patrick.net

I can't wait till they leave!
Time to Flush The Toilet.

http://www.nytimes.com/interactive/2016/02/28/technology/silicon-valley-photo-essay.html?_r=0

Rin says

News flash ... Silicon Valley has no culture.

Rin,

I think there many cultures in The Bay Area, like the one in the NYT photo essay. Just not your kind of culture.
Been to an Oakland Raiders' home game? At least for another year, it's a distinct culture.

rando says

yes, i myself am considering leaving the bay area, mostly because of real estate prices.

Patrick, nothing personal. You've added a lot to our region with your insights and your generosity hosting this site.
But… we need more people like you to leave. Rents are too high here because of the tech workers. Regular ol' folks are struggling. A stampede of techies will make things less unreasonable for those Left Behind.

B.A.C.A.H. says

we need more people like you to leave. Rents are too high here because of the tech workers.

No, that's backwards and illustrates the insane irrationality of the RSFBA housing market. We need tech companies to build enough housing for their workers. AAPL has a giant spaceship for its office, FB has a campus for its offices, GOOG and countless others build offices, but they don't build housing for the people who work in them. What sort of "campus" has no housing?!? Where are the dorms for recent CS grads to move into while they intern or work at a tech company? Where are the deluxe apartment towers for them to aspire to and move into? These companies have the resources to move local politics and change the planning and zoning laws, but choose to defer to entrenched RE interests (landlords) instead. It's as if the most valuable companies in the history of the world (AAPL, GOOG) don't even realize that they have grown bigger than local Realtors (TM). Most municipalities can only wish they had the tax base of AAPL and GOOG et al. It makes no sense to drive away the goose that lays the golden eggs. Only the local political dysfunction, and frankly the ironic failure of tech companies to engineer a solution to that dysfunction, explain this bizarre irrationality.

My question is, why don't the tech companies insist on building housing for their workers? They have the $$$ and are already paying indirectly, via the higher salaries necessary to enable workers to subsist in the RSFBA. Do they lack the imagination? I do find tech people seem to see the world in binary terms and sometimes they lack the social and political skills to bend policy their way, but they're in a position to hire people who should be able to do that for them. Why does it not happen? Do the tech CEOs really want to overpay for a shack in SF? Do they not care so long as they can buy a mansion in Atherton? What is the problem that prevents them from seeing the opportunity, or am I wrong in believing they have an opportunity to build a real campus including housing? Do they not want to get involved in housing? Is it a turnover issue? Even if they outsource the housing, they could still get involved in planning & zoning. Or do they think all the residents are hopelessly brainwashed, which many are really, and that the problem is impossible to solve even with AI and expert systems. Are they right? Are people too intent on overpaying for everything?

You wrote earlier a great insight about the problem of the greater fool theory, i.e. the region becomes ever more foolish due to being populated with ever greater fools. Is that why the tech companies don't address the housing issue?

B.A.C.A.H. says

Patrick, nothing personal. You've added a lot to our region with your insights and your generosity hosting this site.

But… we need more people like you to leave. Rents are too high here because of the tech workers. Regular ol' folks are struggling. A stampede of techies will make things less unreasonable for those Left Behind.

Patrick isn't making your life difficult or more expensive. You frustration is misdirected. Try the HB1 guys who are willing to pay a ton and shack 5 people to a room.

The shortage of affordable housing in the Bay Area is caused by the shortage of housing in the Bay Area which is caused by building and zoning restrictions that limit the supply of housing in the Bay Area. Increase density and limit building and zoning restrictions to health and safety and housing in the Bay Area will become affordable, again. In the meanwhile check out New Mexico.

tovarichpeter says

The shortage of affordable housing in the Bay Area is caused by the shortage of housing in the Bay Area which is caused by building and zoning restrictions that limit the supply of housing in the Bay Area. Increase density and limit building and zoning restrictions to health and safety and housing in the Bay Area will become affordable, again. In the meanwhile check out New Mexico.

yes, this.

except i can't live in new mexico.

tovarichpeter says

limit building and zoning restrictions to health and safety...

