October 9, 2007

Bay Area incomes support high housing prices

I’ve seen a lot of things, but this still took me by surprise:

San Jose Mercury News – Public-employee salary data keeps pouring in
The data received so far shows median public employee wages are fairly consistent, although they’re higher in Santa Clara County than in San Mateo County. Leading the pack of cities is Santa Clara, where 37 percent of workers earn more than $100,000 a year.

If think house prices are going to fall because salaries can’t support them, think again!

Comments (44) -- Posted by: burbed @ 6:01 am

44 Responses to “Bay Area incomes support high housing prices”

  1. sonarrat Says:

    Say hello to 15% inflation..

  2. DensityDuck Says:

    Okay, now…what the FRUCK. Seriously. FREAKIN’ BUS DRIVERS MAKE MORE THAN I DO.

    I don’t even take the bus!

  3. Jim D Says:

    ‘Cause after all, 7x income is the new 3x income. Or something.

  4. TNTinCA Says:

    That CAN’T be real. Is this a joke?

    Bus drivers making more than software engineers? Hell, even cops don’t make that much. (And they get paid well around here)

    I checked the salary range for bus drivers on salary.com and it came in at between $16k and $30k a year for the Bay Area. (Mountain View specifically)

    Seriously, the tax system of this state would collapse if it had to support that type of salary for transit workers.

  5. burbed Says:

    Well to be fair, there’s many more bus operators who don’t make $100k+.

    That’s just a small sample.

    On the other hand, there’s a lot of policies officers who make over $100k.

    A lot a lot.

    Like, a lot a lot a lot.

    I feel bad for cops in NYC. They really ought to move here.

  6. burbed Says:

    BTW, all of this data is available at http://mercurynews.com/salaries

  7. Malcolm Says:

    I think I am going to be sick. I mean, honestly. What sort of message does that send to our youth? How can we advocate higher education when our low skill jobs pay wages that match or exceed those of the high skilled crowd? For that matter, how is that mechanism sustainable?

    And yes, cops make a fortune over here. Ditto for fire-fighters. But at least those are high risk profession. (Not that I am saying they aren’t over paid) But for crying out loud! A friggen bus driver??

    I hope some heads roll in our legislature.

    Btw, can anyone here recommend a place outside of California where one in the tech sector can make a decent life for himself?

  8. DensityDuck Says:

    Well (he says, recovering from his violent fit of vengeance against bus drivers), there are a couple of factors that could explain the apparently-huge salaries.

    *The article quotes a government representative as saying that the listed numbers include overtime pay (and I’m damn sure that these drivers are union, which means that as soon as the clock shows 17:00:01 they book an hour of overtime…and they’ve got one of those funny watches that runs slow in the morning and fast in the afternoon.)

    *It’s also possible that these are part-time earnings “normalized” to a forty-hour workweek. If I make twenty dollars an hour but only work five hours in a week, I make a hundred dollars, even though I’m in a position with a “$40 thousand per year salary”.

    I could do research to look into it further, but the hell with it.

  9. burbed Says:

    >>Btw, can anyone here recommend a place outside of California where one in the tech sector can make a decent life for himself?

    Shanghai? Bangalore?

    >>If I make twenty dollars an hour but only work five hours in a week, I make a hundred dollars, even though I’m in a position with a “$40 thousand per year salary”.

    If you do a search for Bus Operators, and sort by salary, there’s plenty in the very low range. I think those are part timers.

    Clearly there is overtime going on here – if you look at some PDFs for other positions (like Police in Mountain View), it’s actually broken out.

  10. ex-sunnyvale-renter Says:

    PUBLIC employees. Not all workers, those smart ones who realized driving a bus is MUCH better than becoming an EE.

    When I worked as Veri-Fone’s ace repair tech (yes, componant level soldering iron and ‘scope and all that) the guys out in Shipping & Receiving were making more than me. Some of them a lot more.

    I was in the dark about the low pay and miserable prospects of being in high tech for a long time, but I have an excuse: I’m stupid.

    Anyone else who thinks high tech is better than say, plumbing or scraping the gum off of the insides of the CalTrain cars has either been VERY isolated or is on crack.

