patrick.net

Unless lawyers start finding a better place to live and work, Palo Alto real estate prices won't decline much in the near term. The place is swarming with attorneys. That is why it is still so expensive. The techies are still around, but the lawyers have taken over.

The main problem with Palo Alto now is that the schools are starting to get overcrowded. It is such a desirable school district, it is now a victim of its own popularity. They sold off a bunch of schools in the '80's and converted them to housing. Now those schools are lost forever and the families are starting to cycle in again. Major catastrophe starting to happen: http://www.paloaltoonline.com/weekly/story.php?story_id=967

John Haverty says:
I was interviewed at GOOG in early 2003. Man I missed a boat.

Sorry to hear about that. Hope you're not too bitter about it. :-)

I didn’t make the cut, the GLAT / Google labs aptitude test didn’t exist yet at the time but the interview process sucked.

They know that their interview process sucks, they have been trying to fix it for years now, and I think it just got worse. I heard interesting stories from two guys who went through the process in the last few months.
One did not make the cut (I honestly cannot imagine how that could have happened. He must have shown up drunk), and they pissed the other one off with their boundless arrogance, right in the first round.
On the other hand, out of the top five people I'd prefer not to work with again, four are currently at Google.

However, GOOG is a thing on your resume, its a “degree.” They see it as such. he pay is low, the options are the only reason to be there are the hours are long and hard.

True. Options and contact networks, ultimately.

Nowadays, it really sucks to be there. There is not much possibly to upside on the stock, the rich people are bored and have nothing to do but to spend 10s to hundreds of millions, they could care less about working.

Everybody who works there denies that, but both they and I know it's true. I've worked at a company in a similar situation in the late 90s, and human nature doesn't change. What's worse, they'll leave soon after the first earnings miss, leaving behind only a cloud of dust and a few thousand befuddled peons who must now make sense of their undocumented spaghetti code.

As for compensation for new-hires: The hearsay is that they pay indeed at least 15% below market, and the options packages are in the hundreds, vested over five years (and only if you actually perform useful work - they mention that a lot in their handouts. Hmmm. I wonder... :-) ).

So, unless the stock goes to $1,000, I suspect that won't be too many new Google gazillionaires these days.

There's enough housing supply out there for the folks who actually stroke it rich, since for years a lot of new construction in the BA has been luxury homes > $2 mil. And honestly, wouldn't anyone who made it in '04 have bought in '05 at the latest?

Flood zone. That reminds me. There are over 4000 properties in Palo Alto in the flood zone. In 1998 there was a $25M flood. Yet those same "flooded" houses still sell for >$1M. Unbelievable! I looked at a tiny one on University Avenue (2bd/1ba) for $925K last September. It was owned by the creator of Pong. It sold and I think it is back on the market again already. Six month flipper due to the standard mortgage penalty clause?

Girgl,

the google options are not in the hundreds, to be exact, it is topped by 200 for anyone who doesn't go in as a middle or upper manager. Even right after the IPO, the first batch of people I know who got in didn't get any meaningful number of options (sub 1000 for sure), and yes, vested over 5 years.

So ignoring the 400 or so google millionaires, the other average google employees, 5,000 of them, will be lucky if they end up with six figure lottery after-tax when they are fully vested.

During the dotcom time, the standard practice for vesting was around 3-4 years, certainly not longer than 4.

Creator of Pong? You mean the early computer game Pong?

Bike2work,

where is the flood zone of Palo Alto located? This is the first time that I've heard about it. Please elaborate.

Gees, there is so much to learn about the BA on this site, keep it coming.

Yes, Alan Alcorn. I really wanted to bid on the place just for that fact. But I doubt he ever lived there. It was a tiny rental place.

The part of Palo Alto that flooded in '98 was due to San Francisquito Creek. This creek can't handle a 2/3rd's of the 100-year flow. It flooded in '55 too. That covers about a third of the Palo Alto flood zone. The other two thirds are part of the tidal flood zone. This zone is subject to the 100-year high tide. It is currently protected by "uncertified" tidal levees. Given a good storm surge at the right time, major bad "bathtub ring".

burbed,

I assume you're going by SAT stats or 4 yr college admission rates. Just don't go by the Newsweek survey, it is utter rubbish.

I'm pretty shocked by the 5 year vesting process. I hope things continue to be good at Google...the way you all discuss it, it sounds like the late 90s all over again, and it'll be very sad for the peons at the bottom.

GOOG = 5 more years of grad school

I know this is supposed to be just competitive advantage and whatnot, but 90% of America looks like what the Golgafrinchans dumped on planet Earth.

OT, but somewhat hilarious.

http://tinyurl.com/kgxuk

You still can't chew gum in Singapore, but you can now gamble there.

Oops...

Okay, according to the article, you can now chew gum in Singapore. Heck, you can even read Cosmopolitan magazine.

Zeta Says:

"… Only 7% of Bay Area residents can afford a single family median priced home. I’m sure that number is not much higher in MV..."

God almighty! That's so out of whack!

The entire middle class, and a portion of the upper-middle class, cannot afford a home, except through inheritance.

Huh? What is the middle class and what is the upper-middle class?

