San Francisco homes have once again been declared to be America’s most sizzling and in-demand residential real estate market, according to a recent analysis by Realtor.com. The analysis used two primary factors to determine which cities were among the top twenty in the country:
1) The time on the market before the property sells.
2) Which cities received the most homes for sale views on the realtor.com platform.
This recent analysis of the the San Francisco housing market begs the question — Is it possible for San Francisco home prices continue this strong upward trend? Well, according the the respected financial investing website, The Motley Fool, there are several factors which indicate that San Francisco real estate home prices might continue to increase…
First, limited inventory compounded by increasing buyer demand, continues to force higher home prices in San Francisco. In other areas of the country where this is an issue, builders can typically start supplying new homes relatively quickly in the form of tract neighborhoods. However, in San Francisco this isn’t an option. Instead, builders must erect condominium towers, which have lengthy approval processes and construction timelines.
Second, the average 30-year mortgage interest rates continue to remain at historic lows. In fact, the rates could have marginal increases over the next several years and still be considered a favorable lending environment for San Francisco home buyers.
Third, ballooning rent prices will continue to present the practical financial planning dilemma of renting in San Francisco vs. purchasing a home. According to recent rent trend data, the average two bedroom apartment in San Francisco rents for more than $4,600 per month. Of course, this number does not include utilities, food, insurance, entertainment, and other living costs. Thus, many San Francisco residents will spend around $220,000 if they choose to rent over a four year period. This is a significant sum of money that most financial experts would argue would be better spend by purchasing a property in San Francisco, especially if one considers the historic trajectory of the San Francisco home price index and actual San Francisco home price, (see the table below).
The rent vs. buy option in San Francisco. If you expect to live this great city for more than five years, it is estimated to be up to less expensive to buy than to rent. In fact, depending on your property purchase price, you might be able to save more than 30% by buying vs. renting in San Francisco. You can try entering in various housing costs with Trulia’s rent vs. buy calculator to analyze for the results for yourself. Additionally, you can view a great page full of rent related data in San Francisco over many decades. Here you can easily see, San Francisco rent costs continue to rise faster and at a more reliable pace over homes for sale.
Ultimately, San Francisco real estate prices will reach a point where they will begin to level off for several years, however, as history supports, they will rise once again, providing for a very good return on investment for those who made the decision to purchase vs. rent.
San Francisco home prices have seen a 48.875% increase since their Great Recession peak in 2008.