Single Family Homes in Santa Clara County: March 2018 Report(scc.rereport.com)
scc.rereport.com
Single Family Homes in Santa Clara County: March 2018 Report
http://scc.rereport.com/market_reports
122 comments
Select 'Median Price' cell for details.
I'm beginning to wonder if you could make an incubator that also has real estate holdings where you sell and rent houses to people in Silicon Valley and also fund startups. The houses that you have on hand or want to rent you would provide for startups (basically dormitories). The houses in SV would be a hedge on the Startups that you are funding because by bringing in jobs you would also increase the housing prices.
So, you want to be like Erlich Bachman from "Silicon Valley" sitcom? :)
Once upon a time comedy was just for fun, now, if you are screenwriter for a sitcom you have to be carefull because someone, somewhere will take your foolish ideas seriously...
Honestly, we need more "Don't try this at home" warnings.
Once upon a time comedy was just for fun, now, if you are screenwriter for a sitcom you have to be carefull because someone, somewhere will take your foolish ideas seriously...
Honestly, we need more "Don't try this at home" warnings.
There are several “hacker houses” on the peninsula already — that show is more of a documentary than many people realize
I don't have HBO it seems like I should for some reason... I keep on having ideas that are on the show.
Maybe I'm using the wrong terminology, but isn't a "hedge" something you do to reduce the risk / variance of your investment? If the start-up scene tanked, both your house and your incubator would do less well. Therefore, both markets are correlated and do the opposite of reducing risk.
This idea sounds dangerously close to a company town, which is fairly universally regarded as a terrible idea. https://en.m.wikipedia.org/wiki/Company_town
Housing subsidies and allowances are pretty common though.
It would probably be the other way around: an REO firm that made investments in startups.
That prompted me to recall Carl Berg from the prior era of the 1980s and 1990s tech boom. He ended up with a lot of stray equity holdings as a consequence of his real-estate position in Silicon Valley.
https://www.forbes.com/forbes/1998/1012/6208086a.html
https://www.forbes.com/forbes/1998/1012/6208086a.html
> That prompted me to recall Carl Berg from the prior era of the 1980s and 1990s tech boom.
Minor point: those were two tech booms, a 1980s one and a 1990s one, separated by the recession of the early 1990s. I was not around, but period books describe the early 1990s recession as impacting the technology sector fairly seriously.
Minor point: those were two tech booms, a 1980s one and a 1990s one, separated by the recession of the early 1990s. I was not around, but period books describe the early 1990s recession as impacting the technology sector fairly seriously.
This has been happening for the past decade. Why do you think so many VC/PE firms and incubators have a hard requirement of people relocating to SF/SV?
You'll also find that many investors will very strongly encourage your startup to utilize technology choices (e.g. MongoDB or Docker) that happen to be part of their investment circle.
You'll also find that many investors will very strongly encourage your startup to utilize technology choices (e.g. MongoDB or Docker) that happen to be part of their investment circle.
You're suggesting that an individual VC partner requires relocation because it will increase the value of his home? I doubt the effect would be strong enough, especially because the type of homes that VC partners live in ($5M-25M) are in a somewhat different market than the homes that VC-backed startup employees would purchase/rent.
I would think that relocation requirements would be primarily motivated by factors related to the value of being in SV for networking and other purposes.
I would think that relocation requirements would be primarily motivated by factors related to the value of being in SV for networking and other purposes.
Their individual homes? Not at all. They invest in companies that build, sell, and lease single-family, multi-family, and commercial real estate in the SF/SV area.
I'm not familiar with this—how common is this type of investment among VCs? I assume not all VCs have investments in this area, and it would be interesting to see whether the firms that do invest in this area correlate with the firms that require relocation.
This exists but is not publically flaunted/advertised.
... because it's illegal to flout fair-housing regulations.
What I find amazing though is that rents have been flat for the last 2 years.
https://www.zillow.com/santa-clara-county-ca/home-values/
And prices (relative to rents) have increased even more (>35% actually) if you factor in tax code changes making home-owning comparatively more expensive.
Irrational market?
https://www.zillow.com/santa-clara-county-ca/home-values/
And prices (relative to rents) have increased even more (>35% actually) if you factor in tax code changes making home-owning comparatively more expensive.
Irrational market?
SF has, finally, after decades of underbuilding, allowed some modest increase in the supply of multi-family housing units: https://sf.curbed.com/2017/5/4/15543668/san-francisco-new-ho.... Oakland has done the same. The story above is about single-family units, and there is effectively almost no undeveloped space within commuting distance of SF / SV for additional single-family housing units. SF and SV are likely substitutes for renters in the area.
Seattle has some similar problems: https://jakeseliger.com/2015/09/24/do-millennials-have-a-fut... although less severe; about 60% of Seattle is still zoned for single-family housing alone: https://www.thestranger.com/slog/2017/06/21/25230243/poll-fi..., which exacerbates its housing crisis.
Seattle has some similar problems: https://jakeseliger.com/2015/09/24/do-millennials-have-a-fut... although less severe; about 60% of Seattle is still zoned for single-family housing alone: https://www.thestranger.com/slog/2017/06/21/25230243/poll-fi..., which exacerbates its housing crisis.
Seattle has made a lot of progress in the last 20 years. West Seattle for example, has become pretty crowded with apartments, though, as with with the rest of the city, they are concentrated along transit corridors (West Seattle still chokes on traffic these days, unfortunately).
Rents are definitely weaker than they were a couple of years ago. Maybe no reductions but definitely incentives and a freeze on increases.
