It blows me away what houses in SFBA go for. They aren't very nice houses! They're often cramped, the lots are tiny, the block landscaping isn't nice, nothing is walkable, nobody is all that close to public transportation, the surrounding areas are all strip malls and trunk roads, traffic is a nightmare.

At least when you over-pay for an apartment in Brooklyn you're in one of the greatest cities in the world. What's, really, the upside of living in Palo Alto? Palo Alto is nicer than Sunnyvale, I guess? But as a college town, it's not even as good as Evanston, let alone Ann Arbor.

I think that the premium of living in Palo Alto is the access to opportunities. Being able to have a short commute to some of the highest-paying jobs in the world should carry a large cost. Even a "poor" family of a lawyer and an engineer can expose their children to fantastic opportunities. If the engineer's company goes under, she can transition to its competitor across the street. I'm exaggerating a little here, but opportunities are great for people already in the constellation of trendy tech companies & startups.

It's pleasant, it's safe, it's got a walkable town square. Bicycling from Palo Alto to Mountain View is not terrifying for an 11-year-old. I'll say it's sufficient. It's better than where I grew up but that's not meaningful. I agree that the nicer neighborhoods of almost any other metro in the U.S. would result in a better childhood due to a better sense of community and less chance of the parents being house-poor because they spend 70% of their disposable income on their mortgage.

Your comment was germane to the conversation because it rightly contrasts the bizarre practice of sending house owners requests for sale with the low intrinsic value of the property. A rational person should question why a tiny unrenovated house next to a loud commuter train line that operates 19 hours per day would be worth $2.1 million.

And of course there is a decent college nearby, just sayin :)

(and to your point about moving to Cambridge to go to Harvard...sorry, but many of the techies -do- have ties to Stanford...and if your parents went to Stanford, you will be shortlisted when you apply...AND EVEN FURTHER, if your parents make a donation of a certain large amount, Stanford effectively pre-selects you, this has been communicated to people I know personally who have already made the donation in question...so yes, some of the residents can probably already start buying red sweaters)

If it were easy for kids from Palo Alto to get into Stanford, Stanford would be full of kids from PA. In fact, only 36% of Stanford students are even from the state of CA. Top schools value geographic diversity in the admissions process, and the top applicants (in quantifiable areas like SAT score) are highly concentrated in a few areas. Moving to those areas will not help your kid get into a top school. If you want your high-SAT-score kids to get into Stanford, have them graduate from a random high school in Kansas.

Tech money is literally raining down on Stanford. The only thing left to upgrade on the campus is to line the gutters with platinum. Its sad given that San Jose State actually educates more local workers...but connections to Stanford are a real social network for some of these people.

I have been told that Cupertino has some of the finest schools, hence the reason for the high housing prices, and other demographic factors. Ignorance talking here, but am I wrong to assume that some of that "good schools" would bleed over to Palo Alto? It would be one thing if Palo Alto were some slum leftover from failed 70s housing projects, and though wealthy it may be the schools haven't caught up. But AFAIK Palo Alto has been wealthy for decades.

The above is just interesting trivia, from what I understand Palo Alto schools have always been good.

On most of the metrics except public schools, Palo Alto fares similar to nearby "cities". And while public schools in Palo Alto have higher ratings than Mountain View or Sunnyvale, you have the option of private schools (which are better than public schools in PA) for 20-25K/year, which still comes out to ~300K per child.

So I am still baffled by the price premiums one is willing to pay for a house in Palo Alto or Cupertino.

[1] http://www.zillow.com/palo-alto-ca/home-values/ http://www.zillow.com/sunnyvale-ca/home-values/ http://www.zillow.com/mountain-view-ca/home-values/

edit: I am using examples of MV/Sunnyvale only for those who like south bay due to weather/opportunities/current situation etc. Median home prices of >1M in those suburbs are still ridiculous, and someone considering moving to SFBA may benefit by exploring other parts of the world, if they are not tied to SFBA for whatever reason.

But that's my POV. Perhaps others think it's just fine, or that the job makes it all worth it. Meh, takes all kinds to make a world, but to me it was just way too much compromise on the thing that are important to me.