Most google employees belong to the middle-middle-class and they can afford homes without any problem. Upper middle class people can still buy homes with cash.

BillF,

That's the crux of the question. Will BA turn into another Aspen or Jackson Hole or NYC Upper East Side? Or will the prices come down? The former is pretty inconceivable given the old/decrepit housing stock and sheer size of the region.

Most CEOs of large corporations belong to the upper middle class. Large shareholders of large corporations belong to the upper class.

People in upper middle class earn big money when they work. People in the upper class make big money whether they work or not.

Peter P,

Except that middle middle class makes 100K a year and went to Ivy league grad schools. Their current lifestyle can be obtained elsewhere by someone making 40K and has a BA from No Name Land Grant U.

burbed,

Ugh, I have serious issues with that AP exam criteria. It is basically worthless, since it doesn't say anything about the effectiveness of the teaching or quality of student. AP and Honor classes don't make sense for everyone and a good school tries to challenge the best students, push the average student, and not get dragged behind by the worst students -- something basically impossible under this criteria.

I know because I went to a HS that was consistently ranked in the the top 25 under the rubric, and I can tell you that 50+% of the student body and teaching was sub-par.

Re: firefighters. It's a lot easier for firefighters to deal with long commutes, since they work long shifts and don't have to commute as often. It's really a terrific gig - you can pick up an whole second career on the down time and retire with great benefits by your mid 40s.

burbed,

Anyways, sorry about the rant. That stupid Newsweek thing is one of my pet peeves.

BTW, I do agree with your main point. I sense that BA and LA has experienced a lot of overall gentification while your old school district was old money. I know a woman who lived in Oakland in the mid 1980s and she recalled that it was dirt cheap. Now, even the shittiest POS in the shittiest part of Oakland now costs more than a decent SFH in the outer burbs of Dallas or Houston. Basically, prices have gone up so much since the mid 1980s and 90s that most of the CA homeowners cannot afford their home if they had only 20% downpayment on FMV. That's just a sick situation.

Police officers in SF start at $64k to $84k:

http://www.sfgov.org/site/police_index.asp?id=27855

I don't know what they make after 10 years, but the papers are always full of stories of guys making over $100k with overtime. These are the more senior guys though, detectives and sargeants.

The Bay Area already has plenty of middle class people, what it doesn't have is room for any more. Anyone who bought more than five years ago is affording their mortgage just fine. I have a mechanic living across from me who bought in the 80's.

San Francisco has been doing fine as a city with a stable population base for the last 50 years, I just don't know if the Bay Area as a whole can do it. Obviously young people are moving out, obviously the population is going to skew "rich" as each genuinely middle class person dies or retires and their spot is replaced by someone who can afford it.

What is the end game?

Can the whole place become like Monaco?

I still think two adults working full time can afford a home here, they just have to adjust their expectations to reality.

Jimbo,

I think you've got it backwards. Reality will have to adjust to the middle class's expectations, or else all the middle class families will eventually flee for greener pasture.

Yeah, just like happened in Manhattan. A similar thing is happening here.

Jimbo,

Manhattan is pretty small populationwise, and until recently, only a small portion of it was considered valuable - this dispite the fact that Wall Street has a lot more money floating around.

The equivalent would be to say that Pacific Heights will always be beyond the reach of the middle class. That's no big deal if the rest of BA drops back down to Earth.

Manhatten has over 1.5M people living there. Though I suppose you could say that it is the urban core of the area and that there is still some affordable housing somewhere in the NYC area.

I am actually not so sure of that. Joe's "affordable" NJ example has an average home price of $950k. Even in Queen's the average home price is over $500k!

We still have Vallejo...

Jimbo,

Until recently, only the Upper East Side and Gramercy was considered truly upper class housing. Lower Manhattan has become hot only in the last 10 years or so.

Same with LA. Before the recent run up, only Santa Monica, Malibu, Beverly Hills and a few areas of West LA would be considered truly unaffordable for middle class families.

If that's the historic norm (certainly seems likely based on housing affordability - most people living in BA cannot afford the house today, and America isn't creating so many billionaires that they'd look into $1.5M shacks in Marin or Palo Alto) returns, then most areas will be affordable while a small core may be reserved for the elite.

Astrid,

What percentage of the population in Manhattan are homeowners? Has that really changed that much over the years?

These are not rhetorical questions, by the way. I could not find the answer with Google. But I would guess that most Manhattanites have always rented because buying was too expensive.

I know that has been the case for a long time in San Francisco. I don't know anything about LA, so I will refrain from commenting.

It is kind of sad if all the big cities in America have basically priced out our young people. That obviously cannot continue forever... or can it? The increasing desirability of the urban core is going to make it more expensive, there is no way around that.

Jimbo,

I don't know an answer to that. I do know that prices have gone up by a lot since the mid 1990s. Long term rental often does make more sense than direct ownership, since professional RE managers would be more efficient than individual homeowners.

Another problem with direct comparison is that NYC housing situation is always iffy since much of the best housing stock are co-ops.

I don't see current trend continuing forever though, there's just not enough rich people to support the current price level for all of Manhattan or all of SF. At some point, some current owners will sell out and the prices start to normalize.