Rents are definitely weaker than they were a couple of years ago. Maybe no reductions but definitely incentives and a freeze on increases.
It's surprising how close majority-single-family-housing areas are to downtown Seattle, South Lake Union (Amazon campus), and Fremont (Google campus + smaller companies.) A few blocks north of the Google campus is mostly single-family housing. Queen Anne, north Capitol Hill, Greenlake, First Hill - all have apartment buildings only on major roads.
I think it's mostly that the relative value of future money to current money went up, due to cheap money and lack of investment opportunities. One piece of evidence for this is increase in earnings-per-share multiples paid for stocks in the S&P 500: http://www.multpl.com/
But the counter-evidence is that real estate investment trusts are generally flat over the last 2+ years (and that S&P valuation increases can be mostly credited to belief in a business friendly political environment).
What makes Santa Clara real estate defy that trend?
What makes Santa Clara real estate defy that trend?
Rents might have hit a limit with the lower half of incomes of the area.
I've read some articles that mention that california is losing a lot of people.
I've read some articles that mention that california is losing a lot of people.
People are always leaving California, yet every year it gains in total population. As Yogi Berra said, "Nobody goes there anymore. It’s too crowded."
"Bay Area is top region for outward migration in the U.S."
https://www.sfgate.com/expensive-san-francisco/article/Bay-A...
https://www.sfgate.com/expensive-san-francisco/article/Bay-A...
Yes, it would lose population if it wasn't also a top region for inward migration from outside the US. Growth is definitely slowing down (housing has a lot to do with that), but I don't think we will see actual falls until the next decade.
That's a short article, and it describes "actual falls" already in progress. It claims that last year the net outflow for SF was 2,332 down from net inflow of comparable absolute value only five years ago.
Where would I find this for other US cities?
Start at https://www.zillow.com/los-angeles-ca/home-values/ and use various zip code queries at the top bar. The year-by-year plot is at the bottom.
The analysis in the original link has much more data than a Zillow search. I’ve actually never seen a realtor report with that much information.
I'm not sure about a general source, but there's a real estate agency in Summit County, Colorado that puts out similarly detailed reports for that area:
https://www.breckenridgeassociates.com/statistics.php
Their reports show data going back to about 2000. It's interesting to see the rise and fall of inventory levels, days-on-market, price per square foot, etc., as the economy has gone up and down. They also break it down by housing type, so you can, for example, see the changes in condo stats separately from single-family home stats.
https://www.breckenridgeassociates.com/statistics.php
Their reports show data going back to about 2000. It's interesting to see the rise and fall of inventory levels, days-on-market, price per square foot, etc., as the economy has gone up and down. They also break it down by housing type, so you can, for example, see the changes in condo stats separately from single-family home stats.
The odd thing about the current market, compared to the previous periods of rapid appreciation in the Bay Area, is that few of the current owners seem to be cashing out and leaving. This is causing the inventory issues.
Prop 13 makes it really expensive to upgrade, so there’s also less mobility from the “modest” range of homes (approximate $1m range imho).
From my understanding, it's not even a matter of upgrading. Two neighbors with exactly identical homes, who have lived in the same city for 20 years, wouldn't be able to sell their houses to one another (for a net gain of $0 each) without triggering a massive tax increase for both parties.
Theres a common real estate move where you can defer your taxes on a real estate sale if you use the proceeds to buy a similar amount of property (dollar amount) [0].
So as long as the proceeds from the sale go into a similar type of property/business then you can defer taxes for a future date.
[0]:https://www.irs.gov/newsroom/like-kind-exchanges-under-irc-c...
So as long as the proceeds from the sale go into a similar type of property/business then you can defer taxes for a future date.
[0]:https://www.irs.gov/newsroom/like-kind-exchanges-under-irc-c...
This is for investment property, not housing one resides in.
The problem we’re describing is that their property taxes would increase sinificanty, thousands of dollars a month.
Yes temporarily sure? But if you keep deferring can you really tell me what the tax laws will be 50 years from now? I don't think in 2068 if you finally decide to sell and cash out the IRS will come with a list " Well on 2030: taxes were X%, again on 2035: taxes were Y%". They will just give you a bill for the present day tax system
From my understanding, the issue is with the annual recurring property taxes which have a capped annual increase per Proposition 13. Thus, the "taxable value" of the homes pre-sale is a fraction of what it is post-sale, even after swapping for an identical home. This is not an IRS issue, so much as a county tax assessor issue.
My house is functionally identical to my neighbors', but they've been in our neighborhood for ~20 years; me for just 8.
Their taxes are ~$5k; mine are ~$9k. Some of that is certainly from the purchase price as assessed in 2010, but at least $2k is for the couple minor things I've pulled permits for where the city's reassessed us each time and jacked them up.
I'm about done pulling permits.
Their taxes are ~$5k; mine are ~$9k. Some of that is certainly from the purchase price as assessed in 2010, but at least $2k is for the couple minor things I've pulled permits for where the city's reassessed us each time and jacked them up.
I'm about done pulling permits.
Where are you? In CA, cities don't have assessment powers.
Yes that is correct. They also can’t build their home out and increase the square footage to better accommodate their families without triggering a tax appraisal. In a word their stuck, which helps explain again why there’s very little mobility.
My family fits this statement. Rather than move to a bigger house that will accommodate us, but cost more annually in property taxes, it is more cost effective to just remodel and expand the current house. Unfortunately, this moves our "starter" house up another notch, reducing the lower cost inventory in the neighborhood.
