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Thread: Techies Priced Out of Palo Alto as Studios List for $1.3 Million

  1. #1

    Techies Priced Out of Palo Alto as Studios List for $1.3 Million

    http://www.bloomberg.com/news/articl...or-1-3-million

    August 30, 2016

    • High earners unable to afford tech hub amid limited new supply
    • Mayor says runaway job growth is part of the problem


    When Andy and Amy Isaacson looked at buying a home in Palo Alto, California, for their expanding family, the least expensive one they could find was $1.5 million.
    The couple and their three daughters instead moved to Omaha, Nebraska, where they have a $500,000 four-bedroom house with a sprawling backyard.
    “We’re both professionals and we were reaching into savings each month to make ends meet,” said Andy Isaacson, a 35-year-old software engineer, whose wife worked as a clinical research coordinator at Stanford University before their April move. “Something had to give.”
    While runaway real estate costs in Silicon Valley have long since priced out most middle-class homebuyers, even high earners are becoming unable to afford Palo Alto, the suburb at the heart of the technology-rich region. Robust job growth combined with limited new housing supply are pitting well-off newcomers against wealthy residents who have benefited from a doubling of home values in the past decade alone.
    Critics say longtime homeowners wanting to protect the character of the area are standing in the way of new residences to compensate for an employment surge. That’s resulted in a median home value of $2.5 million, 13 times the national level and out of reach for even the six-figure salaries of the area’s tech workers.

    Too Fast

    The issue gained broader exposure this month after a city planning and transportation commissioner resigned because of unaffordable housing. Mayor Patrick Burt last week told real estate website Curbed San Francisco that Palo Alto is adding jobs too fast -- a problem most city leaders would love to have.
    Soaring employment and a limited housing supply are to blame for the astronomical costs, Burt said in a telephone interview. He said he’d like to see “a reduced rate of job growth for a sustainable and healthy economy.”
    “We have more job growth than we know what to do with, and there’s no sin for some of the jobs from the booming tech economy to be shared with other regions,” Burt said.
    Palo Alto, about a 45-minute drive south of San Francisco and adjacent to Stanford, is home to Tesla Motors Inc., HP Inc. and a host of venture-capital firms. Facebook Inc. was based there before moving its headquarters to nearby Menlo Park.
    The city of 67,000 had a 2.9 percent unemployment rate in July, well below the 4.9 percent rate nationwide, according to the California Employment Development Department. There’s far from enough housing to accommodate those workers. A 2014 city report estimated there are three jobs for every resident.

    Prices Double

    The median home value has doubled since 2006 to $2.5 million, data from Zillow show. The lowest-priced home on the market is a $969,000 one-bedroom condominium, according to brokerage Redfin. A 790-square-foot (73-square-meter) studio is available for about $1.3 million.



    Kate Vershov Downing, the former planning commissioner, said in her Aug. 10 resignation letter that her family will move to Santa Cruz, a beachside community about an hour south, after paying $6,200 with another couple to rent a house. She’s an attorney, while her husband is a software engineer.
    “After years of trying to make it work in Palo Alto, my husband and I cannot see a way to stay in Palo Alto and raise a family here,” she wrote. “I struggle to think what Palo Alto will become and what it will represent when young families have no hope of ever putting down roots here, and meanwhile the community is engulfed with middle-aged, jet-setting executives.”
    Palo Alto lost 7 percent of its 18- to 44-year-old population in the 2000s, the only age group to show a decline, according to Census data cited in the city’s report. Those aged 45 to 64 grew by 19 percent and older than 65 increased 20 percent.

    Foreign Buyers

    In addition to tech-job growth, real estate prices have been pushed higher by foreign buyers looking for a place to park their cash. Realty bus tours popular with Chinese and Indian buyers are a common sight, with purchases leading to unoccupied investment properties dubbed “ghost houses.” On the opposite end of the spectrum are homes filled with tech workers -- so-called hacker hotels with more than a dozen young people piled in and sleeping in bunk beds to save on space.
    Longtime residents such as Joseph Hirsch, a steering committee member for the Palo Altans for Sensible Zoning, argue that the area’s rapid growth is creating traffic congestion and a parking shortage, and threatens to change its serene feel.
    “We love that we have a nice suburban neighborhood with good schools, a great place to raise families, have them educated,” said Hirsch, a Palo Alto homeowner since 1974. “That’s something to be valued. We don’t want to become San Francisco or Manhattan.”
    His group successfully fended off a 2013 ballot measure to build 12 market-rate single-family homes and a 60-unit apartment building for seniors. Hirsch said it represented excessive development on a small site, and would have led to inadequate parking and more traffic.
    The lucrative business of office development has dissuaded developers from building more housing, according to Burt.

