Monday, August 14, 2017

Another Financial Bubble?


Financial Bubble Again?

A concern I have heard is that there may be a surplus of office space.  Some have projected a vacancy rate of about 10% in the SF Bay area - higher in some areas than others.  This will only be exacerbated in the Sunnyvale-Cupertino-Mountain View area as much more office space opens up in Central San Jose for companies such as Apple and Google that occupy many buildings in our cities. Will we have a lot of see-through offices?

Another (related) concern is that stock market valuations are very high and we might be in a bubble followed by a crash like the dot-com bust of 2000 or the housing crash of 2007-2008.  This would leave a lot of unfinished buildings in various states.  Sunnyvale has seen this before.

The following chart looks like we are in a 2000 dot-com or 2007 housing bubble again,.  The Standard and Poor's stock index is at 103% of normal.  The only time it was higher was 2000.

S&P stock index between 2000 bubble and 2007 bubble?
https://www.advisorperspectives.com/dshort/updates/2017/08/02/regression-to-trend-another-look-at-long-term-market-performance

Another way to look at the stock market is below.  Again, deja vu of the Dot-Com bubble?



Commercial properties Or maybe the 2007 housing bubble but in commercial real estate?


The above graph is even more impressive when you correct for inflation and find commercial property is above the 2007-2008 real estate value after inflation is factored in.

http://www.rstreet.org/2017/07/24/is-the-real-estate-double-bubble-back/

Are foreign investors in commercial real estate pulling back?  It looks a lot like 2007 only worse because now Asia has joined the "festivities".  The bigger the boom, the bigger the bust.


The next graph shows SF Bay Area housing affordability by county.  Since housing affordability (which goes through cycles) is reaching a level last seen during the 2000 dot-com bubble, and in some areas is at the 2007-2008 bubble levels, we may justifiably be worried about an impending "correction".  Such a correction has left offices vacant for years.

https://www.dpaulsf.com/2016/08/15/income-affluence-and-the-cost-of-housing/

The next graph shows current affordability by county by estimating the percentage of families that can afford to buy a house.  In San Francisco it is only 13%, Santa Clara 19% all of California it is 32%, in Solano County it is 45%.  In the US as a whole it is 57%.

However, growth is slowing down which will give builders a chance to catch up to demand.  San Francisco is seeing a cooling in both job growth and rent increases.  “Tech is growing more slowly than the rest of the economy and tech has been the thing that has been driving the economy forward the last decade,” said Ted Egan, chief economist for the city of San Francisco. “We are in the middle of a notable slowdown.” https://www.wsj.com/articles/san-franciscos-housing-slowdown-could-spread-1498583304

We can hope for a soft landing but the widely viewed Shiller CAPE chart of the stock market going back to the 1880's shows stocks at levels seen only in 1929 and 2000.  Markets did not come down softly from those levels.  Dr. Shiller of Yale won the Nobel Prize in Economics for his work in asset valuation - which includes stocks and houses.  (Click on graphics to enlarge).


A composite of five different valuations of the US stock market shows high levels of stock deviation from the long term average - similar to the 2000 bubble.  Maybe "this time is different"?


I sincerely hope we do not have a major recession but it behooves us to be cautious in making long term plans.

Sunday, August 13, 2017

Sunnyvale Downtown - Part I

On Tuesday, August 15, 2017 the Sunnyvale City Council will take up a proposal to study some revisions to the downtown plan.  It is item 4 on the agenda.  Documents relating to it are here:
https://sunnyvaleca.legistar.com/LegislationDetail.aspx?ID=3124214&GUID=A4DAA6EB-2307-4F1D-918D-A88C033F13C0

Sunnyvale's city web site on the downtown is here:
https://sunnyvale.ca.gov/business/projects/town.htm

Another web site: http://citylinesunnyvaleconstruction.com/

Summary:

Site plan from https://sunnyvale.ca.gov/civicax/filebank/blobdload.aspx?blobid=23861 (Click on image to enlarge).



The proposal includes the following requests:
  1. Re-examine current building height limits of 85 ft and 70 ft.,
  2. Reduce retail from 1,000,000 sq. ft to 675,000 sq. ft.,
  3. Increase housing from 290 to 750 units,
  4. More commercial space:  686,000 sq. ft. instead of 275,000 sf.
  5. Remove 200-room hotel,
  6. Put a pedestrian walk extension of Frances St. through the middle of the current Macy's Building.  This would make it two buildings.  Also, add four floors of commercial space,
  7. Add on to existing "Murphy Square" building.
To let the Sunnyvale City Council know your thoughts on the issue you may attend the public hearing at 7 PM on August 15th, 2017, at 456 W. Olive Ave., Sunnyvale, CA 94086 and fill out a speaker card to speak for 3 minutes on the issues or email the city council at:
Council@sunnyvale.ca.gov

I, of course, remain studiously neutral and completely open, trusting fully in the impartiality of the analysts of the proposed study.

