Monday, February 15, 2016

Is 2016 a good time to buy a house in the Bay Area?

The best time to buy a house is when house is most affordable. Historically, the ratio of median house price to median income is a great indicator of house affordability. But as everyone thinks this ratio should be adjusted by the mortgage interest rates because for the same income homebuyer can afford higher prices with lower interest rates.

Housing is one hundred percent correlated with employment. More jobs, more employees who need place to live, more value to existing houses and apartments. Less jobs, fewer people, less value to existing houses. Keep in mind that housing prices right now are inflated in Bay Area. The implication is that the further they are from employers the more likely the inflation will experience a sudden deflation. Houses in Palo Alto or Cupertino will continue to appreciate, all those folks in Mountain House who bought in the 2000 bubble are still not thrilled with the values of their houses.

The recommendation is to think strategically when you buy a house. Treat it as a home and not an investment. Buy something with a good location, and be prepared to ride out the next economy adjustment which historically comes every 10 years.

No comments: