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Silicon Valley Rent vs. Buy - Simple Analysis


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2011 Jul 19, 5:08am   16,236 views  44 comments

by bmwman91   ➕follow (5)   💰tip   ignore  

Being a big fan on MS Excel, I like to toodle around in it & manage my personal finances. I got into a little debate with my fiancee the other week over the value in buying a house and decided to work out some simple projections for myself (guys, you know what happens when you try to bring logic & data into one of those arguments). I figured I'd share some of the stuff I ended up with in the analysis. "Analysis" may not be the most appropriate term since I am not in professional finance or anything, and there are some huge assumptions in the spreadsheet. Nevertheless, I'd like to share some of this. Feedback is welcome, positive & negative. Keep in mind that I am not saying that buying is ALWAYS bad. I am just trying to illustrate that it is not a great plan with pricing what it is now, which is a pretty common these in here.

American culture today dogmatically holds a number of things to be true. Some examples are voting, working hard and taking care of family. Truly, these are important facets of our culture, and are part of what built us up to be the foremost power in the world. There is another common-sense notion that is also as prevalent as ever: buying a house is essential to living the American dream and having financial stability. This brief analysis is intended to question that notion and to reveal how challenging it can be for just about any upper-middle class (or below) household in the California Bay Area to remain fiscally solvent while owning a house. The data for this analysis was gathered from internet sources providing median income and pricing data for the Silicon Valley. The greater Bay Area also has price to income ratio issues, but data for the Silicon Valley will be used since it is generally where one will find the highest median incomes due to the high tech industry.

In this analysis, inflation is held at 3% over 30 years and applied to wages, rent, home maintenance costs, commute penalties & home values. Investment returns are held at 7%. No transient events are accounted for. Home & rental prices are based on summer 2011 median data for the Silicon Valley. In both cases (renting & buying), fictional couples of age 30, with net household income of $100000 & newborn twins are being simulated. Living expenses with children are assumed to be 70% of net income, with things like school tuition & cars averaged over time. After 25 years, the children are assumed to have finished college & be out on their own, dropping living expenses to 35% of income. Upon retirement, the couple that bought will sell their house & downsize to something half of the price, investing the other half of the money they obtained in the sale. Both couples are assumed to be fiscally responsible & save/invest any remaining money at the end of the year. Mortgage interest is also used to add to the buyers’ end-of-year balance for investment (25% of mortgage interest is added to income). Property tax increases at a maximum of 2% per year, as per CA Prop 13.

To start, Figure 1 shows the spreadsheet setup & inputs set to current nominal conditions. Notice that, assuming that both parents remain employed & wages rise with inflation every year, the buyer of the nominal Silicon Valley home will have a fair period of negative net worth. In cases where the buyer’s net worth is negative, it is assumed that they obtained a HELOC. In this case, they are given an ideal situation where HELOC rates remain at 4.5% indefinitely. The result of a median-earning family buying a median house in the Silicon Valley is decades of debt, and retirement 9 years after the family that rented a median property that saw 3% inflation in rates every year. The buyers are assumed to go into debt because in this model, it is assumed that they carry the same living standard as the renters in terms of living expenses, with real estate costs being separate for the buyers.

Figure 1
Figure 1 - Rent vs. Buy - 20% Down Payment + 2011 Nominal Conditions Over 30 Years

It is unlikely that the couple that bought would be able to obtain HELOC money in the amount indicated above since HELOC rates were set at 4.5% and the home was allowed to appreciate with inflation at 3%. Owning wouldn’t work, and the couple that bought would have likely foreclosed & rented.

Notice the discontinuities in the lines. For the renters (blue), the first one occurs when their kids move out in 2034. The second occurs at retirement, in late 2039. The buyers have these same two points (and at retirement sell their house), plus another one in 2040 when the house is paid off. These discontinuities will also be observed in subsequent figures. Both lines end in 2065, when the couples are age 85 & assumed to die. Retirement year is determined by the net worth a couple has that allows them to reach age 85 with as close to zero worth as possible (with 1-year resolution in everything).

In the next case, depicted in Figure 2, the buyer-couple decides to plunk down 3.5% instead of 20% as in Figure 1. All other parameters are held the same. In this case, it is even less workable. Mortgage interest drains the buyers’ incomes even faster, and no responsible bank would give them a HELOC in the amount required to work this out. Assuming that they were able to get the credit though, they would retire 11 years after the renters.

Figure 2
Figure 2 - Rent vs. Buy - 3.5% Down Payment + 2011 Nominal Conditions Over 30 years

Setting the down payment back to 20%, but adjusting HELOC rates to 9% shows that this living situation is even less workable in a case where interest rates increase. See Figure 3 for the plot. Interest rates in the early 1980’s were well over 10%, and there is no reason to believe that they could not rise to those levels again. As can be seen, the buyers almost do not get to retire. They retire 21 years after the renters, at age 75. That assumes that they are paid constant wages the entire time, which may be somewhat of a stretch on reality.

Figure 3
Figure 3 - Rent vs. Buy - 9.0% HELOC Rates

As some may point out, the model is simplistic and cannot account for transient events. Pay raises in high tech fields often exceed 3% annually. With the current economic climate, and with families typically having one parent work part-time or stop working, I chose to keep wages rising with inflation, with the intent of averaging out things like underemployment, unemployment & pay raises / bonuses exceeding 3% annually.

Up to here, this analysis paints a dismal picture of ownership. Readers should note that the dismal picture is painted using current pricing & wage trends. Prices have far outpaced wages in the Silicon Valley for the last decade or so. The next case to be studied will involve a 34% reduction in the median house price. This is illustrated in Figure 4. With this being the case, purchasing a house starts to make fiscal sense for a young family. Retirement comes at about the same time as the renters, and after downsizing they can own a house where the taxes & maintenance cost less than renting, allowing them to live off of a smaller accumulation of investments. So, as some people are beginning to realize, buying under the current conditions makes little sense. Prices need to drop if young professionals are expected to be responsible long-term owners or more than just debt.

Figure 4
Figure 4 - Rent vs. Buy - 34% Reduction in House Price ($500k vs. $760k)

As unpopular as this final case is likely to be, I would like to add it in anyway. Figure 5 shows both couples’ net worth when they do not have children. Both couples are able to retire in their mid-40’s & live off of their savings / investments. Most people think that a house is their largest financial maneuver and spend a fair amount of time planning around it, and have kids when they “feel ready.” It would seem, for a couple that wants to manage money, that children require far more financial planning than a house.

Figure 5
Figure 5 - Rent vs. Buy - No Children

Hopefully this brief analysis using a simple interest/inflation model can illustrate that buying a house can make sense if prices are more in-line with real wages. The current pricing levels are nonsensical, and many buyers today will be tomorrow’s foreclosures. Fiscally savvy individuals should continue renting and saving their money. For most people, the ultimate goal in life is retirement, whether they know it or not. Younger adults generally seem to focus on home ownership, and assume that it will somehow factor in to retirement. They need to sit down, go over the numbers and see just how a house fits into the puzzle. Our current pricing situation should be a clear sign that the American home-buying dogma needs hard questioning.

If you are interested in obtaining a copy of the spreadsheet used for the calculations in this analysis, you may obtain it from the following link. Instructions are in the spreadsheet.

SPREADSHEET LINK

#housing

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1   cranker   2011 Jul 19, 9:29am  

I call bull on this analysis

1) See SF ace's comment, this is not apple to apple

2) More than that, that 7% return is a pipe dream. Your entire model is based on this difference - 3% vs 7%.

3)Living expenses are 70% of income excluding housing? (in both renting and owning). Whoever does that is doomed. Does not matter whether you own or rent.

Altogether, there are too many macro assumptions here that don't go well with each other - (7% returns for 30 years while inflation is 3% for those 30 years?) your model is inconsistent. All these could be possible for a few individual cases, but the system as a whole cannot do that rates.

And 30-40 years? That's a time frame that is makes it impossible to assume anything about anything.

Get realistic - renting at this time is better, but this is a way ludicrous model. Use Patrick's model. And have a life - use a 7-10 year plan. In the end it's a life lived, not whether you had the best optimal financial plan.

The two thing that I 100% agree on is this (1) on a 100K income, don't buy a 760K house and (2) if you are spending 70% of your income for living expenses (excluding housing), your going to ruin.

2   bmwman91   2011 Jul 19, 9:40am  

Fair enough, I figured I'd get fairly critical responses now that I have had a little more time to think about it. Certainly, it is pretty flawed. Given the current setup of our economy, it is probably pretty difficult to estimate what will be going on even 3 years from now. I set it to a really really long time span since things like inflation & investment returns do seem to average out over time, although compound returns rely heavily on performance early in the game.

$1450 CAN get someone a 2BR apartment, but it certainly won't be as nice as the $760k house. I guess I was operating on the assumption that someone that rents will rent a crappier unit in the interest of saving since there seems little point in dumping tons of money into a "luxury" rental.

Mostly, it was a little for-fun exercise. I'm sure I'll get a few more folks pointing out erroneous assumptions & the fact that steady inflation/investment returns are silly to rely on. Renting only makes sense in certain areas, and at certain times. The Silicon Valley seems to have a number of places where this is true, for now.

Thanks for the feedback. I'll make sure to keep the criticism in mind before I go using my badly informed Excel sheet to make any major decisions (although, coincidentally the sheet suggests that buying isn't a great idea right now, and that would be a big decision). I'll have to check out Patrick's calculator while I'm on here.

3   B.A.C.A.H.   2011 Jul 19, 11:43am  

Thirty years ago, the USSR had 30,000 nukes minutes away from us.

Thirty years ago, "nuclear family" with one worker were typical.

Thirty years ago, we had a different income distrubution than we did now.

Thirty years ago, the main products in Silicon Valley were in defense industry, and the Next Biggest Thing was real silicon hardware made on Real Silicon. Not ideas uploaded onto servers godknows where.

Thirty years ago, credit card and car payment loan interests were tax deductible.

Thirty years ago, students graduated without such onerous student loans, and thirty years ago, if they did have such loans, it could be discharged in bankruptcy.

These were all true thirty years ago and may've been reflected in the assumptions behind whatever spread sheet analysis a person would've come up with thirty years ago, although thirty years ago, most persons did not have access to PC-type spread sheets.

Thirty years ago, if you wanted to sell your house, the mortgage would go with it. It means that thirty years ago, along with the physical description of BR, BA, sq ft, etc., would be the terms of the loan that the buyer would be assuming from the seller. Don't take my word for it- go to the library and look at some 30-year old Real Estate classified ads in the SJ Mercury News and you will see what I mean. That was an important aspect of being able to sell a home if you had to, in a time of higher and rising interest rates, thirty years ago.

Thirty years is a long time into the future to project assumptions about figures in the margins, because over a time as long as thirty years, those marginal differences compound, as John Bogle might say.

4   Hysteresis   2011 Jul 19, 11:52am  

monte carlo simulation would be a more effective too for what you're trying to accomplish: http://en.wikipedia.org/wiki/Monte_Carlo_method

investment groups use monte carlo statistical methods in their automated trading systems. it's also commonly used for personal financial planning.

5   B.A.C.A.H.   2011 Jul 19, 12:25pm  

Monte Carlo Simulation, that's a good one!

Lots of things in the real world (as opposed to the Monte Carlo Simulation of it), like ? will I go on permanent disability because of the actions of a drunken uninsured driver ? have digital consequences. When it happens, the probability is exactly one. Low probability to the victim is meaningless.