  11. sonarrat Says:

    The base pay for VTA is $14 an hour for community bus drivers. I know because I applied for the position. The six-figure workers have likely been there 25 years plus and also have a fat pension waiting for them when they retire.

  12. burbed Says:

    Get in early I guess.

  13. gfw Says:

    There is nothing as “hip” and “cool” as the elitist sneer of overeducated suburbanites toward the working class.

    Cheers, everyone.

  14. burbed Says:

    It’s always surprising to see how much people in other industries can make:

    http://www.detnews.com/2005/autosinsider/0509/18/A01-318432.htm

    >>Oscar Gray achieved the good life during 28 years of hard work at Delphi Corp. — a six-figure income, a nice home in Holly and two vehicles.

    >>But as Michigan’s auto industry tanked in recent years, the forklift operator lost huge amounts of overtime pay and gradually sank into financial ruin. Saddled with $469,000 in debt, he declared bankruptcy last month.

    >>Gray has been losing overtime. His gross pay was cut $16,000 one year, sliding to $87,000, and may dip again because Delphi is considering a Chapter 11 filing.

    Now granted, it took being a forklift operator for 28 years to earn $103k – but let’s face it, after 28 years in tech, you’d most likely be laid off for being old.

    Too bad the mercurynews doesn’t list salaries for teachers. It’s always eye-opening to see how California teachers make 65% of what equiv teachers in NY/NJ/CT/MD make.

  15. RH Says:

    I finally left the Bay Area for two big reasons. We couldn’t afford to buy a house, and we are a doctor and a lawyer. Given the enormous pension debt of most of the counties in the bay area, plus the COLA written into all the pensions, along with health care coverage, there is no way that each county is going to be able to cover this cost burden without drastically raising taxes. If I’m going to pay more taxes, it’s not going to be for somebody’s 3% yearly COLA, but rather to fund schools and police and public works. Goodbye San Jose, hello Oregon.

  16. Miguel Says:

    TTFN, and don’t let the door bang your ass on the way out!

  17. burbed Says:

    Err… I don’t think they can raise taxes at the local level. Property taxes are bound by Prop 13 – I guess they could massively hike the sales tax.

    Anyone have better insight on this?

  18. densityduck Says:

    gfw: What. Ever. Let’s have me and Bus Driver swap jobs for a year. I’ll drive a bus, and he can design military communications satellites. We’ll see who does better.

    Still, it’s nice to know that I could have a bright future waiting for me in the civil-service industry if Lockheed ever dies off. Booms come and busts go, but there’s always plenty of garbage to pick up!

  19. RH Says:

    It’s funny that people respond with, “See you later, TTFN, good riddance,” etc. People are so incredibly protective of the bay area, it’s the BEST and ONLY place to live, nevermind that it’s not affordable, it’s at times an unpleasant environment due to the crowding and traffic, has mostly terrible schools, and when all the baby boomers who work in public service retire and pensions come due and medical care costs skyrocket, somebody is going to have to pay for that. But the bay area is the only place to live, and since they aren’t building more land, you’re welcome to what would have been my 20 x 20 piece of it. I hope you enjoy it. TTFN.

  20. TomM Says:

    @burbed

    That’s Detroit money, too. You can get a decent 3-bedroom house in a nice neighborhood for $180k. State income tax load and sales tax (6% statewide) makes the money go further as well.

    My Brother’s first house in Lansing, MI cost $60k. No, this wasn’t 1980 – it was in 2003. Folks in the Valley will spend that much on a car. But, this is what happens when you live in an area that has been in constant decline for the last 40 years. The only reason why the unemployement numbers aren’t higher are because most of the younger workforce left for warmer climates.

  21. TomM Says:

    @ burbed

    They can’t raise taxes due to Prop 13, but they can tack on fees and “parcel taxes”. This is how many cities and counties are raising money. Prop 13 will slowly be erroded in this way. Plus, future revenue projections usually count on a lot of the old folks dying off, moving up, or moving out of the bay area. This causes the homes to turn over – forcing property taxes that were locked in at $700/year to raise to around $7000/year.

