
Bay Area wages soaring but still can’t keep up with housing prices - 11thEarlOfMar
http://www.mercurynews.com/2016/09/25/bay-area-wages-soaring-but-still-cant-keep-up-with-housing-prices/
======
ScottBurson
One interesting question to ask is, where is all this money, that people are
spending on housing, going?

Owners of rental property are obviously doing well. The other group making out
are people who have owned property here during the times that prices have been
appreciating and who sell and move out of the area; anyone who buys the
property after them has to make the now-inflated mortgage payments.

And I think the question we should ask as a society is, is this how things
should work? The reason property here has become so valuable, and continues to
become even more valuable, doesn't have that much to do with the individual
contributions of the property owners. _Somebody_ has to own the real estate of
the area, after all; from a societal standpoint it doesn't matter very much
who that is. Rather, the value is being created by the local economy
_collectively_. The reason Silicon Valley is such a great place to start a
tech business is because of all the tech businesses that are already here, and
all the people already working for them. Does it really make sense for
_property owners_ to receive such a large fraction of the value being created?

And let's be clear: the property owners wind up with most of it. Those of us
living in the Valley, and commanding salaries that sound positively royal to
the rest of America, are not actually living much (or any) better than most
Americans. Most of the additional value we create by working for these high-
tech companies is being siphoned off by property owners. Even if you own
property in the Valley, if you bought it recently, your mortgage payments are
going to cover a large check written to one of the previous owners.

Those familiar with the work of Henry George [0] will understand that I am
summarizing his argument. If you live in the Bay Area, I urge you to read his
work. I think the Bay Area desperately needs a land value tax system. Yes, it
would change the character of the area. But that character is changing anyway.
Short of forbidding newcomers from moving here -- and how would one do that?
-- there's no way to stop continued urbanization. But, I understand that
that's not happening anytime soon.

This brings me to good old Prop. 13. Kim-Mai Cutler [1] points out that Prop.
13 disincentivizes cities from approving residential construction, since they
realize more tax revenue from commercial buildings.

Prop. 13 needs to be revised. The key change that is needed is that instead of
limiting the amount of property taxes, we need to limit the tax _payments_
only. Here's how that would work. The locality would impose whatever tax rate
it saw fit, by whatever processes were in effect pre-Prop. 13. However, the
homeowner's _payment_ in a given year would be limited by the Prop. 13
formula. The locality would receive a lien on the difference, that lien not
becoming due _until the property is sold_. This would allow localities to
participate in the appreciation of property values; the windfall wouldn't
_all_ go to the property owner. Yet, it still protects those on fixed incomes
from being forced out of their homes by property taxes -- the primary selling
point of Prop. 13.

[0]
[http://www.henrygeorge.org/pcontents.htm](http://www.henrygeorge.org/pcontents.htm)

[1] [https://techcrunch.com/2014/04/14/sf-
housing/](https://techcrunch.com/2014/04/14/sf-housing/)

~~~
refurb
The first think that comes to mind is if we are going to have homeowners
"share" their gain with society, will society "share" any loses with
homeowners?

Homeowners carry most (unless the mortgage fails) of the risk around housing
prices. If a town goes to crap and a $500K house drops to $250K, will society
then help cover that loss?

~~~
ScottBurson
> if we are going to have homeowners "share" their gain with society, will
> society "share" any losses with homeowners?

You're questioning whether we should have property taxes at all. As long as we
do, the principle that property owners share their gains with society is
established. And certainly, if property values fall, taxes should (and I
believe generally do) as well. So to that extent, it already happens.

Governments need a certain amount of money to function. The question is, what
is the best _structure_ for the taxation system. Should we tax property?
Income? Consumption?