And yes, I had a roommate who's life was "wrecked" in such a wreck. Minding his own business, doing nothing wrong except being on the road, and there's nothing wrong with that. Lost his business and forced to live on disability.

6   Hysteresis   2011 Jul 19, 12:30pm  

Sybrib says

Monte Carlo Simulation, that's a good one!

Lots of things in the happen, like ? will I go on permanent disability because of the actions of a drunken uninsured driver ? have digital consequences. When it happens, the probability is exactly one. Low probability to the victim is meaningless.

And yes, I had a roommate who's life was "wrecked" in such a wreck. Minding his own business, doing nothing wrong except being on the road, and there's nothing wrong with that. Lost his business and forced to live on disability.

it is unfortunate that you are clueless about statistics.

7   B.A.C.A.H.   2011 Jul 19, 12:31pm  

Hysteresis says

it is unfortunate that you are clueless about statistics

Yeh if you say so. Some guy trying to sell me an annuity told me that a few years ago.

8   B.A.C.A.H.   2011 Jul 19, 12:33pm  

Hysteresis says

investment groups use monte carlo statistical methods in their automated trading systems.

How did that work in the Flash Crash?

9   Hysteresis   2011 Jul 19, 12:34pm  

ignorance isn't a desirable trait

10   B.A.C.A.H.   2011 Jul 19, 12:38pm  

You might be surprised,

I have used simulations in engineering. The simulation is as good as the model behind it. At least with physics, the Laws of Nature are reliable and predictable.

But economics is not a closed system, and neither is society.

11   Hysteresis   2011 Jul 19, 12:40pm  

Sybrib says

Hysteresis says

investment groups use monte carlo statistical methods in their automated trading systems.

How did that work in the Flash Crash?

sybrib, i'm not going to argue with you.

you clearly don't know anything about stats. if you did or even if you had common sense you wouldn't be making ignorant remarks like this last one. i don't have any reason to explain it to someone as antagonist as you.

12   B.A.C.A.H.   2011 Jul 19, 12:44pm  

Hysteresis says

don't know anything about stats.

I know one thing, simulations and stats are not the same thing.

13   karsten   2011 Jul 19, 5:55pm  

rSybrib says

Thirty years is a long time into the future to project assumptions about figures in the margins

"Prediction is very difficult, especially if it's about the future." --Nils Bohr,

14   clambo   2011 Jul 19, 6:48pm  

I only glanced at your interesting graphs. Did you assume that the home owners reverse mortgaged their house, thereby getting some of their money back during their retirement years?
I see this as one possible advantage of ownership v renting.

15   Cautious1   2011 Jul 20, 12:59am  

This reminds me of a long-ago conversation with my dad. He was a "good provider" and yet very careful with money, and there were a lot of things other kids had that we were denied (like new Mustangs and BMWs when we were furnished with an old Ford Escort--the humiliation!). I asked him, "Why do people even have kids?" He replied, "Because you bring so much joy." I said, "Well, then why didn't you have more kids?" and he said, "Because I had all the joy I could afford."

Sure, kids add to your cost of living-- but they don't have to cost as much as you calculate. You can run two scenarios, the first with private schools and gold-plated potty chairs, governesses and trips to Europe; another figuring the loss of wages from one parent staying home and raising the kid(s) while saving on clothes, commutes, child-care and other work-related expenses. Don't forget the black swan of your spouse dying. Figure in adequate insurance for every foreseeable possibility, knowing that disaster will come in an unforeseeable form.

I do applaud your desire to do right by your children and to make sure they would want for nothing. I'm just feeling a lot of sympathy for your fiancee as she looks to the future and you respond with a pile of numbers and red and blue lines.

16   edvard2   2011 Jul 20, 1:44am  

My take on rent in SV is that just like everything else in the area the cost of rent there is grossly out of whack. We looked into maybe renting in SV because we work there. But we would have to pay almost 40-50% more if we did for the same size house we rent in the East Bay. No thanks. I'll take driving 30-40 minutes over paying a crapload of money on rent.

