Glassdoor.com reveals why Bay Area Real Estate is affordable.
At Glassdoor, Find Out How Much People Really Make At Google, Microsoft, Yahoo, And Everywhere Else.
So how much does a Google software engineer really make? The average, based on ten submissions, is $97,840. And the range is between $80,000 and $150,000, with annual cash bonuses coming in anywhere from $20,000 to $45,000. Adding salary and bonus together, the Google engineers that have entered information on Glassdoor average $112,573 in take-home pay. And then there are stock options on top of that. Yahoo and Microsoft engineers get about the same salaries, but smaller bonuses, leaving their take-home pay at an average of $105,642 and $105,375, respectively. Apple software engineers make only about $89,000, on average, but they get to create some of the most loved products on Earth.
On top of that, most techies meet their spouses at work. So think about it: 2 Googlers – $390k a year in income.
Multiply by the normal 5x rule – boom – a $1.95 million dollar house is easily affordable.
Let’s look at two Apple employees – $178k in income a year. Boom. That’s a $890k house right? Nope. Don’t forget those incredibly valuable stock options. BOOM. $1.2 million dollar house is easily affordable.
Sheesh, no wonder prices are on the rebound!
UPDATE: Thanks to Bad Advice for pointing out a typo.
June 11th, 2008 at 12:49 pm
Well, I’m pretty wary of these sites since only the people with good incomes report their incomes. Additionally, you have no idea if they’re inflating the truth or not. For the most part, the young engineers I know that went to Google aren’t paid more than say Adobe or Yahoo. Google is really not the best for base salary at all.
June 11th, 2008 at 12:51 pm
Multiply by the normal 5x rule
Is the rule now 5 x yearly income = affordable house? I thought it was only 3x, but maybe that’s everywhere-but-RBA thinking?
Whatever the prevailing wisdom, it doesn’t matter much to this family. Even 5x will barely get us a 1960s era condo on El Camino Real. Thank you, but no.
June 11th, 2008 at 12:56 pm
Well, I’m pretty wary of these sites since only the people with good incomes report their incomes. Additionally, you have no idea if they’re inflating the truth or not.
Those are good points – but I don’t understand why only people with good incomes would report their incomes. What’s your thinking behind this?
For the most part, the young engineers I know that went to Google aren’t paid more than say Adobe or Yahoo.
http://www.burbed.com/2008/01/31/stanford-college-grads-salaries-supports-house-prices/
June 11th, 2008 at 1:07 pm
Well, there you have it folks! RE will never go down in Silicon Valley. All the schmucks workin’ Joe jobs( Teachers, Police Officers, HR managers, and Dentists) might as well stop griping and move to Idaho now because there’s no hope now!
All kidding aside, even if said Google employee were to be married to Mrs. Apple Employee with all the goodies, what they’d be able to afford it still a 1960′s Brady Bunch house with un-updated linoleum floors.
I don’t get people that choose to buy here with that kind of salary. The logical choice to me would be this scenario:
1:Work for 5 years. Put 200k each into retirement funds. Bingo- retirement is now in the bag because in 20 years, that’ll be worth around 4 million dollars, hence you will both be worth 8 million by the time you’re 45.
2: put the rest into CD’s and savings accounts. Save 2-300k total.
3: Move to another state and buy a place for cash. Keep the rest in savings for things like cars, trips, etc
4: retire. There ya go!
Of course most choose to buy the Brady Bunch house instead and live like middle class paupers.
June 11th, 2008 at 1:09 pm
Wow–$490K/year for two Googlers including stock options? If we take $112,500 as the average (mean or median?) pay without stock options, we get $225K/couple minus the options. I know Google stock is hot, hot, hot (and can never crash like Microsoft did in the late nineties), but > 50% of total pay in stock options?
June 11th, 2008 at 1:21 pm
$490k does -not- include stock.
($150k salary + $45k stock)*2 = $490k.
Google only hires top performers, so everyone should be earning at the top of the range.
