I work in SF, and have rented as I am wary of the seemingly unsustainable prices. I would like to buy a house (to owner-occupy) if it makes sense, but I can't get a clear picture of whether or not it makes sense to buy here. Often, I hear one of two extremes:

The Pro-Bay Area extreme:

"The bay area has always been expensive. I could barely afford to buy my house when I bought it, and I couldn't afford to buy it now. Get in while you can."  

Problem: Extreme appreciation can't continue into purpetuity. Eventually, you'll hit a point where everyone is priced out. Seems a lot like 2000s era stock investors saying that the market can only go up.

The Anti-Bay Area extreme:

"$1.5m for a house? How can anyone afford to live there? I paid $100k for my house here in Ohio. There are homeless everywhere and poop on the streets. I don't care if I could get paid 2x the salary there, it's just too expensive."

Problem: Ignores factors such as high salaries that lead to higher prices. Brushes aside the career opportunities and massive amount of money in the area.

I'm looking for a more sober middle-ground, or perhaps a more convincing explanation for either of the extremes if they happen to be true. Personally, I would like to believe that home prices will continue to go up, but I haven't heard an argument convincing enough that I would bet $1.5million on it. Experienced bay area investors/ residents, let me know your thoughts on this complex topic!

growth in price is slowing and will slow more... yet hold value more or less, if you were here in 2008 you noticed the prices in sf and silicone valley held. Suburbs around Bay Area dropped quite a bit but not as much as the rest of the country... but then returned in 6 years. The area continues to hold great job prospects and famous colleges... and rich people around the world retire in places like Marin, Sonoma, Napa, Los Altos/peninsula, I would not bet on dramatic price drops nor dramatic increase. 

You’re asking a question that has no quantifiable answer...

There is no answer, there is only belief

Real estate in Bay Area has always been an “local” phenomenon. I have lived in the Bay Area since 2000 and have seen the dot com boom and bust, the 2007 RE boom and bust and the unprecedented 2010 to 2020 bull run both in the RE and the stock market.

In my opinion, so far the Bay Area has been a juggernaut mainly due to the innovation and jobs, with Covid and many companies providing flexible/remote working options, the demand for housing “can” decrease a bit in the bay area but it is not fully clear yet by how much. I would not expect the prices to drop with any significance, in fact they have been going up in most Bay Area locations except SF (that I know of). In the short term, I am a bit bullish on the house prices in the Bay Area mainly because, of the low interest rates (easy money) have been driving the demand and this will most probably be the case for the next couple of years and mainly will drive prices up for the lower to mid level homes, the more affluent homes may see a bit of softness mainly because a good chunk of folks who usually buy those houses are tech and they are probably considering moving out of the bay area. In summary you can expect some softness in the upper tier houses in SF and increases in prices for the short term for houses in some specific Bay Area locations.

If I were in the market to buy a primary residence, where I plan to stay for the next 10 - 15 years and I have ascertained a location and my basic finances are in order, I would go ahead and buy. It is probably the most basic advice but in my opinion there is a higher probability that you will come out on the right side if you buy for the longer term, rather than not.

I am going to make one last stab at this:

Extreme appreciation cannot last forever but stasis can and does last forever.  My father-in-law bought just outside of Toledo OH in the 1950's for $14,000.  At that time, you could have bought a comparable home in Mill Valley CA for about $17,000.  The Toledo property is worth about $60,000 today.  Had he bought deeper into East Toledo, it could conceivably be worth LESS than $14,000 today.  That Mill Valley home - without any updating - is going for around $1,400,000 - much more if updated.  Since the late 1960's the inflation rate in the aggregate has increased price about 8 fold.  So, in today's dollars, the Toledo property would sell for about $112,000 and the Mill Valley property for $136,000 if inflation were the only factor.  In other words, the Toledo property has experience substantial DEFLATION.  The buyer there has LOST REAL WEALTH.  The biggest risk you actually run is not the failure of appreciation beyond the ambient inflation rate but the fact of depreciation such that you fall below it.   

@Tyler D.

The Bay Area has its own unique market with unique jobs and has held its value for a substantial amount of years.

Buying in SF, SJ, Milpitas, or San Mateo for that matter makes sense to me. Find yourself a great deal and jump on it. There is still a lot of successful people living in the Bay Area to connect with.