By the way, some people have strong feelings about some builders.  Speaking for myself, I think we should look only at what is good for Sunnyvale, regardless of who is the agent.  Also, we get a lot of information third hand so we may be missing some aspects of various situations.  Also, Mathew 7:3.

Details:

Current concept from Saris Regis developer is here: http://www.sunnyvaledowntown.com/uploads/3/4/0/4/34043289/citylineconstructiontimeline_2x3panel_063017.pdf with an excerpt below. (Click to enlarge)

http://www.sunnyvaledowntown.com/uploads/3/4/0/4/34043289/citylineconstructiontimeline_2x3panel_063017.pdf
The revisions requested are:
  1. Request existing height limits be made flexible.  Current heights allowed are  85 ft (about height of a 7-story apartment building) for one block and 70 ft. (about = a 6-story apt. building) for other blocks. Developers (or staff?) are requesting these be not absolute limits but 'flexible' height limits. Some might say builders do not want to lower the maximum height so 'flexible' may be taken to mean 'higher'.
  2. Cut the amount of retail space by about one third from roughly 1,000,000 sq. ft. to about 675,000 sq. ft.  The argument is that a lot of retail is going online so you don't want to have a lot of empty store fronts.  Others have argued that downtown near public transit is the single best place to put retail.  To those people, a downtown is distinguished (or not) by its retail - restaurants, hair stylists, nice little bookstores, dress shops, etc.  If El Camino becomes largely residential, as many would like, then where will retail go, these people ask.  What I hear some people are afraid of is that we will get more streets like Olson Way which, to some people, is effectively a 'dead' street.
    Olson Way - Note the benches facing brick and cement walls
  3. Change the number of housing units from to 292 to 790, 2.7 times greater - 500 units proposed by developer Sares-Regis and another 250 units added by city staff.  It is unspecified how large the housing unit buildings will be but this might tie into the 'flexible' height issue above.  The diagram of the current proposal shows the existing 5-story apt. buildings with 4 stories of apts. above 1 story of retail.  If the number of stories of apts is multiplied by 2.7, to accommodate the increase in the number of housing units, they would become 11-stories of apartments plus one of retail on the ground floor.  This would be about 140 feet tall.  There is a 10-story apartment building (about 120 feet tall) in Cupertino at 20450 Stevens Creek Blvd.  Click image to enlarge:
    10-Story Apt. Building at 20450 Steven Creek Blvd
    This is a drawing of a 12-story building in approximately the style of the existing proposals:
    12-story Apartment Building
  4. Add 411,000 sq. ft commercial space - from 275,000 sq. ft. to 686,000 sf. = 411,000 sf increase = 2.5 times the commercial space originally authorized.  Given the huge increase in housing units requiring 10 or 12 story apartment buildings where would this additional space go?  Multiplying by 2.5 a 4-story building is an additional 6 stories = a 10-story building.  Would the 4-story office buildings become 10-story commercial office buildings?  For comparison, here is an 8-story office building in Cupertino near Steven Creek and De Anza Blvd.  Click image to enlarge:  
    8-story Office Building in Cupertino
  5. Eliminate the planned 200-room hotel.  I am unclear on why they would want to do this.  I have heard it argued that while apt/condo dwellers can eat at home, hotel guests pretty much have to eat in a restaurant. This, they say,  gives extra business to the downtown merchants, keeping the downtown busy and attractive.  Another argued 'With all the commercial space being asked for, they continue, where will potential clients and customers of all the downtown office companies stay?'  Those I asked said essentially:   'We are constantly hearing about the dire shortage of hotel space, and how much revenue the hotel tax brings in.  This is the downtown.  We get one chance to get it right.  If we don't build it in now, it may never go in.'  The existing small hotel nearby charges $300 per night and is usually full.  That is the argument for keeping the hotel. On the other hand is the view is that there are a lot of hotels in the works and there might be surplus of hotel space later on.
  6. Cut the Macy's building in half - creating two buildings - with an extension of Frances St. as a pedestrian walkway through to what would become Redwood Square, (roughly 25% of that block).  The existing Macy's building would then have four more floors added to become a 6-story commercial building of about 120 ft in height.  The bottom floor would be "flex retail/office".  It might look like the above photo of the 8-story office building in Cupertino minus top 2 floors.  See schematic plan below:
  7. Add an extension to the "Murphy Square" building in the same height and style.  Where a proposed addition to Murphy sq. would be added (with underground parking).
    Where proposed addition to Murphy sq. would be
    Some have noted it is very close to the train tracks where a 'grade separation' might be put in place.  Here is the existing Murphy Square building.
    Existing Murphy Square
With all the requests to cut back on retail, eliminate hotel rooms and add commercial space, some people are saying builders would rather construct commercial buildings.  One might think commercial buildings appear to be simpler - lay some carpet, almost no walls, plumbing for two sets of bathrooms, get a 5 or 10 year lease and collect rent checks.