Although, at this point all starter homes that go on sale in our city are being purchased by developers, torn down and rebuilt.
Although, at this point all starter homes that go on sale in our city are being purchased by developers, torn down and rebuilt.
Anyone older than 55 is allowed to transfer their basis to a new property.
I suspect having to pay capital gains taxes on appreciation over > $500k is a way bigger barrier to moving.
e.g. Even if you can't basis transfer, imagine you bought for $500k 20 years ago; it's now worth $1.5M. You should be paying $19k a year in property taxes, instead you are paying maybe $9k.
That extra $10k year going forward is not all that much (16 years of time to matter!) compared to the 33%*$500k = $165k in cap gains taxes you will owe on the sale.
I suspect having to pay capital gains taxes on appreciation over > $500k is a way bigger barrier to moving.
e.g. Even if you can't basis transfer, imagine you bought for $500k 20 years ago; it's now worth $1.5M. You should be paying $19k a year in property taxes, instead you are paying maybe $9k.
That extra $10k year going forward is not all that much (16 years of time to matter!) compared to the 33%*$500k = $165k in cap gains taxes you will owe on the sale.
Why would you move to a bigger house at 55 or move at all? And you can only transfer the basis if you downsize or stay the same, which has net zero impact on inventory.
Prop13 keeps people in starter homes for much longer.
Prop13 keeps people in starter homes for much longer.
Moving to a smaller house when your children have moved out is not exactly uncommon. And that matches moderately well with >= 55 too (kids born when you're 25-35, say, and moving out when they are 20-25).
Anyone older than 55 is allowed to transfer their basis to a new property
Why would you? If your home value is going up, your property taxes are mostly static, and rents are high enough to cover your mortgage and then some, there's no reason to sell when you can hire a property management company to take care of the place and rent it out. Doubly so if you can use your primary property to help finance a second one elsewhere.
You can only do that for up to 2 of the 5 most recent years without triggering a taxable event.
Where would you leave to, and more importantly where would you invest the windfall? All asset classes are expensive at the moment...
I was sure the market was going to crash when we bought our home, but external and internal forces made us stop waiting and make the leap. At this point a large correction in the market wouldn’t even put us below our purchase price.
So when do you cash out and move to the Midwest?
When they retire? People aren't moving to the Bay Area because they just love sitting in traffic and overpaying for everything. It's where the jobs are. Also, the schools are full of engineer kids.
Well the preference of the Midwest would be never.
A rapid influx of rich people is never good the people who were there first.
Edit: and that's not even taking into account the incompatibilities between Midwest society and SV society.
A rapid influx of rich people is never good the people who were there first.
Edit: and that's not even taking into account the incompatibilities between Midwest society and SV society.
[deleted]
So sales are up, and inventory is up, but days on the market is down sharply. It seems reasonable that if houses are going faster then higher bids are being made because you're not going to get a second chance.
Totally unrealistic, and somewhat antithetical to the whole idea of free markets charging what consumers will bear, but this is where Vickrey auctions would be amazing: https://en.wikipedia.org/wiki/Vickrey_auction
Totally unrealistic, and somewhat antithetical to the whole idea of free markets charging what consumers will bear, but this is where Vickrey auctions would be amazing: https://en.wikipedia.org/wiki/Vickrey_auction
Really interesting concept. What's stopping me from bidding an absurdly high amount, knowing that I'll win and only pay as much as the second highest bid? I guess I'll have to be the only one trying to do this for this to work?
Nothing stops that, but presumably there is a "Max price" you are actually willing to pay. If more than one person uses the absurd bid strategy then you're screwed, so the incentive is to just put down your true Max price willing to pay.
Nothing, so long as you want the home more than your absurdly large amount of money. Otherwise, all it takes is the existence of another high bid to make you pay your absurdly large amount of money minus epsilon. You may experience buyer's remorse and wish you had the pile of money over the home.
Alternatively, if there is no other high bidder, then you would have gotten the home with a lower bid. The scheme is quite clever in how it incentivizes every bidder to bid exactly what they value the asset at.
Alternatively, if there is no other high bidder, then you would have gotten the home with a lower bid. The scheme is quite clever in how it incentivizes every bidder to bid exactly what they value the asset at.
This is how it's done in the Netherlands, actually.
This is factually incorrect. There are rules regarding the bidding process for buying a property in the Netherlands (Amsterdam model, Haarlem model or closed bidding with deadline), but none of them include a part where the second highest price is used.
Interesting! I have a question about how it works in practice: In the US, there are often extra considerations beyond the offer price. For example, someone paying in cash can typically offer less than someone who needs a mortgage, due to the lower risk of the offer falling through. Or I might bid less, but require that an aging roof be replaced at the current owners' expense. How do they deal with that in the Netherlands?
I've never encountered it, and I'm a homeowner in the Netherlands. The sealed bid auctions I've seen were all regular ones were if you are the highest bid you have to pay that price.
As someone from Seattle, I can only say this makes me unhappy, because even more people will want to move from SF to here. We have enough people here, please consider moving to another fair city. :-) Our own media brags about how we are the fastest rising city by price, yet quotes numbers smaller than this, say 19% yoy as of January - http://seattlebubble.com/blog/.
It's always interesting to me that a progressive city, like Seattle, has a bunch of people who proudly push a protectionist/exclusion stance similar to the anti-immigration stance on the far right.
> similar to the anti-immigration stance on the far right
I'm not on the far right, but I can tell you that of those I know who are, precisely none of them are 'anti-immigrant'. The majority of them would like to reduce illegal immigration and improve border security, but that's also true of the vast majority of Americans as a whole.
