Down & Out In Silicon Valley - Like striking it rich, being 'almost homeless' can happen to anyone

sfgate.com/San Francisco Chronicle ^ | Sunday, October 13, 2002 | Stephanie Salter, Insight Staff Writer

[American Preservative]

Many middle-class people joke about being "one paycheck away from the street." This is the story of a couple who've slammed hard into that reality.

Over the past 18 months, they've gone from his six-figure salary and life in a tony townhouse apartment complex in Silicon Valley to collecting aluminum cans and sleeping in a 28-foot-long recreational vehicle in a parking lot behind the husband's old office building. Once distracted by VCRs and mega- cable, they now watch local television on an old black-and-white set, stand in line at a public food bank for groceries and do their laundry with a garden hose.

[irv]

Most here believe that bad fortune cannot happen to them, I hope they are right.

Wrong. We just see a difference between bad fortune and bad planning.

I've been laid off 4 times in the past ten years. The most recent time was 7 months ago. My wife lost her job a little before that. Don't tell me I don't know about "bad fortune!"

(for what it's worth, I'm working again)

[Arioch7]

Thats what I am talking about! Social Darwinism in action. Look at Venuzuela or the African Continent for that matter. Extremely rich natural resources but abject poverty all around. Pathetic.

[dogbyte12]

You can live in a $2300 place in the Valley without living extravagantly.

To give folks from elsewhere, an idea,.... a few years ago, the median price for a condo in San Francisco was $440,000... median price. I got out of the bay area when my 1 bedroom place climbed steadily from $750 to $985 in a few years.... I moved into the apartment in 1992 at $750, as of today, it is going for $1950, 10 years later. This is for 1,100 square feet. People can get over their heads out there. But they do have themselves mostly to blame.

[GOP_1900AD]

So I've got sympathy for anyone whose life has been affected due to the economic downturn, for our own income level has gone down by about 40% Vs. the boom times. That said, there are a number of unexplained incongruities in this story. If they were, as claimed, not living extravagantly and with 150K / year, then they should have been able to rapidly pay down whatever mortgage they had unless they bought quite recently. Here in the Bay Area it is still possible to buy places in outlying areas (but, I must admit, with a lousy commute) that would have allowed even a recent new home buyer to do this. The other thing I do not understand is that if as claimed this guy went from paying the bills to down and out so fast, then either he had lots of unpaid consumer debt or prematurely had his wife at home not working (I hate to say it but a single income here is very difficult to get by on at least initially - many folks do the dual income thing and put off having kids for a while...). Something just doesn't jibe with this story. Here is what I know about people who have had this happen. Typically:

1. They were not aggressive about paying down student loans.

2. In spite of claims to the contrary, they lived beyond their means.

3. They insisted on living in a house/condo that was bigger than they could afford, or, in a neighborhood that was very overpriced.

4. They saved, however, at the same time, did things like refinanced to support home improvements that they could not otherwise afford.

5. They threw away money on vacations or vices.

Look, I do not wish this on anyone. That said, when we bought our house, we purposely limited our upper end of cost (much to the chagrin of our realtor and loan officer!) and stuck to it. We bought a house that was too small and needed some work. It was in an area that didn't have either the worst or best reputation but was clearly up and coming. Because of the downturn we've had to defer improvements. It is a bit of a downer sometimes to look at our very spartan lifestyle. All of that said, we are well ahead of our payment schedule against the loan principle and continue to slowly accumulate assets. Do things suck? You bet! Are we a paycheck (or even many paychecks) away from disasater? No! It CAN be done! But it takes something that most moderns have forgotten - self control!

[TC Rider]

C&C - The Grasshoppers

[GOP_1900AD]

I've been planning for it for the past 10 years. How about you?

[Euro-American Scum]

This can't be happening. The Democrats run the state and the Bay Area. Oh wait, this must all be Bush's fault somehow.

Either that or. . .

a. Evil straight white males
b. The mean-spirited Republican Congress
c. Greedy Enron corporate executive
d. Conservative hate radio

Gotta be one of those.

