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Because housing in California is just different than the rest of the US; there's really no other way to describe it (Illinois born and raised, now living in SF)

Because housing in California is just different than the rest of the US; there's really no other way to describe it (Illinois born and raised, now living in SF). A lot of CA people explicitly treat their home equity as their retirement fund, planning to "cash it out" when they retire. Then there's the people with loans they might be cashflow-negative on month-to-month (paying down a sliver of principal), who are hoping to re-amortize into a new 30-year loan when their value goes up, hopefully cutting some of their payments. I'm 31. My household income is well over 200K and I have many friends in the same boat, and none -- I really mean it -- zero -- of us own homes. The only hope is to get into a "starter home" as some other commenters describe and then hope to have enough equity that if you ever want to have a kid or live in a non-shoebox, you'll be able to afford to make a big down payment on a new place. I hate this because it seems extremely financially imprudent, but realistically, your options are to play the game or move. There just isn't sanity in/around the Bay Area housing market.

galdosdi 10y ago
This is why I don't understand (at a practical/economic level) the allure in the tech world of moving to the Bay Area. In NYC we complain like crazy about housing, but it's honestly fine compared to what you describe. In NYC you can't have it all but you do get to pick any two of: spacious, cheap, or short commute. Apparently in the Bay Area it's pick any zero? Why do people keep going there?
- dragonwriter 10y ago
  > Apparently in the Bay Area it's pick any zero? No, its not. You can find spacious, reasonably cheap places within tolerable -- though not short -- commutes of most Bay Area jobs. I suspect that young, high-income tech workers very often (1) want short commutes, and (2) want other aspects of the urban lifestyle of the core of the Bay Area whether or not it comes with a short commute, which makes the peripheral, long-commute places with such housing unattractive. (Plenty of families where the adults work in the core areas of the Bay Area do live in those peripheries, though.) > Why do people keep going there? Because that's where the (tech, for instance) jobs are?
  - Retric 10y ago
    Short commutes are under 15 minutes, which is not uncommon in much of the US. That's just not possible from cheap housing in the Bay Area.
- twblalock 10y ago
  > Why do people keep going there? Because the Bay Area has the best job market in the world for software engineers, by a huge margin. It is home to the headquarters of most of the major tech companies people can name, and contains major satellite campuses for major out-of-state tech companies such as Microsoft and Amazon. The scale of the tech industry here is simply unparalleled anywhere else. Besides, you can pick 1, not 0.
  - someguydave 10y ago
    >Because the Bay Area has the best job market in the world for software engineers, by a huge margin. A margin in what quantity exactly? I doubt that Bay Area salaries are high enough to compensate for the insane housing costs.
    - twblalock 10y ago
      Jobs. Tons of them, in many areas of software and hardware engineering. Plus, the network effects cannot be underestimated -- opportunities for career networking, meetups, conferences, etc. are enormous. After a few years here, you will have former coworkers at other tech companies who can help you advance in your career. If you lose your job, or your company fails, you won't have to move to find another job -- there will be plenty of other companies to work for. Taking a job at a startup is therefore not a huge risk. Buying a home here, and thereby tying yourself down to this area, is unlikely to hold you back in your career, as it might elsewhere -- you will probably never need to move in order to achieve advancement in your field. There is also the presence of venture capital. The VC world is very Silicon Valley-centric, although that might be changing. If you want funding, you'll have to come here for it. If you want to take advantage of your investors' professional networks to find other investors and build your team, you'll have to hire people who live here and don't want to leave. As a result of these network effects, many of the world's best software engineers choose to live here, and companies want to be here to hire them. There is now a saying in the startup world that you can start your company anywhere, but Silicon Valley is the best place to grow it, because the pool of engineering talent here is larger than it is anywhere else. Plus, this is a very nice place to live, if you can afford it. Despite some of the exaggerations many people are making in this thread, I know quite a few people who have purchased homes and