Unfortunately, though, all this exuberance seems to be contained to the areas where people who work for hot tech companies tend to live. The Federal Housing Finance Agency reported that nationally housing prices fell 2.4 percent in the fourth quarter of 2011, the most recent figures available. And it was even worse in California, hard hit by the housing bubble bursting, where prices fell 4.6 percent for the quarter.
It's a good 45-minute (or much more in rush hour) drive south from San Francisco to the tech companies in Silicon Valley. But a lot of tech jobs have migrated up the coast, as Hebron notes, with both Twitter and Zynga based in San Francisco. And many of these young, stock-rich tech employees prefer living in the hipper city to the north rather than the drab suburbia of the south. Those who do call Silicon Valley home are spending quita bit, too, however, as The Los Angeles Times's Jessica Guynn notes. Per Guynn:
Upscale stores and restaurants are packed. Good luck getting a table at Madera in Menlo Park, not far from Facebook's headquarters. The see-and-be-seen restaurant at the swanky Rosewood Sand Hill hotel is booked solid for lunch almost daily.
Luxury cars are flying off dealers' lots. In San Francisco, San Mateo and Santa Clara counties combined, luxury vehicles accounted for nearly 21% of new car registrations from April 2011 to March 2012. That's almost double the national average, according to automotive research firm Polk.
"I have rarely, if ever, seen the luxury mix this high," analyst Tom Libby told Guynn. "These data clearly show that there is wealth — and a lot of it — in these counties." It's clear where all this money is coming from. Facebook is about to turn out a bunch of very wealthy people. Not to mention it just bought Instagram for $1 billion, and we saw Zynga, Yelp and LinkedIn all go public within the last year.
But here's where it gets scary: "The San Francisco buyer mindset is that they want to get in before they’re priced out, but they either haven’t reaped their firm’s windfall yet or don’t expect much if any windfall from their firm," writes Hebron. The same optimism that's driving these huge valuations is also driving this buying spree. "We're back to the Kool-Aid-drinking times," a Palo Alto builder James Witt told Guynn. "Everyone feels confident again," Ken DeLeon, a real estate agent, added. "Everyone has the mind-set that their net worth will be higher next year." But, what if it all comes crashing down? This all feels reminiscient of the dot-com era. "We’re getting the second wave of dot-com kids," broker Abigail Glynn told the San Francisco examiner last August, before things had even gotten to this level. Getting the dot-com comparison is not a compliment.
Image via Shutterstock by Mykhaylo Palinchak.
This article is from the archive of our partner The Wire.