Perhaps when you say 'immigrant' you are actually referring to illegal immigrants? Even in that case, over 3/4ths of Republicans favor a pathway to citizenship for existing illegal immigrants (including 'dreamers').
[1] Previous Gallup research has shown that 77% of Americans say that "controlling U.S. borders to halt the flow of illegal immigrants into the U.S." is extremely or very important. And 83% favor "tightening security at U.S. borders." http://news.gallup.com/opinion/polling-matters/209384/buildi...
[2] http://news.gallup.com/poll/193817/republicans-favor-path-ci...
I'm not on the far right, but I can tell you that of those I know who are, precisely none of them are 'anti-immigrant'. The majority of them would like to reduce illegal immigration and improve border security, but that's also true of the vast majority of Americans as a whole.
Perhaps when you say 'immigrant' you are actually referring to illegal immigrants? Even in that case, over 3/4ths of Republicans favor a pathway to citizenship for existing illegal immigrants (including 'dreamers').
[1] Previous Gallup research has shown that 77% of Americans say that "controlling U.S. borders to halt the flow of illegal immigrants into the U.S." is extremely or very important. And 83% favor "tightening security at U.S. borders." http://news.gallup.com/opinion/polling-matters/209384/buildi...
[2] http://news.gallup.com/poll/193817/republicans-favor-path-ci...
You're using surveys of all republicans and all Americans to dispute my comment about 'the far right'?
There comes a point where the system (Seattle) can't support additional traffic (immigrants) without expanding. Expanding pushes out people lower on the ladder, which is often people you could consider locals, which often changes the underlying chemistry and vibe of the city.
I grew up in Oregon and most of my friends and family have a general disinterest in people moving to the state, especially from California. A neighboring town, often regarded as one of the better towns in the area, has seen drastic immigration (mostly from California) in the past 50 years. On the surface, you might not see much damage, and in fact you might see only improvements. But when you look at the side effects, such as multi-generational families getting kicked out due to excessively high taxes brought by wealthy Californians, and general road traffic increasing in speed beyond what locals want (Oregon doesn't have any speed limits above 65mph, AFAICR), you see another story.
Immigration is great when it works out for you, and not so great when it doesn't.
I grew up in Oregon and most of my friends and family have a general disinterest in people moving to the state, especially from California. A neighboring town, often regarded as one of the better towns in the area, has seen drastic immigration (mostly from California) in the past 50 years. On the surface, you might not see much damage, and in fact you might see only improvements. But when you look at the side effects, such as multi-generational families getting kicked out due to excessively high taxes brought by wealthy Californians, and general road traffic increasing in speed beyond what locals want (Oregon doesn't have any speed limits above 65mph, AFAICR), you see another story.
Immigration is great when it works out for you, and not so great when it doesn't.
I completely understand that. However, the only solution to that problem is to try to halt change and protect existing residents from outsiders. Not to mention that existing property owners do really well when prices skyrocket.
Edit: I guess the broader question is to what degree do locals get to infringe on the rights of outsiders to buy property?
Edit: I guess the broader question is to what degree do locals get to infringe on the rights of outsiders to buy property?
I'd support a voting system where your vote is proportional to how long you've been a resident of the area that elected position or ballot question covers. That would save a lot of cities and towns from losing their identity to inter and intra state immigration.
Toleration is a broad, complex spectrum, and all too often people put little thought into their principles. Instead we tend to define ourselves amongst our peers, some distance from the issues. The true test of your principles comes when its happening to you.
Have you seen the comments on HN whenever H1B changes news are on?
Its pretty anti-immigrant. Everyone is progressive with other people's pockets.
Its pretty anti-immigrant. Everyone is progressive with other people's pockets.
[deleted]
I would like to see total mortgage debt and price side-by-side.
*I mean that, anyone know where to get this?
*I mean that, anyone know where to get this?
Outstanding mortgage debt on 1 to 4 family residences: https://fred.stlouisfed.org/series/MDOTP1T4FR
About the same here in Seattle. It makes saving for a down payment even more depressing.
I don't understand who is able to buy these houses when my partner and I can't as software engineer + physician assistant. Maybe it's just because we're not willing to decrease or dip into our retirement savings and we have no help from parents.
I just don't feel comfortable taking out a jumbo mortgage. Even though we could make the numbers work, I'm not confident either of us won't burn out from our stressful careers.
I don't understand who is able to buy these houses when my partner and I can't as software engineer + physician assistant. Maybe it's just because we're not willing to decrease or dip into our retirement savings and we have no help from parents.
I just don't feel comfortable taking out a jumbo mortgage. Even though we could make the numbers work, I'm not confident either of us won't burn out from our stressful careers.
Someone posted this the other day and everything it said hit home: http://highline.huffingtonpost.com/articles/en/poor-millenni...
Relevant pieces:
>Despite the acres of news pages dedicated to the narrative that millennials refuse to grow up, there are twice as many young people like Tyrone—living on their own and earning less than $30,000 per year—as there are millennials living with their parents. The crisis of our generation cannot be separated from the crisis of affordable housing.
>More people are renting homes than at any time since the late 1960s. But in the 40 years leading up to the recession, rents increased at more than twice the rate of incomes. Between 2001 and 2014, the number of “severely burdened” renters—households spending over half their incomes on rent—grew by more than 50 percent. Rather unsurprisingly, as housing prices have exploded, the number of 30- to 34-year-olds who own homes has plummeted.
