Would you buy in the Bay Area right now?

11 Replies

I’m an absolute newbie. My wife and I live in the Bay Area, and we’re looking to buy our first property. Currently, we’re seeing homes being sold for 20%+ of the asking price. Crazy!

From one end, we see interest rates super low, but prices are going up. In contrast, when interest rates will go up, prices will hopefully go down.

But what do you think? Should we wait? Does it make sense to buy anyways? How do you think the real estate market is going to look after pandemic?

Hey Noel.

This is (literally) the million dollar question. Where will home prices be in a few days, months, years. My opinion is if you can buy now, get in and get used to the new normal of limited supply as owner occupiers as well as investors hodl until macro economic factors steady. 

Don't be concerned by the list to sale price ratio. Many agents in the Bay Area intentionally price homes well below their market value to create demand and multiple offer scenarios. That 20% premium on the list price is more likely 3-7% depending on the home and the market. Where are you currently looking?

Another option is trying to find homes off-market, currently working in that capacity for many of my clients.

Hi Micheal, 

Thank you for your reply! We’re mostly looking at the East Bay: Orinda, Oakland hills, Piedmont, Montclair, Lafayette. Additionally, the Northern areas, like Mill Valley, San Rafael and Napa. Ideally, we’re trying to find a house in a nice neighborhood that we can slowly fix, living in it, and hopefully sell it for a profit if we decide to leave. We have seen properties with an adu, do you think those would have less competition from other buyers? We’re also noticing better deals in San Francisco, would you buy in the city? I’m a little concerned with rent control if we were to transform that property in to a rental in the future.

Thanks again!

Best,

Noel



@Noel Pregot You can't count on the fact that prices will drop if interest rates rise.  It makes logical sense that this would happen, but markets do not always respond in that way.  The best advice we got back in the 1990's was to just get in and that's advice I would give assuming you intend to live in the area indefinitely.  If you have plans to move in a few years, I might be more hesitant to jump in, especially when rents in the city have dropped some.  You can't go wrong with southern Marin or Lamorinda.  

@Noel Pregot  

ADUs: The presence of an ADU is not going the affect the competition level significantly. I wouldn't hunt for them specifically, just treat it as a bonus if the rest of the property and main home fit your general requirements. They will be factored into the price, usually anywhere from 75-200k premium.

San Francisco: Strange times we're in when the SF market is seemingly the most affordable/least competitive. There is some comparison bias going on here but I think this is a great time to be searching for homes in SF. We are not experiencing the 15-25 offers per home of 2017-2018. While median home prices are continuing to set records, YoY appreciation was modest (6-8%) versus the 12%+ seen in the east bay and San Jose. 

Rent Control: Single family homes has different rent control guidelines versus multi-family. As an investor, I would not be concerned with owning a rental in SF if my time-line was flexible. People move eventually and tenants that stay beyond their lease can always get evicted by an owner-occupied buyer so there is usually a peaceful transition during transactions. 

East Bay and Marin are hot hot hot right now. But everything depends on price point. Do you have a comfortable max you are willing to go up to? 

Hey Noel, I'm a newbie here as well, and my wife and I are in the same situation. Looking around the East Bay, Oakland more specifically at the moment, trying to find an attractive multi-family rental property. I'd love to connect, and just have a local peer to discuss things with if you're interested. It's a bummer there are no opportunities for group meet-ups right now, as I feel like I could really use some face-to-face time with more seasoned investors, but forums will have to suffice for now. Best of luck either way. Cheers!

To those worried about if now is the "top" of the market....etc., etc. look at what another poster said. Look at what the prices were in the 90's in the East Bay, Sf and Marin County..........and look at them today. Some folks bought at the "top" in the 90's and today those prices look paltry compared to today.

Hello, I took refi from my bay area property to buy another bay area property and holy moly it's cash flowing with 9% cap rate. The other SFR in bay area is also positive cash flowing with 2% interest rate.

For me , before bay area reached 0% cap rate, it's not the top yet.
Also home price in 2020 is relatively cheaper compared to 2018 because lower mortgage payment.  The key here is you must secure below 3% rate.

Originally posted by @Carlos Ptriawan :

Hello, I took refi from my bay area property to buy another bay area property and holy moly it's cash flowing with 9% cap rate. The other SFR in bay area is also positive cash flowing with 2% interest rate.

Can you share where in the Bay Area you are finding 9% caps? and was your purchase SFR or multi-family (5+ units)?

I am actively buying now. Under contract for a 10 unit strip mall in Patterson and a open lot in south San Francisco.

I think 2021 will show huge price appreciation. Moreover, this appreciation is largely supported by the federal stimulus package and money printing. 

It’s hard to find good deals with those bidding war going on though. Buy buy buy.

multifamily, there're still some opportunities in east bay and north bay. Of course it would be in C neighborhood or less but if you've experienced living and managing that, why not. It's pretty decent.

I would definitely keep my eye out for VERY hard to pass deals. And in that note I mean, wait a little longer... maybe another fiscal quarter. The economy is about to shift very soon and that could change tour options... knut for the good or bad? That’s the gamble... Either way—you want to find a home. If it’s feeling like perfect to you, then clench. If you could have got a better deal on six months, don’t worry it will make up for itself somewhere in your financials.