Mythbusters: Is Tech Pricing Itself Out of Silicon Valley?

A plane full of software developers carrying them from the Silicon Valley to greener pastures. Photo by flickr user, hjl.

Last Tuesday, CBS SF Bay Area published an article titled, "Silicon Valley Exodus Is Real, Even Techies Can’t Afford The Bay Area Anymore", and naturally it elicited some feelings of panic from its readers.

Well, local news stations like CBS make a living off of fear-mongering, so apocalyptic article titles like this should be expected. But is there validity to the claim? Like most of these articles, maybe. You just have to sift through the click-bait theatrics to find it.

The article was written in response to a study released by the real estate brokerage Redfin. The study reported that in an analysis of search data from the Redfin's website, they found that 1 in 4 people in the Bay Area searched for a home outside of the Bay Area (compared to just 1 of 7 in 2011), and that a large chunk of these searches were done for homes in other up and coming tech cities like Seattle, Boston, Portland, and Austin. The study ultimately deduced that the high cost of living in the Bay Area is driving some tech workers to take jobs in cities where housing is cheaper.

I'll buy that.

Software Developers in Silicon Valley do have a much higher median salary ($112,000) than software developers in Boston ($83,300), Portland ($79,700) or any other city for that matter. But the median cost of a home here in the Silicon Valley is a whopping $1,050,000, while in Boston it's just $480,000, and in Portland $375,000.  So it seems reasonable to expect that for some techies the pay gap isn't enough to keep them from taking a job in a city that costs less than half as much to live in.  Some of them may not even have to take a pay cut if they are staying with the same company and just transferring to a facility in a different city.

But are we in the midst of a Silicon Valley exodus? Or is there a possibility of one occurring in the near future?

Not likely.

Just because people are taking jobs in other cities doesn't mean we are losing our workforce. The Silicon Valley is growing as fast as it ever has. Facebook just opened a massive new campus near their Menlo Park HQ capable of holding 2,800 employees, and they have plans to develop two other nearby sites they recently purchased (they are by far Menlo Park's largest landowner and employer). According to their careers page they are currently hiring almost 500 new employees in Menlo Park, with that number sure to jump as they begin settling into their new campus (and jump even more once the next new campus opens). And with all of the real estate that Google has purchased over the last several years, they are reported to have the capacity to expand their already massive Bay Area workforce by 30,000 employees. There were even unofficial reports from industry insiders last year claiming Google has plans to hire around 5,000 Bay Area employees per year for at least the next 5 years (Google doesn't disclose hiring data so the numbers can't be verified). Over in Cupertino, Apple is in the process of building one of the largest, most expensive tech facilities yet, which will hold 13,000 employees on a 176-acre site.

And how about our well of innovation, startups?  Those don't appear to be going anywhere either.  Angel List, a fundraising platform for startups, lists 18,040 of them in the greater Silicon Valley area.  And Stanford University figures to continue to be a huge source of brain power for Silicon Valley companies for years to come.

Don't get me wrong - there is no doubt that the cost of living is pushing people out of the Bay Area. The Silicon Valley's flourishing tech sector brought about a population boom that our housing supply wasn't ready to handle. As a consequence, housing prices skyrocketed.  But I think what we are seeing is an overflow of people, not an exodus of people.  The overcrowded housing market is trying to normalize itself by pushing out some of the excess demand.  And while the area is certainly going through an affordable housing crisis, it isn't the software developers making a median salary of $112,000/year that are being forced out of the Silicon Valley - these people are choosing to move.

To put it into perspective: did Wall Street pack up and head elsewhere because Manhattan got too expensive? No, but as the financial industry grew, places like Chicago, Boston and San Francisco emerged as new financial hubs and some Wall Street workers moved there.  Still, Manhattan remains the financial capital of the world.

San Carlos Residents Vote in Approval of Increased Parcel Tax for School Funding

The ballots are in!  68.3% of San Carlos voters voted in favor of Measure P, an extension to a current parcel tax that raises funds for the city's elementary and middle schools.  The County posted the "Semi-Official Results" early Monday morning.

Measure P will be a $58 annual extension of Measure B, a $78 parcel tax, and Measure A, a $110.60 parcel tax set to expire June 30th, 2019.  The passing of Measure P means a total of $246.60 will be collected annually per parcel for the school district, which will total over $9.5 million over 6 years.

According to San Carlos School District Superintendent, Craig Baker, this additional locally sourced funding for the district is crucial due to a lack of state funding.  "While the State's new school funding formula has resulted in large increases in State funding in other districts, State officials continue to see our small district as a low priority," Baker wrote in an email to the Daily News.  "In fact, the new State funding formula actually gives a smaller amount of money to the district compared to what it would have received under the old model."  He added that the new parcel tax "will go a long way in generating additional, stable, local funding to help protect (an) outstanding core academic curriculum and provide programs like design, engineering, music and world language, among other priorities."

