Quoted directly from SF Business Times (because I could never be so eloquent): "As the exodus from the pricey San Francisco office rents has pushed businesses to search for more affordable digs, one city in particular has reaped the benefits: Oakland.
Whether it's Uber buying the 400,000 square foot Uptown Station property, formerly the Sears building, or San Francisco bastion the Sierra Club pulling its 124-year-old stakes, more than a dozen major businesses have fled to Oakland so far this year." See chart below. Bay Area market is slowing down as homes are seeing fewer offers. According to Redfin, many Bay Area residents pay for houses with stock, so that willingness to bid $300k over asking price is being limited by the volatility of the stock market.
"The spring frenzy has been so frenzied for the last three years that there is a certain exhaustion that enters into buyer mentality. They're tired of not winning. There's fatigue on buyers' part and it lessens the competitive environment," Glen Kelman, the CEO of Redfin said. Instead of the bidding wars of 15-20 offers on each property we were seeing only a few months ago, homes are getting 3-5 offers instead. While still undoubtedly a competitive market, the buyers' odds just got a whole lot better. Kelman also added, "The market has gotten frothy so there will be a period of softening. We always say San Francisco defies the laws of physics. In other markets, what goes up must come down. Here, it just flattens out." The same goes for Oakland where there is still so much job creation and high housing demand that we will most likely not see home values drastically decline anytime soon. Tired of seeing the Bay Area on lists of "Least Affordable Places to Live" yet? Welp. That's too bad, because here's another one.
(Spoiler alert: SF, San Jose, and Oakland made it to the top 10.) New data from Trulia finds that the average-earning SF resident has to pay 77% of their monthly salary toward the average mortgage as of August 2015 (assuming 30-year loan, 4% interest rate, property taxes, and insurance). That's an insane 20% increase from just a year ago. Trulia factored in the costs of utilities and of commuting, which SF (and San Jose) has among the lowest costs for, so some of what homebuyers lose in affordability are made up by cheaper commuting and utility costs. Still, added all together, average mortgage, utilities, and commuting add up to 85.5% of the median income earner's wages. That leaves only 14.5% left over for everything that isn't housing yourself, getting to and from the office, and keeping the heat and lights on. In comparison to Oakland, where these expenses make up (only) 55.9% of a resident's income, it almost seems as if Oakland is an inexpensive place to live. But don't worry, Uber will be sure to change that soon. Finally some good news for the discouraged and disgruntled Bay Area buyers! Zillow's latest numbers show that the nation's housing market is actually starting to level off. While the Bay Area is still one of the hottest markets in the nation, we're seeing a decline in home appreciation growth and the market returning to normal.
Falling home valuations and increased home inventory are expected to spur renters to buy, especially given the dramatic increases in rents. SF area rents jumped over 14% to $3,285, proving to be painful - both financially and physically - as tenants go as far as to skip their dentist and doctor visits just to pay their landlords. Because what good is a healthy body if there is no roof to shelter it? The first world problems of the middle class are real! And of course I cannot end this post without a shameless plug: Take advantage of the slowing market and find your next home here! And the award for The Most Unaffordable Place To Live goes to...the Bay Area. You are shocked, I can tell. To buy a median-priced home of $742,900 in the Bay Area (which includes SF, San Mateo, Alameda and Contra Costa counties), all you need to make is a measly income of $142,448 a year. That's it!
On the opposite end of the spectrum, Cleveland is the most affordable metro area on the list, where you can buy a huge roof over your head with just a slightly lower salary of $32,010. But then....you'd have to be a Cavs fan. And who wants that? (See appropriately colored map below for the salary needed to live in other major metros around the country.) The Bay Area is the second worst region in the country (trailing behind LA) to keep up with housing creation. This is surprising to approximately zero people, but isn't it reassuring to have more numbers confirming the sad truths we all already know? New analysis from Zillow shows that for every 1,000 new residents in the Bay Area, there were only 193 new housing units permitted, making it one of the country's least affordable housing markets. Residents can now expect to spend a whopping 44% of their income on rent, or 39.2% on a monthly mortgage payment.
Meanwhile, Zumper, a website that lists and analyzes rentals, released its March national rent report, which found that SF is still the most expensive city in the United States, although rents dropped by 1.7% to a median of $3,400. The migration from SF across the Bay Bridge, mostly caused by everyone's ambitious dreams to not be homeless, has continued to drive appreciation in the East Bay, pushing Oakland up to No. 4 on the list, with a median rent of $2,000. As the old saying goes: The struggle is real. It's official: The fastest growing rental market in the country is...Oakland (??!?!?). Demand in the Bay Area is so high that everyone is now fighting for a spot in the so-called hood. National rent growth was at its highest at 4.9% in January. Meanwhile, Oakland rent increased by a whopping 14.3%. Of the top 10 highest markets, the list includes four California metros: Oakland, San Jose, Sacramento, and last but never least, the depressingly unaffordable San Francisco. Here's how the rest of the country stacked up:
Moral of the statistics: 1) Avoid rising rents by buying a place of your own, 2) Invest in a multi-unit home to leverage the rental demand, and/or 3) Never leave your rent-controlled apartment, ever. Oh, and hey what a coincidence, it just so happens I can help you accomplish 2 out of the 3 items listed above! ;) 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. |
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