patrick.net

I am a lifelong resident of the South Bay. I went through K-12 in the South Bay and took three different degrees at SJS over a period of decades. I worked in the defense industry and in "tech" for decades in the South Bay, including back when there was no such thing as an H-1 and when "immigrant engineers" mostly meant non-Californian Americans from places like Chicago or wherever.

So over the decades I've made friends, aquaintance, etc. with "lotsa" locals before "tech", the regional economy and the local real estate came to be dominated by "non-American" immigrants. And here is what the majority of the local kids from The Fortress do when their Prop-13 parents move on or pass away: (mostly) they sell and divide up the proceeds among siblings, or, one sibling buys out the others' share. (In that case, they might maintain the Prop-13 but they still have a large cost). This is what happens. Running through the years of recall I can recollect so many examples of this, and come to think of it, I cannot recall a single example where they held onto the property, though I am sure people with whom I haven't been aquainted have done it. Especially maybe, an "only child".

SFace says

There's about a 250K millionaires in Santa Clara, San Mateo and San Francisco alone. In 20 years there may be well over 500K to over a million millionaires in the region (In fact you are on your way as well).

I dont think those numbers are valid. And to have 500K of wealth would mean many others outside would lose their savings. I have seen both real legit wealth creation and shaddy irrational wealth transfers.. Today, many have confused both and have no moral compass... utterly blind and too greedy.

thomas.wong1986 says

I dont think those numbers are valid. And to have 500K of wealth would mean many others outside would lose their savings.

So what even if they are valid?

How wealthy are they really, if they're paying market mortgages and market property taxes or market rents to live in The Fortress?

OK! say they are .. if they decide to move, who will fill in their homes on the market... we are looking for a very large new influx of millionairs to fill in the vacant spot to support current or higher prices...

SoCal and Florida, look alot more attractive if you have cash to burn and a have better life style. Buying into Fortress gets you a nice stroll around University Avenue...

thomas.wong1986 says

Prices from LG to LA to Menlo would be much lower without stock bubbles.

Thank you Captain Obvious : )

Bellingham Bill says

Thank you Captain Obvious : )

Not so obvoius for many who came here with long long tales of hitting it big with the idea home prices were 'always' more expensive for years. Fact is its been more institutionalized in recent years by the media. A stark difference from decades prior to 1999. You kill the myths you kill high home prices.

thomas.wong1986 says

A stark difference from decades prior to 1999. You kill the myths you kill high home prices.

Thing is, all these stock-option rich aren't leaving. Place is stuffed to the gills with them, and they're still making more . . .

http://www.businessweek.com/news/2012-01-29/facebook-is-said-to-plan-ipo-filing-for-as-early-as-next-week.html

Thanks to Microsoft, Netscape, Yahoo, Apple, Google, and many others, we've had thousands of millionaires being created every year in the area, but the last major home subdivision was filled in last year . .

http://losaltos.patch.com/articles/walls-go-up-at-old-pumpkin-patch-as-the-enclave-takes-shape

There are 36 houses on the market in Los Altos right now. Demand is probably 3000X that.

And this is just tech winners. There's also medical sector millionaires and other professionals that need a place to live in this place.
Waiting for this place to get affordable is going to be a very very long wait. Santa Cruz might be up in the Arctic Circle by then.

Just for fun I checked zillow for a random area of Saratoga (bounded by Chateau and Argonaut).

Of the 33 homes (built in the mid-50s, all with market values of $1.3M+), 11 have assessed values of under $500,000 and no record of sale.

A further 11 were sold in the 1990s.

The last 11 were sold once or twice in the 2000s. So on average there's been one sale every two years on this block, but there were 3 sales in 2003, 2005, and 2010.

From the looks of it, around 40% of this particular area will not be on the market ever.

ducsingle5313 says

The comments about renters having to move every year seem strange. I've *never* been forced to move from a rental, and none of my renter friends have either. So this issue seems grossly exaggerated.

Most of the apartments in Fortress/adjacent areas increase the rents year after year. I saw 10% increase in 2010 and 15% increase in 2011. If you don't want to pay more, you need to move out.

