San Francisco is the Home to USA’s Toughest Housing Market

Bay Area real estate is some of the most costly in the country. While most people know that, they may be unaware of just how bad it’s gotten. In late October of 2017, a one bedroom, one bathroom house in the highly sought after Bernal Heights neighborhood listed for $800,000, despite having been completely gutted by a fire in 2016.

The fire was caused by a wall mounted gas heater and from the outside, it looks a mess. The house is so badly damaged from the blaze that it would likely take several hundred thousand dollars just to be able to move in. The inside has been completely gutted. The only reason it makes sense to rebuild it is due to the location. It’s very unlikely that the house itself can be salvaged at all. Anyone looking to live on the property, would likely have to rebuild from scratch.

How did this seemingly absurd situation happen?

“There are a number of factors at play here that need to be considered when determining the price of a piece of property,” says one Bay Area real estate analyst. “Firstly, you’re paying for the location, not the house itself. That being said, the average how in Bernal Heights goes for around 1.3 million dollars, and that’s largely due to the fact that it’s an up and coming neighborhood with a thriving commercial district. The question you have to ask yourself is whether or not the plot of land is worth $800,000 or not. If you have the money to build the house on top of the land, then I suppose it might be. If you really like the area. On the other hand, for an extra $500,000 you can get, you know, an actual house.”

While not every area of San Francisco can boast the same sort of property values, residents from all over the Bay Area are finding it more and more difficult to buy real estate in the area.

“It’s not the same situation that we had before the housing collapse,” he continued, “but it’s similar in a couple of important ways. Firstly, the inventory for homes is low, and more people are interested in buying homes than there are homes available on the market. This is the case all over the country. That’s creating a situation where interested parties are engaged in bidding wars and that is what is driving up the value of property. The major difference between now and the pre-bubble housing collapse, is that it’s much more difficult for prospective buyers to get a loan. Banks are far more careful now than they were then.”

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