But you’re right, I forgot to include stock options! No wonder there are wait lists to buy $2 mil houses in Palo Alto.
June 11th, 2008 at 1:24 pm
All the schmucks workin’ Joe jobs( Teachers, Police Officers, HR managers, and Dentists) might as well stop griping and move to Idaho now because there’s no hope now!
Well two police officers make $200k – and with a side job as a security guard that could probably bring it up to $250k. Multiple by 5 and BOOM – $1.25 million dollar house.
Same with bus drivers. $1 million.
Teachers? Well… that’s what Gilroy and Richmond are for.
Denists easily clear that much too. And I think they always marry dentists. Again, boom, $1.5 million.
June 11th, 2008 at 1:26 pm
Oh, about the 5x ratio – even before the boom, I think that coastal places like NY and CA have always been at 3.5-4.5 x.
2.5-3.0 x is for places like Texas.
There’s no reason why it shouldn’t be 5x today. Things have changed.
June 11th, 2008 at 1:28 pm
“Dentists easily clear that much too. And I think they always marry dentists. Again, boom, $1.5 million.”
Well there ya go. Two and Two. Sort of like Noah’s ark ain’t it?
June 11th, 2008 at 1:56 pm
errr 195 x 2 = 390k ……
But that’s what got us in this mortgage mess, the magically inflating salaries
.
June 11th, 2008 at 2:12 pm
The salary on that site already includes the bonus. So two googlers would be in the range of $160-$300K
June 11th, 2008 at 2:17 pm
Oops. I had used $390 to come up with the $1.95 million number, but typed $490. Thanks for pointing it out.
June 11th, 2008 at 2:17 pm
The salary that site quotes already includes the bonus. Ie, the googler range of 80-150K is total take home, including bonus.
June 11th, 2008 at 2:44 pm
How come employees at Google are so young? They look like in their 20s, hardly top performers to me. Google is in their honeymoon stage right now. Its the “it” place to work just like Sun, Cisco, HP, IBM of the yesteryears. Once the honeymoon is over, people will get laidoff and Google will no longer the place to be.
June 11th, 2008 at 2:52 pm
POLL of the day, “WHICH IS SLOWER: Burbed’s website or a turtle missing half its limb?”
June 11th, 2008 at 4:35 pm
A number of reasons Google likes to hire new college grads:
- They are relatively cheap
- They have no family life, and therefore are more likely to work more hours for a given fixed salary.
- They are wooed with cheap perks like free food, ping pong tables, and Razor scooters
- Health insurance costs for young males is significantly lower.
- It will be 3-5 years before they start wondering, “What’s my career path?”
- They are easy to find, havested annually at fixed locations, like a crop of peas.
Google is like most other red-blooded American corporations, focused on growth to the detriment of sustainability.
June 11th, 2008 at 4:56 pm
Well don’t forget about polygamy, if one male muslim googler meets with 4 female there, they can live together in a Palo Alto mansion.
June 11th, 2008 at 5:12 pm
LOL at polygamy comment. Anyway, I graduated from Berkeley. This year’s students are indeed getting 90k at some places. I know a guy starting at 90k at VMWare, and another guy getting 95k+ at yahoo. The yahoo guy has a masters though. Both of them are Berkeley guys. On the other hand a guy who got a masters from Arizona state went to Google and got offered only 70k. As for me I made 94k last year including bonuses but I’ve already worked for 2 years. Even though I think my salary doesn’t suck for a 24 year old, a 800k median San Mateo house is too ridiculous.
June 11th, 2008 at 5:32 pm
When I went to an open house in Palo Alto last week, I happen to ask the realtor what kind of person lives in the house, and was told the owner is a Googler. He’s selling because he just got married, and is moving up to a bigger house down the street.
June 11th, 2008 at 8:26 pm
Work for 5 years. Put 200k each into retirement funds.
How? 401k is capped at 15,500/yr, IRA at 5,000 (or thereabouts).
$20,500 X 5 = $102,500.
Matching is often generous, but not to the extent of 20k/yr.
