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Price cap goes hand-in-hand with what people will be able to afford. Dual tech income ~5-600k means the ceiling is still ahead, and if incomes continue to rise

Price cap goes hand-in-hand with what people will be able to afford. Dual tech income ~5-600k means the ceiling is still ahead, and if incomes continue to rise on the top end then the ceiling is open-ended.

Apocryphon 8y ago
What's driving up tech salaries, is it primarily because companies are aware of the cost of living in the Bay Area and are paying their employees accordingly? And if so doesn't that just cause a feedback loop? Or is it just because tech is making a lot of money and so compensation naturally increases?
- ghaff 8y ago
  A bit of both I would think. It's hard to hire skilled developers etc. in the Bay area if they would have a better standard of living elsewhere. Arguably they would anyway--as has been the case forever--but there are various compensations to SV and Northern California. AND, while they'd prefer to pay less, many companies can in fact afford it if the alternative is to be unable to hire or to be forced to hire lesser talent.
- IkmoIkmo 8y ago
  The potential value of an engineer is unlike anything else. At the time of Whatsapp's acquisition by Facebook they had 10m users per employee and a roughly $500m valuation per employee. That's pretty insane if you think about it, even if it's an outlier. Workers in other industries couldn't cut hair fast enough, fill grocery bags, cook meals, wait tables or chauffeur people fast enough etc to generate that much value in SV. There's just no competing with the type of worker that can de facto service millions of customers every minute of the day like a Whatsapp engineer does. Given that, and network effects and the gigantic pile of liquidity the US/world is sitting on right now (at bizarro low-inflation interest & rates the past decade), and it all just pools around one spot. They'll put support staff in satellite offices, but they can easily afford to put the core devs in central locations. Facebook had about 15k employees up until 2016 or so, Walmart has 1.5 million (100x) on somewhat similar net income (same order of magnitude). These ridiculous salaries aren't the biggest deal to tech companies as insane as that sounds.
thinkingkong 8y ago
500-600k salaries? What jobs are you looking at?!
- bradlys 8y ago
  For a single person - it's not unheard of for total comp. You'll really only find that at the big tech players (Google, Facebook, etc.) but for dual income - which is what I think they were specifying... $250-300k per person is "easily" obtainable assuming you also enter that big N company again.
- simonebrunozzi 8y ago
  I think he/she meant a total of 500k/600k, in cases where both people in the couple earn a 250k/300k annual salary.
nugget 8y ago
If prices continue to rise, they will put even more pressure on couples to leave SFBA once they retire and don't need to be within commuting distance of the major tech companies. It could become extremely rare to see any retirees at all in the area, which could have downstream affects on where their kids and other relatives move or stay.
- slezakattack 8y ago
  You mean like retirees like baby boomers or way in the future retirees? As long as Prop 13 stays around, you have quite a few retirees who've been in their current home for 40+ years and only pay like $700 in property taxes a year. They won't go anywhere and in fact are incentivized to stay.
  - nugget 8y ago
    Today, when a house in SFBA is $2 million and a comparable house in Arizona is $400k, yes. But if prices continue to diverge, then the math could change. What happens if trends continue and SFBA is $4 million and Arizona is $600k? The foregone return on "dead" home equity (once prices do hit a ceiling and appreciation slows) can rapidly outpace any differential in property taxes. IIRC there's also some portability of proposition 13 tax basis within California, which would allow retirees to relocate intrastate, which would presumably create inflationary pressure in those secondary housing markets.
- troygoode 8y ago
  Prop 13 means you're heavily incentivized to stay in your home as a retiree and not move (even if it is "too much" home for you). If you're going to move, its almost certainly out of California entirely – but that is often not a practical option given friends & family nearby.
  - refurb 8y ago
    What do you do when you need to pull the equity out of your home to retire? Reverse mortgage?

Apocryphon 8y ago

What's driving up tech salaries, is it primarily because companies are aware of the cost of living in the Bay Area and are paying their employees accordingly? And if so doesn't that just cause a feedback loop? Or is it just because tech is making a lot of money and so compensation naturally increases?

ghaff 8y ago
A bit of both I would think. It's hard to hire skilled developers etc. in the Bay area if they would have a better standard of living elsewhere. Arguably they would anyway--as has been the case forever--but there are various compensations to SV and Northern California. AND, while they'd prefer to pay less, many companies can in fact afford it if the alternative is to be unable to hire or to be forced to hire lesser talent.
IkmoIkmo 8y ago
The potential value of an engineer is unlike anything else. At the time of Whatsapp's acquisition by Facebook they had 10m users per employee and a roughly $500m valuation per employee. That's pretty insane if you think about it, even if it's an outlier. Workers in other industries couldn't cut hair fast enough, fill grocery bags, cook meals, wait tables or chauffeur people fast enough etc to generate that much value in SV. There's just no competing with the type of worker that can de facto service millions of customers every minute of the day like a Whatsapp engineer does. Given that, and network effects and the gigantic pile of liquidity the US/world is sitting on right now (at bizarro low-inflation interest & rates the past decade), and it all just pools around one spot. They'll put support staff in satellite offices, but they can easily afford to put the core devs in central locations. Facebook had about 15k employees up until 2016 or so, Walmart has 1.5 million (100x) on somewhat similar net income (same order of magnitude). These ridiculous salaries aren't the biggest deal to tech companies as insane as that sounds.

thinkingkong 8y ago

500-600k salaries? What jobs are you looking at?!

bradlys 8y ago
For a single person - it's not unheard of for total comp. You'll really only find that at the big tech players (Google, Facebook, etc.) but for dual income - which is what I think they were specifying... $250-300k per person is "easily" obtainable assuming you also enter that big N company again.
simonebrunozzi 8y ago
I think he/she meant a total of 500k/600k, in cases where both people in the couple earn a 250k/300k annual salary.

nugget 8y ago

If prices continue to rise, they will put even more pressure on couples to leave SFBA once they retire and don't need to be within commuting distance of the major tech companies. It could become extremely rare to see any retirees at all in the area, which could have downstream affects on where their kids and other relatives move or stay.

slezakattack 8y ago
You mean like retirees like baby boomers or way in the future retirees? As long as Prop 13 stays around, you have quite a few retirees who've been in their current home for 40+ years and only pay like $700 in property taxes a year. They won't go anywhere and in fact are incentivized to stay.
- nugget 8y ago
  Today, when a house in SFBA is $2 million and a comparable house in Arizona is $400k, yes. But if prices continue to diverge, then the math could change. What happens if trends continue and SFBA is $4 million and Arizona is $600k? The foregone return on "dead" home equity (once prices do hit a ceiling and appreciation slows) can rapidly outpace any differential in property taxes. IIRC there's also some portability of proposition 13 tax basis within California, which would allow retirees to relocate intrastate, which would presumably create inflationary pressure in those secondary housing markets.
troygoode 8y ago
Prop 13 means you're heavily incentivized to stay in your home as a retiree and not move (even if it is "too much" home for you). If you're going to move, its almost certainly out of California entirely – but that is often not a practical option given friends & family nearby.
- refurb 8y ago
  What do you do when you need to pull the equity out of your home to retire? Reverse mortgage?