Bay Area Real Estate

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Lynx310650
Posts: 11
Joined: Fri Sep 15, 2017 1:33 pm

Re: Bay Area Real Estate

Post by Lynx310650 » Thu Sep 28, 2017 12:06 pm

OP, going through same dilemma as well. The math for me is especially hard to swallow on a condo (which is what we could afford). Seems like the condo we are renting right now would be sellable for about $600,000. HOAs are high here too, about $500/month. So it seems like property tax + HOA alone would eat up almost $1000/month. I am ignoring tax deductibility, but I will say that's a wash if you factor in having to pay for your own maintenance/repairs which as renters we do not have to do. That $1000 is almost half what we pay in rent for this place.

runner540
Posts: 428
Joined: Sun Feb 26, 2017 5:43 pm

Re: Bay Area Real Estate

Post by runner540 » Thu Sep 28, 2017 12:10 pm

Interesting findings about rents dropping 10% in some SF neighborhoods: https://sf.curbed.com/2017/9/26/1636994 ... -fall-2017

Caveat: The data set is limited

User avatar
Hyperborea
Posts: 374
Joined: Sat Apr 15, 2017 10:31 am
Location: Silicon Valley

Re: Bay Area Real Estate

Post by Hyperborea » Thu Sep 28, 2017 12:42 pm

Lynx310650 wrote:
Thu Sep 28, 2017 12:06 pm
OP, going through same dilemma as well. The math for me is especially hard to swallow on a condo (which is what we could afford). Seems like the condo we are renting right now would be sellable for about $600,000. HOAs are high here too, about $500/month. So it seems like property tax + HOA alone would eat up almost $1000/month. I am ignoring tax deductibility, but I will say that's a wash if you factor in having to pay for your own maintenance/repairs which as renters we do not have to do. That $1000 is almost half what we pay in rent for this place.
One of the big plusses to buying versus renting, especially in the Bay Area, is that your monthly costs become fixed* while rents can and do keep going up. If you plan to stay longer term that is a big benefit.

For the HOA cost, I would factor in that you will be paying almost nothing in insurance since the HOA covers the buildings - you only need to cover contents and belongings. As well, there is no costs for building maintenance that a home owner has to cover. That may negate half or more of the HOA fee. Some of the rest of the fee goes to pay for a management company.

* Before anybody not in CA jumps in, property taxes here are reasonably fixed. They are based on the sales price and only go up a maximum of 2% per year.

DrGoogle2017
Posts: 654
Joined: Mon Aug 14, 2017 12:31 pm

Re: Bay Area Real Estate

Post by DrGoogle2017 » Thu Sep 28, 2017 1:42 pm

Im not sure condos make sense unless it's in SF area. High HOA fees is like high ER for mutual funds. I avoid it.
Last edited by DrGoogle2017 on Thu Sep 28, 2017 1:47 pm, edited 1 time in total.

nervouscorps
Posts: 27
Joined: Sun Jan 05, 2014 8:01 pm

Re: Bay Area Real Estate

Post by nervouscorps » Thu Sep 28, 2017 1:42 pm

I live in Oakland and rent. Me and wife are 6 figure earners/health care professionals. The houses we want to buy are all at least 1.2-1.5m. At least in Oakland, there is definitely a bubble-- people coming in and offering 100-300k over asking. Until that stuff cools off, at least here, I won't consider buying. But if you look one town over, the situation is different. There are a lot of micro-climates real estate wise. I'm going to be enjoying my apartment and saving until I have enough free cash to get what I want or we'll just continue renting. If things still continue to be nuts, I may move somewhere further out a couple hours from the Bay area (Sonoma/Mendocino/etc).

User avatar
Hyperborea
Posts: 374
Joined: Sat Apr 15, 2017 10:31 am
Location: Silicon Valley

Re: Bay Area Real Estate

Post by Hyperborea » Thu Sep 28, 2017 1:55 pm

nervouscorps wrote:
Thu Sep 28, 2017 1:42 pm
I live in Oakland and rent. Me and wife are 6 figure earners/health care professionals. The houses we want to buy are all at least 1.2-1.5m. At least in Oakland, there is definitely a bubble-- people coming in and offering 100-300k over asking. Until that stuff cools off, at least here, I won't consider buying. But if you look one town over, the situation is different. There are a lot of micro-climates real estate wise. I'm going to be enjoying my apartment and saving until I have enough free cash to get what I want or we'll just continue renting. If things still continue to be nuts, I may move somewhere further out a couple hours from the Bay area (Sonoma/Mendocino/etc).
It may be a bubble or we may be seeing the start of the gentrification of Oakland. It's been the big scary city in the Bay Area for so long but with the high costs of San Francisco, the public transit access across to SF, the start of tech businesses opening in Oakland, etc. it might be changing.

So, is it better to wait or will those who bought now be sitting on large returns in 10 years? Personally, I wouldn't risk it unless I knew I was willing to stay there longer term. Even if it is turning around a market downturn could stall that and you'd have to wait until later in the next recovery for it come back up.

User avatar
Jazztonight
Posts: 801
Joined: Wed Feb 28, 2007 12:21 am
Location: Lake Merritt

Re: Bay Area Real Estate

Post by Jazztonight » Thu Sep 28, 2017 3:01 pm

I live in the East Bay (Oakland), and in spite of whatever the problem-of-the-day is (construction noise, homelessness, earthquakes, problems with public schools, protests, we're gonna fall into the San Francisco Bay), I love it here.

In the 1970s I moved away for 7 years, and couldn't wait to come back, which I did in 1983. We sold a big house on the East Coast and bought a small one in Oakland. Once you're an owner in the real estate market, it's easier to keep up. There are recessions and downturns, and sometimes it works out for the best. Sometimes it doesn't.

There's a good reason why the San Francisco Bay Area is high-priced: it's a very desirable place to live. I consider the climate ideal, and it's a stimulating place intellectually in many ways. Thus, you pay a premium to live here.

People DO buy houses and fix them up, neighborhoods are improved (call it gentrification if you wish, but it's still improvement), and financial concessions are made.

I know people who have left here to seek other pastures: Seattle, Portland, Idaho, etc. I've lived in elsewhere; I like it here, and am willing to pay the price, and the price can be steep. YMMV
"What does not destroy me, makes me stronger." Nietzsche

cheapskate
Posts: 716
Joined: Thu Apr 26, 2007 1:05 pm

Re: Bay Area Real Estate

Post by cheapskate » Thu Sep 28, 2017 6:43 pm

visualguy wrote:
Wed Sep 27, 2017 5:19 pm
There's one thing that I don't understand about the Bay Area... How do people in most professions survive there?

