Tech workers are increasingly looking to leave Silicon Valley
qz.com
qz.com
I don't even think SF and SV are good places to start out anymore. You can learn skills anywhere with the internet, and you miss out on early investments due to the opportunity cost of rent. If you want to live in the Bay Area, it's better to hunker down someplace cheaper for a decade or more, save up a down payment, and then lateral into a midlevel or senior role at a tech company, whose salaries are high enough to service a mortgage but not high enough to save a down payment and pay rent at the same time.
Edit: I wasn't considering condos. Go fee simple or go home.
The situation is crazy, don't get me wrong, but I think you're a little overselling it.
I purchased a house with my wife here in northern OH, and while we don't have a rental, we do have around 4 acres of land to use and for our son to play on, in an area with an excellent public school district. I know this would be very hard to come by near most tech-centered hubs in the country, and would be very difficult for me to give up now. The more I think about it, the less certain I am that even doubling my salary would convince me to do it.
Note that given the cost difference between living in SV vs Ohio (although I don't live in Ohio) I could spend 12.8 years with my wife at an all inclusive tropical resort. We'd probably get a discount if we lived there full time, so maybe 15-20 years. Not exactly your average retirement home.
Or cash on the barrel no discounts or financial aid at all I could pay list price to send SEVEN kids thru Harvard for four years with a reasonable allowance for expenses and still have money left over. I don't have seven kids, but I guess I could pay cash on the barrel to send a couple thru med school or law school instead, maybe finance a startup or small business for one of them.
Or I could cash buy six rental properties vaguely similar to the house I live in, and retire as a landlord (although from watching my great uncle do this, being a landlord is no retirement!). The rent off six houses, minus realistic expenses, would be a little less than I get paid now, but its interesting to think about.
While you can spend that much for a home in SV, you certainly don't have to.
You'll be paying over $1M for a 5 or 6 bedroom house in a "nice" part of Columbus (i.e. German Village), and you'll be paying around $1.2M for such a house in a decent (though not upper class) neighborhood in Silicon Valley.
Concrete is not a weather condition.
Instead we have hot days followed by slightly less hot nights, and I run the A/C all night lest I get no sleep at all.
The only drawback is cost. But I envy all of those possibilities compared to Miami, where all you have is a big city and sea, maybe watersports but precious little of everything else... and Miami is still not that far behind in terms of cost of living.
Oh, there's a lot of things you can do with 4 acres. You can maintain extensive gardens and supply substantial quantities of your own food, as a profitable hobby. You can consider owning small farm animals like chickens, or maintain apiaries. Children and pet cats/dogs can run around outside and the children can exercise their imagination through unstructured play in a safe environment, especially in a multi-child family, potentially replacing overly-structured and expensive after-school activities for all but the youngest children (with many opportunities to increase their physical fitness through such activity). You or your children can also practice sports, such as baseball.
I lived in a tiny apartment right in the city growing up. And I mean very, very tiny - we shared beds. I did all those things in my city-dwelling childhood. You don't have to own the land to do that stuff. In fact city life lead me to spend plenty of time with the neighborhood kids, which was really great and you don't get that if you are spending all your time on your own property. If I was bored I literally just walked outside and see which of the neighborhood kids were out. I don't believe there was or is anything "unsafe" about public property and you can do sooooooo much more on public property. We did have a very small backyard that was shared with 6 families and we spent plenty of time there. And we got to interact with the other kids who lived in the building and the kid next door who saw us playing. You can also find a surprisingly large amount of nature in the city if you go looking for it. The idea you need to own 4 acres of land to play baseball is just laughable.
I'm fact, seems more like living on 4 acres would be a prison. You couldn't leave without being driven!!!
The problem is kids aren't allowed to go outside anymore by themselves.
Growing up with very little made me such a better person. I'm way off the hedonistic treadmill.
I wouldn't call it public, it's more of a shared space an apartment complex might have.
The larger the city, the higher is the likelihood of public spaces having a variety of homeless encampments, broken glass, needles and plain old feces.
The larger the city, the higher is the likelihood of accessible but nevertheless private property having those same things; though in either case its likely to be restricted to particular parts of the city, and those are likely to be the ones with lower property values (this reduced property value is both a cause and effect of the condition, its a positive feedback loop.)
The larger the city, also the more likely public -- and accessible private -- spaces are to be fairly pristine enclaves. These will usually be found in substantially different parts of the city than the nasty bits.
Besides they yard was an after thought, I spent most of my outdoor time in public places and I was outdoors every day in the summer.
You may just as well say "I'm too good for public property, I'd rather not share with the peons." Don't hide behind "safety." There's no major safety issues in letting your children use a public park.
And anyways, it's probably much safer to let your kids have a hypothetical chance of running into hypothetical broken glass (that they can just walk away from) than to put them in a car every time they need to go somewhere, as automobile accidents are the leading cause of death in people ages 5-25 (or something along those numbers)
And bicycles are great kid transportation...
Having owned a number of houses - the biggest reason is peace. I've owned houses where I felt the neighbors looked in your back window, everyone could hear what others are doing in their yard around you...
Walking out and having a bit of space is wonderful. And tools like slack and hangouts are making it easier to work remotely as well.
No, no it is not.
It's not about need. It's about the fact that my life is pretty awesome, I have tons of spare cash, I can relax on my deck and see nothing but trees and squirrels and my dogs running around.
How much room does a family of three need? I think 4 acres is better than a two bedroom, third floor apartment surrounded by pavement and cars.
Source: Grew up on 4 acres of woodlands. Now live in SF. Would like to move back to a more rural setting after 3 years of hunting for parking spots and spending all my time/money getting away from the city when possible.
If you're an introvert, sure. I love the countryside myself. But extroverts get their energy from being around other people, and dense cities such as NYC are great places for that.
In addition, if you are an introvert, you would love a long commute sitting alone on a bus or train. You should move to the city for sure.
(I live a little ways outside of Boston. The weather here is probably not better overall than Ohio--which I wouldn't describe as cold and rainy for 7-8 months of the year.)
Are market prices even remotely comparable to affording that kind of luxury in SV? Hell no.
It's beyond comprehension for me to justify the cost of living out there. I'd be trading in for a postage stamp in an overly populated area.
Plus, who said they don't like cold weather? I grew up on the East Coast and I love Winter. I love seasons. I love snowboarding and hiking in the Winter.
I lived in SF for a while and didn't really enjoy it at all. Too much congestion, too many people and no fresh air. I could barely see the stars at night.
That being said. To each their own.
Also, this may or may not be appealing to you, but I find it to be a humbling experience. Being alone in an empty winter forest really makes one feel insignificant. Not in the bad way of making one feel worthless, but instead in the way that makes your worries and aspirations seem trivial. I think it's a nice respite from the myriad concerns of daily life.
The only other experience I'd consider possibly better for raising a child is in NYC (my current home) where the best art and culture exist a short subway ride away, with regular interactions from seemingly every culture in between.
You can have your moderate weather fluctuations (I don't consider cold, rain or snow "bad" weather), I'll take a world of life outside my door.
Northern Ohio? That is not even remotely true. The climate has four very distinct, traditional seasons.
I missed that in SF. Time seems to pass a lot quicker when you don't have nature reminding you that it's happening.
But it turns out I really like having space to play more. YMMV.
I actually think many parts of SF are in a suboptimal density band where it is quite dense, but still car dependent, dense enough to add a lot of cars and concrete but not quite dense enough to reclaim some of the pedestrian space… this link explains it pretty well.
http://www.spur.org/publications/article/2008-06-01/eye-stre...
SF really is pretty diverse, especially in terms of language diversity (I read somewhere that the number of languages spoken by 1000 or more households is higher in SF than even NY, though I don't have a cite for this). SF also does have decent density by US standards as long as you're not talking about NY. (http://beyonddc.com/?p=4808). I also find that getting out of the city for the countryside or natural surroundings is faster and easier in SF than almost anywhere else (ie. the time it takes to get from a very high density urban neighborhood into a very quiet forest or rugged, undeveloped coast is amazingly short in SF). Since I really value both things, I do get a lot out of living in SF, but there is a kind of truly urban neighborhood, with trees and open pedestrian areas, that is much more prevalent in larger, more dense cities like NY or Paris. The images in that link about curb cuts, contrasting the street scape between Park Slope and Dolores Street in SF, pretty much sums it up. The image of Park Slope manages to both peaceful and highly urban at the same time, largely because it's urban enough to give up on cars and driveways. It almost seems like SF got just close enough and then blinked.
Aside from NY, though, and maybe a very few parts of Boston or Chicago, there really isn't much else out there, at least in the US. For the west coast, you just aren't going to find as many of those little red dots clustered (high density), even in Seattle. Interestingly, LA is becoming much more urban. That said, SF's high density urban neighborhoods are pretty limited in size, and they are breathtakingly expensive.
But you're right, there aren't many places in the US that hit that balance. I grew up around Boston (found it too small and casually racist), lived in Chicago (you still need a car), have spent a ton of time in SF for work, and have lived in Brooklyn now for about 9 years. When I think of where I'd move if I weren't in New York I usually end up with Mexico City, London, Bogota, Medellin, Tokyo, and other cities abroad.
http://time.com/money/3984416/solon-ohio-best-places-to-live...
You can buy a 4 bedroom house with a three car garage and a big plot of land for less than a 1 bedroom apartment in SV.
