Bay Area: Why you should consider buying a home in 2018

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According to the California Association of Realtors, the median sale price for homes climbed to $1.5 million in San Mateo County and $1.48 million in San Francisco, a 12 percent increase from last year. Other counties saw more dramatic increases. In Santa Clara County, for example, median home sale prices rose 34 percent to $1.3 million, and Alameda County reported a 14 percent increase to $862,000. Adding salt to the wound is the new tax code, which only allows homeowners to deduct interest on up to $750,000 in mortgage debt. With home prices in the Bay Area well above this amount, it adds to the expense of owning a home. 

“The price increases, coupled with the recent update to the tax code, might cause some to hesitate to make the move from renting to home ownership,” said Troy Hall, a mortgage consultant at Tech CU. “But if you’re considering buying a home, now might be the time to do it. You’re going to see interest rates and home prices rise even more. A slew of companies like Uber, Lyft and other Bay Area start-ups are planning to go public — causing an influx of all-cash buyers to the market.”

Why You Should Buy a Home 

Interest rates are likely to go up 

In December 2017, the Federal Reserve raised interest rates for the fifth time over a 12-month timeframe, indicating an improving economy and labor market. This means you’ll now pay more to borrow the same amount of money you would have prior to this. And, the Fed isn’t done. In fact, during that same meeting in December, the Fed forecast another three rate hikes in 2018 — with two in 2019. Renters who would like to own their own homes should consider purchasing a home now — before rates rise again.

Housing prices are likely to continue increasing   

According to Zillow, housing prices in the San Francisco area will increase nearly 6 percent in 2018, meaning that home prices are likely to continue to gradually climb. By locking in a mortgage now, you’ll pay less.

Inventory is not increasing rapidly enough  

Designed to increase transparency in how cities and counties are performing against their housing goals, the Department of Housing and Community Development (HCD) announced that 97.6% of California cities did not meet their full Regional Housing Needs Allocation (RHNA) goals.

What this means, is that the overwhelming majority of cities and counties in California are failing to approve the housing needed to keep pace with population growth. It also means these cities and counties are failing to meet guidelines for the development of market-rate, affordable housing (or both). This is yet another strong indicator that home prices are likely to rise, until supply more closely matches demand.

According to Hermelinda Negrete, also a mortgage consultant at Tech CU, “Based on what we see in the market today, including rising interest rates, little to no growth in inventory and increasing home prices, it makes sense to buy now if you can afford to do so. A home can still be a good investment. ”