The official results are expected to be announced no later than June 4th.

Bay Area Sellers Reveling in Flurry of Buyer Activity

If you look up "seller's market" in the dictionary, you'll find a picture of the Bay Area.  Homes all across the region are staying on the market for shorter periods of time than ever before due to a flurry of buyer activity.  In March 2015, Silicon Valley homes selling for over $1.5 million spent an average of 17.3 days on the market, compared with 23.1 days on the market in March of 2014.  To put things into more of a micro-local context, over the past 6 months homes in the Central Park and Woodside Plaza neighborhoods of Redwood City spent an average of just 10 days on the market, down from 14 days during the same period a year prior.  

While these numbers are good indicators of a seller's market, they don't come close to painting the whole picture.  In the context of this blog, the phrase "days on the market" is defined as the number of days in between the date the property is listed and the date the purchase goes into contract (it is sometimes defined differently elsewhere).  But those numbers are inflated because listing agents don't usually accept offers the day they put a property on the market.  To maximize exposure and encourage competition, agents usually keep their listings on the market long enough for at least one round of open houses and broker's tour (unless someone presents them with an offer so compelling they can't refuse).  Here at RealSmart, we'll often list a property on a Friday, hold open houses on Saturday and Sunday, broker's tour on Tuesday, accept offers on Thursday morning, then enter into contract later that day.  On paper that property was on the market for 7 days, but in reality we were receiving calls from buyer's agents day 1 asking when they could submit their offers.  In fact, buyer activity has been so high lately that we usually start receiving offer inquiries before the home even officially hits the market.

The reasons for seller's market conditions in the Bay Area are well documented:  massive job growth, tons of tech money, foreign investment, low interest rates, looser lending requirements, and (most importantly) extremely low inventory - the perfect storm.  And while the Fed is expected to raise interest rates at some point this year, with all of the other aforementioned factors likely to persist, the Bay Area should remain a seller's market for the foreseeable future.

BUYERS!  Don't let the competition scare you away.  Persistence will prevail, and if you have a good agent there are many ways that he can position your offer to get it noticed before others.  Home values are projected to continue their upward trend, so buying a home now is still a sound investment.

As always, if you are thinking about buying or selling, feel free to call for a consultation.  (650) 222-2327

Amid Downtown Growth, RWC Dining Scene Flourishing

Historically, Redwood City has never been known as a hot-spot for dining or night life.  But over the past several years, city planners have taken the necessary steps to change this perception.  They moved the city's movie theater from it's remote location by the salt marshes to right smack in the middle of downtown, set up Theater Way as a vibrant dining corridor, renovated the courthouse square, and made it a venue for regular outdoor concerts and events.  These changes, coupled with the area's close proximity to the Caltrain station, have helped attract all sorts of new business to downtown Redwood City.

As a long time Redwood City resident, it's hard not to notice the face-lift the downtown area is undergoing.  It seems like every week another restaurant, cafe, or bar is celebrating their grand opening.  A couple weeks ago, Howie's Artisan Pizzaopened their doors to the public, offering made from scratch pizzas, burgers, and sandwiches, a full bar, and an expansive patio area.  And just this past weekend, The Blacksmith - a bar serving specialty cocktails and premium spirits in a friendly unpretentious atmosphere - enjoyed a busy debut.

Last week Redwood City even played host to the Annual Silicon Valley Restaurant Week, during which 14 participating restaurants offered fixed price menus specially designed to showcase what each spot does best. The event was meant to draw attention to the city's up and coming dining scene not only from outsiders, but also from long time residents who may not have been aware of the city's diverse gastronomical landscape.  Many residents don't know for instance, that in an unassuming storefront at the corner of Maple and Broadway, renowned chef Manuel Martinez (formerly Executive Chef at Left Bank and Palacio) can be found at his seafood restaurant, La Viga, serving up culinary masterpieces that unify his background in Latin, French, and Mediterranean cuisine (Martinez is also the proprietor of LV Mar just down the street, which offers similar food in a more formal setting).


Manuel Martinez, of La Viga and LV Mar

Broadway Street alone is home to cuisine from every corner of the globe.  There's Chinese at Crouching Tiger, Vietnamese at Pho Dong,  Southern Mediterranean at Mandaloun, sushi at any number of different restaurants, Indian at Broadway Masala, Russian at the aptly named Russian Family Restaurant, Thai at Erawan, "California Cuisine" at Downtown, Classic American at City Pub, and Mexican at Quinta Sol.  The list goes on and on.

Opinions on the rapid development of Redwood City aside, the downtown area's flourishing dining culture is surely a positive.  Whether it be trendy new hangouts like Howie's Artisan Pizza, fine dining venues like LV Mar, one of a kind watering holes like Gourmet Haus Staudt, or old Redwood City staples like City Pub - there's something out there for everyone.

My advice - try them all!