Definitely true (and your other points, but I didn’t want to quote the whole thing). There are also multiple other (potentially) bad effects. High house prices are not a social good. But of course, the sale of a house at a high price isn’t the thing that makes the price high.
And it’s true that Manhattan is legitimately running into some real physical constraints on population density. But the South Bay sure as hell isn’t. We screwed that up ourselves.
4k is a pretty standard city sized lot. That’s what it is here in Chicago, and I think it’s plenty big. Much bigger and mowing the lawn would be a pain in the ass. I don’t even know what I’d do with a 4k square foot house, much less a 4k square foot garage! That’s huge from my perspective.
Yeah, we figured that out pretty quickly, but it was more fun to pretend we didn’t. 
I don’t have the exact statistic, but I think the average lot size in Santa Clara County is somewhere between 6,000 and 7,000 sq ft. Palo Alto is the northern part of SC County. My own lot, also in that county, is about 6,900 sq ft.
Tiny lots on the order of 3,000 to 4,000 sq ft are not uncommon over on the coast in Santa Cruz and Monterey Counties.
That must be quite some garage, unless you’ve got 4000 sq. ft. confused with 400, which is just about the size of a standard two-car garage. 4K sq. ft. could be a small municipal parking facility.
A lot 40 ft. wide by 100 ft. long would be 4K sq. ft., and that’s a pretty standard city lot. In fact in some areas a 40-ft wide lot would be considered rather big. In urban areas that have become trendy and upscale and new infill is replacing the original small bungalows that had been built on 40-foot lots, I’ve seen houses that look more like freaking giant castles built on such lots and selling for well into the mid 7-figure range.
I know a number of people in the RE industry (agents, mortgages, relocations) who specialize in moving Californians to Texas. Their pitch is simple: No state income tax, sell your home for $1.5 million, buy better in TX for $250k, bank the rest all while working for the same company (in many cases - I talk to the transplants too).
With Austin, Dallas, Houston, and (in cybersecurity at least) San Antonio emerging as tech hubs, this is a very appealing offer to many. And, here at least, it is working as SA has the largest growth in terms of sheer number of people emigrating into any city in America.
Sorry. I should have said “to me, 4000 sq ft is a standard city sized lot.” Of course, it will depend on the city and its density, of course. I just cannot fathom what to do with something like a 4000 sq ft garage. We have two kids and were looking for a house to buy a couple years ago, and my complaint was that all the houses were way too big for me (at 3000 sq ft.) I guess I’m just not used to having houses and lots that big (much less to think about the utility costs of heating and cooling a space that large.)
Now, sure 897 square feet is on the small side for a house (though I’d consider it comfortable for a single person, or couple with no kids), and, given the area, $2.5M doesn’t seem all that nuts to me. But that’s probably because I’ve strolled through Manhattan and out of curiosity looked at real estate postings and it seemed all were of at least that level of insanity, and these were for condos, not single-family detached houses.
Manhattan works because it is small and there is very good public transportation. Same as Hong Kong (not exactly the home of single family homes.) But prices are still sky high.
Before I retired I drove past a whole ton of new apartment/condo complexes in San Jose/Santa Clara, very close to Oracle and Cisco among others. Though some weren’t open, the traffic was still melting down. Housing of the density of New York or Hong Kong is not going to work. There is an initiative to build dense housing near the BART, but that isn’t going to do a lot of good.
Sometimes a place grows faster than housing can keep up. And quality of life counts for something too.
Sort of related. One time I was discussing with a buddy where in the world would be the best place to live.
We came to the conclusion that it was the San Francisco Area
Not too hot, rarely goes below freezing, no tornados, lots of cultural exhibits nearby, on the coast, several world famous parks nearby, (ie Yosemite), fairly scenic, World class airport
About the only downfall we found was the possibility of an Earthquake every 50 or so years and housing costs in addition to its reputation of being a homosexual haven.
Minutes after that discussion, the news mentions that a MAJOR freak blizzard hits the San Francisco area and the entire area is paralyzed.
I then thought so much for San Francisco being the ideal place 
There’s two ways to look at a house
a) A home.
b) A base for your activities.
So I see in this thread what’s probably a lot of ‘house is a home’ people thinking ‘wow! Two and a half million for that tiny thing! Being inside it using it as a home is not going to be anywhere near that amount of value’
Meanwhile, serious ‘base for your activities’ people like me will have thought processes more like ‘eh, screw what it’s like inside. What’s your experience going to be when you step out your front door every morning, that’s the point.’ So what that mega-high price says to me is not so much “why would anyone pay that much for the ability to live inside that tiny house?” as “Palo Alto must be a great place with lots of exciting things going on. I see they’re having trouble squeezing in all the people who want to live in that neighborhood”
Well, a bit more than that. I tend to think of homeownership in those ways. But you can also look at it as an investment. Yeah, $2.5M for 897 sqft may seem super crazy, but if you like the home, the location, and you think there’s an upside to when you sell it, that’s not necessarily a bad place to put a chunk of your investment portfolio into.
When was this? And how big was the blizzard. Because about a half inch of snow would paralyze this place pretty well.
I still have my snow shovels from New Jersey in my shed. If there ever was a snow storm, I could clean up 
by renting them to kids.
I just visited my daughter in Indiana. The houses are dirt cheap, but I stepped out the door for a walk to find it 93 degrees and 70% humidity. Here I can walk comfortably almost every day. So maybe I’m staying.
This is a great point. Appreciate the perspective.
There is another factor here, which is the commute. The person who is going to buy that house probably works pretty close, like in Facebook. You can buy a cheaper house, but at the cost of a massive commute. I struggled with a 45 minute - 1 hour commute for most of 20 years, and it is stressful. And it is worse now. When you pop into work five minutes away, the investment would look pretty good.
Sometime in the early 2000s. Being the news, the blizzard story was probably exaggerated.
It was an expected blizzard not an actual blizzard and it was on February 26, 2011.
There was a possibility of an inch of snow but only a few flurries were actually seen seen.
Before that, the last significant snow was in 1976 (all of one inch)
And yet there is no shortage of people wanting to buy those exiting Californians’ houses.
True that. Location, location, location.
I would be surprised if anyone, even here, called that a blizzard. Anyway, snow near sea level is rare in the SF Bay area, but we have a number of peaks very close by that get snow several times every year. Mt Hamilton, which is near San Jose, is just above 4,000 feet and snow is not at all uncommon. In fact, even at 1,000 feet you’re likely to get a dusting.
That one I remember. We were laughing like hell.
When I lived in SW Louisiana we had a dusting once which also freaked everyone out.
For non-Californians, one odd thing people do here is go to the snow. (Usually Tahoe and its environs.) They buy 4-wheel drive vehicles to go over 80 in the snow.
Where I used to live the snow came to us.