condos in the past few years, including someone who bought one this week on a salary well under $200k -- without any help from his parents or anyone else. I think the highest price any of them paid was about $700k, which is well under some of the numbers people are quoting here. It's doable for a single person who has a high income, and it is easily doable for married couples who work in tech or are successful in other fields. The main barrier to ownership is the down payment, not the mortgage payments. Renting is also not as bad as people say it is, unless you live in downtown San Francisco. I pay less than $2k per month for a decent apartment in a very good location near a train station and major freeways, and I could spend less if I wanted to. My commute is quite pleasant. My rent probably sounds high to people from other cities, but on an average software engineer's salary, it is not burdensome in any way.
- superuser2 10y ago
  >Why do people keep going there? Because new grads keep getting six-figure offers at prestigious companies offering more money, autonomy, and interesting work than what they'd get at Fortune 500 cost center IT departments (those that haven't outsourced to India yet) in their hometowns.
someguydave 10y ago
If you don't leave the Bay Area, you are effectively subsidizing your employer by allowing them to pay below-market salaries. Why would you do that?
- robotresearcher 10y ago
  Where does it say he gets a below market salary?
  - someguydave 10y ago
    Well, it isn't below market if he thinks he shouldn't be able to afford a house. If he does, than it is.
    - twblalock 10y ago
      Being able to afford a house has nothing to do with what a market-rate salary is. Your market-rate salary is the salary the market is willing to pay for your labor. Nothing more, and nothing less. It has nothing to do with the kind of lifestyle the salary will enable you to have, or the things you will be able to afford.
      - someguydave 10y ago
        >Your market-rate salary is the salary the market is willing to pay for your labor. Yes, I understand this. I mean that people are bidding lower than they should - they get fewer goods and services than they could have gotten in cheaper locations with their Bay Area salaries. This artificially low bid can be understood as people paying to live in the Bay Area (and therefore take a salary that buys fewer goods and services than elsewhere). In so doing they are granting a subsidy to their employers who would otherwise pay higher wages to location-indifferent laborers. Why they are motivated to pay to live in the Bay Area is a mystery to me.
        twblalock 10y ago
lgieron 10y ago
Or you could live in an appartment building, like hundreds of millions of other families do. A big house is a luxury, not a necessity.
- eldavido 10y ago
  I currently pay $1100 for a single room in a 4-bedroom quad. I just got engaged last week and am planning to move in with my girlfriend of five years (now fiancee) into a 1br in Oakland for 2200/month. The apartment is about 1100 square feet, which hardly qualifies as "big" for two people, in my opinion. The issue isn't house vs. apartment; it's about being able to have a sane base of committed expenses in the face of 4-5 years of double-digit rental price growth in SF. When I first came here 5 years ago, I was paying 750/month for exactly what I live in now -- just 40% cheaper. I have no objection to living in an apartment and in fact, have consciously chosen to live cheaply and invest aggressively outside the Bay Area. But I think you get to a point where you might be thinking about starting a family and it makes you wonder what the future holds. I suspect most Bay Area buyers would rather buy just to have some stability in their payments, as much or more than anything else.
  - lgieron 10y ago
    Re: 1100 sqft hardly being big for two people - I was raised in a flat exactly half that size. I was fine (had my own room - being an only child rocked). In my country (Poland) 1100 sqft is considered a large flat for a family with 2+ kids. In more general terms, if space is priced at insane levels, it might be smart to rethink how much you actually need to be happy (or even why stay in SF - I don't understand why people do that).
    - eldavido 10y ago
      Again, I guess just a matter of perspective. My parents house was 2200 sqft (2 siblings and 2 parents) and the Zestimate on it is like 140K. Believe me, not a day goes by where I don't think about moving. But right now, as long as you can save a bit and don't mind living in a slightly crappy apartment, you'll do just fine here. Just take all the money you would've dumped into home equity and buy stocks, real estate, invest in companies, whatever, and you'll have plenty of money. The current environment feels very unstable though. Something has to give. Either house appreciation has to slow, or wage growth has to accelerate, or a lot more new supply has to be built. I don't think your average Google/facebook employee knows or cares much about these trends but the startups do, and they're the canaries in the coal mine. If entrepreneurs stop coming to SF, and anecdotally I think it's getting less and less attractive with the rise of angel.co and other distributed funding platforms, this place is really gonna have a huge, long-term problem because big companies don't just spring into existence, they grow up from small companies that start locally.
