Must be nice to have parents who can just loan you ~$200k to make an offer on a 2 million dollar house in Sunnyvale of all places.
I can't get over how ridiculous the market in the bay area is right now.
Being from the Midwest, this is such a foreign concept to me. Looking at Des Moines, $955,000 will get you a 5 bedroom with 3 full and 2 half bathrooms, 1.26 acres, 7037 square feet, and a 5 car garage. And that house has a really nice interior too!
That house in the first picture of the article would probably be $100,000 or so based on its size.
I understand larger cities offer a higher salary, and that the salary can more than offset the cost of living increase, but it would pain me to think about spending that much money on housing (whether renting or buying).
http://www.zillow.com/homedetails/15-Greenwood-Ter-Des-Moine...
With a significant fraction of your salary.
In all seriousness, that is not a typical salary for the vast majority of people in the Bay Area. Not everyone is a software developer working for a company with money to burn.
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[0]: In spite of the smiley, this is also true.
People always think about startups, but there is an army of engineers at profitable tech companies in the bay area that are well comped for work that generally is free of death-march conditions.
I work for one of those, from home, with the same salary as bay area coworkers, but a 200K 4 bedroom house.
There was a recent article here in HN about how Silicon Valley was hiring physicists. Oscar, the main name in that story, is a coworker of mine and he isn't working from the Bay area: he is working from Hawaii.
Living in San Francisco is a legitimate choice, but the whole idea that you have to go live there to get the good salaries and work at the good companies is less and less true every year.
ie, one of the only places more expensive than the bay area. Not sure what point this proves...
I estimated at $2,900/month rent in the valley and $900/month in the Midwest. Valley earned 160/year, Midwest at 80/year. My conclusion was that if everything froze and you could save all non-rent money (minus 20k for misc. other expenses), the end result would be pretty close. You'd have to commit to working in the valley fairly for about 4 years to save up for the downpayment (assuming you started at 0).
After the valley developer gets the house, the numbers may swing substantially in their favor, however it's a long timeline for that to happen, and the housing prices have a fair chance of continuing to rise or for the housing bubble to burst.
I'm not a developer, but it seems like it's a good gig if you've been there for a number of years. It seems like it would be difficult to get by for non-tech workers, either requiring a really long commute for a somewhat reasonable rent/mortgage or putting a huge percent of take-home pay into housing.
Roughly how many years would it take to get to senior engineer or staff engineer?
The salaries at these levels don't start out at the top number. Like many other company, it is a band, so that you can continue receiving smaller raises for a few years after you are promoted.
On the surface, you would be missing out with those numbers, but we have to look at the whole picture. There is no equity gained in a house if you're renting while saving up for a downpayment. Let's look at San Jose vs Des Moines and use the overall median downpayment for comparison.
# Assumptions We'll go a bit conservative here. San Jose developer pay 2k/month more in rent than the Midwest developer.
San Jose developer will earn double the base salary (not a mere 48k/year more as suggested above.)
Outside of housing, the cost of living in both cities is identical at 20k/year. 20k will give you quite a good life in the Midwest as a single person. No idea about the valley.
# Midwest developer living in Des Moines, IA: $80,000/year salary (about 57k after taxes) 2 bedroom apartment in a safe place can be found pretty easily for under $900/month. 1 bedroom for $750 or so. No roommates. Perhaps a 20 minute commute to work.
Rent = $900/month = $10,800/year
Other Living Expenses = $20,000/year
Leftover money = 2,200/month = 26k/year
18 months of saving at that rate to get to the median down payment (39k).
Money sunk into rent before getting any equity in a house: $39,000
# San Jose developer: $160,000/year salary (about 105k after taxes)
Rent = 2,900/month = 34,800
Other Living Expenses = $20,000/year
Leftover money = $4,183/month = $50,200/year
46 months until you have the $192,000 down payment ready, assuming housing prices stay the same.
Money sunk into rent before getting any equity in a house: $133,400
# Result
When the San Jose developer buys a home (assuming the median downpayment didn't go up in those almost 4 years of waiting), the Midwest developer stopped paying rent (11k/year) and was paying down their mortgage with that 11k and the leftover money of 26k/year, totaling 37k/year.
Neglecting mortgage interest because I don't want to calculate that, the Midwest developer put 86k towards the 192k house after the downpayment.