17   Dan8267   2011 Jul 20, 1:53am  

Hysteresis says

it is unfortunate that you are clueless about statistics.

"There are three kinds of lies: lies, damned lies and statistics."
- Mark Twain

"There are only 10 types of people in the world: those who understand binary, and those who don't."
- Unknown

"There are three kinds of people: those who can count and those who cannot. "
- Unknown

"There are two types of people in the world. Those who divide people into two types and those who don't. I am one of the later."
- Me

18   Dan8267   2011 Jul 20, 1:56am  

karsten says

"Prediction is very difficult, especially if it's about the future." --Nils Bohr,

Prediction is easy. Just say vague things and after something happens, say "See, I told you!"

19   bmwman91   2011 Jul 20, 2:22am  

More good feedback, thanks.

I do think that there is SOME merit in trying to use statistical methods to make financial plans. Certainly, the point about life 30 years ago versus now is well taken in how predictions for 30 years from now are baseless. At the same time, I do think that people should try to have SOME sort of plan for their finances. Now, being that real estate is in the middle of a giant transient and the stock market seems to be up on an economy that produces very little, it is perhaps silly to project anything based on current conditions.

I think that the additional $100 per month is a realistic assessment of commute costs. I used to commute from Willow Glen to Mountain View, and even with a 2-door that pulled 28-30MPG, I was dropping a lot more money than I am now. Sure you can buy a Prius & get 2x that mileage, but you had better factor in the vehicle cost then! Once I moved to MV & rented, the commute became a 7 minute drive or bike ride, depending on mood. So, less gas, less miles on the engine/suspension/tires, less cost. Then again, I meticulously maintain my vehicle, and I think most people will just keep driving until the wheels fall off, so my maintenance costs are probably abnormal. (the "91" in the handle refers to the commute car's vintage, and it is German...so yeah, money pit)

The house maintenance cost was calculated to be 1% of the property's value annually, and 1/12th of that monthly. Honestly, we all know that houses in the Bay Area need a bit more than light bulbs & DrainO. Perhaps 1% is a tad aggressive. Hence, why I provided a copy of the sheet if people want to plug different numbers in. Since the value of the sheet has come under serious question though, I suppose it is fair to not bother.

20   ppexx   2011 Jul 20, 2:52am  

I do not get it, Silicone Valley is the most ever priced and over rated hell hole in the US. Why stay when you can buy a beautiful house outside of Cal for half as much. What is the attraction of this dive, and I used to live there.

21   thomas.wong1986   2011 Jul 20, 3:07am  

bmwman91 says

Interest rates in the early 1980’s were well over 10%, and there is no reason to believe that they could not rise to those levels again.

There was a big difference between 1980 and today. First time we saw competition from overseas. Today, its your job that is in competition with much cheaper global labor centers.

Double digit rates are not gonna happen.

22   thomas.wong1986   2011 Jul 20, 3:09am  

ppexx says

I do not get it, Silicone Valley is the most ever priced and over rated hell hole in the US. Why stay when you can buy a beautiful house outside of Cal for half as much. What is the attraction of this dive, and I used to live there.

Hype! Feels more like Hollywood than Santa Clara County.

23   chip_designer   2011 Jul 20, 3:37am  

Who has the time to read your analysis? Your meticulous analysis just come down to what everyone already know.

24   edvard2   2011 Jul 20, 3:39am  

ppexx says

I do not get it, Silicone Valley is the most ever priced and over rated hell hole in the US. Why stay when you can buy a beautiful house outside of Cal for half as much. What is the attraction of this dive, and I used to live there.

Its not the place but the jobs around it. I work in SV myself and the area isn't exactly that great. Its basically a large suburb that was at one time built for working and middle class families who lived in largely unassuming middle class houses. That has now turned into unassuming middle class houses-aka- Brady Bunch style houses- that will set you back a cool million. Its really bizzare. Even if I had the money I'm not sure I would buy there. I usually can't wait to get back to the East Bay at the end of the day.

