CFAH

Our rather succinct headline on May 6 when the Dow closed down 3.2 percent lower at 10,520: “A Rough Day On A Skittish Street.”
A comment from auden four days later when the Dow closed at 10,781: “[SocketSite], stick to subjects you are good at reporting on, or, if you aren’t any good, at least post the whole story, not just the doomsday downturn on the 6th but the recovery the following week.”
Today the Dow closed down 3.1 percent for the day to 9,931. No new updates from auden.
QuickLinks: A Rough Day On A Skittish Street [SocketSite]

Comments from Plugged-In Readers

  1. Posted by A.T.

    Yes, a rough May, and not a great start to June for the markets.
    As to the relevance to this site, I am curious as to the link between stock market performance and SF real estate. One would reasonably suspect some fair amount of correlation. A fairly small number of homes are bought each month, and a pretty small number of additional or fewer purchases driven by market gains or losses could be enough to affect prices. But record-low mortgage rates are likely providing support to housing prices (good for buyers now, but it will backfire when it is time to sell and rates are higher).
    On the plus side, our two weeks in Europe in July can now be had at a 20% discount thanks to a tumbling Euro.

  2. Posted by tipster

    ^On the minus side, those Europeans will soon stop arriving here in SF for THEIR vacations.

  3. Posted by longtime-reader

    Longtime reader of the site, probably my second post in two years. So just know that I really like you (:
    But, I’m going to agree with the cranky poster auden. I personally am a fan of the slightly skeptical tone towards SF real estate found on this site. I think it creates a better platform for discussion, and reveals a lot of what you don’t see/hear in mainstream media.
    As far as discussing stock markets on here… meh. Not feeling it. It feels bearish just for the sake of being bearish. To put it better, I think you do a top notch job of being critical of the SF real estate market without making it feel like you have an agenda. When you start profiling bad days in the stock market, it feels like you have an agenda… to me.
    [Editor’s Note: No agenda, but performance in the equity markets is an important factor with respect to San Francisco real estate (particularly in the over million dollar market).
    Please keep in mind that we posted when the Dow crossed 10,000 on the way up in 2009, we were bound to post if it crossed on the way down. And we’ve passed on quite a few down days in between.
    Regardless, and as always, thank you for plugging in.]

  4. Posted by lol

    The SF Real Estate is directly linked to the state of local companies and their valuation on the stock market (many are listed).
    For once there’s GOOG, AAPL, ORCL, WF, MSFT and many others. Anytime these companies give out major stock bonuses, a few houses gets snatched up at a ridiculous price. These prices do not make sense when compared to rental. When you have the cash, it doesn’t always matter to pinch your penny into a wise investment. You just want the reward in a more concrete way like a nice house in a good area.
    Another is the rank and file workers, at least the ones with 401(k)s or IRAs and who’ve been playing by the rules for 5, 10, 15 years and who are ready to cash out their life savings to purchase.
    These 2 buyer segments are greatly affected by market swings.
    A friend of mine left Google for “greener” pastures after being bored to death by his poorly-performing stock options.

  5. Posted by DanRH

    Good point lol..then on that point, we probably should have seen a post on SS recently when AAPL went past MSFT in terms of market cap. Seems extremely pertinent what with a fair amount of AAPL employees living in Bernal, Noe, Mission, etc. Especially since this was a long term trend, not just an overnight pop of the market up or down.
    But we didn’t.
    [Editor’s Note: Performance since May 6 when we said skittish:
    APPL -0.01%
    GOOG -2.16%
    ORCL -11.26%
    MSFT -13.59%
    WF -13.98%
    The Dow is down 8.9% over the past month (not intraday or overnight).]

  6. Posted by condoshopper

    i enjoy the stock market coverage, whether it’s on a bearish or bullish day, because either way it generates a stimulating discussion from the insightful socketsite crowd.

  7. Posted by A.T.

    The ed. also didn’t post when HP or Oracle (Sun) announced big job cuts recently. I think people losing their jobs may have some impact on the real estate market. Bias!

  8. Posted by Joshua

    SS commenters generally know much, much more about RE than public equity markets or economics. Often it’s best to just ignore most people when they stray into these fields.
    That said, a repost of a comment I made previously:
    Over the past 22 years, Shiller Case data and S&P 500 returns show correlations are strongest in the following order:
    1. SF real estate values lagging S&P 500 by 1 year
    2. SF real estate values lagging S&P 500 by 2 years
    3. SF real estate values compared to S&P 500 in the same year
    All are more powerful than correlations to interest rates and other obvious factors.

  9. Posted by andyc

    i have two mid-30’s colleagues just starting families who have been renting and watching (and saving) on the peninsula for years. they are now able to put 20%+ down and are in contracts. this stock market decline has been painful for them. there’s been a lot of thought and discussion about what to sell when and/or what other assets to liquidate. fortunately they are able to move forward. i believe there’s a strong enough link to the stock markets to warrant occasional comment here.

  10. Posted by xyz

    the link between company stock awards and real estate purchases is far more complicated than LOL makes it out to be. all stock awards have a vesting period and a strike price.
    there is almost never a big stock award that is immediately reflected in a real estate purchase without pre-existing wealth – awards vest over time. if you look at headcount trends over time at some of the companies mentioned and calculate the vest periods of stock, you can get an idea of how many people are vesting around now. ie, a bump in headcount x years ago means a bump in vesting now which may mean a bump in real estate investment even though the stock market is down…also look at the strike price back on those dates – some people may be underwater. or some people may have repriced their options and there may have been adjustments to the vesting schedule as part of that arrangement.
    you could also argue that when the market isn’t doing that well it makes more sense to sell your stock and invest in real estate. when the stock price is jumping exponentially you may be more inclined to exercise and hold. taxes are high and everyone has their own strategy re investment.