Many in tech, real estate, medicine, and maybe one or two other areas do fine, so I understand that part. I don't get the rest of it... The extraordinary thing about the Bay Area is that housing is not affordable pretty much anywhere that isn't crime infested (and even crime-infested areas are ridiculously expensive). You can't escape extremely high costs unless you get out of the area. Housing is the biggest factor, but other costs are high as well (taxes, etc.) You would think that there wouldn't be people to do most jobs there, yet somehow they are found. I guess some are old-timers, but many are not. I don't fully understand how the Bay Area functions and finds the workers it needs for most jobs which don't pay a fortune.
If you don't work for Google/facebook/(insert other high paying, high RSU+bonus granting employer) or if you aren't a dual tech income family, it is *really* hard. I know several teachers who are really struggling. A lot of them drive over the hill from Santa Cruz to the South Bay, others are married to a partner who is in tech, and for others it is really hard. South Bay (Cupertino and sorrounding areas) are especially crazy right now - not just the housing prices, even the traffic. Surface roads are impassable between 7:30-9 and 4-7:30. I live close to one of the 2 arterial surface streets in the South Bay and have to get onto it for pretty much everything, and feel the pain every day. About twice a month, realtors walk up and down the streets in our neighborhood, knocking on doors asking if people want to sell their home. I met one of these guys a couple of weeks ago and they told me of a home in Sunnyvale (Cherry Chase area - not the most "desirable" part of Sunnyvale) that had sold for $780K over list. I googled it up - it was a pretty standard ~200sf tract home built in the 1950s, the home listed for close to 1.8M and sold for almost 2.5M. How could non-tech workers possibly buy that home ?

I work in tech, was fortunate enough to buy a home in a desirable school district after the 2008-09 bubble burst. I can't complain. But I have enough friends in non-tech professions to be able to see the other point of view. Most non-tech people I know actively discuss moving out, and in my circle, there is a steady trickle of people who have.

In a few years, the Bay Area will become a place where pretty much everyone employed in non-tech service industries will be forced to commute from Gilroy/Salinas/Soledad in the South or from Tracy/Lathrop/Stockton on the East.

fnmix
Posts: 177
Joined: Sun Sep 09, 2012 4:50 pm
Location: Northern California

Re: Bay Area Real Estate

Post by fnmix » Thu Sep 28, 2017 10:57 pm

Jazztonight wrote:
Thu Sep 28, 2017 3:01 pm
I live in the East Bay (Oakland), and in spite of whatever the problem-of-the-day is (construction noise, homelessness, earthquakes, problems with public schools, protests, we're gonna fall into the San Francisco Bay), I love it here.
:sharebeer

I lived in Oakland for several years before a changed work location forced a relocation down to the South Bay. I have fond memories and sometimes wish that I could go back.

Buying in the bay area can only work as a long-term proportion. I was on the luckier end as I bought in 2011 when I moved down to the south bay. I have just about paid off the house - start to finish it will have been a 6.5 year proposition, a bit shorter than I had originally aniticipated. When I bought, it was clear that numbers only worked if I had a 10+ year horizon. With a single income, there were times where I had to "gut it out" due to company and industry segment doldrums. For many, this "stress" may simply not be worth it. For me there were some family and personal circumstances that made the process worth it.

At the tail-end of this process, I have maneuvered myself into a position where the house is almost paid off and I am in a job that I like (fingers crossed that it lasts). Once the house is paid off, I know that I will freer. If the job doesn't last DW is likely to start working again and I will go onto part time gigs.


YMMW.

Calidude
Posts: 24
Joined: Thu Jul 24, 2014 12:57 pm

Re: Bay Area Real Estate

Post by Calidude » Fri Sep 29, 2017 12:16 pm

The math only works out if you really want to be here. I encourage anyone who doesn’t think the Bay Area is worth the expense to move somewhere else. You will save yourself some money and make it cheaper for the locals.

One future trend that I would imagine will eventually lead to a big housing unlock in CA will be the eventual demise of the boomers. Not to be too morbid, but a lot of the housing supply is long held by people in their 60’s through 80’s who will not be around forever. I don’t know what percentage of houses have turned over in the last decade or two but I would bet because of prop 13 it’s lower here than in most metropolitan areas. I would love to see data on this if anyone has any.

skteam
Posts: 50
Joined: Wed Jun 24, 2015 6:03 pm

Re: Bay Area Real Estate

Post by skteam » Fri Sep 29, 2017 12:32 pm

At least in the city of San Francisco, housing affordability is greatly influenced by the fact that so much of the city is built out as SFHs and spacious flats, and there is great demand for those units. But experience in other very expensive cities tells us that people don't need to live in SFHs or flats, and that housing costs can be moderated significantly by building dense condos.

The good news is that this is already happening in SF; there is a lot of new condo construction, with the predictable result that condo prices seem to be softening. It remains to be seen whether long-term residents will get comfortable with living in condos in the way they do in other great cities.

mervinj7
Posts: 370
Joined: Thu Mar 27, 2014 3:10 pm

Re: Bay Area Real Estate

Post by mervinj7 » Fri Sep 29, 2017 1:25 pm

Calidude wrote:
Fri Sep 29, 2017 12:16 pm
The math only works out if you really want to be here. I encourage anyone who doesn’t think the Bay Area is worth the expense to move somewhere else. You will save yourself some money and make it cheaper for the locals.

One future trend that I would imagine will eventually lead to a big housing unlock in CA will be the eventual demise of the boomers. Not to be too morbid, but a lot of the housing supply is long held by people in their 60’s through 80’s who will not be around forever. I don’t know what percentage of houses have turned over in the last decade or two but I would bet because of prop 13 it’s lower here than in most metropolitan areas. I would love to see data on this if anyone has any.
Actually, the number of folks over 65 in the Bay Area has increased from 11.1% in 2010 to 12.5% in 2015 and is projected to further INCREASE til 2029. Thus, it will be awhile before you get increased turnover from the "eventual demise of the boomers." Here's the data:

http://www.mercurynews.com/2017/06/21/b ... ates-show/

Calidude
Posts: 24
Joined: Thu Jul 24, 2014 12:57 pm

Re: Bay Area Real Estate

Post by Calidude » Fri Sep 29, 2017 4:09 pm

Thanks for posting that mervin. I'm not sure it refutes my point however. It shows that the population is aging and so one would assume that if there are more people over 65 there are also more people over 80 and more over 90, etc. I don't know what the housing turnover is like right now in the bay area so would really be interesting to see for example what percentage of houses turnover in a year and in a decade and for houses that are sold, how long the period was since the date of last sale.

It seems to me based on my review of the infrequent listings in my neighborhood, that very few houses come to market but most of the ones that do have been sold within the last decade. There are also a lot of houses that have been off the market for 50+ years and will eventually be sold by descendants.

