Saw this article on Bloomberg and it reminded me of our discussions regarding rents in NYC and SF:
Unfortunately it is very short and doesn't go into much detail, but the thesis is that the high rent prices in these two cities have a discernible affect on the national economy.
My rent more than doubled and for a smaller place. I threw out a pretty big number when they asked about my salary expectations - had to account for rent increase and state/city income tax. Wasn't sure if they would agree to it but they came back with 98% of what I asked so I said "ok". (Got the other 2% four months later.)
It's possible to get the rent down in NYC if you are willing to add commute time - have to see if that's something I want to do in the future.
It's definitely a question that comes up when we want to hire non-locals! From SF they don't care but from other parts of the country they are concerned.
These costs are enough to make a guy living in one of these areas, say San Jose for example, take up residence in his mon's basement to save money.
how can those guys in those cities have money for strippers especially otc. the cost savings of moving somewhere much cheaper would finance a sugar baby
@JohnSmith69 "These costs are enough to make a guy living in one of these areas, say San Jose for example, take up residence in his mon's basement to save money."
especially if said guy has never had a real job in his life
Or you could live in the Bronx. That's the only place left in the city with "inexpensive" housing. I live in queens around a bunch of fake gangsters and live solo in a home. So my rent is pretty up there compared to places like Georgia (yes this 24 does live on his own since 21. Que the gasps). This is why i don't frequent the strip as much as you gentlemen. Gentrification is the blame game so you white folk can live better. Im not sure how it affects the nation, rent prices but celebrities living there definitely raise the cost of living.
@player11 not many people that visit strip clubs in NYC actually live in NYC. Those that actually live in the city tend to visit black clubs. And others simply get escorts because its cheaper. Not many strippers in NYC expect their patrons to be from there. The few regulars actually just come in the day like the rest of you. If not then their at a fancy restaurant with friends and family
The local housing costs are insane. It is a joke. You just have to ignore it, tune it out. You can't let it influence your future plans or sense of self worth.
Back during the dot com boom they were saying that SJSU Profs could not even afford to rent here.
You have all sorts off illegal stuff going on too, like guys partitioning two car garages into 4 sections and then renting them out at over $500 per month.
Wrote about after his parents died, selling the family home in Sunnyvale. It was bought by people from Mainland China. They didn't dicker, but they just cut it up into multiple units. The father's workshop got used as one of the best parts to live in.
The quality of life is just gone. It got destroyed in the 60's and 70's, as real estate prices skyrocketed. People think it was later, but that was just because that was when they came. It goes way back.
Here is a company that moved out, to Rocklin. Again, quality of life for it's people is the issue.
One local stripper was their telephone receptionist. She didn't want to follow them because she feared they might cut her pay. So she went back to stripping.
Lots of company's left or built new production plants elsewhere, like Folsom, CA and the Sierra Foothills.
Others left for Chander and Gilbert AZ, and then Rio Rancho NM, or to places even further away. Intel's advanced semiconductor research is just outside Portland, Hillsboro OR. I suspect that is because of the Oregon Graduate Center, championed by Sen. Mark Hatfield.
The things that have taken the places of semiconductors and electronics are nothing, just nonsense, consumer media gambits like Facebook and Twitter.
Semiconductor technology was a spin off of the Apollo program. With that kind of government leadership, tremendous things happened which gave us a huge edge worldwide. But now the consumer media stuff gives us absolutely nothing. Really it is just feeding off of popular culture. I consider it to be worthless.
When the Venture Capitalists were into semiconductor technology, some good happened, but they jumped out at the end of the 80's, scared of the Asian billion dollar fabs going up.
So good has still happened since, I think even more than when the VC's were in, but it is in other states.
Back before the 2008 crash, yahoo real estate listed San Jose, Santa Clara, Sunnyvale as the very worst place in the country to buy a home. This was followed by San Francisco, Berkeley, Oakland.
The issue was simply how great of a distance there was to fall. It was already inflated, so just about anywhere else would be better.