The only thing I would add to this list is to specify health and safety include ventilation and noise reduction. Densely populated areas require building codes with substantial noise reduction to prevent people from driving each other crazy, which can sometimes erupt in violence. NYS required cities to promulgate noise reduction standards for floor/ceiling constructions, and NYC's notorious DOB responded with a standard of 0dB, i.e. no reduction. Consequently, neighbor disputes have erupted in gunfire. Badly designed ventilation can cause cigarette smoke from one unit to waft into another, e.g. if vent stacks have a pressure mismatch. Density requires habitable multi-family housing, which does increase somewhat the cost of construction, but 10% can make the difference between habitable and uninhabitable. Much of the demand for SFH and suburban sprawl results from poorly regulated design choices by commercial developers and landlords who have no intention of living in the buildings that they are designing, and may even be looking to drive turnover by embedding latent defects that residents won't discover until they've lived there awhile.

MMR says

Not the least bit surprising that your kids are in private school if you are paying anything near that for a home.

My kids are in private because my wife and I refuse to let the gov't educate our kids. We live in a great area with great schools, but I'll still go private, until high school/college.

MMR says

Atlanta is good value relatively speaking but to be in a good school district, it will be between 150-200/sq ft, not 68. The places at 68/sq ft do not have good schools. Still a good market for software engineers to find a good job and live in a neighborhood with good schools

Kennesaw, Acworth, Alpharetta, Cumming etc.. in the $90-150 sq. ft. range. Plenty of area's with schools rated 8-10 down the board.

Point is, you can spend $400-500 sq. ft. for shitty school districts our West ranked less than 5. Those same shitty districts in ATL metro would be in that $60 sq. ft. range that you are talking about.

curious2 says

My question is, why don't the tech companies insist on building housing for their workers?

The bottom line reason is because. Because if they built barrack style housing for single workers, most single workers wouldn't be satisfied with it. If they built housing like on-post housing that the military provides to military families ... most folks wouldn't be satisfied with it (let alone the issue of where would they find vacant land large enough to do this). Buying corporate houses (which companies in other industries have done for workers when they entice them to go to another city for a period of time) it would only help to keep prices up there and far too many wouldn't be satisfied with the housing. So the only real choice is to do what they are doing, pay a small boatload of money to the worker and let him or her deal with the prices of housing in the chosen city.

The answer is simple ... sleep in an RV on your SV company's parking lot or bring a mattress to the office. Since you won't have a life anyways, why not just live at work.

Patrick, after 25 years, what the heck happened to renting and buying the Menlo park place with CASH from all the monies that will get you ahead. Your theory, calculators are broken.

rando says

i could retire if i want to go back to the midwest where i came from. but i don't want to go back there either.

A Menlo Park owner can retire in Hawaii or pretty much anywhere in this green earth.

Can I sell my 3/2 crap shack in Fremont and retire to Monaco?

curious2 says

My question is, why don't the tech companies insist on building housing for their workers?

Because they are not in building/rental business, duh.

joshuatrio says

My kids are in private because my wife and I refuse to let the gov't educate our kids. We live in a great area with great schools, but I'll still go private, until high school/college... Plenty of area's with schools rated 8-10 down the board.

Methinks you may have put privatization ideology ahead of results, if you are paying extra for schools that don't even teach you how to spell "areas" correctly. It reminds me of people who insist on prayer in schools, and "intelligent design" alongside evolution: paying extra for worse results.

rando says

i could retire if i want to go back to the midwest where i came from. but i don't want to go back there either.

Why not?

lalalala says

curious2 says

My question is, why don't the tech companies insist on building housing for their workers?

Because they are not in building/rental business, duh.

But why? GOOG is building cars and phones and Nest "smart home" stuff, while FB is building headsets and launching dirigibles and Mark Zuckerberg and his wife reportedly spent more than a year renovating a single house. The executives are spending a lot of time on their own housing, which is needlessly complicated with stress and strife. Can anybody even calculate the opportunity cost of that time? These companies provide employees with cafeteria meals, free snacks, all sorts of services from daycare to dental to medical to laundry. What makes housing so different that they cannot cope with it, even though they must live somewhere?

mmmarvel says

curious2 says

My question is, why don't the tech companies insist on building housing for their workers?

The bottom line reason is because.

