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Home Values Are Rising by $800 a Day in San Jose

189 points by nopriorarrests 9y ago

pascalxus 9y ago
They really undersold it. 800$ per day is what it earns in appreciation, but it earns even more when you rent it out. If you have a house on the penninsula, I'd say it's time to cash out and move to the midwest and retire. ;)
- tehlike 9y ago
  Dont forget tax benefits.
  - toast0 9y ago
    You can pretty much forget about tax benefits, thanks to the 2017 federal tax plan that limits deductability of state and local taxes and reduces the cap on mortgage interest deductability. You may still get a deduction, but it's not going to be that much higher than the standard deduction.
    - sokoloff 9y ago
      For landlords, those new limits do not apply; they remain deductible, just like other qualified business expenses (which makes sense IMO, which is why I support the mortgage interest deduction, to keep owner occupants on relatively equal footing with landlords when contemplating purchasing property).
      - tehlike 9y ago
        The real q is, why does government even subsidizing home ownership in the first place?
        sokoloff 9y ago
        US business taxes are based income / profits. In order to do that, it's required to allow profit-seeking entities to deduct business expenses (such as raw materials, wages, etc.). Logically, interest and property taxes are business expenses for landlords, just as steel and electricity are business expenses for Ford. Then, there's a question of whether you want to have a level purchasing environment for prospective owner-occupants when they are bidding against a prospective landlord. (I believe that we do want to encourage owner-occupancy, at least to the extent that they are on equal footing with landlords.) Repealing the OO-MID (owner-occupied mortgage interest deduction) would mean that a landlord could literally pay more for a property than an owner-occupant and achieve the same long-run financial outcome, or pay the same and achieve a better outcome. This would amount to a subsidy to renters over owners. Providing a similar (now lessened) subsidy to owners serves to level, not tilt the playing field. If one believes that a nation of entirely renters is preferable or indifferent as compared to a mix of landlords and end users, then there is no valid purpose for the OO-MID. I believe there are community and public benefits to owner-occupancy and support the level playing field.
        tehlike 9y ago
        500k capital gains tax free income doesnt fit that. Why does a stock not have this exclusion, but a home ownership does? I get government incentives overall. I am just pointing to some reasons bubbles form.
        sokoloff 9y ago
        That’s a fair question. I don’t support that exclusion, even though I stand to benefit the full amount if we were to sell today. (Obviously, if we sell, we’re taking the exemption, but I agree it’s bad policy.)
        youpassbutter 9y ago
        >The real q is, why does government even subsidizing home ownership in the first place? Firstly, older people own homes and they vote. Secondly, homes are a significant part of people's retirement assets. As companies do away with pensions and as the Social Security age gets increased, home values gain in importance. So the government has an incentive to keep home prices high. This hurts the younger generation looking to buy homes and raise a family. But the older generation votes in greater numbers than the younger people. If you are politician running for office, you aren't going to say "lets raise property taxes" or "lets get housing prices down so that young people can afford it".
doseofreality 9y ago
Queue up some saying about trees, sky, growth, etc.
ninkendo 9y ago
Lived in a rental house in SJ for 7 years now watching prices go up and deciding to sit it out, after having lost 30% on my house in the midwest years ago. I’m kicking myself for not buying earlier, but not a chance you’d get me to buy in now. We’re in a bubble that’s ready to burst IMO.
- pxeboot 9y ago
  I agree, it seems crazy to buy now. But will we actually see a crash, or just a period of stagnation?
  - state_less 9y ago
    I suppose it depends. Is the average property value increasing faster than the salaries of the people that fuel it? Sometimes folks will pack into a house, pumping up the total salary of the house over time, so you'd also have to consider cohabitation trends. If property values goes up faster than salary per home, you'll end up with a precarious housing market subject to the whims of investor sentiment. Workers won't be able to move in and back up the house valuation if they are priced too high.
  - halbritt 9y ago