Total equity for Midwest developer: 86k+39k = 125k.
Total equity for San Jose developer: 192k.
Yes, the San Jose developer has more equity in the end, but we also assumed:
* Identical cost of living
* The housing prices in both cities stayed the same until San Jose developer had their 192k. That will be pretty true in the Midwest, but may not be in SV.
San Jose may not have a huge commute, but other areas of SV would. We didn't even look at the fact that the Midwest developer isn't spending 1-2 hours each way going to work (numbers I see cited here frequently).
After tax estimates are based on this calculator: https://smartasset.com/taxes/income-taxes#347zLoGvwJ
I sat next to a SF attorney on a plane a year or two ago. She said she and her husband were putting 75% of their take-home pay towards their mortgage when they purchased their first home. Their incomes rose which made things a bit better. After a few years, they sold it off, made a fair bit of money from appreciation, and got a place outside of SF city limits where they had at least a very small yard.
It's only a matter of time before home prices drop in a bubble and thousands have lost a giant chunk of their net worth which was held up in a single undiversifiable asset.
hint: they're not local engineers. buying a house like this is like going down to the porsche dealership and buying a couple of cayennes as graduation presents for the kids.
You mention Des Moines... As a thought experiment: if the hand of god moved the city of Ankeny, Iowa so that it was a 30 min commute to the bay, it would soon be regarded as one of the "cooler" places to live outside of SF, and quickly fill up with millionaires.
I have a family friend who moved there perhaps a decade ago and built a really nice house. Few years later, the house wasn't for sale, but someone knocked on the door and wanted to buy it for $1,000,000. Then they wanted it furnished, so the price went up a bit higher. They probably made at least 250k in a handful of years.
My friend wanted to downsize anyway, so when someone literally arrived at their doorstep and offered 1M+, it was an easy decision.
He bought a model home for 770k about 4 years ago. Someone wanted to buy it off of him in 2015, and he wanted to downsize again, so they made a deal. The purchaser put a large sum of earnest money down, and they would get the house after my friend built himself a new house. The old house sold for 820k about 10 months after the earnest money was put down.
Nah. Salaries in the Bay Area are a third of what they should be to compensate for the cost of living.
You can live in lots of big cities in the US and still have discretionary income leftover. The Bay Area is just bananas.
In Vancouver, it will get you a 2 bedroom condo with 2 bathrooms, 859 square feet, and 1 underground parking space.
As they say... location, location, location.
The earning potential in Vancouver is a joke compared to SF.
Metro Vancouver is a curious beast: The City of Vancouver itself is relatively small and very NIMBY, but the suburbs are far more pro-development. Between Vancouver's geography (on a peninsula), residents' opposition to development, and its lack of transportation corridors, I find myself wondering if by 2100 people will be asking "why is the metropolitan area named after a small suburb?"
Probably more in Des Moines, but at least you're living the lifestyle you'd normally associate with a house that expensive.
edit: looks like I got a downvote - did I break a rule? Didn't mean to offend anyone. Sunnyvale is a decent area but when I think 'one million dollars' I don't think Sunnyvale :)
And in NYC I can get a bagel that doesn't suck.
Me and my partner are paying the same amount for a 1BR in Campbell as my buddy pays for a high-rise, swanky 1BR in downtown Hollywood. It's surreal.
Oh and access to great surfing? And quick access to excellent skiing? Oh and an award winning, internationally renowned wine country?
Now you guys do have cheaper maple syrup, that's probably worth it. And the fog in the summer here definitely ruins those awesome summer evenings that are so plentiful in NY.
(Btw, these are the things I repeat to myself to be ok with the cost of living here)
You lost me right there
Valid on the surfing and wine country, but there is skiing in the East :)
NYC's also got great skiing and the wine is nothing to scoff at. Really, the only thing missing is surfing and "internationally renowned" wine.
NYC's got Skiing, yes, but it's nothing like Tahoe... Not even Vermont, though Mad River Glen, will always have a place in my heart; the Paradise trail and it's little frozen water falls to jump off, great memories there.
And while Sunnyvale is mostly an also-ran of Silicon Valley cities, it's actually closer to the new Apple spaceship than most of Cupertino, it has Apple's new campus at Wolfe & Arques and while Sunnyvale/Tech Corners is arguably the least popular of Google's local campuses, hey, at least Sunnyvale has Google offices.