Single Family Homes in Santa Clara County: March 2018 Report

If you are being paid $20k a year more than elsewhere, after tax perhaps that equates to ~12-16k a year. You'd therefore be able to afford between 1-1.5k a month more in expenses than earning the comparable salary offered elsewhere. I'd suggest that in SF that you maybe, just maybe break even (renting that is), but more than likely you are worse off financially.

However, SF will more than likely be a better place for career growth and opportunity. You shouldn't undervalue that, especially at the beginning of your career.

As far as buying a house goes, depends on what kind of commute you can tolerate and how much downpayment you have. I think you'd struggle to be comfortable on anything less than $200k.

> Could someone making $140k/yr ever expect to be a homeowner in SF/SV

You could buy in Vallejo and commute over 1.5 hours to the city every day. Within most "desirable" cities in the Bay Area, houses will be out of your reach.

I'm totally happy living in the Sacramento area and I own two properties on sacramento-software-engineer pay. The downside is certainly less money and definitely way less opportunities if I was looking, but upside is much less traffic and being closer to outdoor recreation. And of course owning whatever type house I want within reason.

> Could someone making $140k/yr ever expect to be a homeowner in SF/SV?

You probably can't. But you can rent. And rents plateaued a couple of years ago.

> There must be a study out there demonstrating that people systematically undervalue (or outright neglect) cost-of-living in a region when taking a job off

Higher COL regions generally provide higher quality of life (why else do people pay more to live there?). I find that the highest "life value" I can get is in the Bay Area (huge tech scene, great weather/outdoors, generally solid culture)

I arrived in the SV 12 years ago (2006) with already $20k savings. I had a $100k job initially to now $140k. My rent was $1,400 for tiny but cute studio. I stayed in that studio for 5 years (until 2011) and managed to saved $100k total. I bought a place in SF with my partner, we put $200k down ($100k each) for a ~$800k 2br/2ba. We now pay $3k per month so $1,500 each per month which is not much more than I used to pay when single in my studio (granted, now I need to add HOA ($150/month) and property tax (but could be deducted from taxes)). So, I would say it was possible but as a couple with same kind of income. Now (2018) I don't think we could afford the exact same condo (maybe worth now up to $1.2M). We could afford something smaller and/or less central. But having said that, I was very surprised when talking with (younger) coworkers who have the same salary ($140k), on how little to none they were actually saving. It is tempting to eat our for both lunch and dinner, etc in the City, but it gets expensive very quickly. To be a homeowner anywhere, you need to save. To be homeowner in SF/SV you need to save even more, and be a couple. Not impossible, but more difficult. Save early, and as much as you possibly can, that would determine your future purchase power.

This is how it's done in the Netherlands, actually.

Really interesting concept. What's stopping me from bidding an absurdly high amount, knowing that I'll win and only pay as much as the second highest bid? I guess I'll have to be the only one trying to do this for this to work?

I live in Portland but I’m in the same boat you are. My wife and I make a decent amount of money ($120k+) but a combination of student debt, crazy housing prices, and lack of wealthy family members who can “gift” a down payment leaves me fairly hopeless that we’ll ever be able to buy a house of our own.

We’ve seriously considered moving to the Midwest or the South where houses are affordable, but neither of our jobs allow fully remote work, very few cities in those areas have any sort of tech presence, and we’d be leaving pretty much every family member across the country.

I live in the area as well and I think the reality is that Seattle is going through a massive change due to densification.

Nobody expects to be able to buy a single family house in NYC- and that will probably soon be the case for cities like Seattle and SF...however this is a relatively recent development for us and therefor a much harder pill to swallow.

I came from the midwest (born and raised) - to respond to the other commenter...home ownership is cool, but I like it out here a lot more. Also, I make WAY more money here. Like 50% more, and I'm at the bottom of the engineer food chain. I make more money than any of my more experienced senior engineer friends back in the midwest. The amount of outdoorsy opportunities, interesting companies to work for, and boom/bust culture is just too exciting. Midwestern cities also experience a lot more violent crime (check out any top 10 list of dangerous cities). I think I heard gunshots almost every night that I lived in Kansas City, MO.