While hotel rooms, apartments, and condos take a lot of (expensive) skilled manual labor putting in and tiling bathrooms, kitchens, etc., with lots of walls.  Apt. tenants move every year or two, fall behind in their rent, complain about neighbors, management, etc., etc.

Some I talk to argue we need to consider the residents wishes for a vibrant downtown with lots of people living there and patronizing downtown merchants.

Santa Clara's City Council destroyed their downtown years ago and now people there are trying to recapture what they lost.  http://www.mercurynews.com/2017/06/26/opinion-rebuild-santa-claras-downtown-no-this-is-not-a-pipe-dream/
Santa Clara's Old Downtown - Gone but may return.
There was also talk at the city planning commission hearing about trying to get more ownership (i.e., condos for sale rather than apartments for rent.)

The planning commission video is here:

The agenda for the City Council meeting is available here:

I have to note that a little paranoia clouds my thoughts.  I look at several indices of housing and stock valuations and find them to be very high - similar to 2000, and 1929.  This makes me cautious.  C.f.,
http://meetingthetwain.blogspot.com/2017/08/another-financial-bubble.html

Planning Commission Video notes:
I took some notes from the video of the planning commission of some of the members of the public who spoke on the proposed changes to be studied.  My notes may contain some errors so you may wish to watch the video yourself at http://sunnyvaleca.granicus.com/MediaPlayer.php?view_id=4&clip_id=2263:

------------  begin notes ------------
Minute mark on video = 83:00 
David Schreny (sp?):  What is being proposed is up to 80% office space because retail rents are 50% below office space hence the incentive for office space.  The Nokia and other existing offices are not inviting for walkability – they are fortresses.

87:30 Benjamin Demming: Increase housing and office and pare back retail.  Regional housing crisis.  Prefer ownership.

90:20 John Cordes:  Short of housing not office space.  Dedicated bike lanes, close off Murphy, hotel has a lot of value:

93:00 Holly Lofgren:  Too much office space – it raises the cost of land which raises the cost of housing.  Ownership better than renting.  Nothing to buy because everything is rental.  Reminder that Sand Hill Property (one of the petitioners) bought and closed down Vallco and is just sitting on it.  Reminder that Mr. Lynch is a former Sunnyvale employee (planning dept.) who vested his public pension and is now a real estate developer.  There are 1/20th the number of places for sale compared to 3-4 years ago.

96:00 Melissa ??:  Visceral reaction against Sand Hill Properties.

97:00 Mehud Vastala: Property values rising causing stress.  Homes near gas stations safe?  Hangs out at Santana Row, SF, and Mtn Vu, but never in Sunnyvale because it has a bad holistic feel.  Need something like Golden Gate Park to make Sunnyvale nice.  Open up space for outdoor concerts etc.

99:40: Jim Davis – (former council member): If you do more office space, you should do it where it was previously designated to go, above Mathilda.  Already did a detailed study years ago on retail space.  Don’t take out the hotel – provide customers for Murphy Ave.  That’s what we had in mind when we authorized it.  The small hotel now in downtown charges $300+ per night for small rooms and is often filled showing demand.  Leave parking in proposed office at corner of Murphy for patrons of Murphy St. after business hours.

103:00 Applicants get to respond.

103:20 STC-Ventures:  Dave Hopkins with Seris-Regis.  Need for building housing downtown.  290 initial proposal, Seris-Regis proposed 500, Sunnyvale city staff added another 250.  Parking underground – understand need for parking.

Commissioner Howe (former Mayor) asked about ownership opportunities.  DH replied they were open to it.

