Bay Area Housing is Still Pretty Crazy

Posted in Places

Few things are as humbling as for a software engineer in silicon valley as dealing with the state of the housing market here. For all the talk about those who build software getting paid more from the shortage of talent (and if you’re not from the area, here’s a pretty good tool from Wealthfront to help you calibrate), it certainly doesn’t seem like enough when looking at million and multi-million dollar residences.

This article from the CEO of Redfin provides some perspective: even $2 million properties are getting multiple offers, and even if the overall bidding wars are down, prices are simply out of reach for the vast majority of first-time buyers who can’t leverage an existing ridiculously-priced home. Of those who haven’t given up, they’re having to pull out 401k’s or dip into parents’ savings to make down payments, which is both sad and a worrying intensification of real-estate-as-sole-investment.

The numbers aren’t pretty: for the “median $1 million home” in San Francisco, if you’re not an early Googler/Facebooker/LinkedIner, you’re looking at having to save $200k just for the standard 20% down payment, and then having a $800k mortgage weigh you down for the next 30 years. Even with $150k engineering salaries, this is not an easy task; indeed, Wealthfront has a case study where a $250k/year couple still has trouble with getting a home, sending the kids to college, and still having enough to retire. The solution is to get lucky and scrounge a cool million from a startup exit early in one’s career.

Anecdotally, I don’t know of many high-flying engineers (or designers, or product managers, etc.) who own their residences; of those that do, almost all are priced out of the main San Francisco/Silicon Valley peninsula and are relegated to the East Bay, San Jose, or the cheapest parts of San Mateo county. Of course, many are young and choose not to buy, giving away half of that monthly paycheck back to a $3000 2-bedroom 1-bedroom rental.

The cost of living here has its way to keep us humble.