Anyone else agree with my logic on silicon valley housing?

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Easy Rhino
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Re: Anyone else agree with my logic on silicon valley housing?

Post by Easy Rhino »

if you're going to be leaving in a year, you should rent, not buy.
Carefreeap
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Re: Anyone else agree with my logic on silicon valley housing?

Post by Carefreeap »

GrandDesigns wrote:
randomguy wrote:
twins2012 wrote:
GrandDesigns wrote:
badger42 wrote: Lets see how that works out. Something like
SV: 1 million dollar house, 10k/year taxes
Austin House: 400k house, ~9k/year taxes.

is about right. Call it even. Now it is 30 years later and you are ready to retire
SV: 3 million dollar house, 15k/year in taxes
Austin: 1.200k house, 30k/year in taxes
Which house would you now rather own during your retirement.:) Ok the odds of them having the same appreciation is low but Prop13 really favors buyiing a house and staying forever.
This is a valid point, but it's also what I mean about how you can spin the numbers either way and really need to pick the lifestyle you want. If you just want to own a house or a condo and keep it forever, prop 13 is a great thing, and it can make a lot of sense to just buy a place here and pay it off with RSUs.

But growing up in a LCOL area, I saw how people had the freedom to move as they wanted and increase their housing quality over time. The downside of prop 13 is that it restricts housing liquidity (increasing housing prices), and it makes it a huge proposition to move because just selling your current house and buying another of equal value might double your property tax. If you upgrade, it goes through the roof.

So who is right? Well, I think it depends on what you want in life.
I want to address the property tax situation. After Prop 13 there were two more Props which address prop taxes. Props 60 and 90 allow a one-time exemption for those 55 and older to transfer their property tax basis to an equal or lesser priced property within the same county. There are also currently 11 counties in CA which will allow for reciprocity. It's actually a little more nuanced but the rationale was to free up inventory of family houses and encourage seniors to downsize to smaller homes.

I'm not sure what you mean by upgrade? Do you mean remodeling or adding on? Doing an interior remodel that doesn't add square footage generally doesn't affect your property tax. Adding on will affect your property tax but only in the amount that the addition adds value. As an example when we bought our Bay Area house back in 1995 our purchase price was about $325k. In 2001 we added another 500 square feet which was assessed at an additional $50k. We've been steadily increased at the 2% and I think our assessed value is close to $500k for a property that is now worth about $1.5M.

Since my house is located in San Mateo County and we are over 55 we have thought about buying a house in San Diego County and transferring the $500k base. So long as we keep the price under $1.5M we can move our property tax base.
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mac808
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Re: Anyone else agree with my logic on silicon valley housing?

Post by mac808 »

Silicon Valley is full of couples who make $300k to $500k each for household income of $600k to a million. It's nirvana for these people because of the abundance of well paid tech HQ jobs. @ $250k/year, as others have mentioned here, you're better off moving somewhere else (maybe Austin, maybe elsewhere), where as an experienced software dev you'll be able to keep making the same amount, if not close to it.
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Watty
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Re: Anyone else agree with my logic on silicon valley housing?

Post by Watty »

countofmc wrote:
Watty wrote:
visualguy wrote:
imperio wrote: Do you mean you think property in SV will appreciate at a faster rate than other locations? I worry that it might be a bubble of sorts, which is why I get nervous thinking about buying at current prices.
It's a supply/demand imbalance, not a bubble. There are enough people with a lot of cash to buy the available inventory without excessive debt.

There's no doubt in my mind that it will continue to be one of the fastest appreciating locations in the country. It keeps attracting large amounts of talent and wealth, and there's no reason for that to change.
A couple of reasons;

1) Low mortgage interest rates end. Buying a house with a 6% mortgage is a lot harder than with a 4% mortgage.

2) People are willing to pay high housing prices there in part because they expect for them to go up even higher. If prices flatten out there will be a lot less people in a hurry to buy.
I'd love to see some data on this, but I haven't really found anything. What I'd like to see is what % of sales are all-cash, what % get a mortgage, what % are going to foreign buyers, etc. If the vast majority of sales are all-cash to some really wealthy people, then interest rates rising shouldn't affect the market too much.

But if the vast majority of buyers are still the "traditional" type that are putting down 10-20% and taking on sizeable mortgages that are a good chunk of their income, then that might indicate prices are starting to get too high, even for the high earners here.
It gets complicated since a "cash" offer does not necessary mean that the buyer actually will pay with cash. It just means that they make an offer without a financing contingency. The buyer is still able to use a traditional mortgage if they want to but will forfeit their earnest money if they don't have the cash lined up on the closing date. The seller may want to see that they have the ability to pay cash if they need to but many buyers will not want to take the tax hit of selling all their investments to actually pay cash for a house. Even if cash is actually paid the buyer can still finance the house for a month or two after the sale and still qualify for the tax breaks of a normal mortgage, as long as they jump through the right hoops.

It will not tell you the current sales but you can see the percentages of houses with mortgages on the census web site. If this link works here is Santa Clara Ca in 2015. Only 102,474 homes out of homes 355,812 in Santa Clara did not have a mortgage in 2015. That is well less than a third and less than the national average.

https://factfinder.census.gov/faces/tab ... Type=table
  • Total: 355,812
    Housing units with a mortgage, contract to purchase, or similar debt: 253,341
    With either a second mortgage or home equity loan, but not both: 46,585
    Second mortgage only 7,646
    Home equity loan only 38,939
    Both second mortgage and home equity loan 2,249
    No second mortgage and no home equity loan 204,507
    Housing units without a mortgage 102,471
If that link does not work go here;

https://factfinder.census.gov/faces/nav ... esh=t#none

and select Santa Clara and the "mortgage status" table for 1 years estimates.
Last edited by Watty on Tue May 16, 2017 12:52 pm, edited 2 times in total.
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goodenyou
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Re: Anyone else agree with my logic on silicon valley housing?

