The Bay Area has been known for overly-inflated real estate prices and the tech industry’s direct effect on the real estate market. With residents of The Bay Area migrating out of this location and sacrificing a shorter commute, real estate prices are slightly sloping down. Keep in mind that wherever the tech industry goes, expect prices to fly off the roof! Bay Area real estate is highly affected by such environmental factors- whether economic or social. If you’re a real estate investor who has gone for Bay Area real estate properties, what does that mean for you?
Why is the Bay Area real estate market so competitive?
There are many factors that make the Bay Area attractive for homebuyers and tenants altogether. The tech industry sure isn’t making things easier for the average Joe. It’s not an uncommon thing to find tech companies spreading out and building offices in any location in town. In any case, when that happens, property buyers find themselves struggling to compete with the many offers that sellers receive. It’s not uncommon to find real estate investors and property buyers competing over a certain property and driving prices over the top!
A typical buyer in the Bay Area is expected to have all the mortgage and financing part of the purchase figured out! More often than not, buyers have a hefty down payment coupled with a high credit score. If you’re an unprepared buyer, you have a better chance of finding a rental property that’s overly inflated than to get an offer accepted!
Bay Area real estate in depth: San Francisco real estate market
Let’s take a closer look at the San Francisco real estate market stats derived by Mashvisor’s analytical calculator:
- Median Property Price: $1,518,938
- Airbnb Cap Rate: 2.18%
- Traditional Cap Rate: 1.08%
- Airbnb Rental Income: $6,362
- Traditional Rental Income: $4,581
At first glance, you can notice the incredible rental income real estate investors can utilize through any real estate investment in San Francisco. With an average traditional rental income reaching $4,581, it’s definitely a great real estate investment. On the other hand, compared to the skyrocketing median property price, it’s a completely different story. The median property price reaches $1.5 million. A number so high that most first-time homebuyers and beginner real estate investors cannot go near it!
If you still have your heart set on San Francisco, read this blog post: How Is It Possible to Have an Investment Property in San Francisco?
Bay Area real estate in depth: San Jose real estate market
It’s often heard that the San Jose real estate market along with other California real estate markets are reaching bubble status! While comparing the San Jose real estate market to San Francisco’s gives it a slightly more accepted image of what a stable real estate market should be, you cannot overlook the scarcity of supply and its domination over property prices!
San Jose real estate market stats:
- Median Property Price: $1,034,661
- Airbnb Cap Rate: 0.71%
- Traditional Cap Rate: 1%
- Airbnb Rental Income: $3,322
- Traditional Rental Income: $3,100
A median property price of $1,034,661 for San Jose real estate is also a high number when buying property that’s forever attached to the Bay Area real estate market. Keep in mind that competition in both San Francisco and San Jose is significantly slowing down, mainly because real estate investors and homebuyers are migrating out of town to find more affordable real estate investments.
Looking for more affordable options in California? Read this blog post: Long Beach Real Estate: A More Affordable Option in California Real Estate.
Bay Area real estate in depth: Oakland real estate market
Oakland is another neighboring city that takes the load off of San Francisco’s almost satanic real estate prices! Of course, throughout the process of real estate investors and homebuyers making the commute through the San Francisco-Oakland bridge, it has become the norm to have a long commute for residents. Let’s take a look at Oakland’s real estate data provided by Mashvisor:
- Median Property Price: $822,893
- Airbnb Cap Rate: 1.36%
- Traditional Cap Rate: 1.83%
- Airbnb Rental Income: $3,052
- Traditional Rental Income: $3,374
It’s clear for both the expert real estate investor and the novice one that San Francisco’s real estate bubble has reached Oakland! With rents exceeding $3,000 a month, it only makes sense that tenants are looking for a longer commute that provides more space for lesser rent!
Do you have a free Mashvisor account? Click here to use our Property Finder and find properties in a matter of minutes!
What’s happening now that competition has decreased over Bay Area real estate?
For many years on end, the Bay Area real estate market was susceptible to economic factors that helped make this real estate market a much more valuable one than neighboring cities! This shocks no one as both out-of-state real estate investors and even international investors have investment properties in the Bay Area. Quite often, you’d pass by a house or a multi-unit investment property and it would be left vacant and depreciating! This is a type of investment strategy that would fall within buy-and-holds, but not exactly. Read this blog post to learn more about buy-and-holds: Real Estate Investing 101: Buy and Hold Strategy.
For many locals who were born and raised in the Bay Area, it’s not a feasible option to buy a property in the same area they were born in; this is simply because prices are only befitting of foreign millionaires!
In any case, after a real estate market gets saturated and prices reach all-time highs, real estate investors and homebuyers turn to nearby locations to buy an investment property. People tend to move to a new real estate market nearby to cover their residential and investment needs. And that’s exactly what’s happening with property buyers and real estate investors leaving Oakland and San Francisco and opting for the more affordable Fremont.
Of course, it’s a long commute for the property owner, but the real estate prices are the main advantage that keeps driving residents out of the Bay Area real estate!
A heat map to navigate?
According to Fortune.com, the San Francisco real estate prices have risen with an average of $205,000 in the past SIX MONTHS! For a real estate investor trying to buy an investment property in such a sizzling real estate market, it can be quite daunting. This is where the role of a heat map comes into play! A real estate investor can utilize the heat map to show properties at different price points or any other analytical factors. Here’s a snapshot of Mashvisor’s heat map analysis to give you a better image of what it’s all about.
Give it a shot and try Mashvisor’s heat map analysis with a 14-day free trial! Click here!
Bay Area real estate has not reached this point in prices all of a sudden. It’s the result of a strong economy and constant migration mixed with a low supply. Therefore, if migrators continue to leave behind the Bay Area into further cities and towns, the real estate prices can witness a decline as bidding wars will be a thing of the past.
If you have any more insights on Bay Area real estate, please share them with us in the comments section below!