ThatGuy
Posts: 793
Joined: Fri Feb 05, 2010 9:00 am

Re: Bay Area Real Estate

Post by ThatGuy » Fri Sep 29, 2017 4:50 pm

Calidude wrote:
Fri Sep 29, 2017 12:16 pm
One future trend that I would imagine will eventually lead to a big housing unlock in CA will be the eventual demise of the boomers. Not to be too morbid, but a lot of the housing supply is long held by people in their 60’s through 80’s who will not be around forever. I don’t know what percentage of houses have turned over in the last decade or two but I would bet because of prop 13 it’s lower here than in most metropolitan areas. I would love to see data on this if anyone has any.
I live on the Peninsula. Anecdotally, about half of the houses on my street have been sold in the past decade due to owners going into assisted living situations or dying. Prices have not decreased.
Work is the curse of the drinking class - Oscar Wilde

User avatar
burt
Posts: 578
Joined: Sun Feb 17, 2008 7:47 am

Re: Bay Area Real Estate

Post by burt » Fri Sep 29, 2017 5:54 pm

I have experienced a mass layoff in a one company town.
No job, and the house lost 25% value within 4 weeks.
A house can be a damn heavy anchor.

Apply the above to a one "industry" city on the west coast and multiply impact x 10.
Too much risk for me.

burt

fnmix
Posts: 177
Joined: Sun Sep 09, 2012 4:50 pm
Location: Northern California

Re: Bay Area Real Estate

Post by fnmix » Fri Sep 29, 2017 7:10 pm

Hardly a one industry town. There is plenty of Healthcare and SLED (State and Local Govt's and Education in the area). Have a look at top employers in various counties:
Santa Clara http://www.labormarketinfo.edd.ca.gov/m ... ode=000085
San Mateo http://www.labormarketinfo.edd.ca.gov/m ... ode=000081
Alameda http://www.labormarketinfo.edd.ca.gov/m ... ode=000001
San Francisco http://www.labormarketinfo.edd.ca.gov/m ... ode=000075

Even tech is very diffuse: Both Facebook and Intel are in the technology Sector. They are hardly in the same Industry segment (Internet content vs Semiconductor).
burt wrote:
Fri Sep 29, 2017 5:54 pm
I have experienced a mass layoff in a one company town.
No job, and the house lost 25% value within 4 weeks.
A house can be a damn heavy anchor.

Apply the above to a one "industry" city on the west coast and multiply impact x 10.
Too much risk for me.

burt

visualguy
Posts: 351
Joined: Thu Jan 30, 2014 1:32 am

Re: Bay Area Real Estate

Post by visualguy » Fri Sep 29, 2017 11:13 pm

Right, and even if you just consider the "technology" industry - technology isn't going away, and as long as creative people keep flowing in and innovating, the economic future is good. The Bay Area doesn't stagnate - it keeps moving to new things and inventing new things. Who knew a few years ago that autonomous driving or AI or electric cars would be of any significance in this area, but it happened. People keep making new things happen there every time other things decline. An amazing place.

User avatar
HomerJ
Posts: 10442
Joined: Fri Jun 06, 2008 12:50 pm

Re: Bay Area Real Estate

Post by HomerJ » Sat Sep 30, 2017 12:59 am

visualguy wrote:
Tue Sep 26, 2017 12:59 am
There's a tremendous supply/demand disparity in the Bay Area. Prices will stay strong. There are enough people with means to bid up any inventory that becomes available. If you can afford it and you think you'll stay for at least a few years, definitely buy.
You don't know that prices will stay strong.

And if interest rates go up or a tech crash (or both!), there will be less people who can afford to buy one's house at a higher price, so the supply/demand equation will change.

But of course, you may be right. Don't be so sure about it though. Even if the chances for a housing crash are small, they absolutely are not zero.

visualguy
Posts: 351
Joined: Thu Jan 30, 2014 1:32 am

Re: Bay Area Real Estate

Post by visualguy » Sat Sep 30, 2017 2:00 am

HomerJ wrote:
Sat Sep 30, 2017 12:59 am

You don't know that prices will stay strong.

And if interest rates go up or a tech crash (or both!), there will be less people who can afford to buy one's house at a higher price, so the supply/demand equation will change.

But of course, you may be right. Don't be so sure about it though. Even if the chances for a housing crash are small, they absolutely are not zero.
Not zero, but infinitesimal in the core parts of the Bay Area. When you live there, you worry about many things, but worrying about your house value crashing is pretty much at the bottom of the list.

wstrdg
Posts: 61
Joined: Sun Jan 29, 2017 11:43 am

Re: Bay Area Real Estate

Post by wstrdg » Sat Sep 30, 2017 10:08 am

calidude wrote:
Not to be too morbid, but a lot of the housing supply is long held by people in their 60’s through 80’s who will not be around forever. I don’t know what percentage of houses have turned over in the last decade or two but I would bet because of prop 13 it’s lower
Prop 13 has a huge impact. In our East Bay neighborhood, houses tend to pass on to the next generation. And that generation keeps the low Prop 13 tax base:

https://www.boe.ca.gov/proptaxes/faqs/c ... ship.htm#3:
Transfers of the principal place of residence between parents and their children (there is no limit on the value of the residence) if a completed application is filed timely with the county assessor's office (Proposition 58).
Transfers of up to $1 million of real property between parents and their children, other than a principal place of residence, if a completed application is filed timely with the county assessor's office (Proposition 58).
Transfers of a principal place of residence from grandparents to their grandchildren, but not vice versa (and the transfer of up to $1 million of other real property from grandparents to their grandchildren) provided that:
the transfer occurs on or after March 26, 1996;
the grandchild(ren)’s parent (grandparent’s child) died on or before the date of transfer; and
a completed application is timely filed with the county assessor's office (Proposition 193).
Many in our neighborhood are adult children and adult granchildren living in the family home, paying property taxes on an assessment that is absurdly low compared to market value.

visualguy
Posts: 351
Joined: Thu Jan 30, 2014 1:32 am

Re: Bay Area Real Estate

Post by visualguy » Sat Sep 30, 2017 12:11 pm

Correct. People try to keep the property in the family with its low tax assessment which passes from generation to generation. Selling makes no sense if it can be avoided.

physiorol
Posts: 158
Joined: Sun Mar 09, 2014 1:52 am

Re: Bay Area Real Estate

Post by physiorol » Sat Sep 30, 2017 3:14 pm

visualguy wrote:
Sat Sep 30, 2017 12:11 pm
Correct. People try to keep the property in the family with its low tax assessment which passes from generation to generation. Selling makes no sense if it can be avoided.
Briefly, what are the tax/financial consequences/benefits of transferring residential property from parent to child? Do the parents have to die first?

Calidude
Posts: 24
Joined: Thu Jul 24, 2014 12:57 pm

Re: Bay Area Real Estate

Post by Calidude » Mon Oct 02, 2017 10:46 am

Didn’t realize prop 13 would remain. So you get a stepped up tax basis but maintain low assessment for prop taxes. What a bonanza for commercial real estate owners looking to pass on wealth as they can provide a nice income stream with favorable tax treatment due to depreciation. And they don’t have to deal with market rates for prop taxes.

