Author Topic: Bay Area housing prices in the next few years  (Read 5004 times)

annod

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Bay Area housing prices in the next few years
« on: September 15, 2013, 06:07:58 PM »
Bay area housing prices had gone up 15-25% in the past year depending on neighborhood (and depend on which source you get the data from). We are looking for houses and the bidding wars are kinda crazy. Not sure are things slowing down, or if we are in a bubble.  We are looking to buy a starter home (2 bedroom with extra space for office), but the thing with starter home is that if we have more than one kid, we may outgrow it. I would hate to be caught up in a situation if/ when that happens and we have to sell during economic downturn and lose money. Esp. with the Bay Area housing prices, buying / selling can mean over 50K. If during a "normal" market, and I can assume housing prices to continue to increase 3%/ year in the next 7 years, then even if we do need to sell 7 years later, it would make financial sense to buy a starter home (according to the nytimes buy vs rent calculator)...

Any meaningful predictions about how the bay area market will go in the next few years?

arebelspy

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Re: Bay Area housing prices in the next few years
« Reply #1 on: September 15, 2013, 11:49:05 PM »
What would make you assume people on the internet have a working crystal ball?

;)
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with two kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

madmax

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Re: Bay Area housing prices in the next few years
« Reply #2 on: September 16, 2013, 02:05:43 PM »
Have you played around with the advanced settings in the calculator? Your renting scenario might be different than ours but we never saw the calculator in favor of buying in the Bay Area. I have a sneaking suspicion that you haven't changed the investing performance rate from 4% to a more reasonable number like 7%.

This might help: http://www.bogleheads.org/wiki/Owning_vs_renting

Undecided

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Re: Bay Area housing prices in the next few years
« Reply #3 on: September 16, 2013, 04:06:25 PM »
Have you played around with the advanced settings in the calculator? Your renting scenario might be different than ours but we never saw the calculator in favor of buying in the Bay Area. I have a sneaking suspicion that you haven't changed the investing performance rate from 4% to a more reasonable number like 7%.

This might help: http://www.bogleheads.org/wiki/Owning_vs_renting

Definitely try the calculator. When I was thinking about buying on the Peninsula, it was really only a question of whether buying paid off in 2 years or 4 years (and I was using an investment return of 8%), so definitely individual circumstances matter. Many of the defaults in the calculator aren't right for the Bay Area (e.g., insurance was like 1/4 of the cost presumed by the calculator, if I remember correctly).

dragoncar

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Re: Bay Area housing prices in the next few years
« Reply #4 on: September 16, 2013, 04:49:18 PM »
What would make you assume people on the internet have a working crystal ball?

;)

Reply hazy try again

scarab007

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Re: Bay Area housing prices in the next few years
« Reply #5 on: September 17, 2013, 01:45:35 PM »
We bought in the Bay Area (San Carlos) about two years ago. Paid off for us and was less than renting where we got in.  No kids and not planning, so we won't grow out of our place. 

The prices are crazy and a ton of hype of buy now so you don't get left out of this buying frenzy.  From what I am seeing in the South Bay is that there is no other place to go. Also the rates being low made it better for others to get in.  I think you might be safe for the next few years, but you can't always predict what is going to happen.

Undecided

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Re: Bay Area housing prices in the next few years
« Reply #6 on: September 17, 2013, 02:30:38 PM »
We bought in the Bay Area (San Carlos) about two years ago. Paid off for us and was less than renting where we got in.  No kids and not planning, so we won't grow out of our place. 

The prices are crazy and a ton of hype of buy now so you don't get left out of this buying frenzy.  From what I am seeing in the South Bay is that there is no other place to go. Also the rates being low made it better for others to get in.  I think you might be safe for the next few years, but you can't always predict what is going to happen.

Aside from not thinking of San Carlos as the South Bay, I agree with this generally. But even having only spent a little over a decade in the Bay Area, I saw two "collapses" that were either really short-lived or didn't have much effect in my immediate area at the time (mid-Peninsula), plus a couple of incredible year-over-year increases in my immediate area in supposedly stagnant times, so I would suggest that the OP think very narrowly about a particular town or even neighborhood, rather than about the "Bay Area" generally. While they might move together, generally, over the longer term (I don't know, I'm just saying might), I think there's a pretty big variation from one micro-region to another micro-region in shorter periods.   

annod

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Re: Bay Area housing prices in the next few years
« Reply #7 on: September 17, 2013, 11:50:03 PM »
Thanks for the replies. i guess in the short-term, it is much harder to predict than longer term when you can ride out some waves (7-8yrs +). It is probably true as well in the stock market and rental market. So I guess our buying decision should be more based on whether we can afford the monthly payments and still save enough for retirement, as well as other non-financial factors. And I think if we can buy a place that can serve us for the next 7-8 years is probably a good time frame. And that's not just because of short-term volatility and cost of buying/selling, but that the whole buying/ bidding war experience has been so stressful (and moving itself is stressful too) and I would prefer not to have to do it frequently.

escolegrove

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Re: Bay Area housing prices in the next few years
« Reply #8 on: September 18, 2013, 12:17:46 PM »
Personally we bought starter houses that we use indefinitely if required. Both of the primary houses were 3 bed 2 bath 1600ish sq. They were in good school districts. We are currently a couple with a cat. So definitely did not need all the space but it was affordable. The other key is utilities. Are they affortable? At this size if we had 4 kids and wasn't able to get a bigger house than we could live in it. Comfortably, well that a whole another discussion :) We also bought house that were easy to rent. So if we did have to get a bigger house, the rental difference between the mortgage and rent could go towards our next house.

3 Bed 2 Bath House
Rent$ 1350
Mortgage: 950

$400

4bed 3 bath 2300sq
Mortgage $1500

Apply renting discount -1100 only $150 more a month

We plan on keeping these houses long term. We don't plan on selling them for the equity but using the rent for towards affording the mortgage payment.

Dicey

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Re: Bay Area housing prices in the next few years
« Reply #9 on: September 20, 2013, 06:23:26 PM »
It seems like you're looking for a single family home. Another possibility is to look for a house that could be easily added on to. If you bought a 2+1 or a 3+1 and added another bedroom and bath, your house would be worth proportionately more and be buffered from market swings, as you're creating a more desireable property. It would be better (i.e. more mustachian) if you could DIY most of it to ensure maximum appreciation. Make sure your work is permitted or you could get skunked at resale time.

As to meaningful predictions, it concerns me that you might trust anyone who says they "know" what the market will do.