    It's pretty straightforward to look at prices throughout the course of the real-bubble and speculate about that fact. A few places along the peninsula had stagnant or slowly rising property values, like Palo Alto. Values in SF either held or declined very little. Places like Oakland lost a little value and Hayward, maybe one of the least desirable areas around the bay regained all of its lost value in just a few years.
    - nshelly 9y ago
      Yup, in general investing an equivalent money in stocks is better than leveraging your income to buy an illiquid, non-diversified asset like a single-family home. From Jan 1987 to Jan 2018, prices in San Francisco MSA have gone up 5.0% a year, ((258.81-46.95)/46.95)^(1/(2018-1987)). The equivalent amount invested in the stocks over that time period would have yielded 10.3% a year[1], with dividends reinvested. Unless you are planning to use it as an investment property and reinvest rents (net of property tax, maintenance) in other properties, it still doesn't appear clear that buying a home vs renting and investing heavily in the market is a better bet, not to mention other intangibles like upkeep and longer commutes. [1] https://fred.stlouisfed.org/series/SFXRSA https://fred.stlouisfed.org/series/SFXRSA [2] https://dqydj.com/sp-500-return-calculator/ https://dqydj.com/sp-500-return-calculator/
wyclif 9y ago
And they're ugly townhouses too, the type that have been slapped up quickly, McMansion style. The Spanish roof tile thing will never die, even when it's applied to a townhouse.
- abritinthebay 9y ago
  That's pretty much most of the south bay in a nutshell tho.
abritinthebay 9y ago
Sounds about right. Similar around the Bay in general tbh. My wife and I bought a place in Oakland in December and it's already up 20%. That's insane.
- tehlike 9y ago
  Something did happen in january.
  - selimthegrim 9y ago
    What was that, for us non-Bay Area dwellers?
    - tehlike 9y ago
      The prices jumped more than 15% in a month (based on december vs jan comps)
    - abritinthebay 9y ago
      Seems like he’s talking about standard seasonal variations (December is the worst month to sell in) However the difference is crazy even accounting for that
      - tehlike 9y ago
        No, i lowballed at 15%. Some places saw 30% which is not attributable to that. I thought it was the tax laws, but still not clear what it is to date.
        abritinthebay 9y ago
        The supply has been almost nonexistent since September. Literally a handful of properties for sale. Suddenly people started listing - so there’s a LOT of pent up demand.
  - abritinthebay 9y ago
deleted 9y ago
[deleted]
d--b 9y ago
There is a double bubble there: 1. low interest rates have been pushing people to buy houses for a decade. 2. and cheap borrowing costs pushed investors into riskier businesses like startups increasing the flow of capital in that region. Add the NIMBY mentality, and you get skyrocketing prices. My guess is that raising interest rates are going to change all this drastically before year end.
- htormey 9y ago
  So what do you think the first signs of this will be?
  - d--b 9y ago
    I think we're already seeing the signs: - stock market is less bullish on tech: https://finviz.com/futures_charts.ashx?p=d1&t=NQ https://finviz.com/futures_charts.ashx?p=d1&t=NQ - less startup funding: https://techcrunch.com/2017/11/30/theres-an-implosion-of-early-stage-vc-funding-and-no-ones-talking-about-it/ https://techcrunch.com/2017/11/30/theres-an-implosion-of-ear... - mortgage costs going up: https://www.zillow.com/mortgage-rates/ca/bay-area/ https://www.zillow.com/mortgage-rates/ca/bay-area/
    - htormey 9y ago
      It really doesn’t feel like a correction right now at least in the tech sector: - The job market is unbelievably hot. - I don’t see why any of the big tech companies will turn in outrageously bad numbers this quarter. - Everyone I talk to is hiring. - A bunch of people at startups that went public or are about to go public will unlock a lot of stock really soon. Yet I still feel a bit nervous. I’ve been in the Bay Area since 2008 and I remember how fast the place cleared out after the last big crash. I could see some stocks taking a hit in the short term however I just don’t see what’s on the horizon that’s going to do in tech in particular.
      - d--b 9y ago
        My view is that many companies in the US are over-funded because the fed stimulated the economy too much. Investors flocked to the stock market in 08, when there was no money to be made in bonds, and then the stock market got whipped up by more people joining the trend. Then it happened again when Trump got elected and investors thought republicans would be easy on businesses. All that funding is being burnt by companies to grow and compete with each other, which is why you see an overheated job market. They also inflate the value of GAFA, because these companies spend a lot in software, hardware, cloud services and ads. When interest rates go up and bond yields get better though, it's likely that investors will no longer fund companies as much as they used to (which is why I think we're starting to see a slowdown in stock prices). This slowdown in funding will cause companies to have some painful debt crunch, and start the bursting of the bubble... Anyway, just my opinion
thatfrenchguy 9y ago
And San Jose really is a really really boring suburb...
- garmaine 9y ago
  Only if you don't know your way around.
- duxup 9y ago
  As someone who worked outside CA and ended up working for a company based in San Jose I was all pumped to visit the corporate HQ for the first time, silicon valley here I come. The offices were very nice, saw lots of signs for super cool companies that I knew. It was great .... except it was all just a lot of office park... and nothing else. I'd take the train up to SF on weekends for things to do. Otherwise I was more entertained back home around Minneapolis than most places outside SF.
tomrod 9y ago
Yeah... that's not going to be sustainable. I know folks like to point at the big techcos in the area being flush with cash as evidence this can continue a long time. And in a vacuum, wage growth in tech could continue to keep pace, perhaps. But that is 300k in appreciation a year. How far out will school teachers, janitors, chefs, mechanics, city employees, and similar need to live before their not-quite-as-quickly-increasing salaries fail to keep up, and they leave the area en masse? Cut the NIMBYism and you might see some improvement, but only as fast as the city can approve permits. As Buffett likes to point out: be "fearful when others are greedy and greedy when others are fearful".
- deepsun 9y ago
  Won't school teachers' salaries grow in presence of diminishing supply and stable demand?
  - nradov 9y ago
    Proposition 13 imposes a fairly hard upper limit on the growth of teachers' salaries.
    - jiveturkey 9y ago
      Not at all. Prop 13 only has effect when houses do NOT sell. Whenever a property changes hands, which is the only event that matters wrt demand, it is assessed at current market value. Prop 13 does have an effect but only in the manner in which it supresses sales.
      - klipt 9y ago
        It limits property tax to 1% which I believe is pretty low compared to other coastal states. Coincidentally, California's public schools have fallen down the rankings since it passed.
        thaumasiotes 9y ago
taurath 9y ago
I have a pretty large group of generally geek-oriented friends across most of the western US, and tracking their migration patterns has been fascinating - we're basically all 1980's-born millennials. In the 2000's was when we met, those who had grown up there and those who were moving were in the same age group. Only about 40% were college educated or in tech/programming oriented roles. Of those, a small amount has ridden the wave to prosperity. Most moved to Seattle (if looking for a career/home/etc), or Portland (if they pass the weird-test). There's been a steady trickle out of the Bay for anyone not in tech for the past decade, and now I think only 10% of them still remain. Now they're going to Colorado rather than Seattle, and a few more to Portland. Those that are currently missing the wave in Seattle are looking at moving to Colorado. I have no idea which area is gonna be next - Colorado is now seen as the last "cool" place thats "affordable" and liberal (sorry screaming Coloradan's, you're next). Personally, I just can't believe its gone on this long - the pressure release valve that I thought would be released from the bay every year for the last decade hasn't fully let go. Career or being able to afford a house seem to be mutually exclusive ideas if you're not in programming. This is creating a rather nomadic culture within my friend groups... welp, this area is too expensive, might as well move onto the next. Very few are putting down roots. I wonder what this all will look like when we look back 20 years hence - was it really a bubble, or the creation of a permanent Elysium style class divide between those that had the capital (or took the risks) early, and those who didn't start out as well (or were conservative in leveraging themselves)? Every day it feels like I'm leading more towards the latter.
- fred_is_fred 9y ago
  We have no avocados here. This isn't the state you are looking for. Move along. Move along.
  - mulmen 9y ago
    I'm from a small town in Idaho. I recently went back to visit family. Everyone was eager to tell me that the direct flight from Seattle would be cancelled in favor of a town 45 minutes away. The local airport which used to serve the region is losing commercial service to the largest metro area in the region. Getting out of town will take an extra transfer and a 45minute to two hour drive. That town has stagnated and now it is dying. It is an oversimplification but I would rather deal with the problems of growth than stagnation and decay.
nradov 9y ago
Peter Thiel claims that the majority of capital poured into Silicon Valley startups ends up flowing to landlords. https://www.sfgate.com/expensive-san-francisco/article/peter-thiel-silicon-valley-capital-landlords-12759450.php https://www.sfgate.com/expensive-san-francisco/article/peter...
- analog31 9y ago
  During a gold rush, rent hovels. ;-)
- Reedx 9y ago
  Yep. VC -> Startup -> Employee -> Landlord. Everyone blames tech workers, but they're not the ones raising the prices. Most of their money disappears into rent.
  - oculusthrift 9y ago
    startups also pay insane rent for their offices
    - kazinator 9y ago
      Not their fault; other than in a high rent area, where can you find people who blow most of their dough on rent? Those are the smart ones!
  - sokoloff 9y ago
    If they’re the ones demanding housing at a rate that outstrips the supply, then they are the ones causing prices to rise: they’re just not the ones editing the listings.
    - jostmey 9y ago
      The demand for housing is not the problem. It's the supply that is the problem. The supply is being kept artificially low
shard972 9y ago
I wonder what affect San Jose being a sanctuary city has on these increases. It would seem me that a policy that encourages illegal immigrants to live in your city is neccisarily going to increase the supply of home dwellers, putting more demand on housing.
rayiner 9y ago
ITT: rent-seeking.
georgeburdell 9y ago
>Home price appreciation serving ‘as a kind of second job’ I had this thought the other day, actually, when tallying my net worth for the quarter. My home went up by ~$100k in value since December (hot neighborhood near Apple) and my family earned about the same amount in income. Long term, we plan on cashing out and moving to the East Coast so it's not just idle numbers tabulating.
- ikeyany 9y ago
  Won't that defeat the purpose of why you chose to buy and live long term on the west coast to begin with?
BurningFrog 9y ago
If you want to do something about it: https://yimbyaction.org/ https://yimbyaction.org/
blondie9x 9y ago
We need to build much more dense places that people can actually own. The housing situation is not sustainable. Many people end up living on the streets because affordable housing isn't available. There is too much demand and we aren't building dense enough to utilize the land available.
- 0x445442 9y ago
  There's plenty of land in this country. I see no compelling reason why Google can't open up more offices in the fly over states. I'm guessing, if offered the same salaries, Google could find plenty of willing takers to move.
  - Bartweiss 9y ago
    > I'm guessing, if offered the same salaries, Google could find plenty of willing takers to move. There ought to be companies with data on this - some places allow fully-remote work without adjusting salaries for CoL. So I wonder: how many of their employees still end up living in high-cost cities? Does anyone know of public data that could sort this out?
- BurningFrog 9y ago
  Are there places built that nobody owns? What are you saying?
__m 9y ago
if we only had some kind of network that would let us work remotely from anywhere in the world, but i'm just dreaming
yAnonymous 9y ago
To everyone hoping to wait out the bubble: We have this in Germany and it's been going on for 9 years now. I hope you enjoy waiting.
11thEarlOfMar 9y ago
Looks like it's all about inventory. No one is selling their home in Santa Clara County (San Jose)[0]: Homes for sale in March 2016: 1,254 Homes for sale in March 2017: 934 Homes for sale in March 2018: 516 [0] http://scc.rereport.com/market_reports http://scc.rereport.com/market_reports
- erispoe 9y ago
  It's artificially constrained supply. It's really hard to build new housing in the Bay Area.
- jandrese 9y ago
  Why sell when your home value is increasing by $292,000 a year and property taxes are not going up? This seems like a very strong HODL time for real estate as an investment. The fundamentals are sound, there are tons of people looking for a roof over their head so they can continue working their dream job and supply constraints that prevent the production of new homes to accommodate them.
kevinburke 9y ago
Please contact your Senator and Assemblymember and ask them to vote yes on SB 827 and 828, which would make it much easier to build housing in transit rich areas that have previously resisted it - Atherton, West Portal, Palo Alto, Forest Hill, all of Marin County come to mind.
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pontifier 9y ago
Autonomous RVs are going to pop this bubble. You're going to see a lot of people dropping static homes for RV's, or even a couple of them. You'll see a new generation of people who have never had a static home, but always been at home wherever they are, and they'll never be more than a few steps from their own bed.

They really undersold it. 800$ per day is what it earns in appreciation, but it earns even more when you rent it out. If you have a house on the penninsula, I'd say it's time to cash out and move to the midwest and retire. ;)

tehlike 9y ago
Dont forget tax benefits.
- toast0 9y ago
  You can pretty much forget about tax benefits, thanks to the 2017 federal tax plan that limits deductability of state and local taxes and reduces the cap on mortgage interest deductability. You may still get a deduction, but it's not going to be that much higher than the standard deduction.
  - sokoloff 9y ago
    For landlords, those new limits do not apply; they remain deductible, just like other qualified business expenses (which makes sense IMO, which is why I support the mortgage interest deduction, to keep owner occupants on relatively equal footing with landlords when contemplating purchasing property).
    - tehlike 9y ago
      The real q is, why does government even subsidizing home ownership in the first place?
      - sokoloff 9y ago
        US business taxes are based income / profits. In order to do that, it's required to allow profit-seeking entities to deduct business expenses (such as raw materials, wages, etc.). Logically, interest and property taxes are business expenses for landlords, just as steel and electricity are business expenses for Ford. Then, there's a question of whether you want to have a level purchasing environment for prospective owner-occupants when they are bidding against a prospective landlord. (I believe that we do want to encourage owner-occupancy, at least to the extent that they are on equal footing with landlords.) Repealing the OO-MID (owner-occupied mortgage interest deduction) would mean that a landlord could literally pay more for a property than an owner-occupant and achieve the same long-run financial outcome, or pay the same and achieve a better outcome. This would amount to a subsidy to renters over owners. Providing a similar (now lessened) subsidy to owners serves to level, not tilt the playing field. If one believes that a nation of entirely renters is preferable or indifferent as compared to a mix of landlords and end users, then there is no valid purpose for the OO-MID. I believe there are community and public benefits to owner-occupancy and support the level playing field.
        tehlike 9y ago
        500k capital gains tax free income doesnt fit that. Why does a stock not have this exclusion, but a home ownership does? I get government incentives overall. I am just pointing to some reasons bubbles form.
        sokoloff 9y ago
        That’s a fair question. I don’t support that exclusion, even though I stand to benefit the full amount if we were to sell today. (Obviously, if we sell, we’re taking the exemption, but I agree it’s bad policy.)
      - youpassbutter 9y ago
        >The real q is, why does government even subsidizing home ownership in the first place? Firstly, older people own homes and they vote. Secondly, homes are a significant part of people's retirement assets. As companies do away with pensions and as the Social Security age gets increased, home values gain in importance. So the government has an incentive to keep home prices high. This hurts the younger generation looking to buy homes and raise a family. But the older generation votes in greater numbers than the younger people. If you are politician running for office, you aren't going to say "lets raise property taxes" or "lets get housing prices down so that young people can afford it".

doseofreality 9y ago

Queue up some saying about trees, sky, growth, etc.

ninkendo 9y ago

Lived in a rental house in SJ for 7 years now watching prices go up and deciding to sit it out, after having lost 30% on my house in the midwest years ago. I’m kicking myself for not buying earlier, but not a chance you’d get me to buy in now. We’re in a bubble that’s ready to burst IMO.