There seems to be general agreement among economists that a land value tax is
the least inefficient form of tax. Read Henry George if you want to know why.

~~~
refurb
I'm not questioning having property taxes. I'm questioning a proposal based on
the idea that any capital gains from real estate should be shared with
society. Right now, most people pay zero tax on their primary homehold capital
gains.

------
ChuckMcM
I toured an open house in Sunnyvale yesterday to have a look at what $1.7M
buys you these days. 1900 sq ft, four bedrooms, two and a half baths, a nicely
remodeled kitchen and a small patch of yard. And I asked the realtors if they
expected to get any offers. They already had offers but they are waiting until
Monday to sit down and sift through them. And then the big question, could
they describe the type of people buying these houses?

The answer was couples where both parents worked in the tech industry with a
combined income of over $300,000. Usually one child and often one on the way,
many have houses already further away (Livermore, Gilroy, Morgan Hill) that
they are selling.

Now that is unscientific, it is the experience of one broker who is sitting in
one open house, showing the house to prospective buyers and gently quizzing
them on their financials in order to understand if they are good prospects or
not. But I can see other evidence that its probably accurate, the folks moving
into my neighborhood fit that profile. A lot of people looking for "good
schools" because if you don't pay private school tuition that saves you
$15,000 per kid per year you can put into house payments.

My point being that the houses are being listed and sold in a short time
frame. That suggests that the housing market is pricing appropriately for the
buyers. That there are more buyers than houses pushes up the price and pushes
out the buyers who do not earn as much. However, unlike San Francisco, there
is a _lot_ of residential building being put up on the peninsula and south
toward San Jose. Across a wide spectrum from apartments to condos to single
family attached, and single family detached. Sunnyvale has a ballot measure
([https://sunnyvalepubliclandsact.com/](https://sunnyvalepubliclandsact.com/))
that is seeking to limit how the city can transfer park land to developers to
turn into houses (or hotels, or office parks). That measure is an artifact of
all the building that is going on.

~~~
11thEarlOfMar
It's not exactly a reply, but in nearby Fremont, there's more going on than
Californians relocating from nearby commuting communities. There is a non-
trivial amount of money coming in from other countries to bid up property as
well. Offering my own anecdote, I received a flyer in the mail about a year
ago from a local realtor who is well known and has a sizable business (I don't
want to promote him by naming him here). He explicitly stated in his flyer
that sellers should dress their homes specifically to market to Indian buyers,
because Indians made up 90% of his buyers at the time.

~~~
ChuckMcM
_" There is a non-trivial amount of money coming in from other countries to
bid up property as well."_

That is true and one of my neighbors was a realtor for 20 years and has a
number of friends who advertise in foreign countries that they can find you an
investment property in California. Typically though, those buyers seem to be
"status invested" rather than simply buying a house. So they look for places
in San Francisco, or Palo Alto, or Saratoga (places where there is some status
associated with owning a home there) rather than say Sunnyvale or Santa Clara.

That said, my neighbor came to the US on an H1B with his wife and daughter, is
working for a local tech company, and his parents gave him the money for a 20%
down payment on his house. That saved him the more typical path it seems of
getting a starter house, building a bit of equity and then trading up to a
larger house. I expect that being foreign nationals they don't have the gift
tax burden that US parents do.

On the one hand that is foreign capital fueling higher house prices but at the
same time my wife and I got a loan from her parents to help buy our original
house, so I don't consider it out of the ordinary if the parents can help out.

