Hi, I’m Michelle and this is my family. We live in Silicon Valley, California. Home to Google, Facebook, Apple and just about every other tech company you can think of.
But lately it seems like the bigger those tech companies get, the less room there is for middle class families like us.
Remember the last housing bubble? You know, the one that nearly brought down the entire global economy? Well, those prices were cheap compared to what they are today. And prices just keep going up and up and up.
“How quickly are houses selling?” asks Ken DeLeon. “One just sold right now.”
That’s Ken DeLeon, the real estate rock star. He was named the number one real estate agent in the country just a few years back. You can’t go far around here without seeing his name hanging on a “for sale” sign.
“I think as crazy as these prices might seem, they’re going to probably double in the next six to ten years,” says Ken.
It might sound crazy, but it’s already happened in our neighborhood. Prices here have doubled in just the last two years. Now they’re twice what they were at the peak of the last housing bubble in 2006. The median home price on our street is around one and a half million dollars.
“The amazing part – I don’t think it’s going to end,” says Ken. “I think the fundamental lack of supply, strong demand is going to drive this market forever.”
That’s not good news for families like us. We’re just renters, trying to save for our first home.
I always thought I’d raise my kids in the place where I grew up. But real life’s no fairy tale. And now, it’s time to face the truth. We’ve been priced out.
“I feel bad for clients who are like trying to save a down payment because they’re getting money, they’re saving as much as they can,” says Ken. “But the market’s jumping ten or twenty percent, sometimes they’re just barely behind the market.”
Ken’s company, DeLeon Realty, makes shopping for houses a luxury experience, with a barista in every open house and neighborhood expeditions in this Mercedes limo bus.
“There’s another booklet that I’m going to give you that has a map of Cupertino which I personally wrote, and that book has Chinese and English,” says real estate agent Lin-Lin Tsou-Otani to the crowded tour bus.
I recently rode along on a tour of Cupertino, right next to the neighborhood where I grew up. Most of the people on the bus have lived in the Bay Area for years. But there’s a representative from a Chinese real estate agency along for the ride. He’s scoping our properties for his clients in mainland China.
“This house is listed for 1.888, very nice Chinese numbers, but it’s probably going to go over two very easily,” Lin-Lin explains in front of a Cupertino home.
Back in communist China even the wealthiest citizens can’t own real estate – they’re only allowed a 70-year lease. And homes in Beijing and Shanghai are even more expensive than they are here. So cashed up investors from China have flooded the local real estate market, bidding up prices all over the Bay Area.
“The strongest all cash offers will be from international investors,” says Ken. “And if they’re here for one week to buy a home, they’re not going to let fifty or a hundred thousand dollars stand in the way of getting the home that they’ve identified.
Even condos in Cupertino are selling for more than a house would have cost just a few years ago.
“Cupertino condo, believe it or not, has appreciated 55.26 percent just from January to May,” says Lin-Lin. “So Cupertino condos are hot!”
Condos like this one.
“Actually, it’s not too bad,” says Lin-Lin. “There’s the highway 280 you’re close by, but depending on which unit you get, you don’t hear it as much. The only thing that I would say is the acoustical ceiling, some people are concerned about that. So, with that, there’s about one percent to ten percent asbestos that’s actually in there. And it’s not really harmful to your health unless you have kids that’s throwing you know a heavy ball and it’s falling down.”
Wait a minute, what? This small condo near the freeway, with asbestos in the ceiling is listed for nine hundred and forty thousand dollars?
“Something that you guys should keep in mind is that the list price is a ‘teaser price’,” says Lin Lin. “This last week I bidded on one that had 19 offers, and went close to three-hundred and fifty thousand over asking price.”
Homes in tear down condition are selling for 1.3 million dollars and up. You’ll never guess how much this neighborhood’s gone up in the last year.
“You’re going to be shocked – 77.67 percent,” says Lin Lin. “Look at the high school. Nice high school, right?”
And it’s not just Cupertino. It’s almost impossible to find a house anywhere from San Jose to San Francisco for less than a million dollars – that’s a 40 mile stretch.
The listing for this San Francisco home warned potential buyers that it was in a “deteriorative state”. But it sold quickly for 1.2 million dollars, 50 percent over the asking price, bought for all cash.