I accept that my "engineer salary" is pretty much average for the bay area, but I still believe I shouldn't have to pay more than 3X my salary for an "average" home.

Sorry, I just can't look at a 40 year old home on a dinky lot and scream "I gotta have this for 7X my income!"

I'll rent the house, sure, for a bit, but no way in heck would I ever commit to buying it.

Strange, I lived in the same 3 BDRM house in Campbell for ~8 years and my rent never increased.

Try being a good tenant.

dellman says

ducsingle5313 says

The comments about renters having to move every year seem strange. I've *never* been forced to move from a rental, and none of my renter friends have either. So this issue seems grossly exaggerated.

Most of the apartments in Fortress/adjacent areas increase the rents year after year. I saw 10% increase in 2010 and 15% increase in 2011. If you don't want to pay more, you need to move out.

I call BS on that.
If all apts raise rent by 10% every year, then how does moving help you?

Yes, during boom times, the larger complexes do raise rent as demand gets higher, but I've never had to deal with it. Larger complexes suck anyways: they almost always smell like ethnic cooking, invite lots of petty crimes, very overpriced, and just overall poorly managed by indifferent apt managers.

If you are a good tenet and rent from a private landlord, they have no reason to want to make you leave and risk losing rent money and having to find good tenets. 2 of neighboring duplexes have been in the same units for 15+ years.

dellman says

ducsingle5313 says

The comments about renters having to move every year seem strange. I've *never* been forced to move from a rental, and none of my renter friends have either. So this issue seems grossly exaggerated.

Most of the apartments in Fortress/adjacent areas increase the rents year after year. I saw 10% increase in 2010 and 15% increase in 2011. If you don't want to pay more, you need to move out.

Where are you living/renting?

I got a 5% rent DECREASE in summer 2010, and then faced a 10% increase in summer 2011, at which time I moved out of Central Park at Whisman Station (large complex, managed by Prometheus) & into a 12 unit building. The market has cooled off a lot since then, and rents have fallen back toward their pre-Google-hiring-binge levels (although not all the way). I will be negotiating hard for a rent decrease when my lease expires in late August since I doubt that Google is going to hire another 5000 people this summer, and my building currently has 2 or 3 of 12 units vacant, although that is certainly subject to change between now & then.
(this was all in Mountain View)

Serpentor says

If you are a good tenet and rent from a private landlord, they have no reason to want to make you leave and risk losing rent money and having to find good tenets. 2 of neighboring duplexes have been in the same units for 15+ years.

I try to be a good tenant. I'll only call the landlord if absolutely necessary, and I'll even do minor upgrades on my own dime, with approval, such as adding a digital thermostat, etc... essentially anything that makes my life easier, and in some cases like the thermostat, less expensive.

And come the 1st of every month, that rent check is either in their mailbox or I'll deliver it personally.

In return, if I get slapped with a rent increase, I'll take my excellent and drama-free tenancy somewhere else that will appreciate it. So far that hasn't happened, though.

Question I have for all of you would be, did the Bay Area ever recover (meaning, deflate) from the Dot-com bubble? Anecdotal, to be sure, but I see a lot of houses in the inner bay going to pre-2000 prices. Could it be that we have further to fall from the prolonged bubble?

bmwman91 says

Where are you living/renting?

Sunnyvale. Renaissance (@old sanfrancisco rd) increases rents every year. It is possible to get better deals in Sunnyvale but you need to move -that's my point. If you like a neighborhood, chances of getting a rental that won't increase year after year is not very good.

CL says

Question I have for all of you would be, did the Bay Area ever recover (meaning, deflate) from the Dot-com bubble? Anecdotal, to be sure, but I see a lot of houses in the inner bay going to pre-2000 prices. Could it be that we have further to fall from the prolonged bubble?

No, not quite.

It seems most of the BA is slowly deflating, though there's exceptions (parts of PA, Cupertino) that don't seem to be budging much. On the bright side, I worked for years in both of those towns and while I like PA, Cupertino is pretty much shit so its pricing is irrelevant to me :)

Everywhere else seems to have a slow hissing sound accompanying it though. So yes, we're still going down.. slowly.