    Oh, and in that Michigan example that I posted, be aware that property taxes there aren’t the 1% that they are here. They’re generally 2.5%-4% (depending on the city and county). That means that if you bought a 500k house in Michigan, you’ll likely be paying 12,500 to 20,000 per year in taxes alone. However, they do have a Prop 13-like law (the Homestead Act) that locks your taxes in when your home is purchased. But, they can increase (just very, very slowly) and the rate can be increased beyond the base rate for new purchasers.

  22. TomM Says:

    In my previous comment, “The Homestead Act” isn’t the famous one enacted in 1862 – it’s the Michigan Homestead Tax exemption. Another twist is that it doesn’t affect rental properties and 2nd homes – only your primary residence. So, holding onto a property as a rental property because the tax basis is super low has no benefit. This causes more churn in the real estate market, resulting in higher tax revenue.

    They really did study Prop 13 and got the good parts, without a lot of the bad parts.

  23. burbed Says:

    >>They can’t raise taxes due to Prop 13, but they can tack on fees and “parcel taxes”.

    Yeah, but those have to be voted on, right?

  24. Kevin Says:

    “How can we advocate higher education when our low skill jobs pay wages that match or exceed those of the high skilled crowd? For that matter, how is that mechanism sustainable?”

    Clearly you didn’t see the $400k+ salaries for physicians, lawyers, and even some nurses.

    These salaries are seriously out of whack. Even the engineers are getting paid better than most people in the private sector.

    Some companies (Google, Apple) can be somewhat competitive, thanks to their rocketing stock values, but how on earth can you expect private industry to compete with those kinds of government salaries? More importantly, how can you expect local salaries to provide enough tax revenue to cover this? The median household income in Santa Clara county is only around $80,000 — it’s absolutely insane that the local governments are paying more than 1.5x that to a JANITOR (no, I’m not joking — check the pdf).

    I know people who’ve been working in the tech sector for more than 30 years who don’t even make $120k a year. Why on earth would you spend years going to college and studying hard when you could be a janitor or a plumber and make just as much?

  25. Malcolm Says:

    I have pretty much given up on the Bay Area. After 10 years here, my resentment has done nothing but grow larger and larger. I am sorry, but life is too short and I am not going to waste the good years of my life just for slightly better weather. I’ve already started seeking job positions elsewhere in the country. And to be honest, I am SO annoyed with this area, I am not being discriminating at all when it comes to location. Anywhere but here! Utah? Sure! Oregon? No problem! Texas? Yeee haah!

    Just get me the hell out of dodge.

  26. TomM Says:

    @burbed

    “Yeah, but those have to be voted on, right?”

    They’re voted on by every registered voter, not just homeowners. So, renters can levy property taxes on homeowners and landlords. Why wouldn’t they vote them up, if they don’t have to pay for them (at least not directly)? Who doesn’t want to soak their rich, home-owning neighbor with new fees?

  27. burbed Says:

    >So, renters can levy property taxes on homeowners and landlords. Why wouldn’t they vote them up, if they don’t have to pay for them (at least not directly)?

    Because renters have the lowest voter turn out, whereas property owners and senior citizens have the highest.

    Human nature and loss aversion indicate that people who face taxation will be far more likely to vote than those who don’t.

    Besides, someone’s gotta work to pay for social security.

  28. sonarrat Says:

    Malcolm: you sound like someone who got burned trying to short Google. But hey, the more people like you leave, the easier it’ll be for the rest of us.

    By the way, the real reason to live in this area, at least for me personally, isn’t the weather. It’s the proximity to San Francisco. I love that town. San Francisco Symphony, Golden Gate Park, and all the downtown attractions are reason enough to pay extra. (For rent, that is – who would buy in a market like this?!!)

  29. Malcolm Says:

    “gfw: What. Ever. Let’s have me and Bus Driver swap jobs for a year. I’ll drive a bus, and he can design military communications satellites. We’ll see who does better.”

    When you’re done, can I swap with the Bus Driver too? He can debug thousands of lines of code, perform technical presentations to execs, and perform product management, scheduling and pricing duties too. And I’ll drive the bus. And I can get overtime!

  30. ex-sunnyvale-renter Says:

    Since when does a white person in the Bay Area get a job designing anything? You have to be Indian or Chinese.

    Welcome to Weimarica……

  31. DensityDuck Says:

    esr: It seems that lack of oxygen is making your brain work funny. Remember, the breathing-holes in the hood go in front.

