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Old 05-17-2013, 01:10 PM
 
483 posts, read 1,069,419 times
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Back in 2011, SF real estate prices, on a sq. ft. basis, was anywhere from 1/3 to 1/2 of the prices of cities like NYC, London, Hong Kong, and Singapore.

This is despite SF having very similar population density to the last 3, and much less than NYC. A lot of room to go up, imo.
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Old 05-17-2013, 01:26 PM
 
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There are few things here. One, a significant portion of people in the Bay Area are born abroad. Condo living, living in smaller apartments are the norm in most countries in Asia and Europe. I have lived in Europe and housing is really expensive due to lack of space. Same in Asia. SF Bay Area is nothing in terms of housing cost and density, when you compared to mega cities like Tokyo that have 30 million people. So in that sense, this large population is not deterred to live in smaller places. That's an acceptable trade off. Living in huge houses while working at a bar, is a very American thing.

Second, many people believe that the housing situation is temporary. Given the amount of opportunities for growth, it is not uncommon to jump ships every year and increase your salary. So many people believe that if they wait out and focus on their careers for a bit, they will be afford to buy bigger and better.

Third, if you are very career centric, it helps to be located at corp headquarters. You are closer to senior managers and executives etc. For example, if you want to be a rising star in Google, you need to be in Mountain view period. Google execs need to know you personally and interact with you. Working out of satellite offices is accepted and prevalent, but it definitely comes at a cost.
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Old 05-17-2013, 02:26 PM
 
1,474 posts, read 2,633,901 times
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Quote:
Originally Posted by Azmordean View Post
I don't know, I think the rent comparison is at least partly flawed. Here in Mountain View my 2br is around 2500. A similar condo, taking into account high condo fees and taxes would easily be 3000-3500/mo depending on down payment.

Of course, that doesn't mean buying is a terrible idea, but at least in terms of cash flow on a short to medium term horizon, buying here is not necessarily a good deal. It's not like DC where my mortgage + condo fee was literally less than rent.
i think you are forgetting that property taxes and interest pain on a primary residence is tax deductable
AND $2000 -$3000 for a studio is not unusual in san francisco.
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Old 05-17-2013, 04:23 PM
 
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Originally Posted by Azmordean View Post
Good post overall. I'd just note that the Bay Area does not have any kind of monopoly on "brilliant people." Not by a long shot. Plenty of other parts of the country have a lot of intelligent people. Most people are here because the job is here, not because of a desire to be in some kind of brain trust. If the job was elsewhere, or tech companies made other, lower cost areas, available as an option, I'm sure many people would take it.

Your point about making good with what you have is also a good one. But the problem I see around here is it is tough to ever get ahead. You get raises and bonuses, and the COL increases soak it all up. I've been here less than a year and am going to look at apartments tomorrow, because there's a real chance I will no longer be able to afford my current apartment when the lease comes up for renewal.

I make six figures and may be priced out of my 900 sqft 2br 1ba garden apartment with laminate countertops and old appliances. When you look at it that way, it's pretty ludicrous. I can't be the only one thinking that, long term, if this trend continues, leaving the tech sector and moving somewhere reasonable may become my only option.
Many younger friends of mine have started to make similar plans to move away to other tech centers like Seattle, Austin, Boston or DC where the COL is lower.

You have to understand that Silicon Valley is like a massive human lottery. You spend nearly your entire salary to survive and hope to cash out on stock options. That's the deal people make when they come here. Over time, folks either become disillusioned with this, or they start a family which they simply can't afford to raise here, and then they move. This replays itself every 10-12 years. It shouldn't be a surprise to any of the veterans.

Don't listen to the realtors who say people spend $3k/month on a 1 bedroom because they love the city. It's like saying the miners who came west for the gold rush of 1849 lived in communal camps in the hills because they enjoyed fresh air and scenic mountain views. Most of these tech workers don't even see the city. They work 80 hours a week and wouldn't have the time to participate in the community on a consistent basis even if they wanted to. And most don't care where they live, it could be any city in the world; they just want to hold on to the dream that they can win the lottery and strike it rich.

Last edited by adam405; 05-17-2013 at 04:36 PM..
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Old 05-17-2013, 08:14 PM
 
Location: Mountain View, CA
1,152 posts, read 2,846,224 times
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Quote:
Originally Posted by adam405 View Post
Many younger friends of mine have started to make similar plans to move away to other tech centers like Seattle, Austin, Boston or DC where the COL is lower.

You have to understand that Silicon Valley is like a massive human lottery. You spend nearly your entire salary to survive and hope to cash out on stock options. That's the deal people make when they come here. Over time, folks either become disillusioned with this, or they start a family which they simply can't afford to raise here, and then they move. This replays itself every 10-12 years. It shouldn't be a surprise to any of the veterans.

