At what point does expensive housing destroy our economy?

Hi all! I have been MIA for a few months. Quit my job, traveled a bit, low internet.

Like all Bay Area landowners, I love to see my home appreciate. Nothing creates appreciation like lack of supply paired with high paying jobs.

But at what point is this too much? One could argue that high paying jobs are a result of expensive housing, or vice versa. But if the median Bay Area home price were to suddenly increase to, say, $5 million, that would drastically impact the local economy, right? Local companies would simply be unable to pay a wage sufficient to entice anyone to move here. So they would leave the region.

Maybe then the prices would come back down. Maybe there is an argument that prices are therefore always at the efficient point on the curve.

But if you had to guess, how much does it take to break the economy? Another 50%?

Housing price won’t destroy local economy because housing price is determined by the jobs.

What could destroy the local economy? Rent control. Once rent control spreads, many new employees would not be able to rent a place. Local companies would need to buy houses for new employees.

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I think that very much depends on what you mean by “local”. If the SF-SJ 101 corridor became too expensive will companies move to Seattle? Or will they move 20 miles to Dublin or Pleasanton where people can commute in from Tracy and even Stockton?

Tracy is actually less expensive than Seattle, and Stockton less expensive than Austin.

More and more of the younger techies that I know are off to satellite offices in Seattle and Denver. Haven’t heard of anyone moving to Tracy or Stockton without a 2-hour commute. I guess Google is moving south to San Jose so that is economic forces in action to keep things “local” to some extent.

I think the keyword is “younger”. For older folks with family I think Mountain House and Tracy are more palatable than Seattle and Denver.

Denver is in the middle of nowhere. It can never match the allure of the Bay Area.

Seattle might have a better shot at it, but doubtful still.

By “younger” I meant in early/mid 30s w/ kids, advanced degree w/ school loans, and no property assets. The allure of the Bay Area only goes so far. At some point, dealing with crummy weather is worth owning a decent home and commute.

I only know based on the people I have met here in Menlo Park/Palo Alto over the last 5 years. When I had my daughter, I met a lot of younger families here. They are starting to leave for other states (rather than accept a long commute) at a pretty surprising rate. Came here when they had recently finished grad school or maybe a few years experience. The economy wasn’t great in most of the US and jobs were here. Now there are jobs to be found elsewhere with better housing, and arguably better work-life balance. They are going.

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Haven’t the prices in Seattle & Denver also risen quite a bit & are rising faster than the Bay Area currently? i.e. the gap is getting lower on a percentage basis?

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The American economy is like a pyramid. BA is on the very top (along with LA and NY). Only the strongest gets to stay here. They will reap the most benefits. The ones who are leaving are probably not meant to be at the top of the food chain. And it is not wise for one to use these people to forecast be demise of BA.

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What industry are these younger people working? What’s their income range? And which cities/states are they moving to?

I guess these younger people are not immigrants. Many native people are leaving Bay Area. One reason could be that immigrants are more frugal so they save money to buy a house here. Native people are not used to making sacrifices and they would prefer easier place

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Once you sell your house and leave the BA you will never be able to afford to come back…Some are leaving, but they are being replaced by many more newcomers…Some boomers like me are leaving, in numbers approaching the pre 2008 crisis…Most are moving to Northern and Southern Cal…Some to other western states like Oregon, Nevada, Arizona and Utah

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It’s still a 30-40% gap.

Seattle and Denver can never match Bay Area pricing in my opinion. There are only 2 places that can match: LA and NY.

Tech, Biotech. I don’t know income but they had respectable titles VP Sales, Product Mgr, Sr Software Engineer… For the most part their families had been here several generations. One family were fairly recent immigrants.

I’m not a fan of the lazy entitled American argument. Sure, in some cases it is true but these people work hard. They save. They want the best life possible for their family…same as an immigrant family. In their calculation, that best life was outside the bay (Boulder, Denver, Redmond, Kansas City, Phoenix, LA, San Diego).

Another argument could be that immigrant families more highly value the bay area because they culturally fit in here. Those whose family have been here for multiple generations can find more places in the US where they feel comfortable to live.

As an immigrant of Chinese descent, I can never imagine myself living in Trump country. Maybe people there are nowhere near what I imagine but why risk it? There is a reason why moderate, inclusive places perform better economically. People all over the world feel welcome and safe there.

That gap is closing fast. I think the fast climb of house prices in the core Bay Area has settled down quite a bit, but Seattle and Denver are charging ahead. If the gap is only 20-30% I don’t see any reason for people to move. Besides salaries, there are just more opportunities here. We have incredible breath as well as depth.

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Another important factor why Seattle will never become Silicon Valley: non-compete. California bans non-compete employment contracts. So you see a very vibrant startup ecosystems. People leave big cos like Google and Facebook and start their own things without worrying about being sued.

That’s a very big deal. I don’t understand why more states don’t ban non-competes.

The data is really interesting.

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Seattle drop in 2008 was less sharp than Bay Area and recovery slope is lower.

It depends on what kind of Chinese people you are. Mainlanders usually support trump (not in a good way, they view him as facilitator who allows China to move ahead by introducing polices that are either favorable to China or counterproductive to the US).

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Maindanders have been burnt by communism and they think capitalism is better than socialism