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The blog post I am about to quote, from WSJ, along with a video from NBC, only talks about US-born talent, but anecdotal evidence that I have shows that even foreign born talent is not going to stay in the area much longer, assuming the trend continues. I mean, I am one. I swore to myself I would never live outside the Bay Area in the US, and after shifting my gaze from a house in the Peninsula to one in San Jose and then Hayward all the while watching prices meaninglessly appreciate, I decided I might just abandon the whole idea and see if there are other places across the country.

The message here is deeper than either the article or the video. I seriously doubt if the traffic or housing prices are the only reason for the move. With Yahoo! going through a meltdown and many VCs developing less warm feet, if not cold feet altogether, the madness may be coming to some sort of a head here and at least few people must have realized it is time to move on.

Egress

Well, we all know this is just another bubble and it is going to burst, just that, none of us knows when. However you dissect the type and number of people who are leaving or the reasons for why they are leaving, there is a long term problem here. The “hotness” of the Real Estate market here, the cost of living and the fact that 5AM and 8PM are slowly creeping into the “rush hour” category means only bad news.

Ingress

You need to think of everything in unison here. It is not just that a handful of tech workers are going to Seattle, which is also relatively bad in terms of real estate, or to a desert location like San Diego. The exodus is causing us to lose professionals from various fields. The ingress is becoming increasingly unpalatable as well. Ask yourself where your kids’ schools will find good teachers? Or any other non-tech related professional services?

Unsustainable mash-up solution: Soviet Style Housing

San Jose for example thinks it has “solved” the low cost housing problem. For every 20 or 25 meaninglessly expensive housing projects, there is one, just announced, like the “Donner Lofts” with just a 102 units that will remind people of the Soviet Union with its ugly, boxy, industrial look and drab colors that some architect is going to try to fool you into believing is “modern”. Also, I am yet to hear what “affordable” means, and how long it will last, and what 102 units are going to do. The problem is not that Ed Lee and Sam Liccardo summarily lack vision, they also just don’t care.

Sooner rather than later, these types of unsustainable band-aid solutions will also fail. Of course, then comes the crash. If it takes another year or two till the bubble bursts, things will only get worse till then. After that of course, real estate will, I predict, going into a rapid, downward spiral. All those “multi-family, high density” adjective-soup units will either have to go empty, or drop rents, forcing this to become a whole another nasty ball game.

Gaming Housing

Almost everyone who lives here or talks about the problem here knows that foreign buyers, and by that I mean, wealthy Chinese individuals, and institutional buyers are deliberately gaming the market in all cash deals, never making housing competitive enough. Imagine housing having gone up 13% in just a year?

I used to track the housing prices when I was “in the market” and I started getting quickly disappointed. Every now and then, for s*s and giggles, I look up housing, only to find a bunch of run down shacks in a high-crime area in San Jose displayed as selling for, wait for it, $600,000 asking prices. Of course, usually people cough up “more” not less than the asking price.

I don’t know what you can do in a market economy to stop this sort of unfair price gouging, but if this trend continues, it spells disaster for the Bay Area. All one can hope for is that these greedy people gaming the prices also take at least some of the hit.

All problems and no solutions?

This is mainly the problem with the Bay Area. From bubble to bubble, we never achieve balance. I don’t know that a solution can be achieved here. The venture capital industry doesn’t care. The “entrepreneurs” want to sell you garbage just so they can become billionaires. What with accommodating lunatics like Marissa Meyer (and the people who thought a 37 year old engineer can save an me-too-also-ran media company) who bought Tumblr, you can’t really blame them.

Silicon Valley doesn’t have good political leadership. The people who get elected here, mostly want to use this as a launchpad for their political agendas. A great example? Chuck Reed, former mayor of San Jose, who not only screwed the city beyond recovery, but also channeled a very ineffective and directionless successor, Sam Liccardo and moved on to weaken unions and pension funds by siding with Republicans. Because, an insecure retirement is a great attraction when hunting for talent I assume?

In a very ironic way, it might take another round or two of bubbles and actual loss of competitiveness to other areas before something changes. Till then, all we can do is, see if we can guess when the next one is coming down and try to duck for cover soon enough.

For more

This particular post was dedicated to real estate, traffic and talent exodus. Here is another WSJ piece on the valley’s slowdown:

http://www.wsj.com/articles/for-silicon-valley-the-hangover-begins-1455930769

References:

1. The WSJ blog post: http://blogs.wsj.com/digits/2016/03/03/silicon-valley-residents-leave-for-greener-grass-cheaper-housing/
2. The NBC Bay Area Video: http://www.nbcbayarea.com/news/local/Housing_-Traffic-Spur-People-to-Leave-Silicon-Valley_-Study_Bay-Area-371126301.html
3. Donner Lofts Announcement: http://www.bizjournals.com/sanjose/news/2015/01/08/midpen-housing-breaks-ground-on-102-unit-donner.html
4. Image Credit: https://www.pexels.com/photo/city-cars-traffic-lights-6732/

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