I'm not saying, "don't move there, you'll hate it." I'm simply relaying an experience that many here might have: that being you get flown into a place you have never been or (in my case) haven't spent much time in, have an interview, then decide based on that little bit of information if you want to tear up roots and move. It's not a lot to go on, but from what I had to work with I concluded it wasn't for me. (Doesn't matter, Apple didn't extend an offer anyway.)

I will ruefully concede that reasonable people can disagree about San Francisco. But I do not understand Palo Alto.

While public schools in Palo Alto are btter, you have the option of private schools in MV/Sunnyvale (which are better than public schools in PA) for 20-25K/year, which still comes out to ~300K per child.

And commute time to {Google, Facebook, Apple, San Francisco, etc} is similar from these 3 suburbs - I don't think PA is any better, especially when you consider the possibility of moving around various companies in the bay area.

[1] http://www.zillow.com/palo-alto-ca/home-values/ http://www.zillow.com/sunnyvale-ca/home-values/ http://www.zillow.com/mountain-view-ca/home-values/

Look at an aerial map of the Bay Area and take a gander at the hundreds of thousands of acres of incredible open spaces. These are all within a short drive of many of the residents. I can go from Palo Alto to old growth redwoods in thirty minutes on a good day! Note that this has nothing to do with tech.

Also, rich people like to be around rich people. There are probably more billionaires in a couple of blocks of Professorville (four that I know of) than there are in the entire state of Michigan. Thats why people are in Palo Alto and not Ann Arbor.

I don't regret leaving. Moving to a small town in Montana (of course, we don't really have any big towns in Montana) gave me an immediate salary hike, lower rent, and a company which was willing to foster me up through the ranks to development. There have even been enough opportunities to switch jobs when I wanted harder work.

> What's, really, the upside of living in Palo Alto?

Good question.

I complete agree, SFBA should not be as expensive as NYC. NYC is better in most ways than San Francisco if you're being objective and Wall Street pays better than Silicon Valley. Housing is usually derivative of the incomes of the area. I blame the SFBA property values on restrictive housing policies and NIMBYs preventing development of housing. There is no way in the long-run that SFBA should be as expensive as NYC. Is Walnut Creek really a better place to live than Queens? I don't think so.

Work, that's it. No one I know actually likes living here (short of the 20+ year resident homeowners). It's just where the jobs are.

a) The weather sucks

b) The jobs and tech serendipity isn't there.

This is like arguing what the best top college is to go to while the majority of the world doesn't even get to go to a top college. [1]

[1] My vote goes to Princeton in the Ivy's even though I went to a different Ivy. Just like the college town feel. Of course today I'd pick Stanford because it's so target rich with opportunities back when I was in college nobody talked about Stanford that much.

School districts are by far the biggest driver in South bay.

I'm personally not sure about SF.

I get that you don't like Palo Alto. Its not Oz. But you seem to be casting it as a dumpy suburb that has exploded for no reason.

(edit: wow, you really don't like Palo Alto!)

Stipulate that a family of four with two professional working full time is going to move somewhere in the US --- that is, they're not staying in Cleveland because they grew up there.

Then, accounting for regional salary and amenities, school quality and cost of schooling, overall burn rate, and housing costs: why would someone choose of all places Palo Alto?

Weather is nice compared to Brooklyn or most East Coast cities though. I remember someone saying way back in the 90's "the house doesn't matter you won't be spending much time in it". Sure that is an exaggeration but...

> What's, really, the upside of living in Palo Alto? Palo Alto is nicer than Sunnyvale, I guess? But as a college town, it's not even as good as Evanston, let alone Ann Arbor.

Seriously if you are in tech and you are a 'go getter' (or even if you're not) there is a great deal to be said about being in a target rich environment like that.

I spent some time in the early 90's out there. When my ex wife wanted to move out there with her new husband (he worked for one of the name companies out there which I will not mention) I said "you have my blessing, I will move there as well if you go there".

Rewind 20 years and Menlo Park and Los Altos were more desirable places and more expensive places to live than Palo Alto. Houses are nicer there as well (particularly MP).

What does PA have that these two cities don't? What is seen as the most desirable school district in the area. That's the pitch used to sell properties to overseas investors as well.

(1) How fragile is SF/SV's "tech capital" status?

SF/SV has no monopoly on talent. There are top engineers and devs everywhere. What it has a monopoly on is smart investors who are willing to take risks and top-notch accelerator programs.

