What do you get when you combine low interest rates, a surging stock market, a sudden growth in employment and population, shockingly high rents, an inadequate supply of homes, and all the tech startups and IPOs in the world?
SF's real estate market!
Just as the law of supply and demand states (thanks Econ101), when there is a limited supply of inventory and an ever-increasing demand for housing, home prices will increase accordingly. This has left many SF residents migrating to the East Bay in search of more affordable housing options, attractive neighborhoods, and oftentimes just the simpler things in life, like a backyard. As SF's demand spills over across the Bay Bridge, we're seeing East Bay home prices and sales skyrocket as a result.
It's difficult to predict how long this will last as numerous political and economic factors can affect any real estate market. However, home prices are appreciating at a slower rate than prior years, which indicate that the buyer and seller sides of the market are starting to even out.
Let me catch you up with an oversimplified version of what's going on: The economy is growing at 3.5%, our stock indexes are rising, budget deficits are shrinking, unemployment is below 6%, mortgage rates are at its lowest since May 2013, and gas prices are falling so hard that a cross-country road trip in the middle of winter seems like a perfectly logical thing to do.
Despite the seemingly good news, many economists are not so bright-eyed about our future as the numbers may not accurately depict the entire story. Yes, unemployment is low, but people are taking pay cuts and working temp or part-time jobs, thus taken out of the unemployment bracket. Yes, interest rates are low but expected to increase in 2015, which will cause the stock market to drop, slow down investments, and put a halt to spending. And the pessimistic list goes on and on.
All of this to say that you should educate yourself, figure out how this all affects you, and take action to protect yourself against the ups and downs of this unpredictable economy.
All things real estate.