January 31, 2021
It goes without saying that the San Francisco Bay Area is irresistible. As one of the most coveted places to live and work in, the region is defined by vibrant cities, stunning architecture, and plenty of areas for young professionals to thrive. Indeed, the Bay Area’s real estate market continues to successfully attract more people and convert tourists into residents—despite the costly housing prices.
If you’re hoping to invest in the Bay Area housing market, don’t let the cost of living stop you from making the move to the Bay. Instead of fixating on the most famous cities out there, shift your focus away from expensive neighborhoods—consider more affordable places to live in NorCal, and look into profitable Airbnb locations or cities with a strong tech presence. Before making any abrupt decisions and breaking into the market, here’s everything you need to know.
What To Know About The Bay Area Real Estate Market
Thanks to the Bay Area’s booming tech industry, young and skilled workers constantly have their eyes on the region—it’s one of the best places to find rewarding job opportunities. As strong as its labor market is, this has led to skyrocketing rental and housing prices, turning many residents into commuters and pushing some farther away to inexpensive areas in the Golden State.
There are a number of factors that determine a home’s value. From the property’s location to its architectural style and square footage, many elements affect its financial worth and cause it to fluctuate over time. Recently, the novel COVID-19 pandemic played a huge role in impacting the Bay Area housing market.
With more people spending more time at home due to the pandemic, the S.F. Bay Area experienced a 34.4 percent increase in real estate sales over the past year—the highest in all of California. All nine counties within the Bay Area had double-digit growth. Contra Costa County surpassed all the areas within the region with a 50 percent increase.
The median Bay Area housing prices in five of the counties saw a double-digit increase. Only San Francisco’s (4.8 percent), San Mateo’s (3.4 percent), Santa Clara’s (9.8 percent), and Solano’s (9.1 percent) median sale prices rose by a single-digit percentage. But the year-over-year sales growth is anticipated to slow down considerably until the spring of 2021—which is expected to be the peak buying season.
The San Francisco Housing Market
The San Francisco housing market has faced several issues recently—largely due to the coronavirus pandemic—with properties getting fewer bids, residents relocating faster than before, and houses sitting on the market for too long. However, there is still a high demand for stand-alone houses in many of the neighborhoods. The median house price in San Francisco for a single-family home was over $1.6 million in November 2020.
With most rental prices falling in all of the major cities, the most noticeable drop was in California’s most expensive housing market: San Francisco. The City by the Bay’s rent is down 24 percent compared to the previous year. Now, the average rent for a one-bedroom apartment is around $2,600.
Even though S.F. is currently one of the top markets for outward migration, the declining rental prices are highly beneficial for residents who were previously unable to afford the real estate market in San Francisco. People are also paying more attention to neighborhoods that usually go under the radar—the Sunset District, West Portal, and the Richmond District.
Experts agree on the main reason for the decline in the San Francisco housing market: many of its residents are working remotely. There’s also high demand in suburban locations; most people no longer desire to live in densely populated areas. Living in an apartment building also doesn’t have the same appeal as it used to. People would rather have a space large enough to make room for a home office and enjoy their private outdoor areas instead of having to share common areas with other residents.
Oakland’s Real Estate Market
Investing in Oakland’s real estate market has been pretty advantageous for at least a decade. Towards the end of 2020, the “bright side of the Bay” proved to be a seller’s market, meaning that the number of people looking to buy a house was greater than the number of homes available. The inventory shortages are expected to increase rental demand; however, its foreclosure rate is 1.4 percent. While that number may seem quite insignificant, it’s double the national average.
What makes Oakland’s real estate market so beneficial is having a lower cost of living without needing to give up the Bay Area lifestyle. Compared to San Francisco and San Jose, Oakland is one of the cheapest places to live in the Bay Area—people are drawn to Oakland’s affordability. (Their departure from S.F. and San Jose has also caused a drop in rental rates in those two cities.) While every other place in the Bay Area saw a drop in rental prices, property owners in Oakland took advantage of the situation by increasing rent and cash flow. So, it’s expected that the local real estate market will be beneficial to rental property owners.
Oakland’s median home prices are valued between $780,000 and $950,0000. Once again, its pricey neighboring cities play a role in boosting home values. The most expensive neighborhoods here are Piedmont, Crocker Highlands, Claremont, Upper Rockridge, and Panoramic Hill.
The East Bay Real Estate Market
The East Bay real estate market is another seller’s market—Alameda’s median home sale price is around $925,000, whereas the median home price in Contra Costa County is a little over $730,000. It’s anticipated that the East Bay housing market may become more appealing to people post-pandemic, especially among Silicon Valley employees. Similar to Oakland, people want to keep living in the Bay Area without feeling the need to be close to their workplace.
Meager interest rates are also fueling sales in the East Bay—city dwellers are making the move to the suburbs, and people from suburban areas are choosing to move to places with lower living costs. Single-family homes are selling faster than ever. Some were even sold in less than two weeks in cities like Alameda, Hayward, and Concord. If you want to invest in the East Bay’s housing market, be prepared for a fast-paced and highly competitive market.
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