
Soaring housing costs forces talent to flee Silicon Valley - joshrotenberg
http://www.cnbc.com/id/102697372
======
Will_Do
This is a classic case of "Nobody ever comes here anymore; it's too crowded."

It is hard to make the argument that people are fleeing silicon valley when
real estate demand keeps reaching new highs.

~~~
aristus
Not quite. Demand is going up faster than supply. Add in rent control and
other local oddities, and you get some absurd situations, ike perfectly
qualified people leaving the area.

My rent is about 40% of the going rate for the identical apartment above mine.
This has several consequences. I literally cannot afford to move. For another,
it would be difficult to fit another child in the place we have, so we're not
having one. And it's more difficult to hire people from outside the area
because they can't find affordable places to live.

~~~
drostie
This is a serious problem for me: I want to move to the Bay Area, but it seems
like the up-front moving costs and rent will be too prohibitive _even if_
after a few months they settle down to a net profitability. I just don't have
$10k+ in the bank to act as an acceptable safety net for the rent, security
deposit, moving fees, tickets, etc.

I'd try to do a van-plus-PO-Box-plus-health-club situation but my girlfriend
would probably never go for it.

~~~
sjg007
Find a job that pays relocation. A lot also have corp apartments that you can
stay in for a few months as well.

------
flipgimble
Not surprised at all that this trend is starting to get big enough for news
outlets to finally notice.

Only once I moved to small town did I realize how much my quality of life was
degraded by the long commutes, the over crowding, and the general scramble for
access. Now I have 10min commute, up to 20min driving for any errands or
shopping, and can't imagine moving back to the traffic jungles of a major city
anytime soon. Especially since an average large townhouse in my neighborhood
goes for $250K compared to $400-600K in Chicago.

It used to be that in small town America the only decent technology job you
could get is by working remotely, or through the local university. Perhaps I
got very lucky, but my current company[1] works with the biggest global
companies, and I get to ship more software and work with much more diverse
technology (most in the mobile space) than in my previous 10 years combined.

All I'm saying is that if are frustrated with Silicon Valley, or any other big
city, don't assume that is your only option. I was pleasantly surprised when I
landed in Charlottesville, VA.

[1] Its called Willowtree, and we are hiring, but I don't mean this to be
recruiting spam, so look it up if you're interested.

~~~
slapshot
But but but you're destroying the Earth by wanting to live in a peaceful small
town where you have to drive to go shopping rather than taking public transit
everywhere! /sarcasm

To be serious, though, threads about various transit innovations tend to be
dominated by people who strongly prefer urban living and can't imagine why
anyone would want anything else. Your case study is a nice example of why
there are good-natured people (engineers even!) who simply prefer a different
style of life. It doesn't prove that there are no externalities to suburban
living (nor urban living), but we should all remember to be thoughtful that
different people may actually enjoy different lifestyles.

~~~
akgerber
The Silicon Valley lifestyle, and the long commutes it engenders, aren't
remotely 'urban living'.

Charlottesville, VA is likewise more of a small city than a small town, where
it's perfectly practical for people to walk and bike to commute and do errands
in the older neighborhoods. Probably more so than in much of Silicon Valley,
in fact. That's because walkability is as much a consequence of development
style as urban scale, and much of Charlottesville was built out before than
automotive era.

~~~
Chevalier
Exactly. The US has virtually no surviving "urban" cities, where one can
comfortably walk and bike wherever they need to go. (Much less enjoy the
population density to support local coffee shops, niche stores, etc.) We have
New York, Boston, DC (sorta)... Philadelphia? Maybe Chicago?

Even San Francisco can barely be called urban. It's absolutely dominated by
automobile traffic, especially outside the tiny downtown core. I've never seen
such fast-moving traffic on such wide streets in a city ostensibly hailed as
walkable. Typical SF buildings are 2-3 stories at most, nearly all have
attached garages or parking, and transit is hilariously awful.

Much less Silicon Valley. It's... suburbia. Try to walk from Google's HQ to
Apple's. Try to walk anywhere, really, outside of a narrow strip near
Stanford. What exactly does the OP feel is urban about Silicon Valley's car-
dependent zoning?