Carefreeap
Posts: 2102
Joined: Tue Jan 13, 2015 7:36 pm
Location: SF Bay Area

Re: Bay Area Real Estate

Post by Carefreeap » Mon Oct 02, 2017 6:02 pm

physiorol wrote:
Sat Sep 30, 2017 3:14 pm
visualguy wrote:
Sat Sep 30, 2017 12:11 pm
Correct. People try to keep the property in the family with its low tax assessment which passes from generation to generation. Selling makes no sense if it can be avoided.
Briefly, what are the tax/financial consequences/benefits of transferring residential property from parent to child? Do the parents have to die first?
No parents do not have to die. However if they transfer to a child and need to get another property they start all over again.

As an example, when my parents divorced they sold their house to my brother. They had bought the house in 1963 and the assessed value was something like $70k when they sold in 1996. Market value was about $325k. Taxes were about $700/yr!

Mom bought a condo for $450k in about 2000 and had to pay $4,500+/yr in taxes for that unit.

One option could have been for Mom to have sold and bought right away and take advantage of prop 60 and do a one-time transfer of the old basis to the new. http://www.boe.ca.gov/proptaxes/faqs/pr ... 0_90.htm#1

The purpose of the law was to encourage older folks to downsize from their larger family homes without losing their prop 13 status.

BTW the transfer from Parent to child also allows for Grandparent to Grandchild and from Child to Parent.

SeaToTheBay
Posts: 45
Joined: Thu Jun 08, 2017 6:11 pm

Re: Bay Area Real Estate

Post by SeaToTheBay » Mon Oct 02, 2017 6:27 pm

It's important to note that tech today is not tech in 2001 with the dot-com bubble. I'm not saying there aren't outrageously valued startups based on dubious ideas, but the largest employers are not going anywhere. They may have layoffs here and there, and some older companies may stagnate, but the likes of Google, Apple, Facebook, etc. are making *serious* cash and their revenue isn't going to plummet anytime soon (and if it does, it will likely be due to another competitor in the area). Semiconductor and hardware companies are also keeping busy with ever more connected devices and features. In sum, tech is a lot more than a website or a desktop computer these days. And where there are jobs, there will be real estate demand.

random_walker_77
Posts: 467
Joined: Tue May 21, 2013 8:49 pm

Re: Bay Area Real Estate

Post by random_walker_77 » Tue Oct 03, 2017 11:00 pm

SeaToTheBay wrote:
Mon Oct 02, 2017 6:27 pm
It's important to note that tech today is not tech in 2001 with the dot-com bubble. I'm not saying there aren't outrageously valued startups based on dubious ideas, but the largest employers are not going anywhere. They may have layoffs here and there, and some older companies may stagnate, but the likes of Google, Apple, Facebook, etc. are making *serious* cash and their revenue isn't going to plummet anytime soon (and if it does, it will likely be due to another competitor in the area). Semiconductor and hardware companies are also keeping busy with ever more connected devices and features. In sum, tech is a lot more than a website or a desktop computer these days. And where there are jobs, there will be real estate demand.
I think you're right about the "anytime soon" part, but if there's any movement it'll be after a turn or two of the economic cycle. One day there'll be a downturn, and profits will be hurt and companies will make adjustments. It's also not unprecedented for a major bay area company to decide it's getting too crowded and move people away. Some might remember that Intel did just that in the late 90's and relocated many engineers to Hillsboro.

I think the question is whether the real estate demand is sustainable? If $400K/yr jobs are sustainable and abundant, then $2.0M homes aren't unreasonable. But if people are counting on $2M homes to appreciate, and if those $400K/yr jobs turn into $200K/yr jobs in the next downturn, then there could be problems. If the cost of capital (mortgage rates) rises 40%, that could also hinder demand by making it costlier to borrow. But then again, who borrows? If the prices are being set by low supply and people buying with suitcases of cash, what happens when paying $1.8M with suitcases of cash becomes unfashionable? There's a chance this will go the way of Manhattan and be permanently premium priced. But it's not a sure thing. When a lot of people start saying it's a sure thing, beware...

One warning sign is that many of these eye-popping incomes are courtesy of equity. And people are using this equity compensation to qualify for long-term mortgages. There're so many ways that can go wrong, and most of those ways don't show up until a recession.

Also, consider that stock options used to be a good ride for those of us in tech. Then accounting rules made that unattractive (i.e. employee options suddenly need to be an expense that hurt reported profits), and options by and large went away. If share dilution ever becomes a bigger concern, if adjusted-EBITDA and non-GAAP earnings gain a real stigma, then the cynic in me thinks the average engineer will see big cuts in RSU compensation. Right now, we're in the boom years. There will be a recession someday. And things have a way of changing during recessions.

visualguy
Posts: 351
Joined: Thu Jan 30, 2014 1:32 am

Re: Bay Area Real Estate

Post by visualguy » Wed Oct 04, 2017 1:28 am

random_walker_77 wrote:
Tue Oct 03, 2017 11:00 pm
There will be a recession someday. And things have a way of changing during recessions.
Not so much in the Bay Area. During the last recession (2008), home prices in the core areas of the Bay Area dropped only 15%. Since then, there have been IPOs (such as Facebook), a big influx of money from China, acquisitions, companies becoming even more successful (such as Google, Nvidia, Apple, Tesla), a lot of RSU money, etc. The economy and amount of wealth in the area jumped to a different level, and home prices doubled. Sure, prices may drop a little bit again next recession, but the overall trend is excellent appreciation. I learned a long time ago that you're far better off betting that the people of Silicon Valley will succeed than to bet that they'll fail.

Frisco Kid
Posts: 285
Joined: Sun Nov 16, 2014 6:18 pm
Location: San Francisco Peninsula

Re: Bay Area Real Estate

Post by Frisco Kid » Wed Oct 04, 2017 9:43 am

I live on the Peninsula. Anecdotally, about half of the houses on my street have been sold in the past decade due to owners going into assisted living situations or dying. Prices have not decreased.

The above is true for me as well with the % being closer to 75% and ALL of those people had been in their homes 35 to 50 years!

User avatar
FrugalProfessor
Posts: 62
Joined: Thu May 25, 2017 11:34 am
Contact:

Re: Bay Area Real Estate

Post by FrugalProfessor » Wed Oct 04, 2017 10:05 am

As other posters have commented, one thing is often neglected with the CA rent vs buy decision: Property taxes due to Prop 13.

My grandfather recently sold his Los Altos home for $2.2M in 2013 (Zillow currently has it pegged at $3.5M) which he purchased in the early 70s. Built in the 60s, it was 2500 square feet. At the time of its sale, he was paying $3.3k/year in property taxes. $3.3k/$2,200M = 0.15% effective property tax rate.

My parents live down the road from Los Altos, purchased their current home in the mid 90s, and have artificially low property taxes as well (0.42% effective property taxes).

