Are you wondering is now a good time to buy property in the SF Bay Area? As a San Francisco resident since 2001, I believe the answer is YES.
2018 was a peak in SF Bay Area real estate prices. Specifically, the median property price in San Francisco declined by 11.5% from its early 2018 peak.
Take a look at the chart below.
The good thing about buying now is that at least you didn’t buy during the 2018 peak! A 11.5% decline in the median home price is significant. That’s a 56% decline in the value of a 20% downpayment.
During the last 2008-2009 housing crisis, prime SF Bay Area real estate declined by about 15%, flatlined for several years, and then exploded upwards.
I believe post pandemic, SF Bay Area real estate will explode higher again.
Is Now A Good Time To Buy In The SF Bay Area?
2021 and beyond is shaping up to be a good time to property in the SF Bay Area due to three main reasons:
- A rebound in the S&P 500 and tech companies. The S&P 500 returned 31% in 2019, while tech giants like Apple, Facebook, Google, and now Tesla have had GIANT years. The S&P 500 was up 16% in 2020 and the NASDAQ was up a whopping 42% in 2020. Some of those gains will be diversified in to real estate.
- A sharp and sudden decline in mortgage rates thanks to the Fed committing to 0% – 0.25% on the Fed Funds to combat the coronavirus pandemic. Mortgage rates are at all-time lows, and will likely stay low in 2021 and beyond. As a result, affordability is up.
- Tech IPO boom flooding the streets with thousands potential new buyers and 10,000 new millionaires. They’re all getting liquid in 2021. The IPOs of Airbnb and Affirm were huge success. And many employees from Uber, Palantir, and Lyft have had huge windfalls.
Affordability has increase because prices softened and mortgage rates went down. I refinanced my primary residence in late 2019 with a 7/1 ARM at only 2.625%. So have thousands of others.
Then in 2020, I bought a new house with a 7/1 ARM mortgage rate of only 2.25% with no fees. If you are looking to refinance, check out my favorite online lending marketplace, Credible. Credible has qualified lenders competing for your business. You’ll get multiple real no-obligation quotes in minutes.
Once you see the mortgage rates, you’ll realize that with a rebound in equities, tech IPO millionaires, and now higher affordability, SF Bay Area real estate is ripe to keep on increasing in prices.
There’s another interesting factor to consider as well. It’s seasonal and not talked about. Immigration.
How Immigration Boosts SF Bay Area Real Estate Prices
This information was written by Terry Lambert, a 20-year SF Bay Area veteran. I myself have owned SF real estate since 2003 and have been here since 2001.
Bay Area real estate market price pressure starts up in about November, and continues upward until about May, when the EB-5 visa season is over.
This is because it costs $1M to get an EB-5 visa, and you can essentially meet the employment criteria by owning a home, and employing a couple of gardeners, a couple of maids, etc., through a company.
This is how the Kapok investment mechanism in St. Croix in the U.S. Virgin Islands worked, in order to get the 90% federal tax break that comes from operating and employing people in an Economic Development Zone.
Several companies took advantage of this in the wrong way; Kapok was not one of them.
As long as you lived in St. Croix or elsewhere in the U.S. Virgin Islands — big hardship, that, right? — for 186 days or more a year, you were golden.
If you had U.S. companies, you could then incorporate down there, and sell your management consulting services to the companies you owned in the U.S., and you would get a 90% break on federal income tax.
Foreign investors can play this same game to essentially buy U.S. citizenship in the form of a green card from an EB-5 investor visa.
But to do this, you have to push the price of your investment up to $1M, and practically guarantee the competition for the same property doesn’t beat you out for it.
So you bid $1M on an $800K house — 25% over actual market value as real estate… but not as an EB-5 mechanism.
Huge upward pressure on prices in any are where you can put the approach to use, and the Bay Area ends up with about 17% of a the 10,000 EB-5 visas granted each year — the current EB-5 cap.
Since the EB-5 program is about 300% oversubscribed, the effect is to permanently consume 10,000 * 17% = 1,700 housing units off the market, and to temporarily consume another 200% of that, or 3,400 housing units off the market.
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.
San Francisco Real Estate Is Cheap
Believe it or not, on an international city comparison, San Francisco is one of the cheapest international cities in the world.
Go to London, Vancouver, Paris, Hong Kong, Singapore, Tokyo and Mumbai and you’ll notice how real estate prices are much, much higher.
With all the tech company growth and massive wages, I see San Francisco real estate continue to increase in price over time.
The best area to buy property in San Francisco is on the less dense west side where there are more single family homes and less condos. If you can get a panoramic ocean view home in Golden Gate Heights, that’s the best micro-investment in my opinion.
Now is also a good time to buy property in the SF Bay Area because there will be a rush back to city living once there is herd immunity. With so many successfully IPOs and sources of capital in the SF Bay Area, I’m certain people will come rushing back.
Real estate has proven to be a wonderful long term investment. Get neutral SF Bay Area real estate and diversify around the country.
With so much funny money gains in the stock market, now is a great time to turn those paper profits into real assets. And the best type of SF real estate are single family homes with ocean views. I highly recommend buying single family homes in the following neighborhoods:
- Golden Gate Heights
- Inner and Outer Richmond
- Inner and Outer Sunset
- West Portal
These neighborhoods are less dense, offer better value, have great access to drive down south, and some homes have ocean views.
It is a good time to buy SF Bay Area property and I’m putting my money where my mouth is. For example of SF Bay Area real estate strength during the pandemic, click the link.
Also Diversify Your Real Estate Across America
Once you’ve purchased your SF Bay Area primary residence and gotten at least neutral real estate, it’s wise to look for the NEXT SF Bay Area and invest in real estate there.
Places like Austin, Memphis, Dallas, Houston, Salt Lake City, Birmingham, and other heartland cities are growing rapidly. The easiest way to invest in specific real estate projects around the country is through Fundrise and CrowdStreet, two of the best real estate crowdfunding platforms today.
Both are free to sign up and explore. I’ve personally invested $810,000 in 18 real estate crowdfunding projects across America to diversify my investments and earn income 100% passively.