Sure, you can, but your salary would be much lower (half?) in Cleveland. And unless you're fully remote, there are far fewer tech jobs in that area. (I also live in Ohio.)
People who stick it out in places like SF, NYC or London tend to have different considerations in mind.
I'm 39, happily single, and live in inner Melbourne, Australia. I pay a small fortune in rent. I could live out in the 'burbs in a 4 bedroom house with a 3 car garage - but that's my vision of hell on Earth!
I absolutely have "different considerations". Bars and restaurants literally on my doorstep, a walk to work, no desire to own a car, singles like me as neighbours rather than families, etc.
Wasn't my intention, in any case. I was really just trying to point out, as dispassionately as possible, that (like many disagreements people have about major life choices) it boils down to preferences of values and taste -- and the inevitable tradeoffs was have to make when choosing to pursue these preferences.
Indeed -- some of my favorite people on this planet have homes with more bedrooms, bathrooms, parking spaces, living rooms, extra playrooms, etc, than they could possibly know what to do with. And I love them all dearly, just the same.
I also have a ridiculously lower cost of living - my 15-year mortgage for a nice house on an acre of land is about 1/2 of what rent was in San Mateo, and about 1/4 of what I know friends were paying for apartments in SF.
Before that, I freelanced which ended up turning into a full-time gig with a startup in SF that liked my work.
Could you elaborate?
Might just mean in general, if the person's single maybe the odds are better of meeting someone, no idea.
http://www.pewresearch.org/fact-tank/2014/10/02/the-best-and...
At least by that metric, that means it's the toughest place for single heterosexual men to find women to date. I'm curious if women find the imbalance awesome or awkward when it comes to dating (probably a little bit of both?).
Plus, salaries at pure software companies and startups are pretty good. I have had four people in the last week quote me 200k salaries.
I was well paid at Google, and loved working at YouTube. I also severely miss our many friends, as well as beautiful San Francisco: I used to walk up Bernal Hill one or two days a week with my toddler. Pictures of oceans and hills and everything else make me sad…
That said, we could never afford a house in San Francisco. And to get affordable, we'd have had to have gone way out, and the commute would have been terrible.
I was lucky enough to find out that Square has an Atlanta office, full of very smart people, so I was able to keep doing Silicon-Valley-style programming, which is a big win.
Is someone making $80,000 for doing 60 hours a week of highly-skilled, highly-profit-bearing work "overpaid". In my opinion, that's underpaid.
If anything, we've seen recent evidence that SV salaries are "deflated" compared to other industries and areas of the country, due to collusion, frequent targeted hiring of very young, often naive grad, inflated time at work, etc.
I don't work in SV, for the reasons I outlined above, so this isn't some kind of self-justification.
Edit: To be clear, I don't disapprove of people working there, I know it's beautiful and a nice place to live. I'm actually defending SV engineers from accusations of "inflated" salaries. It's just not a good place to go to get rich as an engineer with a family.
SF is too expensive though. I like Seattle just fine.
You're ignoring equity here, which after a couple years will be more than your base salary anyway.
With a total comp of $300k+, a lot SV workers don't mind paying $30k/year more in rent to live in the Bay Area. As many others have noted, it really is beautiful here...
What other place is like this? I mean a lively, diverse city where everyone is from everywhere, mountains nearby, and 3000 hours of sunshine a year?
Boy that's diverse.
The area basically vacuums everyone who fits the exact same mold from anywhere in the world – that does not make the area more diverse.
I find that very hard to believe. If you make $12,000 a month in SF and spend $3,000 a month on rent (which is pretty generous for one person), you still have more leftover money per month than your entire paycheck at an $80,000 annual salary.
Glad to be proven wrong here. I'd go back and entertain offers I've had if I knew I was wrong.
It's expensive to live here. That doesn't mean I don't like it though :)
That is kind of true, but it's also not realistic to just compare identical housing arrangements in very different regions. It makes more sense to compare not just median costs of two regions, but also median housing size/type. But of course, if spacious housing is very important to someone, that's perfectly fine, and it's a perfectly good reason to live somewhere else.
On net you get an extra ~2,600/month after taxes.
The median sales price of a Santa Clara County 3 bedroom house is $820,000. This is $3,877/mo, plus $850/mo property taxes, for a housing cost of $4,727/mo
That $140,000/yr is taxed at $48,922 in the state of California, leaving $91,078, or $7,589/ mo income.
CA Income ($7,589) - CA Housing Costs ($4,727) = $2,682 leftover.
---
The median sales price of a Cobb County 3 bedroom house is $173,000. This is $818/mo, plus $140/mo property taxes, for a housing cost of $958/mo
That $80,000/yr is taxed at $23,600 in the state of Georgia, leaving $56,400, or $4,700/ mo income.
GA Income ($4,700) - GA Housing Costs ($958) = $3,742 leftover.
---
I'm not saying my numbers are valid for every person's situation, only that this is an example of a situation where the numbers work in Atlanta's favor.
L4 is ~215k. L5 (Senior) is ~265k.
Factor in free breakfast/lunch/dinner, free gym, free laundry, generous 401k matching, other perks and discounts, and the gap widens even more.
Throwing those out as typical is disingenuous.
Of course, this is just "a couple minutes of google research"--I am not a subject matter expert, as someone on HN kindly pointed out last time I posted these here. Also, they are based on self-reported surveys and don't include sellable equity, so take it with a grain of salt. I don't know where better data would be published. I'm intuitively not too surprised by these figures--I think the HN demographic is probably pretty skewed towards the higher end, judging by all those threads where people toss around $150K and $200K salaries as "normal".
1: https://www.glassdoor.com/Salaries/san-francisco-software-en...
2: http://www.payscale.com/research/US/Job=Software_Engineer/Sa...
When I put everything on a spreadsheet, the lower housing costs in other parts of the country didn't sufficiently make up for the drastically lower salaries. YMMV, but I encourage everyone to very carefully do the math before making these kinds of decisions.
(I do think that SF may be a special case, since it's SO expensive, but even then it's worth doing the math.)
That said, adding in those factors often makes Silicon Valley come out even worse. I've visited it quite a bit and it is not nicer enough to account for cost-of-living difference, unless you simply can not stand to live somewhere with less than perfect weather. But I think that's special to the Valley.
It's a nice area for certain, but it makes me wonder about myself when I'm wearing a parka and everybody else is walking around with a scarf or light jacket.
It's interesting that you bring this up. In the case of food, at least, lower COL areas (which are typically more rural) have access to something far better than any store - farmer's markets and actual farms.
There's a "cheap basics" grocery store in a 5 minute walk, a farmer's market in a 10 minute walk, and a Whole Foods in a 15 minute drive.
I don't really care about organic produce, but that flash pasteurized OJ at Whole Foods is really worth the extra $2.
Parking is a big difference though. You can rent an apartment in the Midwest for what it takes to park a car in some major cities. Not to mention higher gas and insurance.
I live in Cincinnati with one of the most top 10 most expensive airports in the country (CVG). I also spend a lot of time traveling and searching for flights.
One strategy I've used to avoid this is booking Kayak-style "hacker fare" for a domestic ticket to a hub like LAX/ATL/etc. with an international flight out from the hub, then a return ticket from destination to home (with connections of course).
It doesn't sound like it'd be that significant, but it made a recent trip to New Zealand & Australia about 40% cheaper, though it does take some extra effort.
Conversely, they're also being propped up by the massive amount of VC money at play there, which is driving an arms race for programming talent not seen elsewhere around the country. I'm not saying you're wrong about your point about collusion, but there are multiple factors at play there.
https://www.wolframalpha.com/input/?i=$140000+in+San+Francis...
Maybe I'm just not writing my queries just right but it's my major pain point with Wolfram Alpha.
By the way, many here assuming I'm in Atlanta. I am not (and don't wish to be, because of the crazy traffic).
In Mikey Dickerson's talks about fixing Healthcare.gov he talks about two strains of programming: that descended from a more engineering mindset, and that descended from the IT department. (I'm paraphrasing badly: I'll try to find a better link when I have more time.) I guess I was using "Silicon Valley" as shorthand for the former.
Note how the word "computer" doesn't appear in that sentence; it's not unique to computer programming.
Work in a profit center, not in a cost center.
But I get to build RPC services and other cool infrastructure in Go.
Still get to write cool stuff in Go, Node, Elixir or whatever else takes my fancy and tinker with IoT hardware during work hours :-)
I am working for a large bank this summer in San Fran on their main website. This site has an Alexa score in the top 25 for the US, and is in the top 100 overall. They have said I would be working in NodeJS, as they are rewriting large portions of the site with node. Will this project most likely contain people of the Engineering, or IT mindsets?
End up around people that already have that strain, get their attention, and become friends so you can learn and they can teach. You unfortunately just can't teach yourself everything.
It sounds like another form of pedigree selection. Or maybe dividing the field up into "us vs. them". Pretty understandable sentiment if you get pushed into fixing Healthcare.gov like he describes in one of his talks and working with guys arguing about tickets not existing because they're on different ticket systems and people with zero motivation to build a decent product. Wastage is immense in IT from the sounds of it in this talk: https://www.youtube.com/watch?v=7Vc8sxhy2I4
At unsexy companies, and at StackOverflow
Also, YouTube's head office is closer to the SF airport.
Which is also not in SF.
Of course, even if the office was in SF that wouldn't be justified. It's hardly unusual for people to commute into SF from places with lower living costs.