~~~
tamana
There is no gift tax burden (except a little paperwork) on the first $5
million of lifetime gifting. Plenty for a house down payment.

~~~
WillPostForFood
There is a burden in that the $5 million lowers your estate tax exemption.
Whereas you can give $14k a year with no tax impact.

------
declan
Silicon Valley wages would have to increase by something like 3x--or house
prices would have to drop by over 50%--to make houses here as affordable as
the national average. Neither is likely to happen.

A median house in San Mateo County costs 11.3x median county income. A median
house nationally costs only 3.3x median national income. So if you wish to buy
a house in this area (and of course many people may prefer to rent), you
should avoid moving here unless you can make those numbers work.

The reality for homebuyers is a bit worse than even those numbers indicate.
Income taxes in California are very high, and most of the SF and peninsula
housing stock is older and smaller than the national average. The median San
Mateo County home is 1500 sq. ft; the median national home is closer to 2,500
sq. ft.

Construction, renovation, and maintenance costs are higher as well. Gas taxes
are higher than the national average, sales taxes are higher, electricity
costs are higher, etc. SF and peninsula municipalities have planning reviews
that can add tens of thousands of dollars, plus state requirements (Title 24)
and local requirements (no site development without survey, civil engineer,
etc.) that add still more. Also geotechnical reviews and more expensive
foundations--remember we're in earthquake country, folks.

On the other hand, we have very pleasant weather. :)

\---

Sources: San Mateo County's median home value is $1.13M[1]. The county's
median household income is approx. $100K[2]. A house costs 11.3x income. [1]
[http://www.zillow.com/san-mateo-ca/home-values/](http://www.zillow.com/san-
mateo-ca/home-values/) [2] [http://www.mercurynews.com/2014/08/28/can-working-
class-fami...](http://www.mercurynews.com/2014/08/28/can-working-class-
families-afford-)

The national median home is $188K[3]. The median national household income is
$56.5K[4]. A house costs 3.3x income. [3]
[http://www.huffingtonpost.com/2014/03/13/median-home-
price-2...](http://www.huffingtonpost.com/2014/03/13/median-home-
price-2014_n_4957604.html) [4] [http://www.census.gov/newsroom/press-
releases/2016/cb16-158....](http://www.census.gov/newsroom/press-
releases/2016/cb16-158.html)

~~~
iaw
For the price of an okay family home in an okay neighborhood of Palo Alto you
can buy a villa in the South of France...

I'm still not sure how to process that.

~~~
pkaye
You do realize one can live an hour drive from Palo Alto and have a place than
the 25% of the price in Palo Also? And the commute time is much shorter than
from France. It is just that people want to be close as possible to work.

~~~
ridgeguy
The only place within an hour of Palo Alto where this might have been true is
East Palo Alto. It's adjacent to PA. It is still a somewhat dangerous
community.

That's changing. Prices in EPA are now >50% of equivalent housing in PA, and
rising rapidly through the same processes that have given us $1.7 million
starter homes elsewhere in the Bay Area.

There's really nowhere within an hour of PA that has home prices even 50% of
PA, much less 25%. Three hours, maybe.

~~~
scylla
Union City across the Dumbarton Bridge should be less than 50%. It's 22
minutes with no traffic. You can also get to SF in 40 minutes on BART.

I've lived in a home similar to [http://www.zillow.com/homes/34404-Torrey-
Pine-Ln,-Union-City...](http://www.zillow.com/homes/34404-Torrey-Pine-
Ln,-Union-City,-CA-94587_rb/)

------
CrocODundee
And home prices are, what, 8x to 15x US average?

You can buy a great house in Omaha for $150,000, a comparable home in the
valley would run $2,500,000 or more. And yes, you can get a job in Omaha that
pays well!

Unfortunately, many people now have to treat the valley as a stepping stone,
it's a gauntlet to endure long enough to make substantial money and then they
have to get out. Get rich from options or some other liquidation event, then
pack up and move to a place where cost of living is vaguely reasonable. For
many people, the only way to stay in the valley longterm, establish a
household, maybe have a family with kids, and comfortably afford a generic
"middle class" standard of life, is with a truly significant payout, the type
of payout that would define someone as "rich" elsewhere in the USA.

I know this is uncomfortable and unpopular to discuss, and we're all very
fortunate to even entertain such discussions especially compared to the
hardships of most Americans and global citizens, but who in tech has not
experienced this? Whether it's the enticement to go work in the valley for
some theoretical payday, or the feeling you must leave once you reach X net
worth otherwise you'll never be able to actually afford it?

~~~
matthewowen
Omaha has no homes that are comparable to Bay Area homes, because all the
homes in Omaha are in Omaha.

