Affordability is a huge issue in the Bay Area. Oakland, with relatively lower prices, is one of the most dramatically appreciating cities in the Country.
“Should I buy now, or should I wait?”
I’m often asked if it makes sense to wait to buy until prices go down. There are many factors effecting the economy, and some potential buyers are wondering if an increase in interest rates or the presidential election will cause prices to fall or maybe, they wonder, it’s simply time for a correction.
I’m no economist, but some evidence suggests that the causes of our rising prices aren’t going away any time soon. The Bay Area has an extreme housing shortage. Even with more development on the horizon, according to this report, there isn’t enough housing being created to meet the demand. Given the strength of demand for housing, some experts suspect that it’s very unlikely that an increase in interest rates will make a significant dent. It would seem that the same would hold true for the results of the election.
Prices may stop skyrocketing but will likely continue to increase
Experts are predicting that lack of inventory will continue to cause coastal cities like Oakland to rise in price but the price increases will trend smaller in the coming years. This year in Oakland, prices have only increased 13% (between 1/1/16 and 10/30/2016). Although smaller than the increases of the previous years, this is still the fourth largest increase in the country.
For home buyers, it still makes more sense to buy now if prices and interest rates will likely increase. Plus, if you wait too much longer, interest rates are likely to rise, which will also make monthly payments higher.
Inventory is not likely to increase
The great recession that began eight years ago was the result of a flood of foreclosures that resulted from lending policies that have largely been eliminated. Barring a huge unexpected economic or natural disaster, there is no indication that we are going to see a huge increase of inventory or big reduction in demand for homes.
If your goal is to stay in the Bay Area and you are in a position to buy, all indicators suggest that you should try to as soon as you can. If you don’t have a 20% down payment saved, that’s okay. Some loans allow down payments of as little as 3-3.5%, and there are a number of down payment assistance programs that may help those who don’t have enough savings for a down payment and closing costs.