Bay Area Home Prices Still Rising – And Doing So Faster! San Francisco was named the second-least affordable city in America just before the end of 2012. Now, it looks like homes here are getting even more expensive! Home prices in the nine counties that make up the Bay Area metro spent all of 2012 rising. However, the strides the prices here took in December were completely unparalleled! According to DataQuick, a California-based research firm, the median home price in the Bay Area surged a whopping 32% in December. That’s the largest increase in the 25 years that home price records have been kept! Now, the average home in the Bay Area will cost you $442,750. Inside the San Francisco city limits, the median home price is even higher – more than $650,000 to be exact! So, what’s the reason for the price surge? There are several reasons:
1. The foreclosure effect
In December 2011, foreclosures and short sales made up more than 50% of the home sales around the Bay Area. By December 2012, those distressed homes only accounted for about 33% of the area’s home sales. While that’s still a big chunk (bigger than the national average), it’s a significant decrease in a year’s time. As a result, there aren’t quite as many foreclosures and short sales dragging down the median sales price. However, the distressed homes that are on the market here have started getting involved in bidding wars. Because they’re being listed so far below market value – and because people are so eager to find a deal here – they’re pouncing on any home that is even remotely-affordable. As a result, it’s not uncommon for foreclosed homes to get two-thirds above the asking price!
2. Local confidence
As home prices keep going up, more and more people around the Bay Are keep diving into the housing market. And, the more people that get involved in the local housing market, the more prices go up. So, the effect is cyclical. Plus, there has been an influx of new buyers in the Bay Area over the past several months, thanks to an increase in the local tech industry. As all of those new residents have come in and given a boost to the local economy, they have encouraged the “natives” to jump in and do some buying of their own.
3. Low inventory
Even though more people are starting to feel better about the Bay Area’s housing market, the inventory here still isn’t what it should be. So, there isn’t a large enough supply to meet all of the demand – and, as a result, sellers can get a lot more money for their homes.
So, is there any chance that the Bay Area will see another boom – and, ultimately, another crash?
Local experts don’t think so. Because prices have been rising steadily over a longer period of time – instead of skyrocketing over a short period of time – experts don’t foresee a crash type of situation. And, remember, the tougher lending standards that the rest of the country is experiencing are in full-effect in the Bay Area, so the odds of people getting mortgages who shouldn’t are slim. As a result, people here shouldn’t be worried about a repeat of what they saw back in 2007.
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