Again, why? If some employees aren't satisfied with a dorm, or an apartment tower, they could venture out on their own, but most (especially the new ones) might prefer to slot in with peers in a place where everything is already set up and managed for them. Even if you can't satisfy 100% of the people 100% of the time, why is the only alternative to provide 0%, nothing ever? It seems to reflect techies' tendency towards binary thinking, as I had observed previously. Life isn't all-or-nothing. An iphone or nexus phone doesn't satisfy everyone either, but each succeeds well enough in its target market.

Maybe I should use a more familiar logic syllogism, and the transitive law.
1) Companies need people;
2) People need food, clothing, and shelter (a place to live);
Therefore, companies need food, clothing, and shelter.
GOOG provides food and laundry, but not shelter, unless you want to live in a microbus in their parking lot. Theoretically, as between an office building and a dorm or apartment building, the office building is the one the company could do without. At universities worldwide, including many where the CS grads attended, people can live in dormitories, and work from their rooms, and meet in common rooms or a shared cafeteria or library. In cities worldwide, people can live in apartment buildings, and work from home offices, and meet at restaurants. In contrast, it would be rather awkward for everyone to sleep at their desks and shower at the gym. I suppose if the company limits its binary focus to minimizing rentable square feet per employee, the solution is cube farms and open office floor plans, but the company continues to pay the cost of housing one way or another.

curious2 says

But why? GOOG is building cars and phones and Nest "smart home" stuff, while FB is building headsets and launching dirigibles and Mark Zuckerberg and his wife reportedly spent more than a year renovating a single house. The executives are spending a lot of time on their own housing, which is needlessly complicated with stress and strife.

C'mon "renovating a house" is not work - it's what wives of rich folks do for fun.

As for "why not do housing" - because it's not as profitable as selling ads and not as sexy as "moonshots". Besides, salaries in tech companies are not THAT different between BA and, say, Texas, so the idea that googlebook or faceber is grossly overpaying their employees because of high costs of housing is not exactly true.

SFace says

Patrick, after 25 years, what the heck happened to renting and buying the Menlo park place with CASH from all the monies that will get you ahead. Your theory, calculators are broken.

Here's a Larger Reason to leave the region. We're collecting a growing population of gotcha! Snarkers.
Patrick probably don't want his kids to grow up in an environment like that.

rando says

i myself am considering leaving the bay area, mostly because of real estate prices.

This thread is the ultimate of ironies. Most here dismissed the "priced out forever" meme of years ago as nothing more than realtard(tm) scare tactics. Yet, here we all are, a decade later realizing how very real the "priced out forever" mantra is as we are now being systematically being picked off one by one.

Renters win again!

nah, it's not quite priced out forever. it's that the ratios never changed.

it was expensive before, and it's expensive now. but in terms of multiple of salary, it's no different than 20 years ago.

it was easier to save money as a renter before, and it's still easier as a renter now -- in the bay area.

i've gone over it many times, and my conclusion is that it's all about the same around here. i have a bundle of stock, but if i'd bough a house, it would be about the same in terms of equity. at least i have the flexibility to do what i want now.

but this is just the bay area, which is weird. other places really got clobbered.

Homeowners in menlo park owns a shit load more stocks as well

If you fixed your living expensed long time ago, owners are raking it with your discipline. You'll have both homes and just as much stocks.

Again, why can't SV workers, work remotely? Really, why do they need to be in SV?

If they don't work and meet daily/weekly metrics, Fire Them!

Really, it's that easy. These ppl can all live in university towns, like Pat's Ann Arbor Michigan, Burlington VT, Boulder CO, Urbana-Champaign IL, Madison WI, etc, and telecommute.

it just doesn't work very well telecommuting. you miss out on "overhearing" things in the office, seeing who is around, or going out to lunch, or playing ping pong. seriously, those things are huge, and a really important part of the job. you just can't do it even half as well if you're not physically there.

amazing that the internet has not actually made distance irrelevant.

rando says

it was easier to save money as a renter before, and it's still easier as a renter now -- in the bay area.

Yes - the 38 years trajectory of price vs rent.