  32. Malcolm Says:

    “Malcolm: you sound like someone who got burned trying to short Google. But hey, the more people like you leave, the easier it’ll be for the rest of us.”

    Nope. As a matter of fact, I made money during the dot com runup and was fortunate enough to cash at some of the high points. Not enough to retire into obscurity, but I did make money.

    But hey, if your notion of making the Bay Area ideal is for people like me to leave and be replaced with no skill, high paid bus drivers, then by all means, I’ll step out of your way. Wouldn’t want to be a burden to the system by paying large sums of income tax. And I’m sure San Francisco will be just as special when people like me are gone. Hell, I bet every bus driver and transit worker spends their off hours at the symphony and in Golden Gate park. Which, by the way, is now filled with runaways and and drug addicted teens, just like Haight Ashbury.

    But that’s a small price to pay. Afterall, you got that gorgeous bridge too. (That people commit suicide off of; go watch the movie)

    Ah yes, the Bay Area. A true jewel. Too bad its amethyst.

  33. DensityDuck Says:

    Malcolm: I’m really not sure where you’re going with all this. You are simultaneously claiming that you’ve got plenty of money but the Bay Area is too expensive for you even though it’s nice except it also sucks.

  34. Malcolm Says:

    “You are simultaneously claiming that you’ve got plenty of money but the Bay Area is too expensive for you even though it’s nice except it also sucks.”

    That is because people in the Bay Area have forgotten the distinction between “expensive” and “over-valued”. Not unlike the stock market boom and subsequent bust, we eventually understood that distinction. At least until our short term memories caused it to be forgotten.

    I think that is what is problematic of what is occurring here. And I believe that was what the author of this blog has attempted to demonstrate; that property here is ‘over-valued’. i.e. you are not receiving adequate value for the money you are investing.

    The analogy would be someone paying $60k for a Ford Taurus. Maybe someday, that car will cost $60k. (Probably sooner than later considering how fast our dollar is devaluing) But currently, a figure of that size is unwarranted.

    But ultimately, that is the major falacy in thinking around here. And all the math clearly demonstrates the over-valued nature of the market. Every housing index and statistic that compares cost of owning to renting shows a massive skew. But rather than accept it, people here become defensive and attempt to justify high prices by spouting useless cliches or citing data whose only source is the NAR.

    But here is something to ponder: there are many, MANY people in this area that are frustrated because they are now being forced to consider alternatives to live in merely thanks to a grossly inflated (and unjustified) housing market. These are families, friends, people who have tried to settle down here who will likely, out of frustration, decide to vacate.

    So in answer to your initial question: could I afford to buy here? Of course. Does that mean I should? Does it make sense to invest into an over-valued asset that is likely to devalue for the next several years, if not, decades?

    But the initial notion behind this thread is that to counter the over-valued nature of the market, our idiotic legislature is now compensating its government workers to levels that the tax system cannot absorb. How do you think it can sustain itself if transit workers, firefighters and cops make huge sums of money while those in the private sector who provide the majority of the tax revenue are contiually squeezed from all sides? Or better yet, how about our education system which, thanks to prop 13, has gone from being number 1 in the country to number 46. Is that sustainable?

    So if I sound disparaging towards the Bay Area, I am merely one voice of concern amidst a sea of denial. If you think everything is honky-dory and all is well, then by all means, grab a house in East Palo Alto with an interest only loan and enjoy your proximity to San Francisco.

    I for one and tired of it. And fortunately, this is a big country with many other places to live. If I am dissappointed about anything its that I will be leaving friends behind. But the notion of friends and family ties is a concept that has long since evaporated from the California psyche. Now its who has the flashiest car, the expensive Rolex and the crushing mortgage. Good trade off.

  35. TNTinCA Says:

    I echo Malcolm’s sentiment. There IS a lack of distinction between expensive and overvalued.

    The median house price in the Bay Area is around $700k or so? Even a 50% haircut would put it at $350k, which is still almost double the national average.

    Also, if you look at the quality of the median house in the Bay Area, that is where the disparity really becomes apparant. Most homes here in the $700k range were built over 40 years ago and need a tremendous amount of work. Compare that to a house in another part of the country (Texas for example) which is far newer and more modern.

