
San Francisco Real Estate Exuberance - 727374
http://priceonomics.com/san-francisco-real-estate-exuberance/
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tracker1
What I don't get is all the companies actually setting up shop _in_ San
Francisco. If I were a tech startup, I'd actually setup shop in a nice area
relative to cost of living, then attempt to draw people out.

If you can get someone already in SF out to say Boise, Denver, or Phoenix they
can make 80% of what they made in SF and have a better lifestyle. If you cover
the cost of moving that should make it a very attractive offer. Sell their
home in SF (if they own), and buy a nicer/roomier place in the new location.

Phoenix in particular has a pretty thriving tech community, and a far better
cost of living. The main reason I stay here is the job market is great, and
the cost of living is far better, relative to programming pay than most other
areas. Of course there is the down side (June, July and August).

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integraton
The reason people do their startups here is because there are several related,
overlapping professional and social scenes spanning 2+ generations.

From a less cynical perspective, the fact of the matter is that compared to
anywhere I'm aware of, the Bay Area has a _much_ stronger culture of
entrepreneurs assisting each other. There's a much stronger culture of what
could perhaps be framed as mentorship, with a large population of people who
have been in the game for a long time and are still engaged as founders,
executives, or investors. It's also probably one of the few places where
there's a widespread acceptance that innovation means experimenting with risky
business models without being forced to constantly focus on short-term
revenue.

From a more cynical perspective, in many cases for younger or newer founders,
this means it's easier to climb the social ladder and be in the "tech
entrepreneur" scene. It feels exciting and the money flowing around between
young people (something that doesn't exist everywhere) makes everything seem
more real than it is. I also think it's far easier to inflate the value of
companies here for a variety of reasons.

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aryastark
> a large population of people who have been in the game for a long time and
> still engaged as founders, executives, or investors

Yeah, I dunno. Today Silicon Valley sounds more and more like the old money
club of Wall Street than the kids in the garage that will soon revolutionize
the world.

Of course, a big part of revolutionizing the world is not knowing you're doing
it. You can't throw a rock and miss a start-up in SF that isn't planning on
"changing the world" right now. Most are doomed.

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tsunamifury
Most were always doomed. Its an odds game and you get a few game-changers by
achieving a critical mass of startups in a given area, then allowing them to
cross-polinate and share resources in order to breed more successful startups.

Your statement is an example of a non-bay-area mindset. Failure if a badge of
honor -- it means you contributed to the community.

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michaelochurch
_Failure if a badge of honor -- it means you contributed to the community._

Founders move on to get jobs as VCs or high-ranking executives at more stable
companies. Employees lose their jobs and don't get any severance.

Yes, honorable.

~~~
tsunamifury
Michael, I think your pragmatic perspective here is important, but I disagree.
If you aren't prepared financially to play the startup game, you shouldn't. If
you do play, you should be WELL AWARE of the risks associated. It is a game,
you play for sport not survival.

~~~
michaelochurch
The problem is that, while founders are aware, most startup employees have no
idea and there are plenty of companies that make a policy of deliberately
misleading people.

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lolwutf
In my opinion, this is what will eventually spur a braindrain in SF in 5-10
years.

My theory, if it holds, says that a bunch of 20-somethings flooded into SF in
the past 2-3 years. When they reach their early/mid-30s, they will begin their
nesting phase.

They'll want to find/will have found their mate and will want a house with
some space.... The chance to finally to get out of their dumpy
studio/3-bedroom-with-roommates... Some well-deserved adult digs, after years
of hard work in this industry.

However, they'll look around at house prices, look back at their bank
accounts, and realize such dreams could never be fulfilled here.

At that point, they'll pick one of four paths:

-Buy property in a remote, suburban sprawl-y part of the Bay Area (an unattractive option to anyone who's lived in SF for many years)

-Buy some depressingly expensive one bedroom condo and stay here

-Become a lifetime renter

-Move away from the Bay Area ('back home', or elsewhere)

In my opinion, a 30-something, on the verge of midlife crisis anyways, will
take one more shot at the great unknown and set out for a new region, outside
the Bay Area.

Unless, of course, they sold their startup for 8-figures and escaped with a
big chunk of compensation.

Thoughts?

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bigethan
This all depends on how you define "dream". If it's a picket fence, yard,
pool, 2,5 kids, etc, that's not gonna fly in the Bay. But if the dream is to
live in a nice place with easy access to a fantastic city, that's achievable
anywhere in the Bay Area (Oakland has it's moments of greatness, Berkley has
it's chartms, and SF is SF). My take is that the East Bay is about to start
growing like crazy.

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tzs
> This all depends on how you define "dream". If it's a picket fence, yard,
> pool, 2,5 kids, etc, that's not gonna fly in the Bay

It might fly if you fly. :-) I don't know if this is still true, but when I
lived in Silicon Valley a little over 20 years ago, I did some price
comparisons, and it worked out that for the cost of a nice SV house, you could
buy a much bigger house and pool in the Merced area in the Central Valley, and
a Mooney M20 (private plane with a cruise speed of over 250 mph), hanger space
for the plane in Merced and Palo Alto, and a car to keep in Palo Alto. You
could even get the house on enough land with room from a runway, to save
having to drive to the Merced airport every day. Get a couple other people to
move to Merced and share the commute to split operating costs of the Mooney,
and it looked like this would actually be quite viable.

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bennyg
That just sounds like so much fun. You make me want to get a pilot's license.

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steven777400
As a pilot who flies for fun, I totally recommend it.