June 11th, 2008 at 9:37 pm
bob,
How are you going to get 17% annual post-tax (equivalent to about 25% pre-tax) returns for 20 years?
That’s what you need to turn your $200K into $4M assuming you start out with post-tax money. If that’s in a tax-deferred account, you’ll need to make even more to account for the tax you pay during withdrawal.
June 11th, 2008 at 9:49 pm
burbed,
I realize that this is a smart-aleck tongue-in-cheek post (as are most).
However, about a third of the population in the core Bay Area actually does make six figure incomes. About a quarter of the couples do have $200K+ incomes, allowing them to afford $6-800K+ homes.
Since only about 2/3 of the population ever owns, if 1/3 have the above income levels, the $200K income becomes the median. Why do you think the median home price should drop much below the $600K point?
To those of you who expect prices to drop, you do realize that the only way that can occur is when the options fountains and bonus gushers dry up, right? For that to happen, the economy as a whole has to become recessionary enough for the tech/biotech/etc companies to be hurting. At that point, I agree that demand (and so prices) will drop. But that will likely take years to play out and may negatively affect *your* jobs too.
June 11th, 2008 at 9:53 pm
That’s certainly a good point!
June 11th, 2008 at 9:58 pm
About a quarter of the couples do have $200K+ incomes, allowing them to afford $6-800K+ homes.
But that’s the thing. What those couples BUY, apparently, is the 1.5 mil home.
The median we have now, which is roughly, what, 800k, is predicated on much higher numbers at the upper end & rather lower numbers for truly shitty places.
June 11th, 2008 at 10:58 pm
Nah, everyone talks about the 1.5m home, but not everyone can actually buy it. We don’t ALL work at teh Google, and those young college grads aren’t even married yet.
Those DINKs will eventually be SITKAs like us (Single Income, Two Kids Anyway).
June 11th, 2008 at 11:20 pm
The past trend/problem was not 200k income earners buying 600-800k houses, as Renter4 said, they were/are buying million plus houses, it was people making 60-120k buying those homes with funny money, which could not then and cannot afford or qualify for now. Those making 150k plus (probably 20%?) can afford the median house, it’s the other 70-80 who can’t. Thus, the “starter” to “average” home has to drop simply because there are not enough buyers to keep prices at their current levels. Additionally, although probably 20%-25% of the population (in RBA areas) can afford “median” homes, they can’t all afford million plus homes. Again, the problem was people in the 150-225k range range buying houses in the 1.1-1.5 range with option ARMS. Those days are gone. Thus, the that market has to come down too because there simply aren’t enough prospective buyers.
It really all comes down to fundamentals. When prices come back inline with rental rates and salaries, we’ll be back to normal. But we have a LONG (another 20% drop) way to go.
June 11th, 2008 at 11:55 pm
>>Again, the problem was people in the 150-225k range range buying houses in the 1.1-1.5 range with option ARMS. Those days are gone. Thus, the that market has to come down too because there simply aren’t enough prospective buyers.
Wrong. All those buyers who bought for $1.5M are now living in $2M homes. All those who bought for $1M are now living in $1.5M homes. Funny money or not, the profit is real, and these people now have plenty of equity to move up. Funny money became real money. Tracing down the eco-system, there’s a never ending supply of bottom feeders at $800K, because that’s the price point where it can be supported by a regular tech job without funny money.
June 11th, 2008 at 11:58 pm
>>To those of you who expect prices to drop, you do realize that the only way that can occur is when the options fountains and bonus gushers dry up, right?
Wrong. The only way it can happen is if a massive meteorite strikes the earth and burns down Google/Face Book/VMWare/Intel/Oracle/Ebay.
June 12th, 2008 at 1:42 am
True, I don’t know any 200k family with a house (or two) totaling less than $1m. People talking about those incomes seem to forget that in 99 people were making more money and the housing prices were halve. It is like painted a pig’s head first and then look for a body that can fit the picture profile, BA’s salary hasn’t spiked in the last several years buddy.