107: Sand Hill Property: Retail office flex space – if they can repurpose it with retail they will.  Last study was done in 2015 which is a long time ago so let’s study it anew.  If the study says we need more housing or retail we’re open to that.  The alley will be about the width of Frances St.  It will not be a dark windswept alley or we won’t have anything.  It needs to be inviting like Murphy St.

110: Chang Architecture:  Passed on the opportunity to comment.

Commissioner Howe asks about bldg height.  Staff answers height limit of 85 ft.  (About 7 stories of apts, maybe 4-5 stories of commercial).

Debate over motion on first part 2017-7364 – study increase residential, remain silent on hotel space and increased office space.

Moved on to 2017-7362 - Chang property at 111 W. Evelyn DSP blk 22.
Commissioner Howe mentioned that the Murphy Sq. addition would add parking for after hours and weekend visitors to downtown.  Passes 5-0.

Moved on to 2017-7364 – Macy’s bldg.  up to 5 stories - Commissioner Howard suggested adding housing.  Likes pedestrian walkway.  Commissioner Howe – added 1st story remains retail or service - not offices.  Discussion – retail and services on study.  Clearly “no office”.

-------  end notes  -----

Thursday, August 10, 2017

Futile Real Estate Arguments

Futile Attempts to Argue Housing Costs Decrease with Density:


A friend asked me to address some links posted as "proof" that building more lowers costs.  Those who argue increasing density lowers housing costs are making futile arguments.

Before getting into it, I'll reiterate that real estate fluctuates but if it is up 50% down 10% then overall things aren't getting better if you are a renter.  I'm not sure why people want to argue increased density lowers rent unless, of course, they are builders.  Perhaps some people think endless growth is good in and of itself but they want no bad consequences for anyone, ever, anywhere.  Sorry, you can't have your cake and eat it too.  You want growth you get higher priced housing.  That is how things work in real estate.

This is well established:
"First an increase in the population size has fairly straightforward effects. Indeed, a rising population makes competition for land fiercer, which in turn leads to an increase in land rent everywhere [emphasis added] and pushes the urban fringe outward.  This corresponds to a well documented fact stressed by economic historians.  Examples include the growth of cities in Europe in the 12th and 19th centuries as well as in North America and Japan in the 20th century or since the 1960s in Third World countries."  (From page 83 section 3.3.2: Economics of Agglomeration:... by Fujita, Thisse).  

Anyway, here goes:

This one is easy to refute.  Quoting from article itself, "The oversupply is mostly in the high-end market, Shuffield said. Homes priced under $300,000 are still moving quickly in both counties, although there’s a limited supply of them for sale."  So they overbuilt the $1M+ condo market where sales are one-sy two-sy but the broad market of $300K is hot.  That is like saying the car market is weak because only 2 Maseratis were sold last month instead of 3 - while 300,000 Fords, Hondas, etc., etc. got sold.

2.  London: https://www.buzzfeed.com/patri cksmith/wh...
Same thing only different.  Title of article is: Why Are Asking Prices For London's Luxury Flats Falling? "BuzzFeed News has identified more than £18 million worth of asking-price reductions among flats at the Nine Elms regeneration area on the south bank of the Thames"

Again, we're talking about a few houses for the rich.  The broad London housing market is continuing to climb. The very high end is suffering oversupply.  From another article on this topic:  "But these price movements don't really affect the middle of the market; prices are still rocketing in the most affordable London boroughs, so it is increasingly difficult for renters to escape the over-heated rental market.http://www.cityam.com/259600/one-graph-explains-horrors-london-house-prices-and-why
Click on graph below to enlarge.  

The article goes on to say housing prices will grow overall at a more manageable pace simply because no one can afford any further large increases.  They won't decrease except at the very high end.  Above is a graph of housing prices in London.  Up 70% in 5 years.  Up 70% then maybe(!) down 10% - (except it hasn't actually happened yet - maybe later?).  I have never said otherwise.  Housing prices will rise as density increases, builders will over-build because they don't coordinate and no one knows where the top is until they reach it, then prices come down a little - but not much, unless we get a major recession like 2007-2009 - which no one wants to see.  

Here's a graph showing housing prices going down.  Massive unemployment at the same time.  Those are not random, uncorrelated events.  One causes the other.  I don't want massive unemployment.  Does anyone?