    I can provide a great example. A friend of mine recently left the Bay Area and moved to Indiana. He purchased a brand new home over there which was nearly 3600 sqr feet in a nice neighborhood with good schools. The purchase price was $300k. Now what would that equivalent house cost in the Bay Area? Try doing a seach for a 3600 sqr foot, brand new home in a good school district around here. It would be upwards of $1.5 million! And you’re telling me things aren’t over-valued here?? Please. Google didn’t make that many millionaires.

  36. sonarrat Says:

    Of course real estate is overvalued here.. I wouldn’t be on this site if I didn’t believe that. No one is saying you have to buy. By far, most people in this area don’t, and it’s not hard to understand why. My boss makes over $200K, but she has rented the same apartment in Burlingame for years and is perfectly happy there.

  37. burbed Says:

    >>A friend of mine recently left the Bay Area and moved to Indiana. He purchased a brand new home over there which was nearly 3600 sqr feet in a nice neighborhood with good schools. The purchase price was $300k. Now what would that equivalent house cost in the Bay Area?

    Yeah, but it’s in Indiana. It’s not special.

  38. Pralay Says:

    > Because renters have the lowest voter turn out, whereas property owners and senior citizens have the highest.

    Especially in bay area many renters are not US citizens. They are working here on H1 and L1 visa or they are green card holders. They cannot vote.

  39. Sj Says:

    Well I guess I’m another one to chime in on the “bay area sucks” topic. It’s been a fun 8 years but I’m counting down the few remaining months I have here to get the hell out. Tired of the endless suburban sprawl, cheezy strip malls, and overpriced asbestos & stucco tract homes from the 50s. Even more tiring, is the “jim jones” kool-aid mentality of people here that this is the epicenter of the universe. I assure you, it’s not.

    So, here’s to 2 more 6 figure post grads leaving due to the crap lifestyle here.

  40. burbed Says:

    If you leave the bay area, it means you hate diversity, hate smart people, hate gays, hate good weather, hate capitalism, and hate good food.

    So yeah. Maybe you should leave.

  41. Sj Says:

    40 – Yeah that’s the kind of attitude some folks have. I know you’re joking but it’s too bad some people really believe this is true.

  42. sonarrat Says:

    You have to have an appreciation for expensive stupid things here. I’d love to buy an extravagant $2 million home at 24th & Mission in San Francisco and smirk at all the hopeful gangsta types from the security of my amazing abode. Something like this one: http://www.movoto.com/real-estate/homes-for-sale/CA/San-Francisco/261-Fair-Oaks-St-110_330229.htm

    Seriously, where else will you see things like that?!

  43. RH Says:

    Malcolm, let me just say:

    San Jose: both of us working, considering a $6000 mortgage (at least), but what if one of us got sick or lost a job? What about the property tax? And the upkeep on what would most likely be an older home? What about the schools? Would we have to pay for private schools? And we only had 5-10% down saved, what about the financing?

    Portland, OR: Only one of us NEEDS to work to pay the mortgage and all living costs, so when we have kids, we can choose to have a stay at home parent or not. Property tax isn’t cheap, but it’s reasonable, and the schools in our area are rated 10/10 on greatschools.com, so no need to pay for private school. We easily had 20% down covered and got a traditional loan with no creative financing. We have a 2 year old, 2500 square foot house, in a great area.

    But we do miss the bay. We miss our family, friends, the A’s games. We can’t recreate those here, but we are trying, as we are making new friends and go to the Portland Beavers games.

    What we don’t miss? Everything else.

  44. burbed Says:

    @43:

    >but what if one of us got sick or lost a job?

    That’s impossible. No one ever gets sick in the Bay Area because the weather is fantastic! And, no one ever loses jobs because Google and Facebook and Apple are hiring like crazy.

    >Portland, OR: Only one of us NEEDS to work to pay the mortgage and all living costs,

    But what kind of role model will you be setting for your children? They’ll think that life is easy – they’ll grow up to be slackers, be hooked on dope, and play hacky sack all day in downtown portland.

    On the other hand, living in the Bay Area teaches them that life is about making money.

    Think of the children!


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