June 12th, 2008 at 5:25 am
[...] years old, and making $94,000 – a typical Bay Area tech salary Glassdoor.com reveals why Bay Area Real Estate is affordable. [Burbed.com] San Mateo Home Sellers in Trouble Says: June 11th, 2008 at 5:12 [...]
June 12th, 2008 at 7:54 am
bob,
How are you going to get 17% annual post-tax (equivalent to about 25% pre-tax) returns for 20 years?
er, I realized that I made a mistake in my calculations. But if you were to put say- $20,000 into the typical mutual find, which delivers an avg long-term return of 10%, then within 20 years, your 20k would be worth around 200k. So if you were to out 200k into mutual find- again, nothing fancy, then within 20 years your investment would be worth approximately 2 million. Multiply that by 2 and you get 4 million. So if you were to live elsewhere and had started investing by the time you were 30, you’d be retired before you were 50.
In regards to how much 200k salaries get you, well I did a little calculation using what I consider realistic and healthy finances. The truth is that a couple making 200k should probably only be spending 400-450 max on a house, especially if it is their first. That estimate doesn’t include the fact that most couples who buy homes start popping out babies immediately, which will add an additional 200k per child over the course of 20 years. If those 200k couples were in fact buying 1.5 mil homes, then they are in trouble. There’s no way 200k salaries realistically support that kind of price level.
The other white elephant in the corner that nobody seems to talk about it that the BA has yet to experience the fallout from Alt-A loans, which reset in large numbers next year,which probably also explains why so many of thse 1 mil homes are now coming onto the market before the payments goe up and Mr. and Mrs. 200k couple can’t afford the payments.
June 12th, 2008 at 8:48 am
@28:
Real Estater, I don’t know where you get your numbers, but the companies that you’ve listed can’t prop up a real estate market all by themselves. I work at one of those companies, and have friends at most of the others.
Intel/Oracle are enormous companies that pay a decent salary and have a bonus here or there, but they’re not generating wealthy people, just well paid middle class.
VMWare made their early pre-ipo people a bunch of money, not so much for people starting after.
Google created a small number of very wealthy people, probably a couple thousand millionaires, and a couple thousand more with a few hundred thousand in the bank. Like other big companies, the majority of the people did not hit the jackpot and are well paid, but not rich.
Facebook will probably follow the same trend as the Googles and the Ebays. My guess would be that it creates a hundred more millionaires and a few hundred people who make hundreds of thousands on stock.
So, I’d guess those companies created maybe 5,000 millionaires, and maybe two or three times as many people who made a few hundred thousand on top of salary.
That many people can’t prop up the crazy prices an an area with 7.5 million people. If you count just the “real” bay area, that’s still over a million people.
So, I’m with the housing bears here, the prices are unsustainable. There will always be little spots in Palo Alto or Saratoga where the rich live and housing is extremely expensive, but the rest of us will be able to buy a nice house for shelter, not investment, in a decent area in a year or two. I do agree with you that there are places where the rich converge, but the vast majority of bay area prices were driven by speculators who are now defaulting.
June 12th, 2008 at 9:10 am
This single people buy the 800K homes, and there are a lot of them. I love the 800K price point as an investor- its an easy play for appreciation, because developers flock to this price point too. Like in Willow Glen every other house is a developer rebuild on a lot that used to house a shack. I buy those shacks and the best ones are rentable. Sometimes they are even under 800K but not on the prime streets.
June 12th, 2008 at 9:32 am
This single people buy the 800K homes, and there are a lot of them. I love the 800K price point as an investor- its an easy play for appreciation, because developers flock to this price point too.
You’re kidding right? I don’t know any singles that are buying 800k houses. Secondly, you CANNOT monetize an 800k home with rent, sorry.If you buy at that price with the idea of making money , then you’re a fool. But I assume that you’re buying to flip, in which case you’ll simply get burned anyway because you automatically assume that they will appreciate, which as anyone that looks at Dataquick or the MLS can see is not the case, and in fact, the median is actually falling in all areas of the BA.