If the bubble continues I would expect that both places will get priced out in the next 2-3 years. At that point you'll have to look at the Tri-Valley area (Dublin, Pleasanton, Livermore) for the affordable price points.
tl;dr: 1300 sq. ft. new 2 bedroom townhome for 1.3 million.
here's a tip: don't do that. problem solved.
Yeah, 850k, and that was a steal. The mortgage alone is, what ~3k/ mo? Taxes and everything else push this up to ~4.5k to 5k/ mo, right? And this is going to go for how long? Oh yeah, 20 years.
My folks have no illusions that this sweet couple and little Benny next door are going to be there anymore than 5 years. Even all the way out in the East Bay, it is just not possible.
Get out now before this bubble pops again. Beat the rush.
I know in Chicago if you were old past a certain age you got some tax breaks (MAYBE at some point a tax freeze). Does SF have some kind of tax rate freeze?
But ya, live is too short to spend a million bucks on a 2 bedroom house.
https://en.wikipedia.org/wiki/California_Proposition_13_(197...
It's almost a double whammy for someone who wants to buy a house, but can't afford the current prices or was outbid by a cash buyer going over asking price. Cheer up as we've incorporated the price increase into your rent.
So, treat primary residences as primary residences, whether or not they are the primary residence of the property owner. For multi-unit rental properties, the total value of the property is divided among units proportionately to the rent charged for each unit to assess this.
While it's probably not a bad idea, I don't see it moving the needle much.
I'm discussing ways to achieve the goal upthread of insulating people from property tax uncertainty on their primary residence.
I would expect that the larger purpose of that is to allow full-value taxation on all other real property; of which non-primary-residence residential property is a subset (and a fairly small subset, at that.)
Remember that Prop 13 applies to all real property, not just residential property.
Assuming we're talking free markets, then the rent should already be set at the maximum price the market will bear. (If not the landlord is leaving money on the table.) Increasing property taxes is to depress the price of real estate. A simple property tax could also discourage new investment, while a land value tax incentivizes owners to maximize the value of their holdings.
Prop 13 is a blatant wealth transfer between people who are new to the area (mostly the young) to the people who were originally here (mostly the old).
Taxes aren't governed by a market; the same rules don't apply. Arguments against government protectionism in markets don't also apply to protection against the actions of the government itself.
That said, proposition 13 doesn't seem like a good implementation of this. There's no good reason for a sudden increase upon sale; that breaks the ability to buy a home. There should be a hard cap on property taxes that doesn't change on sale.
Why should taxes get to increase without bound or control on existing property? Once you've paid off your home, you should not have an ever-growing expense to keep it.
(You shouldn't have an expense to keep it at all, but that's a separate argument.)
My view is that property taxes fund the very things that make a particular neighborhood desirable, like good schools, roads, parks, and other local services. Your property's value is what it is because of these things, and you shouldn't be able to reap these benefits without paying taxes proportional to the value you've captured.
I think you're arguing that richer neighborhoods should have nicer schools, roads and parks. Granted, SF is an exception here, but that's precisely how things work elsewhere in California.
And if richer neighborhoods don't get that, California made annexations pretty easy, which is why you see those tiny municipalities in the vicinity of Los Angeles, San Diego, Anaheim, etc.
That's a really good reason to stop funding those things through property taxes.
One can't really arbitrage that effectively.
Municipalities can't run consistent deficits, so the new schools, roads and parks will be built after a wave of newcomers buys properties, locking in higher prices and higher tax base.
In case there are no such newcomers (i.e. everybody is maximizing their Prop 13 benefit by not selling), the municipality just sticks to the last year's budget with a 2% increase permitted by Prop 13. But in that case new schools, parks and roads that make the neighborhood better don't appear either.
In California, that's less true than it might otherwise be, given the prop 13 limits on both assessments and tax rates. Lots of those things are funded by sales tax revenue, income tax revenue (primarily state income tax funding local programs), development fees, and other revenue sources other than property tax.
Does it apply to anything else you own? If 2004 Honda Civics suddenly got really popular and I already owned one, I wouldn't suddenly be priced out. Or if I own gold or stocks, and the price goes up, that doesn't affect me at all unless I sell.
In California, since the state has ad valorem taxation on vehicles (the vehicle license fee, which is 1.15% of the market value of the vehicle) which does not have prop. 13 style limits, you, in fact, could be priced out of your 2004 Honda Civic if the market price suddenly and radically increased.
That prevents people from being taxed out of their home, without creating a situation that makes it hard for people to buy new homes.
The Deschutes (Oregon) County Tax Assessor's office made a really good video explaining how three almost identical houses in the same location can have completely different tax bills:
https://www.youtube.com/watch?v=Fo_hSySAC2A
In addition to what the video says, I wanted to point out that the 3% hard annual cap you mention is only on the property's Maximum Assessed Value, which is only one of the many inputs into the computation for a property's tax bill. For example, one thing that can cause taxes to go up more than 3% are general bonds approved by voter measure.
Portland Commissioner Steve Novick also wrote a really good article about all of the problems with Oregon's tax system and made some recommendations:
A lot of places I have lived capped property tax at 2% of market value. In Ohio are their taxes significantly higher than 2% of property value? I wonder if they have tax missing somewhere else, like no local income tax or something... Ohio doesn't strike me as a high tax zone.
Basically, it subsidizes keeping property and never selling it. This is because every year the owner's property taxes essentially go down, presuming any normal level of inflation. And because of follow-on propositions, you can transfer that advantage from parents to children. Yes, this does let existing residents stay somewhere indefinitely. Equivalently, we can say it strongly discourages mobility.
The crazy real estate prices you see are simply a result of the proposition-established cartel. This drives up prices for new arrivals, which California depends on to keep this going, which makes the people holding on to their property think two things: "I'm rich because my home is worth so much" and "I could never get by without Prop. 13 because my home is worth so much." This has made Prop. 13 untouchable — it would basically have to be overturned at the state Supreme Court level at the behest of broad popular opinion.
However, this is just another bubble. California as a state has done relatively quite well in the last thirty years, so it continues to inflate. However, California and local governments have also spent a huge amount of future revenue on state workers, so it has become harder to sustain. But for the huge amount of income tax receipts from the investment class of California, things would already be in rough shape.
Someday, the bubble will burst. If Prop. 13 was ruled unconstitutional tomorrow, it would cause a real estate crisis, followed by an economic crisis, that is hard to imagine. But that might be preferable to having Prop. 13 crumble in the middle of a statewide economic crisis, which is the most likely ending of this story. In the meantime, yes, it does keep grandma in her tidily-appreciating house instead of some filthy tech hipsters chasing the next gold rush.
While the calculation isn't quite this simple (dividends on stock versus not paying rent, and interest deductions) it highlights that real estate appreciation isn't quite as crazy as it's made to sound.
There’s a huge difference between 300% inflation the BLS claims vs. 2800% inflation you are suggesting.
On a practical level, inflation is always relative to what you're actually buying. If you're buying S&P 500 index funds, the inflation rate is the price appreciation of the S&P 500. If you're buying real-estate, the inflation rate is the rate of increase in housing prices.
(Perhaps this is a bad example because you typically wouldn't be buying stock index funds after 40 years of earning, but the point is to illustrate opportunity cost. If someone's goal is to pass wealth on to their children, for example, then the price of income-producing assets is a lot more relevant than the price of milk.)
The price of goods, services, salaries, etc. have all gone up by roughly 3–4x in the US (with some notable exceptions like housing in certain areas and college tuition). Someone who invested in the S&P 500 and has 29x as many nominal dollars as they did in 1976 can buy about 8 times as much of other people’s labor as they could before.
Some fixed percentage of the total size of the S&P 500 is a practically useless measuring stick. If we use that as a standard, 90%+ of the population in the USA is 8x poorer than they were in 1976.
Even so, the approximate return from the S&P 500 (reinvesting dividends) over the same period would be 11.468%[1].
[0] http://www.moneychimp.com/features/portfolio_performance_cal...
Was the salary the same, or was it adjusted?
Other forms of non-base include stocks/options/etc.
Fun calculator for relocations:
https://www.wolframalpha.com/input/?i=compare+salary+of+100,...
For instance, it assumes transportation costs in Manhattan are higher than most other places. This is unbelievably inaccurate in my experience. Maybe it assumes people here take taxis all over the place? I've found transportation to be cheaper in NYC than anywhere else in the USA. No car or gasoline or insurance or maintenance, etc. A car costs on average about 9k/year to own according to AAA. In a place like NYC if you take the Subway every day your cost is about 1,300/year. Throw in a few hundred for cabs and you're looking at 1,800/year. It doesn't cover the rent gap compared to most places but it helps.
In effect this calculator says a salary in Chicago goes nearly twice as far (so if you make 200k in NYC that would be 106k in Chicago. In my experience that is simply untrue. 200k in NYC would be closer to 170k in Chicago.
I think this calculator is making the assumption someone would require the same resources, like a car in all places. Or that someone who had 1600 square feet of living space would expect the same in NYC, which would be ridiculous. No reasonable person would assume they would move to NYC and get a car and garage it. That simply isn't the typical lifestyle here. Most my friends born and raised in the city don't even have licenses.
It also claims that living in San Francisco is significantly cheaper than NYC which is untrue as well.
For example, it's not exactly sound to average the price of all neighborhoods in Manhattan.
