I could use some insight from someone with real estate knowledge. I recently graduated from college with a degree in electrical engineering and landed a job with a major tech company based in Silicon Valley. I couldn’t be more excited about it.
That was until my close friend was telling me about how hard it would be to find affordable housing. My starting salary is pretty competitive but I also have considerable loans to repay, so I won’t be able to pocket much of my income or use it for expensive housing.
He was saying that real estate values have done nothing but rise for years and encouraged me to do some research. He said Bay Area prices were some of the highest in the world, right up there with Sydney, Australia and Hong Kong, China. Is that really a fair comparison?
Congratulations! Earning your bachelor’s degree is no trivial achievement. Inc. recently published a compelling article highlighting how a STEM degree can be valuable to virtually any industry. Graduates who focused their collegiate studies on science, technology, engineering, and/or mathematics (STEM) are prized among the world’s most competitive employers. That being said, you also entered the workforce at the height of global competitiveness. Sharon Florentine at CIO reported as much two years ago when she cautioned graduates to prepare for a cutthroat job market. Managing to land on your feet despite that reality is certainly something to celebrate.
All that being said, your friend’s comparison isn’t far from the truth. Living affordably in the San Francisco Bay Area is likely to be extremely difficult if not impossible. To be clear, however, specific comparisons are hard to validate given the variability in published results. For instance, Alison Millington at Business Insider publicized a list of the top ten most expensive cities in the world, which included multiple American cities, all of which were in California. Try contrasting that with the shortlist composed by James Chrisman at Thrillist. He doesn’t cite a single American city in his top ten and explains that the declining value of the US dollar is primarily to blame. You will notice, however, that both Sydney, Australia and Hong Kong, China were referenced by both writers.
Whether or not the cost of living in San Francisco is directly comparable to the cost of living in Sydney, Australia is almost irrelevant. What matters is that they are both unreasonably expensive cities for the grand majority of their residents. The consequences of that shared reality are similar if not identical for anyone of little means. In places like Sydney, Australia, that meant larger shares of people have had to consider home loans from Bankwest to compensate for the skyrocketing real estate prices. Only more recently have things in that market begun to turn around. You also have to remember that those real estate values were increasing for well over a decade. In other words, it wasn’t something you could easily wait out.
Expect to find a similar story in San Francisco’s Bay Area. Mike Moffitt at SFGate already did you the favor of disclosing exactly how much you should earn to live comfortably in San Francisco. As it turns out, he refers to a study that reveals San Francisco is, indeed, the most expensive American city–even more so than New York and Washington, DC. Fortunately, Peter Jacobs at Business Insider declared that STEM majors earn the most money after graduation. Your competitive starting salary combined with greater earning potential gives you a distinct advantage. Combine that with patience, parsimony, and prudent saving. Time will fly by faster than you think and before you know it, you’ll be in a much better position.