------
birken
FWIW a lot of renters don't pay those prices. If you are buying a house, you
are going to have to pay full market value. However, the rental market has
different influences, because of widespread rent control and the fact that
property taxes are based on the price of the sale (which is _way_ lower than
market value for any property owned for more than 10 years). This isn't
necessarily good for a multitude of reasons, but it means a large percentage
of renters are not paying skyrocketing prices.

This is still my favorite piece on the subject (long but good):
[http://techcrunch.com/2014/04/14/sf-
housing/](http://techcrunch.com/2014/04/14/sf-housing/)

Also if you are planning to move to Seattle, you should follow the ongoing
saga of Bertha. Always a fun topic of conversation:
[http://en.wikipedia.org/wiki/Bertha_%28tunnel_boring_machine...](http://en.wikipedia.org/wiki/Bertha_%28tunnel_boring_machine%29)

~~~
stephengillie
Speaking of renting in Seattle...

There's a phenomenon in older apartment buildings on Captiol and First Hills
where a large number of renters are barely able to pay rent, or are already
past that point and have stopped paying rent. Evicting them just means adding
to Seattle's homeless population (the other 1%).

This doesn't apply to the shiny new condo you'd be living in. It applies to
the ugly, squat, 95-year-old brick apartment building across the street.

~~~
trts
If my rent became unaffordable, that would be unfortunate and inconvenient.
But I think rather than choosing to become homeless I would move somewhere
else where I could afford it.

~~~
stephengillie
You're probably basing this prediction of your actions on your optimistic
worldview, your resources, employment, and your connections. Some people only
start with half of that, and don't know what to do when it starts slipping
away.

And what do you do if your neuroprocessor isn't powerful enough to get you a
good job in the first place? If you worked hard but couldn't become more than
just a laborer? If you've never been able to afford even a car? Then suddenly
you lose your job but your landlord doesn't kick you out.

------
deftnerd
I live in Austin, TX and had 3 job offers earlier this year in Silicon Valley.
I turned all of them down because of the high cost of living.

I have 3 children and a wife that I support. Even with the high wages offered
from Facebook or Google, our quality of life in Austin was far better than it
could ever be in Silicon Valley.

~~~
robbyking
I had almost the exact opposite experience.

I lived in SF, then moved to Athens, GA for 6 years, then back to SF. I have a
lot more disposable income in SF because while my rent doubled, my salary
tripled. On top of that, anything with an MSRP set at a national level (cars,
bicycles, guitars) is a much, much smaller percentage of my monthly income. On
top of that, I can contribute 3x as much to my retirement as I did before.
It's win/win/win.

~~~
unclesaamm
Your salary _tripled_? I think that might be the extraordinary factor here.

~~~
robbyking
Almost to the penny. That said, the median income in Athens is next to
nothing, but the housing market is dirt cheap, too.

Truth be told, it's actually a fantastic place to live, I just missed living
in the city.

------
beamatronic
[http://www.zillow.com/homedetails/1612-W-Hacienda-Ave-
Campbe...](http://www.zillow.com/homedetails/1612-W-Hacienda-Ave-Campbell-
CA-95008/19659769_zpid/)

Here's a great listing I noticed this morning

2 beds 2 baths 827 sqft

"Bring your tool belt, this property needs some TLC! Great location, this
property has much potential! Close to schools, shopping, and freeway access."

$900,000

~~~
joshrotenberg
This was apparently a record sale price for the size in our area just a few
weeks ago:

[https://www.redfin.com/CA/Albany/815-Santa-Fe-
Ave-94706/home...](https://www.redfin.com/CA/Albany/815-Santa-Fe-
Ave-94706/home/2006746)

Granted, what was there was nice enough (all 1100 sq/ft of it), but over $1M
for a 2/1 ... it's just insane right now. It was listed for $749k. The
overbidding situation seems to regularly bring in multiple (as in 10-20)
offers for a house.

