patrick.net

http://research.stlouisfed.org/fred2/graph/?g=4xo

blue line is average salary / mortgage rate.

red line is housing costs.

http://research.stlouisfed.org/fred2/graph/?g=4xp

is interesting too.

blue is monthly net IT hires (left axis)

red is monthly housing starts (right axis)

~4000/mo new bodies

~100/mo new houses

Here's the thing though: Those high salaries don't necessarily result in instant home sales. My wife and I make what would probably be considered a "typical" tech industry income. On the outside it would seem that we're all good to go as far as buying a house. That said- it still takes a ridiculous amount of cash to buy your typical obligatory tiny silicon valley house. 100k sounds like a lot- which it is. But if you're buying a starter home anywhere near SV then you'd better be pulling in at least 150-200k+ per year. That and you'd probably also better have around 200k in cash ready to slap down on a down payment. There are MANY people I know who make as much or more than I do ans still won't buy simply because once they realize just how much its going to take for them to buy here it simply isn't worth it and they continue to rent or they simply move away once they've stashed enough cash.

BTW.... anyone see at the bottom of that report that the median income for the same profession in Austin was $90k? What's the median home price there? Around $190k. Holy crap. The same tech worker in Austin would be doing about 1000% better there than here financially.

Places with high income and limited supply will always be expensive. No shit.
With that said, it is still cheaper to rent then to buy in the decent areas. Which indicates that there is still froth left in the prices, especially in the mid range areas.

I don't see people making posts stating why higher priced areas in other wealthy areas in other states will stay inflated. I sense quite a bit of nervousness by the posters that keep rehashing the same old reasons on why prices won't drop down to reasonable levels in the Bay Area. Nobody is predicting prices will drop to East PA levels, but clearly even with gov proping up prices with artificially low rates, prices are slowly creeping down. There is something wrong when mid-high level engineers need to get FHA assistance to buy a house that is smaller and crappier then a plumber would live in, say Austin or Charleston.

Yes all that insight and prices are still dropping. Very well said. lol.

Obviously there isn't enough money to support home prices.

Try to keep in mind there are ~150,000 people that work in tech in the bay area with ~3.5 million people in total population (SF, SC and SM counties). That's a very small %.

CrazyMan says

Try to keep in mind there are ~150,000 people that work in tech in the bay area with ~3.5 million people in total population (SF, SC and SM counties). That's a very small %.

Those numbers seem low. What's your source? You've left out some counties sometimes considered "Bay Area" but you probably have a reason.

http://www.bayareacensus.ca.gov/bayarea.htm

I can't find it TBH, but it was certainly ~150K. It also depends on what they considered "tech" so it's open to interpretation. An IT guy working for the GAP probably isn't counted, but he/she is certainly in "tech".

Here's a breakdown, though I imagine you'd need a login to get more specifics.

http://www.econovue.com/blog/siliconvalley/Overview/Snapshot_SV_Overview_2011.pdf

Still, the # of engineers making over 100K is a miniscule part of the population. There aren't enough households to support the market, evidenced by the continual decline in prices across the vast majority of the bay area.

The proof is in the pudding. Prices are most certainly still dropping.

crazydesi says

A Six-Figure Salary Is The Average For Silicon Valley Engineers

Average ?

Sure after 15-20 years in an 30-40 year average career timeline.
Yep.. it took you 15-20 years to get to $ 104K. Now tell me something new..

CrazyMan says

It also depends on what they considered "tech" so it's open to interpretation.

The term "Tech" has been perverted at best. Most journalist who frequently use it dont understand the difference between Google which is advertisment and real tech companies.
No clue at all...

SFace says

Besides salary, the other reason housing is so costly here:
Prop 13. which chokes off supply severly and the property tax rate is among the lowest in the country and predictable. Making property ownership very lucrative than otherwise.

Prop 13 hasnt prevented prices from falling from 1989 to mid 90s or 2008 to date, nor prevented more inventory being created during the 80s 90s and more recently in the past 10 years. Nor has Prop 13 prevented jobs moving to other states and over seas keeping salaries locally only.

No law has prevented any homeowner from selling their homes. Sales volumn compared to prior decades is way above the historical norm.

edvard2 says

The same tech worker in Austin would be doing about 1000% better there than here financially.

