Five years after the Great Recession officially ended, the California economy looks like a patchwork quilt. In the Bay Area, the tech boom has driven the unemployment rate down – and housing prices up.
“Things were good,” Grow says. “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.”
Grow is your classic San Francisco techie – smart, aggressive, and 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, and got involved in a few start-ups. He did okay. Then, the recession struck and the venture capital dried up. He ate ramen, or ordered off the McDonald’s Dollar Menu.
“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,” he says
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, Grow lives in San Francisco’s signature residential high-rise – the 58-story Millennium Tower – in the city’s booming SoMa neighborhood. The Millennium’s average unit sells for nearly $2 million.
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-story Salesforce Tower under construction across the street from Grow. It’s named after the tech giant that’s signed on to rent half of it.
“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,” Grow says.
“We’re almost doing triple the national average in terms of recent job growth,” says
Stephen Levy, with the Center for Continuing Study, of the California economy.
“And it’s almost all driven by tech,” Levy adds, “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, “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,” Levy says.
Lorraine Nessel and Joann Avila have rented a two-bedroom home in West Oakland for six years, and are being squeezed by the housing market. Both earn a solid living – Avila’s a union painter and Nessel is a ride-share driver and also 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 Avila’s ’54 Chevy. She says they’ve worked to make their neighborhood better. “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. Nessel says she broke down in tears. “This is where I started my business,” she says. “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. “We’re paying $150 more for a much smaller space and a much longer commute,” Nessel says.
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.