I hope it would be apparent you should reference many different sources when comparing salaries in different locations.
But re: "Silicon-Valley-style programming", I don't see any difference here than any other similar place.
I landed at one of these a few years ago and got out ASAP. They're out there, but not so much in the Bay Area because the talent war is so hot - any place like that wouldn't be able to hire or keep anyone.
I don't do "SV style programming" but we have no dress code, no death March schedules, no charts, no meetings, etc. Same thing as my last job in another city.
Though we also don't have ping pong, Foosball, stocked fridge, or many young people if that's what you are looking for. Oh, and not a lot of turnover either.
Especially in Europe, most programming goes to custom software for banking and various industries. There are very few Microsoft, Square or Google style companies in Europe, where software is the product. A lot of software is a cost center for something else. For some, it doesn't give them the same feeling of accomplishment.
Companies that might pay an employee $110K a year will have zero problem paying rates that end up with take-homes of +$200K a year after paying your own benefits and taking vacation time off.
Software development != software development
In some places of Europe it's most of the time just working for bank, insurance, industry or european institution with too old technology, long and fixed schedules and not so much excitement or feeling of making something useful. Add this to under-market salary, suits everyday, ... Developers are not killing it there, they just cost money, they don't have that aura of hype, respect, perks and all.
But it's starting to change I guess (and hope).
Passing an interview gauntlet will usually suffice. Be really good at sophomore level data structures/algorithms class materials.
You can't fix the lack of proximity to the ocean, but being able to get a direct flight to most airports in the Caribbean almost makes up for that.
http://www.trulia.com/property/3224704811-407-Loreto-St-Moun...
http://www.trulia.com/property/3164651301-1625-NE-Marine-Dr-...
http://www.trulia.com/property/3152279353-109-Syrah-Cir-Aust...
Of course, life isn't about how big/nice your house is. But at some point you realize you've just been working on a CRUD app the last few years (and not changing the world with a self-driving AI satellite hyperloop), you can't cross your apartment without stubbing your toe, and you have enough money for whatever you want but no time or room for anything, and maybe (just maybe) there's delicious food outside silicon valley, too.
>About 60 percent of foreign buyers paid cash, compared with one-third of domestic buyers, according to the 2014 Association of Realtors survey.
http://www.sfgate.com/business/networth/article/How-and-why-...
1/5 (all buyers) = 3/5 (foreign buyers)
So one in three buyers is foreign. Which means two in three buyers are domestic, which means two in nine buyers is a domestic buyer who pays cash. So that puts the number of cash-only domestic buyers higher than foreign investors. That means that it's roughly the same absolute number of domestic cash-only and foreign cash-only (allowing some fuzziness in the numbers), not quite mostly foreign cash-only.
We can safely then conclude that the article linked does not support the claim that the people bidding cash are mostly foreign.
When you're in an auction market, which has a segment of bidders that are more accustomed to bidding over with cash, you're going to see them push auctions into the cash over range more frequently, even if they aren't the ones ultimately buying.
Conversely, once they move out of New Mexico they seem to deeply miss our food.
SFBA is not a good place to hire engineers, unless you're heavily funded AND a clear winner and need to hire a bunch of diverse types. For anything else, I could find other places which are far superior.
It's a great place to hire professional services to support startups, and the best place in the world, hands down, to raise money. YC being here makes it great early on, too. I think investors become less location-sensitive as you get to later stages, if you're winning.
The biggest problem is if you're selling b2b to tech companies at all, you can literally bump into your customers here.
With my next startup, I plan to do Seattle (probably) or Austin for a US office, with a small SFBA presence, and then Berlin, and run EU and US companies as separate entities with separate officers, so people can choose if they want to be customers of a US or EU company. Maybe add other location in the future.
(I'd obviously be doing something in the infosec space, which is becoming increasingly jurisdiction sensitive.)
I absolutely encourage people to work in SFBA for a while to build a network, but after that, GTFO unless you really want to be here.
There are also no non-SFBA cities in CA that I'd actually want to do an infosec startup in. The set of places I'd personally consider (in no real order) is: Seattle, Portland, SFBA, Austin, DC-Metro, Boston, Boulder/Denver, SLC, Raleigh/Durham. I dislike NYC and Chicago but those are also viable (also dislike Atlanta; might be ok). I actually like Las Vegas, Nashville, and Louisville, but they would be challenging. I think Houston, Dallas, Miami, Phoenix, LA, San Diego, Philadelphia, Pittsburgh could work, but not sure. Some other big university places (Ann Arbor being the canonical example) could be fine if you're from there.)
Given how the tech boom/bust cycles are centered here in the Bay Area over the last 20+ years, business seem fine to stay here and attract talent.
There are also communities here where you can get involved, volunteer, etc. SF doesn't equal the rest of the Bay Area.
Why is that a problem? Is the lack of separation a bad thing?
We love it.
To be fair, my wife has to commute to SF at least twice a month for her job, so she still gets her SF fix. I, on the other hand, have gone pure North West. I've got my Subaru to prove it. ;)
I'm very happy with the change. I do miss the beauty of the pacific northwest, but otherwise it's been great.
I come from a small town where the best off made maybe 3X the worst off. The Bay Area is total culture shock.
Before you judge too much, consider that some (not all) of those folks might be paying that because they live in an area that has failing public schools, and they may be living in that area because they can't afford housing in an area with better public schools. Many middle to upper-middle class people find themselves faced with that choice.
In California overall, aside from anomalies like San Francisco itself, wealthier cities correlate with better public schools, and the correlation is > linear.
Tech is such a weirdly age-distorted industry that there seems to be no historical memory. They forget that as recently as 2009, a lot of highly qualified people around here were struggling to get work.
I moved to SF from NYC about 3 years ago and, yes, it's now definitely more expensive than NYC.
But I've built a friend network here that's absolutely unsurpassed in my short 37 years on this earth. I feel more at home in SF than I ever did in NYC - I see friendly faces all around the city, I run into people when out for a walk, I've got a group of people I cycle with regularly.
So - for that reason - even if you offered me 2x what I earn and a home/apartment 3x the size - I wouldn't even give leaving a minute's thought.
How does that play into the thinking for other folks? Do the folks who are thinking of just picking up and leaving not have friends they care about? There's got to be more to where you live than whether or not you own a home (and how big it is)....
London isn't exactly known for cheap housing so there's likely other factors at play.
Greenville and Charleston, SC are working pretty hard to become tech hubs. Charleston is booming to a degree that housing is starting to go the way of SF (which is nuts in this area) but Greenville and it's surrounding cities have virtually no risk of that degree of price inflation. There's just too much land and space.
I live in Easley, which is about 10 minutes from downtown Greenville and you can get a decent 1100 square foot, 2 BR/2BTH apartment with washer/drier for about $500 / month.
Houses tend to run between 80-110 / sqft.
Also, food is awesome: https://www.youtube.com/watch?v=73GcUAb2HO0
Wanna move to Portland? By all means come on up! But leave your dot-com privilege and your "live to impress VC's" mentality back home. Come to Oregon and be an Oregonian.
Also- if you're attached to your car, Portland is not for you. The commutes from the 'burbs are as nasty as the Bay Area, and the inner city is made for biking and walking. Your car is good for the weekends- getting to the Coast and the Mountains- but not for your work week. Change your perspective on commuting. This ain't CAr-ifornia
Note- I said "weekends", meaning Saturday and Sunday when you are not working. If that is a foreign concept to you, Oregon is not for you.
I mean I was fine with most of what you said until you literally wrote, CAr-ifornia. What? People actually use that word and expect to be taken seriously?
I mean maybe there are people who talk too much about VCs, but your post didn't make you sound any better than those people. Talk about exclusionary.
I'm interested in it due to the lifestyle but also the idea of being able to afford to bootstrap my next company in the next year or so. My gf had a friend who moved up but couldn't stand the lack of sun (former San Diegoan) - this has made her reticent to make the move from our rent-controlled shoebox...
I get the opportunity to work at an amazing startup and have been able to build a specialization in mapping technologies. On the weekends, I can hike or take a day trip or go to Sausalito, Angel Island, or just hang out and get high at Delores Park. Sometimes it feels like life isn't real we are so privileged around here, despite all the negativity.
I've made lifelong friends and connections here who "get me" more any other place I've lived. The gay community here is also especially strong...and weird! ;-P
It makes me sad that people are struggling, but I think the key is to value your experiences and spend the best part of your life less consumed with strict acquisition of wealth, and more with the depth and richness of experience. Of course that's a trade off.
Here's my advice on the bay area:
Don't rent an apartment in SOMA. Don't be consumed with trying to buy a house. Learn to accept living with roommates even though you make 6-figures and your friends back home are buying huge houses on far less. Forget about trying to save a lot of money. Be creative in your living situation if you want to save money. Enjoy your life and all that SF has to offer. I've lived all over the world and there's no place like it.
I guess for most people they are consumed with having kids and feel pressure to own a home and save for retirement. I've been able to save money and keep my living expenses down by having roommates, but I know owning a home here is probably out of my reach and that's OK. If you're unhappy here and really want to live a different lifestyle, and SF isn't able to provide you what you need to be happy, I would say you should move so you can give someone else the chance to be happy and thrive here.
I'm glad you like the Bay Area and this is a great post. If this is what it takes to love the Bay Area it's no wonder people would want to leave. But you are right. The extraordinary expense of living there will chase a lot of privileged people away because they don't want to pay the price. (Unfortunately some of the less privileged cannot be so flexible.)