Someone posted this the other day and everything it said hit home: http://highline.huffingtonpost.com/articles/en/poor-millenni...

Relevant pieces:

>Despite the acres of news pages dedicated to the narrative that millennials refuse to grow up, there are twice as many young people like Tyrone—living on their own and earning less than $30,000 per year—as there are millennials living with their parents. The crisis of our generation cannot be separated from the crisis of affordable housing.

>More people are renting homes than at any time since the late 1960s. But in the 40 years leading up to the recession, rents increased at more than twice the rate of incomes. Between 2001 and 2014, the number of “severely burdened” renters—households spending over half their incomes on rent—grew by more than 50 percent. Rather unsurprisingly, as housing prices have exploded, the number of 30- to 34-year-olds who own homes has plummeted.

>Falling homeownership rates, on their own, aren’t necessarily a catastrophe. But our country has contrived an entire “Game of Life” sequence that hinges on being able to buy a home. You rent for a while to save up for a down payment, then you buy a starter home with your partner, then you move into a larger place and raise a family. Once you pay off the mortgage, your house is either an asset to sell or a cheap place to live in retirement. Fin.

>This worked well when rents were low enough to save and homes were cheap enough to buy.

...

>Since the Great Recession, the “good” jobs—secure, non-temp, decent salary—have concentrated in cities like never before. America’s 100 largest metros have added 6 million jobs since the downturn. Rural areas, meanwhile, still have fewer jobs than they did in 2007. For young people trying to find work, moving to a major city is not an indulgence. It is a virtual necessity.

>But the soaring rents in big cities are now canceling out the higher wages. Back in 1970, according to a Harvard study, an unskilled worker who moved from a low-income state to a high-income state kept 79 percent of his increased wages after he paid for housing. A worker who made the same move in 2010 kept just 36 percent. For the first time in U.S. history, says Daniel Shoag, one of the study’s co-authors, it no longer makes sense for an unskilled worker in Utah to head for New York in the hope of building a better life.

>This leaves young people, especially those without a college degree, with an impossible choice. They can move to a city where there are good jobs but insane rents. Or they can move somewhere with low rents but few jobs that pay above the minimum wage.

>This dilemma is feeding the inequality-generating woodchipper the U.S. economy has become. Rather than offering Americans a way to build wealth, cities are becoming concentrations of people who already have it. In the country’s 10 largest metros, residents earning more than $150,000 per year now outnumber those earning less than $30,000 per year.

The idea that housing always goes up in price is nonsense so you’d be right to be skeptical of “get in now” urges. If anybody said that about stocks they’d go to jail but for some reason we don’t regulate marketing if housing-as-security the way we regulate actual securities.

The only reason housing prices are skyrocketing is because we’ve built a protective legal regime around incumbent land owners. The market can’t function so the price goes up. Just as an example I’d be very pleased to build a small stack of flats on my Oakland property, say four units, but the law doesn’t permit that. On my block there’s a 1938 building with 22 apartments on the same sized lot as mine. So we used to allow it, and clearly it’s within the character of the neighborhood, to borrow a phrase from the NIMBYs, but we’ve just outlawed that kind of building.

As soon as the regulatory environment gets fixed, supply is going to explode and prices will fall.

Julian Castro is doing a seminar series at the LBJ Library that I've been attending. I think they livestream them as well on Facebook. They are definitely worth a watch and address issues of housing prices, services, gentrification, how to approach them from a government and legal perspective.

https://www.eventbrite.com/e/policy-seminar-series-with-juli...

Not housing specifically (although he does talk about it every now and then), but I find Doug Noland’s analyses on global credit dynamics to explain a lot about what I see in the world around me. From what I’ve heard, he was also on the right side of understanding the severity of the subprime crisis (haven’t read the blogs around that time, though).

http://creditbubblebulletin.blogspot.com/2018/02/weekly-comm...