Post by goodenyou »

EnjoyIt wrote:We moved out of NY to Texas for the same reason about 8 years ago. Our lives couldn't be better.

I did it 21 years ago. Never looked back, nor would I go back.
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madbrain
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Re: Anyone else agree with my logic on silicon valley housing?

Post by madbrain »

countofmc wrote: It seems unlikely that this current rate of appreciation would continue. Otherwise in 5 years we'd see another doubling of prices in certain areas. You'd have ordinary suburban homes in East San Jose going for $2 million. Even with all the tech and Chinese millionaires, I don't know how an entire region could support such prices. But I don't think it's farfetched to say prices will continue to rise at at least inflation (which is long term trend for real estate) going forwards, and the 10-20% drop some people are calling for won't happen.
As someone who has lived in the bay area for 20 years and been a homeowner for 19.5 years, I have seen real estate prices go up and down.
If we have another recession like we had after 9/11 and 2008, you could very easily see 10-20% drop in prices - heck, 40% would not surprise me.

I bought an 1160sq ft townhome in Santa clara in 1997 for $230k. It was worth as much as $620k in 2006. I didn't sell it because it would have been prohibitively expensive to move up. I sold it for $450k in 2012. It's apparently worth $760k today. Real estate prices go up and down, as the economy does. Some places more than others.

As for east San Jose, I bought a mansion there in 2010 for $800k. It's over 4600 sq ft, and still not worth $2 million. Zillow says $1.9 today, but I think realistically closer to $1.4 . Average home in east SJ is $600K according to Zillow, and that seems high also, with all the foreclosures still going on in the area. No chance we'll see the average home in east SJ anywhere close to $2 million in the next decade, IMO. Maybe not even the next 2 decades.

Another recession is only a matter of when, not if, IMO, and if stock prices crash, so will bay area home prices. Rents may not follow quite as dramatic a pattern, though. I personally bought my first and second home to live, not as investments. It provided stable and fairly predictable housing costs, vs rent. Buy if you want to be in the area for the long term. But now may not be the best time to buy, IMO, given valuations.
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GrandDesigns
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Re: Anyone else agree with my logic on silicon valley housing?

Post by GrandDesigns »

bigred77 wrote:OP,

In the Bay Area and other global cities, it's incredibly hard to buy property as a single 27 year old unless you have deep pocketed family willing to help. That's just a fact of life. If you move to Austin, do you want to immediately buy a house on an acre with a 15-20 mile commute? Why? There's a time and place for all that but why not wait until your ready to settle down or at least more established?
I don't actually want to buy a big house in Austin yet, I would live near downtown in a one bedroom.
If you stay in the Bay Area and partner with someone who makes a comparable salary, then you have no issues buying a single family home. If you stay single, just wait and keep saving for 5 years and then you can buy a 2 bedroom condo when you're making 350k a year and have doubled your available down payment. Is it so bad to have to wait until your early 30s to buy property when your living in place with as much to offer as where you are (especially with the best job market in the world for your chosen line of work)?

Now if you decide that you don't like your situation because you don't like the fast paced, career focused lifestyle than that's a different story.
This is exactly my thought. If I enjoyed living here, it's not a big deal to wait a bit and then buy a place. But I don't like living here. I interned here when I was in college, and explicitly tried not to move here. But I wound up here because of the opportunities so I decided to just make things work for 4-5 years to establish my career with some awesome experience, and then make my way out of here. I'm going on four years, and it's time for me to begin making plans to move on.

Yes, this place has a ton to offer, but I believe strongly that the extreme population crowding, sky high cost of living, and career obsessed mentality makes its very hard to actually go enjoy what is offered.
mac808 wrote:Silicon Valley is full of couples who make $300k to $500k each for household income of $600k to a million. It's nirvana for these people because of the abundance of well paid tech HQ jobs. @ $250k/year, as others have mentioned here, you're better off moving somewhere else (maybe Austin, maybe elsewhere), where as an experienced software dev you'll be able to keep making the same amount, if not close to it.
This is definitely part of what I dislike about the bay area. To keep up with an average lifestyle here you really need to have two high earning partners together. My coworker is married to another very highly paid engineer and they couldn't even afford a starter home in Palo Alto where they grew up.
btenny
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Re: Anyone else agree with my logic on silicon valley housing?

Post by btenny »

MY brother used to live in Cupertino. His backyard looked out at the Apple campus. His house cost $250K as I recall for small 4/2 rancher in 1985ish when he moved there. He lived various places before moving there for work. His kids went to high school there and then went off the college. One ended up in Arizona and the other in Sacramento. Both thought the COL was way too high and they were not engineers so they did not want to stay. My brother left after the kids left. He hated his commute and the 4-5 hours needed to just get out of town.

My BIL lived in Pleasanton for 20 years from 1993 to 2013. He left when the prices for a simple 3/2 condo went over $500k. He wanted a home to retire to with nice neighbors. He could not find anything less than $600K that fit his needs. His issue was the extreme crowding that was happening due to high housing prices. His next door neighbor subdivided their 3/2 condo into a 5/2 condo that would let him move in his MIL and FIL and a sister. The other neighbor moved her two kids in with her and their two teen kids. So three generations and 6 people. It was just crazy and he said it was typical all over the bay area.

I could go on but this is what I see all over the bay area. If you are not paid crazy amounts or already own your home for years you will never over come the crazy home prices. You will be a slave to your mortgage for life.

Good Luck.
inbox788
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Re: Anyone else agree with my logic on silicon valley housing?

