A Sunnyvale, CA home that went for nearly $800K over the asking price | Hacker News Reader

A Sunnyvale, CA home that went for nearly $800K over the asking price

latimes.com

14 pointsjseliger43 comments

The bubble seems to be back. My parents bought their house in 2011 (my dad had the foresight to buy at the low point). The house has miraculously gone from $700k to $1.1m in less than a decade.

I've come to terms with the fact that unless I win the startup lottery (or there's another 2007-2008 crash), I'll probably never be able to afford a house in California.

Don't worry too much. The American economy generally runs on 69 month cycles (on mobile, sorry for no source). In about 6-7 years you will be able to buy a home again.

I am not entirely sure: https://www.paragon-re.com/trend/3-recessions-2-bubbles-and-...

I think we are past that cycle so far. It could burst anytime, but in the bay area the impact probably won't be that high.

Sure you can, probably just not in one of the urban areas, particularly the bay area.

$700k to $1.1m in 10 years is about 4.6% annualized...that doesn’t seem that crazy.

It's actually pretty terrible when you throw in that they bought at the bottom of the market, and likely paid at least 3% monthly in financing costs.

Well it was actually the last top of the market; it bottomed out a year later. They probably could have gotten it for much less in 2008.

Sorry, they actually got it in 2011, had to double check Redfin.

That's only a 4.5% rate of growth over 10 years. And that's boosted heavily by the incredible fortune of having bought at the low point. If they financed at 3%, they only made a 1.5% return on their money.

If your parents had put that same money in the stock market, they would have made something like a 7% return and have well over $1.4mm — or possibly much, much more depending on the exact timing.

They could easily have afforded $3,000/mo or more of rent (in the 2007 market) — assuming they financed the house — and still come out well ahead. Especially when you throw in insurance, maintenance, etc.

They actually got it in 2011, my mistake. Had to double-check.

Sure, but it's probably boosted by the 10x leverage that mortgages allow.

Let's say it cost $1M with $100k money down, interest-only loan. You get the 1.5% on the $1M, not on the $100k.

So if you measure it like that you get $15000 interest on $100k, so in reality this is a 15% per year return, not a 1.5% return.

Works the same in reverse when house prices go down, of course.

It's not as much a bubble as it is a supply-demand situation.

> The buyers, who work in tech, had been hunting for a home for a while — but kept getting out-bid, said Mini Kalkat, the Intero agent who represented them: “They lost two before they bid on this one, so we kind of knew what the numbers would be. It’s a crazy market, but there’s a way to maneuver the market.”

Source: Mercurynews.com [posted in previous Discussion] https://news.ycombinator.com/item?id=15238835

Given that the house is close to Apple HQ and other tech companies there, and that these buyers kept getting out-bid 2 times before, they probably got tired of it, and had the money to put in a very high 1st bid that would almost guarantee that they'd win it, and they won it.

San Francisco went through a very similar situation from 1998 to 2004 (the .com bubble and burst was in that period). If you lookup any house in the city for a 10 year period (from 1995 to 2005) you'll notice that the prices almost tripped for most house, condos, big or small, because .com millionaires were doing something similar to what's mentioned in this story back then, i.e. placing ridiculously high bids over asking so they could guaranteed get a place, and since they had the money, they didn't give a sh*t.

Even though the .com bubble burst brought down prices from 2004 - 2008, they didn't fall nearly as much as they rose in the 10 year prior.

Why do people put up with California? This is a 3 bedroom 2 bath house in a completely generic charmless suburb almost 40 miles away from the city. For $2.4 million. A similar house where I live (about 35 miles east of DC) would go for about $400,000, with a water view (also, fiber internet).

In a previous discussion of the sale, it came up that it is about a mile from the new Apple campus.

https://news.ycombinator.com/item?id=15238835

It's 40 miles from San Francisco, but just a fraction of that to San Jose, which is the larger of the two cities. People paying 2MM for a house in south bay likely work in south bay.

