Will a Tech Boom Create A Real Estate Bubble?

Are we about to see a replay of the first dotcom bubble?  Buyers and sellers ask us this question a lot.

So here’s our take on what is going on today:

Yes, the constant hype around mobile apps reminds San Franciscans of the market’s enthusiasm during the late 1990s.  As NASDAQ reaches levels above the dotcom bubble’s peak, buyers and sellers should wonder how long the residential real estate market can sustain a tech boom?

If you are going to live in San Francisco for the long term, you should not worry.  The startups that do make it to market come with large user bases and revenues.  WhatsApp was acquired for $19Billion for its mobile messaging services.  But that came with 450 Million users and a billion messages a day.  The SF startup scene seems to be filled with entrepreneurs with sound business models and we don’t believe the likes of Facebook, Google, Apple, SalesForce and Genetech leaving the Bay Area anytime soon.  They have spent too much time and money arguing with the City about their employee shuttle buses!

Past vs Present.  The dotcom bubble was marked by an incredibly steep—and unsustainable—growth trajectory: Between January ’96 and January ’99, the NASDAQ doubled in value. Over the next 13 months, the index doubled again before the bubble burst and sent prices falling just as quickly.  Aside from the value of the NASDAQ, today’s tech industry doesn’t have much in common with that of the ’90s.

While the late 90’s bubble was based on growth in employment trends for internet publishing, broadcasting, web portal services—workforce were over expanded by 70% in 2000.  Today, analysts believe Tech is on more solid ground.  Over the past five years since the recession, NASDAQ has doubled but at a slower pace compared to the splurge in the late 1990s.  This time employment is for internet services and mobile development, expanding at about 20% annually since 2010.  This is much different that the rapid expansion of the dotcom bubble.

So our advice is to find a property you like, tie it up with a solid offer, get really low mortgage financing and live in the property for a long amount of time.  You will never be able to time the marker and there are a lot more fun things you can do with your life.  Like a kitchen remodel, or adding additional square footage to your property’s footprint.

Let’s start your property search by going to jasonfayollat.com today!