This uninhabitable Palo Alto home is in a flood zone. So the savvy buyers got a great deal. They only paid 1.75 million – a whole 50 thousand dollars under the asking price.
So lots of locals are cashing in. And like gamblers on a winning streak, they just can’t resist the lure of all that easy money.
“When people knew that this house was going on the market it kind of became cut-throat with the neighbors,” says or neighbor Laura Montufar. “ How much are you putting it on the market for? How much did you get? Well, if you get that much then how much will I get?”
Things are so out of control that in our neighborhood, you can barely rent a tent in someone’s backyard for less than a thousand dollars a month. No, really.
“For forty-six dollars a night you get a tent in the back yard,” says John Potter. “It is an eight by nine Coleman tent with a sleeping bag, a pillow, a handful of wicker baskets to put your stuff, you get an extension cord to charge your laptop, you get wifi, you get a shower per day, and if we happen to be cooking then you can eat with us.”
Meet John Potter. His AirBnB listing got national attention and sparked a lively debate online. In the end, the city of Mountain View shut him down, despite the high demand.
“Even though I had to stop offering it, I recently got an email from some Danish man who wants to live in the tent for a month or two,” says John. “He even said if someone outbids me I’m willing to book seventy-five days instead of sixty.”
Our daughter thinks a tent in the backyard sounds awesome.
“Can I go camping in your backyard?” she asks.
“Do you have your own tent you can bring?” replies John laughing. “Mine’s full.”
But she’d have to book ahead.
John lives just around the corner from our family, and his story does not bode well for renters like us. Only a handful of areas have any rent control laws, so rent hikes and evictions are everywhere.
Deb Follingstad lived in this San Francisco apartment for 10 years. One day she got a notice from her landlord saying her rent was going up more than three hundred percent, from just over two thousand dollars a month to eight thousand nine hundred dollars.
“I didn’t even know how to react to it,” says Deb. “I’m like what!? You know, is this a joke? And I like keep reading it and then it was like and my security deposit is going up to twelve thousand five hundred dollars.”
She went straight to the tenants union for help.
“And they’re shocked,” she says. “Like they’re shocked. They had never seen a rent increase like that. Like no one had seen, I mean like they passed it around the office like, look at this.”
They told her there was nothing she could do. She had to either pay up or get outs, ao she started looking for another place.
“I was seeing studio, basement studio apartments and in San Francisco, that means somebody converted their basement, into a studio apartment,” she says. “Like one room, no windows, damp, underground, and the lowest I saw was something at seventeen hundred dollars a month.”
Turns out, that’s a bargain. The median rent for a one-bedroom apartment in San Francisco is now three thousand five hundred dollars – the highest in the nation.
Want two bedrooms? That’ll be four thousand seven hundred dollars. If you spend about a third of your income on housing, like the government guidelines recommend, you’ll need to make more than two hundred thousand dollars a year just to afford an average two bedroom.
People say the main reason rents are so high is because there’s a housing shortage. But there are plenty of empty houses in our neighborhood.
“Oh my god, I think it’s safe to say that nobody lives here,” says Michelle Joyce-Fyffe as she looks around the yard. “This is like the biggest weed I’ve ever seen in my life…Oh my gosh this thing is so tall.”
Unoccupied houses are so common that the locals have a name for them – ghost houses.
“Over here, there’s trash in the driveway,” says Michelle. “It’s like these are old clothes closet doors.”
I heard a rumor that this house on our street was purchased by a Chinese investor in an off-market deal. I have no idea if that’s true or not. All I know is that it’s unmaintained and empty.
“The back yard’s really overgrown,” says Michelle. “It’s worse than the front yard.”
With home prices going up so fast, many property owners, especially overseas investors, don’t want the bother of tenants. So these houses sit permanently empty, even though they could easily rent for more than four thousand dollars a month.
“I would say that of homes bought by international investors, maybe like ten to twenty percent are never occupied,” says Ken.
It’s frustrating to see all these empty house, especially since we’re being told there’s just not enough room here for people like us.
“What are you going to do when you grow up?” Michelle asks her daughter. “Where are you going to live and what are you going to do for money?”
“I’m going to live in maybe an apartment building or a home, and I want to drive a yellow convertible,” replies her daughter. “And I want to be a preschool teacher.”