Post by inbox788 »

Watty wrote:
visualguy wrote:It's a supply/demand imbalance, not a bubble. There are enough people with a lot of cash to buy the available inventory without excessive debt.

There's no doubt in my mind that it will continue to be one of the fastest appreciating locations in the country. It keeps attracting large amounts of talent and wealth, and there's no reason for that to change.
1) Low mortgage interest rates end. Buying a house with a 6% mortgage is a lot harder than with a 4% mortgage.
As long as people have cash, and if higher mortgage interest rates comes along with higher bond returns and growing economy and higher stock prices, some folks are going to have even more cash. More fuel for the bubble.

There is:
3) Earthquake and fire hits the bay area and scares off half the people sharply reducing demand. However historically, the area seems to bounce back fairly quickly.
randomguy wrote:And FWIW, nobody has all their income taxed at the 33% bracket and 10% state. That just isn't the way the tax code works.
But that is how alternative minimum tax works, well kind of. And the top state tax rate is 12.3% or higher. And unlike federal tax, the 6% and 8% tax brackets are quite modest for individuals, and most silicon valley workers are likely paying 9.3%+.

https://www.forbes.com/sites/feeonlypla ... 382a4a6489
https://www.ftb.ca.gov/forms/2016-calif ... ions.shtml
IMO
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Re: Anyone else agree with my logic on silicon valley housing?

Post by IMO »

I'm a little confused as I read through this thread. You are seriously considering moving in 1 year, and even if you stayed beyond 1 year you are probably ready to move on sometime in the next 1-4 years? It seems a bit odd to be considering buying a home, which essentially sounds like "trying to time the market?". Lot to risk if housing goes flat/drops a bit, or if a earthquake occurs requiring a 20% insurance deductible on damages.

I guess prices for homes could theoretically continue to rise as the level of say the last 7 years or however long the run up has been going. But what if you plotted out that recent housing trajectory, will it really continue on the same recent trajectory indefinitely? I mean really?

The argument is tech salaries keep going up astronomically and housing thus will follow.

I'm not a techy person or super familiar on these jobs. What I found interesting was talking to a SV tech person one day on a ski lift and he said how he was paid so much more than his out of the US counterparts. Had this attitude like those other countries won't ever have people that can do what he/others are doing in the SV area. From my uneducated tech perspective, seems odd as isn't there is actively ongoing concern on how countries like Russia/China with their inferior IT people are hacking into our "superior systems."

I honestly wonder, will tech companies trying to maximize profits simply go more and more to farming out those jobs overseas? The crash being in the SF tech people thinking they have somehow superior knowledge/skills that cannot and will not be perhaps more significantly farmed out overseas. And I know I'll get feedback on this telling me why I'm so wrong to think that at some point, the IT industry will never leave SV in any significant way/shape or form. Salaries will continue just like housing on the sky rocketing trajectory . . . .

What is the saying, irrational exuberance or something?

Anyway, time will tell (how did we not see this?), and I've got no skin the SF tech game....

Best of luck with whatever you decide.
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gr7070
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Re: Anyone else agree with my logic on silicon valley housing?

Post by gr7070 »

Austin must be the most overrated city to live in the country!!

It is a nice place to live. However, everyone thinks it's one of the great places to live in this country. It's not!

There's no ocean. There's no mountains. No saltwater beaches. No skiing. The weather is very hot. No "trees" (they're large bushes).

Top 10 worst traffic in the county and getting far worse, not better.

COL is fine, but far from great.

It has a nice bar district, but what city doesn't? And live music does not necessarily mean good music.

I enjoy living here. But if I were to pack up and move across country it wouldn't be to Austin. It'd be a city that has those great things Austin doesn't, or at least a city like Austin but with better weather, traffic, COL, etc. It'd be Colorado, Seattle, San Diego, the Carolinas, Chicago, NY, BC Canada, South Florida (maybe), Nashville, Minneapolis (great city, but cold!), Portlands ME and OR (get your own slogan!). Shoot, maybe even places like KC or Madison.

The Austin love just doesn't make sense by comparison.
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sunny_socal
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Re: Anyone else agree with my logic on silicon valley housing?

Post by sunny_socal »

IMO wrote:I'm a little confused as I read through this thread. You are seriously considering moving in 1 year, and even if you stayed beyond 1 year you are probably ready to move on sometime in the next 1-4 years? It seems a bit odd to be considering buying a home, which essentially sounds like "trying to time the market?". Lot to risk if housing goes flat/drops a bit, or if a earthquake occurs requiring a 20% insurance deductible on damages.

I guess prices for homes could theoretically continue to rise as the level of say the last 7 years or however long the run up has been going. But what if you plotted out that recent housing trajectory, will it really continue on the same recent trajectory indefinitely? I mean really?

The argument is tech salaries keep going up astronomically and housing thus will follow.

I'm not a techy person or super familiar on these jobs. What I found interesting was talking to a SV tech person one day on a ski lift and he said how he was paid so much more than his out of the US counterparts. Had this attitude like those other countries won't ever have people that can do what he/others are doing in the SV area. From my uneducated tech perspective, seems odd as isn't there is actively ongoing concern on how countries like Russia/China with their inferior IT people are hacking into our "superior systems."

I honestly wonder, will tech companies trying to maximize profits simply go more and more to farming out those jobs overseas? The crash being in the SF tech people thinking they have somehow superior knowledge/skills that cannot and will not be perhaps more significantly farmed out overseas. And I know I'll get feedback on this telling me why I'm so wrong to think that at some point, the IT industry will never leave SV in any significant way/shape or form. Salaries will continue just like housing on the sky rocketing trajectory . . . .

What is the saying, irrational exuberance or something?

Anyway, time will tell (how did we not see this?), and I've got no skin the SF tech game....

Best of luck with whatever you decide.
I think your analysis is spot on. My Megacorp has a de facto hiring freeze in the USA and all the new jobs are going to China. Why?
- People work hard over there. Nights, weekends. The convention is to work weekends in order to 'earn' any national holidays.
- Engineers have the same degrees, MS, PhD. No difference whatsoever.
- The cost of labor in China is 50% compared to the US. For the price of one engineer here we hire 2-3 over there.

Everyone is doing it. The high tech parks in China have _every_ US company represented.

How long will the gravy train stay on the rails? 5 years? 10 years? I don't know, but eventually it will come to a stop. The last people to stay will be the system architects and other high level designers but jobs that require just pushing a button have already moved overseas. The trend is clear.
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FrugalInvestor
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Re: Anyone else agree with my logic on silicon valley housing?

Post by FrugalInvestor »

celia wrote:Why don't you take a week's vacation and go visit Austin, TX. Go talk to some locals, look around, and see what the lifestyle is really like. (I'll bet there's nothing going on after midnight and the weather isn't as nice.) Or you can keep your current job for "x" more years while renting and sock away as much as you can, then move.
This is sage advice. Do your research, don't just dream because dreams skew reality. You may or may not want to move immediately after you do. Or you may decide to delay the move or move somewhere else.

An important lesson I learned during my working years - and it was as much was by chance as by design - was that living in a HCOL area (read that 'high earning potential area') but keeping expenses relatively low is an excellent opportunity to save, as you have apparently already discovered. If you can make the best of it in the present and look to the future (delayed gratification) it may open up more options to you such as early retirement.

But if you do decide that moving is the best option for you then make sure you're going to a place where your expectations match reality.
Have a plan, stay the course and simplify. Then ignore the noise!
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Re: Anyone else agree with my logic on silicon valley housing?

Post by visualguy »

sunny_socal wrote:
I think your analysis is spot on. My Megacorp has a de facto hiring freeze in the USA and all the new jobs are going to China. Why?
- People work hard over there. Nights, weekends. The convention is to work weekends in order to 'earn' any national holidays.
- Engineers have the same degrees, MS, PhD. No difference whatsoever.
- The cost of labor in China is 50% compared to the US. For the price of one engineer here we hire 2-3 over there.

Everyone is doing it. The high tech parks in China have _every_ US company represented.

How long will the gravy train stay on the rails? 5 years? 10 years? I don't know, but eventually it will come to a stop. The last people to stay will be the system architects and other high level designers but jobs that require just pushing a button have already moved overseas. The trend is clear.
People have been saying this for many years, but incomes and home price in the Bay Area kept going up. The reality is that technology is a growing area of the economy, and the size and capacity of the Bay Area is limited. There's enough high-paying work to keep the Bay Area going, and also enough growth to keep Israel, India, China, etc. growing. It's not some kind of a zero-sum game.
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Re: Anyone else agree with my logic on silicon valley housing?

Post by new2bogle »

gr7070 wrote:Austin must be the most overrated city to live in the country!!

It is a nice place to live. However, everyone thinks it's one of the great places to live in this country. It's not!

There's no ocean. There's no mountains. No saltwater beaches. No skiing. The weather is very hot. No "trees" (they're large bushes).

Top 10 worst traffic in the county and getting far worse, not better.

COL is fine, but far from great.

It has a nice bar district, but what city doesn't? And live music does not necessarily mean good music.

I enjoy living here. But if I were to pack up and move across country it wouldn't be to Austin. It'd be a city that has those great things Austin doesn't, or at least a city like Austin but with better weather, traffic, COL, etc. It'd be Colorado, Seattle, San Diego, the Carolinas, Chicago, NY, BC Canada, South Florida (maybe), Nashville, Minneapolis (great city, but cold!), Portlands ME and OR (get your own slogan!). Shoot, maybe even places like KC or Madison.

The Austin love just doesn't make sense by comparison.

I live in Austin and could not have said this better!

:sharebeer
countofmc
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Re: Anyone else agree with my logic on silicon valley housing?

Post by countofmc »

One thing I did fail to consider is changing political sentiment (I will tread carefully due to forum rules) surrounding density. As more and more younger people and immigrants who may be more conducive to tolerating density if it means they can better afford a home move into the area, there might be more political pressure to start allowing more dense developments. I'd think this wouldn't affect the value of SFHs too much, but would affect condos/townhomes. Just another thought on this broader topic.
countofmc
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Re: Anyone else agree with my logic on silicon valley housing?

Post by countofmc »

gr7070 wrote:Austin must be the most overrated city to live in the country!!

It is a nice place to live. However, everyone thinks it's one of the great places to live in this country. It's not!

There's no ocean. There's no mountains. No saltwater beaches. No skiing. The weather is very hot. No "trees" (they're large bushes).

Top 10 worst traffic in the county and getting far worse, not better.

COL is fine, but far from great.

It has a nice bar district, but what city doesn't? And live music does not necessarily mean good music.

I enjoy living here. But if I were to pack up and move across country it wouldn't be to Austin. It'd be a city that has those great things Austin doesn't, or at least a city like Austin but with better weather, traffic, COL, etc. It'd be Colorado, Seattle, San Diego, the Carolinas, Chicago, NY, BC Canada, South Florida (maybe), Nashville, Minneapolis (great city, but cold!), Portlands ME and OR (get your own slogan!). Shoot, maybe even places like KC or Madison.

The Austin love just doesn't make sense by comparison.
I've only visited, never lived there. But Nashville seems like a great town that's often overlooked in these city discussions. Just an opinion. Maybe actual residents will disagree.
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HomerJ
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Re: Anyone else agree with my logic on silicon valley housing?