It's ironic that the people who build the net can't use it to escape one of the most absurd rent bubbles in the Western world. The problem isn't that devs and founders aren't willing or able to do this. The problem is that investors and mentors tend to be older people who are not "net natives" and are not yet comfortable doing deals or mentoring remotely.

Younger angel investors -- or those who are more net-native and comfortable with telework -- will already fund things far away, sometimes without even physically meeting anyone involved. I see this happen regularly. Startup crowdfunding is also going to add a new source of geographically unconstrained capital.

As older VCs and older accelerator/mentor types who are not this comfortable with the net retire and are replaced, expect to see way more of this... especially since the real estate costs of SF/SV are a serious liability in terms of runway and recruiting capability.

(2) The SF/SV housing crisis is partly political.

SF/SV are geographically constrained and earthquake codes do impose additional costs on vertical construction. Those are indeed fundamentals. But the rest of the "shortage" is political and is due almost 100% to self-serving NIMBY resistance. That NIMBY base is being attacked from all sides now.

If the NIMBY wall crumbles, you'll see a construction boom to rival all construction booms. Supply will flood the market. If this also coincides with a dip in tech financing or factor #1 above coming into play, blood will be on the streets.

Edit: another factor is foreign speculation, and if SF/SV (wisely) copies Vancouver's new foreign real estate speculator tax that will help deflate this factor too.

(3) Why again should I come to SF?

Back before this madness SF was one of the greatest cultural centers of the world. It was quite honestly one of the coolest places in the world.

Real estate hyperinflation is pricing all that out. The artists and musicians and true 'hackers' and freaks and all the rest of the interesting people who made SF great can no longer afford to live there.

So why again should I pay through the nose to live in what's rapidly becoming a giant glorified office park for venture capitalists and big tech firms?

--

My own anecdote:

We've repeatedly resisted coming up there. I did the math. Doing so would triple our burn rate. We are "default alive" and growing today, but up North we'd be dead eight months ago. (We being this: https://www.zerotier.com/)

Investors who are not willing to invest outside SF/SV should just skip the middle-man and cut checks directly to real estate speculators.

The rent I would personally have to pay (I have kids) would be about 10% higher than my total cost of living in Southern California... and SoCal is not considered "cheap" by any standard. Last time I checked out apartments in SV I found a place that cost almost my total cost of living in SoCal where the lobbies smelled like dog piss. I call Silicon Valley "the world's only six figure slum."

The tech scene in SoCal is booming. Everyone I talk to says they have zero interest in going North because "you can't afford to live there unless you are rich."

Edit:

The parent is spot on, but I'd add this: while Manhattan is comparable to SF/SV, New York as a whole is considerably more affordable. That's because it has very good transit. You can easily live further away and commute into Manhattan, and you can read a book on your commute instead of staring at the butt of a car. You can also live without a car pretty easily in NYC and even surrounding suburbs, which really mitigates the cost of living. You can only do that in SF if you never want to leave the peninsula.

More and more people (and businesses) are wondering why they are allowing themselves to be raped by real estate when geographic diversification is easier today than it has ever been in all of human history. Seriously. Think about this. These real estate bubbles as we move into the true broad cultural uptake era of the Internet are like a bubble in fossil fuel prices six months after over-unity nuclear fusion has been demonstrated. Such bubbles have one and only one role: to allow smart money to exit and hand the (burning) bag (of dog crap) to dumb money. Every time you read about how this real estate bubble is permanent and will never deflate or how you are nobody if you don't live in one of 3 cities remember that you are probably reading a submarine ad sponsored by someone who wants to make sure they can exit at a healthy profit before reality ensues.

(Side note: given the Moore's Law growth of solar and batteries and the interesting progress in fusion I do wonder if the "peak oil" hysteria of the past 10 years wasn't exactly that... a final profit taking and exit opportunity for a soon to be obsolescent industry.)

In the long term SF/SV desperately needs a real estate crash if the region wants to have any hope of holding onto its culture or any of the other things that make it great. If a crash does not occur eventually the exodus from this madness will reach a tipping point and the city will lose its soul forever. Then the crash will still eventually come, but it'll be less like a correction and more like Detroit in the 80s.