Perhaps if it was San Fran then perhaps I could understand. But there's not really anything that appealing about SV and its areas. If anything its another place for people to play pissing contests by living in what's considered " desirable" areas ( ironic since the houses they buy are purely middle class looking houses) and showing off their shiny fancy cars. I think what I dislike about the area more than anything is the vibe. Its this sort of phony, artificial kind of feeling.

As far as buying a house outside Cali.... well that's why I'm busting my ass in SV s I can save enough to move out of here and buy cheaper elsewhere. SO yes- I would concur.

25   chip_designer   2011 Jul 20, 3:54am  

ppexx says

What is the attraction of this dive, and I used to live there

one attraction is you cannot escape from seeing a chinese or an indian in SV. SV is where the jobs are. You live where you can find work. That work is the ultimate attraction. And california weather.

26   Hysteresis   2011 Jul 20, 4:02am  

edvard2 says

I think what I dislike about the area more than anything is the vibe. Its this sort of phony, artificial kind of feeling.

agreed. there's way too many egos around here.

As far as buying a house outside Cali.... well that's why I'm busting my ass in SV s I can save enough to move out of here and buy cheaper elsewhere.

i'm here strictly for the money - which is very good.
i haven't decided if i'll leave when i retire, probably not.

you don't need to leave california to find cheaper homes with fewer asswads. you just need to stay out of the poser areas. move a few hours out of sf/south bay. the folks near lake shasta seemed down to earth and very nice.

27   Rew   2011 Jul 20, 4:39am  

ppexx says

I do not get it, Silicone Valley is the most over priced and over rated hell hole in the US. Why stay when you can buy a beautiful house outside of Cal for half as much. What is the attraction of this dive, and I used to live there.

Jobs.

The valley has decent paying jobs with benefits, stock options, and a 401ks. Even if your quality of life could be better by living someplace else, the real scare is, the "somewhere elses" have less job opportunities and stability. It can also be difficult to weigh that "quality of life" factor. Each choice has different advantages and disadvantages, and for as unattractive as the land/communities can be, the valley has a lot of attractive things going for it.

I'll agree with you in that I've lived in much nicer places before. Currently living and working in the valley, if a more attractive opportunity presented itself someplace else I'm ready and willing to move. Renting keeps me mobile and able to do that.

28   edvard2   2011 Jul 20, 5:23am  

Hysteresis says

you don't need to leave california to find cheaper homes with fewer asswads. you just need to stay out of the poser areas. move a few hours out of sf/south bay. the folks near lake shasta seemed down to earth and very nice.

Agreed. My favorite parts of Cali are in some of the smaller towns in the Sierra foothills. No work there in my field though. Problem is that ALL of my family lives in NC, and they sure as hell aren't moving here because even if they sold everything they own they wouldn't be able to buy anything here. So my choice is part financial, part family. If I had to stay in the immediate Bay Area I'd perhaps consider some of the far-flung suburbs that are at that threshold of being too far away. Places like Pleasanton or whatnot. Places with 350k homes or so. Then again my commute would probably be hell.

rewrew7 says

The valley has decent paying jobs with benefits, stock options, and a 401ks. Even if your quality of life could be better by living someplace else, the real scare is, the "somewhere elses" have less job opportunities and stability

I've been working in SV for years and the word "stability" doesn't exactly fit the nature of jobs here. I've been at numerous jobs and I am not yet 35. Its one the main reasons I don't buy a house here because whether I'm at the same job or have a job period is not certain from one year to the next. In fact I would argue that jobs here are less stable than in other areas and fields. The fact that the majority of Americans live in the other 49 states and somehow make it work indicates that "somewhere else" is every bit as viable as it is here, and perhaps more so.