  11. Posted by ex SF-er

    although there are obviously direct links between stock performance and RE pricing (such as stock people cashing options to buy a house), the more important aspect comes in the form of indirect links.
    The equities markets give you a good sense of investor psychology and optimism. when the stock market is roaring it is often a good signal that people are optimistic about the future, and they will thus be more willing to spend. Partly through increased optimism, and partly through the wealth effect. (they are more wealthy on paper).
    when the stock market is struggling or volatile, it is a sign of investor/consumer pessimism or uncertainty. people tend to spend less when the future is uncertain.
    The US govt and Fed waged a “confidence” war the last 16 months or so which convinced many people to be more optimistic. Among other things, this resulted in a massive 70%+ surge in equities and also an improved RE market (slower fall, and also some increases in RE valuations). This was the so-called green shoots rally, which many bears have been calling the bear market rally or dead-cat bounce.
    The problem is that none of the structural problems in our economy have been fixed. They were simply papered over or they were hidden by transferring private debt onto public balance sheets. Unfortunately, the debt still remains. And now people are starting to realize that even the sovereigns cannot actually pay off the debt. (this includes the PIIGS but also the UK, Japan, and the US).
    the market has also suddenly realized that much of the “recovery” was based solely on government spending that may be going away. the private sector has not stepped in to take over.
    thus the “shocking” jobs number today. (honestly, could anything have been more obvious?). or the “shocking” information from Hungary. or the “surprising” drop in mortgage applications after the FTHB credit expired.
    “the market” is slowly digesting this which causes volatility-and that volatility will likely impact RE valuations. The data itself also causes pressure on RE valuations. Bad jobs data, crushing sovereign debt (which means either future tax increases or decreased govt spending), etc.
    In sum, the primary issue is that the equities market and the stock market are both affected by investor/consumer psychology and by macroeconomic trends. Both are negative right now.
    in time that will change. but it usually takes time. (many years).
    heck, it’s been 2 years and we still haven’t done a thing to improve our zombie banking system! we just rack up more debt that is funneled right to CEO bonuses!
    =====
    a word of caution however
    the stock market is and has been a joke for some time.
    there are very few retail investors in the market these days (relatively speaking of course). The market consists mainly of computers that trade with computers, and with big firms trading on their own behalf (proprietary trading) with other big firms.
    Retail investors are nowhere to be found (again, relatively speaking). Thus, we see progressively lower volumes especially on up days, and slightly higher but still low volumes on down days.
    all a joke. it’s all being manipulated as well, and everybody knows it.
    so I’d really not make too much of this volatility. it’s just algorithms competing with other algos.
    I continue to be surprised by how few people care that we were just robbed of more money than ever before and the criminals just walked away with all the loot and no consequences. all aided and abetted by our govt officials (including past and current administrations).

  12. Posted by "Dave"

    [Editor’s Note: No agenda, but performance in the equity markets is an important factor with respect to San Francisco real estate (particularly in the over million dollar market).
    Really? Why wasn’t the alarm sounded back in May when the S&P was up 79.9% off the lows? Selective bias much? I agree with auden and longtime-reader. This site is far more interesting when it sticks to its knitting…

  13. Posted by DanRH

    xyz, agree and that was sorta my point in pointing out AAPL. The last 5 yrs has been very good, and if you’re on a 4 yr vesting, you did quite well.
    I know…that assumes a lot (you didn’t sell, etc.) but just saying – lot of folks from AAPL live in the southern parts of the city, and if they have been at AAPL for, say, 3+ yrs, they’re vesting nicely now despite today’s (or next week’s) market downswing.
    A company in our backyard that is now the 2nd most valuable US company…that can’t have hurt real estate values.

  14. Posted by condoshopper

    the site has covered broad stock market movements as it is deemed related to real estate, but that’s no reason to pick on why they haven’t covered movements on individual stocks, as it is a real estate site after all. the site doesn’t make a story out of it when an individual tech company crashes or conducts layoffs either, unless i forgot about it.

  15. Posted by ex SF-er

    The last 5 yrs has been very good, and if you’re on a 4 yr vesting, you did quite well.
    do AAPL employees get a significant amount of stock options? Last I heard (admittedly it’s been a while) AAPL doesn’t give out many stock options.
    The mature tech companies tend not to pay much in terms of options. (sorta like Google now… very few people have become Googleaires since the first few years of its existence… that’s why many of the best jumped to Facebook).
    this IMO is one of the headwinds for SF RE. As industries mature the super upside is less for employees. Tech has clearly matured… and Tech 2.0 was clearly less profitable overall than the .com days (with google being the notable 300lb gorilla exception). Tech 3.0 will likely be even less so.
    (How many of us talk about newly minted millionaires out of Microsoft or Cisco or Dell as example).
    the big money in tech or any industry is if you can join the upper level executive suite, or join when it is a small player.
    all IMO of course.
    the next possible boost to SF RE from a company specific standpoint would likely be Facebook, IF they can figure out a way to monetize. As for Twitter… the chances are far less likely.
    of course, there are a lot of companies that have built themselves around Facebook, and some of those may end up doing well too…
    I doubt Facebook will be as significant as Google was, but I have a lot of friends who jumped from GOOG to Facebook a few years ago who believe otherwise.

  16. Posted by "Dave"

    ex SF-er, I normally enjoy your posts but I think you’re missing the mark. You make it sound like a handful of millionaires are individually responsible for driving RE values here. I beg to differ.
    I worked for a B2B company that went public 3 years ago and most people on this board have probably never heard of it. And I wasn’t a VP there. But I made money and so did a bunch of people that I worked with. Based on the time that I arrived, I wasn’t in the 7-figure money but it was easily enough to make home prices here seem relatively affordable.
    Point being, there are hundreds if not thousands of anonymous worker bees like me out there that fuel the market. You don’t need to be employee #6 at facebook to buy a million-dollar place in SF and those million-dollar places make up a far larger portion of the market than the $10m places.
    You obviously bailed on SF so your bias is known but there’s plenty of us still earning a living here and new people showing up every day. I wouldn’t be so quick to write us off…