Post by HomerJ »

freebeer wrote:So I don't think this is about debt or your $2M condo vs. something in Austin but about whether you really really want to make the big score (even if at expense of lifestyle). If so, stay in Bay Area would be my advice (but don't be looking for that $150K +$100K stock thing at BigCo, look for that promising late-stage startup thing and prepare to do that 2 or 3 times until the score happens).
Just note that you may do it 2 or 3 or 7 times, and NEVER get the "big score".
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HomerJ
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Re: Anyone else agree with my logic on silicon valley housing?

Post by HomerJ »

countofmc wrote:Heck my wife and I are not in tech, and we still have enough income to qualify for $600k mortgage, not too hard at today's interest rates.

I mean if I was interpreting those numbers I'd say short of some kind of major 2000-style tech implosion, home prices are not really in danger of a huge decline, but we might see appreciation slow down.
Really?

So what happens to the SV housing market when interest rates go back to average instead of being historically low? Is that a black-swan event? We're not talking a tech implosion or a Great Recession event. We're talking mortgage rates going back to the historic average. Think that's a low-probability event?
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Re: Anyone else agree with my logic on silicon valley housing?

Post by curmudgeon »

HomerJ wrote:
countofmc wrote:Heck my wife and I are not in tech, and we still have enough income to qualify for $600k mortgage, not too hard at today's interest rates.

I mean if I was interpreting those numbers I'd say short of some kind of major 2000-style tech implosion, home prices are not really in danger of a huge decline, but we might see appreciation slow down.
Really?

So what happens to the SV housing market when interest rates go back to average instead of being historically low? Is that a black-swan event? We're not talking a tech implosion or a Great Recession event. We're talking mortgage rates going back to the historic average. Think that's a low-probability event?
Gotta remember that the typical SV buyer is only paying 60% (or less) of the increased mortgage interest when rates rise because of the income tax burden at high incomes. Now if you want a "black swan" for SV real estate, maybe a removal of the mortgage interest deduction would do it (though that wouldn't phase the cash buyers).

But the general point is quite true, that SV isn't for everybody. The weather and other desirable factors come at a price.
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burt
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Re: Anyone else agree with my logic on silicon valley housing?

Post by burt »

Your logic is correct. When the music stops, someone is going to get burnt. Those most likely to get burnt are a young couple where both are educated having a family income between $200,000 and $400,000.
Just my opinion.

https://www.youtube.com/watch?v=SBjXUBMkkE8


burt
hoops777
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Re: Anyone else agree with my logic on silicon valley housing?

Post by hoops777 »

If you really like living in the Bay Area,you are 27,making more money than 99 pct of the working people in the country,so hold off on buying and save some more money.It is none of our business what your personal life is,but a lot changes if you enter into a serious relationship with someone,and if that happens the odds are good that person will likely want to stay in their home area.People pay the price to live in the Bay Area for a reason.It is cheaper to live in Austin for a reason.Whatever reasons are important to you is what matters.I am born and raised in the Bay Area and have lived here my entire life,minus a 3 year move to Arizona.I love California but would have no problem retiring in Arizona either.To each his own :happy
K.I.S.S........so easy to say so difficult to do.
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Re: Anyone else agree with my logic on silicon valley housing?

Post by random_walker_77 »

new2bogle wrote:
gr7070 wrote:Austin must be the most overrated city to live in the country!!

It is a nice place to live. However, everyone thinks it's one of the great places to live in this country. It's not!

There's no ocean. There's no mountains. No saltwater beaches. No skiing. The weather is very hot. No "trees" (they're large bushes).

Top 10 worst traffic in the county and getting far worse, not better.

COL is fine, but far from great.

It has a nice bar district, but what city doesn't? And live music does not necessarily mean good music.

I enjoy living here. But if I were to pack up and move across country it wouldn't be to Austin. It'd be a city that has those great things Austin doesn't, or at least a city like Austin but with better weather, traffic, COL, etc. It'd be Colorado, Seattle, San Diego, the Carolinas, Chicago, NY, BC Canada, South Florida (maybe), Nashville, Minneapolis (great city, but cold!), Portlands ME and OR (get your own slogan!). Shoot, maybe even places like KC or Madison.

The Austin love just doesn't make sense by comparison.

I live in Austin and could not have said this better!

:sharebeer
Don't forget the mosquitoes, rattlers, and scorpions. Also, mosquito-borne diseases like West Nile, Zika, and chikungunya. Triple digit highs in summer is one thing, but most people don't realize that it doesn't cool down at sunset like most other parts of the country. The low might get down to 78-79, but only between the hours of 5am-7am. Sure, people still jog, but in hot sticky weather. The relative humidity might sound reasonable, but that's only b/c the temp is 102. The dew point is still up around 70-73 deg F, so it's still kind of humid. If you like being outdoors, either you need to really like the heat, or you've got to get your outdoor time done before 9am.

Don't get me wrong, I like it here, but it's definitely not for everyone.
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Re: Anyone else agree with my logic on silicon valley housing?

Post by itstoomuch »

glassdoor and city-data are your tools.
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gr7070
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Re: Anyone else agree with my logic on silicon valley housing?

Post by gr7070 »

random_walker_77 wrote: Triple digit highs in summer is one thing, but most people don't realize that it doesn't cool down at sunset like most other parts of the country. The low might get down to 78-79, but only between the hours of 5am-7am.
That is particularly draining. Not only does it never cool off for 75 days, but there's never a rainy day or an overcast day; never a cool front comes through for a 12 hour respite.

Nothing but constant heat. And the actual 101* F temps don't bother me much. I bike any time of day (even commute to work), mow lawn, what/whenever. But it gets old never having the break.