Where did I move to? Medellin, Colombia. While I'm not sure I'll stay here forever and may move back to SF at some point, I'm definitely enjoying living down here for the moment. I'm doing remote software consulting, so I am geographically agnostic.
I definitely miss friends, the hustle, and being surrounded by smart people in SF. However, there are a lot of things I do not miss about SF. For example:
Prices: SF <> Medellin
Rent: $2000 (mediocre) <> $300 (nice, best part of town)
Nice restaurant dinner: $30-40 <> $10-15
Uber (20 mins): $25 <> $3
One example is my gf: set production assistant wages have not gone up with cost of living in the area, at least for the companies she works for. Set production assistants are freelance, non-reliable work with sometimes terrible hours. You think they'd make okay money. But even in L.A. where the industry is at it's biggest, they're usually shortchanged.
Another example: A friend of mine accepted a position as a mid-level gameplay programmer at a place that is choosing to pay them hourly so they can make them work overtime without having to pay $100k or more, because of CA law. Yet another business strong-arming someone who wasn't in a good position to negotiate due to circumstances. Hopefully that friend can work their way into a senior level position soon, but even then not every place pays senior level as well as they should.
Industry can be very stingy, focusing on the short-term business instead of long term employees.
I agree that LA is a pretty good place right now. Industry is good, and you get a lot of the cultural benefits of a big city without the ridiculous costs of the Bay Area or NYC.
I moved into a 1BR for $1500 in nearby Culver City, which cut my commute down to 20-25 minutes. Not so bad. I'm across the street from a little downtown area with bars, restaurants, a movie theatre, 3 yoga studios, and a grocery store. Fairly walkable.
The job market is pretty hot. The problem in my job search was lining up interviews to get as many offers as possible at once so I could have my pick of the litter.
And even nicer weather than the Bay Area to boot.
The downtown / Santa Monica Expo line extension is opening in March, the Gold line is opening a bunch of new stations in April, extending it almost all the way to Claremont, and they have an LAX metro line they're building to prevent the traffic clusterf* that LAX has become.
The reverse brain drain might not be long term but if that trend continues I dont think the western world has to worry much about jobs being lost.
http://www.nytimes.com/2012/03/11/opinion/sunday/the-go-nowh...
The difference may come down to how we grew up; my father traveled quite a bit when we were younger, so I lived in France from ages 3-6. I thought those few years added to my life experience and gave me a unique cultural perspective. My girlfriend never moved growing up though, and she believes that moving hurts the friendships that young children develop. To be honest, I'm not sure who's right. I was always kind of introverted, so I didn't have particularly strong attachments, but she is very outgoing and extroverted and still keeps in touch with friends from elementary school.
Kids are stuck near their parents because they can't get decent jobs.
If they're still living with their parents in their 20's, well, they can't relocate unless whatever job they have can absorb a huge increase in housing cost.
And, even if they did move out, they're so close to the economic edge that having Mom and Dad nearby when the car breaks down, the washing machine dies, etc. is huge.
Sure, unemployment rate may be different in different areas, but why move from one McJob to another McJob?
50 years ago, if your girlfriend said she didn't want to move but you got a job across the country you would probably both move across the country. In part that's because you would likely be the primary income for the two of you and partly because women's wants were not often considered as equally important as men's wants.
Would that have been true in every case two generations ago? Maybe not. And would it still be true in some cases today? Probably. But the odds have changed over time quite dramatically. My wife earns nearly the same salary that I do (and made waaay more back when I was a student). We can't move somewhere unless we both have job offers lined up.
Also, our culture now has a rather unhealthy (imho) obsession with trying to make life perfect for our children that previous generations were less inclined towards.
I've been looking at some of the stats here:
http://www.bestplaces.net/cost_of_living/city/california/pal...
http://www.bestplaces.net/cost_of_living/city/california/san...
It seems that aside from housing, everything else is just moderately higher.
Compare that to NYC, which is also on the list:
http://www.bestplaces.net/cost_of_living/city/new_york/new_y...
If it's just housing that's insanely expensive, I could see why some have been trying to arbitrage the situation by living in alternate housing arrangements (think RVs), such as some notorious cases with Google employees.
Obviously NYC can be ridiculously expensive and the real estate market is annoying to navigate (broker's fees, wtf) but there is more housing stock available here, with decent-to-great public transportation that makes living in the outer boroughs pretty convenient.
Brooklyn, Queens, and Jersey City (NYC metro area) are all much cheaper than SF. Even parts of Manhattan above 59th st are quite affordable.
[which further proves to me that suburbs are not dead. it's merely been the vocal majority (millennials) blabbering on about big city living and how they'll never do this or that, only to hit the family creation stage in life and realize they were naive to think in such extreme absolutes]
Price
On the other side for developers it could mean better earnings with less being spent on paying rent and other services which could lead to more savings for you.
At industry level this would translate to a competitive advantage as you can build a service cheaper.
I guess it's a personal question as to which one you choose.
Yeah, the salary of the developers is usually increased when moving into a lower cost of living area, because of all the money the company saves thanks to the low office rent.
We now have midwestern VCs that are really doubling down on this strategy (e.g., Drive Capital).
The job market, while 1/10th what is was back in the valley, is still great. Now that Microsoft is embracing open source, the vast pool of talent that was previously locked away in msft's proprietary tech will be free to leave and spin off many new start ups over the next few years.
SF in your 20s, South Bay in your early 30s and Seattle when you have a family.
Granted, the traffic on the Peninsula has gotten really bad in the past few years, it's ALMOST as bad as Seattle!
Indeed.com, a job search site, published stats that show how tech workers in the Bay Area, and especially those from age 31 to 40, are increasingly looking for job opportunities outside, mostly in New York, Austin, Seattle.
This might be attributed to the search for a balance between happiness and opportunity.
Also, this type of migration is common in other parts of the world, and tech companies are willing to follow these trends, such as Facebook opening offices in Austin and Seattle, or Google in Portland.
Shameless plug: I started posting summaries of HN stories here: https://github.com/simonebrunozzi/MNMN
I've gone from lusting over migrating my career to the Bay Area, to becoming almost completely averse to the idea over the last two years.
Boulder is more startupy and small to medium size companies, but just southwest of Boulder is Interlocken, which has some biggish tech companies (Oracle and Level3 being the largest). Downtown Denver has all manners of software companies, from startups to big telcos. And then in south Denver (about 1-1.5 hours of commuting from Boulder) are a bunch of larger corporations (it's called the Denver Tech Center).
Additionally, California labor laws are more employee friendly when compared to other states.
I know this limits my choices as businesses are leaving California due to the employee-friendly labor laws and the high cost of housing, but I'm semi-retired anyway so it doesn't matter to me. I can be choosy when it comes to taking a job.
But thanks for the vote of confidence!
Joe Flyover
...that's $6/sq ft for a year.
So two months paying for my two bedroom apartment, in Mountain View, can get me more than a year of rent for my office.
There's a lot more places up for rent lately, because the fracking bubble popped.
This is a strange comment, given that 5 of the 8 cities listed as top destinations outside of San Francisco are larger cities/metro areas.
That said, we will likely relocated for a period of time later this year/early next north of Seattle for a bit of a change (ties there). That may dictate the overall plans we have.
Honestly, while having strong ties here (and owning a house) I'm not wedded to this area. Cost for the quality of life (I live in Santa Cruz) is ridiculous -- crime, drugs, etc. -- surfing and biking are great though.
I suspect the balance we will end up finding is part time in CA, part time in WA, and part time in Europe -- we both currently have location independent jobs.
I still work for a NYC-based company, I just work remotely from Richmond, VA. I like it better this way. I may not always work for a NYC co, but I will stay here. I bought a house last year that would be well into the millions in NYC's commutable suburbs. My kids go to just as good of a school as they did in NJ. There is no traffic to speak of.
If you have a dream of being in one of those cities, one of those scenes, then by all means, go for it. It's just not for me (and from what I can see, a lot of other folks on here).
My personal, subjective reality is that the reason to leave the valley is this: culture. Which is to say, by way of corollary, a reason to Be in the Valley is this: the lack of culture.
Let me explain what I mean by culture: If you have to drive and park, its not culture.
After 15 years of success in the Valley as a relatively content systems software developer, what it boiled down to was this: can I take a bus where I need to go? No?
Well, go where the buses are. Go where the train, is.
Too many long days spent in dread of the ride home, the inevitable gear-grinding maelstrom of disaster that starts on the onramp and doesn't end until you get to your generic hide-away.
Cars: a reason to move.
You get it from sitting on a bus, going somewhere local, with a bunch of locals.
The fact of the distance between things just makes the culture there so .. dire. Seriously. So much time spent traveling, so little actual human interaction beyond the parking lot.
The difference between a city that's been given to cars, and a city that has resisted it is incredibly stark. Even America's "walkable" cities, like SF, NYC and so on, are ever so inhuman, due to the cars. The young and poor tolerate it, and the rich can buy nice things to make it tolerable, but a city where cars have taken over pretty much half of the public realm is profoundly flawed.
Required anecdote: I've lived and worked in Europe for a while in a city that's mostly pedestrian, and whatever traffic there was, was incredibly slow. It was basically an environment that was fully build-up, no nature-proper for miles, but it felt natural, human, and, well, "cultured". I stepped out the door in a place that was made for me, a feeble 6ft meatbag.
