# What are people doing with all these massively overpriced houses (shacks) in Silicon Valley? **URL:** \ **Category:** In My Humble Opinion\ **Created:** [July 12, 2017, 11:52pm UTC](https://boards.straightdope.com/t/what-are-people-doing-with-all-these-massively-overpriced-houses-shacks-in-silicon-valley/791140 "2017-07-12T23:52:22Z")\ **Posts on this page:** 20\ **Page:** 2
**Author:** ![Doug\_K](https://avatars.discourse-cdn.com/v4/letter/d/b5ac83/32.png) [@Doug\_K](https://boards.straightdope.com/u/Doug_K)\ **Post date:** [July 13, 2017, 1:20pm UTC](https://boards.straightdope.com/t/what-are-people-doing-with-all-these-massively-overpriced-houses-shacks-in-silicon-valley/791140/21 "2017-07-13T13:20:41Z")
> [@Wesley\_Clark](#): > > I’ve heard Chinese real estate investors are becoming common in the US, because they know the economic prospects, health and environment in the US are much better than in China. Investing in real estate is a way to get their kids into a better country. > > But why go to Silicon valley? You can buy a dilapidated shack in the midwest for $20,000. You can buy a decent home in a decent neighborhood for 200-300k in the midwest. That will get you into the US, you don’t need to spend $1-2 million in Silicon Valley. 200-300K? Try 40-65 k. I live squarely in the midwest. 150k will get you a near mansion. If you don’t mind a little work and 4-5 k in improvements you can easily get a decent home for around 30k. We paid 31k for our house a little less than 2 years ago. The most expensive house in the town where I lived 2 years ago sold for 500K, and most of the people agreed that the owners were idiots to pay that much, because the house had been sitting on the market for several years with no lookers. ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [July 13, 2017, 1:47pm UTC](https://boards.straightdope.com/t/what-are-people-doing-with-all-these-massively-overpriced-houses-shacks-in-silicon-valley/791140/22 "2017-07-13T13:47:06Z")
> [@Shalmanese](#): > > 1. You can’t tear them down and rebuild because the neighbourhood associations are crazy restrictive. Going through the permitting process is a nightmare so most of them are frozen in amber. Doing any kind of minor modification to the house that has “environmental impact” triggers CEQA which requires you to notify anyone who could be potentially impacted and a single person complaining is enough to trigger a suit. There are people who routinely file CEQA against any modifications in their neighbourhood. This is largely not true. Houses are torn down (we say “scraped”) all the time. The trick is, you often don’t want to tear down the house because then you are dealing with a “new build” and all the new code applies. If you can meet the requirements for a “remodel” instead, you don’t have to do things like put in fire sprinklers. But often those rules are superficial, and what you are doing is making a brand new house even though you technically didn’t. As an example, you will need to “save” a certain amount of the original walls to make it a remodel. But you can cover those walls with new siding material, as long as the old stuff is still there, underneath. Crazy. ---
**Author:** ![Gary\_T](https://avatars.discourse-cdn.com/v4/letter/g/3ec8ea/32.png) [@Gary\_T](https://boards.straightdope.com/u/Gary_T)\ **Post date:** [July 13, 2017, 2:15pm UTC](https://boards.straightdope.com/t/what-are-people-doing-with-all-these-massively-overpriced-houses-shacks-in-silicon-valley/791140/23 "2017-07-13T14:15:51Z")
> [@Shagnasty](#): > > …many houses in Silicon Valley…would be regarded as …dilapidated shacks in some cases. > [Silicon Valley real estate prices leap: new bidding wars](http://www.mercurynews.com/2017/07/11/bay-areas-dizzy-real-estate-market-over-asking-bidding-wars-escalate/?utm_source=fark&utm_medium=website&utm_content=link&ICID=ref_fark) > > 1. Do people actually intend to live in the houses like the ones in the photos as is… You think the houses in the photos are dilapidated shacks? You wonder if folks could live in them? Wow. Just wow. ---