    Other Options

    Palo Alto should consider housing options such as micro units and new homes on top of shops, said Adrian Fine, the planning and transportation commission chairman and a city council candidate.
    Fine, who grew up in Palo Alto, said he and his fiancee, who both work in the tech industry, pay more than $3,000 in rent for a one-bedroom apartment, three times the mortgage payment his parents make for a house that they bought 20 years ago two blocks away.
    “For young professionals, it’s really hard to get a toehold here unless you’re coming from existing wealth or you’re one of the lucky few who your company IPOs and you make a ton of money,” Fine said. “That’s frankly a bit of a myth. It doesn’t happen so much anymore.”



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  3. #2
    Supply and demand. If people were unwilling and unable to buy at those prices, they would be lower.

    There’s far from enough housing to accommodate those workers. A 2014 city report estimated there are three jobs for every resident.
    Not sure how the Starbucks workers are surviving there though.
    Last edited by Zippyjuan; 08-30-2016 at 06:21 PM.

  4. #3
    Quote Originally Posted by Zippyjuan View Post
    Supply and demand. If people were unwilling and unable to buy at those prices, they would be lower.
    Yeah, nothing to see here.

  5. #4
    I sold a brick three bedroom , two bath , two car garage and barn with 5 acres in Southern Indiana this yr for 160k . One closest to me now is for sale , 139K , House , Barn , 7 1/2 acres .
    Last edited by oyarde; 08-30-2016 at 10:16 PM.

  6. #5
    Chester Copperpot
    Member

    FWIW, Ive heard that if you only make $285,000 a year in silicon valley you qualify for public assistance... i $#@! you not

  7. #6
    Quote Originally Posted by Zippyjuan View Post
    Supply and demand. If people were unwilling and unable to buy at those prices, they would be lower.



    Not sure how the Starbucks workers are surviving there though.
    Bull$#@!..

    Critics say longtime homeowners wanting to protect the character of the area are standing in the way of new residences to compensate for an employment surge.
    Longtime homeowners are artificially inflating the prices by using government force to prevent new building, supply and demand is not working because of government.
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  8. #7
    Quote Originally Posted by dannno View Post
    Bull$#@!..
    Longtime homeowners are artificially inflating the prices by using government force to prevent new building, supply and demand is not working because of government.
    Every freaking extra square inch is being developed. There is limited space. There are limits.
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  9. #8
    Quote Originally Posted by Brian4Liberty View Post
    Every freaking extra square inch is being developed. There is limited space. There are limits.



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  11. #9
    Quote Originally Posted by Brian4Liberty View Post
    Every freaking extra square inch is being developed. There is limited space. There are limits.
    Is there anything about the geology of the area that would prevent someone from building upwards? Skyscrapers should alleviate the land shortage problem which in turn will supply the demand for living units in the area.

  12. #10
    Quote Originally Posted by juleswin View Post
    Is there anything about the geology of the area that would prevent someone from building upwards? Skyscrapers should alleviate the land shortage problem which in turn will supply the demand for living units in the area.
    none that I can think of.

  13. #11
    They do have a height limit in many parts of town (50 feet currently) but they also have major traffic and parking problems besides housing. Building upwards would yes squeeze in more people but would mean even more traffic.

    https://www.quora.com/What-time-is-r...-San-Francisco

    In the mornings, traffic congestion begins at around 7:00 a.m. and doesn't let up until about 10:00 a.m.

    In the afternoons, traffic congestion begins at around 4:00 p.m. and doesn't let up until about 7:30 p.m. at the earliest.
    http://www.mercurynews.com/traffic-o...p-25-over-last

    San Jose, San Francisco traffic congestion increased 22-25 percent in last year

    As the Bay Area economy sizzles, our commutes are turning into a slow, grinding torture not felt since the final years of the Bill Clinton presidency.

    Traffic congestion increased 25 percent in the San Jose area from April 2012 to April of this year, and 22 percent in the San Francisco region over the same period, according to a new study by the Kirkland, Wash.-based company INRIX.

    The numbers are staggering. San Jose's jump in congestion is the sixth biggest change nationwide. The state's third biggest city now ranks as the seventh most congested city in America and the 28th most congested in the world.

    San Francisco remains the third most congested city in the U.S. and the 10th most congested city in the world.

    "Nothing can stop San Jose," said INRIX Traffic Analyst Jamie Holter in a news release. "It's not a surprise that San Francisco and San Jose are big movers. When people get jobs they start driving again. These cities are on economic overdrive and so are their freeways."
    The worst section of road in the South Bay is southbound Highway 101 from Fair Oaks Avenue to De La Cruz Boulevard. In free-flowing traffic, it takes four minutes to cover the 4.1-mile stretch. During a typical commute, it takes 12 minutes with an average speed of 21 mph. On the worst day, it takes 19 minutes with an average speed of 13 mph.

    Name a highway and the complaints pour in as the bad days far outnumber the good, said motorist Doug Hagan of Palo Alto. "It is unbearable between San Antonio Road and Embarcadero," he said.

    Highway 4 is a crawl from Bailey Road to Somersville Road, I-80 from 101 to Treasure Island, and I-680 almost from Walnut Creek to San Jose. A sea of red brake lights has almost the entire nine-county Bay Area aglow.