It's always interesting to me that a progressive city, like Seattle, has a bunch of people who proudly push a protectionist/exclusion stance similar to the anti-immigration stance on the far right.

I think it's mostly that the relative value of future money to current money went up, due to cheap money and lack of investment opportunities. One piece of evidence for this is increase in earnings-per-share multiples paid for stocks in the S&P 500: http://www.multpl.com/

Rents might have hit a limit with the lower half of incomes of the area.

I've read some articles that mention that california is losing a lot of people.

SF has, finally, after decades of underbuilding, allowed some modest increase in the supply of multi-family housing units: https://sf.curbed.com/2017/5/4/15543668/san-francisco-new-ho.... Oakland has done the same. The story above is about single-family units, and there is effectively almost no undeveloped space within commuting distance of SF / SV for additional single-family housing units. SF and SV are likely substitutes for renters in the area.

Seattle has some similar problems: https://jakeseliger.com/2015/09/24/do-millennials-have-a-fut... although less severe; about 60% of Seattle is still zoned for single-family housing alone: https://www.thestranger.com/slog/2017/06/21/25230243/poll-fi..., which exacerbates its housing crisis.

Prop 13 makes it really expensive to upgrade, so there’s also less mobility from the “modest” range of homes (approximate $1m range imho).

Where would you leave to, and more importantly where would you invest the windfall? All asset classes are expensive at the moment...

Why would you? If your home value is going up, your property taxes are mostly static, and rents are high enough to cover your mortgage and then some, there's no reason to sell when you can hire a property management company to take care of the place and rent it out. Doubly so if you can use your primary property to help finance a second one elsewhere.

You can’t just add homes and not worry about traffic. That only exacerbates commute issues which is one of the reasons why houses so far away from business centers get so expensive, because houses even further have exponentially worse commutes.

Public transportation needs to be fixed first so that people from east bay and beyond can get to the Silicon Valley and SF faster.

If I could live in Tracy and get to SF in 30 mins or even 45 mins, I would move there in a heartbeat. But it takes 1.5-2hrs even with BART.

That will do more to lower house prices than cramming a small number of houses or condos in an already crowded area.

This is not informative. Pick any planning meeting, at random, from anywhere in the United States, and you will find someone like this. Cranks are everywhere, and practically the entire purpose of public meetings are so that the cranks have a place to go rant and "be heard" by local officials. The real question is: does anyone listen to them, and if so, why? There's usually a good reason that isn't being discussed.

Silicon valley bedroom communities should be building more housing, but this kind of stuff is just straw-man argumentation.

So, you want to be like Erlich Bachman from "Silicon Valley" sitcom? :)

Once upon a time comedy was just for fun, now, if you are screenwriter for a sitcom you have to be carefull because someone, somewhere will take your foolish ideas seriously...

Honestly, we need more "Don't try this at home" warnings.

It would probably be the other way around: an REO firm that made investments in startups.

Maybe I'm using the wrong terminology, but isn't a "hedge" something you do to reduce the risk / variance of your investment? If the start-up scene tanked, both your house and your incubator would do less well. Therefore, both markets are correlated and do the opposite of reducing risk.

This exists but is not publically flaunted/advertised.

This idea sounds dangerously close to a company town, which is fairly universally regarded as a terrible idea. https://en.m.wikipedia.org/wiki/Company_town

Outstanding mortgage debt on 1 to 4 family residences: https://fred.stlouisfed.org/series/MDOTP1T4FR

So when do you cash out and move to the Midwest?

Nevermind, turns out I can't read straight.

Start at https://www.zillow.com/los-angeles-ca/home-values/ and use various zip code queries at the top bar. The year-by-year plot is at the bottom.

As opposed to condominiums, townhomes, duplexes, etc.