The prices are completely out of wack, but not many are willing to admit this.
The costs are higher than the benefit one could ever get from ownership.
Now, with more and more work being done over the internet and people being able to live where ever they want, the price bubble is even more absurd.
This guy I've listened to. He puts to rest this idea of making money by trading up in homes. And also he puts the nail in the coffin of buying fixer uppers.
People believe they are making money, but really they are just watching prices go up. If making money is what they wanted, they could do better just by buying and selling. "You can't eat your living room". And as far as fixups and renovations, let the new owner do it according to their taste and schedule. No reason for you to put more into it when it is the land which is appreciating.
The real estate market always took away from work quality too. People would say, "Oh Joe over there, he is so smart, he's made tons of money in real estate."
So I would ask, "Well does the fact that he works here, in our department, count for anything?"
From the 80's onwards people were always talking about various "hot metros". I think this what the Bloomberg article is getting at. These metros have never been in the Bay Area, not from the 80's onwards, because the cost of being here was just too high.
So it's always been medium sized cities which have attracted lots of young people and lots of single people, and which have experienced phenomenal economic growth. These are always other places.
As for the various industry types which have grown here, yes the high cost of living does reduce the number of people able to take part.
Oh well. These things can be done else where.
What I would like to see is manufacturing brought back, and also some land returned to what it was, agricultural.
The big big real estate bubble burst hasn't happened yet. I am waiting with baited breath. Bring it on!
I've always known that this place was another Detroit in the making.
I'll continue by talking about a more recent real estate issue.
SJG
Layla, fast youtube.com
JS69 and DoctorPhil,
Just for you:
Ed Kemper, driving around in his mom's car, which has Univ Calif parking stickers, and picking up young female hitchhikers.
SJG
A couple of days ago the front page of the San Jose Mercury news continued to chronicle the real estate frenzy. They have noted that what was happening at the peak of the dot com boom, just before the bubble burst, is happening again. People are over bidding, going over the asking price, on homes and apartments. Supposedly they are afraid that they will get cut out unless they do this.
So I ask the question, why, and what does it mean?
I know this gets outside the scope of the Bloomberg article, as that was looking the longer term historical effects of high housing costs.
Real estate agents usually tell people to expect one round of dickering. So why now are people over bidding, and why aren't sellers just pricing it higher?
The Mercury News headline called it a "Feeding Frenzy".
I think that for this to happen it takes two things. First, buyers who don't care how high the price is, and who just want to get in no matter what. Second, there have to be sellers who are not concerned about getting all the money they could. They just want to get out.
The newspapers focus on the first factor, but never on the second.
Now anyone who is stupid enough to listen to realtors will be told that prices always go up and that they double every seven years. The intended meaning is that no price is ever too high to pay.
But history does not support what these realtors are claiming. Most of the time when prices are rising faster than wages, then what is happening is a demographic change. For example, middle class married women could be entering the work force. Or the types of employment to be had are changing and so a different type of person is coming to live here.
The thing about these changes is that they don't happen everywhere at the same time, but when they do happen, they happen just once. This accounts for much of the price insanity we are now seeing.
As I can see, the people doing the over bidding are all dual income and first time home buyers. They have socially conservative values, and so home ownership has a near unlimited symbolic importance for them.
So then who are the sellers? Probably they are long term owners, people who will be making a ton of money no matter what, and who most certainly are not planning to live in another high cost area ever again. So as they see the prices as nonsense too, they just want out. So they don't care if they leave money lying on the table, as they sense that the situation is extremely unstable and they don't want to be a part of it.
Again I emphasize that the last time this started to happen was in the late 90's, just before the dot com bubble burst.
So who is more correct in their perception, these super eager buyers, or these super eager sellers?
I have to say that I think it is the sellers. These buyers are taking a huge risk, where as the sellers are risking nothing except maybe failure to maximize the take.
Nothing would be worse than to buy something and have the bubble burst and at the same time loose one's job. People think two incomes is safer, but when this means dual income sized mortgage payments, then two incomes is double the risk.