I lived in the U.P. with 240" inches of snow a year, where it's overcast for months, and gets dark by 4; and I think the neverelenting heat is more bothersome. Though I still prefer the warm climent as I can do more things outdoors year round.

Nice city.

Going to take advantage of the tons of mountain biking within minutes of my house tomorrow. But it's not close to the PacNW or Colorado or even the U.P. with regard to mountain biking.

Not a great city.
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Re: Anyone else agree with my logic on silicon valley housing?

Post by mchriton »

GrandDesigns wrote:I'm an engineer living in silicon valley, and I am pretty sure I'm going to exit within the next year, to somewhere like Austin, Texas or something. I came to the revelation that I need to live SV when I realized that, as long as I am comfortable financially, lifestyle is more important to me than numbers, and I want to work 40 hours a week and have a house with a decent yard and a grill, and that just isn't the lifestyle here.
If you don't plan to push your career aggressively, I think you're best of doing what you suggest relocating. As others have noted, work for a bay area company remotely and your salary should be within 5-10%.

The primary advantage I see to the bay area is opportunity. For entry positions, there is a shortage of talent that for many positions employers struggle to find employees that will work locally. For senior positions, it helps and in many cases required to be local.

In my case and similar situation to others I know in SV, we went from making low six figures at college graduation to high six figures or low seven figures in early 30s after 6-7 promotions.

Once I plateau, I'm likely gone as well or retired. The traffic drives me nuts and work culture is insane among other reasons.
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Re: Anyone else agree with my logic on silicon valley housing?

Post by Nathan Drake »

mchriton wrote:
GrandDesigns wrote:I'm an engineer living in silicon valley, and I am pretty sure I'm going to exit within the next year, to somewhere like Austin, Texas or something. I came to the revelation that I need to live SV when I realized that, as long as I am comfortable financially, lifestyle is more important to me than numbers, and I want to work 40 hours a week and have a house with a decent yard and a grill, and that just isn't the lifestyle here.
If you don't plan to push your career aggressively, I think you're best of doing what you suggest relocating. As others have noted, work for a bay area company remotely and your salary should be within 5-10%.

The primary advantage I see to the bay area is opportunity. For entry positions, there is a shortage of talent that for many positions employers struggle to find employees that will work locally. For senior positions, it helps and in many cases required to be local.

In my case and similar situation to others I know in SV, we went from making low six figures at college graduation to high six figures or low seven figures in early 30s after 6-7 promotions.

Once I plateau, I'm likely gone as well or retired. The traffic drives me nuts and work culture is insane among other reasons.
I mean, congrats on the success but I can't imagine this is anywhere near normal.

I'm an engineer in a LCOL area that, after nearly a decade of work since graduating, has had 3 promotions, and none of them came with meteoric salary bumps as described.

Guess I picked the wrong location/engineering discipline, apparently...and I still work a ton.
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Re: Anyone else agree with my logic on silicon valley housing?

Post by IMO »

mchriton wrote:
GrandDesigns wrote:Iwork locally.

In my case and similar situation to others I know in SV, we went from making low six figures at college graduation to high six figures or low seven figures in early 30s after 6-7 promotions.

Once I plateau, I'm likely gone as well or retired. The traffic drives me nuts and work culture is insane among other reasons.
1st thought: If this is the OP's situations, no graduate school, high six to seven figures by early 30's and still haven't hit your plateau, then you better do some soul searching if you're going to leave that type of salary potential .....

2nd thought: I did something wrong in life .. . .
Valuethinker
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Re: Anyone else agree with my logic on silicon valley housing?

Post by Valuethinker »

bigred77 wrote:OP,

In the Bay Area and other global cities, it's incredibly hard to buy property as a single 27 year old unless you have deep pocketed family willing to help. That's just a fact of life. If you move to Austin, do you want to immediately buy a house on an acre with a 15-20 mile commute? Why? There's a time and place for all that but why not wait until your ready to settle down or at least more established?

If you stay in the Bay Area and partner with someone who makes a comparable salary, then you have no issues buying a single family home. If you stay single, just wait and keep saving for 5 years and then you can buy a 2 bedroom condo when you're making 350k a year and have doubled your available down payment. Is it so bad to have to wait until your early 30s to buy property when your living in place with as much to offer as where you are (especially with the best job market in the world for your chosen line of work)?

And I live in Texas!! I think Texas is great. But all of my family is here, most of my friends are here, and most importantly, I work in Oil and Gas.

Now if you decide that you don't like your situation because you don't like the fast paced, career focused lifestyle than that's a different story. If you want to be able to clock out at 5:01 and work only 40 hrs a week than you're probably right, a LCOL city would probably be a better fit. But if you make that decision, I would advise you not expect to keep making the same money you do now in perpetuity.
All of the above I think is good advice.

Generally the high paying jobs with the challenge (and the stress) come in the high cost locales. You can get lucky-- you might be one of a small surgical team in the major hospital in the area where houses are "cheap as chips" as we say.

But generally, in the private sector, high paying jobs come with high cost of living areas.

Another factor is that in those industry "clusters", you can move jobs easily. That increases your salary because your employer has to stay competitive, and means that you can usually find another job pretty quickly-- unless there is a slump.

Yet another factor is that if your spouse also works in the same industry, you can both find jobs and one does not usually have to make big career sacrifices for the other.
Last edited by Valuethinker on Fri May 19, 2017 4:40 am, edited 1 time in total.
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Re: Anyone else agree with my logic on silicon valley housing?

