The Best Time to Buy a House in the Bay Area: 2017 vs. 2018

This article is part of our “good time to buy a home” series. In previous blog posts, we looked at whether or not it’s a good time to buy a house in California (as a whole) and also within the San Diego real estate market. Today we will zero in on the San Francisco Bay Area.

Question: Is now a good time to buy a house in the Bay Area, or should I wait until 2018?

Best Time to Buy in the Bay Area: 2017 or 2018

Home prices in the Bay Area have risen steadily over the last few years. And these days, affordability is the big story. In many cities across California, and especially within the San Francisco Bay Area, housing affordability has become an issue for some residents.

With that being said, home prices in the Bay Area real estate market have slowed down a bit over the last or so. This could be viewed as a market correction in response to the rapid price gains that occurred from 2014 to 2016.

According to the real estate research team at Zillow, the median home value for the San Francisco Bay Area rose to around $850,000 in August 2017. That was an increase of 5.7% over the previous year. Looking forward, the company’s economists expect the median home value for the area to rise by 1.3% over the next year (through the summer of 2018).

Which begs the question: Is now a good time to buy a home in the Bay Area? Should you buy a house in 2017, or wait until 2018?

Assuming you are financially and emotionally prepared to make a purchase, you might be better off doing it sooner rather than later. While home prices have slowed a bit, they are still trending north in most cities across the Bay Area. So buyers who postpone their purchases until 2018 could encounter higher housing costs.

Related article: Buying a home in 2018

Higher Mortgage Rates Ahead?

Most Bay Area home buyers use mortgage financing when buying a house. So mortgage rates are another big consideration. And on this front, we have some good news to deliver.

Earlier this week, the government-sponsored mortgage buyer Freddie Mac announced the latest results of its nationwide rate survey. They reported that the average rate for a 30-year fixed home loan was 3.89%, for the week ending August 18, 2017.

Rates have actually declined since the start of this year, which is another reason why now might be a good time to buy a house in the Bay Area. During the first week of January 2017, the average rate for a 30-year fixed home loan was 4.20%, according to the Freddie Mac survey. So the average has dropped by roughly 30 basis points since then.

Which prompts another question: Will mortgage rates in the Bay Area continue dropping, or will they turn north in the near future? Is it better to buy a house in the Bay Area this year or in 2018, from a financing standpoint?

While no one can predict the future of mortgage rates with absolute certainty, most economists and industry watchers expect them to rise gradually over the coming months. This is partly the result of actions taken by the Federal Reserve, along with the natural tendency of interest rates to rise with economic growth.

In July, the Mortgage Bankers Association predicted that the average rate for a 30-year home loan would rise to 4.5% by the fourth quarter of this year. They expect rates to continue creeping upward in 2018 as well.

Related: Average down payment in Bay Area

Home Buyers Competing for Limited Inventory

Inventory is another important consideration. In many parts of the Bay Area, there aren’t enough homes listed for sale to satisfy the current level of demand from buyers. This is largely what has pushed prices north over the last few years.

A “balanced” real estate market has five to six months worth of supply, according to housing experts. But most cities in the Bay Area currently have less than a two-month supply of homes.

These “sellers’ market” conditions have been with us for a while now, and it could carry over into 2018. So whether you choose to buy a home in the Bay Area in 2017 or 2018, you should be prepared for competition from other buyers.

The bottom line: Is now a good time to buy a home in the Bay Area, or should you wait until 2018? Ultimately, you are the only person who can decide when the time is right for such an investment. But from a market standpoint, a strong case could be made for buying a home sooner rather than later. Housing analysts expect prices and mortgage rates to rise gradually over the coming months. So buying a house now versus later could save you money.

Disclaimer: This article includes forecasts and predictions regarding Bay Area home prices and mortgage rates. These projections were provided by third parties not associated with our company. We have compiled them here as an educational service, and to help you decide if now is the best time to buy a house.