2009 Rent ($2,500) vs Buy ($2,900) = RENT
2016 Rent ($3,800) vs Buy ($4,450) = RENT
2021 Rent ($4,100) vs Buy ($4,750) = RENT
2027 Rent ($5,000) vs Buy ($5,700) = RENT (bubble)
2031 Rent ($4,800) vs Buy ($5,250) = RENT (crash)
2038 Rent ($5,200) vs Buy ($5,775) = RENT
2042 Rent ($5,350) vs Buy ($5,950) = RENT
2047 Rent ($5,625) vs Buy ($6,500) = RENT

Dont buy at $2,900 - Wait, get priced out, then pay $6,500 on your deathbed. Massive savings here - renters win again!

rando says

it just doesn't work very well telecommuting. you miss out on "overhearing" things in the office, seeing who is around, or going out to lunch, or playing ping pong. seriously, those things are huge, and a really important part of the job. you just can't do it even half as well if you're not physically there.

amazing that the internet has not actually made distance irrelevant.

The only time management is interested in telecommuting workers is when they are slave labor from undeveloped nations.

More Government help needed:

http://www.noozhawk.com/article/santa_barbara_goes_after_vacation-rental_owners

JasonM says

rando says

i myself am considering leaving the bay area, mostly because of real estate prices.

This thread is the ultimate of ironies. Most here dismissed the "priced out forever" meme of years ago as nothing more than realtard(tm) scare tactics. Yet, here we all are, a decade later realizing how very real the "priced out forever" mantra is as we are now being systematically being picked off one by one.

The mistake we made was to underestimate the amount of financial depravity AND crony capitalism that Congress and the Federal Reserve would be willing to engage in to re-inflate asset prices.

I guess we will see soon whether it worked or whether we will have another financial disaster.

justme says

The mistake we made was to underestimate the amount of financial depravity AND crony capitalism that Congress and the Federal Reserve would be willing to engage in to re-inflate asset prices.

I guess we will see soon whether it worked or whether we will have another financial disaster.

Not really. There was already a hard floor on prices due to investors. When the ROI of buying and renting gets to a certain level, there are almost unlimited #s of investors looking to buy.

justme says

The mistake we made was to underestimate the amount of financial depravity AND crony capitalism that Congress and the Federal Reserve would be willing to engage in to re-inflate asset prices.

This is the fed. I learned long ago (college econ/greenspan days) the country will choose inflation over deflation 100 out of 100 times. This will never change.

lalalala says

Besides, salaries in tech companies are not THAT different between BA and, say, Texas, so the idea that googlebook or faceber is grossly overpaying their employees because of high costs of housing is not exactly true.

That's a point, but there is no free lunch. Tech workers make sacrifices to live in RSFBA, for many reasons. They choose to live here for career networking, access to startup capital, friends and family nearby, nice climate, whatever; the precise reasons are not really the point. Employers trying to lure workers to TX must pay to compensate for the reduced advantages and increased disadvantages of living in TX. Ceteris paribus, employers could pay less here if there were more housing. It's a converse corollary of Bellingham Bill's assertion that higher incomes end up getting absorbed by higher rents: lower rents would likely result in lower wages. That might sound bad, but consider: are you really making more if the extra goes into higher taxes and rent, or more debt? I look at the fully depreciated Sears catalog houses that sell for more than $1 million, and consider that even a 10%/year drop could wipe out new buyers' equity, and even existing owners' total annual income, for years.

SFace says

I learned long ago (college econ/greenspan days) the country will choose inflation over deflation 100 out of 100 times. This will never change.

The American postwar/boomer era corroborates your opinion, but does not prove it. We did have a period of deflation in housing prices, and IMO that was interrupted largely by the Fed. Those who think the Fed had no role should advocate abolishing the Fed; why pay to continue that organization if even its most enormous interventions have no effect? The extremely swift and sharp moves in the financial markets, with no news other than Fed announcements, indicate a very strong connection between Fed actions and market reactions. SF prices fell to approximately rational levels in 2010, for around one day, then resumed their irrational exuberance based on (ir)rational expectations of greater fool theory. Meanwhile, other countries have benefited from deflation. The American Empire of Debt has produced a culture of borrowing and spending, where people can believe the most absurd things, e.g. debt is wealth, ignorance is bliss. Most Americans have debt and little or no savings, and so they have preferred inflation over deflation, and that has worked wherever the greater fool theory has continued to work, but many housing markets outside RSFBA have seen falling prices for a long time. Reasonable housing prices are almost the only advantage of TX compared to SF, and yet that one advantage is evidently enough to lure employers to relocate.