~~~
dlubarov
Sounds pretty cheap compared to South Bay homes! Like this 776 sqft
"opportunity to do a remodel" which went for 1.75M:
[http://www.zillow.com/homedetails/133-Coleridge-Ave-Palo-
Alt...](http://www.zillow.com/homedetails/133-Coleridge-Ave-Palo-Alto-
CA-94301/19497074_zpid/)

~~~
AreaGuy
Wow... and the last time it sold was for $34,000 in 1975.

That's a 10.4% annual return per year for 40 years.

That's better than the 8.2% returned by the S&P 500 over the same period.

------
joesmo
At around $150k/yr, a bank will typically lend around $350-400k (more would be
imprudent, even if the bank agrees). So even with two people working and
making a decent, probably average wage for SV, it's still impossible to buy a
median home there. Of course people are leaving.

~~~
kordless
Your numbers are low. $150K/yr will get you almost double that with good
credit and a decent downpayment.

~~~
joesmo
Yes, but then your payment is $4-5k a month, more than half of what you're
bringing home every month. That's not really feasible and a terrible financial
situation to be in.

~~~
kordless
At higher income levels, it really doesn't matter if you are spending 1/2 of
your income on your home. If I'm making $200K/year, that gives me ~$8K of
spending power per month for my home and ~$8K, pre-tax, for other things. If
the market is going up, long term, then buying a house is a good investment
vehicle for your money. It's also a writeoff on your taxes. That said, my
response was targeting the comment about what a bank would loan you at a given
salary, not whether it was a good idea or not. :)

------
johnrob
If you measure Silicon Valley salaries in houses/year instead of dollars/year,
they are quite low.

~~~
geebee
Some sort of housing adjusted salary would be valuable. But simply as a
percentage type thing might miss the way people experience expenses.

Think about it this way. Suppose you make $30,000 a year, and your housing
costs are $10,000 a year.

Now suppose you make $200,000 a year, and your housing cost are $100,000 a
year. Aside from that, prices in the higher cost area are maybe 10-20% higher.

You might actually have more disposable income in the second scenario, along
with more opportunities to enjoy it. This is why I think SF is still a
pleasurable place to live for people who substantially exceed a certain
threshold. That threshold is very high, though.

------
gamechangr
I think that maybe more accurate for entry level developers. Housing is an
issue to work around for sure.

Seattle - Yes (but also quite expense)

Austin - Yes to a less degree

Portland - Maybe.

All of these are great cities with plenty of dev jobs. You really need a
strong CS program to build around if you want think about not moving to
Silicon Valley. University of Washington totally fits that bill, as does
University of Texas- Austin, but I would have to guess that Portland has a
good local university (but I'm not familiar with it from afar like the others)

~~~
stephengillie
Seattle has the highest income of any city in the USA at $94,000 a year. And
we just got the $15 minimum wage.

Portland has good programs and an OK tech scene. A lot of them are
poached/contracted by Seattle firms, since it can be cheaper to pay for a
contractor's hotel than it can be to hire a local. The wage differential is
that big between the cities.

~~~
unclesaamm
What is that 94k/yr number from? Is that for industry average?

~~~
stephengillie
It's from newspaper-blog articles about the $15 minimum wage increase.

------
Apocryphon
So is there any chance that the giant tech companies will band together to
lobby local governments for measures that will improve living situations and
transportation? Because if all they do is upping salaries (which is doubtful
to continue indefinitely) all they do is empower landlords to keep charging
higher.

~~~
seanflyon
The obvious solution is allowing people to build more (and denser)
residential, but that is a hard sell around here.

~~~
Apocryphon
Right, which is why I'm saying tech companies- huge economic producers (and
tax payers)- should use their influence to lobby for such measures. It's a
hard sell until someone with the means gets into the ring and starts fighting
for it.

