House prices have risen during the last few years. The rental market, though, hasn't done so. Instead, rents have remained the same while prices in San Francisco and other cities have increased. As a result, the market may experience a sudden collapse in the future. According to experts, more people working remotely are to blame for the decline in rent, but this trend won't stay long. However, this year's rental market might experience some seasonality again, making it an excellent opportunity to purchase a house in the Bay Area.
According to Zillow, one of the top real estate data providers in the Bay Area, home prices will continue to rise. For the past few years, they have been calling for this development. According to the firm's most recent prediction, by the first quarter of 2022, housing prices will rise by 6% yearly.
The quantity of potential purchasers has a significant impact on housing prices. While some customers make a primary investment, others make an urgent purchase. When the market changes, main buyers frequently hold their properties, while non-sticky buyers are more likely to sell them. As a result, a correction in the housing market is likely to occur in the upcoming year.
Although the housing sector has been the backbone of the American economy for the past two years, it is beginning to falter. Existing home sales dropped 5.9% last month, marking the sixth straight month of declines. Moreover, while the typical sales price of homes decreased by about $20,000, it is still 11% higher than it was a year ago.
The economy and consumer sentiment have also influenced the recent ups and downs in the property market. Even though the housing market is unstable, many economists maintain that it is still strong. Even though the GDP has declined for two straight quarters, there is still a solid labour market and high levels of consumer spending. Despite this, many purchasers have held off, hoping mortgage rates may decrease much further.
Despite these elements, the market is still far from boiling, and mortgage applications are outpacing resale home sales. Some economists predict a 20% price decline by the summer of 2023. However, there is still no definite indication that home prices in the Bay Area will fall. Instead, the housing market will determine whether they will decline any further. The housing market cannot be "fixed," yet some people argue that now is not the worst moment to buy a house.
Despite the high mortgage rates, housing affordability in the Bay Area is still a significant challenge. The typical home payment increased by 76% from June 2017 to June 2018, and incomes aren't keeping up with the rising cost of living. While inflation increased by 8.5% over the past year, wages only grew by 5.2%. Despite this, MBA economists do not believe home prices will soon decline and forecast increases of 3.1% in 2023 and 9.9% in 2022.
Sales of homes are increasing in California. The California housing market has benefited from this trend. San Bernardino County saw a $270,000 rise in single-family home sales in August. San Diego sales decreased by 2.9%, but prices decreased by $15,000 in July. Sales in the Bay Area increased by 9.1% in August. But in the counties of Monterey, Santa Clara, and Lassen, prices fell 2.7%.
The California housing market is primarily driven by increasing mortgage rates and a scarcity of available dwellings. On the other hand, home specialists are unsure about the FED's plans for this fall and think the next rate hike will hurt the housing market. In any case, it is impossible to forecast when prices will begin to decline. Still, the most recent monthly poll made public by CAR demonstrates that the housing market in the Bay Area is already moving in the direction of a decline. The buyers appear uninterested and pessimistic. The distinction between the sales and rental markets must be understood, even though this may seem unfavourable.
Although the future housing market cannot be predicted, experts anticipate a modest increase. Freddie Mac predicts that although home price growth will continue, it will slow down in the second half of this decade. In addition, the rate of price rise is anticipated to decelerate in 2022 due to new buildings.