If work from home, remote/hybrid is the future and people are moving out then why are housing prices skyrocketing in few specific counties of Bay Area? Specifically Santa Clara and alameda.
Bidding 300K+ for an old single family home which has several issues to begin with. Easily 6+ offers on a decent size townhouse and condo which has HOA… rent back waived for 2 months, no contingency… paying about 1.2m for a 3 floor house…
this is the reality today.
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You’re not geniuses discovering El Dorado if a place is cheap. It’s cheap because no one else wants to live there.
1. Even with loads of people moving out of CA, the number of engineers left in the Bay Area is HUGE and the number of people who left is only a rounding error when it comes to the prospective buyers in the housing market
2. The Bay Area is a time tested, resilient market. Think of Lindy Effect. An idea/region that has survived for 50 years has a good chance of surviving another 50 years. in the past 40 years, The Bay Area housing market has stayed resilient/strong in spite of 2 big recessions, 1 major earthquake etc. So, people like to take chances on something that has a track record and the Bay is hard to beat in that respect.
3. Most homebuyers are in their 30s and have spent at least 5 years in the bay. So, they've built up a strong network of friends and family here. To give up this network just to buy a fancy house in a far away place where you have to start from scratch and build a new network? Sorry, wont work.
4. The weather here is really good in spite of the WILDFIRES! People say "Oh... Global Warming.. There will be more fires in the future..". Sure, there's definitely a chance that the number of fires here will increase. But people forget that global warming is affecting a good number of other areas of the US equally or even worse. Remember when the Texas grid came down? So, its really hard to find a place in the US that has beautiful weather like the Bay, no adverse weather conditions like storms, tornadoes etc AND have a lot of tech jobs.
5. a) Remote work is NOT a win for the employers. The companies that are trumpeting full remote are doing it either to show that they are "trailblazers" and/or to lure good employees from companies like Apple/Google that are adamant on not going fully remote. The time required for an employee to prepare and quit their current company is drastically less in a remote environment compared to an office environment. If no one is around me, I'll grind leetcode 24/7 and get out quickly. This will increase competition for good employees driving up wages.
5 b) Remote work is really inconvenient when you are building new path breaking products. Cos collaboration is utmost important in such scenarios. For startups it might be much harder.
5 c) Just like there are vested interests that are pushing for fully remote work, there are lobbies that are pushing for office/hybrid work. Offices generates a lot of economic activity - restaurants, food industry in general, oil, rideshare, office real estate, contracted office staff and a host of others rely on people commuting to office.
5 d) Most Markets are mostly efficient. If an employee can work from a remote mountain in a cheap ass state and pull in $500K+, every one would want to do that and the edge doesn't exist anymore. So location based compensation eventually kicks in.
6. Cali has Prop-13 which places a cap on the amount of property tax you owe. And the property tax is really nominal - 1.17% in Alameda county. Thats not the case in places like Austin where people flocked to early in the pandemic. Most cities around Austin have a property tax rate of 2.64% that will be re-evaluated every year based on the property prices of the neighborhood homes. So, crazies from Cali will migrate and keep pumping up the prices and you keep paying higher property taxes every year.
7. Excess liquidity injected by the Fed from the past 1.5 years is yet to be drained out of the system. When people have a lot of money and inflation is running rampant(6.1% officially. Imagine the real number!), people want to hedge their bets by investing in time tested physical assets, one of which is a house. Also, the interest rates are low for a LONGGG time and people want to take advantage of that.
8. Covid is shooting up again in Europe. People simply don't know when this nonsense will end. Most people are fed up working from their small dingy apartments and have no certainty if that arrangement will end soon. So, why not upgrade to a decent house and make your new work place comfortable?
I am not against individuality but just saying that herd mentality has its benefits and hence a strong bias in our brains towards it. If 100s of people are running away from a burning house, its better you run away from it too rather than thinking "Oh, the house might not be completely on fire. I can go in and find valuable things inside"