Spring Forecast

As we enter March, the Bay Area is finally getting the rain it sorely needs. The weather forecast varies between warm days and cold. And the world of real estate is experiencing its own fluctuations. With the traditional hottest season for real estate fast approaching, we should look ahead with our own forecast for the real estate market.

Forecast 1

Now, real estate overall continues its hot streak. Prices are high, inventory is low, and the historic seller’s market continues. That is nothing new…these trends have been ongoing for some time now. But to analyze things a bit deeper, one must consider several news items and reports that have been released recently related to this market.

For one thing, there is an increasing number of people leaving Silicon Valley. Employment is strong and wages are high, plus it’s undeniably a beautiful place to live..why would anyone leave? Well, unfortunately, all that upside comes with a price: a hefty cost of living. The cost of living in the Bay Area is so high that even highly paid tech workers can find themselves needing to commute several hours every day to afford to make a living. Naturally, the cost of housing is one of the biggest factors in this, and though a steady influx of residents has kept this being too much of a problem, it is simply impossible for property values to continue rising forever, especially at their recent pace. There is a limit to what people can and will pay, even if we don’t know what that is yet.

So what does this mean?

In the short term, probably not much. Demand for homes from buyers is so high that once-unheard-of prices increasingly seem reasonable. And inventory is likely to remain low, as many homeowners would rather stay put and let their home investment grow than test the market and figure out a new living situation. New home building is slowly picking up, but that takes time, and development space in Silicon Valley is scarce.

Still, it’s worth considering the mid-to-long term possibilities in a market like this. Once things take a downturn, they tend to move quickly. This is perhaps most significant for sellers…the market has never been more favorable for sellers, but there will come a time when this changes. On the other hand, this area is almost certain to remain highly desirable for the foreseeable future, barring some cataclysmic shift. This means home values may go up and down, but should remain high overall. This is a double-edged sword: homes will remain a safe, highly valuable investment…but those struggling to survive with the high cost of living may find themselves with minimal relief. For these people, an exodus from the state may end up being their best course of action.

That’s my real estate forecast, in brief. Ultimately, there is no one-size-fits-all option for anyone selling their home. There are many factors to think about, though. Sellers dragging their feet may want to consider putting their home on the market sooner rather than later in light of some of this information. You don’t want to be left with regret when prices do start to recede. If you would like a personalized analysis of your own situation and what would be best for you, contact me at ejohal@kw.com. I’m always happy to help!