JasonM says

This thread is the ultimate of ironies. Most here dismissed the "priced out forever" meme of years ago as nothing more than realtard(tm) scare tactics. Yet, here we all are, a decade later realizing how very real the "priced out forever" mantra is as we are now being systematically being picked off one by one.

Don't confuse unwilling to pay the price with priced out.

FP says

Don't confuse unwilling to pay the price with priced out.

OK---try this then:

JasonM says

Yes - the 38 years trajectory of price vs rent.

2009 Rent ($2,500) vs Buy ($2,900) = RENT

2016 Rent ($3,800) vs Buy ($4,450) = RENT

2021 Rent ($4,100) vs Buy ($4,750) = RENT

2027 Rent ($5,000) vs Buy ($5,700) = RENT (bubble)

2031 Rent ($4,800) vs Buy ($5,250) = RENT (crash)

2038 Rent ($5,200) vs Buy ($5,775) = RENT

2042 Rent ($5,350) vs Buy ($5,950) = RENT

2047 Rent ($5,625) vs Buy ($6,500) = RENT

Dont buy at $2,900 - Wait, continue to be unwilling to pay, then pay $6,500 on your deathbed. Massive savings here - renters win again!

JasonM says

Yes - the 38 years trajectory of price vs rent.

2009 Rent ($2,500) vs Buy ($2,900) = RENT

2016 Rent ($3,800) vs Buy ($4,450) = RENT

2021 Rent ($4,100) vs Buy ($4,750) = RENT

2027 Rent ($5,000) vs Buy ($5,700) = RENT (bubble)

2031 Rent ($4,800) vs Buy ($5,250) = RENT (crash)

2038 Rent ($5,200) vs Buy ($5,775) = RENT

2042 Rent ($5,350) vs Buy ($5,950) = RENT

2047 Rent ($5,625) vs Buy ($6,500) = RENT

Dont buy at $2,900 - Wait, get priced out, then pay $6,500 on your deathbed. Massive savings here - renters win again!

You are overlooking several things:

1. No family needs to rent a large house in an expensive neighborhood for 38 years. Once empty nesters, downside and move to a less expensive region.

2. The stock market has gone up significantly since 2009 as well.

3. Long term tenants offen end up with significantly below-market rent.

4. In my neighborhood, houses that rented (market) for $2,500 in 2009 had PITI over $3,500 (after tax savings taken into account and without maintenance costs included). Current (2016) market rent of the same houses is ~$3,600.

5. There are clearly scenarios under which renting wins. It depends on individual circumstances. Not becoming obsessed with owning RE helps too.

tatupu70 says

OK---try this then:

How about you trying to think before writing, for a change?

FP says

You are overlooking several things:

1. No family needs to rent a large house in an expensive neighborhood for 38 years. Once empty nesters, downside and move to a less expensive region.

2. The stock market has gone up significantly since 2009 as well.

3. Long term tenants offen end up with significantly below-market rent.

4. In my neighborhood, houses that rented (market) for $2,500 in 2009 had PITI over $3,500 (after tax savings taken into account and without maintenance costs included). Current (2016) market rent of the same houses is ~$3,600.

5. There are clearly scenarios under which renting wins. It depends on individual circumstances. Not becoming obsessed with owning RE helps too.

All of those are valid points, but they change nothing about the point of the post. Even if renting is cheaper in year one, owning is usually cheaper if you plan to stay in the same area for a decent amount of time.

FP says

How about you trying to think before writing, for a change?

lol--I'm the one who knows how to properly evaluate the rent vs. buy equation.

tatupu70 says

All of those are valid points, but they change nothing about the point of the post. Even if renting is cheaper in year one, owning is usually cheaper if you plan to stay in the same area for a decent amount of time.

You are hopeless. Really.

FP says

You are hopeless. Really.

OK--get back to me when you understand how to do the math.