Remote Work Is Increasing The Silicon Valley Exodus

Remote Work Is Increasing The Silicon Valley Exodus

The end of 2020 saw a surge of major tech companies, like Tesla, Hewlett Packard and Oracle, reveal their intention to leave Silicon Valley. The mass exodus seemed to mark an end for the longtime tech hub. However, their relocation appears to have come in the midst of a trend that’s been gaining momentum during the pandemic.

Months prior, Google and Facebook had announced that their employees would continue working remotely for at least the next year, while Twitter disclosed that their staff would work from home indefinitely. Although the prevalence of remote work had been increasing prior to the pandemic, COVID-19 has expedited its implementation.

For the first time, tech workers are no longer tied to Silicon Valley, and many appear to be realizing that they can maintain their high-paying jobs without having to put up with a high cost of living. So, how has this phenomenon impacted real estate? A recent Rocket Homes® study reveals that the Silicon Valley market is taking a hit.

Back in late May, Blind asked its 4.3M users, “If you had a choice to WFH as much as you would like, would you consider relocating”? The week prior, Blind ran a survey gauging whether tech and finance professionals, if given a choice to work from home permanently, would consider relocating out of San Francisco Bay Area, New York, and Seattle Area.  66% of professionals on Blind would consider relocating according to the results.

Additionally, Blind learned that 32% of working professionals would consider relocating with a pay cut.

2,800 users across Silicon Valley, NYC, and Seattle showed their willingness to reduce their salary.  Other Key Learnings include:

  • 38% of Facebook professionals would consider relocating with a pay cut.
  • 20% of Bay Area professionals would you be willing to accept a 10-20% pay cut
  • The Bay Area (35%), New York (30%), and Seattle (31%) showed similar proportions of intent to relocate with a pay cut.
  • New York (75%) has the highest proportion of those wanting to leave the Metropolitan Area.
  • Only (25%) of New Yorkers would not consider relocating out of the metropolitan area.

With talent bubbles getting a taste of brain drain, it’s finally a renter’s market.

Supply Is Outpacing Demand

As the nation’s tech hub, real estate in Silicon Valley has been in high demand. With tech workers constantly moving into the area, the market has seen a dramatic rise in prices over the years. However, now that employees have the freedom of flexibility and tech giants have been themselves relocating, there has been a considerable shift in the market.

Creative clustering has been the Bay Area’s secret to success for innovation. What happens when technology workers go remote, permanently? Blind, the anonymous professional network partnered with ROOM8, a popular app optimizing co-living through roommate-matching and apartment-search services, to run a survey to gauging “Tech Exodus” in 6 major US cities. The Survey asked:

  1. Have you recently moved outside the metropolitan area you reside in?
  2. What is your employer’s attitude toward permanent remote working?
  3. If you have moved recently, are you planning to move back where you are closer to work? (If so, when)
  4. Are you looking for roommates or co-living solutions?

The survey ran in the Bay Area, NYC, and Seattle, LA, Chicago, and Austin on 9/13-9/21. Here are some Key Learnings: 

  • 35% of LA survey respondents have recently moved outside the metropolitan area
    • 23% of NYC survey respondents have recently moved outside the metropolitan area
    • Only 18% of Bay Area survey respondents have recently moved outside the metropolitan area
    • 31% of Chicago survey respondents say their employer’s attitude toward permanent remote working “allows permanent” remote work
    • 19% of Bay Area survey respondents say their employer’s attitude toward permanent remote working “allows permanent” remote work
    • 15% of LA survey respondents say their employer’s attitude toward permanent remote working “allows permanent” remote work
    • 9% of Settle survey respondents say they are planning to move back within a year
    • 7% of Bay Area survey respondents say they are planning to move back within a year
    • 91% of  Bay Area survey respondents say they are not looking for roommates or co-living solutions.
    • 92% of  Austin survey respondents say they are not looking for roommates or co-living solutions.

 

You can see the report highlighting the overall responses here. 

A Blind user at Netflix writes, “Inventory has risen 96% YoY. Get ready bay area folks. Not long before all the foreign investors start selling to invest elsewhere. If you haven’t bought a home, you are damn lucky.”

Another Blind user at Lockheed Martin writes, “The eviction moratorium and stimulus ended in July. There is an exodus from SF. Will we see mass evictions and house price drops in the bay area?” The post has a poll attached, where 23% of respondents think Bay Area prices will drop significantly.

While listings have increased by 48% year over year, sales have only grown by 22%. With demand falling considerably short of the supply, Silicon Valley is no longer experiencing a seller’s market. For the first time in nearly a decade, the market has become neutral. This desire to relocate is not new, but it has certainly risen. Since 2012, interest in leaving the Valley has increased 79%, according to Rocket Mortgage® Loan Application Data. Last year alone, 65% of residents who applied for a mortgage were seeking a home outside of the area.

Most Are Looking To Stay Close To Home

Although residents are leaving the Valley, the majority are remaining in California. Rocket Mortgage® Loan Application Data shows that 66.4% are looking to purchase homes in more affordable markets within the state.

That being said, more individuals are seeking homes outside of the Golden State than before. In-state relocations are down 4.4% year over year. Of those wanting to leave, 6.2% declared interest in moving to Texas.

4,400 users across these three major cities showed intentions of limiting their time physically going to the office. 15% anticipate never returning to the office. After Twitter’s permanent work from home announcement, 66% of Twitter employees in the Bay Area do not anticipate relocating.

Download full report here: The Permanent relocation.

Since this original survey, the story has evolved. Earlier this month, VMware and Twitter announced they are cutting pay for remote employees who move out of the Bay Area, per Bloomberg. On Blind, a Bloomberg user ran a poll asking, “Are folks willing to take the trade off in this new Covid-19 future we have?”

The poll had 5,591 responses and robust dialogue with 561 professionals commenting on their own experiences, here are some key learnings:

  • 48% of professionals responded to the poll stating “No I shouldn’t get a pay cut if I’m doing the same work.”
  • 61% of VMware professionals responded to the poll stating “Happy to take a paycut for better WLB and reduce Total cost of Living”
  • 47% of Twitter professionals responded to the poll stating “Happy to take a paycut for better WLB and reduce Total cost of Living”
  • 63% of Netflix professionals responded to the poll stating “Happy to take a paycut for better WLB and reduce Total cost of Living”
  • 67% of Square  professionals responded to the poll stating “Happy to take a paycut for better WLB and reduce Total cost of Living”

You can see the report highlighting the overall responses here.

A user at VMware responded to the poll saying, “I’ll gladly do this. It’s only a reduction on base, and base makes up half of my TC. So a net 6.5% decrease in my TC to move to a place where houses are 20% of the price and taxes alone make up ~5-6% difference? Sign me up”

Texas relocations have grown by 8.3% year over year, which may not be a surprise considering a slew of tech giants, including Dropbox, Tesla, HP and Oracle, have shown the same desire. Interestingly, Silicon Valley residents are applying for loans that are 45.7% higher than the average resident of the Loan Star State.

Meanwhile, 3% of Silicon Valley residents want to make Nevada their next home, marking a 15.5% increase in interest year over year. These applicants have sought loan amounts that are 51.7% higher than the average Nevadan.

While remote work may have accelerated the Silicon Valley exodus, it’s clear that the area’s exorbitant costs were the true instigator. Those wishing to leave the state have chosen to relocate to places where their paychecks go farther, they can buy bigger homes for lower prices and they don’t have to worry about paying income tax.