Looking back at it, I find the feeling incomparable, and I miss it. I live in a US city now, in a verdant, central area of town. Mobility is never an issue. It has many of the same qualities you'd attribute to attractive urban neighborhoods, like stupendous architecture, lush gardens, good walkability, a variety of things close-by. But the streets are for cars. And it is jarring. They don't belong. They are too fast. The asphalt ribbons are ugly. The noise is out of place.
Cars do have their place. They're very useful, for longer trips, hauling things, having a fun leisurely drive in the country. So I get why a family would want one or more. But cars are poison to cities, and it's been a terrible mistake to either have them take over our older cities, or design our new cities around them.
Its just an observation. Of course there is culture in the Valley. Damned, expensive, culture.
And I can bike commute. Yes, in the suburbs of the bay area.
I get what you're saying, but it's too absolutist. I would simply never, ever live anywhere I couldn't keep a car. I enjoy being able to bike or take public transit where I want to go. I've spent entire months with cars parked in the driveway that I never use. But I simply cannot live without the freedom to load up the car and take a multi-hop roadtrip. Out to the woods to go camping. Up to the mountains to go skiing. Yes, some of these things can be accomplished, at some pain, via transit. But not all.
At what point in this tech worker shortage/drastic expensive economy do I convince one of these companies that I'd be a better value working remotely, even willing to work for less salary? The tooling is so good now it almost seems like I'm in an office anyway. And the irony is many of these companies already have distributed teams that use these tools.
What am I missing?
From my point of view there are issues like "knowledge sharing", team spirit, group problem solving, reporting, etc. All of these "important" reasons are raised to be on-site, even you have project specific position where you are the only one who has required knowledge (nobody for sharing), you are the only one working on project (like migrations).
But I think the problem is that you're being contacted by recruiters in the bay at big tech cos. The small cos. might not have a recruiter, and the big cos. grew big without a remote-first culture.
Then again, maybe it's because I'm not really looking, and I'm being contacted by those who are just grasping at straws at that point.
My company is a mid-stage startup of ~30 distributed across Cincinnati (75%), NYC (20%), and SF (5%). I would say we're semi-remote: most of our tech team works from home 1-4 days per week. I've personally done a few trips working remotely in another U.S. city one week at a time. In our case the culture isn't quite ready to accommodate a person being fully remote, though I'm hoping to be the guinea pig.
For anyone reading this and looking for fully remote, there's a nice "database" of remote jobs in this GitHub repo.
For me personally, there are tons of activities to do and not enough time in SV, which wasn't the case in Texas. It's a fast paced life and it took a while to get used to.
Yes there are negatives: cost of living, taxes, commute etc. but I'm okay with this trade off. IMO, I don't need 4 acres of land in the middle of suburbia or nowhere with nothing to do.
It's much, much less affordable there than Seattle or SF, trust me.
Which is $60K CAD. If you get roommates, rent can be $600-1000 (again, CAD)/month. Health insurance is $72/month, single-payer, and increasingly being 100% covered by tech companies. You don't have to worry about a car if you live downtown, and transit is good enough that living downtown isn't your only option if you don't want a hellish commute. (e.g. Hastings-Sunrise, Metrotown, New West)
No way Vancouver is more affordable than SF (if you have to work in tech for a living).
https://docs.google.com/spreadsheets/d/18UwaThgGikSXzinnLNHx...
In fact, not a single company that pays well whom I've talked to is on your list other than Amazon and Microsoft (Whom will pay a whole lot more if you point the spread out to them).Proof: https://docs.google.com/spreadsheets/d/18UwaThgGikSXzinnLNHx...
I am planning on converting this data to website that will keep track of what tech employers are in the city. Kind of like HackerBatch but just listing companies, not delivering job postings. (Also, it will be available to the public, not just UBC/SFU students. You won't have to get 50 students from your school to sign up like with HackerBatch, either.)
For the moment, I'm protecting the sheet so I have a stable source from which to work. Stay tuned...
Heck, just check Angel.co and notice most engineering jobs are >= 100K... and that's just tiny startups kicking off.
Salaries are in the range of 7000 - 12000 CHF / month after taxes and apartments can be way cheaper than in San Francisco.
I am a technical recruiter with a software engineering background and I live in Zurich. You find my email address in my HN-handle.
[1]"Living in the suburbs" anywhere else in the world but Switzerland means a >1h commute...
It seems like New York, Bay Area, and Austin, TX have become the three large Internet/App tech hubs.
The latest incarnation of VC-backed tech companies leave very little for the founding members.
What practical benefits does it give you? All I can see are many many downsides.
edit: I can see it making more sense if you can pay the whole sum in full on the day of purchase.
When you rent, you might as well be lighting that money on fire.
There are a few other terms in the equation (property taxes in particular) but that's it in a nutshell.
Take SF for example. I'd need $1mil to buy an apartment. At 30 years, that gives me a mortgage payment of $4700.
Rent for a similar apartment is $3400. And I don't have to pay for upkeep.
So if my rent stays the same, I will have saved almost $40,000 in the next 30 years.
I can do a lot with an extra $1300 per month.
Not to mention I can maintain my desired lifestyle of moving every 2 years or so.
What it does buy you is that you can customize your place to a significant degree and you can't be forced to move if you don't want to. If you're not at least planning to stay put, it probably makes no sense for you to buy.
Good point. There's definitely benefit in that for a lot of people.
> you can't be forced to move if you don't want to
If you buy cash, yes. If you are practically leasing from your bank, no.
You don't really own it until it's paid off.
You do but obviously you can be foreclosed on if you stop making your payments. (And, of course, even after your mortgage is paid off you still need to pay taxes, insurance, upkeep, etc.--although those will usually be a lot less.
My basic point though was that you can easily lose the lease on a rental property even if you've religiously made your lease payments every month. Or the lease can be increased significantly if you live in an area where real estate prices are rapidly increasing.
It's ultimately about predictability/control vs. mobility. IMO, some variant of that tradeoff is what potential buyers should really focus on.
My grandparents have a "property they can now sell". They never will. They've been investing in it and adding to it for so long that it has become useless to any potential buyer, and parts of it are now so old they really really need repairs.
They cannot afford to sell because the investment to make it sellable for a good price is too high. Nobody would want to buy because the investment to turn it into a useable large house, is too high.
So instead they turned a tiny part of the house into an apartment for themselves because the costs of living in the whole thing are too high. They turn on the heating in the rest of the house just enough during winter to keep the pipes from freezing.
None of the kids want to inherit the property. None of the grandkids want it either.
The location isn't that great either because the economic activity the location was great for (wine) is now in tatters and the government is paying people to please for the love of god stop making wine and cut down their vineyards.
My mum has a nice flat in a downtown area. She recently had to go into debt to afford to fix it up. She could potentially sell, but then she'd have nowhere to live. She's too young to buy a rural house (same price) because she still goes to work. She's too entrenched to deal with finding a new apartment somewhere else. And she'd have to pay more for a new apartment than she'd get for her current flat. At 50-ish, she also doesn't really want to go into another 10+ year mortgage.
So ... no, I don't see the value in owning.
Basically: Having all your wealth tied up in an illiquid asset is twoplus not good.
Regarding your mum - I assume there are rent controls in her area - in mine (Western US) there aren't necessarily those. If she rented she'd have been priced out of her flat years ago as the landlord ups the rent to market rates or "renovate".
Its still assets at the end of the day, no? Just because they don't sell it or they put a lot of money into it doesn't mean they can't. A renter doesn't have that option. I'm not making claims about its efficiency as an investment vehicle, I'm simply pointing out that in the example that I replied to you they'll end up with an asset worth more than the $40,000 they saved by not buying.
OK, try lighting that money on fire. Then go live under a bridge because your rent money is ashes.
Rent gets you a roof over your head and it's completely ridiculous when people claim it's "lighting money on fire" or "throwing money out the window". Obviously it's not because if it were "lighting money on fire" people wouldn't do it.
Ownership also comes with expenses--maintenance, insurance--and with the substantial risk that your property will decrease in value or that you will need to move and take a loss on the sale. Also, the transaction costs when buying and selling are considerable--agent commissions and taxes are thousands of dollars.
That doesn't necessarily make buying a bad idea but renting is certainly nothing remotely close to "lighting money on fire".
I own property and only a fraction of what I pay each month goes to reduce loan principal. By this logic everything else I pay is "lit on fire". This is ridiculous logic. It buys me a place to live.
It also turns out that when I buy and eat a pizza, I built no equity either. Did I just light money on fire?
Obviously. If you would just buy a pizza restaurant instead, your payments would go towards your pizza equity. You'd get pizza, but you would also get returns from your mortgage payments on the pizza restaurant.
/s
Once you factor in the risk offset (what happens when that once-in-a-century flood ruins the house? if you're renting, you just fuck off scot-free) and the ability to pick up and move to another city (which is what this whole article is about) if you still can't see the value prop you deserve your property taxes and underwater mortgages that you will never see a return on, because your house is not really an investment vehicle.
A house degrades with use and has a limited lifetime. You take a hit due to wear and tear, or you have taken a hit due to having made remodelling. So you are paying for that wear either way.
You can get some idea if you tally up the cost of full renovation (including pipes, roofs etc) and divide that over the expected age of those, for example 25 years. Plus a fuzz factor for the smaller stuff.