As an outsider looking in, I think the way to win the California real estate game is to purchase a single home in your lifetime, preferably sooner than later, and die in this home.
I blog. My effective (not to be confused with statutory) MTR is 45% (fed + state, excluding payroll). I save $30k/year in taxes by maxing out deferrals. Taxes are the lowest hanging source of alpha.

mervinj7
Posts: 370
Joined: Thu Mar 27, 2014 3:10 pm

Re: Bay Area Real Estate

Post by mervinj7 » Wed Oct 04, 2017 11:25 am

FrugalProfessor wrote:
Wed Oct 04, 2017 10:05 am
As an outsider looking in, I think the way to win the California real estate game is to purchase a single home in your lifetime, preferably sooner than later, and die in this home.
+1. I've been reading BH for years and have seen many Bay Area real estate posts over the years. In them, you will find sound and sage advice from many well-meaning BHers recommending you to NOT buy a home here. And yet, considering the appreciation over the last few years, I would think that almost every poster would have been better off if they had bought a home at any point in the past (even at the pre-recession peak). However, whether it still makes sense in 2017, is up to you to decide. Study the data (e.g. market trends, local neighborhood factors, impact of Prop 13), and make a decision you can sleep with at night. At the very least, be prepared for a 10%-15% dip.
That said, after 10 years of renting here and seeing my rent increase over time from $1.8k/month to $4.3k/month for a 2 bedroom while moving further and further away from the city (SF), I took the plunge this year and bought a duplex. Should I have done it five years ago? Perhaps. Best not to have regrets.

bigred77
Posts: 1932
Joined: Sat Jun 11, 2011 4:53 pm

Re: Bay Area Real Estate

Post by bigred77 » Wed Oct 04, 2017 12:11 pm

fnmix wrote:
Fri Sep 29, 2017 7:10 pm
Hardly a one industry town. There is plenty of Healthcare and SLED (State and Local Govt's and Education in the area). Have a look at top employers in various counties:
Santa Clara http://www.labormarketinfo.edd.ca.gov/m ... ode=000085
San Mateo http://www.labormarketinfo.edd.ca.gov/m ... ode=000081
Alameda http://www.labormarketinfo.edd.ca.gov/m ... ode=000001
San Francisco http://www.labormarketinfo.edd.ca.gov/m ... ode=000075

Even tech is very diffuse: Both Facebook and Intel are in the technology Sector. They are hardly in the same Industry segment (Internet content vs Semiconductor).
burt wrote:
Fri Sep 29, 2017 5:54 pm
I have experienced a mass layoff in a one company town.
No job, and the house lost 25% value within 4 weeks.
A house can be a damn heavy anchor.

Apply the above to a one "industry" city on the west coast and multiply impact x 10.
Too much risk for me.

burt
I think people who are really worried about the downside can look to Houston in the 80s to see what can happen during a bust. It got REALLY bad. Especially Real Estate.

Houston had/has a large healthcare industry and plenty of SLED (never heard that term before) jobs, as well as representation from a variety of industries (tech and finance included). But it's dominated by Energy just like the Bay Area is dominated by Tech. There are upstream (E&P) companies, midstream (pipeline, transportation and storing) companies, downstream (refiners, chemical companies) companies, and oilfield services companies. They are about as diversified, if not more so, than Facebook and Intel. But when it goes, it goes.

The current bay area housing prices make sense to me. Limited availability of buildable land, lack of sufficient dense housing options, incredibly desirable location (weather, culture, jobs, Universities, etc.), foreign buyers, speculators and investors, abundant high paying jobs, optimism about the future, etc. I would buy if I lived there and could afford it. Just don't think that things can't ever take a dive in the future. It's certainly possible.

fnmix
Posts: 177
Joined: Sun Sep 09, 2012 4:50 pm
Location: Northern California

Re: Bay Area Real Estate

Post by fnmix » Wed Oct 04, 2017 3:13 pm

Ofcourse a black swan like event can happen in the bay area. It can also happen anywhere in the world. No geography is 100% safe.

There is a difference between a large metro having a concentration of one large sector with notable amounts of other sectors vs the large metro area being a one industry town. The former is not unusual - every large metro area will have one (Houston - energy, bay area - technology, NY - finance).

Buying a house in the bay area is like buying a stock index fund. There is going to be volatility but over a long period of time (10+ years) it works out, provided one has the resources and the stomach to stay the course.

https://www.paragon-re.com/trend/3-rece ... and-a-baby has an aggregation of charts (more focused on San Francisco than the rest of the bay area) that show the volatility. They also show that over 30+ years, Bay Area house prices move relentlessly upwards.
bigred77 wrote:
Wed Oct 04, 2017 12:11 pm
I think people who are really worried about the downside can look to Houston in the 80s to see what can happen during a bust. It got REALLY bad. Especially Real Estate.

Houston had/has a large healthcare industry and plenty of SLED (never heard that term before) jobs, as well as representation from a variety of industries (tech and finance included). But it's dominated by Energy just like the Bay Area is dominated by Tech. There are upstream (E&P) companies, midstream (pipeline, transportation and storing) companies, downstream (refiners, chemical companies) companies, and oilfield services companies. They are about as diversified, if not more so, than Facebook and Intel. But when it goes, it goes.

<SNIP>

fnmix
Posts: 177
Joined: Sun Sep 09, 2012 4:50 pm
Location: Northern California

Re: Bay Area Real Estate

Post by fnmix » Wed Oct 04, 2017 3:23 pm

You nailed it FrugalProfessor.

I started out 6.5 years ago at ~1.25% tax rate. My house price has close to doubled and my effective tax rate is now ~0.65%. The actual dollar cost to me still feels high but as the years go by and the property tax each year (flow) is a smaller and smaller portion of my net worth, the high dollar amount of the property tax becomes more palatable.
FrugalProfessor wrote:
Wed Oct 04, 2017 10:05 am
As other posters have commented, one thing is often neglected with the CA rent vs buy decision: Property taxes due to Prop 13.

My grandfather recently sold his Los Altos home for $2.2M in 2013 (Zillow currently has it pegged at $3.5M) which he purchased in the early 70s. Built in the 60s, it was 2500 square feet. At the time of its sale, he was paying $3.3k/year in property taxes. $3.3k/$2,200M = 0.15% effective property tax rate.

My parents live down the road from Los Altos, purchased their current home in the mid 90s, and have artificially low property taxes as well (0.42% effective property taxes).

