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I’ve recently learned that real estate brokers in San Francisco have reached a consensus on a topic thatÂ entrepreneursÂ and investors can’t seem to agree on: that we are in the midst of a technology bubble.
Technologists have been debating the existence of such aÂ bubble for over a year now, but they just can’t seem to agree.Â Some argue that companies like Twitter, Facebook and LinkedIn, are overvalued with multi-billion dollar valuations. Others say that technology companies are actually undervalued.
Real estate brokers in San Francisco have seen the evidence of a new dot-com style bubble: Rents are shooting up as the demand for apartments grows. As a newcomer to San Francisco, I can attest to how frantic the search for apartments has become in the area, and to the often audacious pricing of rental properties.
AnÂ article published on Thursday in The San Francisco Examiner notes that Bay Area renters are now seeing rent hikes that are eerily similar to thoseÂ during the dot-com bubble thatÂ occurredÂ a little more than a decade ago.Â RealFacts, a real estate analysis firm, told the Examiner that aÂ new wave of San Francisco residents who work for technology giants and start-ups seemed to be responsible for the rise in apartment rental costs.
“I think a lot of new dot-com employees,Â specificallyÂ those who work for companies like Apple, Google and Twitter, are now moving into the city and can afford to pay much higher rents,” said Sally Kuchar, editor of the real estate blog Curbed San Francisco, told me in a phone interview.Â ”As a result, San Francisco rental rates have risen by 6 percent between 2010 and 2011.”
As a very recentÂ transplant to San Francisco, I’ve visited dozens of open houses over the past week and already see a frightful pattern. When I show up to see a property there is always a long line of young people, mostly wearing t-shirts adorned with Twitter, Facebook or Google logos, who are standing at the ready with an application, credit report and deposit check in hand. They often bid up the price of an apartment by several hundred dollars too.
Real estate brokers I’ve spoken with note that although the San Francisco market has always beenÂ challenging for renters, the current state of affairs isÂ extraordinary.
Ms. Kuchar of Curbed said rents were also rising because more landlords were choosing to turn their properties technology/matching-travelers-with-rooms-via-the-web.html">into short-term rentals using services like AirBnB, a company that lets people rent out their spare bedrooms or homes to travelers.
“A lot of residential property owners are now converting their long-term rentals into vacation rentals; that has also depleted the market,” Ms. Kuchar said. She also said that though high real estate prices make it clear there is a new bubble in Silicon Valley, no one can really predict how long it will take before it pops.