This article claims a lot of economists predict housing prices will fall in Melbourne, Australia by as much as 20%.  Except it hasn't happened yet!  And after rising 100% then maybe down 20%.  Covered that above.  Chart below shows Australian housing prices 'ups and downs' but big 'ups' and small 'downs'.  Click on chart below to enlarge.  Note it is a log scale so rises were sharper than they first appear.

The 2014 article claims office space is in oversupply and that investment in housing was only 10.5% which is evidently less than before.  Housing prices might decline 5-6%.  Nothing goes up forever, but 100% up and 6% down?  What does this prove?

Following chart shows housing prices doubled = 2x (after factoring out inflation) from 1985 to 2010 but GDP was up 7x.  Housing went up because the country and it's people got richer.
(behind a paywall)  This says nothing about "increasing supply lowering prices".  The article says prices have not gone up as much in the hinterland as they have in the key areas like Beijing and Shanghai.  Here's a quote: "One of those queuing, Wang Jie, bought a new apartment for 2m yuan ($307,000) in October, and has watched its value soar by another 1m since then."  And here's their graph for the article.  Does it look like a drop in prices?





6.  Austin, Chicago, and D.C.: https://www.google.com/amp/s/d anielkayhe...
Quote from article:  "Real estate data firm Zillow said Friday that rents have fallen 0.5 percent in the Chicago area over the past year."  Is this supposed to impress?

People believe what they want to believe.  I am not trying to address the true believers, because I know they are not convince-able.  I am trying to help articulate the reality as determined by economists and economic historians over the last 200 years for those who are open-minded and know what they hear doesn't jibe with what they see.


Sunday, July 30, 2017

Cupertino: Work-Live-Commute

Cupertino

Jobs and Commuting

Cupertino Community Hall
Cupertino: Population: 60,643 (2016 est.)
Land Area: 11.3 Sq. Mi.
Density: 5,361/sq. mi.


A look at the number of employed in Cupertino and how many commute in and out.  Part of a series including:
Mountain View: http://meetingthetwain.blogspot.com/2017/07/mountain-view-work-live-commute.html
Sunnyvale: http://meetingthetwain.blogspot.com/2016/12/live-work-commute-1.html


Summary:
Examining census data (as seen in the graphics below) over the 12 year period 2002 to 2014 we find that:
  1. Cupertino has added housing, yet most new residents don't work in Cupertino.
  2. Very few (9%) Cupertino residents (new or old) work in the city.
  3. Most residents (91%) commute to nearby communities.  
  4. Most (93%) of those employed in Cupertino commute in from other cities.
  5. Over the 12 year period, more employees in Cupertino commuted from further away; 28% commute 25 miles or more to Cupertino, up from 24%.
  6. Despite more housing being built, housing costs increase, commutes worsen both in and out.
Commute Times Approaching Maximum
Commute times to Cupertino may have reached a point at which no further job growth is possible. It will become increasingly difficult to hire employees as potential employees won't apply because of the commute times.  Increasing housing density would increase housing costs making it harder for many workers to live in Cupertino, but since most residents (new or old) commute out, increased housing would have little or no impact on commute times to Cupertino.

("Increased density increases housing costs" is discussed in detail here: http://meetingthetwain.blogspot.com/2017/01/live-work-commute-2.html
and here http://meetingthetwain.blogspot.com/2017/04/urban-economics.html )


Jobs per Resident:



The Jobs / Resident ratio indicates how equitable a city's housing and jobs situation is.  If it is high (many more jobs than residents) it might indicate the city is hogging all the jobs (and tax revenue from commercial business) and letting other cities bear the expense of providing services for housing workers.  Housing requires many more services than commercial.  Some cities like Saratoga and Los Altos prefer to be almost exclusively residential, but most cities want as much tax revenue as they can get from business and commercial to support the expense of providing services for residents.  Cupertino is within the range of normal for most job centers in the US as is Sunnyvale. Cupertino is starting to get an excessive number of jobs per resident, but this seems unlikely to continue very long because of increasing commute times.

Cupertino: Number of Jobs / Number of Resident Workers:
2002:  26,751 / 20,243 = 1.32 = 32% more jobs than resident workers
2014:  33,949 / 23,749 = 1.42 = 42% more jobs than resident workers

Contrast with Mountain View - Number of Jobs / Number of Resident Workers:
2002:  50,174 / 31,467 = 1.59 =   59% more jobs than resident workers
2014:  85,006 / 36,935 = 2.30 = 130% more jobs than resident workers (!)

