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Why is the Bay area so expensive

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The San Francisco Bay Area is a region in Northern California spanning the city of San Francisco and surrounding counties. On a peninsula, hilly San Francisco is known for its cable cars, Victorian houses, and the iconic Golden Gate Bridge. North, the Sonoma, and Napa valleys are renowned wine-producing regions with hundreds of hillside vineyards. Gourmet food is showcased in Oxbow Public Market in the city of Napa.

The city’s economy ranked at the top of an analysis of local economies in the US’s 40 largest metro areas which answers the question of why is the bay area so expensive. San Francisco’s close proximity to Silicon Valley, considered the tech center of the world, has caused the city to become one of the wealthiest cities in America, making the bay area too expensive.

Why is the bay area so expensive (Reason/History)

First of all, because San Francisco lies on a peninsula, the amount of land available is limited, thus making each acre more valuable and an accurate answer to why is housing expensive in the bay area. 

The presence of cranes and high-rises getting built makes them fear that the city they grew up in is becoming too dense and expensive. Projects are consistently appealed for various reasons, which slows down the overall process and drives up development costs. Outlining below is the answer to why is the bay area so expensive. 

1. The Bay Area is home to more wealthy people than any other of the most populous US metro areas, according to the US Census.

2. The typical rent in San Francisco exceeds $4,500 — more than 2.5 times the typical national rent.

3. The typical price of homes listed in San Francisco is $1.3 million — 4.4 times the typical national price of homes listed.

4. One of the city’s cheapest neighborhoods, Bayview, has an average home listing price of $890,000.

5. To buy a typical San Francisco home with a 20% down payment, residents need to earn $303,000. It takes more than six years for the median US worker to earn that much.

6. San Francisco is the most expensive US city for raising a family; a family of four needs to earn $148,440 a year, nearly triple what the median US worker earns in one year.

But how did San Francisco become America’s most unaffordable city in such a short period of time? Several factors have contributed to the city’s current predicament of why is the bay area is so expensive:

1. Years of insufficient housing production coupled with a booming economy have finally caught up to the city, giving an answer to why is the bay area so expensive

2. Stringent regulations for development make building any kind of housing difficult and time-consuming, showing why is housing so expensive in the bay area 

3. A democratic public process that gives everyone a voice

4. The city has a strong anti-growth culture.

Will the bay area price go down?

Many simply can’t afford to buy a house despite Covid-19. In the latest quarter, the San Francisco real estate appreciation rate has been around 0.21%, which amounts to an annual rate of 0.84%. Some experts feel that home prices may drop by 1 to 2% in the next twelve months.

Below is the latest tabulated housing market report for the entire Bay Area release by the California Association of Realtors. The tabulated report shows the sales and prices of the Bay Area counties for April 2021. Much of the Bay Area real estate market remains firmly in “seller’s market” territory, with months of supply of available single-family homes being 1.3.

2021-06-22 17:00:52.965000

Is now a good time to buy a house in the bay area?

Housing prices are largely determined by demand (the number of people looking to rent or buy a home) and supply (the number of homes/apartments available). And basic economics tells us that when demand is higher than supply, there is more competition for less stuff, and thus prices increase, making the bay area too expensive. 

And thus, the reason for the high prices on the Peninsula is that there are a lot more people looking for homes and apartments than places that are available to buy or rent. 2021 and beyond is shaping up to be a good time to property in the Bay Area to reduce the question of why is the bay area so expensive due to these reasons:

* A rebound in the S&P 500 and tech companies. The S&P 500 returned 31% in 2019, while tech giants like Apple, Facebook, Google, and now Tesla have had GIANT years. The S&P 500 was up 16% in 2020, and the NASDAQ was up a whopping 42% in 2020. Some of those gains will be diversified into real estate.

1. A sharp and sudden decline in mortgage rates thanks to the Fed committing to 0% – 0.25% on the Fed Funds to combat the coronavirus pandemic. Mortgage rates are at all-time lows and will likely stay low in 2021 and beyond. As a result, affordability is up.

2. Tech IPO boom flooding the streets with thousands of potential new buyers and 10,000 new millionaires. They’re all getting liquid in 2021. The IPOs of Airbnb and Affirm were a huge success. And many employees from Uber, Palantir, and Lyft have had huge windfalls.

Affordability has increased because prices softened and mortgage rates went down. I refinanced my primary residence in late 2019 with a 7/1 ARM at only 2.625%. So have thousands of others.

Then in 2020, I bought a new house with a 7/1 ARM mortgage rate of only 2.25% with no fees. If you are looking to refinance, check out my favorite online lending marketplace, Credible. Credible has qualified lenders competing for your business.

2021-06-22 17:01:30.897000

Once you see the mortgage rates, you will realize that with a rebound in equities, tech IPO millionaires, and now higher affordability, Bay Area real estate is ripe to keep on increasing in prices.

Will the housing market crash in 2022?

As housing markets become less and less affordable, the demand from buyers drops off. This can have a cooling effect on the market. But overall, home values are expected to continue climbing through 2021 and into 2022. None of the reports or forecasts we have encountered suggest that housing prices will drop in 2022. Of course, as we learned from last year, unforeseen events can arise to shake things up.

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