robotresearcher 10y ago
> The only hope is to get into a "starter home"... This has been completely normal in many/most major world cities/regions for generations. That's why there's a term for a first home. I don't understand the consternation.
- eldavido 10y ago
  You know, it might just be a matter of perspective. Thank you for this. I grew up in a small but nice suburban town about 20 miles outside of Chicago. Plenty of my friends are buying 3-4br houses in decent parts of Chicago for 250-350k. So maybe I just grew up in a "cheap" global city and am not used to what, say, Parisians have come to expect. I think it's just worse in the Bay Area.
- gohrt 10y ago
  In CA, "Starter homes" are $800K
  - kbenson 10y ago
    It's not nearly that uniform. I live in Sonoma County (an hour north of SF), and my home cost a little over $500k a couple years ago, but that's for over 2500 sq ft and it's brand new (I bought before they built). There were smaller models in the low $400k's. There are plenty of older houses for sale for less than $400k in town that are fixers. For obvious reasons, prices scale with proximity to population centers and higher paying jobs. CA is a big place and encompasses a few very different regions. If you want to live in say, Coalinga (which I just found through a map) in the Central Valley, I'm seeing houses on Zillow in the low $100k's and below. But, to what's likely your point, in SF and the surrounding metro area, even starter homes are well out of the reach of most of the people that live there. Hell, starter homes here are out of the reach of a good percentage of people, and it's not nearly as bad as farther South.
    - seanp2k2 10y ago
      Yeah, this, the problem is just interesting because everywhere within a 60-minute commute is almost a million dollars. At least in real cities with high density (e.g. not San Jose), the rent makes sense because it's close to things you want. In the suburbs of SJ and the greater Bay Area, the difference in rent between the "downtown" area, or even downtown SF proper, seems like way less of a difference between the rent in Manhattan vs the suburbs. My point is that the suburbs here are terribly over-priced and over-valued, but I guess we could argue based on the logic that got us to this point: "it's worth what people will pay for it".
Gibbon1 10y ago
The bay area housing market is deranged of late because the huge fire hose of money that's pointed at it because of the 'tech industry'. Also there isn't a lot of turn over in housing in the bay area, partly due to rent control, prop 13, and I think some places just an older population.
- Joof 10y ago
  Why is the tech industry so big there? I can code from anywhere in the world. Is there something special about the valley?
  - maerF0x0 10y ago
    Its not that recent since we've been able to fairl effectively code from anywhere. Investors/Managers/ et. al. are having a hard time keeping up with the times. IMO a team should be able to 100% remote from anywhere within a timezone restriction (ie, ET to PT ? )
    - bertiewhykovich 10y ago
      To be fair, it's significantly more difficult to manage and maintain a remote team than a local team. Some people thrive under those circumstances, of course, but I think that many more benefit from working with their team in "meatspace."
    - superuser2 10y ago
      You can code from anywhere, but typing out code isn't the only part of software engineering. Understanding exactly what code the business needs, and how it interacts with the rest of your company's environment, can be more difficult if communication flows less freely. If engineers are purely sitting at their computers and not talking to each other at all (except during scheduled meetings), the team could probably be converted to remote without downside, but plenty of organizations have an implicit dependency on unstructured conversation, and while there are ways to facilitate that in a remote work environment, it's not obvious.
kisstheblade 10y ago
"A lot of CA people explicitly treat their home equity as their retirement fund, planning to "cash it out" when they retire. " And where do they move then? To an equally expensive (per sq.ft.) but smaller apartment? Where I live (not california) I know literally zero parents who have moved out of the house they raised their children after retirement. It seems that only people who inherit their parents houses stand to benefit from rising prices in any way.

