Bay Area Housing Costs

Multiple forces are fueling the Bay Area and specifically the Peninsula area’s real estate market. 

Low interest rates, robust population and employment growth, limited housing supply, and the impact of the expansion of the high tech industries are among the reasons real estate in the Bay Area is so expensive.

Some attribute the high increases in property values to foreign investors. It is a little unclear how much influence foreign investors may be having on prices.  Early data suggest that the number of foreign buyers in the Bay Area housing market has dropped this year compared to last year. 

Many home buyers are viewing housing as more of an investment tool rather than just a home, and realizing that purchasing real estate and holding the property has many advantages.   This is a philosophy that we have preached for the 50+ years we have been in business. We own, manage, sell and exchange quite a bit of residential income property.

Many buyers are holding onto property and taking advantage of the high rental rates.  There has been a new resurgence in investing in local real estate for the long term, and receiving all the benefits that rental income property has to offer.

There are certainly many contributing factors that come into play.  The lack of available buildable dirt plays a major role in the value of real estate on the Peninsula.  There is no single reason for our high values, it is a combination of factors that are not found in other locations. 

There is no doubt that the impact of the high tech industries on local real estate is the single most significant factor in our strong market.  San Francisco and the Peninsula are the strongest high tech markets in the country.  The software services industry has created most of the new jobs and growth.   The high tech industry’s expansion dwarfs growth in other sectors of the economy.

Basically all areas of real estate are impacted by the tech industries; office rents, office prices, as well as housing costs have risen sharply over the last several years.  The Bay Area is still considered to be in the expansive phase of the tech industry.

We feel that the housing market will remain strong on the Peninsula for the foreseeable future.

Eric Ruxton and Larry Aikins are the owners of Terrace Realty Inc. and Terrace Associates Inc., in Redwood City. Terrace has been in business for over 50 years and in addition to being an independent Brokerage Company, also owns and operates rental properties.