Don't listen to the realtors who say people spend $3k/month on a 1 bedroom because they love the city. It's like saying the miners who came west for the gold rush of 1849 lived in communal camps in the hills because they enjoyed fresh air and scenic mountain views. Most of these tech workers don't even see the city. They work 80 hours a week and wouldn't have the time to participate in the community on a consistent basis even if they wanted to. And most don't care where they live, it could be any city in the world; they just want to hold on to the dream that they can win the lottery and strike it rich.
I agree with you to some extent. But not entirely. The reason I say that is Silicon Valley is growing up a bit. In the past, you were right - SV was all about the "startup stock option lottery." Increasingly though, the employment in the Valley is with established tech giants like Google, Apple, Facebook, and Yahoo. Anyone joining these companies knows they will get a strong salary, excellent benefits, and yes, stock. But these companies are already public, so there is zero chance of striking it rich. You know that going in.

I would venture to say that MOST people in the Bay Area now fall into this category. Most people are moving for a lucrative but not "rich" job with an established large company, not a lotto chance with some no-name startup.

I think as this dynamic works itself out more and more people will get fed up with COL here, and eventually tech companies will compromise on possible work locations or start losing good people. And if tech companies make compromises on work location, that will reduce demand somewhat for real estate and the Bay Area may finally stabilize.

I'm not saying there isn't some value to the Bay Area "tech central" mentality - there is. As a single guy it's a great place for me to live and it helps that I really enjoy my job (with a large company, not a startup). But I have trouble seeing myself here long term with the current state of affairs.

The problem is tech companies try to compensate by paying more without realizing that doesn't work because there is flat nowhere to live here. So all paying more does is raise prices more. Something has to give - and that is either (1) the horrible NIMBYs here must give and allow more infill development; or (2) tech companies must give and allow people to live and work from less expensive places. Sadly I think (2) is more likely than (1) - I've never seen such an entrenched group of NIMBYs as I see here.
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Old 05-17-2013, 08:23 PM
 
Location: California
1,199 posts, read 1,067,811 times
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I don't know. A part of me thinks it is unsustainable. My wife and i are the stereotypical yuppie couple. She is a lawyer and i m in management consultng/finance. We have both done really well in our carrers and are in late 20s. We cant afford a house, despite being pretty frugal and not driving a fancy car, not eating out every day etc.

I really wonder WHO buys these houses. I know for a fact we are paid better than a lot of tech workers. So is it all senior managers? Did the not own before? It is not like there are new IPOs every day. I just dont get it

But i dont hope for a collapse. We love our rental and i want the local economy to do well.

I just cant see how it is sustainable.

And to people comparing SF to HK, london, nyc etc. it is not the same. You wont find a bigger fanboy of SF than me, but let's be objective. HK has a lot of rich mainland Chinese. London attracts EVERY wealthy person. Same with NYC. SF is not like that.

The houses are bought by locals. I just dont know how they can afford it
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Old 05-17-2013, 11:24 PM
 
Location: Mountain View, CA
1,152 posts, read 2,846,224 times
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Originally Posted by HappyinCali View Post
I don't know. A part of me thinks it is unsustainable. My wife and i are the stereotypical yuppie couple. She is a lawyer and i m in management consultng/finance. We have both done really well in our carrers and are in late 20s. We cant afford a house, despite being pretty frugal and not driving a fancy car, not eating out every day etc.

I really wonder WHO buys these houses. I know for a fact we are paid better than a lot of tech workers. So is it all senior managers? Did the not own before? It is not like there are new IPOs every day. I just dont get it

But i dont hope for a collapse. We love our rental and i want the local economy to do well.

I just cant see how it is sustainable.

And to people comparing SF to HK, london, nyc etc. it is not the same. You wont find a bigger fanboy of SF than me, but let's be objective. HK has a lot of rich mainland Chinese. London attracts EVERY wealthy person. Same with NYC. SF is not like that.

The houses are bought by locals. I just dont know how they can afford it
Right now a lot of it is fueled by investors and private equity funds. Normal people don't make all cash offers on homes that cost 500k plus. This is part of why I think things may cool off a bit.

And to be clear I'm not arguing housing will collapse. I just think it will flatten out a bit. An interest rate hike would help a lot too. I think artificially low rates (Fed free money) are fueling speculative investment in real estate in general as well. Of course the Fed is doing this so prices will rise artificially and banks can unload their underwater assets. But it doesn't do actual people any favors.

On the international point it is undoubtedly true density is higher in Asia and Europe. I'm all for more density. It would lower prices without expanding sprawl and killing the natural beauty of this area. Unfortunately there are a lot of NIMBYs who think 2 story 1970 garden condos on some of the most valuable land in the USA makes sense.
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Old 05-28-2013, 11:01 PM
 
49 posts, read 50,704 times
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Short memories...
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