  17. Posted by tipster

    I work with a lot of tech companies. For every “Dave” there are 100 people who worked their asses off for years and got nothing.
    Apple computer isn’t in “our backyard”. It’s a 90 mile roundtrip from Noe that most people will never make on a daily basis just so that they can pretend they live in SF because it has a two block shopping district. Though I am sure that somewhere in Blythe CA, some realtor is also claiming that Applye computer is in their backyard and real estate prices will soon skyrocket.
    Sun Microsystems is far closer to SF than Apple. Sun has laid off thousands, Oracle acquired them and laid off more – nearly every Sun employee director level and above has been fired. They announced yesterday they will be laying off even more.
    HP has a large presence between Apple and SF and has announced massive layoffs.
    Cupertino House Prices are down YOY, according to redfin. Great schools, easy lifestyle if you are an Apple employee, and yet prices are down because the suffering in the rest of the valley is overwhelming a single company’s success.
    Many companies in SF have laid off, shut down or moved away.
    How on earth anyone can think that a single large company’s stock options are going to “save” real estate in a very distant city is beyond me, and a sign of complete reaching to the bottom of the barrel to try to scrape out any positive signal.
    The general stock market is far more of a barometer than a single company’s stock because it affects far more people.
    And “Dave”, exactly how many IPOs have there been in the valley in the last 3 years? Your story is of a time that no longer exists. The world has changed – one of my businesses involves downsizing companies and we get calls all the time — from VCs – they can’t raise money and they are cutting back operations as a result. The days you describe are over, at least for a while. Your story describes why real estate values will continue to fall, not rise: people like you were around to pump up values but not any longer on any scale.

  18. Posted by sanfrantim

    If “SF real estate values lag S&P 500 by one year” (Joshua @3:54) then – hot damn – we are in boom times now! Eagerly awaiting my 40% appreciation in 2010.

  19. Posted by NoeValleyJim

    Tech has done better than many other sectors during the recession and appears to be leading the recovery. I know from my perspective the industry is as hot as any time since 1999. I have three openings for my team and there are at least half a dozen more in my group. I have gotten into bidding wars for two of the last three I have tried to hire, most recently $90k+/yr for a 26 year old with no college degree. His current employer both outbid me and offered a plum job to keep him. He does have unusual aptitude, but still!
    Now it is certainly true that no one is going to get rich from getting stock options in an established company, but the big established companies do pay very well to compensate for that. Remember the average salary for a tech worker in Silicon Valley is $144k/yr. There are lots of $200k-$300k households in the area this is definitely props up home prices in the “affordable” $700k-$1M sector, but like many posters I am kind of at a loss to understand what is causing the strong showing of homes in the higher end.
    The long feared “double dip” that ex-SFer has warned about is now widely discussed. It was even the topic of a recent cover article in The Economist. My favorite leading indicator from ECRI just dipped strongly this week to flat. All the world’s major developed economies are facing deflationary pressures and all have slashed interest rates and have a loose monetary policy to compensate. Maybe we will all have a “lost decade” like Japan did.
    Meanwhile the emerging economies of Brazil, China and India are growing extremely strongly, perhaps even into pre-bubble territory. They are all experiencing inflation. This is actually needed to adjust global imbalances, but I don’t really want to get into that right now.
    What does this mean for SF real estate? My crystal ball is too cloudy right now to make any predictions. The super low interest rates have got to be helping keep home prices strong. If deflation actually sets in and people start having deflationary expectations and adjust their spending accordingly it will have a severely negative impact on real estate prices everywhere, probably here more than most places.
    One of the reasons that people are willing to stretch to buy homes when they are in their 30s is the expectation of future wage growth. Take that away and we could very easily see a repeat of Japan’s “lost decade” in the real estate market as well.

  20. Posted by NoeValleyJim

    Tech companies are moving to San Francisco, not moving away, right now:
    http://techcrunch.com/2010/06/03/goodbye-palo-alto-techcrunch-moves-to-san-francisco/
    Tech Crunch is just the most famous of many. People want to be near Twitter, Yelp and the other hot Web 2.0 companies.
    It is not just Apple that is hiring like mad, it is Google, Yahoo, Amazon, Facebook, Cisco, LinkedIn and countless other smaller names you have probably never heard of. And almost all of them run shuttles from all over The City, not just Noe Valley though we probably have the most stops. Facebook now offers breakfast on its morning shuttles, in the latest escalation in the fringe benefit wars.
    Talk to some tech recruiter sometime, tipster, I think your info must be six months old or something.

  21. Posted by Dan

    Tipster wrote: “Sun Microsystems is far closer to SF than Apple.”
    No, Sun’s headquarters in Santa Clara and Apple’s in Cupertino are about the same distance from SF. And it is a faster drive from Noe Valley to Cupertino on 280 than to Santa Clara.

  22. Posted by tipster

    Sun Microsystems was Menlo Park’s biggest employer, with about 2500 people working at that facility.
    http://maps.google.com/maps?oe=utf-8&rls=org.mozilla:en-US:official&client=firefox-a&um=1&ie=UTF-8&q=sun+microsystems+menlo+park&fb=1&gl=us&hq=sun+microsystems&hnear=Menlo+Park,+CA&ei=ILIKTJmEAYP6Nabr3bUE&sa=X&oi=local_group&ct=image&resnum=1&ved=0CCAQtgMwAA
    And tech crunch? 15 writers, earning what? $50,000 tops. You’re joking, right? The reason those low end companies are moving to SF is that the city is emptying out of high paying jobs making rents for the low paying jobs more affordable. Schwab moves out but tech crunch moves in and you think that’s going to do what? Did you read that article: they were working out of their homes!
    And there will always be a few companies hiring, no matter what the economy. The great depression only had 25% unemployment. For every company aggressively hiring there are 5 laying off, moving away or shutting down.
    No one really cares about being near twitter, as if that’s going to help their business in any way. All you’ve proved is that enough jobs have left the city that the low paying ones like tech crunch can now be housed there because rents have plummeted with the loss of all the high paying jobs. That’s all well and good that the low paying jobs are coming back, but it isn’t going to support real estate prices, it’s going to drive them down.

  23. Posted by The Milkshake of Despair

    Didn’t Sun beam out of Menlo Park and over into the rehabbed Agnews site in Santa Clara years ago ?