...And Sunnyvale - Number of Jobs / Number of Resident Workers:
2002:  77,480 / 58,375 = 1.33 =   33% more jobs than resident workers
2014:  84,276 / 66,209 = 1.27 =   27% more jobs than resident workers


2002 In-Out Commutes

In 2002 Cupertino had:
20,243 workers residing in the city.  Of those...
  1,950 worked in Cupertino
             I.e., only 7% of all workers in Cupertino lived there.
18,293 workers commuted out of the city = 90% of resident workers commuted out.
24,801 workers commuted into Cupertino = 93% of those working in Cupertino came from outside.

I.e., 93% of the workers commute in while 90% of the resident population commute out. Maybe it changed 12 years later in 2014? (click image below to enlarge)


2014 In-Out Commutes

In 2014 Cupertino had:
33,949 jobs in the city - an increase of 7,198 = 27% growth in jobs over 12 years.
23,749 workers residing in the city - an increase of 3,506 = 17% increase in resident workers
  2,175 residents working in the city = 9.2% of residents worked in Cupertino (down a fraction)
            = only 6.4% of all workers iCupertino live in town (down a fraction).
21,574 workers commuted out of the city = 91% of resident workers commuted out (up 1%).
77,671 = 94% of workers commuted into Cupertino from other cities.

I.e., In 2014, 94% of the workers commute in - about same as in 2002  - while 91% of the resident population commute out.  (click image below to enlarge)


Most residents (80%) of Cupertino  Don't Work There

Over the 12 years 2002 to 2014, there was new housing for 3,500 more workers in Cupertino.  Yet only 225 more Cupertino residents worked in Cupertino.  Despite increased housing, 3,250 more residents commuted out and 7,000 more commuted in.

Almost 7,200 more jobs were added.  Despite all those new jobs the percentage of residents who commuted out stayed about the same over 12 years.  Twelve years is plenty of time for residents to find a job in their home city of Cupertino if they want to.  Building more housing doesn't do anything to lessen commuting in or out.

It appears that for the vast majority of people, living and working in the same town isn't as important as finding a job that suits them, even if it means commuting.  They may live in Cupertino because they like the schools, or it is equidistant from jobs for both husband and wife, or any of a number of other reasons.  Commuting is not enough of a factor for them to move either home or job.

Commutes to Cupertino Get Longer



What we find in the next pair of data visualizations for 2002 and 2014 as seen below is that most people are commuting to Cupertino from further away in 2014 than in 2002.  (Yellow high-lighted numbers below.)  In 2002, only 6,400 (3458 + 2,938 = 6,396) or 24% commuted more than 25 miles.  By 2013 that had risen to 9,400 (5,320 + 4,074 = 9,394) or 28% (commuting over 25 miles) into Cupertino - nearly 50% more.  Nor can that increase be fully explained by private buses to San Francisco.  Further below we see figures showing the largest group commuted from San Jose - only about 1,000 (about one third) of that increase came from San Francisco.

Summarizing census data shown in visualizations below: (click table to enlarge)



The above data is from the two charts below.  

The 2 "radar" graphs show most everyone is commuting in from the North, South-East, and East.  Cupertino seems to be on the edge of a commute area.  The other thing to notice is that the commutes have increased in distance.  The number commuting has increased in all four distance categories but the longest commutes to Cupertino have increased more.  The "bike-able" Less than 10 miles category for commuters to Cupertino decreased from 50% to 48% while the two 'More than 25 miles' categories increased from 24% to 28% of commuters.  This suggests that Cupertino employers (mainly Apple) are having to go further and further to find employees.  Employees in Silicon Valley change jobs frequently and are not going to uproot their family so one parent can bike to work.



Commuting on a luxury bus is better than driving but at some point the sheer time involved becomes a burden.  Getting home at 7:30 is a lot different than getting home at 6:00.  The commutes become too much for employees. Companies will relocate or expand elsewhere to find workers.
See your kids awake only on weekends?

Vehicle Miles Traveled:

Vehicle Miles Traveled (VMT) is the standard way of describing traffic.  For example, if 10 people each commute 12 miles, that is 10 people times 12 miles = 120 VMT.  How many VMT are logged by commuters to Cupertino is in the following table (click to enlarge):



The high-lighted last column illustrates that the biggest percentage increases were in further out commutes.  This is probably the motivation for Apple to start setting up a big campus in north San Jose.  Commutes to Cupertino are getting increasingly time-consuming for the average worker.  Put another way, Apple has run out of nearby workers so they have to go further out.  The longer commute likely makes it harder to hire.