Whatever pros SV and the Bay Area has- from higher paying jobs, weather, food, and so on are in my opinion heavily canceled out by the extreme costs, insecure job situation and huge crowds of people who also moved here for the same reasons that make living here so difficult compared to other places.

29   corntrollio   2011 Jul 20, 6:18am  

rewrew7 says

obs.

The valley has decent paying jobs with benefits, stock options, and a 401ks.

Also, if you work in anything tech-related, it's the place to be. Sure, you can be a bankster in Chicago, but if you're serious about it (assuming you don't do futures stuff), you probably work in New York. There are tech businesses that you can open in other cities, but the VC market is also more mature here. Expensive, sure, but the talent market is also deep. If you relocate to Boise, you can pay people less and have a lower cost of living, at the expense of a shallow talent pool.

There are tradeoffs to living anywhere, so few cities are a one-size fits all decision.

30   badhumvee-yahoo-com   2011 Jul 20, 8:39am  

To be fair to bmwman91, this was just his attempt to quantify the scenario around the basic question of rent v/s buy for Silcon valley.

We may not agree with some aspects of the methodology he used, but should appreciate the effort and sharing the full thought process.

Does any body else have a better analysis/model put together in one file that can be shared here?

31   thomas.wong1986   2011 Jul 20, 8:53am  

edvard2 says

I've been working in SV for years and the word "stability" doesn't exactly fit the nature of jobs here. I've been at numerous jobs and I am not yet 35.

Job stability in SV ended some 20 years ago.

32   thomas.wong1986   2011 Jul 20, 9:02am  

corntrollio says

There are tradeoffs to living anywhere, so few cities are a one-size fits all decision.

Being a saleman.. aka.. Account Executive.. out in the field for a SV tech company is the best of both worlds. Live in other state (cheaply) serving tech customers while raking in Salary and Commissions.

And they make a heck of alot more in compensation than several Engineers put together. After all, they roll in the revenue dollars every single month. If you know of any, talk to them.. they are very happy crew.

33   thomas.wong1986   2011 Jul 20, 9:14am  

edvard2 says

Its not the place but the jobs around it. I work in SV myself and the area isn't exactly that great. Its basically a large suburb that was at one time built for working and middle class families who lived in largely unassuming middle class houses. That has now turned into unassuming middle class houses-aka- Brady Bunch style houses- that will set you back a cool million. Its really bizzare. Even if I had the money I'm not sure I would buy there. I usually can't wait to get back to the East Bay at the end of the day.
Perhaps if it was San Fran then perhaps I could understand. But there's not really anything that appealing about SV and its areas. If anything its another place for people to play pissing contests by living in what's considered " desirable" areas

Its the same middle class homes and area current and former tech workers purchased back in the 70s, 80s and 90s. Why would it be anything else ? No this is not SF, Boston, Philly, Chicago or any other Urban mecca some have envisions. The rest is media hype and nonsense.

34   corntrollio   2011 Jul 20, 9:19am  

edvard2 says

I've been working in SV for years and the word "stability" doesn't exactly fit the nature of jobs here. I've been at numerous jobs and I am not yet 35. Its one the main reasons I don't buy a house here because whether I'm at the same job or have a job period is not certain from one year to the next. In fact I would argue that jobs here are less stable than in other areas and fields.

But the overall job market is more robust. If you live in Omaha, there may only be a relatively small number of employers that you'd actually consider working for given your job skills. In Silicon Valley, you have a lot more choice and many more employers who can leverage your skill set.

I've had friends move to cities with shallow job pools because they moved with their spouse to a new city, and it has been problematic in some cases. One friend's skill set was great in bigger cities, but in a small city, most of the employers think he's way overqualified for their jobs. They think he'd do a great job, but are confused as to why he would ever want so junior or "boring" a job.

Also, being better paid means that you can save more money in case you do get laid off at some point (most people with good skills will land eventually and sooner rather than later).

