The San Francisco Bay Area is hot—and no, it’s not because of climate change. While the mild summers of the “city by the bay” haven’t changed much in recent years, the real estate market sure has. While a good portion of the U.S is still recuperating from the ravages of the housing bubble bust, San Francisco and the surrounding Bay Area has seen fast—and arguably furious—recovery.

It is probably not a real surprise that the main driver in the Bay Area real estate market’s recovery is the strength of the job recovery. It is no secret that the region is a melting pot of tech’s brightest stars and their big money IPOs-waiting-to-happen. San Francisco proper is in and of itself becoming a force for Silicon Valley to reckon with. The great result of all of this is a stimulated market. Conversely, the thorn in a potential buyer’s side? A stimulated market. Perhaps even an over-stimulated market. Essentially, this “tech boom” is putting the San Francisco market out of reach for a good many buyers. Top notch engineers, social media gurus, and “biz-dev” geniuses are being sought after with, often times, unbeatable salaries by cash-cow tech companies. The more money, and people, that flows into the Bay Area the stronger the market and the higher prices will rise.

So how is this affecting the overall housing market throughout the region?

Home buying has seen a steady uptick in the region as much as rents have too. As the economy and job market continues to grow stronger in the city and surrounding areas, so do rent prices. In just a six month period, rental prices in San Francisco proper have seen a 6-7% increase and that isn’t just in the more historically affluent or prestigious neighborhoods like Marina or Presidio. Places like the Mission and Nob Hill are up and coming on the rental price front, and we’re also seeing gentrification of other areas within the city as a leading cause of San Francisco outpacing the national rental average three fold. Furthermore, what we’re seeing in line with the growing job market is the jump in the average rental price for a studio apartment.

What does this tell us? A number of things.

First off, the rental market is ultimately at the mercy of supply and demand. While new residential buildings are being erected along Van Ness Avenue, overall affordable housing supply is at a low, thereby driving prices up more. Moreover, with studio and one bedroom apartments rather than more roommate-friendly two bedroom apartments in high demand, we can see that the influx of new residents is affecting the overall rationale of potential homebuyers. At the same time, interest rates remain fairly low and “new money” and even international funds are looking for somewhere to be invested. All that being said, for those who have the ability to, homeownership is becoming more and more attractive.

Then again, just as the rental market is becoming overwhelming for city and suburban dwellers alike—keep in mind that tech giants like Facebook and Google are still gobbling up space around them outside of the city—the housing market has seen its fair share of competitive bidding. While the Bay Area’s expanding economy is a welcome change, new construction has not simultaneously kept up with the growth. Therefore, we’re also seeing homeowners typically paying list or above asking prices. Unfortunately, while the “American dream” is very much alive in the entrepreneurship that underpins the Bay’s growth it is becoming farther and farther out of reach for the middle class family. While this is a trend we’re seeing throughout the nation, the Bay Area is more so on the nightmare end of that spectrum. Although there has been some slowdown in the housing market in recent months it’s not anywhere near national averages. The pervasive tech/start-up culture of this region means any marked slowdown is more ominous than not.

So what does this mean for potential homeowners? Well, while the San Francisco Bay Area market may be sitting pretty on the front burner it’s not ultimately too hot to handle. That being said, while your pockets (and patience) necessarily run deep in this market, just as equally should your ability to navigate it be strong. As it is a hot market now, keep in mind that the old real estate adages still ring true:

– Find a Realtor who demonstrates professionalism, knowledge of the market, and success. Most importantly, someone and that you can trust to work for you.

– Educate yourself about the market and homeownership in the Bay Area.

– Be prepared.

Happy hunting…and while you’re at it, stop and smell the roses along winding Lombard Street!

If you are buying or selling a house and are looking to hire a successful real estate agent to help you through the process, take a look at AgentHarvest's list of top-ranking local Realtors in your area. We found these agents by examining their sales track records, awards, rankings, client testimonials and by conducting personal interviews.