How Do You Stay Ahead Of The Curve In San Francisco Bay Area Market?

[Patty C.]

After looking in San Francisco, the East Bay, South of San Francisco, and the North Bay, I decided to invest in the North Bay because the housing prices were still reasonable. 

Perhaps this is slipping away as well:  I just put in an all cash offer in a marginal area north of Petaluma and I am feeling the breakout from San Francisco.  There are over 20 offers that went as high as 110% over asking.  This is in a marginal area at the C/C- area. for a 3/2 house that is an advanced/mechanical rehab. project.

So what have investors been doing in this market? What is the best way to invest here? @Bill Gulley do you have any ideas? Any Big Dogs out there?

[Account Closed]

Hi Patty,

I guess not that many people responded because you asked for big dogs' opinions.  Just like anything else in life, you have the 1%er and the 99%er.  Most people don't feel qualify thus the lack of response. Of course, that is just my wild guess. 

Kidding aside, I'm not a big dog by any means. I don't even qualify to be a little poodle. Hope you don't mind me throwing in my 2 cents. As you know, real estate in the Bay Area is cyclical. With that said, do you have any ideas where we are currently in this housing cycle? If you don't, how would you know if now is a good or bad time to invest in real estate?

This run up has been quite fascinating. Prices are going up while interest rate still remains low. Inventory is also low. Lending is still tight although the banks are starting to loosen it up a little bit. The pool of buyers to date has been solid, which means the chance of default in the future will likely be low. If low default and low inventory, my guess is that the correction will likely be mild. 

As lending eases, the marginal buyers will likely enter the market. Since they're priced out of nicer areas, they would likely have to settle for "C" class neighborhoods.  If history is any indication, when the economy turns, these people will likely be the first ones to get laid off.  Thus, there's a high probability of a higher price swing in the lower end neighborhoods. The higher end market would likely remain solid IMO. 

Doesn't matter which part of the cycle we're in, there are always deals. It's just a matter of more deals or less deals being available. The kids still have to eat, right? Sometimes, time in the market is more important than timing the market. However, if you could time the market, your yield will grow exponentially.  :0)

@Harry Zhou, you have to look at the rate of housing turn over in the areas you sought after to understand why a software engineer making over $200k+ can't afford it.  Real estate is about supply and demand. If supply is scarce while demand is abundant, it makes sense why a software engineer is priced out. Just like I want to live in Atherton or Hillsborough, but I can't afford it. That's why they call it "the market."