**Author:** ![Chefguy](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/chefguy/32/138_2.png) [@Chefguy](https://boards.straightdope.com/u/Chefguy)\ **Post date:** [July 13, 2017, 2:17pm UTC](https://boards.straightdope.com/t/what-are-people-doing-with-all-these-massively-overpriced-houses-shacks-in-silicon-valley/791140/24 "2017-07-13T14:17:45Z")
The value of the house is usually irrelevant in areas like that. You’re paying for the land. Our very small bungalow is presently valued at over $500K because it’s becoming more desirable to live in Portland. The value of the house itself has not changed much; it’s just that the location has become more valuable, especially to developers. ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [July 13, 2017, 2:22pm UTC](https://boards.straightdope.com/t/what-are-people-doing-with-all-these-massively-overpriced-houses-shacks-in-silicon-valley/791140/25 "2017-07-13T14:22:04Z")
> [@Chefguy](#): > > The value of the house is usually irrelevant in areas like that. You’re paying for the land. Our very small bungalow is presently valued at over $500K because it’s becoming more desirable to live in Portland. The value of the house itself has not changed much; it’s just that the location has become more valuable, especially to developers. Yes, but it’s still funny for us folks in the Bay Area to watch shows like _Fixer Upper_, and see what it costs to remodel a home in Texas vs here. Prices are easily 1/2 to 1/3 the cost. ---
**Author:** ![wguy123](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/wguy123/32/3161_2.png) [@wguy123](https://boards.straightdope.com/u/wguy123)\ **Post date:** [July 13, 2017, 2:25pm UTC](https://boards.straightdope.com/t/what-are-people-doing-with-all-these-massively-overpriced-houses-shacks-in-silicon-valley/791140/26 "2017-07-13T14:25:53Z")
What are they doing with them? They are selling them when they retire at 50 and moving up to my part of the country and buying a $500K beautiful house with 5 acres and then banking the rest of the money. See Greg Brown’s “Boomtown” for a more thorough explanation. 😃 ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [July 13, 2017, 3:02pm UTC](https://boards.straightdope.com/t/what-are-people-doing-with-all-these-massively-overpriced-houses-shacks-in-silicon-valley/791140/27 "2017-07-13T15:02:48Z")
There was an article in the paper the other day (it might actually have been the NYT), and it started off by saying: Silicon Valley is the only place in the world that isn’t trying to be Silicon Valley. Or something along those lines. It was actually a bit of a negative article, talking about how it’s a mistake to be building these corporate headquarters like what Apple and Google are doing. Anyway, I thought that was a clever and interesting line as it’s certainly true that Silicon Valley is organic in nature-- it really just happened due to a lot of different factors and no one was really "behind’ it becoming what it is. ---
**Author:** ![jasg](https://avatars.discourse-cdn.com/v4/letter/j/f0a364/32.png) [@jasg](https://boards.straightdope.com/u/jasg)\ **Post date:** [July 13, 2017, 3:44pm UTC](https://boards.straightdope.com/t/what-are-people-doing-with-all-these-massively-overpriced-houses-shacks-in-silicon-valley/791140/28 "2017-07-13T15:44:15Z")
> [@Slash1972](#): > > How can you not afford to move if you’ve just sold your house for 2.1 million?? The appraised value for taxes is $210,000 (up from $126,000 in 2001). Taxes are less than $300/month. When it is sold and you purchase a different home, both go up. A similar home, 3 houses down the street sold in 2015 for 2.05M - taxes are now $2,000/month for that home. Thanks Prop 13 ---
**Author:** ![ReticulatingSplines](https://avatars.discourse-cdn.com/v4/letter/r/e274bd/32.png) [@ReticulatingSplines](https://boards.straightdope.com/u/ReticulatingSplines)\ **Post date:** [July 13, 2017, 4:06pm UTC](https://boards.straightdope.com/t/what-are-people-doing-with-all-these-massively-overpriced-houses-shacks-in-silicon-valley/791140/29 "2017-07-13T16:06:34Z")
I wouldn’t think of it as “so many people” spending that much on (relatively) crappy homes. There is a such a chronic undersupply here that a small number of rich people can sustain the market. Because of Prop 13 + rent control, nobody is moving. I know a lot of middle-class people who are trying to leave and go to Portland or Seattle. Maybe Austin. ---