Liz Warren and her daughter or daughter in law amazon.com
I say you would have to be insane to be buying into one of these Feeding Frenzy markets, or to want to have anything to do with it. But apparently other people don't see it that way at all. I feel that they are just being controlled by normative social standards, and hence lack good judgment. But then, most of the economy runs off of this.
SJG
Bonus points to anyone who read all that.
It's a good thing work is so busy I have little time to lament how shitty the strip clubs here are. Also a good thing Detroit is such a short flight away. :-)
Ranukam - that's was hilarious.
So what SJG was trying to say is he has a roommate in his moms basement to help out with expenses. It took him 2,000 words where it only took me 20.
Lol @ranukam
The high housing costs completely change the way people live. The only remedy will be if lots and lots of people just up and leave. This is happening on a continual basis. Most people's dream is to get out.
SJG
@SJG: The hot housing is in the news this morning (front page WSJ) and hitting some areas that you don't normally identify with a hot housing market:
(not sure if the link is working).
We lived in Silicon Valley until 2006 and the area has always had a hot housing market because of good jobs and great schools. Getting into the housing market there at the right time can be a great investment. My kids are happier in our new area, but I miss the Asian influence and the general "genius level" over in S.V.
Yes, if you get in at the right time, and if you actually have the money to do this, and then if you get out at the right time, SV housing can be a great investment. No different from oil well drilling stocks, commodities trading, or the roulette wheel.
But you shouldn't have to live that way. Housing should not be a gamble. You should not have to take the great risk of buying something already inflated, hoping it will go up, just so that you can later sell and then split.
If you want to speculate with money, you can live somewhere else cheaper, and then still find ways to speculate with the money you are saving.
The over inflated housing costs lock lots of people out, and force others to live in horrendous conditions.
For many decades now, the dream of most people has been to get out. Glad things are going well for you in your new area.
SJG
SV does have a big Asian influence. I find this to be both a plus and a minus.
SV does have lots of very smart people. I enjoy this.
But SV politics are still far to the right of San Francisco. Most SV community groups are completely worthless because they are infused with Born Again Christianity. San Francisco is not this way.
I like the AMPs. I like the SJ Public Library Main Branch as it is merged with the huge SJSU library. I like the electronics and computer surplus stores.
There is still some manufacturing going on, and this also means technical support services. Some still going on. Still some culture of electronics and technical software, still surviving despite the consumer media ( EBAY, Twitter, Facebook, Google ).
I love the weather, fantastic for bicycle riding. Not much cold, often very hot. Rain fall only about 10 or 15 inches per year. Low even for Bay Area. I love the Viet Coffee Shops, excellent bike riding destinations.
I would like to see a reindustrialization of Silicon Valley, along with lots of land also going back to agriculture.
I think you could call the Silicon Valley of the pre-dotcom years a kind of Non Union Fordism.
Asian immigrant women working at benches in factories. White males with technical training from the military working as technicians. And all making good enough money to buy homes and live, but still locked out of the ranks of corporate power.
Everyone says that in Silicon Valley you just have to be skilled. No one cares how you got that way.
Well maybe for non-exempt or exempt non-exempt positions there is some truth to that. But for higher level positions, all anyone cares about is your degree level and what school it is from. Nothing else matters, unless maybe you are a Founder CEO.
So it is a completely class biased environment.
The nice Fordism for the people at the bottom was being financed by plentiful agricultural land which could be turned into tract houses or industrial plants. Eventually that land vanished and the housing costs got too high, and so the industry left. Now we have just these consumer media things.
Again, re-industrialization, and restoration of some farm land. Right now we have one of the most severe homelessness problems in the country, and extreme class stratification.
Some of this was caused by the Jarvis Gann, which decoupled property values from property taxes.
Property taxes are the least painful and the easiest to collect type of tax.
Do you want your monthly housing payment to go 100% to the landlord / bank / former owner, or do you want a bigger slice of it to go to public use, like paying for schools and universities? Reducing property taxes has only caused property values to skyrocket.
