Real Estate News

Housing affordability an issue for many Bay Area buyers

Published: 26 Oct 2017

One of the hottest metro housing markets in the country over the past several years has been in and around the San Francisco Bay Area. The tech boom there has created plenty of high-paying jobs, and demand for housing has increased significantly. In fact, most ZIP codes in the region have long since surpassed pre-recession norms for both demand and home prices.

Indeed, more than 550,000 jobs have been created in the region from San Francisco and Oakland to San Jose in just the last five years, and the trend led the local housing markets to significant heights, according to the San Jose Mercury News. That, in turn, leads many housing market insiders to wonder just how much longer the growth can last; after all, many of the conditions in the region resemble something of a bubble, with home prices growing sharply and showing no signs of stopping.

Home prices in and around the Bay Area continue to climb.Home prices in and around the Bay Area continue to climb.

What's the outlook?
Speaking at a local industry conference, National Association of Realtors Chief Economist Lawrence Yun noted that there has been concern about a Bay Area bubble for some time, but it probably hasn't come close to bursting yet, the report said. Indeed, San Jose saw prices rise 18 percent on an annual basis in August, but sales still climbed 12 percent despite that significant increase. Furthermore, over the past 20 years, home prices in the Bay Area - as well as Los Angeles - have effectively quadrupled.

Yun cautioned that things could change in the near future, the report said. That's because buyers today - even when paying significantly more for their homes - still get the benefit of near-historically low mortgage rates. However, it's likely that rates could see at least a few sharp increases over the next two years, and that upward trend might price more people out of even the most in-demand housing markets.

Bay Area not alone in California
In September, San Jose, San Francisco and nearby Vallejo were considered the three hottest housing markets in the entire country, according to the latest data from Realtor.com. Moreover, five other cities in the Golden State were in the top 10, and three more were in the top 20. For the top-20 markets overall, the average home spent only a little more than two months on the market, down eight days from the same month last year, and homes in those metro areas sold for an average of 10 percent more.

Meanwhile, millennials - who tend to make up the largest share of first-time would-be buyers - say they're starting to feel the pinch, according to Credit.com. Many believe they will have difficulty meeting down payment requirements in some of the nation's hottest markets (which, not coincidentally, are where many young people are now working), and some may likewise struggle meeting more stringent credit requirements that give consumers access to the best possible rates.

The more would-be buyers can do to make sure they have strong credit - by paying down outstanding credit card balances and keeping up with their payments - while simultaneously saving more to build a sizable down payment, the better off they can be when it comes to not only being able to buy a home, but also doing so affordably.