Is Bay Area housing due for a correction?

[piercrab]

Housing in the Bay Area has always high.  In the last couple years, the become ridiculous.
Anything under $1 million is not worth looking at.  Inventory is low. What drives the housing prices when so many companies did not do well in the last quarter report?  I hear from colleages that small layoffs are happening everywhere.  Is a housing correction coming soon?

[iamlindoro]

Regarding whether a correction is coming, you'd need a crystal ball to know for sure.  My guess is that so long as the economy continues along its present trajectory, the Bay Area housing boom has at least a few years left in it.

I think that you might be looking at prices and inventory from a San Francisco/Peninsula-centric view.  There is tons and tons and tons of housing in the Bay Area under a million that is well worth looking at, particularly if you are willing to consider a townhome or a condo.  There are hundreds of 600K-800K single family homes on the market in very nice parts of San Jose near where I live at this moment.  There are a bunch of 1-2 bedroom condos all around for 400-500K.  Fremont and Milpitas are about the same. Oakland is rapidly improving and has a number of affordable SFHs.  Pleasanton, Livermore, and Morgan Hill are even less expensive if you can get away with living a little further out.

Yes, inventory is somewhat tight, but it's definitely possible to get into a good home way under a million. 

ETA: That is not to say that you *should* buy a home in the Bay Area, by the way. Pretty much everywhere in the Bay Area favors renting over buying right now.

[Lagom]

I wish, but I'm not optimistic. Happily renting for now in Santa Clara, but I would love to be able to buy a place in the South Bay someday. Not sure where you're seeing 600k SFHs, though. I suppose maybe in East San Jose? There are certainly parts of it that are nice enough, except it's far from everything and commuting would be terrible to most major employers. From my own research, the floor for SFHs that are in decent neighborhoods (without crazy commutes) and not completely falling apart seems to be the low 700s. But maybe I'm too picky.

There do seem to be some "deals" in the condo/townhouse markets, relative to the square footage offered, but they are still insanely expensive and I've been burned by too many HOAs to find them a particularly attractive option. Parking is also usually a major issue at most complexes.

Honestly, when people wag their fingers about CA taxes or regulations and warn about Google moving to Texas, all I can think is "I sure hope they do!" =P

[Another Reader]

$600k will get you into some questionable neighborhoods in South and East San Jose.  Won't be much of a house, either.  Your options improve in the $700's, but you need to be over $800 to get a standard 3/2 (1,600-1,800 sf) in a neighborhood with passable schools.

Yes, there will be a correction.  The confluence of tech employment and overseas cash won't last forever.  The tech-driven market is already softening and expensive homes in Palo Alto are sitting.  It will take awhile for the slowdown to filter down, but once the layoffs start, prices will flatten and drop.