35   corntrollio   2011 Jul 20, 9:21am  

thomas.wong1986 says

Being a saleman.. aka.. Account Executive.. out in the field for a SV tech company is the best of both worlds.

If you know of any, talk to them.. they are very happy crew.

I have. There has been greater and greater pressure on them to provide big numbers in this down economy. The best ones are fine (and honestly are looking for new and better opportunities than their current job). But if you're a middle performer, you're probably very nervous.

36   edvard2   2011 Jul 20, 11:46am  

thomas.wong1986 says

Its the same middle class homes and area current and former tech workers purchased back in the 70s, 80s and 90s. Why would it be anything else ? No this is not SF, Boston, Philly, Chicago or any other Urban mecca some have envisions. The rest is media hype and nonsense.

What I was getting at is that these were at one time truly middle class neighborhoods with middle class houses. The houses might be middle class but those buying them have serious coin. I worked in the heart of Palo Alto for 2 years and honestly- I've never seen that many Bentleys and Ferraris in my life... and they were parked in front of hum-drum houses all doctored up to look fancy.corntrollio says

But the overall job market is more robust. If you live in Omaha, there may only be a relatively small number of employers that you'd actually consider working for given your job skills. In Silicon Valley, you have a lot more choice and many more employers who can leverage your skill set.

Ironically states like Nebraska and North Dakota have some of the best economies in the country. I have no doubt that you might be correct that as far as tech goes, SV offers opportunities. That said, the average worker changes professions several times in a lifetime. Life is about flexibility and once I've saved enough to buy a house for cash and pad my retirement that's what I intend to do: Do something else.

37   corntrollio   2011 Jul 20, 11:50am  

edvard2 says

Ironically states like Nebraska and North Dakota have some of the best economies in the country.

Only if you work in certain professions. The measures that Nebraska and North Dakota have survived the recession better than other states doesn't really mean much if you don't work in those professions. Low downside generally means low upside too.

38   mdovell   2011 Jul 20, 12:26pm  

Not all areas experienced the housing boom and thus aren't exactly dropping. Sometimes stability can be better than risk depending on what you want..

Having the best economies depends as to the demographics. Higher education is tied to lower unemployment but at the same time when the economy shrinks those with a degree are the first to leave (just look at any diaspora)

Around 2005 or so a friend of mine picked up another friend (from the bay area) at an airport and brought her to the cape cod area. Housing in the area was 500-600K. She thought only a city could command such prices. Any place can boom if conditions are right. Currently there's a town near me that is allowing a massive food distributor to open up a plant. Their total taxable property value for the town will increase 20%. The place has less than 500 people. I have no doubt they'll be awash in cash.

39   thomas.wong1986   2011 Jul 20, 1:34pm  

edvard2 says

What I was getting at is that these were at one time truly middle class neighborhoods with middle class houses. The houses might be middle class but those buying them have serious coin.

FWIW Middle class back in the day, and still applies today is your HW/SW Tech engineers, along with others in Marketing, Finance, Sales IT and other workers. Thats how its always been. What you have seen over the past 10-12 years is abnormal, and that is proving to be true as prices continue to decline back to long term trends. The only serious coin I seen were inflated stock certificates traded for real cash. The stock took a 60-90% dive.

40   thomas.wong1986   2011 Jul 20, 1:46pm  

edvard2 says

I've never seen that many Bentleys and Ferraris in my life... and they were parked in front of hum-drum houses all doctored up to look fancy

Ferrari dealers are actually nation wide.
http://www.ferrari.com/English/Dealers/Pages/Dealer_Locator.aspx

The one in Los Gatos, been around since the 80s went out of business was bought out by LA dealership as was the one in SF.
Another in Monteray Park went of business. Lambo dealer in LG went of of business in a few months as did Ultimate motors in Palo Altos. Oh well...

You should try going to Miami one day... Ferrari, Lambo, Bently, and plenty of Cigarette boats!

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