RE investors crack me up. You can easily make way the hell more in stocks and investments with less risk and better odds. Yet you all believe the garbage you see on TV. So- be my guest, why- there’s plenty of 800k+ homes just begging for you to buy and “invest” in them. You’ll make a fortune!
Anyhow, if you’re a Troll, I fell for it pretty good.
June 12th, 2008 at 9:56 am
I have previously referred to the term “knife catcher,” which is someone buying a house on the price downswing. They’re trying to catch a falling knife and they will be cut.
But things are getting so bad in Southern California they’ve move onwards in their terminology. Now they’re talking “chainsaw catcher.”
You optimists really crack me up.
June 12th, 2008 at 10:46 am
So, I’d guess those companies created maybe 5,000 millionaires,
Actually Google alone created about 5000 millionaires.
June 14th, 2008 at 2:56 pm
burbed said:
Actually Google alone created about 5000 millionaires.
Do you have a reference?
Every pseudo-authoritative source I’ve encountered has estimated the number to be an order of magnitude less.
I’ve only seen the multiple thousands number bandied about on real estate related sites.
June 14th, 2008 at 10:30 pm
When Google went IPO in 2004, there were less than 2000 employees. Not all of those 2000 employees became millionaire, because some were low paid secretaries, etc.
June 16th, 2008 at 12:38 am
I’ve been thinking about this off & on the last week. It really kind of shocks me that the salaries on glassdoor are this low, relative to house prices. I’ve always assumed that the Google folks were making VAST sums, like over 200k each, which would maybe allow couples of them to buy 1.5 mil houses with traditional loans without feeling a pinch.
If this is what the best of the best are making, then what the hell are people using to buy their houses?
I’m not complaining about my own income–I’m making far more than I would ever earn in any other region. But my partner & I couldn’t possibly have a nice life AND pay for a million-dollar house on our income: even if we came up with 20%, the mortgage payments would be too vast to manage comfortably. The margin of safety would be too small.
So, really, if Google is funding all those purchases, how the hell is it being done?
June 16th, 2008 at 12:45 am
Glassdoor only cover salaries.
You forget about stock. There are Googlers who joined after the IPO and did phenomenally well. Think about it, even if your strike price was $80, all you would need is 1000 shares and you’ve instantly got half the purchase price of a $1m home.
1000 shares isn’t particularly a lot.
June 16th, 2008 at 12:54 am
It’s hard to tell without knowing who got how much. For your example, after taxes it would boil down pretty much to a good down payment. For the person who got 10,000 shares, yeah, absolutely that’s a house right there.
June 16th, 2008 at 1:00 am
Aren’t Capital Gains taxes at 15%?
Let’s say you were looking at buying a $1m house, if you had 1000 shares at $80, wouldn’t you have $416,500 after tax?
Your mortgage would be that for a $500k house. That’s pretty affordable for even a one salary family (using the 5x rule).
June 16th, 2008 at 2:25 pm
According to this site, capital gains tax is about 20% & whether you pay that or the higher regular income tax depends on how long you hold the stock.
Don’t get me wrong, I’m not arguing that one thousand shares with an increase in value of $400 each is anything other than a great big chunk of change. I’d just question whether it would really buy you a nice house outright.
If it ever happens to me, I’ll let you know how it works out…
June 16th, 2008 at 3:49 pm
I think a lot of people that are buying these expensive houses are working at companies like Google and Apple and even the older firms like Cisco as consultants. They setup their own corporation and make say, $80/hour. $80/hr equates to a salaried employee of about $120K so its not like getting $80 out of these firms is that hard. Then every month these people get a check for around $14000. where they have to pay their own FICA and all taxes. But here’s the thing- they can WRITE OFF their mortgage from gross (depending on how many people live in the house or how big the house is). Plus there are tons of other writeoffs. There are millions of these consultants in the bay area.