>Falling homeownership rates, on their own, aren’t necessarily a catastrophe. But our country has contrived an entire “Game of Life” sequence that hinges on being able to buy a home. You rent for a while to save up for a down payment, then you buy a starter home with your partner, then you move into a larger place and raise a family. Once you pay off the mortgage, your house is either an asset to sell or a cheap place to live in retirement. Fin.
>This worked well when rents were low enough to save and homes were cheap enough to buy.
...
>Since the Great Recession, the “good” jobs—secure, non-temp, decent salary—have concentrated in cities like never before. America’s 100 largest metros have added 6 million jobs since the downturn. Rural areas, meanwhile, still have fewer jobs than they did in 2007. For young people trying to find work, moving to a major city is not an indulgence. It is a virtual necessity.
>But the soaring rents in big cities are now canceling out the higher wages. Back in 1970, according to a Harvard study, an unskilled worker who moved from a low-income state to a high-income state kept 79 percent of his increased wages after he paid for housing. A worker who made the same move in 2010 kept just 36 percent. For the first time in U.S. history, says Daniel Shoag, one of the study’s co-authors, it no longer makes sense for an unskilled worker in Utah to head for New York in the hope of building a better life.
>This leaves young people, especially those without a college degree, with an impossible choice. They can move to a city where there are good jobs but insane rents. Or they can move somewhere with low rents but few jobs that pay above the minimum wage.
>This dilemma is feeding the inequality-generating woodchipper the U.S. economy has become. Rather than offering Americans a way to build wealth, cities are becoming concentrations of people who already have it. In the country’s 10 largest metros, residents earning more than $150,000 per year now outnumber those earning less than $30,000 per year.
Relevant pieces:
>Despite the acres of news pages dedicated to the narrative that millennials refuse to grow up, there are twice as many young people like Tyrone—living on their own and earning less than $30,000 per year—as there are millennials living with their parents. The crisis of our generation cannot be separated from the crisis of affordable housing.
>More people are renting homes than at any time since the late 1960s. But in the 40 years leading up to the recession, rents increased at more than twice the rate of incomes. Between 2001 and 2014, the number of “severely burdened” renters—households spending over half their incomes on rent—grew by more than 50 percent. Rather unsurprisingly, as housing prices have exploded, the number of 30- to 34-year-olds who own homes has plummeted.
>Falling homeownership rates, on their own, aren’t necessarily a catastrophe. But our country has contrived an entire “Game of Life” sequence that hinges on being able to buy a home. You rent for a while to save up for a down payment, then you buy a starter home with your partner, then you move into a larger place and raise a family. Once you pay off the mortgage, your house is either an asset to sell or a cheap place to live in retirement. Fin.
>This worked well when rents were low enough to save and homes were cheap enough to buy.
...
>Since the Great Recession, the “good” jobs—secure, non-temp, decent salary—have concentrated in cities like never before. America’s 100 largest metros have added 6 million jobs since the downturn. Rural areas, meanwhile, still have fewer jobs than they did in 2007. For young people trying to find work, moving to a major city is not an indulgence. It is a virtual necessity.
>But the soaring rents in big cities are now canceling out the higher wages. Back in 1970, according to a Harvard study, an unskilled worker who moved from a low-income state to a high-income state kept 79 percent of his increased wages after he paid for housing. A worker who made the same move in 2010 kept just 36 percent. For the first time in U.S. history, says Daniel Shoag, one of the study’s co-authors, it no longer makes sense for an unskilled worker in Utah to head for New York in the hope of building a better life.
>This leaves young people, especially those without a college degree, with an impossible choice. They can move to a city where there are good jobs but insane rents. Or they can move somewhere with low rents but few jobs that pay above the minimum wage.
>This dilemma is feeding the inequality-generating woodchipper the U.S. economy has become. Rather than offering Americans a way to build wealth, cities are becoming concentrations of people who already have it. In the country’s 10 largest metros, residents earning more than $150,000 per year now outnumber those earning less than $30,000 per year.
I live in Portland but I’m in the same boat you are. My wife and I make a decent amount of money ($120k+) but a combination of student debt, crazy housing prices, and lack of wealthy family members who can “gift” a down payment leaves me fairly hopeless that we’ll ever be able to buy a house of our own.
We’ve seriously considered moving to the Midwest or the South where houses are affordable, but neither of our jobs allow fully remote work, very few cities in those areas have any sort of tech presence, and we’d be leaving pretty much every family member across the country.
We’ve seriously considered moving to the Midwest or the South where houses are affordable, but neither of our jobs allow fully remote work, very few cities in those areas have any sort of tech presence, and we’d be leaving pretty much every family member across the country.
I live in the area as well and I think the reality is that Seattle is going through a massive change due to densification.
Nobody expects to be able to buy a single family house in NYC- and that will probably soon be the case for cities like Seattle and SF...however this is a relatively recent development for us and therefor a much harder pill to swallow.
I came from the midwest (born and raised) - to respond to the other commenter...home ownership is cool, but I like it out here a lot more. Also, I make WAY more money here. Like 50% more, and I'm at the bottom of the engineer food chain. I make more money than any of my more experienced senior engineer friends back in the midwest. The amount of outdoorsy opportunities, interesting companies to work for, and boom/bust culture is just too exciting. Midwestern cities also experience a lot more violent crime (check out any top 10 list of dangerous cities). I think I heard gunshots almost every night that I lived in Kansas City, MO.