“Do you think that everybody should be able to have a house, or do you think that only very rich people should have houses?” asks Michelle.
“I think everybody should have houses,” her daughter says. “Even bad people.”
“Even if you’re making good, good salary, nobody can get in without help,” says Rob Jordan. “That just doesn’t exist anymore.”
Our friends Rob and Shira just had a baby. They both have graduate degrees and good jobs, but their only hope for getting a house is to have Shira’s parents buy one and then rent it back to them. Her parents are willing to spend up to two million dollars. But here’s the punch line: even with that kind of budget, it’s hard to find a decent place.
“And then we’re like, so, where are the bedrooms,” says Rob. “And the agent said ah, yeah, upstairs there are two bedrooms. So we walk upstairs. It’s an attic. It’s an attic.”
“You kind of look at it and you’re like, that’s ridiculous,” says Shira Jordan. “It is just so mind blowing that these houses are going for this much. And somebody will buy it. Its not like it’s not going to get sold.”
If Rob and Shira can’t find a home here, there’s no hope for us.
“Amazingly I’ll have clients where both husband and wife are making between a hundred to two hundred thousand dollars each in the tech industry,” says Ken. “But now that only qualifies you for a mortgage of below two million dollars, which in Palo Alto means you’re mainly looking at townhomes, not even a home.
It seems like everywhere I go, everybody’s talking about the housing crisis.
“Our neighborhood is, is you know, we walk around and it’s like, ‘Wow, am I a millionaire?’” says Barbara Heninger. “I don’t think so.”
“This is a great part of the world to live,” says Simon Kelly. “But I’m now beginning to feel like it’s unsustainable to live here because of that cost.”
“I’ve been in the real estate business all my life,” says Craig Bollman. “And trying to get an apartment just to rent and the rents are higher than any place I’ve been, almost in the world.”
“It’s cascading through the rest of the economy,” says Paul Bogorodsky. “’Cause people are spending three quarters of their money on rent and healthcare, and they don’t have any money to spend on goods. So all the businesses around here are going broke because people have no extra money.”
If you factor in the cost of housing, California’s got the highest supplemental poverty rate in the country – that’s according to a recent state government report. While people’s disposable incomes keep shrinking, the tech companies just keep getting bigger.
Google wants to build a series of futuristic bio-domes using an army of hybrid crane robots. Facebook’s new digs has a nine-acre rooftop garden. And Apple’s spaceship-shaped headquarters is going to have room for more than twelve thousand employees all under one roof.
“It’s a real problem,” says Andrew Heninger.
“Yeah, he works at Google and I work at Synopsys, both are in Mountain View, and it’s hard to hire people if they’re not from here ‘cause then they try to find a place to live and they can’t afford it,” says Barbara Heninger.
“Are you thinking that you might want to buy in the Bay Area sometime?” asks Michelle.
“No way, no way,” says Cody Lu. “Buy one, that’s about one million or something like that.”
“It’s a problem I think the tech companies have to figure out themselves,” says Michael Wiacek. “You keep hiring people and you pay them enough to meet the current market rate, but then they get more money and then prices go up and then no-one ever really gets ahead. So you have people who are making a lot of money, but they still can’t afford anything because everything just goes up.”
It wasn’t always like this. The Bay Area used to be a middle class utopia. I know. I was here before Google, Facebook, and even Apple.
My two brothers and I had the quintessential “all American” childhood. Our Mom was always around to take care of us, and our Dad was always home in time for dinner.
Today, two professional incomes are barely enough to pay the rent, let alone save for a down payment. So middle class families like us are being forced further and further away.
“The drive home can go up to four or five hours, depending on what time I leave,” says Maryann Creasy Rieger. “Because everyone comes in at different times, but they all leave at the same time.”
Maryann’s a close friend of my Mom. She used to telecommute to her job at Yahoo, but then the new CEO changed the rules, so she had to start making the 90 mile commute from Fairfield all the way down to Sunnyvale every day.
“I usually get up about five, and I leave my house about ten to six,” says Maryann. “I work a full day, and I get on a train at about four thirty, five o’clock in the afternoon, and I usually get home about eight at night. It’s a long day.”
One day a week she tries to ease the burden of her long commute by sleeping in my childhood bedroom. Maryann tried to find a new job, but the best offer she got was in Mountain View, so her commute is just as bad.
