Silicon Valley housing costs are insane, verified by real data
Housing costs in Silicon Valley are insane. Both rental and purchased housing has always have been outrageous, compared to the rest of the country, but the last two years has seen an absolutely insane rise in property values and rental rates. I haven't looked for data on this, but obviously those at the lower end of the pay scale are being priced out of the market. The last 2 months we've been looking for a new place to live, for the 2nd time this year, and it "seemed" that prices were significantly higher than it was in February, and that generally speaking the prices were seeing are outrageously unaffordable.
The situation isn't quite as bad as this video makes it out to be - but then we're not looking in San Francisco, but in Silicon Valley. The data I've found shows that housing costs are even worse in San Francisco than what we've seen in househunting.
This situation has me, a 24+ year resident of Silicon Valley, angry as heck at being priced out of the market. But it's becoming insane to stay here, so while we've found a place that isn't too exorbitantly outrageous, we're probably not staying beyond the 1 year lease and will be moving somewhere more affordable.
A great example of the insanity is the current asking price to rent a cottage that I myself rented 10 years ago. It's a 500 square foot cottage, with no land, sharing a piece of property with three other cottages. It's located in Old Town Mountain View, 2ish blocks from Castro Street, which made it a highly attractive place to live. Want world class food? Just walk 5 minutes to Castro and let your nose lead you to the chosen restaurant. At that time, I moved out 10 years ago after 2 years in the cottage, the rent was $1000 per month. Actually, it started at $1100 per month, but after a year the landlord sent me a letter explaining the market rate meant the rent was being decreased to $1000 per month. Yup, a landlord of their own free will decreasing the rent. Fast forward to today, and a month ago I found that same cottage on Craigslist and the asking price was $2500 per month, making for a $1500 per month jump in 10 years.
We were simply unable to find a house, or cottage, or townhouse - nothing that's a detached unit with land you could garden - within our threshold of affordability. That is, below $1800 per month rent. Even if we broadened the search to a maximum of $2000 per month rent, all that we found was apartments in apartment complexes, and mostly shabby ones at that. We found some places for $1400-1500 but the neighborhoods were almost invariably unsafe.
In February we did find some cottages below $1800, including the one we rented - a 500 square foot 1 bedroom place which went for $1525. It's on a property shared by a couple other houses, and a large Victorian mansion that's been subdivided into four units. Going by what we're seeing in the market now, the going rent for this cottage would be over $1800.
At the same time, just 30-40 miles away in the East Bay area (Hayward, Union City, Fremont) prices are significantly less. There's a large quantity of 2 bedroom townhouses available for about $1600 a month, for example. There's even some houses with land available for under $1800. We considered these places, and in the end decided to stay near friends and other connections we value.
A couple weeks ago I wanted more than just handwaving facts like those. I thought surely someone must be tracking rents and giving reports on the trends. Turns out there's a little industry of commercial reports on rental price trends that are used by landlords to know when to change prices, and by how much. What's published in the open is not so useful, but it did confirm the suspicion. Silicon Valley housing costs have become insane.
The following charts come from rentbits.com, a website to help search for rental housing, and their rental rates browser.
All the charts below are for apartment rentals (not houses) over the last 12 months, ending June 30, 2014. I've included charts for various cities around the SF Bay Area, and for comparison a couple places in the Saint Louis area.
The SF Bay Area is showing some wild price swings, and for the most part ever-increasing prices. As we saw in our house search, Hayward is significantly less costly than other areas. We went to Hayward and looked at a couple places, but just the process of getting there demonstrated the difficulty of then staying in contact with our people back in Silicon Valley.
Overall the prices in the SF Bay Area are on an increasing trend. Considering the boom in technology companies - the Google or Facebook millionaires - and the rapid influx of new technology workers, yes of course the prices are on a strong upward trend. There's a huge demand for housing here, with not enough supply, even though we saw dozens of housing complexes being built.
We managed to have frank conversations with some of the rental agents. Every one of them admitted to how insane prices have become, and some even admitted to feeling embarrassed by the prices they're having to quote to prospective tenants. At the same time they all told of the huge competition for housing, that people are renting apartments sight-unseen, even moving cross country without ever seeing the apartment. The majority of rental agreements is now occurring that way.
You'll see in many of these charts a price dip in February. One agent described that as a yearly pattern where during the "holidays" (November-December) there isn't much house hunting activity, and by February prices will have eroded. That same fellow said that in any case the long term trend is upward.
Another impact on the local market is those who lost their houses during the financial bubble in 2008-9. With damaged credit ratings they're unable to get back into owning a house for awhile, putting pressure on the rental market.
Santa Clara, CA
Mountain View, CA
Palo Alto, CA
Menlo Park, CA
Union City, CA
Castro Valley, CA
San Francisco, CA
Saint Louis, MO