Reality catches up in Bay Area
Conversations are now about rising prices and falling incomes, says this letter from California
Sitting at a makeshift outdoor café in my local farmers market, I had to admit to myself that the slowdown triggered by the subprime mortgage and fuelled by rising international oil prices had now definitely arrived in Palo Alto, California.
Illustration: Jayachandran / Mint
Somehow, the Bay Area has been isolated from the economic slowdown sweeping through the rest of the US, and I believed that the tech-heavy nature of the Silicon Valley would continue to protect this enclave. But, despite technology companies continuing to grow and tech-stocks still holding up, thanks to firms such as Google, Apple and Facebook, the citadel may finally be crumbling.
The ripple effect of the failure of financial companies and hedge funds mainly based in the East Coast has finally reached us here. And Bay Area folks in their typical innovative style have risen to the occasion with elegant and creative solutions grounded in pragmatism.
And how do I know all this? Through my neighbourhood webgroups and my Bay Area online parents club to a large extent, but mostly through the buzz at my local farmers market where I meet real people, not online avatars.
Like most Bay Area suburbs, Palo Alto has its unique farmers market. It began in 1981 and is one of the oldest outdoor farmers markets south of San Francisco. Like most other farmers markets, its main purpose is to provide fresh, seasonal and local produce in the heart of the asphalt-ridden desert of downtown. Mine also happens to offer artisan cheeses, whole grain breads, gourmet chocolates, varieties of coffee, flowers and herbs as well as a couple of regional cuisine and “slow” food stalls where people like to sit and have a leisurely weekend brunch. In fact, a market such as this is a unique ecosystem in itself — but that is a whole other column.
Besides the obvious reasons for preferring to buy from my local farmers market (such as getting fresh, organic produce) and ideological ones (supporting the environment, energy conservation, supporting local farmers and sustainable agricultural practices). I love shopping here as it provides me with an unfailing pulse to the community I live in.
Just the act of sitting under gaily patterned umbrellas in the brilliant Californian sunshine, sipping freshly brewed coffee, errands complete, purchases scattered around them, makes people relax. Even the most privacy-obsessed tend to let their guard down and discuss vexing issues more frankly.
So, over the last month when I began hearing more and more conversations centring on rising prices, falling incomes and the economic slowdown, I sensed the inevitable. People are hurting.
National newspapers had begun talking about an impending economic slowdown almost a year ago, but Californians were as concerned about — and as far removed from — those initial stories as they were from the genocide in Darfur or the war in Iraq. It was almost as if most parts of California and specifically the Bay Area remained magically untouched by the slowdown.
To pick up a newspaper or listen to National Public Radio was to know of foreclosures, steep falls in the value of homes, layoffs, rising unemployment, falling stocks and bailout plans for mortgage companies. Car sales are at a 10-year low due to a weak economy and high fuel prices. Detroit auto makers will lay off 25,000 workers over this summer and fall. Starbucks will close 600 of its ubiquitous stores in the country beginning this year, laying off 12,000 employees, the most in its history, said headlines.
Yet, to look around here was to see a whole different story, an altered reality. The lines of the hiply dressed that I saw at the Apple store in downtown Palo Alto to buy the new iPhone 3G (“twice as fast, half the price”) were no shorter than the lines forming at some private banks in Ohio and Washington state by depositors fearing bankruptcy hurrying to withdraw their money.
This cognitive dissonance between the gloomy outlook highlighted by TheNew York Times (NYT) and The Wall Street Journal over the past year and what I could actually see going on around me continued even when the subprime mortgage crisis began spreading, first insidiously, then juggernaut-like over larger and larger parts of the US.
But until April this year, every time I ran into my realtor at the local market, she would insist that property prices in Palo Alto and neighbouring areas were still rising.
It is only recently that she has amended her view to saying that prices of homes have stabilized. Fewer homes are on the market, but demand is still higher than supply, though the gap is no longer insurmountable in the Valley, she explained to me one morning at a stall of summer greens and salad leaves.
Sitting, overhearing myriad conversations simultaneously last week, I find California no longer remote from worries of a recession. Local home remodels as well as new construction plans are being put on hold; spending is falling. Architects, contractors suddenly have less work, and I even heard a group of young people discussing a recent article in NYT which said cosmetic surgeons who used to be booked up months ahead, now have openings as early as next month — so even Hollywood’s rich and beautiful are feeling the pinch.
And recently, I overheard an elderly couple at the next table talking about how they were getting squeezed at both ends — prices of most items are rising, and falling stock markets are bringing the value of their retirement funds down, affecting their monthly income flow. A young couple with two children, sitting next to them joined in the diatribe, adding that the cost of raising children is driving them to cut down on household help and other “luxuries”, and they are actually considering moving to a smaller house — it is that, or moving to a cheaper suburb in the mid-Peninsula, closer to work.
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