  24. Posted by jeff

    NoeValleyJim, could you help me to understand why you feel the need to spin San Francisco as some booming tech haven? To pretend San Francisco is economically healthy because some people get free breakfast on the Facebook shuttle to jobs, which as Tipster noted, are “hardly in our backyard”.
    I now live in another much larger urban city and make more money doing the same job, but my housing costs are 1/4 of San Francisco. When I wait for my express train in the morning I see many private “club” cars, some owned by corporations or financial/trade exchanges, others operate as private clubs where you buy a share in the car, and have noticed that private rail cars have increased 50% in the last 8 years, but I do not pretend that this will help to boost my home’s real estate value. The private cars are fulfilling a need for luxury not provided by the public train line (I guess).
    The private transportation provided by Facebook or Google to those that feel they need to place their head on a pillow in San Francisco at night is only fulfilling a need not provided by the current transit infrastructure, and not a sign of better days ahead for “the city”. My question is why do some feel they are San Franciscans when they work 40 miles away in a suburban office park and only spend minimal weekday time in their “urban” neighborhood”? If Noe Valley is a bedroom community for “suburbs” 40 miles south of here, how is it a true urban neighborhood?

  25. Posted by tipster

    What is really telling about this discussion is how eerily similar it is to one that happened on this site just before the prior downturn. We heard that rich foreigners and Haas MBAs would “save” SF real estate from what everyone knew was an inevitable downturn.
    So now we have had a little bit of stabilization resulting from a liquidity induced equities bubble, punctuated by a “mysterious” 300 point instantaneous drop that indicated that not a single investor believed any of it was supported by fundamentals, and which in the end turned out to be not so mysterious after all (or was it a “conundrum”, I forget).
    Everyone can see the handwriting on the wall, and so the usual SF boosters feel the need to come out of the woodwork and tell us that the handful of Tech Crunch free lancers moving from a home office to a falling down building in Palo Alto and then to SF are going to “save” SF real estate the same way that Haas MBAs and rich foreigners were going to save us the last time.
    The breakfast on the bus sounds like the modern day equivalent of a foosball table in every dot com office, and that didn’t save a single unprofitable company when the funding dried up. I didn’t buy it then and I’m not buying it now.
    When this pattern starts rearing itself, we’re usually doomed. My income continues to fall, every small business owner I talk to tells me the same thing. I’m not buying any of the “Save SF” talk, especially when the last few remaining successful companies are a 70-90 mile round trip from SF.

  26. Posted by Po Hill Jeff

    NoeValleyJim: can you provide a source for that $144K/yr salary number for the “average” tech worker in Silicon Valley? My previous employer down there paid much less than this, on average, and wages have been almost stagnant since then.

  27. Posted by satchelfan

    Here’s some info. on wages. According to the Bureau of Labor Statistics, the 2009 mean annual salary for a person employed in a computer/math occupation (non-management) is $95,570 (san francisco/san mateo/red wood city metro/nonmetro area).
    http://www.bls.gov/oes/current/oes_41884.htm#(2)
    Before someone starts crying that this not really the valley,
    the mean annual salary for a person employed in San Jose/Sunnyvale/Santa Clara metro/nonmetro area in a computer/math occupation is $109,130.
    http://www.bls.gov/oes/current/oes_41940.htm#15-0000
    Silicon Valley high tech companies LOST 108,400 jobs between 2000-2008, or 19.9% of their employment.
    Real wages in the tech sector declined 13.5% from the peak vs. a 1.3% increase for the rest of the nation. The real growth (according to BLS) will be in biotech.
    http://www.eweek.com/c/a/IT-Management/Silicon-Valleys-Wage-Crash-by-the-Numbers-564272/
    For those who want a complete analysis of Silicon Valley high tech employment (2000-2008), read the following BLS report.
    http://www.bls.gov/opub/mlr/2010/01/art3full.pdf

  28. Posted by ex SF-er

    @ “Dave”
    point well taken. I actually conflated a few different ideas into one post, and did it poorly.
    Idea #1:
    DanRH brought up the idea that lots of Apple Employees live in SF, and thus the rise in Apple stock should really help SF RE.
    I don’t agree with this because as far as I know the majority of income of Apple employees comes in terms of salaried income, and not stock options. Thus, increased Apple stock wouldn’t affect SF real estate in the same way as rising GOOG stocks did mid decade as example. increased Apple stock helps RE a little of course, just not as much as GOOG stock did 5 years ago.
    I’m willing to be corrected as to compensation structure of Apple, because I’m not 100% sure on this point. However I am reasonably sure in an anecdotal 1st degree sort of way. (family)
    Issue #2 (poorly conflated with above)
    in general mature companies/fields tend to pay less than hot/emerging/cutting edge firms.
    I thus suspect that overall compensation will continue to fall in SF, unless some new non-ad based innovation can occur in SF.
    this doesn’t mean that housing valuations have to fall significantly however. On the contrary: I’ve said many times that year 2000 pricing would be far enough. That is hardly a fall either… 2000 pricing was during the heat of a major bubble centered on SF. I’m willing to hear arguments why 2010 pricing should be more than 2000, but I just don’t see it.
    Tech workers made A BUNDLE in the .com days. and they spent like it too. today there are less tech workers than in 2000, and last I checked they don’t get paid much more than in 2000… thus I don’t see a reason why pricing in SF should stay much higher than the sky high nosebleed levels of 2000.
    sure, the DINKs earning $200-300k can afford a $1M home. but there just aren’t that many of them. (look at census figures). Latest ACS figures for SF (2006-2008) shows that only 12.2% of SFers make $200k or more. that includes doctors and laywers and tech folk and venture capital people and CEO’s and all that. It of course does not cover foreign sheiks and wealthy children like Paris Hilton.
    http://factfinder.census.gov/servlet/ADPTable?_bm=y&-geo_id=05000US06075&-qr_name=ACS_2008_3YR_G00_DP3YR3&-ds_name=ACS_2008_3YR_G00_&-_lang=en&-_sse=on
    thus: I’m not saying that SF shouldn’t be expensive. it should.
    I’m only saying that SF was horrendously expensive due to high incomes and bubble mentality… in the year 2000.
    not sure what’s changed that would make RE more valuable today than then
    g’night all!