As an outsider looking in, I think the way to win the California real estate game is to purchase a single home in your lifetime, preferably sooner than later, and die in this home.

visualguy
Posts: 351
Joined: Thu Jan 30, 2014 1:32 am

Re: Bay Area Real Estate

Post by visualguy » Wed Oct 04, 2017 3:51 pm

mervinj7 wrote:
Wed Oct 04, 2017 11:25 am
+1. I've been reading BH for years and have seen many Bay Area real estate posts over the years. In them, you will find sound and sage advice from many well-meaning BHers recommending you to NOT buy a home here. And yet, considering the appreciation over the last few years, I would think that almost every poster would have been better off if they had bought a home at any point in the past (even at the pre-recession peak). However, whether it still makes sense in 2017, is up to you to decide. Study the data (e.g. market trends, local neighborhood factors, impact of Prop 13), and make a decision you can sleep with at night. At the very least, be prepared for a 10%-15% dip.
That said, after 10 years of renting here and seeing my rent increase over time from $1.8k/month to $4.3k/month for a 2 bedroom while moving further and further away from the city (SF), I took the plunge this year and bought a duplex. Should I have done it five years ago? Perhaps. Best not to have regrets.
Yes, you should have done it 5 years ago, but better late than never :wink: At least you weren't priced out.

Posts on forums advising people to rent and not buy in the Bay Area have a long tradition... There used to be a web site (patrick.net) dedicated to a very active forum on this about 15 years ago. People were posting on it for years about how real estate in the area was in a bubble which was going to burst. While this was going on, prices just kept going higher and higher. It took years, but eventually the forum died in the face of reality.

Not sure why people can accept that the stock market can do something like double in value every 10 years on average, but cannot accept that real estate in the economically strongest and most attractive areas in the US is likely to do something similar.

fouroheight68
Posts: 33
Joined: Wed Aug 02, 2017 1:23 pm

Re: Bay Area Real Estate

Post by fouroheight68 » Wed Oct 04, 2017 4:33 pm

FrugalProfessor wrote:
Wed Oct 04, 2017 10:05 am
As other posters have commented, one thing is often neglected with the CA rent vs buy decision: Property taxes due to Prop 13.

My grandfather recently sold his Los Altos home for $2.2M in 2013 (Zillow currently has it pegged at $3.5M) which he purchased in the early 70s. Built in the 60s, it was 2500 square feet. At the time of its sale, he was paying $3.3k/year in property taxes. $3.3k/$2,200M = 0.15% effective property tax rate.

My parents live down the road from Los Altos, purchased their current home in the mid 90s, and have artificially low property taxes as well (0.42% effective property taxes).

As an outsider looking in, I think the way to win the California real estate game is to purchase a single home in your lifetime, preferably sooner than later, and die in this home.
This is where Prop 60 is a huge incentive for Bay Area retirees. My parents bought their home in Morgan Hill in 1993 for the low $200s. Due to Prop 13, their property tax increased only slightly even though their house was worth $800,000. They sold their house in January and moved closer to me, in El Dorado County. Due to Prop 60, they were able to TRANSFER their tax base to their new house. Their new house was twice the size, on 5 acres, for $640,000. Their tax payment never changed.

User avatar
Watty
Posts: 11761
Joined: Wed Oct 10, 2007 3:55 pm

Re: Bay Area Real Estate

Post by Watty » Wed Oct 04, 2017 4:42 pm

fnmix wrote:
Wed Oct 04, 2017 3:13 pm
Buying a house in the bay area is like buying a stock index fund. There is going to be volatility but over a long period of time (10+ years) it works out, provided one has the resources and the stomach to stay the course.
That is a bad analogy.

Over the long term the value of stock funds grow mostly because companies earn a profit and either pay more dividends that can be reinvested, invest the profit and grow, or do stock buybacks. There is no limit on how much the value of the companies and stock index can grow and it can rationally double in value in real terms every 20 years or so.

A million dollar house in the Bay Area might 40 years old and be a 1,000 square foot cottage. 20 years from now it will still be a 1,000 square foot cottage, but it will be 60 years old. Will it be worth two million inflation adjusted dollars by then? There is now way to know but at some point it will not be able to increase any more.

visualguy
Posts: 351
Joined: Thu Jan 30, 2014 1:32 am

Re: Bay Area Real Estate

Post by visualguy » Wed Oct 04, 2017 4:44 pm

fouroheight68 wrote:
Wed Oct 04, 2017 4:33 pm
This is where Prop 60 is a huge incentive for Bay Area retirees. My parents bought their home in Morgan Hill in 1993 for the low $200s. Due to Prop 13, their property tax increased only slightly even though their house was worth $800,000. They sold their house in January and moved closer to me, in El Dorado County. Due to Prop 60, they were able to TRANSFER their tax base to their new house. Their new house was twice the size, on 5 acres, for $640,000. Their tax payment never changed.
It's an incentive only for people who want to move somewhere else for some reason (as in the case of your parents).

From a financial perspective, it's typically better to keep the property if possible, at least in the core parts of the Bay Area.

User avatar
HomerJ
Posts: 10442
Joined: Fri Jun 06, 2008 12:50 pm

Re: Bay Area Real Estate

Post by HomerJ » Wed Oct 04, 2017 4:45 pm

visualguy wrote:
Wed Oct 04, 2017 3:51 pm
Not sure why people can accept that the stock market can do something like double in value every 10 years on average, but cannot accept that real estate in the economically strongest and most attractive areas in the US is likely to do something similar.
They are not remotely the same thing. Human capital and natural resources are converted into goods and services, which continually increase value in businesses. There are INPUTs into the stock market.

There is nothing intrinsically increasing the value of housing in SF except for supply/demand.

Demand cannot and will not grow forever. This is a really simple concept. Right now, housing in SF costs 5x as much as comparable housing in most of the rest of the country. It cannot grow forever 3x faster than the rest of the country.

There will not be a time where housing in SF costs 100x as much as comparable housing elsewhere. There will not be a time when a 1200 square-foot shack costs $20 million if you can buy the same house 100 miles away for $200,000. There are not enough high income people to support that.

Where will it tip over? At 10x costs? 20x costs? I don't know... Maybe it will double again, maybe even another double after that. Or maybe it will crash tomorrow.

Interest rates going up is not exactly a black swan event. As prices go up, and higher interest rates make mortgages more expensive, the demand part of the equation will decrease.

There is no question about this. SF cannot double in price every 7-10 years forever while the rest of the country increases at inflation.

You can make a bet that the increases will last a while longer, but it's a bet. No one knows.

fnmix
Posts: 177
Joined: Sun Sep 09, 2012 4:50 pm
Location: Northern California

Re: Bay Area Real Estate

Post by fnmix » Wed Oct 04, 2017 5:09 pm

Sure - I overstated to make a point.

That said, home prices in the bay area are not about the structure. They are about the land/location. A 1000 Sq ft structure varies significantly less between locations in a country than the underlying value of the land/location.
Watty wrote:
Wed Oct 04, 2017 4:42 pm
fnmix wrote:
Wed Oct 04, 2017 3:13 pm
Buying a house in the bay area is like buying a stock index fund. There is going to be volatility but over a long period of time (10+ years) it works out, provided one has the resources and the stomach to stay the course.
That is a bad analogy.