galdosdi 10y ago

This is why I don't understand (at a practical/economic level) the allure in the tech world of moving to the Bay Area. In NYC we complain like crazy about housing, but it's honestly fine compared to what you describe. In NYC you can't have it all but you do get to pick any two of: spacious, cheap, or short commute. Apparently in the Bay Area it's pick any zero? Why do people keep going there?

dragonwriter 10y ago
> Apparently in the Bay Area it's pick any zero? No, its not. You can find spacious, reasonably cheap places within tolerable -- though not short -- commutes of most Bay Area jobs. I suspect that young, high-income tech workers very often (1) want short commutes, and (2) want other aspects of the urban lifestyle of the core of the Bay Area whether or not it comes with a short commute, which makes the peripheral, long-commute places with such housing unattractive. (Plenty of families where the adults work in the core areas of the Bay Area do live in those peripheries, though.) > Why do people keep going there? Because that's where the (tech, for instance) jobs are?
- Retric 10y ago
  Short commutes are under 15 minutes, which is not uncommon in much of the US. That's just not possible from cheap housing in the Bay Area.
twblalock 10y ago
> Why do people keep going there? Because the Bay Area has the best job market in the world for software engineers, by a huge margin. It is home to the headquarters of most of the major tech companies people can name, and contains major satellite campuses for major out-of-state tech companies such as Microsoft and Amazon. The scale of the tech industry here is simply unparalleled anywhere else. Besides, you can pick 1, not 0.
- someguydave 10y ago
  >Because the Bay Area has the best job market in the world for software engineers, by a huge margin. A margin in what quantity exactly? I doubt that Bay Area salaries are high enough to compensate for the insane housing costs.
  - twblalock 10y ago
    Jobs. Tons of them, in many areas of software and hardware engineering. Plus, the network effects cannot be underestimated -- opportunities for career networking, meetups, conferences, etc. are enormous. After a few years here, you will have former coworkers at other tech companies who can help you advance in your career. If you lose your job, or your company fails, you won't have to move to find another job -- there will be plenty of other companies to work for. Taking a job at a startup is therefore not a huge risk. Buying a home here, and thereby tying yourself down to this area, is unlikely to hold you back in your career, as it might elsewhere -- you will probably never need to move in order to achieve advancement in your field. There is also the presence of venture capital. The VC world is very Silicon Valley-centric, although that might be changing. If you want funding, you'll have to come here for it. If you want to take advantage of your investors' professional networks to find other investors and build your team, you'll have to hire people who live here and don't want to leave. As a result of these network effects, many of the world's best software engineers choose to live here, and companies want to be here to hire them. There is now a saying in the startup world that you can start your company anywhere, but Silicon Valley is the best place to grow it, because the pool of engineering talent here is larger than it is anywhere else. Plus, this is a very nice place to live, if you can afford it. Despite some of the exaggerations many people are making in this thread, I know quite a few people who have purchased homes and condos in the past few years, including someone who bought one this week on a salary well under $200k -- without any help from his parents or anyone else. I think the highest price any of them paid was about $700k, which is well under some of the numbers people are quoting here. It's doable for a single person who has a high income, and it is easily doable for married couples who work in tech or are successful in other fields. The main barrier to ownership is the down payment, not the mortgage payments. Renting is also not as bad as people say it is, unless you live in downtown San Francisco. I pay less than $2k per month for a decent apartment in a very good location near a train station and major freeways, and I could spend less if I wanted to. My commute is quite pleasant. My rent probably sounds high to people from other cities, but on an average software engineer's salary, it is not burdensome in any way.
superuser2 10y ago
>Why do people keep going there? Because new grads keep getting six-figure offers at prestigious companies offering more money, autonomy, and interesting work than what they'd get at Fortune 500 cost center IT departments (those that haven't outsourced to India yet) in their hometowns.

someguydave 10y ago

If you don't leave the Bay Area, you are effectively subsidizing your employer by allowing them to pay below-market salaries. Why would you do that?

robotresearcher 10y ago
Where does it say he gets a below market salary?
- someguydave 10y ago
  Well, it isn't below market if he thinks he shouldn't be able to afford a house. If he does, than it is.
  - twblalock 10y ago
    Being able to afford a house has nothing to do with what a market-rate salary is. Your market-rate salary is the salary the market is willing to pay for your labor. Nothing more, and nothing less. It has nothing to do with the kind of lifestyle the salary will enable you to have, or the things you will be able to afford.
    - someguydave 10y ago
      >Your market-rate salary is the salary the market is willing to pay for your labor. Yes, I understand this. I mean that people are bidding lower than they should - they get fewer goods and services than they could have gotten in cheaper locations with their Bay Area salaries. This artificially low bid can be understood as people paying to live in the Bay Area (and therefore take a salary that buys fewer goods and services than elsewhere). In so doing they are granting a subsidy to their employers who would otherwise pay higher wages to location-indifferent laborers. Why they are motivated to pay to live in the Bay Area is a mystery to me.
      - twblalock 10y ago

lgieron 10y ago

Or you could live in an appartment building, like hundreds of millions of other families do. A big house is a luxury, not a necessity.

eldavido 10y ago
I currently pay $1100 for a single room in a 4-bedroom quad. I just got engaged last week and am planning to move in with my girlfriend of five years (now fiancee) into a 1br in Oakland for 2200/month. The apartment is about 1100 square feet, which hardly qualifies as "big" for two people, in my opinion. The issue isn't house vs. apartment; it's about being able to have a sane base of committed expenses in the face of 4-5 years of double-digit rental price growth in SF. When I first came here 5 years ago, I was paying 750/month for exactly what I live in now -- just 40% cheaper. I have no objection to living in an apartment and in fact, have consciously chosen to live cheaply and invest aggressively outside the Bay Area. But I think you get to a point where you might be thinking about starting a family and it makes you wonder what the future holds. I suspect most Bay Area buyers would rather buy just to have some stability in their payments, as much or more than anything else.
- lgieron 10y ago
  Re: 1100 sqft hardly being big for two people - I was raised in a flat exactly half that size. I was fine (had my own room - being an only child rocked). In my country (Poland) 1100 sqft is considered a large flat for a family with 2+ kids. In more general terms, if space is priced at insane levels, it might be smart to rethink how much you actually need to be happy (or even why stay in SF - I don't understand why people do that).
  - eldavido 10y ago
    Again, I guess just a matter of perspective. My parents house was 2200 sqft (2 siblings and 2 parents) and the Zestimate on it is like 140K. Believe me, not a day goes by where I don't think about moving. But right now, as long as you can save a bit and don't mind living in a slightly crappy apartment, you'll do just fine here. Just take all the money you would've dumped into home equity and buy stocks, real estate, invest in companies, whatever, and you'll have plenty of money. The current environment feels very unstable though. Something has to give. Either house appreciation has to slow, or wage growth has to accelerate, or a lot more new supply has to be built. I don't think your average Google/facebook employee knows or cares much about these trends but the startups do, and they're the canaries in the coal mine. If entrepreneurs stop coming to SF, and anecdotally I think it's getting less and less attractive with the rise of angel.co and other distributed funding platforms, this place is really gonna have a huge, long-term problem because big companies don't just spring into existence, they grow up from small companies that start locally.