Payroll taxes are the ones to cut first, followed by sales taxes, but never real property taxes.
Where SV could have political activism from those at the bottom, you have the Born Again Christian groups soaking up the discontent and energy and putting out a message of innate moral defect. Until people can learn to reject this, we are stuck.
SJG
Enjoyed your posts, SJG, which brought back (mostly) good memories of Silicon Valley(SV).
You're right that SV is to the right of San Francisco and especially Berkeley. I remember the tech workers as being mostly apathetic and there to get rich. Does that sound familiar? Some of the kids were into Rand Paul's daddy / Ayn Rand and had nutty ideas about Fed policy. Still SV is a lot more level-headed than our current suburban locale, which is heavily white and conservative. My wife is Chinese and she misses SV where about 20% of the population is Asian.
Good points about prop13. I lived in CA my whole life up until 2006 so I'm well aware of how it has shaped the CA economy. It's a regressive tax, and the old farts sitting on expensive properties in Bell Air and Beverly Hills just love porp13. They can sit on the property forever without getting reassessed on the true value of the property. No politician in CA dares to mess with Prop13 -- and since property taxes are so low, the state makes up for it by high sales tax, corp taxes, and state income tax. As you say, that leads to huge boom-and-bust cycles.
What's wrong with Ayn Rand? I mean she didn't take it to the ultimate level that my idol Gordon Gekko did but she was definitely on the right track.
I, myself, couldn't hack living in New York and having to compete with those in suits who weren't just posers like I am. So I left. Things are better for me now.
Brilliant!
Low cost of living, rural and urban settings depending on taste, a variety of vacation and leisure time activities, and plentiful inexpensive pussy. Flyover country for the win.
I agree with you Josh43. I want to add just a bit more to what I have already said about the culture, that is how it pertains to those at the bottom.
I've long been involved with various community groups which try to deal with our severe poverty problems.
First of all, we have a severe homelessness problem. The people who are the most visible are male alcoholics. But actually the majority of homeless are working homeless. They just don't get enough money to get into a place. Or once they have an employment gap and they get evicted, they can never get back in.
So even according to the City's own counts, which are certainly undercounts, the average age of the homeless in San Jose is 7 years. See, most of the homeless are families with young children. You just don't see them.
Now as Sam Liccardo ran for Mayor, he characterized the homeless as a social problem who should be dealt with via pity programs. He was involved with the installation of one Dana Bainbridge at the downtown Disciples of Christ Church. She closed down a very much liked meals program. She replaced it with the Recovery Café, where to get food people have to submit to case management.
This is designed to humiliate the homeless and the poor, as that keeps other works in line, like those who work for the city.
Bainbridge herself comes from this company Maximus, which specializes in the outsourcing of govt health and human services program. She worked in the enforcement of the Clinton Gingrich Welfare Reform. Isn't that a strange person to pick as church pastor, bringing her out all the way from Nebraska.
This church is directly adjacent to City Hall. It had long been a sort of activism pertaining to poverty issues. Not any more. I am sure Bainbridge was hired by City Hall.
Then there is this Downtown Street Teams. They try to put the poor and the homeless into "Work Readiness Programs". These are not jobs and they don't pay a living wage or even the minimum wage. But they do use the poor and the homeless to make a public spectacle and they do intimidate working people all the way up the line. Liccardo, a graduate of George Washington University and Harvard Law School, and his father himself a prominent local attorney, supports all of this stuff.
Liccardo won by a very small margin. It was completely neighborhood by neighborhood, and completely racial too.
His opponent was Dave Cortese, someone who is endorced by Labor. Cortese characterized the typical homeless as someone who is employed full time and is attending San Jose City College, but as they lack a place to live they sleep in their car.
Just a completely different view between the two men.
What I see with the various community groups are people who have been the family black sheep and had never had any kind of a chance. If they are anything less than completely compliant, then they will probably be diagnosed with something and put on psychiatric medication by our County white coats.
