The California Association of REALTORs most recent Home Affordability Index reveals that statewide home prices have doubled since the first quarter of 2012. Which, not coincidentally, was when home prices in much of the Bay Area took off like a rocket.
Trajectory of this rocket closely resembles trajectory of California home prices over past five years.
Back in 2012 a Bay Area home buyer needed an annual income of $90k to purchase a median-priced home, about what many Bay Area residents can find in loose change under their sofa cushions.
Today, the buyer of a Bay Area median-priced home needs an annual income of $179k. That gets him, her or them a home selling for $895k. Which in most of this immediate area gets him, her or them a forty-year-old condo with one bath and at least one bedroom, maybe two.
What makes this rocket ride to the stars even more piquant is that when home prices started going up throughout the Valley in 2012 I was getting emails from market watchers protesting that No! This is all a fluke! It’s too early for real estate to recover! These charts prove it!
Multiple offers? Not for me! I’m waiting for the market to cool down!
It’s a truism that contrarianism is the way to beat markets, but truisms aren’t always true and, besides, Silicon Valley real estate has had so many who-saw-that-coming? moments over the past nineteen years that second-guessing it has been virtually impossible. But it takes the newbies, and sometimes the old-timers, a market cycle or three to figure this out.
And sometimes contrarianism is just another way of saying I’m really not interested. Not at these prices. Not right now.
So how has anyone using the I’ll-wait-until-reason-prevails home-buying strategy fared since 2012? Today just 17 percent of Santa Clara and Santa Cruz Counties residents can afford a median-priced home, according to CAR. But those counties are bastions of affordability compared to San Mateo County (14 percent) and San Francisco County (12).
You can overthink this.
copyright © John Fyten 2017