of their expenses. That's not particularly hard to manage, even in NYC.
posted by saeculorum at 3:27 PM on April 22, 2021 [6 favorites]

Someone who bought in 2012 probably paid half of what it would be listed for today, and that's the mortgage price that they are paying.
posted by xo at 3:27 PM on April 22, 2021 [3 favorites]

In addition to the earning ability of young professionals in high-demand positions, don't underestimate the role that inheritance plays in some cases.
posted by yclipse at 3:35 PM on April 22, 2021 [33 favorites]

I think one aspect of real estate purchasing power in America we tend to forget about is family money. Some of those houses are almost certainly lived in by people who couldn't afford them based on their job/salary, but are able to do so because family money, either in the form of trust funds/inheritance or parents willing to buy expensive homes for their children as investments. Some of these people have high-paying jobs, some bought when prices were lower, and some simply have access to family wealth. (And, to be fair, many of the people in these homes are likely some combination of those three things.)
posted by lhputtgrass at 3:35 PM on April 22, 2021 [33 favorites]

for tech people, some of their compensation over the years might come in the form of equities which have appreciated starkly as the value of their stocks has gone up. so they might have been able to turn appreciated stock into large down payments which then reduce the monthly mortgage payments to something manageable. in the area in which I live this is a far more common scenario than family money.
posted by fingersandtoes at 3:36 PM on April 22, 2021

My nephew owns a multimillion dollar home in Brooklyn. He is doing very well as a hedge fund manager in Manhattan. According to him, buying in Brooklyn was more affordable than buying in Manhattan.
posted by hworth at 3:38 PM on April 22, 2021

Best answer: New York City Property Tax Map

If there is a specific property you’re interested in you can search for it and it will tell you the name on the deed. A quick search will tell likely tell you what they do for a living. Not a way to determine trends for an entire neighborhood but will give you a sense of the backgrounds of the residents.

I picked $$$ place for sale in Brooklyn Heights and searched the owner’s name using this tool. He is apparently an Ivy League educated lawyer.
posted by scantee at 3:48 PM on April 22, 2021 [1 favorite]

I know someone who bought a Park Slope brownstone probably 10 years ago and it was definitely family money. She came into control of it in her 20s and bought in her early 30s. She has passive income only and her husband teaches at a private high school. They have two children who are always perfectly dressed.
posted by Lawn Beaver at 3:55 PM on April 22, 2021 [4 favorites]

Generational wealth also figures very highly in these situations. It can include everything from attending elite private schools where personal and familial networking led to incredible career opportunities, familial help with down payments, no student loans because families paid cash for tuition, access to prestigious and exclusive unpaid internship opportunities (because family could afford to subsidize rent and living costs), not having to aggressively save for retirement because of assumed inheritance, and direct inheritance. Multiply those advantages by two and it becomes a situation that most bootstrappers can't achieve. Yes, many are high paid professionals, but they often also had many legs up because they came from families where power and money were widely available.
posted by quince at 3:55 PM on April 22, 2021 [23 favorites]

They are also the people who got priced out of the places that used to be 3-5M but now cost 6-7M.
posted by biffa at 4:03 PM on April 22, 2021 [6 favorites]

I always imagined another form of family wealth might be traceable to the little old ladies and gents who you see outside sweeping the sidewalk on nice days. Maybe they bought a brownstone in 1960 for $10,000, raised their family there, and then by the time the grandchildren grow up, the house is worth several million bucks.
posted by scratch at 4:05 PM on April 22, 2021 [2 favorites]

If you zoom in far enough on Zillow for a particular street, you can see the estimated prices. Click on them and it brings up the information including often the last sales price, and property taxes for the last few years.

Looking at a random house on 6th St in Park Slope, it was last sold in 2011 for $1.3m. That's a lot of money, but if you were lucky with your purchases you could have traded up to that in perhaps a decade, and your purchase equity might have been 50%. It would still take a couple of six figure salaries but it's more approachable.

I do think that more people than you might think who own in expensive places like Brownstone Brooklyn have benefited financially from family help, which includes inheritances, loaned of gifted deposit money for the first place bought, no need for student loans. And quite a few jobs, particularly software and finance have bonuses or stock options which can provide windfall type income. A hedge fund manager will definitely be getting income outside of their base salary (which may be in the mid six figure range).
posted by plonkee at 4:32 PM on April 22, 2021 [2 favorites]

When I was a wee baby NYC lawyer back in the mid-oughts, Brownstoner was just an individual's blog, basically. A lot of my peers were looking into that option as more attractive for various reasons (including affordability) than Manhattan real estate. Prices were lower then, although that also often entailed the need for substantial renovation. A two-lawyer couple without kids could swing it. Remember that even in NYC you "only" need 20% down. Two senior associates at a Biglaw firm will clear $100K after taxes just in end-of-year bonuses in non-collapse years.

Say a couple earns, say, $500K/year as a combined doctor and lawyer - which to me seems a bit low for NYC.