[GOP_1900AD]

I started out in SV working in the old HP sheetmetal shop (e.g. pre outsourcing) and am damn glad I did. Over 20 years later I (still... barely!...) manage a group at a high tech firm that has shed a few "moltings" and will no doubt go through a few more. Having a memory (unlike the minions who arrived since about '91 or so) of past boom-bust cycles I always viewed each job as a game to see how far I could climb and how long of a run it would be. The insane job hopping thing never appealed to me and I only did it rarely and under duress for purely strategic reasons and only if the offer was great and / or the alternatives too painful. Not to inflate to old ego but I've got a damn thick skin now and indeed assume that I will get laid off any day at any given time. I have lived and continue to live well below my means and continue to invest as I have for nearly 30 years in a classic investment pyramid. The dot commers looked askance at my old cars a few years ago but now they are turning in theirs for cash. None of this is class envy, more of a bemused, detached chuckle about all the idiots who bought into the whole 3rd way, utopian, "good times forever" BS that came into vogue... hmmmm... right after Slick started to debase the Oval Office. Coincidence?....

[GOP_1900AD]

Very interesting observation. The way things are going, the bank will soon be coming TO ME and will offer to PAY ME to renegotiate my mortgage (whatever is still left of it!... another KEY fact...). I am more than glad that I do not work in a bank! And that I have (small but) highly productive land. We are close to the point where every default will become more and more costly for THE LENDER!

[GOP_1900AD]

Why are your expenses 6000 per month?

[PFKEY]

$2300 a month isn't living extravagently?

Actually, I went out to San Jose a few years back for a job interview and a little look around and that price is not extravagent. You'd be lucky to find an average 2 BR Apt for much under that price.

Boy O boy, am I glad I didn't accept the offer.

I'd most likely still be employed had I moved out there as the company I interviewed with was/is not a dot.com. But, I wasn't impressed with the area or should I say the crowds, bad politics, and the overall quality of life.

[Snerfling]

I continue to use the SV as a barometer for housing prices in SoCal. As long as they're equal/higher than SoCal, home prices are not going anywhere soon down here now that LA is back to having the strongest economy in the state/country.

I grew up in Saratoga and my parents still live in the house they bought in 1970. My brother works in the biz and has a house in SJ right on the LG border. Up until around 1991, housing was more expensive in SoCal than in the BayArea - then the Net explosion hit around '94.

Now, we're slowly but surely getting back to normal - Beverly Hills/Newport Beach are all beginning to price out higher than Atherton/Woodside at the high-end, while Palos Verdes/Manhattan Beach are moving ahead of Saratoga/Los Gatos on the medium/high-end.

Based on my experiences during the great LA aerospace meltdown of the 90s, I was suggesting last year that they should sell their house while it was still at the peak. Having been in the Valley since 1960, my dad has seen many ups/downs - he thought any downturn would only be temporary. But being in the high-tech business myself, I was telling him that this was a long-term event - more like 5-7 years. (It took LA 10 years to work out its downturn.)

Last week we were talking on the phone and he's starting to come around to my POV. He's long retired, so none of this really effects him, but he's still in contact with friends in the business (and of course my bro). He says it's finally starting to sink in with everyone that this time it IS different - it's not cyclical, but structural. That is, IT spending is not going to automatically pick-up as the economy improves.

My other brother was down visiting a few weeks ago from SF and was thinking of moving. He's single so he can still get up and go.

[speekinout]

Geez, 75k in my area of flyover country will get you a comfortable existance.

Yep. I have relatives in flyover country happy on half that. I picked that number because it is half of what the SV dwellers think they need. They really don't. SV has had booms and busts before, and will again.
Both the booms and busts are temporary, and IMO most of the people in trouble are the ones who assumed that the latest boom was permanent.

[CounterCounterCulture]

a. Evil straight white males
b. The mean-spirited Republican Congress
c. Greedy Enron corporate executive
d. Conservative hate radio

In an indoctrinated leftist's viewpoint, A = B = C = D

Hate to post and run now...gotta feed some old people dog food.