Some people like Omaha. That's fine. But if you want a mix of city culture, a
range of excellent restaurants, bars, a reasonable public transit system, and
the particular outdoor options that the Bay Area has, then Omaha isn't an
option.

Maube this sounds facile, but it's important. It's not like San Francisco is
expensive purely because of the economy or the government or whatever. It's
expensive because lots of people want the things it has to offer.

~~~
liquidise
It is facile. You can insert any 2 areas for "Omaha" and "Bay Area" and much
if not all of what you says remains true. Denver is also known for nearly
everything you mention except valley companies. Our housing is a fraction of
bay area prices. Heck, even places like Portland, ME offer all but similar
ethnic diversity and their home costs are a small fraction bay area prices.

The difference at play is not culture. The difference is housing market
restrictions, median wages and company + worker density. Every city has
cultural, food and geographic advantages. To word it that the Bay Area is
nearly strictly superior is to frankly confuse the issue entirely.

~~~
matthewowen
I didn't say it was strictly superior.

Denver has snow. It doesn't have a comparable food scene.

Portland, ME is small and has cold winters. Did you mean Portland, OR? Again,
big climate difference.

Again, it's not whether one is better or not. That's personal preference. But
the Bay Area has excellent cultural amenities and a pleasant climate. There
are many people for whom that is important. There's a reason so many people
say that they'd love to live in Chicago if it weren't for the winters.

If that doesn't apply to you, congratulations! You can save money! Personally,
I like being in the Bay Area, and the things I like about it aren't available
in Omaha or Denver.

~~~
dsfyu404ed
"and the things I like about it aren't available in Omaha or Denver" Like $4
gas and $6 bagels?

Or is the the ability to belong to a group of people that can afford $4 gas
and $6 bagels that's notably missing from other places?

~~~
matthewowen
It's the height of irony that your post (which seems to be suggesting that the
only reason I prefer San Francisco is snobbishness) is fundamentally
predicated on a disbelief that anyone could reasonably have preferences
different from your own.

If you don't think the Bay Area has amenities worth paying for, that's ok. I
do. Many other people do too. Different people like different things. That's
ok.

This is obviously besides the point that I've never paid $4 for gas or $6 for
a bagel in San Francisco.

------
siculars
What this article and many of the comments fail to mention is the supply side
of the conversation. If you drive south from San Fran to San Jose you can
probably count all the building more than 10 stories along the way. This price
spike is entirely manufactured by the policies of those already living in this
region.

------
TheSageMage
As a young(late 20's) Software Developer and San Francisco resident who loves
the weather(who doesn't love yearly temp range of 50-70) and the city
feeling(being able to walk/muni everywhere), what are some alternatives?

My wife and I are DINK's, so the suburbs are too sleepy for us, and we've done
the driving life style in the South, which we hated.

~~~
jandrewrogers
Seattle has similar temperature range and city living, probably about as close
as you'll get to San Francisco in a city with tons of good tech jobs. I left
my car in the Bay Area when I moved here and walk everywhere, the only time I
drive is to go hiking and similar. Seattle is expensive but less so than the
Bay Area.

Lack of income tax in Seattle/Washington is huge if you make tech wages. My
mortgage in downtown Seattle is less than the additional income taxes I would
pay if I lived in California!

~~~
TheSageMage
How are the local laws and politics? I feel like SF/CA have a lot of
regressive housing policies that some other US cities are trying to adopt.

~~~
jandrewrogers
Much better than the Bay Area, they are throwing up high density construction
about as fast as they can build it (there are about a hundred sky cranes over
the city right now), both glass skyscrapers in the downtown core and mid-rise
buildings (4-6 stories) in the immediately adjacent desirable neighborhoods
like Capitol Hill. Minimal restrictions on new construction.

Importantly, zoning is intentionally mixed, so a significant fraction of the
population doesn't drive for much of anything unless they choose to move way
into the suburbs and it is a very neighborhood-y city. When a building goes
in, the lower floor is often restaurants/bars/retail/etc to allow everything
to be local. This is important because Seattle's highways are at max capacity
and they can't be expanded anymore due to geological limitations (surrounded
by water, no unused land remaining). The only way to continue the insane pace
of population growth is to build up in a way that minimizes the amount of
driving required, so that is how they have been dealing with it.