Nobody expects to be able to buy a single family house in NYC- and that will probably soon be the case for cities like Seattle and SF...however this is a relatively recent development for us and therefor a much harder pill to swallow.
I came from the midwest (born and raised) - to respond to the other commenter...home ownership is cool, but I like it out here a lot more. Also, I make WAY more money here. Like 50% more, and I'm at the bottom of the engineer food chain. I make more money than any of my more experienced senior engineer friends back in the midwest. The amount of outdoorsy opportunities, interesting companies to work for, and boom/bust culture is just too exciting. Midwestern cities also experience a lot more violent crime (check out any top 10 list of dangerous cities). I think I heard gunshots almost every night that I lived in Kansas City, MO.
Does anybody have an economist that they like who is writing intelligently about housing pricing right now?
You see 27% in SV, and almost 20% in subs like Oakland and it's hard not to remember the couple of years leading up to the 2007 crash when word on the street was "buy now or you will never be able to afford"
I bought on that advice and took a 35% haircut in a good market a few years later.
You see 27% in SV, and almost 20% in subs like Oakland and it's hard not to remember the couple of years leading up to the 2007 crash when word on the street was "buy now or you will never be able to afford"
I bought on that advice and took a 35% haircut in a good market a few years later.
The idea that housing always goes up in price is nonsense so you’d be right to be skeptical of “get in now” urges. If anybody said that about stocks they’d go to jail but for some reason we don’t regulate marketing if housing-as-security the way we regulate actual securities.
The only reason housing prices are skyrocketing is because we’ve built a protective legal regime around incumbent land owners. The market can’t function so the price goes up. Just as an example I’d be very pleased to build a small stack of flats on my Oakland property, say four units, but the law doesn’t permit that. On my block there’s a 1938 building with 22 apartments on the same sized lot as mine. So we used to allow it, and clearly it’s within the character of the neighborhood, to borrow a phrase from the NIMBYs, but we’ve just outlawed that kind of building.
As soon as the regulatory environment gets fixed, supply is going to explode and prices will fall.
The only reason housing prices are skyrocketing is because we’ve built a protective legal regime around incumbent land owners. The market can’t function so the price goes up. Just as an example I’d be very pleased to build a small stack of flats on my Oakland property, say four units, but the law doesn’t permit that. On my block there’s a 1938 building with 22 apartments on the same sized lot as mine. So we used to allow it, and clearly it’s within the character of the neighborhood, to borrow a phrase from the NIMBYs, but we’ve just outlawed that kind of building.
As soon as the regulatory environment gets fixed, supply is going to explode and prices will fall.
But a lack of supply doesn't explain rents being comparatively flat over the past 2 years.
The prices going up imply either:
1. Market has strong belief that housing construction will stop in the future (i..e regulatory environment actually worsens), leading to surge in rents.
2. Irrationality.
The prices going up imply either:
1. Market has strong belief that housing construction will stop in the future (i..e regulatory environment actually worsens), leading to surge in rents.
2. Irrationality.
There are many reasons why rental and house price can diverge.
More people living in the same space, a change in demographics, marginal tax rates.
Markets have an irrational component, but seemingly irrational behavior is more often misunderstood rational behavior than the other way around.
More people living in the same space, a change in demographics, marginal tax rates.
Markets have an irrational component, but seemingly irrational behavior is more often misunderstood rational behavior than the other way around.
I think you’re drawing conclusions that might not be warranted by this data. The rent survey is fundamentally different because it’s rents reported by large apartment management firms, not all private leases. We don’t really know what’s going on in the rent-a-house market. On the sales side the data is all recorded sales, which are public records.
Which rent survey are you referencing?
I'm going off https://www.zillow.com/santa-clara-county-ca/home-values/ which AFAIK uses all rent postings.
FWIW, there's also intuition backing this. e.g. go to zillow and click on units for rent in Cupertino. And be shocked that their estimated purchase prices are ~40x yearly rent. (It's difficult for me to see how that just isn't irrational pricing)
I'm going off https://www.zillow.com/santa-clara-county-ca/home-values/ which AFAIK uses all rent postings.
FWIW, there's also intuition backing this. e.g. go to zillow and click on units for rent in Cupertino. And be shocked that their estimated purchase prices are ~40x yearly rent. (It's difficult for me to see how that just isn't irrational pricing)
Not housing specifically (although he does talk about it every now and then), but I find Doug Noland’s analyses on global credit dynamics to explain a lot about what I see in the world around me. From what I’ve heard, he was also on the right side of understanding the severity of the subprime crisis (haven’t read the blogs around that time, though).
http://creditbubblebulletin.blogspot.com/2018/02/weekly-comm...
http://creditbubblebulletin.blogspot.com/2018/02/weekly-comm...
Julian Castro is doing a seminar series at the LBJ Library that I've been attending. I think they livestream them as well on Facebook. They are definitely worth a watch and address issues of housing prices, services, gentrification, how to approach them from a government and legal perspective.
https://www.eventbrite.com/e/policy-seminar-series-with-juli...
https://www.eventbrite.com/e/policy-seminar-series-with-juli...
There must be a study out there demonstrating that people systematically undervalue (or outright neglect) cost-of-living in a region when taking a job offer. One of my friends graduated from my phd prog (uc san diego) a few months ago and immediately took a job offer in SF. He said it was his best offer by more than $20k/yr. Every time I've spoken with him since, he complains about how expensive it is to live there and how much he pays for rent for an apartment in Berkeley area. Though when I ask if he is considering looking for a job elsewhere soon, he just says nah, the money is too good to leave. The thing is, even knowing this, I can totally see myself in an interview soon, somewhere in the valley, and getting an offer that makes me go 'well shit, how could i not afford a nice apartment on that salary'. How bad is it guys? Could someone making $140k/yr ever expect to be a homeowner in SF/SV?