Edit #2:

To avoid perpetuating age-ism I must point out that I know people in their 50s and 60s who are pretty "net native." It's a mentality thing. There is a bit of an age correlation but that's because not everyone remains open to letting their paradigm shift as they age. Ironically it is often the very successful who have big egos and inflated images of their own intelligence who resist this the most. It's one of the many ways that having a big ego makes you dumb.

1. I think that SF/SV's status as a "tech capital" is not fragile. Even if a dramatic push or pull happened it would be a slow drain. The dot-com crash was a quick flush, but that was predicated on the market realizing a majority of companies being revenue-negative wasn't sustainable. Google, Apple, Microsoft, and Facebook aren't going anywhere in the next few years. Despite newspapers reports of doom, most tech companies in the region are profitable. Tech employees' families are sticky and won't move unless the push or the pull is substantial enough to end friendships and uproot community ties.

2. Agreed, the SF/SV housing crisis has a large political aspect to it. I foresee it continuing indefinitely. Owners often immediately switch sides from YIMBY to NIMBY once they get their deed. The area is more geographically constrained than SoCal. Even if massive development were permitted, it would take half a decade before price reductions started to occur. It would be simple to plan this in a way to preserve the existing character of neighborhoods, but it would require centralized planning; only dramatic legislation at the state level would make this possible.

3. You should or you shouldn't live in SF. SF's culture has waned dramatically but Haight-Ashbury and Mission are still vibrant. I agree the SF counterculture is on the decline. Oakland has a lively art scene though it is also being choked by SF-like house price increases. I agree that it is at a turning point where many different things could happen.

I think that a rational person might still move to the area due to the feedback loop of successful companies congregating to where developers and capital firms exist, and developers moving to the region to get jobs at good companies. Though it doesn't feel like it to me, I can't help but admit it's a good thing because this price pressure will eventually push companies to open campuses in other metro areas. In the meantime, we can only hope and wait.

I wasn't necessarily arguing that SF will completely lose its "tech capital" title (though nothing's impossible), just that SF real estate is overvalued and that the craziness of this is likely to soften in the future as multiple factors conspire against it.

... though I do have to say: we are in uncharted territory. I have to reiterate that the Internet is young and is nowhere close to being fully assimilated by the culture. The net makes geographic diversification easier than it's ever been by orders of magnitude, and once more conservative industries adopt it this could have massively disruptive effects.

To give you an idea of how big such shifts can be: in the 19th century something like 90% of Americans worked in agriculture.

An effect of this magnitude could occur in relation to geography and place-advantage. The initial visionaries of the Internet predicted this, but they were overly optimistic about how long it would take. Personally I think they might turn out to be right but it'll take another 10-20 years to fully metastasize.

A maximum disruption scenario would be the "full virtualization" of centers. No more financial, tech, etc. "center" in physical 3d space. These things move to the cloud.

... and yes we are about to grow our team but our new team members are already identified. :)

I think the earth quake hazard is undervalued in comments asking for more construction, and at least when I lived there - I left about 10 years ago after having lived there for about 7 years - water was a serious future problem too. It was still okay but they were looking at huge amounts of deferred maintenance and construction just to update the water supply. Even when I lived there I could read about significant leakage of water for the peninsula on the way from Hetch Hetchy.

So if they decide to build more and more densely, I'm not sure what a) infrastructure like water will do, and b) what happens when the next major earth quake inevitably strikes - admittedly it is more likely to strike in the ("less valuable") East Bay.

Nor do I understand why it needs to happen. You said some of it yourself. There really is no reason for everyone to actually be there in order to work in an IT job. There are people who will argue that presence in their experience is a must, okay, so they can do that. But there are plenty of examples of projects and companies that have shown that purely remote does work for a lot of people and companies.

Why put ever more people into that small congested area that has to get basics like water from very far away, and will have huge problems with earth quakes? I immensely enjoyed living there, in places like the Presidio in SF itself, or in San Ramon, Mountain View and Redwood Shores (I kept moving) - and in the Oakland hills, a wonderful, gorgeous place with miles and miles of open spaces and trails and horses right in front of my door, with a view over the Bay to SF.

I don't see why the Bay Area of all places (meaning the physical limitations, water and quakes) should be made into Hong Kong density. Few people who (have to) work there actually benefit from the often touted benefit of "potential connections".