    "I'm not surprised," said KQED traffic reporter Joe McConnell. "From my observation, traffic has been getting worse for a lot more than just a year, in lock step with the improvement in the economy.
    Last edited by Zippyjuan; 08-31-2016 at 01:18 AM.

  14. #12
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    Housing is another market sector that they refuse to let deflation occur. It's pathetic.
    Last edited by AuH20; 08-31-2016 at 11:43 AM.

  15. #13
    Quote Originally Posted by dannno View Post
    Longtime homeowners are artificially inflating the prices by using government force to prevent new building, supply and demand is not working because of government.
    That's been going on for 50 years at least.

    In Carmel, the quick route to a huge fine and perhaps jail time is to cut a tree on your own property. ANY tree. I kid you not. There are trees growing out of the middle of roadways around which the city has paved. And that was in the early 70s. I can only imagine it being far and away worse now.

    As to your statement, that isn't completely true. I remember when I lived in LA, going to Orange County and seeing literally endless lemon orchards. They stretched on and on. Back ca 1997 I was visiting old friends from my days at USC and drove with Scott down I15 which was brand new at that time. I was flabbergasted by what I saw - new housing that seemed to occupy every square inch of the now-former groves. Theses were those horrid attached housing units almost like townhomes.... may even have been just that. I exaggerate no whit when I say that there must have been hundreds of thousands of them. I could barely comprehend it - and a damned depressing sight it was, I would add.

    So housing development, at least in those days, seems to have been out of control. No idea what goes on today, but I can certainly agree that in established areas, the people already there do what they can to keep out new arrivals. I know it isn't very liberty-oriented of me, but I really don't blame them for the sentiment... though the use of the government ban-hammer is pretty low.
    Last edited by osan; 08-31-2016 at 12:54 PM.
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  16. #14
    Quote Originally Posted by juleswin View Post
    Is there anything about the geology of the area that would prevent someone from building upwards? Skyscrapers should alleviate the land shortage problem which in turn will supply the demand for living units in the area.
    Sometimes...

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  17. #15
    Quote Originally Posted by osan View Post
    That's been going on for 50 years at least.

    In Carmel, the quick route to a huge fine and perhaps jail time is to cut a tree on your own property. ANY tree. I kid you not. There are trees growing out of the middle of roadways around which the city has paved. And that was in the early 70s. I can only imagine it being far and away worse now.

    As to your statement, that isn't completely true. I remember when I lived in LA, going to Orange County and seeing literally endless lemon orchards. They stretched on and on. Back ca 1997 I was visiting old friends from my days at USC and drove with Scott down I15 which was brand new at that time. I was flabbergasted by what I saw - new housing that seemed to occupy every square inch of the now-former groves. Theses were those horrid attached housing units almost like townhomes.... may even have been just that. I exaggerate no whit when I say that there must have been hundreds of thousands of them. I could barely comprehend it - and a damned depressing sight it was, I would add.

    So housing development, at least in those days, seems to have been out of control. No idea what goes on today, but I can certainly agree that in established areas, the people already there do what they can to keep out new arrivals. I know it isn't very liberty-oriented of me, but I really don't blame them for the sentiment... though the use of the government ban-hammer is pretty low.
    What goes on today is that old business properties (strip malls, shopping centers, hospitals, light industrial) are being demoed and 4-5 story apartments and condos are being built. Very little parking to go along with it. Recycling property is the main way that new housing is built.

    As for the existing "selfish" home owners, eminent domain may someday ensure that their property can be redeveloped too.
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    "Beware the Military-Industrial-Financial-Pharma-Corporate-Internet-Media-Government Complex." - B4L update of General Dwight D. Eisenhower
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  18. #16
    Too much success? Too many high paying jobs attracting too many people to one area?



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  20. #17
    Quote Originally Posted by AuH20 View Post
    Housing is another market sector that they refuse to let deflation occur. It's pathetic.
    How would you suggest the Fed deflates prices in the housing market? They could try to crash the economy by massively jacking up interest rates. That would lower demand for houses (and cost thousands of jobs).

    Should the government interfere?

    Maybe move people from Palo Alto where there is housing shortage to Detroit with tons of vacant homed being torn down?
    Last edited by Zippyjuan; 08-31-2016 at 01:49 PM.

  21. #18
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    Quote Originally Posted by Zippyjuan View Post
    How would you suggest the Fed deflates prices in the housing market? They could try to crash the economy by massively jacking up interest rates. That would lower demand for houses (and cost thousands of jobs).

    Should the government interfere?
    It's going to be much worse when they finally lose control. They are playing a game of Jenga with real lives.

  22. #19
    Quote Originally Posted by Zippyjuan View Post
    Too much success? Too many high paying jobs attracting too many people to one area?
    Aha The secretive billionaire who built Silicon Valley http://fortune.com/2014/07/07/arrillaga-silicon-valley/



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