Best SF Home Buying Conditions in 30 years?
Yesterday on NPR, I listed to Bob (Robert) Shiller, famed Yale economist say that he felt the real estate buying conditions were the best he has seen in decades. Decades, people. Yes, the government is playing a role by supporting home ownership. Yes, the mess in Europe helping to keep home loan interest rates low here in the United States. Yes, according to Zillow, a third of homeowners in the San Francisco Bay Area are underwater.
Nonetheless, the truth remains that it is a kick-ass time to buy a home in San Francisco if you have stable employment, plan to be in SF for the next 5 years or so (or plan to keep the home as an investment property), and can afford to buy. Well, actually, the real best time was 6 months ago but hey, we can’t all be clairvoyant.
Sunday’s Business Report in the San Francisco Chronicle featured an article by Carolyn Said entitled: Limited supply of houses lifts prices.
Buyers are battling over tight inventory, with for-sale homes in such short supply that they sell up to twice as fast as a year ago and draw multiple offers. In many areas, asking prices and sale prices are up significantly from this time last year.
The combination signals a shift to stability for the once-plummeting housing sector, experts say.
“The market has clearly turned,” said Christopher Thornberg, principal at Beacon Economics. “The question is: How high a bounce? Will it be a basketball or a bowling ball? The answer is more on the bowling ball end. While things have clearly (improved), it’s not like the problems are finished.”
Record-low interest rates and home prices that have tumbled from once-stratospheric heights are bringing buyers, especially first-time owners and investors, out of the woodwork.
“Affordability is extremely high and there is pent-up demand,” said Esmael Adibi, director of the Anderson Center for Economic Research at Chapman University in Orange. “Buyers who were sitting on the fence are now noticing that prices are firming up, which is bringing a significant number to the marketplace.”
But the biggest factor of all, he said, is employment. Despite disappointing national figures released Friday, showing that only 69,000 jobs had been created across the nation in May, Bay Area job growth remains strong, fueled by the technology sector, analysts say.
“What is helping the Bay Area is that San Francisco and Silicon Valley are showing the strongest job creation of any area of California,” he said. “Job growth basically translates into housing demand.”
Ken Rosen, chair of the Fisher Center for Real Estate and Urban Economics at UC Berkeley, agrees that the “job engines of Silicon Valley and San Francisco” have ignited the real estate market.
“It’s a boom,” he said. “It completely turned around in the past six weeks and the bottom is in hindsight now.”
“We have a long way to go to a broad-based recovery in real estate in California,” Adibi said.
Zillow shows that negative equity – people who owe more than their home is worth – is still pervasive. Almost a third (30.7 percent) of homeowners with mortgages in the five-county San Francisco metropolitan region (San Francisco, San Mateo, Marin, Alameda and Contra Costa counties) are underwater. Almost 10 percent of those underwater homeowners are behind on mortgage payments by 90 days or more, presaging possible foreclosures.
“Because we expect a slower pace of home value increases in the immediate aftermath of the bottom – thanks to the overhang of negative equity and elevated foreclosures – it may be a long time for some deeply underwater homeowners to resurface,” Humphries said. “For the nearly 2 in 5 underwater homeowners who owe more than 40 percent over the current value of their homes, it may be five to eight years, or even longer, before they have positive equity.”