  29. Posted by NoeValleyJim

    There you go Po Hill, I have posted it before, but here it is again:

    This is probably overall compensation, not just salary. If you spend some time on glassdoor or salary.com, you will see that this is about right.
    The most common job title at most tech companies is Senior Software Engineer, and these almost uniformly pay about $120k/yr (almost as if there was some kind of wage collusion). Most companies also pay about 10% in bonuses and about $10k/yr worth of stock.
    A really senior person, one with 15+ years and who is on top of their game makes more and ends up with a title like Architect or Principal, but plenty of people spend most of their career at Senior. Managers of course make more as well, so this is going to drive the average up.
    I agree tipster, just like the old days, though I haven’t seen you predict that prices will be 50% off by 2011 in a while. Still standing tall with that prediction?
    Prices should be higher today than in 2000 because median salaries are higher today, quite a bit higher, more than 30%:

    It would be interesting to know what the percentage of families had incomes above $200k in 2000, do you know how to pull that up ex-SFer? It has got to be this group that is buying the majority of homes today and probably even back then.

  30. Posted by NoeValleyJim

    Crud, I screwed up my link tags, here they are again:
    Average Tech Salaries
    San Francisco Salaries 2000 and today

  31. Posted by diemos

    Tsk. I’m shocked.
    You should know that that was my prediction. Rest assured that I am sharpening up my indignant insistence that things have to be priced in a “real” currency, like gold.
    In which everything is already off 50%. 😉

  32. Posted by BSMeter

    > Average Tech Salaries
    No way an “average” tech worker wage is $144k in San Jose or any city in the bay area.
    First, it was based on federal data from 2006 before the recession started. Salaries have come down since then. But even for 2006 it sounds ridiculous.
    I talk with managers who hire very specialized engineers (read: expensive) and there is no way they are spending an average salary of $144k for an average engineer.
    It’s common for someone making a $145k salary or higher, to also earn bonus, stock options, restricted stock, espp, 401k matching. They’re likely pulling in $170k or more all told.
    Also all the folks I know making $145k or more in salary are skilled to very highly skilled. They are nowhere near average.
    As a sanity check go to glassdoor.com or any salary website and you can see the average salary for engineers in San Jose/Silicon Valley. It’s nowhere near $144k – not even close. It’s under $100k.
    For a junior engineer making $50k-$70k, there needs to be a senior engineer making $210k-$230k to keep the average at $144k. But I can guarantee there are way more junior engineers making low wage than an engineer making over $210k. The numbers don’t add up.
    Every report I’ve seen, website that has salary figures, and my own experience as an engineer and talking to managers that have hired hundreds of engineers is that an -average- of $144k is so far from reality it’s not even funny.
    That the report is published by a trade association makes it suspect. Just like the NAR or CAR reporting that the housing market is always up and it’s a great time to buy all the time.

  33. Posted by jeff

    “The city-by-city snapshot delivers some surprises, starting with the realization that in total tech job count, the New York (316,500) and Washington (295,800) metropolitan areas beat third-place San Jose-Silicon Valley (225,300).”
    From NoeValleyJim’s SFGate link posted above. And trust me, your salary does not always go down if you leave the Bay Area. My new position in another city with the exact same job title and responsibilities pays 30% more while I enjoy housing costs which are a LOT less.

  34. Posted by Dan

    jeff: If one is making a jobs comparison of SF with the NY metro area, which is huge both in population and area, a more proper comparison is to the combined numbers of the San Jose metro area and the SF-Oakland metro area, rather than using numbers which don’t include tech jobs in SF.
    Is SF “special”? I don’t know. But it is interesting how many midwesterners are posting on this SF real estate site. Are San Franciscans active on midwestern real estate sites?

  35. Posted by satchelfan

    I already had several links on salaries in a post that is still going through the moderator ( not sure why). The median salary in the valley is NOT $144k. According to the BLS, the 2008 real annual salary was $104k from a high of $120k in 2000.
    http://www.eweek.com/c/a/IT-Management/Silicon-Valleys-Wage-Crash-by-the-Numbers-564272/

  36. Posted by satchelfan

    BTW. The BLS wage calculation includes stock options (pg. 64)
    The full BLS report below.
    http://www.bls.gov/opub/mlr/2010/01/art3full.pdf

  37. Posted by satchelfan

    For a range of salaries, below is the May 2009 BLS wage and employment report for San Jose-Sunnyvale-Santa Clara. Salary range for computer/math occupations (non-manager) range from a low of $68k to a high of $135k. The range would drop even lower if architecture and engineering occupations were included.
    http://www.bls.gov/oes/current/oes_41940.htm

  38. Posted by NoeValleyJim

    The Cybercities report is based on BLS data. Your chart on page 69 of the PDF (full report) is based on 2000 dollars, you need to multiply by the deflator from there until now to get 2008 wage, so you are understating 2008 wages by 14% (and also understating 2000 wages, real wages have gone down though nominal wages are approximately flat).
    Look for the phrase “Real average annual wages (in year 2000 dollars), by industry; 2000, 2004, and 2008”
    Also, the AeA definition of high tech is somewhat different than yours, you include a few lower paying professions like Architecture.

  39. Posted by satchelfan

    The BLS is only providing a snapshot of wages in the May 2009 report. It does not define what is considered high tech employment in the metro/nonmetro report. Take it for what it’s worth.
    The 2000-2008 BLS report does define what it is considered high tech employment (table 3). It does include architecture, but it is lumped under the architecture and engineering umbrella. The architecture and engineering category represents 9% of total employment in high tech.
    Regardless of whether we are arguing real or nominal wages,
    “From 2000, when high-tech employment and wages peaked,
    to 2008, Silicon Valley’s high-tech industries LOST more than
    108,400 jobs, or 19.9 percent of their employment. High-tech
    industries in the rest of the Nation lost 6.2 percent of employ-
    ment. In addition, real wages fell by 13.5 percent among Silicon
    Valley’s high-tech industries, while high-tech wages grew by
    1.3 percent in the rest of the Nation.”

  40. Posted by satchelfan

    Just to be clear – May 2009 BLS report is based off of nominal dollars.

  41. Posted by satchelfan

    ps If you look at the 2009 BLS report, architecture represents a very tiny fraction of the total architecture and engineering category.
    Ok. I’m done.

