The Incredibly Overvalued Real Estate Market of San Francisco

The Incredibly Overvalued Real Estate Market of San Francisco

The San Francisco Real Estate Boom

San Francisco has recently been described as the hottest real estate market in all of America. When I say hot I mean that the values of houses in San Francisco are unequally high, probably the highest the city has ever experienced. Experts say that this record high house price has made the city reach a bubble stage. Well, how do you know that the real estate prices are unreasonably high or houses are overvalued? The answer is simple. You just put into consideration the average income of the city and compare it with the cost of houses in the city. There you will get your answer.

Why the Real Estate Boom?

overpriced-real-estate-market-silicon-valley-millionairesAccording to Fitch’s reports, real estate prices in San Francisco reached a record high during the second and third quarter of 2015. These numbers are 62% above the post recession low back in the year 2012.Th report further indicates that home prices in San Francisco, and the ay area a large went p y 10% in 2015, which make the housing market in the city approximately 16% overvalued as compared to the city’s economic situation which is not all that bad.

The Fitch’s report further indicates that the San Francisco has never seen such a surge in the real estate market since the dot com era of 1997-2000. Furthermore, more statistics indicated that the prices recorded in the last few years are way above the prices observed in the housing boom of 2003-2006. However, it will be very ignorant not to put into consideration the impact of the Silicon Valley boom to the real estate market prices in the area.

Innovative Technology Companies

silicon-valley-real-estate-boomDuring the onset of 2000, companies like Yahoo and Google set up base in San Francisco area better known as Silicon valley in the world. This meant that there were incredible opportunities that came with these big companies. Young, focused entrepreneurs went ahead to take advantage of the startups that slowly began to crop up. Within a short time, millionaires were popping up everywhere in the area.

This directly impacted the real estate market as people would start selling properties at higher prices to these millionaires just because they have the money to spend. In the end, the spindrift shaped the city’s housing market as a high value place but in real sense, only a few people compared to the majority could afford the $1 million mansion in the area. This makes the area to be considered as overvalued.

Young & Smart Silicon Valley Millionaires

Apart from millionaires buying luxury homes, the Silicon Valley boom also impacted the rates of renting a house. With many startups cropping up, it meant that there were more employees in the companies. Subsequently, there were fewer housing units available to house these employees. The few available hiked the prices to unimaginable heights.

However, with time, more and more renting units came up and prices slowly came down from $2,300 to $1,600. However, these prices are still very high compared to other cities in America. Although San Francisco is a tech hub, it’s only fair to say that it is highly overvalued considering that its only because of the startup companies in the area and not factors such as amenities and security which often determine the value o any neighborhood and the prices tag.