If not that, they will probably be prescribing alcohol or street drugs for themselves.
Then they will be targets for the Born Agains. You've got North Valley Baptist ( Southern Baptist affiliate ) saying that were it not for their people, "this would truly be a Heathen State", and telling people that they have to confess their sins so that they can get into Heaven. Then you've got "Jubilee Christian Center ( Word-Faith Pentecostal ) telling people that if they keep calling out the name of Jesus enough times, he will eventually make it rain on them, and then telling people that they have to use corporal punishment on their children. And then you've got the outreach ministries, who are sometimes even worse.
So here I speak of those at the very very bottom, those who have suffered the most and who have nothing to lose.
We can talk more about real estate and the high tech sector. But for right now focus on those with the least, who have just been run out of areas along the Guadalupe and some other places.
These people are preyed upon by the Born Again Movement, the county White Coats, and these corporate sponsored pity mongers, and they are used by the politicians.
Though they have nothing to lose, don't expect these people to be going to the barricades anytime soon.
SJG
Shailynn's Unemployment Thread tuscl.net
Dugly still desperately trying to convince us all he's got money?
Maybe now he's "established" enough to give more than a few hundred bucks to charity.
There are other remedies which could have been passed to protect people on fixed incomes from escalating property taxes. This matter has already been explored at length.
But also understand that one of the brakes on real estate price inflation is property tax.
There are other ways to do it, but what we have set up with prop 13 has made the situation crazy.
Better to collect property taxes than payrole taxes or sales tax. Income tax in California is quite progressive, but as such it is not that consistent from year to year. It is also hard to enforce. So better if more of the tax burden is carried via real property tax. Though I agree that there needs to be some kind of deferred collection until the time of sale, or collection via reverse mortgages, as someone's living room is not liquid.
SJG
I'd read all of SJG posts... Except my phone runs out of memory!!!! . lol!
Anybody who had time to read all of that not only gets extra points, but has Waaaaaayyyyyyy too much time in their hands!!!
I don't use cell phones because they are too small. Screens too small, keyboard too small. I've been typing into full sized keyboards for decades. And now because of the World Wide Web I've been reading stuff off of screens for at least 20 years. So I can type and read extremely fast. Only thing is that I have to take eye rest breaks, look out the window and look at stuff far away.
SJG
A couple of my best friends are now in SF. Who knows if I decide I don't like NYC maybe it will be back to the West Coast for me. Maybe I can join SJG's Church by then. :-)
So if Prop13 did in fact protect "millions" of grannies, wouldn't you expect to see a downturn in foreclosures in the years after Prop13 was passed? Can you post anything to support your argument?
Also, to protect granny, do we need to let someone sitting on a property presently valued at $20M to pay property taxes capped at 1% of the price paid 25yrs ago? If Prop13 is supposed to rescue seniors, wouldn't it be easier to simply exempt older people on a fixed income from paying property taxes? I personally think it's fair for granny to pay a fixed percentage of her property taxes if she's lucky enough to see her property value go up. She may need to extract her home equity in some way -- maybe with a reverse mortgage or home equity loan.
Che wrote: " Those “millions” of people who moved to California in the 1960s and 70s and bought their modest houses for $30-60K and have spent their lives in those same homes have been spared from being taxed on the current market value of $1-2 million" {snip} "Most of them would be forced out of their houses"
So suppose Prop13 is repealed and replaced with a 1.25% property tax on the assessed value. Doesn't an elderly person sitting on $1-2M in equity have the option of taking out a reverse mortgage instead of being forced out? Seems to me, the real objection is that grandma wants all of that home equity to pass on to her heirs. Or perhaps grandpa wants to keep and squander all that home equity on strippers.
Che wrote: "until a few weeks ago I had skin in the game for years with multiple properties."