  42. Posted by jeff

    Dan, I still own properties in San Francisco (and the Peninsula) through a trust set up by my father for both my brother and myself, and would imagine that there are others who have left the Bay Area but choose to stay “plugged in” to San Francisco real estate news. Is THAT so horrible?
    I also enjoy other sites that report on real estate trends for both Chicago and Southern California, but I am not sure if that means those places are “special” also?
    As for making a “jobs comparison”, I think many Bay Areans will be surprised as I was at what professional salaries are outside the region, and when calculating in lower housing costs, the “special” feeling some get by living in San Francisco is not felt by others who were born in the city or region, like myself. I do not live in New York, but in one of the garden suburbs of the North Shore outside of Chicago, and believe me, many people in Winnetka, Kenilworth and Glencoe do think their neighborhoods and real estate are “special”.

  43. Posted by Gil

    One comment Jeff – that special feeling some have about SF. I was born and raised in SF and like you do not feel special feeling.
    It’s like the emperor has no clothes – too many SFers are afraid to admit that most SF neighborhoods are down right ugly and foreboding. Glen Park is “hot” right now – agents tout being able to commute to the Peninsula for work.
    Hello – who would choose to live in Glen Park when you could live in Burlingame for the same cost – less even as you wouldn’t have a commute to your mid-Peninsula job.

  44. Posted by ex SF-er

    It would be interesting to know what the percentage of families had incomes above $200k in 2000, do you know how to pull that up ex-SFer? It has got to be this group that is buying the majority of homes today and probably even back then.
    This is a very good point.
    (one minor quibble, I used households and not families, as households is more pertinent. there are many more households in SF compared to families.)
    the answer:
    7.4% in 2000. (23,942 out of 325,657 households)
    this compares to 12.2% in 2008. (39,359 out of 323,339 households)
    there is a problem though, the two data sets have SLIGHTLY different methodology. that said, I would GUESS that the error due to methodology changes would not counteract the fact that more people made more than 200k/year in 2008 than in 2000.
    so the million dollar question: is that enough to drive housing prices up as far as we see today?

  45. Posted by tipster

    In 2010, my income as a small business owner is off 40% from 2008. A lot of small businesses that were making $200K for their owners are losing money or barely breaking even today.
    Everyone at Sun Microsystems making $200K has been laid off. Sun isn’t the whole world but those guys get laid off too, and sometimes in disproportionate numbers. And a lot of 200K earners are sales people and their income is way off too.
    I doubt the percentages are even remotely close to those in 2008.
    2008 was a different era and that era is now over.

  46. Posted by NoeValleyJIm

    To answer you question ex-SFer: no, probably not, but it is certainly enough to drive prices up from 2000. Unlike most regulars though, I think that it is clear that incomes do not tell the whole story, at least not in San Francisco proper. There was a heck of a lot of wealth generated in the region over the last decade and some of it has ended up locked up in real estate.
    We both expected to see a long period of flat nominal prices in San Francisco, where inflation took a bite out of real prices. I am very surprised to see home prices start to creep back up, this is not like any other real estate cycle before.
    Do you understand the difference between real and nominal wages satchelfan? You quoted “In addition, real wages fell by 13.5 percent among Silicon Valley’s high-tech industries, while high-tech wages grew by 1.3 percent in the rest of the Nation” This is just a restatement of what I said a post before “real wages have gone down though nominal wages are approximately flat.”
    High tech wages in Chicago are no where near what they are in the Bay Area jeff, at least according to the AeA report we have been discussing: “These jobs were high paying, with the average tech worker in Chicago earning $81,400 in 2006.” So this is a bit more than half as much as Silicon Valley pay.
    ex-SFer has told us that MDs for instance actually make more in the Chicago area though, so not only is the cost of living lower for him, his wages are higher. So it depends on what profession you are in.

  47. Posted by Satchelfan

    NVJ – Knew you would pick that up. My point was that the valley has lost a lot of jobs. Wages, real or nominal, have never increased.
    sheeshhh – relax….I really don’t want to get into an argument with you regarding wages. If anyone is interested in wage info., it is all available ikn black and white on the BLS web site for every job category and metro/nonmetro area.

  48. Posted by NoeValleyJim

    Cool, not trying to get in argument I just want get to the facts. tipster is probably right that the number of $200k households is probably down from 2008. We won’t really know how much down until the census numbers come out.

  49. Posted by BSMeter

    > the answer:
    > 7.4% in 2000. (23,942 out of 325,657 households)
    this compares to 12.2% in 2008. (39,359 out of 323,339 households)
    > so the million dollar question: is that enough to drive housing prices up as far as we see today?
    just look at the number of homes sold.
    i don’t know about sf, but in palo alto, there’s anywhere from 100 to 400 sales per year.
    so just 1% of the 39,359 need to buy to keep prices afloat in PA. let’s not forget the rich foreign or out of state buyers that purchase here.
    apparently the pool of buyers is global not only local.

  50. Posted by Paul Hwang

    OK, this is great stuff, but let’s see if we can add any value. Where will the Dow close tomorrow?

  51. Posted by diemos

    Wherever Ben Bernanke wills it to.

  52. Posted by Justin

    Agreed BSMeter, but remember, Glen Park and Noe Valley are in NO WAY comparable to the strength of the Palo Alto market, try as they might. I think a better comparison with a Palo Alto buyer shopping for a home in that district’s better neighborhoods would be to homes located north of California Street in the SF, especially Pacific/Presidio Heights.