robotresearcher 10y ago

> The only hope is to get into a "starter home"... This has been completely normal in many/most major world cities/regions for generations. That's why there's a term for a first home. I don't understand the consternation.

eldavido 10y ago
You know, it might just be a matter of perspective. Thank you for this. I grew up in a small but nice suburban town about 20 miles outside of Chicago. Plenty of my friends are buying 3-4br houses in decent parts of Chicago for 250-350k. So maybe I just grew up in a "cheap" global city and am not used to what, say, Parisians have come to expect. I think it's just worse in the Bay Area.
gohrt 10y ago
In CA, "Starter homes" are $800K
- kbenson 10y ago
  It's not nearly that uniform. I live in Sonoma County (an hour north of SF), and my home cost a little over $500k a couple years ago, but that's for over 2500 sq ft and it's brand new (I bought before they built). There were smaller models in the low $400k's. There are plenty of older houses for sale for less than $400k in town that are fixers. For obvious reasons, prices scale with proximity to population centers and higher paying jobs. CA is a big place and encompasses a few very different regions. If you want to live in say, Coalinga (which I just found through a map) in the Central Valley, I'm seeing houses on Zillow in the low $100k's and below. But, to what's likely your point, in SF and the surrounding metro area, even starter homes are well out of the reach of most of the people that live there. Hell, starter homes here are out of the reach of a good percentage of people, and it's not nearly as bad as farther South.
  - seanp2k2 10y ago
    Yeah, this, the problem is just interesting because everywhere within a 60-minute commute is almost a million dollars. At least in real cities with high density (e.g. not San Jose), the rent makes sense because it's close to things you want. In the suburbs of SJ and the greater Bay Area, the difference in rent between the "downtown" area, or even downtown SF proper, seems like way less of a difference between the rent in Manhattan vs the suburbs. My point is that the suburbs here are terribly over-priced and over-valued, but I guess we could argue based on the logic that got us to this point: "it's worth what people will pay for it".

Gibbon1 10y ago

The bay area housing market is deranged of late because the huge fire hose of money that's pointed at it because of the 'tech industry'. Also there isn't a lot of turn over in housing in the bay area, partly due to rent control, prop 13, and I think some places just an older population.

Joof 10y ago
Why is the tech industry so big there? I can code from anywhere in the world. Is there something special about the valley?
- maerF0x0 10y ago
  Its not that recent since we've been able to fairl effectively code from anywhere. Investors/Managers/ et. al. are having a hard time keeping up with the times. IMO a team should be able to 100% remote from anywhere within a timezone restriction (ie, ET to PT ? )
  - bertiewhykovich 10y ago
    To be fair, it's significantly more difficult to manage and maintain a remote team than a local team. Some people thrive under those circumstances, of course, but I think that many more benefit from working with their team in "meatspace."
  - superuser2 10y ago
    You can code from anywhere, but typing out code isn't the only part of software engineering. Understanding exactly what code the business needs, and how it interacts with the rest of your company's environment, can be more difficult if communication flows less freely. If engineers are purely sitting at their computers and not talking to each other at all (except during scheduled meetings), the team could probably be converted to remote without downside, but plenty of organizations have an implicit dependency on unstructured conversation, and while there are ways to facilitate that in a remote work environment, it's not obvious.

kisstheblade 10y ago

"A lot of CA people explicitly treat their home equity as their retirement fund, planning to "cash it out" when they retire. " And where do they move then? To an equally expensive (per sq.ft.) but smaller apartment? Where I live (not california) I know literally zero parents who have moved out of the house they raised their children after retirement. It seems that only people who inherit their parents houses stand to benefit from rising prices in any way.