[closeparen]

The Bay is driven by vast numbers of Google and Facebook millionaire hopefuls, who are willing to pay 60% and more of their salaries for single rooms in dilipidated apartments shared with strangers, and to endure uncomfortable hour-plus commutes, in pursuit of their dreams.

High competitiveness among the few thousand who actually got rich would not fall on the middle and working class so heavily.

A huge number of people willing to pay most of their upper-middle-class salaries for a standard of living we would call poverty in any other region, on the other hand, makes even poverty-style living too expensive for the Bay Area's actual poor.

[refurb]

Agreed. How many people have been made millionaires through tech companies? 10,000? 20,000? Even 50,000?

There are 7 million people who live in the greater Bay area and they live in ~2.5M owner-occupied housing units. I can't see tech millionaires making that much of a an impact on housing prices. Sure, they could push prices up by 10-20%, but SF housing prices have pretty much doubled since the great recession.

I think it's the "now or never" mentality of home buyers. they think that prices will only ever go up, so if they don't buy now (even if it means overextending themselves) they'll never have a home. I'm sure a lot of people thought the same thing before the housing crash of 2007.

[bagels]

Prices are set on the margins.

Sales volume in the bay area are low for a variety of reasons (Prop 13, not enough new construction).

It doesn't take many people with high salaries when there is low inventory to push prices up.

If many more houses were for sale, the prices would plummet due to lack of buyers able to pay the current prices.

[stuckagain]

Millionaire doesn't just buy themselves a house. They also buy houses for their children! One of my colleagues at work just bought a house for her daughter, all cash, in Piedmont where every house costs more than a million bucks. She's a mid-level software developer, nothing remarkable or extraordinary but she has that kind of money.

As someone who once was outbid by an all-cash offer on a house in Piedmont I had to sort of grit my teeth over that one.

[obstinate]

No Google engineer is paying sixty percent of their salary for a rented room of any quality in the Bay Area. I don't know whether you're vastly overestimating the cost of a room, or underestimating Googler salaries, but one way or another, you've got it twisted.

[closeparen]

By "Google/Facebook millionaire hopeful" I'm referring to founders/early employees that are trying to build a company with Google or Facebook's level of financial success and get rich on equity.

Google pays enough to get your own apartment on less than 50%, sure, but I don't think Google is making people millionaires anymore, except the slow way (401k savings).

[user5994461]

Facebook/Google made lots of people millionaire with their share grants. I'm not talking about the IPO from 10 years ago, but the regular stock grants they give on top of salaries.

Over a few years, the big company compensation package is over 1 million. (It helps that the valuation has been rising steadily forever).

[seanmcdirmid]

If you are talking about rents, sure: more demand, same supply = higher rents.

If you are talking about sale prices, then those hopefuls hardly influence that market. Instead, it is the people coming in with money that can afford to bid up houses that you have to worry about.

[closeparen]

I don't think the rental and ownership markets are that segregated. If buying a house costs less than the expected value of renting it out for a while, a smart investor would buy that house and make it a rental.

There's a huge amount of demand to live here. The price level has to rise until only the number of people who can fit in the housing stock are coming in. We could have no inward migration, but I don't think we could have a large number of people without money moving in - how would we decide who gets a home and who doesn't, if not by raising prices?

[seanmcdirmid]

To become a landlord, you have to have either the capital or credit. Playing landlord even in the Bay area is risky.

Vancouver, even though rents are crunched also, is not so affected much by internal movements. The distortions are much more at the sales level and then, speculators leaving bought property empty because they intend to flip sooner rather than later, or just don't want to rent it out for money that isn't very comparable to the purchase price.

Vancouver is basically the mainland Chinese real estate market: very expensive to buy a house, but still cheap (relatively) to rent. The Bay Area is not.

[mahyarm]

People often downgrade their housing type before they start paying more for housing if they can. Ex: Live with room mates, live in a studio vs a 1 or 2 bedroom with their partner, etc.

[closeparen]

Precisely. The downgraded housing options that tech workers accept, i.e. roommates, tiny studios, bad neighborhoods, poor maintenance, long commutes, etc. are hallmarks of poverty in the rest of the country.

In Milwaukee, a 20th percentile household still has a car and a commute below 30 minutes [0].

Here, even six-figure professionals can't afford such things, so life is nearly impossible for the genuinely poor.

[0] https://datausa.io/profile/geo/milwaukee-wi/#housing

[explainthisth]

These claims have very little in common with the facts on the ground. A Google engineer can afford a condo five miles away in Sunnyvale ($700k), or a house ($1M) if they have a partner earning decent money too. These prices are absurd, and untenable for regular people who don't work in tech, but let us be realistic. Those are the prices because there are people paying them.

[closeparen]

>A Google engineer can afford a condo five miles away in Sunnyvale ($700k)

If we're using the 2-2.5x income definition of "afford" that stands in the rest of the country, no. Total compensation across software engineers at Google looks to be about $160k [0]; a Googler can afford about $400k.

Not a lot of $400k condos around here.

To get to $700k, you'd need a married pair of Googlers (not an easy thing to do in this overwhelmingly male industry), the equity from a paid-off house somewhere else in (more likely), or the willingness (and lenders' willingness) to spend a much higher multiple of your income (seems to be what's happening).

[0] https://www.glassdoor.com/Salary/Google-Software-Engineer-Sa...

[gabbo]

I'm not sure the average Google software engineer according to Glassdoor is representative enough of Google software engineers who would be buying housing that it's valid basis to make assertions about housing affordability.

It's extraordinarily unaffordable in the Bay Area and none of my friends there (at Google, Facebook, or elsewhere) would say it's easy, but I don't think $400k is the right number to pick even if you're conservative about affordability.

Google has been hiring extremely heavily over the last 4-5 years, and their HQ gets tons of early 20s fresh university hires. So I'd expect that $160k number (which I see as $166k?) to be skewed down a bit. Anyway, fresh early 20s university hires aren't likely to have the savings, stability of personal situation, or desire to buy property.

You're probably looking at more established engineers as buyers, and they'll have been able to save longer and advance in their careers, and $160k + the standard 20% down payment is probably on the low side for that.

Glassdoor's numbers don't change much when you bump up the experience, and I'm afraid I don't have sources other than my fairly extensive social network at large Bay Area tech companies, but I can pretty confidently say 3-6 years out of school that yearly total comp number will be $200k+ and if you're saving properly without 6 figures of debt you'll have upper 5/lower 6 figures saved to put down on a place.

$700k is still a stretch, so I think your point still stands, but I don't think you need to be a dual-income Google/Facebook/etc. software engineer household to afford it.