Tech's Effect on Bay Area Home Prices: It's Substantial

Paying for the iPhone at the store - and in the mortgage. As the following article explains, Apple employees living in more expensive homes than most BAy Area residents and the company's success as reflected in employee's wealth as well as that of other tech workers - especially since the iPhone launch in 2007 - has driven up prices across the region. JL

Laura Kusistro reports in the Wall Street Journal:

In San Francisco and San Jose, Apple employees lived in homes with a median value of $1.1 million as of July 2015. The median value for the entire San Jose area was $896,000. In San Francisco it was $757,000, according to Zillow. Homes occupied by Apple workers are appreciating 18% a year, compared with 11% for San Francisco and 12% for San Jose. Since iPhone sales launched in June 2007 the average difference between the median home value of Apple workers (vs other) workers has swelled to 20% from 13%.
Protesters of rising home prices in the San Francisco area blame the technology sector, saying the industry’s high salaries and lavish stock-option awards are fueling the increases.
But they have had little evidence to support such claims, in part because many of the cities with the highest concentrations of technology workers also have limited housing supply and tough rules governing new projects.
Now they have some hard data to chew on.
The San Francisco area is home to a concentration of tech firms, including Apple Inc., AAPL -0.85 % Google parent Alphabet Inc. and Facebook Inc., FB -2.77 % all of which are based near neighborhoods with rising home values.
Home tracker Zillow, at the request of The Wall Street Journal, homed in on employees at Apple, the world’s largest tech firm, studying the neighborhoods where they live to tease out the extent to which tech workers in particular are pushing up home prices.

The findings: Apple workers live in pricier homes than other residents in the region, and home values are rising much faster in neighborhoods where Apple workers live. The gap between homes that Apple employees live in and overall prices in those areas, according to Zillow, has widened since the release of the first iPhone in 2007. The iPhone has helped boost Apple’s stock price and, in tandem, employee compensation.

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Apple is likely not the only technology company to have such an effect, but the labor-intensive nature of the research made it difficult to study several firms. Zillow used census data to track down where workers in the census tract that is dominated by Apple’s Cupertino, Calif., headquarters live—primarily neighborhoods in the San Jose and San Francisco metropolitan areas.
The findings offer a cautionary tale for cities around the U.S. looking to attract more tech jobs, which might also come with the challenge of rising home prices. While high-salaried tech workers might be able to afford homes, people in other industries might have a tough time competing.
“There’s a concern that you’re displacing the current population,” said Svenja Gudell, chief economist at Zillow.
Tech workers can’t be blamed for all of San Francisco’s and San Jose’s housing troubles. Zoning laws and regulatory red tape are key factors as well. Markets with high concentrations of tech workers but with readily available land and more permissive zoning regulations, such as Seattle and Austin, Texas, are seeing more modest price increases.
While home values shot up 11% in San Jose and 14% in San Francisco in the year ending in October, according to real-estate website Trulia, they increased by 10% in Austin and 9% in Seattle.

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Still, for cities that historically have been considered affordable places for middle-class families, the change in home prices as the tech sector flourishes can be dramatic.
In Boulder, Colo., which enjoyed an influx of tech workers over the past five years, home values have risen nearly 38% over the period, according to Trulia. Google is building a campus with room for hundreds of employees in the area, which real-estate agents there said is likely to drive even more price increases.
Paul Stone, an agent in Boulder with real-estate brokerage Redfin, said he has watched local buyers struggle to compete with tech workers coming from California who find prices a bargain and often pay in cash.
Other sellers have decided to pocket a profit from the rise in their homes’ value over the past couple of years and leave the area.
“They realize that the appreciation has been so great that they can sell those places and move onto something different,” he said.
In San Francisco and San Jose, Apple employees lived in homes with a median value of $1.1 million as of July 2015. In comparison, the median home value for the entire San Jose metro area was $896,000. In San Francisco it was $757,000, according to Zillow.
Homes occupied by Apple workers are appreciating at 18% a year, compared with 11% for San Francisco as a whole and 12% for San Jose. Since iPhone sales launched in June 2007, the Zillow analysis found, the average difference between the median home value of Apple workers and San Jose workers has swelled to 20% from 13%.
The region’s housing problems aren’t easily solved. Because homes are so expensive, many young people must rent. That has created a swell in demand for rentals. New construction has failed to keep pace. The result is that rents also have skyrocketed.
In 2011, one in seven people in the Bay Area searched the Redfin website for homes outside the Bay Area, the company said. Now it is one in four.
Many of those people were searching in areas, such as Portland, Ore., and Denver, that traditionally have been affordable for middle-class families, but where concerns about affordability are rising.
On the other hand, the trend bodes well for longtime residents of the neighborhoods Apple employees favor. Their home values are appreciating, leaving them or their heirs with bigger profits when it comes time to sell.
“Some people may be selling because the price is high and also because they think the bubble is going to burst any time because it’s just insane already,” said Sophie Tsang, a Cupertino-based agent at Intero Real Estate Services. “There’s another group of potential sellers that think it’s going to keep going up.”