California dreaming. The tale of moving to the West Coast. However, recent reports indicate Californians are packing up and leaving. Approximately 38,000 more people left California than entered it in 2018, according to the U.S. Census. This is the second straight year that migration to the state was negative. And the expectations are the exodus trend will continue. While the numbers are “minimal,” it’s a trend generating lots of open forums on social media and table talk. Cost of living is one of several reasons locals are leaving the state. Let’s focus on the San Francisco Bay Area. The Bay Area is continuing to attract residents in the flourishing tech-boom cycle. Cushman & Wakefield projected the median household income for a millennial living in Northern Californian will be $110,589 by 2020. These numbers are based on tech-related incomes. While overall median household income for other Northern Californians was $71,805 in 2017. And according to the real estate company Zillow, the average house value in California has risen from about $300,000 in 2012, to about $550,000 in 2019. The median price paid for a Bay Area home or condo May 2019 was $860,000, up 1.2 percent from April but down 1.7 percent from May of last year, representing the biggest year-over-year percentage drop in more than seven years, according to a CoreLogic report. Now these numbers are impactful. Which is why some millennials and younger generations prefer to rent instead of buy. There has been an increase in multifamily development. But what about that growing concern affordability in the Bay Area? Some in the Bay Area are even labeling the current situation a “housing crisis.” The San Francisco monthly average total cost of living is at $4,210.60, according to Move.org. The survey even broke it down further, noting the average utilities bill is $123.22; interest is $66.62; gas is $197.88; rent is $3, 396.62; and food expenses are $426.26. 
And that budget doesn’t even include fun money! There has been a growing number of multifamily development projects in the East Bay. For example, in the city of Walnut Creek, which is 30 minutes from San Francisco, development activity has blown up with numerous luxury residential projects. Twenty years ago, the tallest apartment complex in Walnut Creek was three stories. Now there are multiple five-, six-story luxury, premium residential towers. The city is growing into a suburban metropolitan city. In addition, builders have nearly 7,000 units in progress in Alameda County, focused on locations in Fremont and Oakland, reported Marcus & Millichap. Farther south in Santa Clara County, sites in San Jose lead the way, with 2,600 rentals scheduled to be delivered this year inside the city limits. Corporate strongholds in Mountain View, Santa Clara and Redwood City are also receiving an influx of new supply. Completions in the East Bay/Oakland area over the past four quarters have picked up compared with the previous annual period when 1,570 apartments opened. There were 2,410 units completed year-over-year. In 2019, the largest complex will be the 632-unit The Asher in Fremont, noted Marcus & Millichap. Rent is pretty pricey even in these secondary and tertiary cities. The average rent for an apartment in Walnut Creek is $2,481, a 4 percent increase compared to the previous year, when the average rent was $2,375, according to RentCafé. Overall, rent in the East Bay/Oakland rose to $2,373 per month during the past year. Since the third quarter of 2016, the quarterly annual rent growth has also averaged 2.7 percent per quarter. In the previous five years, annual quarterly growth averaged 9.7 percent. And rent performance continues to be driven by class C properties, where the average annual effective rent jumped 5.7 percent to $1,695 per month. All these ongoing and completed units are projected to be occupied. Despite the growing projects in the smaller cities outside of San Francisco, there has been a drop in proposals for residential projects. Building permits in California fell 16 percent in the last year, dropping for the first time since the recession nearly a decade ago, according to analysis by the Public Policy Institute of California. In the Bay Area, permits to build new homes and apartments dropped, falling nearly 50 percent in San Mateo County compared with the prior year, 30 percent in Alameda County, nearly 10 percent in Santa Clara County and 7 percent in Contra Costa County. Rising prices for labor and materials have driven up costs, making developers more cautious. A survey released by Turner & Townsend earlier this year found the Bay Area is the most expensive market in the world to build at $417 per square foot — higher even than New York, London and Hong Kong. Commercial development costs in the Bay Area grew 5 percent last year, and the survey expects another 6 percent leap this year. For all three markets — the East Bay, San Francisco and Silicon Valley — developers think that 2022 will see worse economics than 2019, according to Allen Matkins/UCLA Anderson Forecast California Commercial Real Estate Survey and Index Research Project. In the last six months, Bay Area developers have pulled back on new development, and half of the panelists stated they were not planning to start a new development in the next 12 months. The survey polled a panel of California real estate professionals in the development and investment markets, on various aspects of the commercial real estate market.