Bike-to-Work:


Biking is very healthy and enjoyable.  Commuters who walk or bike to work actually enjoy their commute.  Cities should encourage it.  Does it make a difference in pollution, congestion, or GHG emissions?
Philadelphians Bike To Work
The last line in the previous table shows what VMT becomes if everyone who is within a 10 mile radius bikes to work (10 miles is about an hour by bike).  That is about 50% of all Cupertino commuters.  Most bike-to-work advocates would be ecstatic if they could get 10% to bike to work (second to last line in table above).  The impact of getting 10% or 50% of commuters to bike to work is seen in the following chart: (click chart to enlarge)


With 10% of all commuters biking to work we get a small but noticeable reduction in VMT.   With 50% biking we would get a noticeable (about 14%) reduction in VMT, but not really a "save-the-planet" or "clear congestion" difference.

This illustrates the "go big or go home" aspect of trying to reduce GHGs, pollution, or congestion by individual actions.  To get a meaningful reduction in GHGs we need all transit (including cars) to go fully electric with all electricity generated by renewable energy with some sort of storage (battery, pumped hydro, etc.) to fill in fluctuating usage periods.
Tesla Model 3 - 100% Electric - Saves the planet
So in answer to the question a few paragraphs ago: biking, despite its many virtues, does not make much difference in congestion or GHG emissions, even in the most extreme cases.  The arguments for biking should concentrate on child safety, health, and making life more enjoyable - all valid reasons to encourage biking.

2002: Where the Jobs Are

The blue "heat maps" below show where the jobs were most densely concentrated in 2002 and twelve years later in 2014.  The actual numbers have increased in all job centers so the maps show relative concentrations of jobs.  There are no surprises.  (click on chart to enlarge).

2002 - Where the jobs are


In 2002, the jobs were mainly concentrated in Cupertino, San Jose's North First St., Palo Alto, Sunnyvale, and Santa Clara.  The data in the lower right corner of the graphic above shows two out of three (67%) Cupertino residents were able to commute less than 10 miles.  This is a much greater percentage with short commutes than is typical in the area.  It largely explains why Cupertino is so expensive.  People pay more to have shorter commutes.  The people who can pay more tend to have better educations.  This means their kids have the social and financial support to do better in school so the schools are "better" reinforcing the attraction of Cupertino to educated people in a reinforcing cycle.


2014: Where the Jobs Are

By 2014, Google had become a major jobs presence, Apple had grown tremendously (the iPhone came in 2007).

The more intense blue in Mountain View in the 2014 heat map below shows that Mountain View became a much more major job source relative to Sunnyvale, Cupertino, and San Jose's North First St.  Sunnyvale grew the number of jobs but not as fast as Mountain View - the decline was not in absolute numbers but relative to other nearby areas.

2014 - Where the jobs are



The data at the right of the visualization above shows that the percent of Cupertino residents who commuted nearby actually decreased from 67% to 64% while the number who commuted more than 25 miles increased from 15.7% to 18.2%.  This runs contrary to the narrative that building housing and increasing density for people allows shorter commutes.  It also runs counter to the narrative that adding jobs to a city lessens commuting distances.  Could it have increased commuting distances by Cupertino residents?  Perhaps building housing and adding jobs did nothing whatever.  Perhaps the number of jobs around the SF Bay area increased randomly with respect to geography.  Many people seeking jobs consider first, how it helps their career, and only second, commuting distance.

Where Workers Commute From:

The graphic tables below show that the distribution of where workers commute to Cupertino from is relatively constant.  Most come from San Jose, followed by Sunnyvale and Cupertino.  The difference between 2002 and 2014 is that a smaller percentage of workers are commuting to Cupertino from nearby, and more commute from further out.  The numbers from all cities have increased but disproportionately greater from more remote communities.  Sunnyvale had 400 more commuters to Cupertino than 12 years before and Mountain view added 200.  Not huge amounts.  (click on graphics to enlarge)

2002                                         2014

The visualization below shows a 10-mile radius circle centered in downtown San Jose.  For 2014, the data on the lower right of the chart shows a jobs / worker ratio of 1.05 (703K / 669K) - very close to one job per worker.

10 mile Radius from Downtown San Jose
Extending the radius of the circle from 10 miles to 15 miles (below) includes all of Mountain View and parts of Palo Alto and Fremont.  

15 mile Radius from Downtown San Jose

The number of workers goes up nearly 100,000 but the number of jobs goes up nearly 200,000.  This shows the extreme imbalance of the jobs vs. workers in the area between Santa Clara and Palo Alto.  Now the jobs-to-worker ratio is 1.17 which is still low or moderate.