(If comparing to renting, there are other significant fixed costs that come on top of the mortgage payments which are included in the rent.)
You get stability: Don't need to worry that the rent will go up or that the landlord will sell and stop renting to you.
Additionally, in many markets, certain kinds of housing are for all intents and purposes buy-only. Nobody is renting out a house with a yard in a good school district that you want to be in, for example.
It's your place and you can do whatever you want there: own a pet, change the colors of walls, install a decent kitchen.. anything. For example, I love cooking (and invest decent amount of money for equipment), do various DIY home improvement weekend projects, but I would be much less tempted to invest my time and money to someone's else place. Also, my girlfriend moved in recently and I didn't have to ask anyone's permissions for that. I see a lot of benefits with only few downsides, in the worse case scenario, I can always move somewhere else and rent my property -- currently mortgage monthly payment is less than the rent for a similar flat in this part of city where I live.
The quality of life is 500% better here in Portland than the Bay Area. Even if housing prices were the same, I would still prefer living in Portland.
I am serious, but my thoughts have the added benefit of deterring people from moving to Portland :)
I know others who did the same thing, and are doing fine over here ("here" being mostly Berlin but also further afield). I think the trick is to know what you're moving for, as opposed to what you're moving away from.
In most cases you will make less money, at least over time, and miss out on career opportunities. But there are other opportunities people in SF are missing out on. And as others have said, the income difference can easily be balanced out by a cost-of-living difference.
If you want to be at the core of a game changing software company that's got a decent shot of being a rocket ship, you're most likely to do it in the Bay Area. It isn't about getting rich, or cost of living or any of that. If you want a good stable technology job with a large house in a good school district, you can get it anywhere. If you want to maximize the likelihood of earning cash, hold your nose and go to Wall Street. If you want to work at Google or Facebook, you can live very well outside the Bay Area.
But... The best chance at grabbing onto the next Google or Facebook, it's best to go where these companies are sprouting from.
Source: Proud Waterloo-ite surrounded by Ex-Blackberries. Possibly moving to the Valley soon.
P.S: Every region that wants to grow will face the real-estate crunch SV is. Look to your municipal laws/stucture to see how your region will weather this storm.
But the cynic in me wants to point out that Indeed.com is based in Austin has a vested interest in bringing more talent to town.
I live in Mid-Ohio (Columbus), and have been contemplating a move for some time. I know there's lots of tech companies outside of the Bay Area, but it seems like there's sooo much concentration there that I want to experience it at least for a short while. I was planning to try it out for a year or so, but now I'm not so sure.
FWIW, I make about 100k and but plan a significant increase when I transition into my own consulting full-time.
In general, I'd recommend you take a short-term rental to explore the city rather than trying to lockdown a long-term rental from afar. Especially because the open houses are often open for an hour or two and result in waiting lists (dozens of would-be tenants) in length.
Also, just be aware of rent control. I think the market prices aren't any different between older (rent-controlled) and newer buildings, but after a couple of years of 20% pa price increases for the non-rent-controlled place, the rent controlled unit will be much relatively cheaper.
Feel free to ping me if you're interested in the area.
Ft Collins might work out really well for the right person and company.
But, your blog post about Boulder hit the nail on the head. So far we have dealt with growth by pushing lower income residents to the L cities (Longmont, Louisville, Lafayette) and accepting large amounts of in-commuting.
Yeah, that's a dealbreaker for some people. I don't mind much - my wife wouldn't mind being a bit closer to somewhere larger.
On the other hand, I live 10 minutes by bike from work and pay 1000 less a month than I would have for something further out from downtown Boulder. So we only have one car, rather than two, resulting in more savings.
I could easily imagine living in Boulder if I were younger and wanted a more outdoorsy alternative to the bay area - there is a lot of tech stuff going on there.
I also have been considering south of Denver but it has similar expense issues.
Houses with decent size yards are 450-600k in Boulder, depending on location and square footage (7000 SF lots). Low property taxes (CO has a counterpart to prop 13, TABOR, where every tax increase needs to be voted on by the public), a flat 4% state income tax, and great schools (in Boulder) add to the attraction, IMHO.
I haven't looked at the rental market for housing in depth, but I think you can get a 4br 2br ranch w basement for about 2000-2500/month.
Lived most of my adult life in Boulder so can't really speak to the real estate situation in south Denver.
http://www.zillow.com/homes/for_rent/Boulder-CO/house,mobile...
Don't forget that Zillow will have the asking rent price, which is not always the same as the final rent.
But thanks for injecting some hard data into the discussion!
Nice thing about Silicon Valley: The quiet, peaceful time of year during which all the burners are on the playa. [2]
[2] https://www.jwz.org/blog/2014/08/i-wish-you-could-stay-on-th...
I would not sacrifice my quality of life (diversity, food, education, etc.) to live somewhere else because it was cheaper.
I definitely don't miss California. Never going back there.
I've lived in SV for about 9 years now. I know a lot of people who live up in SF and commute to SV. I don't know how accurate this is, but my observation is that SF housing prices are >= SV. The people that live in SF and commute to SV universally do it because they would prefer to live in SF for one reason or another, rather than for financial reasons.
When comparing what $x of housing will get you in SF vs. SV, the SF equivalent for the same price will have very different characteristics. The SV housing will likely be much newer and less unique than the SF housing, but it will also likely be in better condition than the SF housing.
Another huge aspect is the length of that commute. It's 60-90 minutes each way, every day. Some people are much more OK with that than others- I personally couldn't do it. The big SV companies have generally nice buses with bathrooms and wifi, where you might be able to get work done and might even be comfortable, but even so that means 3 hours/day on a bus. A nice bus, but still- 3 hours/day on a bus is 3 hours/day on a bus.
Now, some people will say that's great, because they use SF public transport and take the company bus to work and now they don't have to spend money on a car. In theory that sounds great, but what if you want a car? You're living in northern California, which I think is one of the most beautiful, varied, and interesting places in the world. Not owning a car means not being able to take off on a whim and go drive down Big Sur, or out to the desert, or Tahoe, or wherever. In theory a non-car-owner could rent a car when they want one and enjoy that lifestyle, but in practice most people end up sticking to destinations they can get to via public transit. That might not be a tradeoff everyone wants to make.
Ah, one might say, but you can have it both ways! You can own a car and live in SF, and still enjoy the commuter buses. Well, get ready to spend several hundred dollars a month on a place to store your car that you only use for weekend jaunts, road trips, and whatever needs pop up. Now the housing that was $x in SV that included car storage will cost you $(x + y) in SF, where $y is the cost of a parking space.
All of which is a long-winded way of saying that SF and SV cost about the same but it's very hard to do an apples-to-apples comparison of what $x will get you in either place. The choice comes down to how an individual assigns weights to the pros and cons of each locale.
According to the skyscraper theory, there is an economic bubble set to burst in SF before 2018. Maybe this is one of the signals?
Property speculation is utterly engraved into Western society now and it's killing it.
EDIT: it's interesting how people upvote this as they can see it's a truism, but downvote my post attacking land speculators.
NEWSFLASH: buying land and sitting on it to exploit scarcity creates no wealth. Therefore if you buy lower and sell higher that money comes from wealth created elsewhere, making you a leech. If you buy somewhere to live in, fine, but more than one place to speculate: you are leeching off of the labour of others.
EDIT: don't have time to reply now as i've got a prod issue to debug. Read up on Henry George or don't.
If you think making money from doing nothing then using the same money to consume goods is fine, well to hell with you.
As many economists have noted, land is not applicable to the general laws of economics because it is finite in supply.
We need land value tax to squash speculators who add nothing to the world, right now.
http://www.theguardian.com/lifeandstyle/2015/apr/11/secret-h...
Based on the work of Henry George.
It's likely that most judges follow this pragmatism, even if they claim to believe in a different, more idealized philosophy. It's hard to falsify that hypothesis. We'd have to find several cases where the judge admitted that the ruling was worse for the world and yet must be enforced as the best interpretation of the law or precedent.
If that didn't exist (small 'l' liberal) then in 2008 the banks would have gone to hell and many a lesson would have been learned.
Also land is a natural monopoly - you can't make more. Small 'l' liberal economists have said this time and again.
There is no shortage of land. There is a shortage of land in urban areas or areas with easy road access.
You don't sit on it, you rent it out to people who can't afford or don't want to buy their own homes. Where are those people supposed to live if there were no landlords?
I'm very happy and grateful I can pick any city in the world, move there, and find someone with an extra home willing to let me live in it in exchange for some cash.
With proper taxes discouraging speculation, like land value tax, income taxes could be far lower and we'd have a world where working actually got you somewhere instead of leveraging up on land to build a property mini-empire.
Would love to know how many people made very little from their failed SF startup but overall made out good due to land prices appreciation.
HN is full to the brim with people complaining about high rents. You are not the common case.
If this were true, why would you have a problem with landlords in general? They are providing a service at cost. If a landlord is not buying land in a speculative market, what is your criticism of them?
Your comment is worded strangely also - I'm saying they are speculating on land. If they are buying and making a little just by providing a service I have less of a problem with them, but this simply isn't possible in the current environment of unlimited fiat issuance. The bank lending and endless speculation means wealth producers are squeezed to the limit.