But they'd have to live in Texas.

This is a popular MYTH. That "tech people" and founders, and CEO's of tech companies in the Bay Area keep the prices high for real estate.

There are ~7,000,000 people int the BA.

How many tech people are there? 100,000 ? 200,000 ?

Less than 10% of the entire pop.

So, that isn't the only cause.

(besides, did you know starting salary for San Jose police is $94,000 ?)

swebb says

edvard2 says

The same tech worker in Austin would be doing about 1000% better there than here financially.

But they'd have to live in Texas.

Maybe, one doesn't have to go far, housing at Folsom, CA, is very cheap too. 400K houses there would cost more than 1M here or the high end of 2M. Another thing I don't understand, besides the land value, why would two California houses differ so much in *values* if built from the same materials?

Best job working for Silicon valley company are sales people(account executives)...working outside of California. Makes sense, they can live anywhere, travel expenses/hotels paid for ..make good money,plus commission and have no motivation to move to Silicon Valley.. closer to the mothership.

Many AEs i known are very happy where they are at.

SFace says

Besides the base salary, stock compensation and bonus compensation are among the highest in the world.

Salary, bonus and compensation in Chicago is on par, or higher than in the Bay Area. Tech people in Chicago make the same pay as in the Bay Area. Financial sector employees in Chicago make more than the Tech workers in the Bay Area, and they have less competition from China and India. House prices, however, are about 50% lower.

SFace says

salary.com indeed.com

Payroll service data like ADP or Ceridian might be better than some web sites who dont process PR data.

LarryPatrickMaloney says

This is a popular MYTH. That "tech people" and founders, and CEO's of tech companies in the Bay Area keep the prices high for real estate.

Sometimes what is really interesting to me is that it seems like people need an explanation to justify their behavior, but that explanation doesn't have to be true. But once the debt slave has it, they can reference it as a reason they *had* to go into all that debt.
1. the banks made it easy, like drug dealers. If I hook you, I own you.
2. extravagant consumerism is fun
3. there is/was peer pressure -my friends are doing it, it must be OK.
4. it is an important indicator of success for me and my family to have a house
5. engineers force home prices up around here. What choice do I have?

dunnross says

SFace says

Besides the base salary, stock compensation and bonus compensation are among the highest in the world.

Salary, bonus and compensation in Chicago is on par, or higher than in the Bay Area. Tech people in Chicago make the same pay as in the Bay Area. Financial sector employees in Chicago make more than the Tech workers in the Bay Area, and they have less competition from China and India. House prices, however, are about 50% lower.

it's also about 50% colder.

toothfairy says

it's also about 50% colder.

Yes, but there is 100% more culture, night life, friendlier people, more trees/greener, lake, etc. Besides the weather, the Bay Area doesn't really have that much to offer in comparison to Chicago.

If I were going to live somewhere cold I'd move to New York. Chicago's got nothing on New York except the fact that it's cheaper. But As usual there's a reason for that.

swebb says

But they'd have to live in Texas.

Yup- another bonus. Better than other places, like CO where its freezing and snowy during the winter...

toothfairy says

If I were going to live somewhere cold I'd move to New York. Chicago's got nothing on New York except the fact that it's cheaper. But As usual there's a reason for that.

Although I agree that New York has more culture, Chicago is a much more livable city. Besides, prices in New York are much much higher than in Chicago.

Apparently, the social media IPO boom is helping to reinflate Bay Area housing prices:

http://finance.yahoo.com/news/ipos-stoke-san-francisco-housing-034321653.html

Good luck with that.

Did you read the article? It's just speculation.

Also:

dunnross says

Yes, but there is 100% more culture, night life, friendlier people, more trees/greener, lake, etc.

Geeks and Culture dont mix.. either you are a partier at night or your coding.

CrazyMan: I agree with you that it's speculation and even a bubble (see my name, TheBubbleBubble? ;) )

dunross,
your posts are as hilarious as they are irrational. If Chicago is sooooo great and the Bay Area is so awful, what are you doing here?
I remember the bumper stickers from the 1980's: "Welcome to California. Please go home."