June 16th, 2008 at 4:08 pm
The answer as to ‘how’ people afford homes here is probably much less glamorous. My observations are that home buyers here are willing to accept a much higher level of financial pain just to get into something. I think in more cases then not, many BA home buyers simply spend the bigger portion of their paychecks on their houses. Hence this is the reason why homes are viewed more as a savings account or some sort of investment because instead of actually investing in anything, many out here buy a home instead. The google and apple people still make up for a tiny percentage of the whole. Not enough to alter an entire market.
June 16th, 2008 at 4:17 pm
WG, I just met one such person today (at $120/h) but either such contracts eventually get cut by the provider company, or the contractor gets tired of the work routine and the corporate ceiling (it pays well but they’ll never make it to management). I think the people who’ve fit this profile for a few years are financially satisfied and emotionally unhappy, if that makes sense.
June 16th, 2008 at 4:36 pm
I agree with DreamT. I know couple of consultants. Their rates are eaten by what they call “multi-layering”. In addition, they need to buy their own medical insurance for family. It’s not cheap nowadays.
And, writing off mortgage amount from gross – that’s tricky. Because, by law, you can deduct only the business workspace from mortgage. For example your home is 1500 sq-ft and you are paying $3000 mortgage for this home. If you are using only 750 sq-ft for business, you can deduct only $1500. Of course one can deduct the whole mortgage anyway, but there are more chances of IRS coming after him.
June 16th, 2008 at 5:45 pm
Stock option gains (as opposed to stock purchase gains) are not taxed at capital gains rates. You have a couple of choices with options but the less painful way is to pay the taxes up front now rather than getting very screwed later. You can do a same day sale, which is taxed at regular income levels, or you can exercise the option and pay taxes when you sell the underlying stock. However, we know people who really were nailed doing this, owing huge taxes even though the stock had tanked between exercise and sale, because they had to pay taxes on the difference between the strike and the exercise price, independent of the sale price.
June 16th, 2008 at 5:48 pm
Home mortgage deductions as business are a huge red flag for the IRS — unless you are full-time work at home never use another office, it probably is not worth it because they tended to disallow the deduction even if it was legit.
June 16th, 2008 at 6:19 pm
Someone who has his own corporation should be able to deduct car expenses, gas expenses, and food expenses. Basically anything that contributes to the current inflation is deductible.
I know some folks who hold a regular job, and also have their own corporation.
Whether these people are emotionally unhappy or not, it depends on their personality and career goals. To some people, being their own boss offers a sense of freedom. They usually have flexible hours, can sometimes work from home, and doesn’t have to worry about climbing the corporate ladder.
July 9th, 2008 at 10:27 am
Question:
What happens when banks approve you only based on your W-2 income, and take your option income for exactly what it is…nice if it happens?
Answer:
Less debt is available to purchase homes. Home prices fall.
All these people living in $1.5 or $2MM homes only have equity in their home to move if there is someone in a smaller home that can afford to buy their home. And THOSE people need the people below them, etc., etc., etc..
I’ve heard the phenomenon called “plankton theory”. If you kill off the plankton in the ocean, eventually all larger fish die as well–it takes time though. The plankton were killed with subprime, and we are watching the problem slowly spread to the bigger fish.
Real estate cycles take a long time to work through the system–we’re in the early stages in the inner Bay Area. To believe that the hundreds of thousands of households in the Bay Area are immune to this because of a few thousand newly minted millionaires is ridiculous.
Ability to buy aside (I could buy today if I wanted). As long as I can rent for about 1/3 of the actual after-tax cost of ownership (inclusive of maintenance, which is not insignificant), I will rent and save piles of money for kids’ college, retirement, travel, investment, etc., and sleep very well at night, thank you very much.
In the meantime, if I want to live in a nicer/bigger house, I’ll just rent a bigger, nicer home. Gravity re-exerts itself on all things, even planes/real estate–once they have run out of fuel/free money.
May 13th, 2010 at 5:38 pm
I prefer http://www.cubecheck.com
Much more employee oriented, better privacy, and more benefit information.