Post by Valuethinker »

visualguy wrote:
sunny_socal wrote:
I think your analysis is spot on. My Megacorp has a de facto hiring freeze in the USA and all the new jobs are going to China. Why?
- People work hard over there. Nights, weekends. The convention is to work weekends in order to 'earn' any national holidays.
- Engineers have the same degrees, MS, PhD. No difference whatsoever.
- The cost of labor in China is 50% compared to the US. For the price of one engineer here we hire 2-3 over there.

Everyone is doing it. The high tech parks in China have _every_ US company represented.

How long will the gravy train stay on the rails? 5 years? 10 years? I don't know, but eventually it will come to a stop. The last people to stay will be the system architects and other high level designers but jobs that require just pushing a button have already moved overseas. The trend is clear.
People have been saying this for many years, but incomes and home price in the Bay Area kept going up. The reality is that technology is a growing area of the economy, and the size and capacity of the Bay Area is limited. There's enough high-paying work to keep the Bay Area going, and also enough growth to keep Israel, India, China, etc. growing. It's not some kind of a zero-sum game.
Some of us began our career in the mainframe world which has basically been in a 30 year slump- -declining towards irrelevance.

Slumps in tech *do* happen. OK 2000 was mostly a capital market slump (but it was brutal for those caught in it)-- the growth in internet, mobile etc. kept on.

Nothing ignores the laws of gravity forever.

If you look at the demographics, it's actually medical that is the world's growth industry. The world is getting older, and richer, and that means it spends more on people 65+. Now to be fair a *lot* of that will be tech, and the tech industry has an amazing capacity to morph to face new challenges.

There is lots that is not now digital, that will be digital. And there are the Emerging Markets where internet penetration is still low, ecommerce nascent etc. So tech will keep growing.

But we shouldn't assume that the Bay area will always be booming in the way it has done or that its particular share of tech will always be dominant. The forces of commoditization are everpresent. It's not a given that people will always pay $700 for a new iphone as opposed to $100 for some generic solution using a UNIX derivative (Linux, Android etc.).
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Re: Anyone else agree with my logic on silicon valley housing?

Post by CyclingDuo »

GrandDesigns wrote:I'm an engineer living in silicon valley, and I am pretty sure I'm going to exit within the next year, to somewhere like Austin, Texas or something. I came to the revelation that I need to live SV when I realized that, as long as I am comfortable financially, lifestyle is more important to me than numbers, and I want to work 40 hours a week and have a house with a decent yard and a grill, and that just isn't the lifestyle here.

Anyhow, I do want to make sure I check all my bases before leaving so I was going through the supposed math that the income-to-debt ratio of average housing cost means its still better to live here (if you're an engineer). Let's ignore that the average housing here is lower quality than elsewhere. I make $150k/year in salary and another $100k/year in stock, all taxed at the 33% bracket + 10% state tax. Let's suppose that I decide to spring for a $1,000,000 2 bedroom condo (yes there are cheaper options in South San Jose, etc. but this is the lifestyle thing - if I can't even afford to live near work I am not willing to stay).

If I put $200k down and borrow the other $800k, I am now leveraged 5:1 on this "investment." But more disturbingly, that investment is almost my entire net worth (I max my 401k out but I'm only 27). So if this condo loses even 10% of its value, I'm in big trouble. Next up will be property tax ($1,000/mo) and HOA fees, which means that I'll easily owe $1,300/mo or more just for "management fees." And on the hook for $4,800/mo or more on this highly leveraged asset thats consuming my entire net worth, how will I ever get out of the rat race? What will happen when I want to get out of the condo which means now tying $2,000,000 up into a tiny house with double the property tax? I'm not convinced I will own a 2 bedroom condo so much as that condo will own me.

I would much rather move somewhere like Texas and buy a house with $150k/down and $150k mortgaged, which leaves me leveraged 2:1 on an asset that actually affords me the lifestyle I want and isn't consuming my entire net worth, and with mortgage payments that don't loom ominously over all of my life plans.

Maybe my logic is completely wrong, but I'm hoping if nothing else some other people who got out of Silicon Valley (or Manhattan) will remember once going through similar thoughts and share their revelations with me. Thanks!

TL;DR: Thoughts on the perils of justifying huge amounts of debt based on having a large income.
Don't even think about buying a home until you are in the age range of 30-40! Sock away that money/savings for another 5-10 years.

As another poster said - buy a grill! Home ownership isn't all it's cracked up to be. :sharebeer
"Save like a pessimist, invest like an optimist." - Morgan Housel | "Pick a bushel, save a peck!" - Grandpa
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Re: Anyone else agree with my logic on silicon valley housing?

Post by ajjulee »

GrandDesigns wrote:
EnjoyIt wrote:We moved out of NY to Texas for the same reason about 8 years ago. Our lives couldn't be better.
Thanks. All the replies here are great and super helpful, but they seem to be confirming the conclusion I came to originally. You can spin the math about housing anyway you want based on future career prospects, etc. and so you really have to get to the bottom of who you are as a person and what you want out of life. SV is a very high octane, busy, crowded lifestyle, and if you are drawn to that, you can definitely make enough money as an engineer to own something here.

I am not drawn to the lifestyle here at all. If it was cheaper to live here I think I could look past some of my disagreements with the bay area, but why would you bury yourself in that much debt to live somewhere you don't even like?

Thanks for the replies, because even the people who disagreed with my logic helped me get to the bottom of what I really want.

You have answered your own question - looks like it isn't really a financial decision for you for wanting to leave SV.

