[quote=AN][quote=flu]
I don’t think there’s a disagreement on there being a correction in the future. I’m doubting the magnitude of it that some apparently are convinced will happen, just as much as I doubted the magnitude of the correction we experienced here in SD in the areas where demand is generally stronger than other places.
And that cousin doesn’t *need* to live in a 1.8million+ place in Cupertino, he can live just fine in Santa Clara. It’s a tradeoff, that people make more so there than down here.
Regardless, when this new tech bubble does pop, guess who’s going to end up eating shit the most? Yup, retail stock “investors” who either bought these company stocks directly, or are indirectly holding onto them with a mutual fund, like the famous Fidelity Contrafund or OTC fund, that is in just about everyone’s 401k plan.. It won’t be all the employees and insiders of these companies that were given these shares as part of their employment package. Just like how was back in 2000/2001.[/quote]
I won’t predict the depth of the crash because it’s foolish to even try. However, according to the video, Cupertino saw a 70+% rise in 1 year? If that’s true, I think there’s a possibility of a big decline, but who knows. Even at the peak of the bubble, I don’t think places like La Jolla and Del Mar were seeing 70% increase in a year. So, this is uncharted territory. Maybe this is the new normal for bay area and it’s going to be forever expensive like other major cities around the world. Only time will tell. But regardless, if you’re not making millions from the IPO lottery, I don’t see a reason to stay. If you own a home, this is a perfect opportunity to sell your million dollar shack and move to less expensive places like SD, LA, OC and retire.
Then the next question is, at what point do companies will start saying, why are we paying Sr. Engineers $250k in the bay (just so they can afford an average life style) while we can pay 1/3 of that in SD, OC, LA, etc. I don’t know where that tipping point is, but I would assume there has to be a tipping point.
As for your cousin, I find it crazy that you would have to make that kind of tradeoff when you have that big of a windfall. That’s one of the reason why I think it’s unsustainable. It goes back to, if you’re not young (in your 20s) with no kids trying to chase the IPO lottery, this is a perfect opportunity to cash out.
As for who will eat shit the most, I think it’s the young engineers who feel rich with their paper $ who got in a little too late and got greedy and does not cash out. Remember all the .com companies? You can be millionaire one minute and a few months later, you’re back to where you started. Only the lucky few who are founders who sell their company who would make it out big, but they’re the minority, even in the bay. I don’t think the bay area tech crash would bring down the entire economy like the housing crash, since bay area tech is isolated, unlike housing.[/quote]
I agree with everything you say, except the interconnectedness between local markets. For example, high prices in CA have pushed buyers into other markets, pushing up prices there. Suburbs in particular benefit from increasing prices as more and more buyers are forced to look further afield. Let’s also remember that the current frothy market is not confined to SF or even the US. Other markets may have different causes for a bubble that are not connected to tech companies. For example, a favorable tax environment or anonymity. A danger of course is if mayors of other cities see the effect on housing and revenues that is happening in SF and seek to emulate it. The other important point to remember is that lending is not local, so what effects credit in one place can effect it in other places as happened in the last bubble. Some states scarcely saw a blip on the bubble radar, yet the effects of crashing markets in more frothy states especially cities were felt everywhere it terms of credit availability, unemployment, and the effects of a deep recession generally.
While I agree that making precise predictions is a fools past time, I see ample justification for that happy middle ground of hoping for the best yet expecting the worst.
