Lot of people think tech crowd in Bay area is driving up housing, but that's not true - at least not entirely. Tech crowd is actually small fraction of populati

Lot of people think tech crowd in Bay area is driving up housing, but that's not true - at least not entirely. Tech crowd is actually small fraction of population even in Bay area and housing is on similar steep incline rate pretty much everywhere. My theory was that much of the demand for housing is from investors. I've read tons of reports that wealthy people from China had been descending on US soil and gobbling up pretty much everything on their way with entire deals in cash. My real estate agent told me she is completely stunned how many deals are coming from foreign investors in cash. On a typical house that comes in market, it gets viewed by 200 buyers and gets about 10 offers within 1 week involving bidding wars more often than not. I also show these giant investing funds sweeping entire areas with their billions (my area was gobbled up by Berkshire, for example). I also have few colleges who are now owning as many as half dozen real estate properties - all bought from mortgage then rented out through agencies. They are saying business has never been better and I suspect they might soon leave their jobs to retirement. Many other people I know overseas are putting larger and larger savings in buying real estate. In most big cities, you can find buildings upon building with super expensive apartments that only gets bought and sold but no one lives there. I think what has happened is 2008 crash actually made real estate more stronger then any other time in history because of the way it has bounced back. In essence, real estate is a new cow. You can milk it forever by renting it out and are thus guaranteed certain % of return. Plus it goes up in value on pretty much any long stretch of time. Plus you can actually use it unlike gold or stock. Plus it's virtually inflation protected. The biggest advantage, however, is that you are almost guaranteed never to loose your entire principal - even in the tough times. Even if 2008 repeats, you might lose 5-25% of value unlike stocks where anything is possible. Traditionally investors thought of real estate as lousy investment because of non-liquidity, auxiliary expenses, less rate of return than stock etc. The modern investor thinks real estate as highest yielding best bet among all other safest bets. I feel trend is going to continue at least for another 2-3 year if not more. I can easily imagine 10-30% of all urban areas bought out by investors and only available for rent. This would be a really bad thing on many levels. First, money tied up in real estate doesn't go toward economy growth. Second, rental market will get worse and worse because it will be controlled by few players who will dictate prices to make sure they get highest return. Third, owning house would become too distant a dream for pretty much anyone except top 1%. The funniest thing is that you and me are technically funding above process. All our 401Ks and retirement funds ultimately ends up at groups like Blackstone to buy up real estate and then rent it back to us at highest possible rate :).