pxeboot 9y ago
I agree, it seems crazy to buy now. But will we actually see a crash, or just a period of stagnation?
- state_less 9y ago
  I suppose it depends. Is the average property value increasing faster than the salaries of the people that fuel it? Sometimes folks will pack into a house, pumping up the total salary of the house over time, so you'd also have to consider cohabitation trends. If property values goes up faster than salary per home, you'll end up with a precarious housing market subject to the whims of investor sentiment. Workers won't be able to move in and back up the house valuation if they are priced too high.
- halbritt 9y ago
  It's pretty straightforward to look at prices throughout the course of the real-bubble and speculate about that fact. A few places along the peninsula had stagnant or slowly rising property values, like Palo Alto. Values in SF either held or declined very little. Places like Oakland lost a little value and Hayward, maybe one of the least desirable areas around the bay regained all of its lost value in just a few years.
  - nshelly 9y ago
    Yup, in general investing an equivalent money in stocks is better than leveraging your income to buy an illiquid, non-diversified asset like a single-family home. From Jan 1987 to Jan 2018, prices in San Francisco MSA have gone up 5.0% a year, ((258.81-46.95)/46.95)^(1/(2018-1987)). The equivalent amount invested in the stocks over that time period would have yielded 10.3% a year[1], with dividends reinvested. Unless you are planning to use it as an investment property and reinvest rents (net of property tax, maintenance) in other properties, it still doesn't appear clear that buying a home vs renting and investing heavily in the market is a better bet, not to mention other intangibles like upkeep and longer commutes. [1] https://fred.stlouisfed.org/series/SFXRSA https://fred.stlouisfed.org/series/SFXRSA [2] https://dqydj.com/sp-500-return-calculator/ https://dqydj.com/sp-500-return-calculator/

wyclif 9y ago

And they're ugly townhouses too, the type that have been slapped up quickly, McMansion style. The Spanish roof tile thing will never die, even when it's applied to a townhouse.

abritinthebay 9y ago
That's pretty much most of the south bay in a nutshell tho.

abritinthebay 9y ago

Sounds about right. Similar around the Bay in general tbh. My wife and I bought a place in Oakland in December and it's already up 20%. That's insane.

tehlike 9y ago
Something did happen in january.
- selimthegrim 9y ago
  What was that, for us non-Bay Area dwellers?
  - tehlike 9y ago
    The prices jumped more than 15% in a month (based on december vs jan comps)
  - abritinthebay 9y ago
    Seems like he’s talking about standard seasonal variations (December is the worst month to sell in) However the difference is crazy even accounting for that
    - tehlike 9y ago
      No, i lowballed at 15%. Some places saw 30% which is not attributable to that. I thought it was the tax laws, but still not clear what it is to date.
      - abritinthebay 9y ago
        The supply has been almost nonexistent since September. Literally a handful of properties for sale. Suddenly people started listing - so there’s a LOT of pent up demand.
- abritinthebay 9y ago

deleted 9y ago

[deleted]

d--b 9y ago

There is a double bubble there: 1. low interest rates have been pushing people to buy houses for a decade. 2. and cheap borrowing costs pushed investors into riskier businesses like startups increasing the flow of capital in that region. Add the NIMBY mentality, and you get skyrocketing prices. My guess is that raising interest rates are going to change all this drastically before year end.

htormey 9y ago
So what do you think the first signs of this will be?
- d--b 9y ago
  I think we're already seeing the signs: - stock market is less bullish on tech: https://finviz.com/futures_charts.ashx?p=d1&t=NQ https://finviz.com/futures_charts.ashx?p=d1&t=NQ - less startup funding: https://techcrunch.com/2017/11/30/theres-an-implosion-of-early-stage-vc-funding-and-no-ones-talking-about-it/ https://techcrunch.com/2017/11/30/theres-an-implosion-of-ear... - mortgage costs going up: https://www.zillow.com/mortgage-rates/ca/bay-area/ https://www.zillow.com/mortgage-rates/ca/bay-area/
  - htormey 9y ago
    It really doesn’t feel like a correction right now at least in the tech sector: - The job market is unbelievably hot. - I don’t see why any of the big tech companies will turn in outrageously bad numbers this quarter. - Everyone I talk to is hiring. - A bunch of people at startups that went public or are about to go public will unlock a lot of stock really soon. Yet I still feel a bit nervous. I’ve been in the Bay Area since 2008 and I remember how fast the place cleared out after the last big crash. I could see some stocks taking a hit in the short term however I just don’t see what’s on the horizon that’s going to do in tech in particular.
    - d--b 9y ago
      My view is that many companies in the US are over-funded because the fed stimulated the economy too much. Investors flocked to the stock market in 08, when there was no money to be made in bonds, and then the stock market got whipped up by more people joining the trend. Then it happened again when Trump got elected and investors thought republicans would be easy on businesses. All that funding is being burnt by companies to grow and compete with each other, which is why you see an overheated job market. They also inflate the value of GAFA, because these companies spend a lot in software, hardware, cloud services and ads. When interest rates go up and bond yields get better though, it's likely that investors will no longer fund companies as much as they used to (which is why I think we're starting to see a slowdown in stock prices). This slowdown in funding will cause companies to have some painful debt crunch, and start the bursting of the bubble... Anyway, just my opinion

thatfrenchguy 9y ago

And San Jose really is a really really boring suburb...

