Fits and Starts: Bay Area Housing Boom Prices Out Some People
Editor's Note: Five years after the Great Recession officially ended, the California economy looks like a patchwork quilt. All this week, we feature a series from our partners at Capital Public Radio and KPCC on how the strength of California’s economic recovery varies depending on where you live. Capital Public Radio’s Ben Adler kicks the series “Fits and Starts” with a look at the Bay Area, where the tech boom has driven the unemployment rate down – and housing prices up.
The recession hit Damon Grow swiftly and very hard.
Damon: “Things were good. And then all of a sudden, I mean, literally it was one day – the mortgage crisis was all over the news. And oh my god, I mean, raising money during that time was just nearly impossible.”
Damon’s your classic San Francisco techie: smart, aggressive, talks as fast as he thinks. He’s an all-or-nothing guy.
He came to the city nearly 20 years ago, at age 19 … got involved in a few start-ups, did okay. Then, the recession struck and the venture capital dried up. He ate ramen, or ordered off the McDonald’s Dollar Menu.
Damon: “I’d go in there and you get a chicken sandwich for a dollar, and then another dollar you get two pies. And that was like my day. It was awesome.”
Finally, he raised a half-million dollars from a Dutch billionaire. His startup blossomed, and as the Bay Area began its economic rebound, Damon cashed out.
Today, he lives in San Francisco’s signature residential high-rise – the 58-story Millennium Tower – in the city’s signature booming SoMa neighborhood. The Millennium’s average unit sold for nearly two million dollars.
It’s hard to hear the construction over the sounds of city life. But new buildings are popping up everywhere. And not just any buildings. Skyscrapers, like the 61-floor Salesforce Tower under construction across the street from Damon. It’s named after the tech giant that’s signed on to rent half of it.
Damon: “These companies are just exploding. Residentials are being built. They’re extremely expensive. But the system supports itself, right? Because if it wouldn’t, it would collapse.” Levy: “We’re almost doing triple the national average in terms of recent job growth...”
That’s Stephen Levy, with the Center for Continuing Study of the California Economy.
Levy: “…and it’s almost all driven by tech – and then the income that comes from tech, and people go out and spend it on restaurants, and cars and other things.”
The latest unemployment rates in each of the nine Bay Area counties are far below the statewide average. But the region risks becoming a victim of its own success. The tech boom has sent housing values soaring: The median Bay Area home price is now well over $600,000. That’s more than twice what it was in the depths of the recession. That’s fine, Levy says, if you already own a home. But if you don’t…
Levy: “There’s a dramatic undersupply – at the time when job growth is just surging. So that puts just rampant upward pressure on prices and rents.” Avila: “I’m Joann Avila… Nessel: “…I’m Lorraine Nessel, and we’re in West Oakland, in our home that we’ve been renting for six years, in our two-bedroom house.”
Lorraine and Joann are being squeezed by the housing market. Both earn solid livings – Joann’s a union painter; Lorraine is a ride-share driver and runs a dog-walking and pet-sitting business.
They love their home, no matter the gunshots they heard again a few nights ago, or the car cover just stolen from Joann’s ’54 Chevy. Joann says they’ve worked to make their neighborhood better.
Joann: “I would go outside and sweep the sidewalks, sweep the gutters, and I’d say, hey neighbor, you know, the street sweeper can’t make it past your tree over there – do you mind trimming it?”
Now, like much of the East Bay, West Oakland property values are jumping. A house across the street just sold for nearly $425,000. And last month, their landlord said he’s moving back in – so they must move out. Lorraine says she broke down in tears.
Lorraine: “Because this is where I started my business. This is the first house that I’ve ever lived in. I’ve always had an apartment. This is the first place that has ever felt like a home to me.”
Despite their two solid, middle-class incomes, the best they can afford is a two-bedroom apartment in Richmond – a struggling city north of Berkeley.
Lorraine: “We’re paying $150 more for a much smaller space and a much longer commute.”
That’s the Bay Area’s economic quandary: Explosive growth in both the job market and the housing market. Some cities are building more places to live. The question is whether that additional supply will slow the housing boom down – at least a little bit.