**Author:** ![Bone](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/bone/32/407_2.png) [@Bone](https://boards.straightdope.com/u/Bone)\ **Post date:** [July 13, 2017, 7:23pm UTC](https://boards.straightdope.com/t/what-are-people-doing-with-all-these-massively-overpriced-houses-shacks-in-silicon-valley/791140/30 "2017-07-13T19:23:13Z")
> [@John\_Mace](#): > > This is largely not true. Houses are torn down (we say “scraped”) all the time. The trick is, you often don’t want to tear down the house because then you are dealing with a “new build” and all the new code applies. If you can meet the requirements for a “remodel” instead, you don’t have to do things like put in fire sprinklers. But often those rules are superficial, and what you are doing is making a brand new house even though you technically didn’t. > > As an example, you will need to “save” a certain amount of the original walls to make it a remodel. But you can cover those walls with new siding material, as long as the old stuff is still there, underneath. Crazy. I have relatives that kept a door frame. So dumb the hoops that need to be jumped through. > [@wguy123](#): > > What are they doing with them? They are selling them when they retire at 50 and moving up to my part of the country and buying a $500K beautiful house with 5 acres and then banking the rest of the money. > > See Greg Brown’s “Boomtown” for a more thorough explanation. 😃 This is my plan, except instead of 5 acres I want 50. > [@Shagnasty](#): > > Yes, they are pretty shitty, small houses by general U.S. standards. The first one is small but seems to be maintained well. The second one is just pitiful and absurd for the price. It would be worth less than 10% of the price in most of the U.S. > > I am not sure where you live but here is what houses look like in places like Dallas, TX which isn’t struggling at all itself either. Here is what you get for a half to a quarter of the price in places like that. > > [https://www.bizjournals.com/dallas/news/2017/02/14/see-what-a-500k-1m-home-looks-like-in-dallas.html#g9](https://www.bizjournals.com/dallas/news/2017/02/14/see-what-a-500k-1m-home-looks-like-in-dallas.html#g9) The problem with this, is that who wants to live in Dallas? I mean, there’s nothing wrong with Dallas and I’m sure it’s a fine place, but it doesn’t compare to the Bay Area, not even close in my totally subjective view. And houses selling for over asking price is not indicative of anything per se. Certain pricing strategy will have sellers list their property for significantly below market in order to generate multiple bids, bidding wars. ---
**Author:** ![Lemur866](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/lemur866/32/434_2.png) [@Lemur866](https://boards.straightdope.com/u/Lemur866)\ **Post date:** [July 13, 2017, 7:35pm UTC](https://boards.straightdope.com/t/what-are-people-doing-with-all-these-massively-overpriced-houses-shacks-in-silicon-valley/791140/31 "2017-07-13T19:35:48Z")
The political impossibility of building dense housing is what drives the insanity in the Bay Area. At least here in Seattle they’re building high-rises as fast as possible to stuff in all the Amazon employees. ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [July 13, 2017, 7:43pm UTC](https://boards.straightdope.com/t/what-are-people-doing-with-all-these-massively-overpriced-houses-shacks-in-silicon-valley/791140/32 "2017-07-13T19:43:02Z")
> [@Lemur866](#): > > The political impossibility of building dense housing is what drives the insanity in the Bay Area. Can you elaborate? My first thought is that’s nonsense, but maybe I’m misunderstanding you. Also, clarify if you’re talking about SF or the SF Bay Area. The latter is huuuuuuuuge, with wildly different zoning rules depending on where you are. ---