garmaine 9y ago
Only if you don't know your way around.
duxup 9y ago
As someone who worked outside CA and ended up working for a company based in San Jose I was all pumped to visit the corporate HQ for the first time, silicon valley here I come. The offices were very nice, saw lots of signs for super cool companies that I knew. It was great .... except it was all just a lot of office park... and nothing else. I'd take the train up to SF on weekends for things to do. Otherwise I was more entertained back home around Minneapolis than most places outside SF.

tomrod 9y ago

Yeah... that's not going to be sustainable. I know folks like to point at the big techcos in the area being flush with cash as evidence this can continue a long time. And in a vacuum, wage growth in tech could continue to keep pace, perhaps. But that is 300k in appreciation a year. How far out will school teachers, janitors, chefs, mechanics, city employees, and similar need to live before their not-quite-as-quickly-increasing salaries fail to keep up, and they leave the area en masse? Cut the NIMBYism and you might see some improvement, but only as fast as the city can approve permits. As Buffett likes to point out: be "fearful when others are greedy and greedy when others are fearful".

deepsun 9y ago
Won't school teachers' salaries grow in presence of diminishing supply and stable demand?
- nradov 9y ago
  Proposition 13 imposes a fairly hard upper limit on the growth of teachers' salaries.
  - jiveturkey 9y ago
    Not at all. Prop 13 only has effect when houses do NOT sell. Whenever a property changes hands, which is the only event that matters wrt demand, it is assessed at current market value. Prop 13 does have an effect but only in the manner in which it supresses sales.
    - klipt 9y ago
      It limits property tax to 1% which I believe is pretty low compared to other coastal states. Coincidentally, California's public schools have fallen down the rankings since it passed.
      - thaumasiotes 9y ago

taurath 9y ago

I have a pretty large group of generally geek-oriented friends across most of the western US, and tracking their migration patterns has been fascinating - we're basically all 1980's-born millennials. In the 2000's was when we met, those who had grown up there and those who were moving were in the same age group. Only about 40% were college educated or in tech/programming oriented roles. Of those, a small amount has ridden the wave to prosperity. Most moved to Seattle (if looking for a career/home/etc), or Portland (if they pass the weird-test). There's been a steady trickle out of the Bay for anyone not in tech for the past decade, and now I think only 10% of them still remain. Now they're going to Colorado rather than Seattle, and a few more to Portland. Those that are currently missing the wave in Seattle are looking at moving to Colorado. I have no idea which area is gonna be next - Colorado is now seen as the last "cool" place thats "affordable" and liberal (sorry screaming Coloradan's, you're next). Personally, I just can't believe its gone on this long - the pressure release valve that I thought would be released from the bay every year for the last decade hasn't fully let go. Career or being able to afford a house seem to be mutually exclusive ideas if you're not in programming. This is creating a rather nomadic culture within my friend groups... welp, this area is too expensive, might as well move onto the next. Very few are putting down roots. I wonder what this all will look like when we look back 20 years hence - was it really a bubble, or the creation of a permanent Elysium style class divide between those that had the capital (or took the risks) early, and those who didn't start out as well (or were conservative in leveraging themselves)? Every day it feels like I'm leading more towards the latter.

fred_is_fred 9y ago
We have no avocados here. This isn't the state you are looking for. Move along. Move along.
- mulmen 9y ago
  I'm from a small town in Idaho. I recently went back to visit family. Everyone was eager to tell me that the direct flight from Seattle would be cancelled in favor of a town 45 minutes away. The local airport which used to serve the region is losing commercial service to the largest metro area in the region. Getting out of town will take an extra transfer and a 45minute to two hour drive. That town has stagnated and now it is dying. It is an oversimplification but I would rather deal with the problems of growth than stagnation and decay.