  53. Posted by Brahma (incensed renter)

    After reading the socketsite editor’s note appended to the comment from DanRH on June 4, 2010 2:54 PM, I thought it’d be fun to see how some randomly-selected real estate-related funds did over the same time period (nothing’s specific to The City here, however). Between May 6th and Friday:
    • ICF: Realty Majors Index -6.94%
    • IYR: Dow Jones U.S. Real Estate Index -6.41%
    • KME: SPDR KBW Mortgage Finance ETF -9.58%
    • PKB: Building & Construction -8.52%
    • REZ: NAREIT Residential Plus Capped Index -5.17%
    • XHB: S&P Homebuilders -9.23%

  54. Posted by hangemhi

    as a realtor i enjoy the economic news and commentary here because it lacks the “know it all” no nothings’ comments about RE buyer and seller psychology and what realtors supposedly do to make people do stupid things and manipulate the market.
    too bad this thread declined into a “who makes what” argument including ridiculous anecdotes about one worker who moved out of town for a higher paying job thus proving out of towners have higher paying jobs than SFers. i always love how the bears skip over terrible anecdotes that support their points and spit all over others that don’t.
    this thread only makes me miss satchel – where’s the investment advice? predictions of where the stock market, gold and other assets might be headed, etc, etc.

  55. Posted by DanRH

    wow, went away for the weekend and a lot of activity on this thread.
    first, i don’t think AAPL or any single employer will ‘save’ sf real estate. i was just trying to point out that despite the market’s daily ups/downs, AAPL, who employs plenty of folks in the southern part of SF, are doing extremely well.
    I agree, AAPL’s rise is nothing like Goog’s. But I do know of 2 friends that have low-salary (lower than $120k/yr) at AAPL but who each have a great nest egg ($500K-1M) of vested stock just because they’ve been there for 5-6 yrs, have been in the stock purchase program, etc. They’re now looking to go to SF because a) they can, and b) there is a daily bus service.
    To the person that said the shuttles (apple, msft, ebay, apple, goog, genetic, etc.) don’t make a difference, I disagree. Location is important, and those shuttles make living in the Mission / Noe / Bernal now more do-able not less, thus, these locations improve.
    To the person that was saying tech is maturing / getting old, oh man, that’s funny. Maybe some parts (enterprise software), but others like twitter, facebook, zynga etc? really? c’mon. Although private, did you know zynga is supposedly doing $15M in profit..a month? Tech in the valley/bay/sf/etc is always going to have cycles up and down but that’s about it. I think it’s starting to go back ‘up’ from the recent ‘down’. But I don’t think we’ll see boom-days of .com. And I don’t know why so many of them are right here in SF but they are despite the high prices.
    Anyway, for the record: I don’t think SF prices will change much up or down anytime soon. I see a gradual increase but nothing like in the past. Pretty boring.
    tipster, btw, those 20-40 iphone app developers that you pooh-poohed long ago seem to be doing ok.
    http://techcrunch.com/2010/06/07/ipad-ibooks-app-store-stats/

  56. Posted by auden

    This blog is only as interesting as it is honest, Adam.
    And not that anyone should be getting their stock information from a real estate blog but if you want to go there, at least attempt to do it right.
    Your posts on the stock market are sporadic and shoddy at best. You don’t post information that gives any added insight into the stock market. They are all titles anyone can read about everywhere else. The fact that the sporadic reports on the stock market are all negative (ignoring the fantastic gains that some investors reaped from March/April 2009 to a year later (in which there were quite a bit at the upper level of the investment community) and the overall gains in stock prices of local companies (minus some of the retraction of the past two weeks)) makes these posts seem biased and agenda driven. They detract from the overall quality of a real estate blog where *I think* you are trying to put forth, at least in appearance, an unbiased, truthful source on the local real estate market where you get “insight into what’s really happening,””>https://socketsite.com/archives/2006/08/one_free_pass.html#comments>” and “the inside scoop” so your readers can make “an informed decision”. Your stock reporting is amatuer and anything but. You reported on a day where a system glitch sent stocks sailing downward but nothing on the dramatic rebound because the drop was due to a malfunction, or the unwinding of those glitch related trades. Now Friday’s downturn is a true downturn. But how can anyone distinguish that you see the difference. You just seem interested on reporting whatever negative news you can to fit your agenda when it comes to stocks, so my recommendation is if you are going to report the obvious headline pieces that the entire world may have read before you post them, you should post on the ups and downs, not just the downs. At least then it would appear less biased.

  57. Posted by Willow

    “Who would choose to live in Glen Park when you could live in Burlingame for the same cost – less even as you wouldn’t have a commute to your mid-Peninsula job.”
    Gil – These are two very distinct markets. I doubt most people who are looking for a house in Burlingame are going to consider Glen Park or vice versa. If you’re a prospective buyer going to open houses in Glen Park you’re most likely going also to also see comparable homes in Bernal Heights, Noe Valley etc. Conversely, prospective Burlingame home owners are probably looking at homes in Millbrae or San Mateo. I doubt there’s much crossover between the city and places outside it. You average buyer more or less knows whether they want to be in San Francisco or not. Oh yeah and I have several fellow Glen Park friends and neighbors who have chosen to live in the city while working in the Peninsula so it does happen!

  58. Posted by 1st time buyer

    “Your average buyer more or less knows whether they want to be in San Francisco or not.”
    Very true. City life is not for everyone. If you like Burlingame better than Glen Park, you are probably not a city person. If you are, you’d pick Glen Park in a heartbeat.

  59. Posted by sfrenegade

    “You average buyer more or less knows whether they want to be in San Francisco or not.”[sic]
    People say this in the abstract all the time, but how does this work practically speaking and at what price? If the price difference between Place Inside the City and Place Outside the City were hypothetically $300K (note that your $800K Glen Park place vs. your $800K Burlingame place are not equivalent, for example), are people necessarily making the decision based on whether its in the city or not?
    Add to that having kids, including whether you want to roll the dice on SF County schools. I don’t think this is always as simple as the platitudes make it out to be.
    It’s nice to think that people who buy in Glen Park are solely making the decision based on whether one wants to live in the city or not, but it’s not that simple. I’ve known several people who’ve moved back and forth between the city and the surrounding towns, and no one has had just one reason for doing so.

  60. Posted by NoeValleyJim

    From the BLS:
    “What is included in total wages?
    Covered employers in most States report total compensation paid during the calendar quarter, regardless of when the services were performed. A few State laws, however, specify that wages be reported for or based on the period during which services are performed rather than the period during which compensation is paid. Under most State laws or regulations, wages include bonuses, stock options, profit distributions, the cash value of meals and lodging, tips and other gratuities, and, in some States, employer contributions to certain deferred compensation plans such as 401(k) plans.”