The charmlessness, though, I agree with. People live in charmless apartments in Manhattan, too, but they live in Manhattan, which is an amazing place to be. South bay, though, is just bleak.

There's something really bizarre about the claim that San Jose is "bigger" than San Francisco. Obviously, it's technically "true" in that San Jose officially consists of a land area 4x that of San Francisco, lapping up a lot of people as it stretches over those vast, nowhere suburbs. But this shows just how overrated "technically correct" can be when using the arbitrary political boundaries of different cities to make comparisons.

Paradoxically, San Francisco is obviously the "bigger" of the two cities, even if it technically isn't.

What's your preferred definition?

Because the arbitrary political boundaries of individual cities are, well, arbitrary, it's usually more useful to compare Metropolitan Statistical Areas than constituent cities. This helps us avoid the confusion of assigning significance to the machinations of 19th century politicians when making modern regional comparisons.

By that measure San Francisco is the 11th largest in the country. San Jose is 35th.

https://en.wikipedia.org/wiki/List_of_Metropolitan_Statistic...

I don't entirely disagree with your point but the fact that Alameda & Contra Costa counties aren't part of San Francisco isn't so much due to the machinations of 19th century politicians as the fact that they are separated by quite a large body of water.

Geography isn't all that useful here, either, as long as it's not so extreme as to eliminate the anchor city's ability to wield economic influence (at which point, by definition, the region in question would no longer be in the same MSA as the anchor city).

All we're trying to do here is come up with some way to compare cities that doesn't rely on the political and geographical borders that vary dramatically between regions. Why is Brooklyn part of NYC but West New York isn't? Why isn't East St. Louis in St. Louis? Why is Kansas City, KS something different from Kansas City, MO? Why does NYC get to claim Queens, but SFO doesn't get to claim Oakland?

When Indianapolis politically joined with its surrounding county in 1970 to form Unigov, did something actually change about Indianapolis that justifies moving it around in regional rankings? Or is it the same as it was the day before, when those were two separate entities?

The answers to those questions (or, really, the questions themselves) mostly confuse regional comparisons. If we want clarity, then we need something else. The MSA is usually a pretty good stand in. (But it's not the only one. What's important is just that you're aware of the core issue and try to account for it. Making anchor-city to anchor-city comparisons using only the borders of the anchor cities is almost always the worst means of comparison. Any measure that leads you believe that Austin, TX is "bigger" than Boston is a pretty bad one.)

... given a definition of "San Francisco" as including discontiguous regions like Oakland(!) and San Leandro and Alameda and San Lorenzo and Hayward, and then compare that to a definition of San Jose that omits the broader contiguous communities of Cupertino, Mountain View, Milpitas, Saratoga, etc.

Um, okay.

You can take that up with the Office of Management and Budget, I guess (they're the folks who define the MSAs in the U.S., not me). My point is pretty clearly that there are better ways to compare cities that don't rely on political borders. I don't have strong opinions about the way the OMB chops up the SFBA. As I said before, that's just one way to do it.

You original statement was that it was "bizarre" to say SJ is bigger than SF. But you then went on to say that by land area and population it is, but by some other metric it isn't.

I think the people took "bizarre" to be some kind of attack, but perhaps that wasn't your intended meaning. Certainly using size or land area to call SJ bigger isn't that weird, despite the OMB using other metrics.

The "bizarre" part is that the statement "San Jose is bigger than San Francisco" is technically true while also self-evidently ridiculous.

In other words, I hope nobody thought I was attacking tptacek! What he said is fine! Again, it does have the attractive quality of being true, even if it obviously isn't true :)

A more revealing example is the statement "Austin is bigger than Boston" which is, again, only true in the most narrow sense. What any reasonable person thinks of as "Boston" is much larger than Austin.