Over the long term the value of stock funds grow mostly because companies earn a profit and either pay more dividends that can be reinvested, invest the profit and grow, or do stock buybacks. There is no limit on how much the value of the companies and stock index can grow and it can rationally double in value in real terms every 20 years or so.

A million dollar house in the Bay Area might 40 years old and be a 1,000 square foot cottage. 20 years from now it will still be a 1,000 square foot cottage, but it will be 60 years old. Will it be worth two million inflation adjusted dollars by then? There is now way to know but at some point it will not be able to increase any more.

sunspotzsz
Posts: 206
Joined: Fri May 08, 2009 9:35 am

Re: Bay Area Real Estate

Post by sunspotzsz » Wed Oct 04, 2017 5:11 pm

I struggled with this for a long time, thinking this craziness can't possibly continue and decided to wait. It turned out to be a very bad decision since price went up significantly since then.

I now tend to think that the price will continue to go up. there are still a lot of people who want to buy. The companies in the area pay really well and have solid growth despite the size. The area doesn't have a lot of land and is a desirable place to live especially for immigrants.

Now, i am telling my friends, buy as soon as you are able otherwise you will be priced out like we were.

visualguy
Posts: 351
Joined: Thu Jan 30, 2014 1:32 am

Re: Bay Area Real Estate

Post by visualguy » Wed Oct 04, 2017 5:13 pm

HomerJ wrote:
Wed Oct 04, 2017 4:45 pm
There are not enough high income people to support that.
I think that's where you're wrong. Why wouldn't the income and wealth (such as stock holdings and RSUs and foreign money) of enough people in the area keep up with the rate of growth of the stock market?

A more likely scenario, in my opinion, is that the core parts of the Bay Area will continue to appreciate at the rates that we've seen over the last few decades, with lower and more volatile (but still high) appreciation in the periphery.

Similar things happened in other parts of the country - look at Manhattan. You can also see it in other countries. For example, the Tel Aviv area in Israel where prices are actually higher than in the Bay Area, and where most of Israel's techies live (Bay Area prices have quite a lot of room to grow to reach those prices).

fnmix
Posts: 177
Joined: Sun Sep 09, 2012 4:50 pm
Location: Northern California

Re: Bay Area Real Estate

Post by fnmix » Wed Oct 04, 2017 5:18 pm

From the chart in one of the links earlier (https://www.paragon-re.com/trend/3-rece ... and-a-baby), the 1988 price index was 52. The Price index in 2017 is 226. That is 4.3x over 30 years. So it is not quite doubling over 7-10 years.

While one can not expect the same performance from real estate, in this one location, going forward, there is no law of physics that prevents it. Just as there is no law of physics that says that the US total market index will double over X years.

Past history in both cases (SF real estate, US Stock market index) have lead to some rules of thumbs that people use to invest (or equally to not invest) in these instruments. Just like any other rule of thumb they won't be accurate forever.
HomerJ wrote:
Wed Oct 04, 2017 4:45 pm
visualguy wrote:
Wed Oct 04, 2017 3:51 pm
Not sure why people can accept that the stock market can do something like double in value every 10 years on average, but cannot accept that real estate in the economically strongest and most attractive areas in the US is likely to do something similar.
<SNIP>

There is no question about this. SF cannot double in price every 7-10 years forever while the rest of the country increases at inflation.

User avatar
HomerJ
Posts: 10442
Joined: Fri Jun 06, 2008 12:50 pm

Re: Bay Area Real Estate

Post by HomerJ » Wed Oct 04, 2017 5:25 pm

visualguy wrote:
Wed Oct 04, 2017 5:13 pm
HomerJ wrote:
Wed Oct 04, 2017 4:45 pm
There are not enough high income people to support that.
I think that's where you're wrong. Why wouldn't the income and wealth (such as stock holdings and RSUs and foreign money) of enough people in the area keep up with the rate of growth of the stock market?
Because the companies that pay those people are not run by morons.

If housing costs 100x, then they will have to pay programmers at least 50x the salary. Right now, they pay programmers 2.5x as much, and the programmers get 1/2 the house they could afford elsewhere (which makes up for the 5x differential in housing).

If housing continues to go up at 10% a year, they will have to pay programmers even more. At some point (3x salary? 5x salary?, 10x salary?), startups and even established companies will migrate to other areas where they can get the the same good people but paying 1/3 or 1/5 or 1/10 as much.

It's happening NOW.

https://www.cnbc.com/2017/03/17/silicon ... attle.html

As the differential grows, more companies and people will leave.

100x will never happen. 5x is already too much. At some point, it will tip over. It cannot grow to the sky forever. So you CANNOT think that SF real-estate will grow at 10% forever. This is basic logic. There will not be a point where SF is worth more than the rest of the country combined.

But maybe it will double again. Maybe it's a good investment for a few more years, or a decade or two. Or maybe it will crash tomorrow. But the next 40-50 years will not return the same as the last 40-50 years. The entire U.S. is only worth $30 trillion. SF is currently at $1 trillion. 7 doubles over the next 50 years will make SF worth $30 trillion all by itself (in today's dollars).
Last edited by HomerJ on Wed Oct 04, 2017 5:43 pm, edited 3 times in total.

mervinj7
Posts: 370
Joined: Thu Mar 27, 2014 3:10 pm

Re: Bay Area Real Estate

Post by mervinj7 » Wed Oct 04, 2017 5:35 pm

Watty wrote:
Wed Oct 04, 2017 4:42 pm
That is a bad analogy.

Over the long term the value of stock funds grow mostly because companies earn a profit and either pay more dividends that can be reinvested, invest the profit and grow, or do stock buybacks. There is no limit on how much the value of the companies and stock index can grow and it can rationally double in value in real terms every 20 years or so.

A million dollar house in the Bay Area might 40 years old and be a 1,000 square foot cottage. 20 years from now it will still be a 1,000 square foot cottage, but it will be 60 years old. Will it be worth two million inflation adjusted dollars by then? There is now way to know but at some point it will not be able to increase any more.
The house I currently rent (for a short while longer) is almost a 100 years old and about 1200 sq ft. It was likely worth much less than a $1M 20 years ago but now its worth $2.3M. The next person who buys it will likely tear it down (assuming there are no heritage laws protecting it) and rebuild it. Of course, there's no way to know whether it will double in another 10 years but its worth has nothing to do with the house. Generally, land will appreciate while buildings will depreciate.

runner540
Posts: 428
Joined: Sun Feb 26, 2017 5:43 pm

Re: Bay Area Real Estate

Post by runner540 » Wed Oct 04, 2017 5:49 pm

HomerJ wrote:
Wed Oct 04, 2017 5:25 pm
visualguy wrote:
Wed Oct 04, 2017 5:13 pm
HomerJ wrote:
Wed Oct 04, 2017 4:45 pm
There are not enough high income people to support that.
I think that's where you're wrong. Why wouldn't the income and wealth (such as stock holdings and RSUs and foreign money) of enough people in the area keep up with the rate of growth of the stock market?
Because the companies that pay those people are not run by morons.

