5 Reasons Why The Bay Area Expensive
Updated: Aug 16, 2020
The Bay Area is one of America's hottest real estate markets, coming neck to neck with New York when buying and selling homes. Why though, does it cost so much to buy a home in the Bay Area?
California Housing Shortage
It will come as no surprise that California has a significant housing shortage problem and it's been this way since the 70's. As more people re-locate to California to experience the thriving and vibing lifestyles of LA and San Francisco, the popularity of California outweighs the capacity to house the population.
Coming from outside of the US myself, I know what the dream feels like to want to move to California, only to find that when you arrive, it's a very expensive to get setup! However the attraction and excitement of this amazing state continues to pull in residents both domestically and internationally to enjoy the lifestyle it has to offer.
Why The Bay Area?
The Bay Area, home of Silicon Valley and thriving San Francisco are not only great tourist attractions for visitors, they also offer opportunities and pathways to success that cannot be experienced in many other parts of the America.
The issue is however, that the Bay Area has not had the development required to support the growing economy, increasing employment opportunities and compounding population. The resulting effect is an imbalance of supply and demand, creating more competition between buyers, driving up the prices.
Will The Prices Ever Go Down?
I often have people tell me they will buy a home when the prices go down in the Bay Area. While I am not a clairvoyant, I wish I was! However, I need to go back to the data to answer this question as best possible.
The Bay Area has a thriving tech industry and tech is the way of the future, so far as we can see. The recent changes with the impact of the pandemic in 2020 has allowed Bay Area residents to work from home. There have also been a lot of layoffs and increasing unemployment levels across many industries. It doesn't take much to see the increased competition in places like Sacramento, where we are seeing people flock to compete to buy affordable housing when comparing to other alternatives such as expensive rentals in San Francisco.
The economy hit its lowest during shelter in place and it has been argued that housing has not felt the impact yet. However, in the field, particularly in the East Bay, there is solid competition for most homes where sellers are achieving $50k - $130k+ above the list price. During shelter in place, the market did change and when the economy re-opened, demand grew back to where it was prior to the pandemic.
- Housing shortage
- Thriving Tech Industry
- Bay Area Lifestyle
- Low Interest Rates
- Consumer Confidence In Bay Area Housing Market
- New work from home norm
- Relocation To More Affordable Cities And States
- Consumers Feeling Its Out Of Reach
At the moment, the increasing demand factors are outweighing the decreasing demand factors. For prices to go down, consumer confidence would need to drop significantly, companies would need to allow their employees to work from home indefinitely and/or interest rates would need to go up significantly.
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