[0] https://ww2.kqed.org/science/2014/02/28/bay-area-do-you-know...

There also is the issue of how many people can actually be served from Hetch Hetchy (for the peninsula) and the various other places (various rivers) for the rest of the BA. Already Hetch Hetchy is being stretched. The water levels there also depend on the California drought situation. A headline from not that long ago: "Hetch Hetchy levels a major concern for water officials" (http://www.ktvu.com/news/4607391-story)

So adding a few hundred thousand or even more people to the Bay Area doesn't seem to be such an easy proposition and "purely political" to me? The politics sure also exist, but when I follow those discussions as an interested bystander - as someone who used to live there - I always hear the arguments about politics (which are of course true) but I never see things like water even mentioned. I'm not saying I know, I'm saying I wonder that it's not even mentioned. I would happily be educated and find out that those concerns have been solved or don't exist, but I'm suspicious because nobody even mentions them. Even if politics takes care of changing laws and starting construction, is it even feasible, especially the water question? And if I remember the climate model predictions right California will have more droughts than in the past decades (https://www.washingtonpost.com/news/energy-environment/wp/20...).

Predictions by a California government agency: http://www.water.ca.gov/climatechange/

Reading just the first few paragraphs on that page shows that they expect a negative impact on just the water sources the Bay Area depends on.

... except when it comes to weather.

If I wanted to sell my house and move next door (our houses cost about the same), besides the fees to the real estate agents, my property taxes would literally double (from about 10K a year to 20K) and I've only lived here (Cupertino, right next to Apple HQ) for eight years.

My neighbor, who has been in the house for 35 years, would go from 1K a year to 20K a year.

Because of Prop 13, I'm highly unmotivated to sell.

On the other hand, the only meaningful macro effect it can have is to reduce liquidity and moderately buoy prices.

A family can't upgrade to a larger house without incurring the increase, so they don't move. A family receives a better job offer... but the commute will be too far so they don't accept it. A family wants to move, but they demand a premium to sell to cover their increase of property taxes.

On the other end, a family buys a house that is far too expensive than reasonable (6x income) but does this with the expectation that their frozen property tax rate will not scale with their income and their property value. Families that aren't willing to accept this default risk miss out on being able to purchase in that area.

Both of these effects are bad but I think it only partially explains the differential between house prices and annual incomes. I assert the overarching reason is scarcity due to geographical constraints and insufficient development. If Prop 13 were a primary factor, we would see high house prices in the Central Valley and near Joshua Tree.

Exactly. The article is about the lack of inventory. I was explaining why there is a lack of inventory.

"Mr and Mrs Jones are both professionals, with two children at private school. They are looking to move into this area. ... Properties like yours are selling for over £600,000 on this road." etc.

I was renting, so obviously these all went in the bin.

Out of curiosity, I contacted one of these realtors, and they asked me questions about my house -- how many bedrooms, bathrooms, detached garage, etc. When I said it was 2 bedroom, she said "oh, well, my client wanted a 3 bedroom. but since you are thinking of selling anyway..." -- it felt like a scam, like they were just trying to see who was willing to sell their house so they could be my realtor.

Further, my kids go to Cupertino public schools and they are some of the best in the nation. It is amazing how stringently they enforce the residency requirement, even to the point of visiting the homes of students who they suspect don't live in the district. Palo Alto schools are also very good though lots of people send their kids to the private schools there and in Menlo Park.

Someone also mentioned the outdoor opportunities. It is amazing how close the wilderness is to almost anywhere in the Bay Area. I can get to the beach, the mountains, or a redwood forest within an hour.

I live near a ton of Apple executives. They have moved here from all over the world. Simply put, if you want to work at (for example) Apple and have a significant position in the company, you must be here. Must.

Only two in CA, the rest are scattered over the US. But if you had to pick another place to live, looks like Detroit would be a good choice.

Where do the nurses, garbagemen, policemen, etc. live? Their salaries are not nearly that of those in tech so I can't imagine these prices wouldn't lower the number of people in essential non-tech jobs in the area (unless they're willing to suffer through the commute).

Our real estate market has certainly picked up over the past several years (after decades of being severely undervalued), but median house prices are still less than half of what you pay closer to Toronto.