New residents to the Bay Area are earning far more than the people they’re chasing out, a new report says, pushing up home prices and highlighting the gap between owners and renters in Silicon Valley.
Lower-income workers moving out of the Bay Area were being replaced by younger workers making about $12,640 more annually from 2005 to 2016, according to a national study released Wednesday by BuildZoom. The Bay Area income gap has accelerated from 2010 to 2016, with the average newcomer out-earning the typical former resident by about $18,700.
“In the Bay Area, you have a tremendous demand for housing,” said Issi Romem, BuildZoom chief economist and author of the study. High housing prices, he said, make it almost impossible for many families to put down roots and push them away from the region.
Bay Area newcomers had a median annual household income of about $70,000, while those leaving had a household income of $57,400, according to the study. About 60 percent of the newcomers had at least a four-year college degree, while about 50 percent of the outgoing residents had that level of education.
The Bay Area represents the extreme edge of a national trend: higher paid and educated professionals moving to large, coastal cities like San Francisco and New York, while lower paid workers are moving toward less expensive metro areas, the report found. This migration has driven up housing prices in coastal cities, while others in the Rust Belt have seen home prices drop.
Romem said the findings reveal a fundamental shift from the 1970s when suburban development flourished to accommodate new residents.
The soaring price of Bay Area real estate today deters lower-paid workers from moving to the region, he said. Romem also noted that residents with above-average incomes for the region still find it difficult to save enough for a down payment.
The median sale price for a single-family home in prime Bay Area counties has climbed for nearly six years. The median price for a home in Santa Clara County in February was $1.3 million, in Alameda County $750,000, in San Mateo County $1.45 million and San Francisco $1.5 million, according to real estate data firm CoreLogic.
Real estate agents say even well-paid tech employees moving from other states struggle to find satisfactory housing. Many compromise on size for location, and pay a lot more than they expected.
Michi Olson, a relocation specialist with Alain Pinel Realtors, has handled employee moves for several major tech, biotech and social media companies in Silicon Valley. She helps families of tech engineers and executives moving to the Bay Area get through sticker shock by selling a lifestyle – beautiful weather, outdoor activities and Northern California culture – rather than properties.
Many new arrivals are trading vast homes in other states for less than half the space in a Silicon Valley house. “We’re in a very blessed area,” Olson said, but added, “that’s really, really tough for first-time home buyers.”
In a competitive fight for top tech talent, companies will extend generous relocation packages for key employees, she said. Some offer up to $15,000 a month to cover rental housing, a big salary boost and assistance in financing a new home, she said.
Still, some former residents have found satisfaction outside of the Bay Area.
Jim DeStefano, 71, left San Jose in November and found another sunny climate – Florida. The former medical technologist retired, sold his home for $1 million and moved with his wife to Fort Myers.
Downsizing from 4 bedrooms to 2 bedrooms has been great, he said. The couple’s new home cost just one-quarter of the proceeds from their California home.
DeStefano felt Florida was a better place to retire. “San Jose is a great place if you’re in your 20s and 30s,” he said. He could have waited for the housing market to drive up prices a bit more, but he felt the time was right to leave.
His new Florida house is sturdy enough to endure hurricane season, and he likes having a nature preserve – complete with alligators, deer, and bobcats – in his backyard. “It’s a much quieter lifestyle.”
Source: Sacramento Bee
By: Louis Hansen