No, with AMT (and assuming maxing out the 401ks), people relying on earned income at that level in NYC will be taking home only a little over 50% of their paychecks. But two senior associates these days would actually clear more like $800K before taxes, so the calculus remains. There are a fair number of these people, and their finance equivalents, even before you get into tech people, where the comp dynamic is somewhat different.

(So long as house prices don't go down, the only real "cost" of a mortgage is the interest paid on it since the principle of the mortgage is recovered when the property is sold.

Tangential note: this is not true. Closing costs are not insignificant (in NY, estimated 5% of sale price), and that money is essentially vaporized. More importantly, the opportunity cost of having money tied up in a down payment can often be quite real. That is, assuming a constant cost of housing vs. renting (and taking differences in taxation into account), your down payment costs you whatever the difference is between the return on the property and what that money would've earned in the market. This may work out in your favor in certain hot markets, but in a lot of places, it will not.)
posted by praemunire at 4:32 PM on April 22, 2021 [6 favorites]

Best answer: There is so much generational wealth in NYC. The trust fund kids of 2000s-era Williamsburg and Bushwick are now the owners of some of the places in Brownstone Brooklyn that you’re talking about. There are many, many jobs in NYC that will allow a 2-income family to buy a multi-million dollar place and they'd rather own a building in nice, leafy Brooklyn than a condo in Manhattan. There are lots of corporate lawyers and Wall Streeters who don’t want to live in the suburbs. There are just random wealthy people from around the world who like the idea of having a house in Brooklyn. And if you’ve lived there for any length of time you will have noticed the place is also crawling with actors, musicians, and other famous media people.

I’ve lived in Brownstone Brooklyn off-and-on for over 15 years as a renter. Most people who owned an entire building (neighbors as well as friends and acquaintances) seem to be the following:
-lawyers (corporate firms as well as in-house counsel)
-finance people (analysts, traders, etc.)
-people with family money (either inheritance or direct help)
-people who’ve owned their building for many years
-doctors of various kinds who have a practice on the ground level
-actors, directors, producers, cinematographers
-famous musicians
-famous artists
-famous authors
posted by theory at 4:37 PM on April 22, 2021 [12 favorites]

If you want to get a bit into the weeds, check out Jobs and Income Growth of Top Earners and the Causes of Changing Income Inequality: Evidence from U.S. Tax Return Data. It compares 1979 and 2005. Short version: executives, financial professionals, doctors, and lawyers, with a shift from execs to finance over that period. It's national, so NYC is different, and there's certainly been a shift towards tech.

And yes, family money. A while back a house near me sold for well over a million (back when a million meant something), about 20 percent over what it seemed worth, and by a guy in his early thirties. A neighbor explained: His billionaire father bought it for him. (A few minutes of Googling confirmed: yes, a literal billionaire. I doubt he missed that extra few hundred thousand.)
posted by Mr.Know-it-some at 6:49 PM on April 22, 2021 [1 favorite]

posted by AugustWest at 7:06 PM on April 22, 2021 [1 favorite]

I don’t know how it is in Brooklyn, but in many popular neighborhoods, a number of these houses are bought in cash by foreign buyers looking for a safe haven for their money.
posted by redlines at 7:51 PM on April 22, 2021 [2 favorites]

My old landlord was an artist who was able to own a $3 million brownstone in Brooklyn because she'd bought a building in SoHo in the 60s, cheap, and then sold it in the 2010s.
posted by pinochiette at 8:50 PM on April 22, 2021

Best answer: there are only about 150 transactions a year >2mil in BK, so a lot of those people have been in those units for years, and if the tried to sell en masse prices would collapse very quickly because the market is extremely thin at that price point. 150 marginal buyers able to afford a place > 2mil in a city of 7 mil really is pretty far out in the tail.

The long-term appreciation is 1) interest rates 2) the relative attractiveness of those brownstones as a place to raise a family has dramatically improved over the last 30 years. That manifests itself as well in the fact that the Suburban housing market >2 Mil has also been absolutely terrible for forever, even as the market <1.5 or so absolutely smokes.
posted by JPD at 6:32 AM on April 23, 2021 [5 favorites]

Best answer: I know maybe five people with single family brownstones and either their family bought it in the 60s or their parents are rich.
posted by Mavri at 7:15 AM on April 23, 2021 [1 favorite]

The couple I know who own one of these and live in the whole thing are artists. Very very successful artists.
posted by DarlingBri at 4:15 AM on April 24, 2021

always imagined another form of family wealth might be traceable to the little old ladies and gents who you see outside sweeping the sidewalk on nice days. Maybe they bought a brownstone in 1960 for $10,000, raised their family there, and then by the time the grandchildren grow up, the house is worth several million bucks.

Yes, I think an important thing to remember is that the 70s and 80s, those places were considered a bit of a rough neighborhood and were much cheaper. A lot of those are probably just inherited person to person rather than people getting money and buying.
posted by corb at 8:20 AM on April 24, 2021

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