I mean this in the most common-sense way imaginable. Say your dream was to move to a "big city" and your choices were Austin and Boston. If you used the statistics within each city's political borders to decide which to move to, you'd paradoxically end up in the smaller city. That "Austin" has more people within its arbitrarily-drawn political borders is mostly just trivia. That fact doesn't help us make useful comparisons; in fact, it pretty clearly misleads. (At bottom, there's no other reason to have this conversation than this last point. We're just looking for a way to compare cities that adds value and clarifies. A system of comparison that leads you to believe Austin is bigger than Boston fails that test.)

That's a similarly arbitrary distinction that seems, like SJ and SF, to be the product of Austin's proximity to San Antonio, and the way San Antonio slurps up a lot of towns south of Austin that would otherwise be within the same range as, say, Worcester or Manchester is from Boston.

No, sorry, this only further confuses. First of all neither Worcester nor Manchester are in the Boston MSA, so they're not great examples. They are in the larger designation -- the CSA -- which includes cities as far afield as Providence. The whole reason CSAs exist is to help us make comparisons that do include cities that far outside of the core urban area.

Unfortunately for us, the OMB hasn't defined a CSA for San Antonio-Austin, so it's hard to compare here, but almost certainly the CSA of Boston-Worcester-Providence would still be larger than San Antonio-Austin. The whole reason the OMB would define a CSA for San Antonio-Austin is to let us make these kinds of comparisons in a fair way without having to guess where San Antonio ends and Austin begins. (I wish they would!)

Additionally, these are not arbitrary designations. The whole point of MSAs and CSAs is that the OMB is trying to come up with reasonable ways to compare regions that aren't arbitrary. (I mean, the conditions they decide are most important are arbitrary in the sense that they could choose some other conditions, but that's kind of a silly way to say that it's arbitrary. What slurps up what, in other words, is well defined.)

All of this is just to say that there are many ways to compare regions and, again, the worst of all of them is using political borders.

There is a movement afoot in St. Louis to combine the City of St. Louis and its surrounding County. Nothing about "St. Louis" actually changes the day after that measure passes (if it ever does), but St. Louis would jump way up in city rankings. The results of an 1876 law that set St. Louis's borders where they remain today is a very silly way to decide how big "St. Louis" is.

Edit: Another way to say this is that using political borders is like resolving the question by taking a vote. Which city is biggest? Let's just let the people vote! MSAs and CSAs exist to help us make better comparisons than that.

Edit: yet another way to say this is that your follow-up comment notices that it's hard to make comparisons because it's hard to know where one thing ends and another thing begins and which things should "count" in comparisons. That's the whole question and it's why we should use MSAs and CSAs. They're at least trying to answer those questions in a way political borders don't even address.

This is all fine and makes sense, but to bring it back to the thread: people who buy houses are more attached to the south bay job market, which is unofficially centered on San Jose (and Santa Clara) than to San Francisco, which is the point I was making originally.

People don't generally buy houses in Sunnyvale to commute to SF from (that is a brutal commute), but they do buy in Sunnyvale and commute to San Jose/Santa Clara.

Totally. I was merely making an aside about the claim, casually made, that San Jose is bigger than San Francisco.

Sunnyvale is near Apple and Google headquarters. Dual income families where both adults earn $250k+ per year are the type of people I imagine buying these places.

They appreciate in value, so it doesn't really matter if the price is inflated as long as it continues to inflate. You throw some money down, make payments, and cash out and move away when you're older.

It's still annoying, but it does make some sense to me.

They do not necessarily appreciate in value, especially if you buy at the peak of a bubble! They don't even tend to appreciate all that much over the long run when you factor inflation and ownership costs. Expensive houses are not a riskless transaction, even though many of our parents told us they were.

Sure, but I don't really feel Silicon Valley housing is a bubble that will crash aside from temporarily. I think the prices will continue to grow in the long term.

It boggles my mind to buy a house that maxes out your mortgage qualification on $500,000 HHI.