FWD.us agitating for immigration reform for potential future employees should
take a backseat to lobbying for improving local living conditions in the Bay
for _current employees_ who already live in the Bay.

~~~
mavelikara
The management in these firms most likely have personal property in the Bay
Area. They will like to keep it just as sparse as it is now. So, don't hold
your breath for this to happen.

------
kqr2
From
[http://sf.curbed.com/archives/2015/05/22/san_franciscos_medi...](http://sf.curbed.com/archives/2015/05/22/san_franciscos_median_rent_climbs_to_a_whopping_4225.php)

Median rent is now $4,225 in San Francisco.

------
ryandvm
I briefly evaluated a move to Silicon Valley. But after calculating that I was
going to pay twice as much for half as much house, quadruple my commute, and
have to send my kids to a lower quality (or private) school; the decision was
made for me. My rough estimate was that I'd have to make about $300K/year to
make it worth it.

Instead I'm enjoying the vibrant and feverishly growing tech community of
Charleston, SC and the quality of life advantages that come with living in
Conde Naste's #1 rated travel destination.

I suspect as housing costs in the Bay Area continue to rise, an increasing
number of engineers will come to the same conclusion.

------
elif
As a tabletop gamer, I want to see the disparity as an advantage rather than a
disadvantage. If typical cost of living drives up wages by even just a 1.5-2x
multiplier, you can min-max with lifehacks by, say, living in a van and making
that into a disproportionate increase in savings retention, giving you a
shorter runway to escape wage slavery.

Of course, if your desired end-game doesn't include escaping the paycheck
cycle, it is really a wash anyway.. so you may as well go where the fun jobs
are.

------
not_that_noob
I think there's another effect operating here.

New borrowing rules went into effect that reduce the amount that can be
borrowed for a given income. As interest rates rise, the approvable loan
amount will be trimmed still further. Even if you have stock winnings, most
people still need to borrow to buy a home. So buyers are looking at a
declining amount that they can bring to bear in the market.

However, sellers conditioned on ever rising prices aren't willing to accept
lower prices just yet. Some are starting to reduce prices, but recently there
have been multiple homes that don't sell and then quietly roll off the market
in the 'hot' areas.

Thus there is a market standoff, and buyers who want a house realize they can
simply not afford a house here. Some react to that by leaving, a trend that is
accelerating.

It will be interesting to see what happens as interest rates go up, and reduce
borrowing amounts still futher. If the future will bring a decline in prices
or long-term stagnation - it's anyone's guess.

~~~
beamatronic
Exactly. $200k is a pretty decent windfall for most folks, which conveniently
just happens to match up with the 20% down payment for your median priced
house. Down payment is the "hard part" of buying a house in the Bay Area, not
so much the salary.

------
bryanlarsen
I did a back of the envelope calculation on how much salary it would take to
get me to move my family to Silicon Valley. The answer was "7 figures".
Granted, part of that was due to the fact that my wife would have to recertify
to find work, but it was still eye opening.

------
sjg007
In some sense yes. But parts of Oakland, San Leandro and East Palo Alto still
offer bargains.

------
rossf7
London has a similar issue with house prices / rents continuing to rise much
faster than the rest of the UK.

I relocated from London to Barcelona 3 years ago to do remote freelance work.
The cost of living is lower here with a good quality of life. There is lots of
interesting work in London and its a good place to gain experience but I've
got no plans to go back.

~~~
M8
And unlike Silicon Valley, same salaries are still being offered. Hopefully
exiting EU will ease the pressure and make the competition for talent more
healthy.

------
Quanticles
Austin is a great city with great food, music, and brews. And you can even
afford a nice house too

~~~
hwstar
Great except for the noncompete contract shoved down your throat be Texas
employers. I won't work for any employer who won't waive a noncompete
contract. This means California or a couple of other states. More states need
to make noncompetes illegal.

------
mbrzusto
searching for a home somewhere doesn't mean you actually moved there.

~~~
mbreese
But when compared to similar searches historically, you can draw conclusions
from the trend.

If one assumes a similar historical probability between looking for a house
and buying a house, it follows that if more people are looking for houses
outside of SV, more people are also buying houses outside of SV.

At the very least, it shows that people in SV are more interested in housing
markets outside of SV today than they were a few years ago, even if they don't
move there.