There is much discussion about teachers not being able to buy a house in the towns they teach in.  The solution is not to build more housing - that only increases the demand for land thereby increasing the value of land thus making housing more expensive.  The solution is a more logical and also equitable distribution of jobs.

The peninsula area from Santa Clara to San Mateo will in the foreseeable future be a center for start-ups.  That area is close to the venture capitalists on Sand Hill Rd. in Palo Alto who don't want to go very far to check up on the start-ups they fund.

From Wikipedia:  "Sand Hill Road, often shortened to just "Sand Hill",[1] is an arterial road in Menlo Park, California, notable for its concentration of venture capital companies.[2] The road has become a metonym for that industry; nearly every top Silicon Valley company has been the beneficiary of early funding from firms on Sand Hill Road.[3]"  https://en.wikipedia.org/wiki/Sand_Hill_Road

However, for cities on the periphery like Cupertino, bounded by protected open space on one side and SF Bay on the other, there is a point at which further job growth is not possible without extreme strain on housing and transit - which we are currently seeing.  The following chart of a 10 mile radius around Cupertino shows that for the area as a whole, including Mountain View, Sunnyvale, Santa Clara and parts of San Jose and Palo Alto, there are many more jobs than workers.  The ratio is 1.5. That is because of the large spaces to the south west of Cupertino with very few people.  Moving the center of the circle to Central San Jose as shown above, largely takes care of that problem.

Building 'up' is not a solution to housing price inflation, as seen by looking at the densest parts of major cities like London and New York.  It is not a coincidence that a nice townhouse in the center of London in Mayfair costs $7M.  No matter what some may say about changing attitudes, most people want a single family home and will commute as far as necessary to get that.  We see that already with 93% of new workers in Sunnyvale commuting from Morgan Hill, Livermore, Fremont, and Pleasant Hill. (c.f., http://meetingthetwain.blogspot.com/2016/12/live-work-commute-1.html)

Conclusions:

The map below shows the urbanized areas of the San Francisco Bay Area.  Cupertino is clearly on the very edge.  Which clearly implies it is on the edge of the easy commute area.  The area to the west of Cupertino is simply not going to be urbanized.  As we have seen, it is getting increasingly difficult to commute to Cupertino so Apple has to relocate in order to continue to grow.
Cupertino is on the very edge of the Urbanized Area
http://discoveringurbanism.blogspot.com/2012/03/new-census-maps-tell-ambigious-urban.htm
  1. If Cupertino adds housing, much of the new housing will go to people who commute out of Cupertino, giving no relief to those commuting into Cupertino.
  2. Increasing housing density would further increase the cost of land and therefore the cost of housing built on the land.   "Increased density increases housing costs" is discussed in detail here: http://meetingthetwain.blogspot.com/2017/01/live-work-commute-2.html and here http://meetingthetwain.blogspot.com/2017/04/urban-economics.html
  3. Cupertino is already very expensive so further increases in housing costs would be unmanageable for most of those who rent there.  They would have to leave to be replaced by more affluent workers who can afford the higher rents.  This would cause even longer commutes by the less affluent from lower rent locations resulting in greater difficulty in hiring people to work in Cupertino.
It appears Apple as the main employer in Cupertino has no choice but to expand closer to where workers are.  They will be doing just that with a new campus in San Jose north of the airport.  See below:

  
86 Acre Future Apple Campus in San Jose
As Apple and Google expand in San Jose, housing costs in Cupertino and other communities will stabilize.  Housing prices won't decrease because most residents of Cupertino don't work there.  People will continue to pay high prices to be in the highly rated Cupertino school district while commuting to other cities.
What Home Buyers Really Care About
As downtown San Jose develops, housing prices within central San Jose will increase because people pay more to be close to major job centers.  San Jose has 180 sq. miles and about 1,000,000 people.  Cupertino has 11 sq. miles and 61,000 people = 6% of San Jose's area and population.  San Jose can absorb the influx much more easily than Cupertino.  A few neighborhoods near downtown and transit depots will see an increase in property values, but most neighborhoods won't even notice.  Schools near the new high tech job centers will 'improve' not because of anything school systems do but because the students will be the children of highly educated parents.

San Jose can and will evolve into a major city with a vibrant and exciting cultural life that people from the boring suburbs of Cupertino, Sunnyvale, and Fremont can visit for an evening or weekend before returning to their quiet little homes.