I bought my house in Mountain View right after Larry Page announced that hey intends to bring another 10-20K employees to the Mountain View campus.

It's just a pure numbers game. You can't have a single employer bring in that many people and expect everyone to commute in. There is always going to be a population that can afford and will pay to live closer to campus. Also, as the population of Googlers age, there will be pressure to move to the suburbs after they get married and have kids.

Also, there's lot of new development in Mountain View that will make the city more appealing to live in. If and when the monorail to Google (http://www.mercurynews.com/2017/09/13/mountain-view-studying...) arrives, this will make downtown Mountain View even more appealing.

Mountain View is now broaching the prices that Palo Alto was. Sunnyvale is the next Mountain View.

the monorail to Google

If only there were already multiple expandable mass-transit systems in the area that could add new lines/capacity...

And even that is twice as much as my dad's house that's only 18 miles outside of Chicago.

Most of us in "charmless" Sunnyvale happily do without living among the unique "blessings" of San Francisco.

Events in SF are just a rail ride away, and you often return to find your car intact.

every time someone writes about this they talk about the teachers, janitors and minimum wage people. Although they struggle they have some assistance (discounted day care or affordable housing). What no one talks about are middle class with dual income, that still can't afford a home, and don't qualify for anything at all. The dependent care spending account covers only about 2.5 months of my child's preschool cost. It's much much worse than it seems

Anecdata time! I grew up in Southern California, first in the San Fernando Valley (Los Angeles County) then Ventura County and then Orange County. The housing market was amazing and crazy. My father started buying property in the late 1960's and finally left in 2006. He worked hard his entire career to afford to live there. Honestly, it wasn't much better in the late 70's and early 80's than it is now. Imagine buying a small rambler in Reseda for a bit more than $200,000 with a 19% mortgage. Remember also that you had to have 20% down. Then imagine a 3 bedroom two story in Thousand Oaks for a bit north of $300,000 with 17.5% interest rate. Or maybe a little Huntington Beach home that more then tripled in value and then dropped (in 2009) to 20% below the original purchase price within a 10 year timeframe.

So yes it is wild, very expensive, and can (if you are intelligent and lucky) make you very wealthy. In about 2000 I had made a windfall profit off of Y2K consulting and met a beautiful woman from Pittsburgh who had 3 children and I decided to settle down. I could have moved them all to California and used my savings to get us a modest home. We decided to not do that and we have been very pleased with our decision.

California is amazing and has a really interesting economy and job market. But I have as of yet never regretted leaving. I have always been employed. I have a very nice home with great schools and a beautiful area to live in. I make a substantial income and have no problem saving for retirement and investing. I also invest in property to this day and have done extremely well by almost all standards I have come across.

You really don't have to deal with California if you don't want to. It's a great place. But there is no real reason to live there.

Quick, someone build that carbon nanotube cable for the fabled space elevator we used to dream about out in middle-of-nowheresville, U.S.A. and watch a new boomtown draw off all of California's excess population in quest of The Next Big Thing® or whatever.

Good to hear that at least one person in California recognizes that it's a supply/demand problem.

Build more housing. Build more high density housing.

Simple solution to a complex problem.

Reduce demand. Tax the tech industry to encourage it to relocate anywhere else in the 99.99% of America it doesn't currently occupy.

Also, for good measure: eliminate the mortgage deduction, and tax short-term capital gains on property at 100% to eliminate rampant speculation.

Simpler solution to a complex problem.

eliminating mortgage deduction could help with the prices, but overall, probably wouldn't affect how much each people end up effectively paying. I could pay 10K before the deduction, and effectively pay, say 8K, out of pocket. Remove deduction, i still pay 8K. Effectively nothing changes.

Also, in the bay area, plenty of houses used to go for cash (to chinese). No amount of mortgage interest deduction cut could help with that.

The demand & supply problem is somewhat due to prop 13, but still not entirely.

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