“The train starts in Sacramento and it’s probably 80 percent full, and those are all people that are going all the way down into Santa Clara and San Jose,” says Maryann. “So I don’t have it as bad as some people.”
The U.S. Census created a special category for people like Maryanne – they call them “mega-commuters.” And the Bay Area is the “mega-commute” capital of the nation.
“We don’t have kids,” says Maryann. “But for people with kids how do you spend time with your kids if you’re spending all of your time on a commute?”
Sometimes we think we just need to get out of the tech bubble altogether. Families like ours are now fleeing California in droves, heading to places like Portland, Seattle, Boulder and Austin. Places where middle class families can still afford homes…at least for now. The influx of Californians is driving up housing costs there so fast, that locals are being priced out of their own market.
And the worst may be yet to come. A recent study from UC Berkeley predicted that the exodus is not even half over.
I went to San Francisco where Mission District residents were protesting at city hall. Families who’ve lived in the Mission for generations are being forced out to make room for high-paid tech workers and their luxury condos.
“This housing problem and this, well it’s not a housing problem it’s a rich people coming in and taking all the stuff problem,” says Andy Libson.
“All around us in my parish, all around us in our neighborhood, are the signs of one of the largest displacements probably in the history of the city,” said Father Richard Smith. “It’s not coming because people want to move out of the neighborhood. It’s coming because they’re being forced out.”
“Really what it comes down to is greed, you know, we have a lot of greed,” says Teresa Almagaur. “So people are seeing you know seven thousand two bedroom condos being rented out, so they want to get paid that to for their house, housing right. And that’s unfair for the tenants that have been there for 30 years helping them pay off their mortgage, helping them get that property.”
“The basic problem is this is that housing is treated as a commodity for profit, rather than being treated the way it should be as a necessity for people,” said Richard Becker. “Everybody needs a place to live and everybody deserves a place to live, and in the richest country in the world, everybody should have a place to live.”
Today there’s a vote to limit luxury condos in the Mission. The council hearing room was so packed, supporters had to watch from an overflow room. And when that room filled up, they had to make even more space for everyone downstairs. Testimony went on for hours and hours. But in the end the measure was defeated.
Maybe it’s already too late to fight. Maybe this is the new normal.
“Silicon Valley has radically changed in the last thirty to forty years, and this is very clearly evident when you talk to sellers versus buyers,” says Ken. “Sellers will tend to be nice people, but sometimes maybe they were teachers or blue-collar workers. Um, just kind of you know, it was a middle class community back then they could afford the home for fifty thousand dollars or sometimes even twelve thousand dollars. But now with these staggering prices, the buyers tend to be these brilliant people. The vast majority of my clients have graduate degrees, PHD, MBA, law degree. You pretty much need this, to be hyper educated to be able to afford this area. And I would say, just to quantify, probably about a 20 to 30 point higher IQ score than the sellers.”
So let’s see how the other half lives. I got the DeLeon treatment, touring exclusive neighborhoods in Ken’s Rolls Royce.
Another one of Ken’s tech clients just bought this place in Los Altos. It’s got a coy pond, a built-in latte maker, a computer-controlled shower, and a lap pool in the living room.
“My techie clients, they want to showcase that they’ve done well in life, they’ve made it big,” said Ken. “So they want a place to entertain and bring their clients in, and this home really showcases that.”
Cool house. But I don’t need any of that stuff. I just want a simple home where I can raise my family.
“There’s been some anger directed at techies and certainly international buyers about long-term residents being displaced from this area,” says Ken. “In the end I think Silicon Valley, it’s such a small little area, it’s inevitable that prices will rise and I think it’s inevitable that those who have the most money are going to pay the premium to be as close in as possible to work. So the techies who are working these amazingly long hours and tend to be really brilliant, great people, I’m for that. And just because somebody grew up in this area for a while, I think that the person who is working hard at Google has more of a right to be here that somebody just because their parents were here and they complain they can’t afford a home. I would say just work harder, you know, get more education, um is my advice to them.”
Maybe Ken’s right. Maybe there isn’t a place for people like us anymore. But I can’t help holding on a little longer, hoping I can do something, anything to stop the Bay Area I love from disappearing forever.