~~~
TheSageMage
Is public transportation good as well?

~~~
aji
it's decent. not world-class, but getting better. the light rail was recently
extended and future plans for expansion seem to be met with approval, although
they're at least a decade off. the buses are crowded during peak hours which
at least means they're being used. in my opinion, a lot of the region's
problems with transportation stem from the sudden spike in people living here
and the challenging nature of the geography. for example, a bus from Queen
Anne to Captiol Hill is not exactly practical because there's a big lake in
the way, so anybody wanting to bus between the two has to change buses
somewhere downtown or walk some leg of the trip.

~~~
ameen
Is it possible to walk to work? I've always been enamoured by Seattle thanks
to Valve and Microsoft, hopefully I'll move there in the near future.

~~~
jandrewrogers
Yes, walking to work is definitely an option, a significant percentage of the
population does exactly that, with biking being another very popular option
for people that want to live in the suburbs. My commute to work in Seattle has
always been walking, across multiple offices and companies.

Tech companies in Seattle are clustered in a few different neighborhoods, but
most of them are walkable from their respective neighborhoods. That said, tech
companies are slowly migrating toward the greater downtown area due to the
gravitational pull of techies that want to live there. And everything in the
greater downtown area is walkable if you don't mind walking (and people in
Seattle don't). It isn't a small area.

Microsoft specifically, though, is still mostly on the "east side" (the metro
area has a 88 square kilometer lake in the middle, Seattle proper is between
the "west side" of the lake and the bay). Microsoft has offices in the major
urban neighborhoods but still have a huge campus in Redmond (an east side
suburb).

------
jimmywanger
It makes no sense these days to buy in the silicon valley.

I was talking to some people renting out their house for about 3500 dollars a
month. It's a single story ranch house (3 bed 2 bath) that they bought in the
eighties for 150k. It's now worth about 1.5 million.

Doing the math, a mortgage + insurance + property taxes on a 1.2 million
dollar mortage (less 300k for the down payment) is about 7k. And rents should
be inherently higher than house payments. Why would you buy when you could
just rent, and not deal with any of the maintenance and stuff?

~~~
esaym
For me in Texas, I am kicking myself for paying $800 rent a month for 4 years
now (so I've "given" $40k to my landlord). That 40k I've given away would be
really nice to help me do a down payment on a house I'd like to buy (or
anything I'd like to buy). But if I was "giving" away $7k a month, I'd be
really kicking myself...

~~~
jimmywanger
Hey I'm not trying to be snarky, but I'm trying to understand your point of
view.

You didn't "give" 40k to your landlord. You paid him for the use of his
property, which presumably gave you shelter, kept you warm, gave you a place
to park your car and keep your stuff, and he would fix anything that went
wrong.

That, to me, would like be me kicking myself for "giving" a hotel a couple
hundred dollars for a room for a couple of days.

A house provides you with shelter and warmth, and presumably provides these
things to your family. You're paying money to take advantage of these things.
Why is renting so much different from buying?

~~~
ScottBurson
One might add, the amount of a mortgage payment that goes toward interest --
which is most of it at the beginning, and the fraction comes down only slowly
-- is just as "wasted" as rent would have been.

~~~
jimmywanger
Well, the interest part of the mortgage payment is tax deductible, so that
offsets things somewhat. Not 100%, but somewhat.

Basically the amount you're paying in interest is tax-deductible, but you're
not building equity.

~~~
dionidium
This benefit is often overestated (especially in discussions focused on the
parts of the country with the highest housing costs (which is to say, places
unlike Texas)).