    Just so you know, that average “Salary” I reported should be average “wage” and this includes a lot of things like bonuses and stock plans.

  61. Posted by Willow

    “Add to that having kids, including whether you want to roll the dice on SF County schools. I don’t think this is always as simple as the platitudes make it out to be.”
    I’m not making a case for the city. It does have significant drawbacks and Burlingame is very nice, and housing there is probably more expensive. However I do think that at any given point in time most prospective buyers have already decided if San Francisco is where they want to live. Granted over time circumstances change and people do move in and out of the city all the time…

  62. Posted by lol

    Another anecdotal effect of publicly traded companies and BA RE: AdMob’s acquisition by GOOG completed 2 weeks ago. This minted quite a number of regular techies into millionaires. A friend at adMob is actively looking at purchasing a house though his relocation into the GOOG campus will probably make him choose the Valley instead of SF or the Peninsula.

  63. Posted by EBGuy

    Just so you know, that average “Salary” I reported should be average “wage”
    Does it include flex dollars used for health insurance, AD&D insurance, etc.? You know, all the stuff the mortgage broker wants to show as income on your application…

  64. Posted by Po Hill Jeff

    lol @ 10:54: Glad to hear someone say this. I can understand why a newly wealthy techie might choose a place near their work (in Mountain View, San Jose, Cupertino, etc.) but only those with a certain type of lifestyle in mind (single, hip) would like to be in SF IMO. That two hours per day (minimum!) really takes a toll, even if you’re working on your laptop from the bus or train. Add to that the fact that Silicon Valley housing has taken a beating recently and you’re looking at paying more for a longer commute. SF is great, but how much will you take advantage of it when you’re exhausted?

  65. Posted by lol

    Choosing SF is a lifestyle choice, but is probably not the best career choice in tech.
    Heck, I chose SF and lost a few thou’s in pay (I was at a point where I had 2 firm offers at the same time, one in SF and one south of SJ), but am soooo happy with it.

  66. Posted by R

    I agree with Auden at June 7, 2010 1:16 PM.
    Why no post today?
    Up 2.76% and closed at 10,172.53 (not that daily swings mean anything).

  67. Posted by R

    Up 2.10% today to 10,404.

  68. Posted by NoeValleyJim

    Above the fold on the front page of today’s Chronicle:
    Tech firms making S.F. new home
    http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/06/21/MN541E04FV.DTL
    “Twitter, the popular microblogging service, expanded its San Francisco space by nearly six times in the past year. It had been looking for still more space, as much as an additional 100,000 square feet, but that effort seems to have gone quiet, sources say.
    An especially encouraging trend for San Francisco business boosters, who have long lamented the exodus of companies to surrounding regions, is the relocation of a handful of Silicon Valley firms to the city in recent months.
    Industry blog TechCrunch and video-streaming site MetaCafe moved up from Palo Alto, while Webcasting service Ustream and tech-consulting firm Encover Inc. arrived from Mountain View. Mobile application company Booyah Inc., also of Palo Alto, recently signed a lease to shift its headquarters to San Francisco.”
    Just remember Bears, “they” control the media, so you can safely discount any information like that does not conform to your worldview.

  69. Posted by tipster

    “but that effort seems to have gone quiet”. “Zynga was on the verge of signing a lease for approximately 140,000 square feet last fall, but that deal fell apart. Zynga doesn’t have an update on our expansion plans right now”
    “Geez, did you even read the article? It looks like these companies are largely struggling.
    And MetaCafe moved up? It’s maybe three guys in this area. The rest of their employees are in Tel Aviv.
    But congratulations on snagging those three guys. Big win for SF real estate!
    What this illustrates is how the local press, such as the Chron, always cheerleads. There is a mention of 5 companies moving up, but no mention of the 5 or more that moved out.

  70. Posted by anonymous

    Saying it’s up from the dregs is cheerleading?
    “As of June 15, 83 technology companies were in the market, seeking 1.5 million square feet of space, up 51 percent since the financial crash in fall 2008, according to brokerage firm Jones Lang LaSalle, which regularly tracks the market
    Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/06/21/MN541E04FV.DTL#ixzz0rVnPKiuI

  71. Posted by tipster

    Yes, it is when, in spite of a 3 person company looking for space in SF, the vacancy rate is actually rising, at least as of two months ago! That means, in spite of these small companies moving up here to take advantage of plummeting rents, more jobs are being lost than are being gained.
    “An amount of office space equivalent to 13 Bank of America buildings sits vacant in San Francisco today as companies continue to shed more square footage than they rent”
    http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/04/10/BUDV1CSC61.DTL#ixzz0rW3zqbLm

  72. Posted by anonymous

    So then the Chronicle wasn’t cheerleading, but now it is? I see.

  73. Posted by Dan

    Tipster had to reach back to an article from April, because in May, the number of employed people in San Francisco increased by 1300:
    https://socketsite.com/archives/2010/06/san_francisco_county_unemployment_down_to_92_percent_in.html

  74. Posted by R

    ed, no commentary on the Dow? up almost 10% since this post.

  75. Posted by sfrenegade

    I find it funny that people are still harping on this Dow thing. The two times the editor mentioned it that I saw, the Dow was down 3+%, which is probably rightly characterized as skittish or at least as having the hint of volatility. R then chimed in on days when the Dow went up 2+%, so we’re still not talking apples-to-apples here.
    If the people who say SF real estate is loosely correlated to the Dow are right, then a 10% increase may be good for the SF housing market. Someone suggested the best correlation was a one-year lag, so come back to us next September.

  76. Posted by tipster

    Or it could be that investors are rotating out of the real estate asset class, which is losing government support, and into stocks, which will gain support with any QE2. So one falls and the other increases.

  77. Posted by [anon.ed]

    Yeah. Investors are probably just now rotating out of the real estate asset class. sarcasm iv drip up your nose.

  78. Posted by R

    My only reason for posting in this thread is to question why SS posts about financial markets at all… and usually only when down. It’s a real estate blog.
    Sure, the markets have some correlation to real estate prices, but so does the weather, local universities, restaurants, museums, traffic, public transportation, etc.

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