Robert Shiller says we could be in another hosing bubble, but the Bay Area didn’t get the memo. After a huge 2013, prices are off to the races again for 2014:
In the most expensive regions of the Bay Area, such as Palo Alto and Atherton, the gains since 2011 have been so pronounced, by looking at the chart, you wouldn’t have known a real estate bubble had burst in 2006 unless someone told you.
With the web 2.0 boom showing no signs of slowing and the huge influx of wealthy foreigners, as well as private equity, home prices will keep going up. Facebook just reported another blowout quarter and the stock is at a new 52 week high, enriching everyone from the employees, to the VCs, and the founders. The obscene wealth being generated in tech is flowing into the Bay Area economy – from homes to landscapers, to interior design, and restaurants. Do you need any more evidence the Bay Area is the center of the universe? As we wrote earlier:
America, especially since 2008, has become a hyper-meritocracy in overdrive. If you like coding, have a prestigious degree and a high IQ, now couldn’t be a better time to be alive, although having the first two qualities pretty much guarantees the third. We’re in a high-IQ, STEM, wealth creation feeding frenzy on a biblical scale. The Rockefellers, Vanderbilt and Carnegies actually had to build something to get wealthy, which took decades and thousands of people. Now start-ups less than three years old are making instant billionaires out of their youthful founders and early investors. Even in the 90′s – what many consider to be the epitome of a bubble – a typical tech start-up was seldom valued at over $60-100 million. Now that is just the Series A round. The Bay Area housing market is going nuts in all-cash bidding wars above the asking price due to endless fed money, rich foreigners, web 2.0 founders and investors flush with cash, and private equity. There is so much wealth being created in relatively few hands. Outside of the Bay Area tech scene and Wall St., there’s an abundance of low tech opportunities catering to the new rich, such as nannys, butlers, trendy restaurants, landscaping, and home restoration. America, more specifically its elite institutions such as Harvard, Stanford, and MIT as well as its tech giants like Google and Facebook and the Bay Area have become epicenters of innovation and wealth creation. The left predicted in 2008, incorrectly, that the over-hyped financial problem would usher in a post-America era. The exact opposite happened. As evidenced by historically low treasury yields, a perpetually rising stock market that has vastly outperformed its peers, a strong dollar, surging Bay Area real estate, tech companies and Ivy League institutions being inundated with foreign applicants, America has, more than ever before, become the center of the universe and envy of the world all over.
This is the greatest wealth boom in the history of the world, and it will only continue. Snapchat will soon be valued at $15-20 billion, Uber at $30-50 billion, Pinterest at $15 billion, Tinder at $10 billion, AirBNB at $40 billion, and so on… Just two or three of these companies will be equal to one Disney or a McDonald’s, but still not a bubble. The left said Facebook was a bubble at $15 billion back in 2007. Now it’s worth $190 billion. These companies each fill a niche, have no viable competition, and have huge growth. Just like there is only one Palo Alto or one Stanford, there is only one company that does what Snapchat or Facebook does. Other have tried, but they cannot gain traction. The moat is too wide, and unlike the demise of Myspace, teens aren’t getting ‘burned out’, as so many pundits predicted, incorrectly, would happen to Facebook and Instagram. Speaking of Instagram, now it’s obvious, in retrospect, that Facebook’s acquisition of Instagram for $1 billion was a steal instead of being a sign of bubble. Instagram would be another $10 billion company had they not sold out too soon. This is is the state of bay Area capitalism – a hyper meritocracy, where anyone, regardless of age, race or socioeconomic background can become obscenely wealthy in a very short period of time – by virtue of intelligence, hard work, and a little luck. You can code an app and be a billionaire in a couple years or invest in a web 2.0 start-up and increase you money ten-fold in just a year, as investors in Uber and Spanchat have done. Or buy some already expensive Bay Area real estate and watch it become even more expensive, as the left calls it a bubble and the usual blah blah blah.