We sold our SV home in 2006, rented for a few years, then picked up a much nicer foreclosed house in 2009. So we've also had some skin the game --but our decision to sell had absolutely nothing to do with property taxes. My folks bought a home in Southern CA in the late 1960s and they've lived there ever since. I'm completely in favor of trashing Prop13 even though it goes against my self-interest.
When you talk about "thieving politicians" and the "tyranny" of taxation, I start to lose interest in the discussion. Sure there's wasteful government spending and welfare cheats. In CA, there's also UC Berkeley that has top-five programs in math, physics, chem, economics, computer science etc.. Taxation buys civilization.
@Josh42: I like it! That's brilliant. Make grannies pay property tax and force them to take out HELOC's giving the banks back some ownership of their homes. Don't forget to factor in the rates of those loans in the effective tax they would pay. Also like your idea of a wealth tax on such individuals. Again, HELOCs to pay it each year?
You ought come work on Wall Street with ideas like that!
@josh42 “In CA, there's also UC Berkeley that has top-five programs in math, physics, chem, economics, computer science etc.”
populated by foreign national students taught by foreign national professors. and as Paul Harvey would say, “now the rest of the story”. california’s education system ranks 49 out of 50. every morning the california department of education begins the day with a super secret prayer, O God thank You for Mississippi or we would be dead last.
Lol!
Lol!
Is that an invitation to come work in your group as a subordinate? Seems like I would have little chance of getting past your rigorous hiring standards. Plus the daily humiliation: "Go get my coffee now, Joshy, you circle-jerking cock-sucker." I would probably be the indispensable idea man in your group, though.
Talk today in the Mercury News about how high the jobs level is now, almost as high as the dot com peak. But then that ain't much because that was 20 years ago, and the national and local population have increased.
And then besides, the dot com bubble was built on the ruins of a semi-conductor manufacturing industry. Google and Facebook just don't cut it.
They talked yesterday about Intel buying Altera. Intel has 107k employees world wide. Altera has 3.1k in San Jose.
Well for the share holders of the two companies this is probably good, using Altera's field programmability with Intel's advanced processors, in more embedded applications will be outstanding.
But, the next generation of Altera's products will be coming out of an Intel fab, like in AZ or NM, or somewhere, but not out of Silicon Valley.
Also, this merger and all the others which have been written about will still at least in the short term involve job contraction.
But I also note something else. They are talking about going to 10nm dimensions, like MOSFET gate length. Well, back in the late 80's when the VC's started bailing out, the gate lengths were about 2000nm or maybe 1500nm. Given that the wavelength of green light is about 500nm and that this is all being done lithographically, tremendous technology developments have clearly occurred, and most of it during semiconductor slow downs and without the VC's. Its the kind of stuff which takes slow and methodical work, and is not necessarily going to give 10 to 1 payback in 4 years. It is the kind of stuff interesting to the people who do the work and to the people who like 2Ghz computers instead of 20Mhz computers, but not to VC's who simply want a gimmick to rake in money from unsophisticated speculators.
Over Christmas I noticed many empty parking lots. Some companies take holiday shutdowns to save money. Sometimes people are not so productive during the holidays. But on the other hand, the whole reason for being in business is the presumption that by paying people to do their jobs, there will be payback, and there are market windows. So once you start seeing holiday shut downs, it is often not much longer until people figure out that they can save even more money by closing completely.
I have seen a couple of buildings which have been vacated since Christmas. Not prominent enough firms though to draw headlines. And then there are still vacant buildings from the 2008 crash. And then the seminconductor industry started pulling out in the early 80's and in the late 80's there was a big crash. None of this has ever come back. The main new entry is of course Micron in Boise.
The 2015 long boom, like a balloon being blow up until it is tighter and tighter. Better get in so you are not left out, because it will blow soon.
SJG
Helter Skelter youtube.com
full movie, with real press conference footage of Roman Polanski.
Watch now as this kind of stuff does not stay up long.
You blow all the time.
The market was asleep for a while lately but some nice action in some names today.
Doug, what was the increase in your housing costs when you moved to NYC? Did it influence your decision in making the move?