CrazyMan says

Everywhere else seems to have a slow hissing sound accompanying it though. So yes, we're still going down.. slowly.

How low though? Where is our collective resting place? I see a lot of properties that went up 50% from 2000-2005, but they had a pretty crazy run-up prior to that? Maybe this is a longer fall than most?

After the dot-com bubble, we had 9/11, then low-interest rates to combat it, combined with creative financing. It must've been the early 90s when we last had a normal market.

I wish I knew the answer (I'm sure we all do) but I'm still seeing properties in my price range (550-700k) still dropping, though some obviously do sell.

I pay attention to the trends and the trend is still down overall. I think the next couple summers will tell us a lot. On the bright side, there is a chance somewhere between 0 and a cold day in hell that home prices in that segment will start trending up anytime soon, so I'm happy sitting here waiting a bit longer.

CrazyMan says

I wish I knew the answer (I'm sure we all do) but I'm still seeing properties in my price range (550-700k) still dropping, though some obviously do sell.

i'm seeing the same - the lower prices are giving me an itchy trigger finger to buy. but rationally i know i should wait for the prices to flattened out , and then go up a bit before i buy.

houses that were selling in the $700k range last year (and sold very quickly) are listed in the $600k range this year and sitting unsold.

SFace says

There's about a 250K millionaires in Santa Clara, San Mateo and San Francisco alone. In 20 years there may be well over 500K to over a million millionaires in the region (In fact you are on your way as well).

And as Bill pointed out, wealthy people including boomers pass their wealth.

I don't get the argument if everybody have to reset and buy today?

I question those numbers. And even if they are remotely accurate, many of those folks are classified as "millionaires" based on the value of their house, not because they are making huge money. My guess is many of these "millionaires" couldn't couldn't qualify for a mortgage on a starter home in San Jose at their current incomes.

Actually, if you do some research, you will find that Bay Boomers are much less likely to pass on wealth to their kids than in previous generations. This pretty much reflects the stereotype of Boomers being incredibly self-centered. More recent immigrants from different ethnic groups might be the exception to that though.

The point there is where will the large number of millionaires needed to soak up very expensive houses (when the current residents retire, downsize, or die) come from?

ducsingle5313 says

My guess is many of these "millionaires" couldn't couldn't qualify for a mortgage on a starter home in San Jose at their current incomes.

The affordability index came in at around single digits by 2004-5 I think.. something like only 6-9% could afford their own home.
I was one of those.. couldnt afford to my own home.

Pretty common across California, the whole index was changed to inflate the index.

E-man says

There is no reason to sell their home thanks to Prop 13.

You mean 58 and 193 maybe ? How about those who overpaid and carry a higher property tax 2x than had they waited as priced dropped 50%. Every reason to sell thanks to Prop 13 maybe.. some call it unfair. Too bad they are suckers.

What is Proposition 58?
Proposition 58, effective November 6, 1986, is a constitutional amendment approved by the voters of California which excludes from reassessment transfers of real property between parents and children. Proposition 58 is codified by section 63.1 of the Revenue and Taxation Code.

2.What is Proposition 193?
Proposition 193, effective March 27, 1996, is a constitutional amendment approved by the voters of California which excludes from reassessment transfers of real property from grandparents to grandchildren, providing that all the parents of the grandchildren who qualify as children of the grandparents are deceased as of the date of transfer. Proposition 193 is also codified by section 63.1 of the Revenue and Taxation Code.

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3.How do these Propositions work?
In the State of California, real property is reassessed at market value if it is sold or transferred and property taxes can sometimes increase dramatically as a result. However, if the sale or transfer is between parents and their children, or from grandparents to their grandchildren, under limited circumstances, the property will not be reassessed if certain conditions are met and the proper application is timely filed.

These propositions allow the new property owners to avoid property tax increases when acquiring property from their parents or children or from their grandparents. The new owner's taxes are calculated on the established Proposition 13 factored base year value, instead of the current market value when the property is acquired.