This guy was paying $800/mo for rent, so presumably he'd be looking at
mortgages near that cost. If so, he'd almost certainly just take the standard
deduction.

------
ktRolster
As long as there is more demand than supply, wages will never keep up with
housing prices. It's a simple matter of math (the pigeon hole principle,
actually).

~~~
esaym
>> (the pigeon hole principle, actually).

IE if there are 10 houses for rent and 11 people want to rent, there will be
one house in which will have two people trying to rent it.. lol

~~~
im4w1l
They could live in the same house.

------
swframe
What if large companies built on-campus employee housing on top of their
parking lots and moved the parking lots below ground? They could make a
"corporate" city by adding a mall, hospital, child care/schooling. Imagine
being able to have lunch with your family everyday; having a 15 minute walk to
work.

~~~
skybrian
Zoning often prevents it. Only recently did Mountain View approve housing
north of 101.

------
segmondy
It's not about how much you make, it's about how much you save and the cost of
living. An article could also be published about how the average US wage is 5x
the wages in another country.

What would that mean? Nothing by itself. What matters is this, after your
expenses how much do you have saved? How long will what you save a month last
you if you were out of work? How long will you be able to find a replacement
job? What options do you have in moving to a cheaper place? What lifestyle do
you get to experience by being in a particular environment? All that matters.

I get Silicon Valley envy from time to time, spoke to my buddy who moved and
use to have a 5-10minute commute. Now he has a 2hr one way commute since he's
trying to save money. Yet his rent is 50% more. I doubt he's saving more. He
keeps trying to serenade me to move. I run the numbers, and I would have to
make a whole lotta money for SV to be worth it. :-(

------
h4nkoslo
It's really uninformative to look at average incomes or average prices
anywhere, let alone someplace with as big of a spread as the Bay Area.

~~~
11thEarlOfMar
Very true. In 2014, the average tech worker salary in San Mateo County was
$291,497.

But if you took out one specific tech worker, it dropped by $80,000 to
$211,000. Mark Zuckerberg's income alone impacted the average by $80,000
across an entire county [0].

It impacted the median by, probably $0.

Edit: For completeness;

US Median Household Income: $51,939 [1]

San Mateo County: $79,548 [2]

Not quite as newsworthy...

[0] [http://valleywag.gawker.com/average-tech-wages-up-
to-291-497...](http://valleywag.gawker.com/average-tech-wages-up-
to-291-497-in-san-mateo-county-1625755095)

[1] [https://www.google.com/webhp?sourceid=chrome-
instant&ion=1&e...](https://www.google.com/webhp?sourceid=chrome-
instant&ion=1&espv=2&ie=UTF-8#q=meadian+US+household+income)

[2]
[http://citylab.news21.com/data/types/19/](http://citylab.news21.com/data/types/19/)

~~~
stdbrouw
A nitpick, but "average" can refer to any sort of central tendency, whether
it's the arithmetic mean, the harmonic mean, the median, the trimean or
anything else.