If housing costs 100x, then they will have to pay programmers at least 50x the salary. Right now, they pay programmers 2.5x as much, and the programmers get 1/2 the house they could afford elsewhere (which makes up for the 5x differential in housing).

If housing continues to go up at 10% a year, they will have to pay programmers even more. At some point (3x salary? 5x salary?, 10x salary?), startups and even established companies will migrate to other areas where they can get the the same good people but paying 1/3 or 1/5 or 1/10 as much.

It's happening NOW.

https://www.cnbc.com/2017/03/17/silicon ... attle.html

As the differential grows, more companies and people will leave.

100x will never happen. 5x is already too much. At some point, it will tip over. It cannot grow to the sky forever. So you CANNOT think that SF real-estate will grow at 10% forever. This is basic logic. There will not be a point where SF is worth more than the rest of the country combined.

But maybe it will double again. Maybe it's a good investment for a few more years, or a decade or two. Or maybe it will crash tomorrow. But the next 40-50 years will not return the same as the last 40-50 years. The entire U.S. is only worth $30 trillion. SF is currently at $1 trillion. 7 doubles over the next 50 years will make SF worth $30 trillion all by itself (in today's dollars).
Well said. I'm bookmarking this thread to return to in 5 years and reread. A lot of posts are fancy ways of saying "this time/place is different". The Paragon site has an interesting chart showing that this year for the first time since 2008/2009, employment declined in the Bay Area...any locals that can provide more background?

fnmix
Posts: 177
Joined: Sun Sep 09, 2012 4:50 pm
Location: Northern California

Re: Bay Area Real Estate

Post by fnmix » Wed Oct 04, 2017 6:02 pm

Here is some color from a local paper: http://www.mercurynews.com/2017/06/16/s ... ea-slumps/

My $.02 on this: the bay area is at (or close to full employment). Statistically there are atleast some layoffs, shutdowns and voluntary resignations all the time. With "full employment", small changes in employment that were previously ignored become noticeable. There may be more to it than employment rates bouncing around "full employment", but so far I haven't seen any significant job panic or employment fear.
runner540 wrote:
Wed Oct 04, 2017 5:49 pm
The Paragon site has an interesting chart showing that this year for the first time since 2008/2009, employment declined in the Bay Area...any locals that can provide more background?
Last edited by fnmix on Wed Oct 04, 2017 6:07 pm, edited 1 time in total.

visualguy
Posts: 351
Joined: Thu Jan 30, 2014 1:32 am

Re: Bay Area Real Estate

Post by visualguy » Wed Oct 04, 2017 6:05 pm

HomerJ,

Regular "programmers" get paid enough to rent, not buy. Rental complexes are growing very fast in the Bay Area. The vast majority of residential construction in the area now is nice apartment complexes. Many old commercial buildings and strip malls are getting torn down, and replaced by apartment complexes.

Buyers in this area these days are people with exceptional resources who did well with company equity (RSUs, startups, etc.), or inherited wealth, or foreign wealth, etc.

The world is changing, life is getting tougher, and inequality is rapidly increasing... A different location isn't much help. You mentioned Seattle... Prices there are now extremely high, and appreciation has been even higher than in the Bay Area. Traffic is worse there too. Vancouver is even worse than Seattle. LA is crazy too, and so is San Diego. Want to run away to Silicon Valley 2 in Israel? Forget about it, because prices are even higher there. NYC?
Not a chance. See the pattern?

roamin survivor
Posts: 107
Joined: Fri Nov 20, 2009 5:32 pm

Re: Bay Area Real Estate

Post by roamin survivor » Wed Oct 04, 2017 6:19 pm

visualguy wrote:
Wed Oct 04, 2017 5:13 pm
Similar things happened in other parts of the country - look at Manhattan. You can also see it in other countries. For example, the Tel Aviv area in Israel where prices are actually higher than in the Bay Area, and where most of Israel's techies live (Bay Area prices have quite a lot of room to grow to reach those prices).
I used to think that as well via Tokyo, but there are arguments to it. A lot of the major cities of the world (London, Tokyo, NYC) had a long time to grow and become established as economic and political hearts of the country. I think land size is also a major factor, as there's no where else to go to in Israel, so Tel Aviv becomes the economic and political center. Same with Japan and Tokyo and Osaka. Same can probably be said of large inhospitable areas like Stockholm. For the Bay Area, there's outlets. If in CA, then Sacramento or Fresno. If in US, Seattle's a good example. I mean, San Jose used to be a small city until the 1970s and in 50 years, explodes to the technological center of the world. Who's to say it can't happen to Galveston, TX if the creators of the next big tech leap wanted to build there?
HomerJ wrote:
Wed Oct 04, 2017 4:45 pm
If housing costs 100x, then they will have to pay programmers at least 50x the salary. Right now, they pay programmers 2.5x as much, and the programmers get 1/2 the house they could afford elsewhere (which makes up for the 5x differential in housing).

If housing continues to go up at 10% a year, they will have to pay programmers even more. At some point (3x salary? 5x salary?, 10x salary?), startups and even established companies will migrate to other areas where they can get the the same good people but paying 1/3 or 1/5 or 1/10 as much.
Sometimes, I wonder if this is on purpose. Make it so that programmers work, get experience at resume builders, save up, and then move out to LCOL areas, allowing hiring of newer, younger workers with the latest tech knowledge? A way to economically force churn for the latest tech skill base?

visualguy
Posts: 351
Joined: Thu Jan 30, 2014 1:32 am

Re: Bay Area Real Estate

Post by visualguy » Wed Oct 04, 2017 6:38 pm

roamin survivor wrote:
Wed Oct 04, 2017 6:19 pm
I mean, San Jose used to be a small city until the 1970s and in 50 years, explodes to the technological center of the world. Who's to say it can't happen to Galveston, TX if the creators of the next big tech leap wanted to build there?
To be accurate, San Jose isn't really where it happened. It was the peninsula and south bay. That area had Stanford University, and Berkeley not too far. Galveston has a port and hurricanes...

fnmix
Posts: 177
Joined: Sun Sep 09, 2012 4:50 pm
Location: Northern California

Re: Bay Area Real Estate

Post by fnmix » Wed Oct 04, 2017 6:53 pm

While Stanford and Berkeley are major contributors (I have an affiliation with one of these), there are other educational institutions that have contributed over the years: UC Davis (Agg technology), UCSF (Medical advances), UC Hastings (Law), Santa Clara University (oldest operating institute in California for higher-ed). I am less familiar with other schools in the area (UC Santa Cruz, CMU Silicon Valley, Wharton west) but these too contribute.
visualguy wrote:
Wed Oct 04, 2017 6:38 pm
To be accurate, San Jose isn't really where it happened. It was the peninsula and south bay. That area had Stanford University, and Berkeley not too far. Galveston has a port and hurricanes...

Post Reply