If you are being paid $20k a year more than elsewhere, after tax perhaps that equates to ~12-16k a year. You'd therefore be able to afford between 1-1.5k a month more in expenses than earning the comparable salary offered elsewhere. I'd suggest that in SF that you maybe, just maybe break even (renting that is), but more than likely you are worse off financially.
However, SF will more than likely be a better place for career growth and opportunity. You shouldn't undervalue that, especially at the beginning of your career.
As far as buying a house goes, depends on what kind of commute you can tolerate and how much downpayment you have. I think you'd struggle to be comfortable on anything less than $200k.
However, SF will more than likely be a better place for career growth and opportunity. You shouldn't undervalue that, especially at the beginning of your career.
As far as buying a house goes, depends on what kind of commute you can tolerate and how much downpayment you have. I think you'd struggle to be comfortable on anything less than $200k.
Even if your after tax cash flow is similar Social Security befits from higher salaries.
Another consideration is there are larger benefits to downgrading your lifestyle. Living in a Tiny studio apartment in SF or even having roommates frees up a lot more cash than it does in most places. Going without a car in NYC is a minimal sacrifice for significant rewards.
Another consideration is there are larger benefits to downgrading your lifestyle. Living in a Tiny studio apartment in SF or even having roommates frees up a lot more cash than it does in most places. Going without a car in NYC is a minimal sacrifice for significant rewards.
[deleted]
>However, SF will more than likely be a better place for career growth and opportunity. You shouldn't undervalue that, especially at the beginning of your career.
Unless you plan to spend your entire career there having your the vast majority professional network is a bad thing because it means it's much harder to cut and run. If you don't cut and run you wind up with a wife, kids, a stupidly overpriced house in the suburbs, etc.
Unless you plan to spend your entire career there having your the vast majority professional network is a bad thing because it means it's much harder to cut and run. If you don't cut and run you wind up with a wife, kids, a stupidly overpriced house in the suburbs, etc.
A lot of people who start in SF probably end up somewhere else a decade or so down the line due to the reasons you mention. So even if your network starts out being purely SF based, in a few years those people (and thus your network) will probably end up being spread over a much wider area.
Every life is different, I have friends who had children in SF and left to find good jobs and houses elsewhere, it's more than possible.
All I'd suggest is just going in with your eyes open, and your point is definitely one worth considering when evaluating moving to SF.
All I'd suggest is just going in with your eyes open, and your point is definitely one worth considering when evaluating moving to SF.
I arrived in the SV 12 years ago (2006) with already $20k savings. I had a $100k job initially to now $140k. My rent was $1,400 for tiny but cute studio. I stayed in that studio for 5 years (until 2011) and managed to saved $100k total. I bought a place in SF with my partner, we put $200k down ($100k each) for a ~$800k 2br/2ba. We now pay $3k per month so $1,500 each per month which is not much more than I used to pay when single in my studio (granted, now I need to add HOA ($150/month) and property tax (but could be deducted from taxes)).
So, I would say it was possible but as a couple with same kind of income. Now (2018) I don't think we could afford the exact same condo (maybe worth now up to $1.2M). We could afford something smaller and/or less central. But having said that, I was very surprised when talking with (younger) coworkers who have the same salary ($140k), on how little to none they were actually saving. It is tempting to eat our for both lunch and dinner, etc in the City, but it gets expensive very quickly. To be a homeowner anywhere, you need to save. To be homeowner in SF/SV you need to save even more, and be a couple. Not impossible, but more difficult. Save early, and as much as you possibly can, that would determine your future purchase power.
> Could someone making $140k/yr ever expect to be a homeowner in SF/SV?
You probably can't. But you can rent. And rents plateaued a couple of years ago.
> There must be a study out there demonstrating that people systematically undervalue (or outright neglect) cost-of-living in a region when taking a job off
Higher COL regions generally provide higher quality of life (why else do people pay more to live there?). I find that the highest "life value" I can get is in the Bay Area (huge tech scene, great weather/outdoors, generally solid culture)
You probably can't. But you can rent. And rents plateaued a couple of years ago.
> There must be a study out there demonstrating that people systematically undervalue (or outright neglect) cost-of-living in a region when taking a job off
Higher COL regions generally provide higher quality of life (why else do people pay more to live there?). I find that the highest "life value" I can get is in the Bay Area (huge tech scene, great weather/outdoors, generally solid culture)
I'm totally happy living in the Sacramento area and I own two properties on sacramento-software-engineer pay. The downside is certainly less money and definitely way less opportunities if I was looking, but upside is much less traffic and being closer to outdoor recreation. And of course owning whatever type house I want within reason.
> Could someone making $140k/yr ever expect to be a homeowner in SF/SV
You could buy in Vallejo and commute over 1.5 hours to the city every day. Within most "desirable" cities in the Bay Area, houses will be out of your reach.
You could buy in Vallejo and commute over 1.5 hours to the city every day. Within most "desirable" cities in the Bay Area, houses will be out of your reach.
"You could buy in Vallejo and commute over 1.5 hours to the city every day. Within most "desirable" cities in the Bay Area, houses will be out of your reach."
I assume you mean 1.5 hours, round trip - either on the vallejo ferry (right to the core of SF) or timing your commute by car to miss rush hour. That fits my own experience well.
