Further, given that 50% of all new job growth over the last three years is related to housing (sales, construction, lending, etc.), the Bay Area's economy is precariously perched, extremely sensitive to interest rate movements, and could easily tumble.
Some choice quotes:
"Many Bay Area workers are earning paychecks far bigger than their counterparts with comparable jobs in other states."
"So why are they struggling to make ends meet?"
"It turns out that while most workers in the region earn more on paper than workers elsewhere, their purchasing power is slashed by the high cost of living, according to an analysis of Labor Department and other cost data."
"Meanwhile, on a statewide basis in California, wages have failed to keep up with inflation, UC Berkeley labor economists say. And although payrolls have been growing, job creation has become heavily dependent on the boom -- some would say bubble -- in housing."
"Yee found that San Jose topped the nation with an average annual wage of $55,830, San Francisco ranked third at $51,570 and Oakland came in seventh with a $46,490 paycheck -- all far above the national average of $37,020."
"But what kind of living standards do those fat paychecks support?"
"Once deflated for cost of living, the wage picture changes substantially. The average annual wage in San Jose fell to $32,385 after the adjustment. The East Bay ranked next in the region with an average cost-adjusted paycheck of $30,235, surpassing metropolitan San Francisco, where big salaries actually buy a mere $28,418 in cost-deflated goods and services. All three areas trail the national average annual wage of $37,020, the statisticians said."
"Erol Yildirim, who runs the council's cost-of-living analysis program, said the biggest single reason for the Bay Area's poor showing in purchasing power is obvious to anyone with a mortgage."
""Housing in San Francisco is three times as expensive as the national average," he said. Food is also more costly. A dollar's worth of groceries nationwide costs $1.50 in San Francisco, according to his figures."
"At the risk of ruining barbecues up and down the length of California, the UC Berkeley researchers offered another disturbing finding: After adjusting for inflation, wages statewide fell during the first half of 2005. According to Dube, the UC Berkeley economist, this was the second year in a row that real wages fell in California."
"The Berkeley labor economists noted that the state's economy has gotten a huge boost from housing. Construction and related fields such as real estate or lending, all related to the housing boom, accounted for half of all the net job growth in the state between 2002 and 2005."
"With job creation dependent on housing, which is in turn dependent on interest rates, that puts a question mark over the state's labor market, Dube said."