Most landlords don't build new homes to house people. More commonly they compete with owner-occupiers to buy existing property. Remove the landlord from the story and the renter may well become a buyer, at a lower price.
p.s. Thank you for your comments in this thread and elsewhere - you have inspired me to finally read Henry George.
ps you can tell he's a nice guy because he has utter disdain for rentiers, the enemy of all working people everywhere!
So I disagree with your premise, no rational investor purchases houses and leaves them empty. And the ones who don't are providing a valuable economic service by assuming all capital loss risk, interest rate risk, maintenance, opportunity costs, etc. involved in owning property in exchange for a tenant's cash.
The issue I see is that hindsight is always 20-20 so even if housing was the better investment in the past, I still wouldn't want most of my savings/wealth to be invested in an asset that isn't very liquid and is susceptible to swings in the market. However, if you buy in a place like London or San Francisco those swings are probably only minor setbacks if you're in it for the long haul.
Go to your bank and ask for $70 to mess about on stocks because "you think they will go up". Yes there are margin accounts but these are not in common use.
All roads lead to land speculation and the banks are waiting with a big hat to capture all the surplus.
Although they only give you 4x leverage vs. the 5x-20x common in residential real estate.
Anyways, I think you're grossly overestimating how good of an investment real estate is. Unless you have some kind of edge (like you're a developer and your friend is on the zoning board or whatever) you're not going to magically get rich doing it. It's just another asset class.
I'm not saying real-estate is the route to riches, I'm saying everyone is speculating on it ("they only go up!"). The system ensures that land prices run ahead of wealth creation which shifts all productivity gains to rentiers.
You make it seem like it'll be this panacea for all of the ills relating to property renting and ownership. The market will most likely "absorb" the distortion caused by your proposed tax. What you'll then be discouraging is property investment/development into areas that don't have immediate and/or predictable returns that justify the investment for whatever period the capital owner wants. Not only that, but you'll make it even more difficult for small/medium business to do the same.
I don't see how the market would absorb this tax. Rent is set at what the market can bear. If you raise further in light of being taxed more your renter cannot pay.
Rents are set by wages. Land values are set by the ability of banks to lend against land based on the price they just lend on ... land, all "financed" by fiat money created by banks.
http://www.economist.com/blogs/economist-explains/2014/11/ec...
"Land value taxation is so beloved of economists because, in theory, it does not distort decision making. Suppose a land value tax of one per cent on land value is introduced tomorrow. There can be no supply response: there would still be as much land as there is today. Neither would consumers’ preferences change, as land would be no more useful, either. So if the market for land is competitive, no transactions would be deterred or encouraged. All that changes is the price, which falls until it exactly offsets the discounted cost of paying the tax forever. The buyer assumes the burden of paying the tax, so all things considered is no better or worse off. Landlords are unable to pass the tax on to tenants, because the supply and demand of rented land is unchanged too. Furthermore, if LVTs replaced property taxes, incentives against improving homes and developing land would be removed. Yet LVT would continue to account for "undeserved" gains landowners make on the investment of others, such as the government improving nearby transport links (this feature of the tax appealed to Winston Churchill)."
Considering 30% of US land is owned by federal government (and there's more by states and municipalities), how would this replace the income taxes? Federal budget is comprised of 46% personal income taxes and 13% federal income taxes, so roughly two-thirds of it would have to be replaced by land value tax.
By taxing the land not owned by the federal government, since obviously it can't tax itself.
> Federal budget is comprised of 46% personal income taxes and 13% federal income taxes, so roughly two-thirds of it would have to be replaced by land value tax.
So? Look, to replace the entirety of federal revenue (which is more than you need to replace, since obviously things like fees for uses of federal land, which are part of federal revenue, aren't going to go away with a land-use-tax scheme) with land use tax on the 70% of land not in federal use, assuming a flat per-acre tax (which has the virtue of making calculation easy, even if its not the most likely tax scheme), you'd need an annual tax of $3.02 trillion / 1.7 billion acres, or a land-use tax of about $1776 per acre per annum.
To extract $3 trillion out of $23 trillion the tax would need to be established at an average 12% annually, which will probably cause some massive repricing.
Is that entirely true? If you're willing to take on the responsibilities of being a landlord, and rent out your property, you are providing utility to those renting from you.
I think more people would agree with you if you were talking about those CREATING scarcity, by arbitrarily raising prices in a real estate market that has an inherent cap on supply.
In the finance world this is the definition of "good business" is it not? Nothing expended and lots of electronic money to show for it.
Example:
http://www.zillow.com/homedetails/2240-Columbia-St-Palo-Alto...
The owner of this plot was able to hold onto a huge empty lot (with weeds) for ~$1000 a year in property taxes until 2014 when it was sold for more than $2 million with an original purchase price probably under $30 thousand. In less than one year, it was flipped for $3.3 million.
06/01/15 Sold $3,300,000+56.0%
08/15/14 Sold $2,115,000+41.5%
07/21/14 Listed for sale $1,495,000It's easy once you pony up the cash (land loans are generally in 70-75% range, 80% is an exception, so one needs to have the 25-30%), have a credit history that's good enough for the bank to approve the other 70-75%, willing to take a hit on the property tax (~1% annual), and will generally be okay and have other sources of income if the market were to cool down or take a dive.
I disagree that this is leeching. For one thing, there's no guarantee the speculator's land is going to go up in value. It could just as easily flatline or decrease.
For another thing someone has to own the land. Whether it's another person or a government. A speculator can't force anyone to sell their land. On the other side of the purchase, there was a previous landowner who wanted to sell. The speculator created a market in which that seller can sell their land. Are you suggesting it should be incumbent upon the seller to discern the motives of every buyer and only agree to sell to someone who's not speculating? How could they? Also, why would they artificially limit their pool of potential buyers? They don't gain anything from that.
The buyer presumably created some value at some point in the past in order to have the wealth to buy the land in the first place. Owning it and maintaining it in a salable condition until someone needs it is a useful service.
This is where the distinction is. Most people think their "house" is worth $2MM - no it's the land, the wood and bricks are easily replaced.
Regardless, in the land example you raised it is not neccessarily true you are a "leach".
* someone living/working there would of course need a place to stay, and owning something that increases in value would be intelligent.
* it may have been non-obvious in 2000ish to be buying.
* while it is likely you are capturing much of the value from external input, it is also from demand. Sf/sv is finite and as societal resources concentrate into urban areas (as it has been for decades) the issue is supply. That previous statement agrees with you however, it isn't clear birthrate/deathrate ratios will fall enough to stabalize total pop. So to some extent you are capturing value from buying an asset that is scarce while more people will be born who need it.
Ideally this can force correction in that SF may build more resedential housing or that another place does and engineers relocate there.
So yes, in a black/white I buy 2 housing blocks and literally rent collect, choosing to have no tenants rather than lowering prices, I would consider that unethical. This happens. It isn't phenomenal for society.
However, there are many other factors where people own homes or assets and some degree is speculation, some is need and some is risk minimization.
Bitcoin is good example. Some people buy in, this creates the value as it is externally valued. Then more adopters come in and buy. Some more come in and begin trading. Etc.
In your land example, this land initially had limited value (way way back). It isn't particularly clear SV/SF couldn't have existed 50 miles south or north.
Who are the speculators?
* the settlers
* the originsl chip manufacturers
* people coming in 90s
* companies buying real estate in 2000s when some of the above went bankrupt
* people coming pre 2010
* people coming post 2010
This is a continuum and also it is driven by complex factors. There are many people/actors and it isn't clear that you can call 1 sector/type of market action objectively "bad" or a "leach"
A Georgist might say that wealth is actually created in the scenario you describe, but that it's created "by the community" in the sense that it's only because of many variables of the surrounding community that the land has become more desirable and therefore more expensive; and that the speculator's current ability to capture all of that increase via his untaxed monopoly on the ground rent creates a deadweight loss for the broader economy.
EDIT: knock yourself out: http://www.henrygeorge.org/rent1.htm
We detached this subthread from https://news.ycombinator.com/item?id=11197849 and marked it off-topic.
Then you went and got a rental.
Christ. People just love rentier activity. What is better than money for nothing!
I know landlords always harp on about how hard their (chosen) path is but land prices have rocketed in SF due to this mentality. His post intimates it was a core reason for leaving. Then off he goes and joins those who let the plebs work for them once they can get a down-payment together.
The USA has a real problem with ethics that stems from the simple problem "it's just business". "Yeah I kicked him in the face and robbed his family, but it's just business" seems to be an acceptable sentence there. It covers a multitude of ethical sins. And let's not cop out of this with "but who decides what is ethical" - you do. This guy didn't like being exploited by high rent in SF.
It also seems impossible for people in the USA / UK to imagine a world where, although they are satisfied and have plenty, they would actually forgo having even more money for ethical reasons. Thinking "yes, I could holiday in luxury and exploit my fellow man" seems fine to them.
No, hate the player.
No, kicking someone in the face and robbing his family is illegal. It is not "just business." Unless you're trying to equate owning property and renting it out to kicking people in the face and robbing their family...
The high cost of housing in the Bay Area is partly due to geographical limitations, partly due to the attractiveness of the area and its amenities, partly due to economic opportunities, partly due to speculation, and lastly partly due to restrictive zoning and development laws. One of these five factors - which are not exhaustive - is much easier to rectify than the others. Reforming common law property rights, which is what the land tax proposes, is much, much harder than reforming local laws against density and development.
We detached this subthread from https://news.ycombinator.com/item?id=11197766 and marked it off-topic.