nradov 9y ago

Peter Thiel claims that the majority of capital poured into Silicon Valley startups ends up flowing to landlords. https://www.sfgate.com/expensive-san-francisco/article/peter-thiel-silicon-valley-capital-landlords-12759450.php https://www.sfgate.com/expensive-san-francisco/article/peter...

analog31 9y ago
During a gold rush, rent hovels. ;-)
Reedx 9y ago
Yep. VC -> Startup -> Employee -> Landlord. Everyone blames tech workers, but they're not the ones raising the prices. Most of their money disappears into rent.
- oculusthrift 9y ago
  startups also pay insane rent for their offices
  - kazinator 9y ago
    Not their fault; other than in a high rent area, where can you find people who blow most of their dough on rent? Those are the smart ones!
- sokoloff 9y ago
  If they’re the ones demanding housing at a rate that outstrips the supply, then they are the ones causing prices to rise: they’re just not the ones editing the listings.
  - jostmey 9y ago
    The demand for housing is not the problem. It's the supply that is the problem. The supply is being kept artificially low

shard972 9y ago

I wonder what affect San Jose being a sanctuary city has on these increases. It would seem me that a policy that encourages illegal immigrants to live in your city is neccisarily going to increase the supply of home dwellers, putting more demand on housing.

rayiner 9y ago

ITT: rent-seeking.

georgeburdell 9y ago

>Home price appreciation serving ‘as a kind of second job’ I had this thought the other day, actually, when tallying my net worth for the quarter. My home went up by ~$100k in value since December (hot neighborhood near Apple) and my family earned about the same amount in income. Long term, we plan on cashing out and moving to the East Coast so it's not just idle numbers tabulating.

ikeyany 9y ago
Won't that defeat the purpose of why you chose to buy and live long term on the west coast to begin with?

BurningFrog 9y ago

If you want to do something about it: https://yimbyaction.org/ https://yimbyaction.org/

blondie9x 9y ago

We need to build much more dense places that people can actually own. The housing situation is not sustainable. Many people end up living on the streets because affordable housing isn't available. There is too much demand and we aren't building dense enough to utilize the land available.

0x445442 9y ago
There's plenty of land in this country. I see no compelling reason why Google can't open up more offices in the fly over states. I'm guessing, if offered the same salaries, Google could find plenty of willing takers to move.
- Bartweiss 9y ago
  > I'm guessing, if offered the same salaries, Google could find plenty of willing takers to move. There ought to be companies with data on this - some places allow fully-remote work without adjusting salaries for CoL. So I wonder: how many of their employees still end up living in high-cost cities? Does anyone know of public data that could sort this out?
BurningFrog 9y ago
Are there places built that nobody owns? What are you saying?

__m 9y ago

if we only had some kind of network that would let us work remotely from anywhere in the world, but i'm just dreaming

yAnonymous 9y ago

To everyone hoping to wait out the bubble: We have this in Germany and it's been going on for 9 years now. I hope you enjoy waiting.

11thEarlOfMar 9y ago

Looks like it's all about inventory. No one is selling their home in Santa Clara County (San Jose)[0]: Homes for sale in March 2016: 1,254 Homes for sale in March 2017: 934 Homes for sale in March 2018: 516 [0] http://scc.rereport.com/market_reports http://scc.rereport.com/market_reports

erispoe 9y ago
It's artificially constrained supply. It's really hard to build new housing in the Bay Area.
jandrese 9y ago
Why sell when your home value is increasing by $292,000 a year and property taxes are not going up? This seems like a very strong HODL time for real estate as an investment. The fundamentals are sound, there are tons of people looking for a roof over their head so they can continue working their dream job and supply constraints that prevent the production of new homes to accommodate them.

kevinburke 9y ago

Please contact your Senator and Assemblymember and ask them to vote yes on SB 827 and 828, which would make it much easier to build housing in transit rich areas that have previously resisted it - Atherton, West Portal, Palo Alto, Forest Hill, all of Marin County come to mind.

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pontifier 9y ago

Autonomous RVs are going to pop this bubble. You're going to see a lot of people dropping static homes for RV's, or even a couple of them. You'll see a new generation of people who have never had a static home, but always been at home wherever they are, and they'll never be more than a few steps from their own bed.