Let’s say you’re interested in a city, on the other hand, where the person earning the median income can afford the median home and can live the median lifestyle, that is, where something without a few million dollars in wealth can enjoy a pleasant life. How to choose, then? As Mr Bradford notes, simple price/income comparisons put very different cities like Pittsburgh and Atlanta in the same category. More information is needed to make an appropriate choice
Here’s the thing though. Suppose that living on a shoestring in San Francisco wasn’t as good as enjoying the high life in Atlanta. Why don’t people just move from San Francisco to Atlanta? The fact that they choose not to implies that either there is something about San Francisco that attracts them or something about Atlanta that repels them.
Now that having been said, markets aren’t frictionless. There are costs to moving, finding a new job, finding new friends and being far from family. Some people are living in San Fran in large part because they have always lived there and getting out would cost more than staying. On top of that, population isn’t static. Lots of people are moving to Atlanta. The wage / home price model only truly holds for communities that are equilibrium – a hypothetical situation where everyone has made their choices and they’re sticking with them. This doesn’t accurately describe the Southern boom towns or the Midwestern ghost towns.
Lastly there is the complexity of fixed capital. I don’t want to go to deeply into this but part of the reason Detroit is so cheap is not just because no one wants to live there but because no one wants to live there AND there are a bunch of already built houses and shops. If we suddenly swept away many of those buildings the price of housing in Detroit could rise even if livability feel. This is the story of New Orleans in the immediate aftermath of Katrina.