And if so, I don't know why that's so terrible.
My generation (generation X) was raised by parents who routinely and happily made similar sacrifices - either longer commutes or a second, part time job as a UPS driver or an extra shift at the nursing job, etc. to make our lives work.
I don't understand how these minor sacrifices, which were nearly universal in the suburban middle class we were raised in, are now "unthinkable" and clear evidence of "social pathology".
I assume you mean 1.5 hours, round trip - either on the vallejo ferry (right to the core of SF) or timing your commute by car to miss rush hour. That fits my own experience well.
And if so, I don't know why that's so terrible.
My generation (generation X) was raised by parents who routinely and happily made similar sacrifices - either longer commutes or a second, part time job as a UPS driver or an extra shift at the nursing job, etc. to make our lives work.
I don't understand how these minor sacrifices, which were nearly universal in the suburban middle class we were raised in, are now "unthinkable" and clear evidence of "social pathology".
If middle class has to have the same effort the previous generation did for the same results, where is the GDP per capita growing for?
Doing the same as the previous generation and getting the same means a diminishing rate of income.
I agree that our generation consumes a lot more, travels more, goes out to eat more, drinks more, etc. But maybe that is the consequence of not having a home and having high rents, not the other way around. For the past 20 years the RE market has been very unstable for our generation.
Doing the same as the previous generation and getting the same means a diminishing rate of income.
I agree that our generation consumes a lot more, travels more, goes out to eat more, drinks more, etc. But maybe that is the consequence of not having a home and having high rents, not the other way around. For the past 20 years the RE market has been very unstable for our generation.
My god, 1.5 hours :(
My current commute to work, from utc to la jolla, is 4 minutes.
My current commute to work, from utc to la jolla, is 4 minutes.
[deleted]
We should build higher and increase the density of housing. Building dense housing will also help end the housing shortage that raises rents and makes people homeless. One of the roots of the housing shortage is in the zoning laws that limit how much housing can be built on a plot of land. We can't make housing inexpensive while keeping it low density.
You'll understand why this is once you watch this 36 second video clip of a guy shouting he will devote his life to stopping 900 homes from being built where an abandoned K-Mart and Circuit City now lay - and how he will succeed just like he's done in the past.
https://twitter.com/cafedujord/status/971633159669338113
https://twitter.com/cafedujord/status/971633159669338113
This is not informative. Pick any planning meeting, at random, from anywhere in the United States, and you will find someone like this. Cranks are everywhere, and practically the entire purpose of public meetings are so that the cranks have a place to go rant and "be heard" by local officials. The real question is: does anyone listen to them, and if so, why? There's usually a good reason that isn't being discussed.
Silicon valley bedroom communities should be building more housing, but this kind of stuff is just straw-man argumentation.
Silicon valley bedroom communities should be building more housing, but this kind of stuff is just straw-man argumentation.
You can’t just add homes and not worry about traffic. That only exacerbates commute issues which is one of the reasons why houses so far away from business centers get so expensive, because houses even further have exponentially worse commutes.
Public transportation needs to be fixed first so that people from east bay and beyond can get to the Silicon Valley and SF faster.
If I could live in Tracy and get to SF in 30 mins or even 45 mins, I would move there in a heartbeat. But it takes 1.5-2hrs even with BART.
That will do more to lower house prices than cramming a small number of houses or condos in an already crowded area.
Public transportation needs to be fixed first so that people from east bay and beyond can get to the Silicon Valley and SF faster.
If I could live in Tracy and get to SF in 30 mins or even 45 mins, I would move there in a heartbeat. But it takes 1.5-2hrs even with BART.
That will do more to lower house prices than cramming a small number of houses or condos in an already crowded area.
If I could live in Tracy and get to SF in 30 mins
I had a couple of co-workers in Sunnyvale who moved that way (to Ripon and Manteca) to settle their families in single family homes. They formed a vanpool. Result: each had to drive only one way, and they made enough from the vanpool to more than pay for all their commute costs.
This was in 1985.
Paving over San Joaquin County with detached single family homes on quarter-acre lots will never fix our housing problems and certainly runs against our climate change goals. We have to build walkable neighborhoods a sensible distance from job centers, along existing transit corridors.
lol With all these disparate opinions, the problem will never be solved. People are going to have to agree on a sub-optimal but better plan otherwise the status quo will continue to win. Keep in mind that the NIMBY powers that be are a lot stronger, and as the house prices go up, every new home owner becomes more and more disinclined to support new housing in the SF Bay Area. The ONLY chance for lower house prices is better, more efficient public transportation and moving people further away from their jobs.
One of the more interesting theories I've seen about traffic is that people respond to traffic the same as any other cost. Meaning that if it takes longer to get to the city due to more homes in the area, fewer people will be willing to make the drive. So the theory is that infrastructure use will always expand to meet capacity.
I'm not saying I buy this idea to the extreme, but I think it's a pretty accurate model for how I make my travel decisions.
I'm not saying I buy this idea to the extreme, but I think it's a pretty accurate model for how I make my travel decisions.
Another good website to understand the bay area housing situation is Juliana lee's website (https://julianalee.com/). I regularly visited her site to understand pricing trends in different zip codes and cities. For the record, I did not use her services.
If it’s hard to make it work for someone with a 100k salary, I can’t imagine what it must be like for people with “normal” salaries.
What about bus drivers and waiters and salespeople in stores? How do they make it work?
I’m genuinely curious, I have no idea what living in the bay area is like.