The San Francisco and Silicon Valley unemployment rates are a huge driver of the SF Bay Area’s housing market. Today I saw real estate market info from the California Association of Realtor’s chief economist, Leslie Appleton-Young. One of her slides makes plain why the Silicon Valley real estate market is so crazy: our unemployment rate is extremely low, behind only San Francisco (where trying to buy a home is even worse than on the Peninsula or South Bay). Have a look at the data by California metro area:
San Francisco and Silicon Valley unemployment rates
San Francisco and Silicon Valley unemployment rates plus all of California by metro area
As you can see, San Francisco has a screaming hot jobs market with only 3.4% unemployment. The San Jose metro area is only slightly cooler at 4.1%. (Unfortunately there are no “Cliff Notes” to tell where the San Francisco Metro Area ends and where the San Jose Metro Area begins – so I cannot tell if San Mateo County is lumped in with Santa Clara County to the south or San Francisco County and City to the north.)
With all this hiring going on, it’s no wonder that a frequent topic of conversation is Silicon Valley traffic patterns and congestion. A few years ago, the rush hour traffic in the morning went from about 6:30 or 7am to 9am, and the evening commute times were about 4 to 7pm. Today both are extended. I find that Highway 85 in the “west valley” areas along Los Gatos, Saratoga, and Cupertino tends to still be pretty thick with cars even at 10am. The return trip from Palo Alto (where I have some doctors at Stanford Hospital) can be sluggish as early as 3pm.
Worsening traffic from low Silicon Valley unemployment rates means that Silicon Valley real estate is even more expensive than usual for close-in locations. Many San Jose area commuters spend an hour driving into work in the morning and 75 or 90 minutes driving home in the evening (for reasons I don’t understand, the evening commute is quite a bit worse than the morning one). That translates to home prices being much, much more expensive than you’d expect in places like Mountain View, Sunnyvale and Santa Clara. For a better quality of life, Silicon Valley employees will often pay dearly to get that shorter commute. If they can get the smaller commute and great public schools, the communities are the most expensive places to live, as is the case in Palo Alto, Los Altos and Los Altos Hills in particular.
Find Silicon Valley real estate and homes for sale in “close in” locations below
Just read an interesting article on how important tech workers feel it is to live in Silicon Valley: Is Silicon Valley Still the Top Tech Hub? This piece reports on a survey done by Indeed Prime which found that many high tech workers do not believe that living in Silicon Valley is all that important for their careers. For all those polled, 68.3% said that living here is either “not that important” or “not at all important.”
I can almost hear local old timers saying “great, maybe we’ll get our calm environment back if they all go to Seattle, New York, or Austin!”
So what is happening? High housing costs do scare people off of living in the San Francisco Bay Area, and San Jose and nearby specifically. Recently, my 26 year old son (in high tech also – he’s a video game designer currently getting a master’s in that field) informed me that many of his old high school friends don’t feel like they’ll ever be able to afford to live here. And they are all well employed. I can see that, and it’s terribly sad.
But I don’t think you can blame the lack of attachment by tech workers generally to Silicon Valley real estate prices, because the attachment to living in the Santa Clara Valley is not uniform across all types of tech workers.
Further into this article, there’s a breakdown by age – and here it gets interesting. Many younger high tech folks find value in being here, but the interest wanes as the workers age (that could be due to housing and the availability of other alternative locations for work).
For those thinking that having a job in Silicon Valley is important or very important, the generational breakdown is as follows:
Gen X 32.5%
Baby Boomers 10.2%
Will we see a trend toward a younger, more transient population here? Time will tell. But the other places luring Silicon Valley talent share some of our same challenges. Alternative locations for high tech careers include New York (not known for being inexpensive) and Boston (also fairly pricey) as well as more affordable locations such as Austin (where prices have been going through the roof), Seattle (also seeing extremely steep appreciation in real estate costs), Washington DC, Atlanta, and Demver.
It is a very interesting bit of research and I encourage my readers to check it out.