For what it's worth, I have always looked at buying a house as an investment - it may be a matter of opinion. To live, one doesn't *have* to buy a house/apt. I made home purchases in HCOL areas, taking into account the usual factors (regarding the soundness of the investment) when purchasing a house. So far it turned out okay. Having said that, though my expectations of the return on the investment were informed by available research in RE investment, one thing that surprised me and continues to surprise me - how inevitable the change is in our lives. Nothing stays the same - so whatever rules, theories, worldview, you have built your life on, allow for possible change in your views. Reminds me of the poem The Hound of Heaven by Francis Thomas:

I FLED Him, down the nights and down the days;
I fled Him, down the arches of the years;
I fled Him, down the labyrinthine ways
Of my own mind; and in the mist of tears
I hid from Him, and under running laughter.

But with unhurrying chase,
And unperturbèd pace,
Deliberate speed, majestic instancy,
They beat—and a Voice beat
More instant than the Feet—
‘All things betray thee, who betrayest Me.”


He wasn't talking about change but I no longer think death is as inevitable (people stay 'alive' long after their deaths - Steve Jobs. Gandhi, Mao...) but Change - it just keeps on going:) - I apologize if I strayed off the topic :(
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Re: Anyone else agree with my logic on silicon valley housing?

Post by visualguy »

Valuethinker wrote: But we shouldn't assume that the Bay area will always be booming in the way it has done or that its particular share of tech will always be dominant. The forces of commoditization are everpresent. It's not a given that people will always pay $700 for a new iphone as opposed to $100 for some generic solution using a UNIX derivative (Linux, Android etc.).
The focus areas of tech companies in the Bay Area keep evolving. As one area becomes commoditized or less innovative, you see other areas emerge with cutting-edge work happening in the Bay Area. I wouldn't worry about the future of the Bay Area...
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Re: Anyone else agree with my logic on silicon valley housing?

Post by Watty »

Valuethinker wrote:Slumps in tech *do* happen. OK 2000 was mostly a capital market slump (but it was brutal for those caught in it)-- the growth in internet, mobile etc. kept on.
It is easy to forget that after the Dot Com bust it was pretty hard to find any computer job and many people that graduated with Computer Science degree had a hard time even getting interviews. The 1980s were also not exactly a boom time for technology jobs either.

There is a lag but the numbers of students graduating with CS degrees follow the boom and bust cycle that has happened in the past.

http://cs.stanford.edu/people/eroberts/CSCapacity/
visualguy wrote:
Valuethinker wrote: But we shouldn't assume that the Bay area will always be booming in the way it has done or that its particular share of tech will always be dominant. The forces of commoditization are everpresent. It's not a given that people will always pay $700 for a new iphone as opposed to $100 for some generic solution using a UNIX derivative (Linux, Android etc.).
The focus areas of tech companies in the Bay Area keep evolving. As one area becomes commoditized or less innovative, you see other areas emerge with cutting-edge work happening in the Bay Area. I wouldn't worry about the future of the Bay Area...
A large percentage of people in the technology last wave will not be able to transition to the next wave. That is not to say that they will be unemployable when they are 45 but but most people in that situation will not be in a position to get the big bucks that makes living in the Bay Area affordable.

If you can pay cash for a house in the Bay Area that is one thing but getting a mortgage for 30 or even 15 years with the expectation of having a high paying tech career that lasts that long could be a bad assumption.
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Re: Anyone else agree with my logic on silicon valley housing?

Post by gunn_show »

visualguy wrote:
sunny_socal wrote:
I think your analysis is spot on. My Megacorp has a de facto hiring freeze in the USA and all the new jobs are going to China. Why?
- People work hard over there. Nights, weekends. The convention is to work weekends in order to 'earn' any national holidays.
- Engineers have the same degrees, MS, PhD. No difference whatsoever.
- The cost of labor in China is 50% compared to the US. For the price of one engineer here we hire 2-3 over there.

Everyone is doing it. The high tech parks in China have _every_ US company represented.

How long will the gravy train stay on the rails? 5 years? 10 years? I don't know, but eventually it will come to a stop. The last people to stay will be the system architects and other high level designers but jobs that require just pushing a button have already moved overseas. The trend is clear.
People have been saying this for many years, but incomes and home price in the Bay Area kept going up. The reality is that technology is a growing area of the economy, and the size and capacity of the Bay Area is limited. There's enough high-paying work to keep the Bay Area going, and also enough growth to keep Israel, India, China, etc. growing. It's not some kind of a zero-sum game.
Agree with visualguy here and his subsequent responses. People surmise the death of SV all the time. And yet FB and WhatsApp and Instagram and Uber and Twitter and Tesla and all the other unicorns continue to sprout. The big historical SV titans continue to do well and grow (Google, Apple, Intel, SAP, eBay, Paypal, etc.). We've all see the multi-billion dollar campus Apple is building right? It ain't because they're hurting for cash folks. Tech is always changing and these companies change with it, no matter the year or technology. There are tons of jobs and MOST of these large firms CANNOT hire fast enough. Go search LinkedIn or direct job boards, and come back with your findings. Jobs galore. It is not a zero-sum game and never will be. Folks like "IMO" are just posting guesses and hearsay and have no clue, sorry. Every business trip to SV my brain explodes with how busy it is and vibrant and hotels are full and restaurants are bustling and people are hustling. If you like that sort of thing, want to grow a career, and as "mchriton" said multiply your income, this is the single best place to be. If those are not at the top of your list, you are free to pack your bags and live elsewhere. Free country.

And sunny_socal... I would ask to see hard numbers on your guess that "The cost of labor in China is 50% compared to the US. For the price of one engineer here we hire 2-3 over there. " I was just in Shanghai, where my megacorp has a huge office, as do most, and learned that the pay gap is not even close to what you think it is, unless you are trading 15 year experienced SV vets for 3 year Chinese kids. Big difference. But talent for talent, the pay is not far off anymore, perhaps 20% or less difference. So, go check your numbers. This fallacy is close to over.
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