~~~
jdale27
You may be technically correct regarding the common usage of the word
"average". However, "average" is most commonly used to refer to the arithmetic
mean. Using the word "average" to refer to the median is bad writing, and
furthermore, using the arithmetic mean instead of the median to represent the
"central tendency" of a distribution that is highly skewed and/or has extreme
outliers is bad statistics. Journalists who are going to write about these
things should know better.

~~~
stdbrouw
> Using the word "average" to refer to the median is bad writing

It can be, but not necessarily. Otherwise, you'd have to say that the average
Joe has 1.9 legs. Median or mode are much more natural in that context.

Other than that, not trying to make any particular point, of course you're
right that using the arithmetic mean is a lousy practice for many kinds of
data.

------
geebee
The valley and SF need to build more, but eventually we need to accept that
many talented technology workers will neither wish to nor be able to live in a
small peninsula in central northern California.

High tech companies will change then they need to change. If they find that
they are not able to access a high quality workforce in the numbers they need
unless they allow their workforce to live in other areas, and they lose out to
competitors who do allow this, they will change.

I've been beating a drum here on HN, and I know that people are probably
getting tired of hearing about it, but here it goes again... we must not allow
employers to control the residency and work rights of their employees. All
workers, technology and otherwise, immigrant or born in the US, must be free
to pursue their educational path, career path, and place of employment
according to market signals and their own personal interests and abilities.
Anything else, at scale, will produce harmful market distortions and is an
affront to personal freedom.

If employees who have the right to make this choice are not choosing to
subject themselves to brutal housing costs in spite of salaries that silicon
valley employers insist are at shortage-indicating highs, that's the market's
answer. We should welcome immigrants, but we should not welcome Facebook's
control over an immigrant's right to decide what to study, where to work, or
what profession to choose as a condition of coming to the united states.

As long as corporations have this coercive power over individuals on a large
scale, expect nothing to change. Remarkably, the corporations who lobby for
this sort of massive personal power over technical workers often wear the halo
of being "pro-immigrant".

"You may live and work in the United States provided that you take the
technical interview exams I insist you take, study the fields I insist you
study, live in the high cost region I insist you live in, work on the projects
I insist you work on, for the salary I've decided is fair". Why do they get
away with this?

------
dmourati
We're shopping for a new home in Silicon Valley and are also considering
picking up. Median home price in Mountain View for a single family home is
around 1.7M. This price has about doubled in the past 5 years.

The schools are variable as rated which also rules out some areas for us. We
have a small child at home and need to find someplace to start him in public
school.

I think we will sit tight for a while and see what prices do. Most sites I've
looked at call for a leveling off on price over the next year. This would help
us increase the amount for our down payment and get into a property we could
afford with decent schools.

Luckily our rent is very low (<$2000 for a 2b).

------
noobermin
At what point will the drive back to equilibrium occur, and hopefully rational
free market actors figure out you can hack anywhere in the country and that
there are many other places you can work or set up shop?

~~~
11thEarlOfMar
It's just like Hollywood attracting actors, directors and producers.

As long as there is the factor of prestige, Silicon Valley is going to
continue to see this nearly unbelievable housing market. If there were a true
tech crash, like the dot-com bubble bursting, we'd see a slow down. But in
order for there to be a sustained weakening, Apple, Google, Facebook, and the
Y Combinators of the valley will all have to see a substantial weakening in
profitability.

It's the high salaries they are able to pay to legions of workers that is
primarily responsible for housing prices. That's what this article is about.

~~~
noobermin
My point is hackers are idealistic supposed to be more rational--I was
sarcastic in my post, but statistically, they should be more rational. I don't
know if I need to break this to any of you, but you can hack on anything. I
learned C on an island with a 28 kbps internet (that was metered). I didn't
have to fly to SV to attend a code bootcamp and shell out hundreds to a
thousand dollars. Also, the internet is a wonderful thing, being connected to
people has never been easier.

My point is that no Apple, et. al, you can't keep extracting heat from the
system and violate the second law of thermodynamics, at some point, people
will evaluate the costs and people will be more and more reluctant to relocate
to SV just to have a shot.

~~~
11thEarlOfMar
Allow me to say it a little differently, then. As long as profits flow to
silicon valley companies from around the world, people from around the world
will also flow there, and housing prices will increase.

So I'd say that the heat is being extracted from the world's population
(dollars from their pockets) and as long as that source is plentiful, the
growth will continue. Since the global standard of living is increasing, the
world's ability to buy iPhones and thereby consume Internet advertising
presented by Google and Facebook, all continues to grow.

Come to think of it, it may be self sustaining. How many HN readers came to SV
with a job offer in hand? The more profitable the companies are, the bigger
the delta between what SV pays and what the ROW pays and the more people will
be willing to take the plunge.

This could go on for a very long time.

(Google + Apple + Facebook pre-tax profit = ~$20 billion _in the last 3
months_.)