[potlatch]

Most here believe that bad fortune cannot happen to them, I hope they are right.

Strange - must be nice to feel that way! I spend my life worrying and praying for my children because I KNOW bad things can happen.

[GOP_1900AD]

My folks are on the S'vale - Cupertino border, paid it off about 20 years ago, and proceeded to do improvements with cash. Both of them did something quite unusual and worked in start ups until well into their 60s then cashed out just before each place respectively melted down. In truth, all work they did since paying off the house was to pad the retirement plan (thankfully not just securities but a classic investment pyramid built on a base of low risk low yield funds) and improve the house prior to the "great escape." Along the way, each was laid off multiple times. (BTW - My dad grew up in a classic automotive industry family and saw gramps out for both temporary layoffs, unheard of today unless you count forced vacation, and strikes, including, I might add, a couple after he took a pay cut or face a permanent lay off during the Great Depression! Gramma had to go work in low end retail during some of these times and so as you might imagine my dad had his share of BBQ dinners cuz that was Gramps' menu!). Now they are scoping out places in the "wine belt" of the Sierra foothills, just above the tule fog and below the snow. They may have a bit less than planned but since they worked longer than planned I supposed it all works out in the end. They led by example and I am forever greatful for that. If I am half as successful as they were I will be an even happier camper than I am. Heck, my mom just went back to work as a teacher at a private cram school just for kicks! My dad's getting a kick out of volunteering with kids who want to learn about space technology and high tech and having a blast. Hard work is a way of life... and don't anyone forget it.

[Cvengr]

Very common occurance in the Bay Area. Upper level managers now figure this into their salary scheme. If they are worth $80K, add in another $30K for savings. Be prepared for a 1yr on 1 yr off schedule, and if you last 5 yrs between layoffs, corporate swaps, you're lucky. When they were making a $150K salary, 70K should've gone into investment with a 48K living salary, especially with both husband and wife working.

RV is a good way to go but the Bay area has remarkably few locations for RV parks for the indigent. Try the desert., North or south, Hi or low.

[speekinout]

Let me tell you a story - as I've said before, I have moved in and out of CA (both LA and SV) as the booms and busts occurred.
My first move to LA happened at the end of one of the Aerospace busts. I hired a guy to clean my apt. He was an aerospace engineer who had lost his job, and he bought a vacuum cleaner and some cleaning supplies and hired himself out as a house cleaner. He said it kept him solvent.
I left at the end of that short-lived boom.
I went back at the beginning of the next boom, several years later, and just as a long shot, called the same guy to see if he was still cleaning apts, houses, etc. Well, sort of. He had a rather large business providing cleaning services to homes and offices. He said it was recession-proof, and he was making more money than he ever did as an engineer.

It's called "thinking outside the box". Sometimes things don't go exactly as you planned, but there are alternatives, some of which can be better than the original plan.

[UnBlinkingEye]

Why are your expenses 6000 per month?

They were around $6,000 a month...

$2,500 mortgage

$885 for two car payments

$240 for car insurance, teenage driver impact

$500 monthly phone bill due to telecommuting

$300 utility bill, power, water, sewer

$50 cable modem

$35 cable tv

$70 Dish network

$1,000 - $1,200 feeding my family of five, two teenagers and one to four of their friends.

$500-$1500 for clothes, misc repairs, entertainment, legal bills etc. add $600 for credit card payments and we break through the $6,000 dollar level.

When you are taking home $7,500 to $9,000 a month this level of expense does not seem unreasonable, when your income is a quarter, or less, of what you have been earning the worm turns very quickly.

[UnBlinkingEye]

I've been laid off 4 times in the past ten years. The most recent time was 7 months ago. My wife lost her job a little before that. Don't tell me I don't know about "bad fortune!"

I don't think I did tell you what you know about anything.

(for what it's worth, I'm working again)

Good for you!

What kind of work do you do?