In any company, there are a few key people that run the whole operation and make all the major decisions. Those people decide where the office(s), manufacturing facilities, warehouses, etc. will be located. These people generally work out of the main office so they will locate it in the area where THEY want to live and they aren’t constrained by housing prices. Areas like this also have a “critical mass” of like minded people and are often near research universities and major airports – plus they are just nice places to live as far as cultural amenities, etc. La Jolla fits this bill for the biotech industry. Because there are a lot of biotech firms in La Jolla, there are a lot of biotech jobs in La Jolla. Because there are jobs, there are people that want to live near those jobs. Those people can either buy or rent.
However, MOST people are NOT highly paid biotech workers. The issue is that in our global economy, wages for the average Joe get held down by global competition so the bulk of the population just doesn’t have much in the way of buying power unless they go into horrendous debt. That’s what will cause prices to crash back down. It remains to be seen how that crash affects the lower cost neighborhoods vs. the middle vs. the high exactly.
Personally, I have no problem with “throwing my money away on rent” and will never buy a house again unless the numbers pencil out – period. One thing I really like about renting is that if the neigborhood goes downhill or if you get a new job, you can just move when your lease is up or go month-to-month if you think you might be moving soon. No stress of having to show your house, etc. and no closing costs.
Long term, it appears to me that future generations are going to be making even less money (since most new jobs are in low-pay industries) and having fewer kids – this really increases the downside risk of homeownership, making it even more important to make sure that the price you’re paying is in line with rent.