------
dragonwriter
> Bay Area wages soaring but still can’t keep up with housing prices

Wages are soaring because businesses are trying to hire people faster than
local supply of talent can respond, driving up the market clearing price of
labor. But that means that people are making more in the Bay Area, and there
are more of them working (and thus, wanting to live) in the Bay Area -- both
of which are factors driving up demand for housing, and thus price.

Its thus unsurprising that the wages can't keep up with housing prices, since
they are one of several means by which housing prices are being driven up.

------
Tempest1981
Then this today -- wonder why? "New report shows rents falling in San Jose,
San Francisco" [http://www.mercurynews.com/2016/09/25/new-report-shows-
rents...](http://www.mercurynews.com/2016/09/25/new-report-shows-rents-
falling-in-san-jose-and-san-francisco/)

------
partycoder
Rent, in combination with California taxes, and cost of living, makes it very
challenging to save in comparison to other states.

------
misnamed
Housing is proportionally higher cost but many things aren't that much more
expensive in the Bay, which helps cancels it out. Plus if you're willing to
commute, rent and/or live with other people, it all helps (unlike that Yelp
lady who got her own place, kept her car, etc...).

~~~
tptacek
You are describing an area that is perfectly acceptable for unattached
20-somethings but more or less untenable for young families.

~~~
blackguardx
Look at how families in the US were raised historically in big cities or even
in the suburbs. People were happy with much less space than is considered
"untenable" today.

~~~
tptacek
Do you really think this is a persuasive argument for raising a family in a
shared 2-bedroom apartment?

~~~
blackguardx
No, but many people who want kids seem to think that they need so much space.
Someone upthread lamented how small the housing stock in SFBay was at "only"
an average of 1500 sq ft. That was the normal sized house 50 yrs ago
regardless of how many kids there were.

~~~
tptacek
What's the median price of a 2bdr condo in SFBA right now? Because if you're
planning to raise a family in SFBA, that's what you need. You can't rent it,
because you can't routinely move small families --- changing school districts
is incredibly disruptive for children --- and you would be somewhat lucky to
keep a good 2bdr apartment for 5 years, let alone 12-15.

~~~
blackguardx
Why do you state your opinions as if they were facts? I moved out of state 5
times as a child. It wasn't that bad. It is actually normal if your parents
are in the military or work in the oil and gas sector.

Also, it is incredibly hard to evict tenants in SF or Oakland. People
routinely live in the same apartment for 20+ years.

~~~
tptacek
Less than a quarter of SF tenants have kept their apartments for 10 years. We
may have different definitions of "routine".

------
gjolund
The only way I would live in SF again is in a van.

There is no reason to throw your money away on that housing market, just bank
your salary and count the days until you leave.

------
LargeCompanies
What's the starting salary for a front-end dev from jr to intermediate to sr.
in the valley/san fran now?

Here in the Mid-Atlantic it ranges from 60k to 150k.

~~~
autotune
90K is the average according to glassdoor:

[https://www.glassdoor.com/Salaries/san-francisco-front-
end-d...](https://www.glassdoor.com/Salaries/san-francisco-front-end-
developer-salary-SRCH_IL.0,13_IM759_KO14,33.htm)

You really can't afford to make less than 100K out here though unless you can
stand roommates.

------
chiefalchemist
Those in favor of a forced $15 min wage should take note. More money in The
Market gives others the opportunity to see what increases it can bear.

That is, to presume you can increase income and all other costs will remain
fixed is naive.

~~~
StanislavPetrov
You might have a point in we lived in a free market where the FED didn't spend
$6+ Trillion (with a T) in the last 8 years alone to artificially prop up real
estate and equity markets.

~~~
forgetsusername
> _You might have a point in we lived in a free market where the FED didn 't
> spend $6+ Trillion (with a T) in the last 8 years alone_

The Fed didn't "spend" $6TT; they exchanged one asset for another that was in
high demand. Also, do you have any idea how much wealth disintegrated in
2007-2008?