Nomograph says

LarryPatrickMaloney says

did you know starting salary for San Jose police is $94,000

Incorrect, as usual. In fact, that's almost the TOP salary, not the starting salary.

http://www.sjpd.org/joinsjpdblue/SalaryBenefits.html

WHERES MY FREE HOUSE LARRY I WANT MY FREE HOUSE

Did you calculate in the benefits package?

LarryPatrickMaloney says

Nomograph says

LarryPatrickMaloney says

did you know starting salary for San Jose police is $94,000

Incorrect, as usual. In fact, that's almost the TOP salary, not the starting salary.

http://www.sjpd.org/joinsjpdblue/SalaryBenefits.html

WHERES MY FREE HOUSE LARRY I WANT MY FREE HOUSE

Did you calculate in the benefits package?

Why would he have done that. You specifically stated "salary".

Take a drive down Central Expressway in Santa Clara between Lawrence and De La Cruz and note the number of For Sale and For Lease signs. Those are a pretty good indication that the total number of jobs continues to decline in the Bay Area. . . .

It's misleading to focus on average compensation for tech workers. You have to look at median family income overall, which I seem to recall is about $70k/year for Santa Clara County. That's actually very high compared to the rest of the U.S., but still grossly out of whack with local median housing prices.

dunnross says

Yes, but there is 100% more culture, night life, friendlier people, more trees/greener, lake, etc. Besides the weather, the Bay Area doesn't really have that much to offer in comparison to Chicago.

I lived in Boston for a few years. If Chicago has as bad of weather as Boston, and I'm pretty sure its actually worse, then I could really care less about night life, culture and whatever else might be there. I absolutely hate nasty, cold, miserable cold weather.

One of the factor for housing demand in Bay area - immigrant mindset to buy property. If you are making above average (I consider $100K as above average salary for Techies), you are tempted to invest in property. Think of the alternative - moving from one apartment complex to another every year

The Bay Area is one of the few bright spots in the entire economy.
People are very confident here in their future earnings potential. And companies are doing very well, too many to name. Couple that with the highest salaries on average in the nation, and limited space, and I see housing prices maintaining in the good areas, though not booming.

dellman says

Think of the alternative - moving from one apartment complex to another every year

Motherfucker movers destroyed my Ikea bookcase last year.

I didn't blame them because it's Ikea, but that thing cost more than the cost of the movers.

Wish I had stuck to my rule 2000-2005 of not buying anything that wouldn't fit in my Miata.

ducsingle5313 says

Take a drive down Central Expressway in Santa Clara between Lawrence and De La Cruz and note the number of For Sale and For Lease signs.

Here's the old Sony building in N San Jose:

http://g.co/maps/96q4p

Goodbye!

Last year I was driving by a perfectly good office building from the late 1980s being torn down.

More housing, yeay! I guess we can all work from home or Starbucks now.

dellman says

One of the factor for housing demand in Bay area - immigrant mindset to buy property. If you are making above average (I consider $100K as above average salary for Techies), you are tempted to invest in property. Think of the alternative - moving from one apartment complex to another every year

1. riiiight magical immigrants with unlimited money.
2. why would you move from one complex to another every year? I've moved 3 times in 15 years renting, all of them because I wanted to be closer to work or wanted to upgrade.

ducsingle5313 says

Take a drive down Central Expressway in Santa Clara between Lawrence and De La Cruz and note the number of For Sale and For Lease signs. Those are a pretty good indication that the total number of jobs continues to decline in the Bay Area. . . .

Okay, so boring median areas are declining. But the Real Bay Area continues to skyrocket in price! And if you show a place with prices going down, then obviously it's not in the REAL Bay Area.

Of course I think the RBA is down to 6 houses in Palo Alto and one of them belonged to Steve Jobs.

The RBA gets smaller and smaller each year.

CrazyMan says

The RBA gets smaller and smaller each year.

Yeah, but don't forget the law of conservation of REAL. REAL can neither be created nor destroyed. As the RBA shrinks, the REAL-density increases. At some point all of the REAL will be crammed into a single property, probably somewhere in SF. This will be where the portal to hell inevitably opens as the REAL density reaches a critical threshold and tears a hole in our universe through which demon spawn will march.

Actually, I think this already happened. Considering how many realtors are around, it would seem that numerous demon-spawning portals to hell have been open for quite some time.

I make more than $250k/year and chose to rent because for me it makes economic sense to do so. 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.