**Author:** ![Lurking\_Quahog](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/lurking_quahog/32/21274_2.png) [@Lurking\_Quahog](https://boards.straightdope.com/u/Lurking_Quahog)\ **Post date:** [July 13, 2017, 7:53pm UTC](https://boards.straightdope.com/t/what-are-people-doing-with-all-these-massively-overpriced-houses-shacks-in-silicon-valley/791140/33 "2017-07-13T19:53:37Z")
Where do all the people who work lower paying jobs in these towns live? Do they all commute in from more affordable cities? I mean, if you’re working at a convenience store or a Subway or something, is it really worth the hassle to deal with the drive and the traffic to work at a lower wage job? ---
**Author:** ![Infovore](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/infovore/32/420_2.png) [@Infovore](https://boards.straightdope.com/u/Infovore)\ **Post date:** [July 13, 2017, 8:03pm UTC](https://boards.straightdope.com/t/what-are-people-doing-with-all-these-massively-overpriced-houses-shacks-in-silicon-valley/791140/34 "2017-07-13T20:03:59Z")
> [@teela\_brown](#): > > That spaceship campus (official name: Apple Park) is about to start moving people in. Apple is all over, as well, but 12,000 people will be working at Apple Park. Homes within driving distance are greatly in demand, for both that and the above-mentioned schools. That means sky-high prices for Cupertino and Sunnyvale, and increasingly, San Jose and points south. We were driving by the Spaceship a month or so ago (spouse works at Apple) and I noticed an apartment complex right next door so I Googled it to see what the rents were. You can get an 875-square-foot 1-bedroom apartment with a parking space (though residents on Yelp were complaining that you often have to park far away from your apartment) for the low-low price of only $5,200 a month. To rent. An 800-square-foot, 1-bedroom apartment. It’s crazy around here. I’m just glad we bought our place in 1999. Our plan is to keep it until we retire, then move someplace cheaper and buy something outright that will certainly be bigger and nicer than what we have now. ---
**Author:** ![ReticulatingSplines](https://avatars.discourse-cdn.com/v4/letter/r/e274bd/32.png) [@ReticulatingSplines](https://boards.straightdope.com/u/ReticulatingSplines)\ **Post date:** [July 13, 2017, 8:07pm UTC](https://boards.straightdope.com/t/what-are-people-doing-with-all-these-massively-overpriced-houses-shacks-in-silicon-valley/791140/35 "2017-07-13T20:07:49Z")
> [@Lurking\_Quahog](#): > > Where do all the people who work lower paying jobs in these towns live? Do they all commute in from more affordable cities? I mean, if you’re working at a convenience store or a Subway or something, is it really worth the hassle to deal with the drive and the traffic to work at a lower wage job? They either commute in from cheaper suburbs or they live in the city with like five roommates (no joke). Or if they’ve lived in SF a long time, they may be living in a rent-controlled apartment for which they are paying way under market rate. ---
**Author:** ![Tamerlane](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/tamerlane/32/7602_2.png) [@Tamerlane](https://boards.straightdope.com/u/Tamerlane)\ **Post date:** [July 13, 2017, 8:11pm UTC](https://boards.straightdope.com/t/what-are-people-doing-with-all-these-massively-overpriced-houses-shacks-in-silicon-valley/791140/36 "2017-07-13T20:11:48Z")
> [@Shalmanese](#): > > 1. You don’t need $500K salary to buy a $2M house. The commonly accepted 30% rule of thumb is meant to apply to areas where the housing market isn’t so crazy distorted. But yes, a lot of people living there are crazy house poor and have dumped everything they can into a small plot of land. Yeah, it is to laugh. Last study I saw in 2014 said over 50% of Bay Area residents paid more than 30% of their monthly income on housing. More than 20% paid more than _50% of their monthly income_. House poor is quite common in the Bay Area, where you have the phenomenon of people making six-figure incomes feeling locked out of the housing market and people making less than six figures ( but still good money ) struggling to afford places near where they work. I love the Bay Area in a lot of ways, but nobody but the 1%'ers loves the real estate market out here. ---
