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Facts About the Future of Real Estate

Having trouble finding your dream home in San Francisco? Have properties on the market spun out of control? Tired of disappointments finding a realtor you can trust? San Francisco real estate can get you down!

The San Francisco real estate market is not going to burst on you any time soon--don't worry about that. But you do need to find a real estate agent who knows the San Francisco market, and who can match you with the right properties. This article highlights the fundamental value of the Bay Area real estate market. Good luck, and be in touch when you're ready!

By Avram Goldman
President / Chief Operating Officer of Coldwell Banker San Francisco Bay Area

With a sluggish economy and layoffs in the high-tech industry mounting, many wonder whether the Bay Area housing market might be the next sector to be affected. Are prices “too high” in the Bay Area and could “the bubble” burst like it did in the stock market two years ago?

While no one can predict the future of the economy, a number of experts have indicated that the bubble is not likely to burst. There are a number of economic factors that keep Bay Area prices higher than elsewhere in the nation, and that many believe will continue to do so for many years to come. Following is a look at Bay Area real estate and the economics of why experts agree, the bubble is not likely to burst.

According to the January, 2003 issue of Kiplinger's Personal Finance, investors agree that the market is going up. “Stocks are cheap and America is on the mend.” Additionally, the financial publication reports, “Home prices played hero last year, defying a struggling economy to sail to record-breaking highs…Continued low mortgage rates, consistent demand and a slight decline in home building will prop up prices. With those factors constant, and with the sluggish economy taking the edge off what had been voracious demand in certain markets, the price outlook nationwide looks remarkably uniform.”

James Diffley of Global Insight, a company which provides housing-forecast figures, says: “We don't think home markets virtually anywhere can be characterized as a bubble about to burst…We'll see more normal, sustainable increases in home values in 2003.”

The California Association of Realtors reports, historically, the changes in Bay Area prices are more pronounced than elsewhere in the country, but the long-term direction has always been up.

A look at historical data provides an interesting glimpse at the stability of California real estate. According to the California Association of Realtors, over the last 37 years the median sales price of homes in California has only decreased seven times – six times under 4% and only once at 6%.

The supply of housing continues to fall short of the demand; according to the California Building Industry Association, California typically adds about 250,000 new households each year, yet only builds about 150,000 new housing units.

The shortage is particularly acute in the Bay Area where the population will grow by 450,000 between 2001 and 2005 according to the Association of Bay Area Governments. Interest rates also are making housing more affordable. Mortgage rates are at their lowest levels since President Kennedy was in the White House.

In the future we're likely to see even more investment in housing due to what two Cornell University economists, Robery Avery and Michael Randall, have dubbed “the wealth tsunami.” Baby-boomers nationwide will be the beneficiary of as much as $10.4 trillion in inheritance between now and the year 2040, much of which will go into real estate.

An Ohio State Professor, Lisa Keister, found that the only baby-boomers who haven't done as well as their parents have been those who haven't bought a home.

The fundamental strength of the Bay Area market, according to the United States Commerce Department, lies with the depth of the region's economy, in particular the tech sector in Silicon Valley . Despite the recent downturn, Silicon Valley 's long-term prospects can't be denied. It remains the heartbeat of the American economy. Silicon Valley accounts for approximately $28 billion in exports, according to the Commerce Department. If it were a state, Silicon Valley would rank 7 th in the U.S. , right behind Illinois and ahead of Florida .

Finally, it's hard to put a price on the quality of life factors that attract so many people to the Bay Area.

The Bay Area boasts a temperate climate, breathtaking scenery, a host of outdoor activities within a short drive, world-class restaurants and unmatched entertainment and cultural events.

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