Is It Worth Buying A House In The Bay Area?
2020 and beyond, San Francisco Bay Area is a great time to buy land. 2018 was a record for real estate values in the SF Bay Area. Specifically, San Francisco 's median property price dropped by 11.5 percent from its high in early 2018.
The nice thing to buy now is that you at least didn't buy at the height of 2018! A fall in the median home price of 11.5 percent is important. This is a reduction in the value of a down payment of 20 percent by 56 percent.
Prime SF Bay Area real estate plummeted by about 15 percent during the last housing crisis of 2008-2009, flatlined for several years, and then exploded upward.
By Oleg. - https://www.flickr.com/photos/olegshpyrko/15400283837/, CC BY 2.0, https://commons.wikimedia.org/w/index.php?curid=101352444
Is Now A Good Time To Buy In The SF Bay Area?
For three main factors, 2020 and beyond is shaping a good period for property in the SF Bay Area:
A turnaround at the tech and S&P 500 stocks. In 2019, the S&P 500 returned 31 percent, while tech companies like Apple, Facebook , Google, and now Tesla had years of GIANT.
After the Fed telegraphed no more from two hikes, a fast and unexpected fall in mortgage rates.
Tech IPO boom of about 2,000 – 3,000 potential new customers and 10,000 new millionaires entering the streets. By 2020, they'll all get air.
When markets weakened and mortgage rates dropped, affordability has improved. I refinanced my primary residence at 2.625 percent at the end of 2019 with a 7/1 ARM. So, have thousands more.
Check out SF-based Credible to refinance your mortgage, or a reasonable new mortgage. They are a leading marketplace for lending which allows you to compare rates and qualified lenders in one place. Having a quote for real takes less than 3 minutes.
When you see the mortgage rates, you will know that with a recovery in equity, tech IPO millionaires, and now higher affordability, the real estate of SF Bay Area is ready to continue to increase in value.
There's also another important aspect to remember. It's seasonal, and hasn't been mentioned. Trade. Trade.
How Immigration Boosts SF Bay Area Real Estate Prices
The pressure on the real estate market in the Bay Area starts around November and continues up until around May, when the EB-5 visa season is over.
That is because having an EB-5 visa costs $1 M, and by owning a home and hiring a few gardeners, a couple of maids, etc., you will effectively fulfill the job requirements for a business.
Note: That is how the process for Kapok 's investment in St. Croix in the U.S. Virgin Islands fought to get the federal tax break of 90 per cent that comes from running and hiring citizens in an economic development zone.
This has been exploited in the wrong way by several companies; Kapok was not one of them.
As long as you've lived in St. Croix or anywhere else in the USA. Virgin Islands-great misery, right? -- You've been lucky for 186 days or more a year.
If you had U.S. firms, you could then incorporate down there and sell your management consulting services to the firms you owned in the U.S., and you'd get a 90 percent federal income tax break.
Global investors will play the same game to effectively buy U.S. citizenship from an EB-5 investor visa in the form of a green card.
But to do this, you have to push the price of your investment up to $1 M, and virtually guarantee the same property competition won't beat you out for it.
And you're paying $1 M on a $800 K house — 25% above real market value as real estate, just not as an EB-5 method.
Huge upward pressure on prices wherever you can put the approach to use, and the Bay Area ends up with about 17 percent of every year's 10,000 EB-5 visas — the current EB-5 cap.
This runs out at the beginning of May, but there's momentum going on at the end of June that keeps it moving on a ballistic line.
Since the EB-5 plan is over-subscribed by about 300 percent, the result is to consume 10,000 * 17 percent = 1,700 housing units off the market permanently, and consume another 200 percent or 3,400 housing units off the market for a temporary duration.
That’s some pretty big market pressure. So there’s an epicycle in the real estate market in the Bay Area that most investors do not take into account.