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zinssmeister
Like others have mentioned, the possibility of a brain-drain from SF is a very
likely scenario in a few years (if the cost of living stays this shitty). It
would be more beneficial if startup land would decide on one of the secondary
tech hubs as opposed to everyone going wherever. Having 2 people move to
Seattle, 4 of them to Boulder and 3 to Phoenix isn't gonna establish much in
either of those. But having 10 people all move to Austin seems like a bigger
impact.

~~~
lolwutf
Sounds like an awesome recruiting product.

~~~
zinssmeister
how so?

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marincounty
Why do people want to live in a foggy, high priced city? 1\. Nerdy guys are
hit on by women.(Yes--they are that desperate--remember the lack of available
guys?) 2. It's a strict union city--meaning if you get into a union you have a
decent living. There's a ton a jobs, but if it's not union expect around
10/hr. If you look good--a chick will take you into her rent controlled
apartment. Money/intellect doesn't mater in your 20-30's though--you have to
be a Fonzie--in order to get rent controlled girl.

Owning a car is like shooting yourself in the foot to stop a robbery, except
in a handful of neighborhoods.

It's a great town for young men(some of you), but it's horrid for straight
women. If you make your fortune with your start-up, you will move to Marin,
and live like a hermit. Although, your neighbors won't steal from you.

Home is really a state of mind. I've seen successful Flat Landers arrive in
the Bay Area, and realize they might have been the popular kid in there town,
but in reality there just a C student--on all levels. They become depressed
within a year.

If you do decide to live if San Francisco most people assume you have an
advanced degree. They are not impressed by where you went to school. They are
impressed with what you built in your garage though. If you enjoy working with
you hands, and back, look into local 6 apprenticeship program. If you become a
book 1 dude, you will make $100/hr. If you become book 1, don't turn into an
asshole though. Remember, the only reason you make that money is because of a
liberal Union.

~~~
tn13
Nerdy guys are hit on by women ? When where?

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qq66
Always worth noting that "this time may be different." Specifically, this
trend may or not be the beginnings of a long-term structural move of the
world's wealthy from suburbs to urban areas, with world cities like San
Francisco, New York, and London becoming luxury dwellings for the 1%. If so,
then prices will continue to rise substantially.

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cmottau
This is a tech-heavy community, but the interest of foreign buyers cannot be
overlooked in this current market. San Francisco is a world-class city and if
you look at overall macro trends of comparable cities (London, New York,
Paris, Tokyo, etc), SF is still downright cheap. There will always be a wave
or renters in great locations, so if you have the cash SF real estate is a
good place to park it.

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reustle
As far as I've seen, SF is about the same cost of living as New York

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moocowduckquack
Average price of a 3 bedroom house in central London is currently around
$4,900,000.

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michaelochurch
_Average price of a 3 bedroom house in central London is currently around
$4,900,000._

Europeans get xenophobia all wrong. They freak the fuck out about minarets but
do _nothing_ to keep foreign speculators and billionaires out of their real
estate markets.

If you want a decent life in your town, keep the despots and oil sheikhs and
drug kingpins the fuck out of your real estate market.

~~~
hcho
UKs house prices are high by design. Germany, another European country, does
not have that kind of price levels for property.

It's not the speculators or billionaires, it's the governments.

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ArbitraryLimits
So how exactly does the government design that?

I saw the same thing in Italy when I lived there in the 90s - any kind of real
estate was much more expensive than it seemed like anyone would be able to
afford.

Never did figure it out - in the US, the public policy issue with
homeownership is making mortgages easier or harder to get. If they're easy,
then prices go up but more people own something. If they're hard, then prices
go down (because no one bids them up) but fewer people own. I can't figure out
a policy that leads to high prices and low rates of ownership.

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moocowduckquack
_" So how exactly does the government design that?"_

Restricting affordable housing so that it doesn't grow as fast as population.
In the UK the rise in the price of housing is expected to hit 7%, whereas
inflation is supposed to maybe get as high as 2% over the next two years. This
should give a property bubble in the southeast before the next election, which
the government can claim represents an economic recovery.

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mtdewcmu
It seems hard to extrapolate a long-term boom-bust cycle from those graphs. SF
may be more sensitive to national trends, but I only see two clear busts, and
one was 2008, during which housing markets collapsed almost everywhere. The
earlier one coincides with the 2001 downturn and dot-com bust. You'd probably
see echoes of those busts in plenty of other housing markets.

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tn13
I will move to some other small city in USA any day for the same pay. SF truly
sucks at so many levels.

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solarmist
The graphs aren't showing up for me. Anyone else having trouble with them?

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icedog
When I see more significant venture capitalists in Portland (or SF VCs willing
to invest in Portland based startups), I'd move within days.

\-- Software Engineer in SF

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johnrob
_By 2005, however, 73% of buyers paid above ask._

Is 73% a typo? It seems like it should be lower based on the tone of the
sentence.

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bluedino
You missed the sentence before that one - _By the next year, prices plummeted
and most people paid below or at the asking price._

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johnrob
Got it - I missed the bit about it dropping since the previous high.

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antihero
What is SF like to rent? There's a small chance I'll be moving there, and
don't want to be super broke.

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pyrocat
Thought this was going to be a modernized Yatta! and I left disappointed.

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mbesto
> _The question is, when?_

Easy. When the bubble pops.

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rfnslyr
And yet the question still remains, _when_?

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fantnn
figure that out, you can make a nice chunk of cash

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rfnslyr
Lets disturb the real estate market!

~~~
benatkin
TC Disrupt: Real Estate