**Author:** ![teela\_brown](https://avatars.discourse-cdn.com/v4/letter/t/d9b06d/32.png) [@teela\_brown](https://boards.straightdope.com/u/teela_brown)\ **Post date:** [July 13, 2017, 8:25pm UTC](https://boards.straightdope.com/t/what-are-people-doing-with-all-these-massively-overpriced-houses-shacks-in-silicon-valley/791140/37 "2017-07-13T20:25:57Z")
> [@Infovore](#): > > We were driving by the Spaceship a month or so ago (spouse works at Apple) and I noticed an apartment complex right next door so I Googled it to see what the rents were. You can get an 875-square-foot 1-bedroom apartment with a parking space (though residents on Yelp were complaining that you often have to park far away from your apartment) for the low-low price of only $5,200 a month. > > To rent. > > An 800-square-foot, 1-bedroom apartment. . . . I bet you’re talking about those “Hamptons” apartments. The owners wouldn’t sell, and now the site is kind of embedded in the new Apple Park campus. I wondered how much rent they would eventually command. No doubt they’ll be popular with Apple bigwigs who want to walk to work. ---
**Author:** ![Infovore](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/infovore/32/420_2.png) [@Infovore](https://boards.straightdope.com/u/Infovore)\ **Post date:** [July 13, 2017, 8:51pm UTC](https://boards.straightdope.com/t/what-are-people-doing-with-all-these-massively-overpriced-houses-shacks-in-silicon-valley/791140/38 "2017-07-13T20:51:41Z")
> [@teela\_brown](#): > > I bet you’re talking about those “Hamptons” apartments. The owners wouldn’t sell, and now the site is kind of embedded in the new Apple Park campus. I wondered how much rent they would eventually command. No doubt they’ll be popular with Apple bigwigs who want to walk to work. I think so, though I just checked their website and they’re a lot cheaper than what we saw now. Weird. ---
**Author:** ![Scoobysnax](https://avatars.discourse-cdn.com/v4/letter/s/c4cdca/32.png) [@Scoobysnax](https://boards.straightdope.com/u/Scoobysnax)\ **Post date:** [July 13, 2017, 8:57pm UTC](https://boards.straightdope.com/t/what-are-people-doing-with-all-these-massively-overpriced-houses-shacks-in-silicon-valley/791140/39 "2017-07-13T20:57:17Z")
> [@jasg](#): > > The appraised value for taxes is $210,000 (up from $126,000 in 2001). Taxes are less than $300/month. > > When it is sold and you purchase a different home, both go up. A similar home, 3 houses down the street sold in 2015 for 2.05M - taxes are now $2,000/month for that home. > > Thanks Prop 13 For people not familiar with California’s weird property tax rules, under prop 13 your house value for property tax purposes is based on what you paid for the property plus up to 2% annual growth for inflation. Housing prices go up far more that 2% per year in California, so you get the situations where one neighbor is paying 10% of what his neighbor is paying in property taxes. It also means that businesses can hold onto property for decades and still pay early 80s property tax rates. The value of a property is only updated whenever it is sold or transferred. After 10-15 years people tend to get locked into their homes. ---
**Author:** ![Acsenray](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/acsenray/32/4519_2.png) [@Acsenray](https://boards.straightdope.com/u/Acsenray)\ **Post date:** [July 13, 2017, 9:06pm UTC](https://boards.straightdope.com/t/what-are-people-doing-with-all-these-massively-overpriced-houses-shacks-in-silicon-valley/791140/40 "2017-07-13T21:06:14Z")
To summarize: 1. Supply is low, because of geography but also because of restrictions that prevent the replacement of low-density housing with high-density housing. 2. Demand is high: the economy is good, there are jobs that pay tremendously high salaries, and if you are in the tech industry and want to have a future, you want to be where the action is. There are plenty of studies showing that Solicon Valley companies prefer to hire and investors prefer to invest in people who are physically located near them. [Previous page](https://boards.straightdope.com/t/what-are-people-doing-with-all-these-massively-overpriced-houses-shacks-in-silicon-valley/791140.md?page=1) [Next page](https://boards.straightdope.com/t/what-are-people-doing-with-all-these-massively-overpriced-houses-shacks-in-silicon-valley/791140.md?page=3)