Bay Area House Prices in 2018

I have been studying the house market for the last few months, trying to see whether it is a good time to buy a house in the San Francisco bay area right now or we should wait for another few months or a year. I like to share few thoughts and resolutions.

No body can predict the future obviously. The most honest answer anyone could provide you with when asked is simply to say that they don't know, unless they are biased for some reason. For example, if you ask people who own a house, they would always think the house prices are going to go up. Well, because that is what makes them feel happier. If you ask the real estate agents about their thoughts they would always be like `it is the best time both to buy a house and also the best time to sell a house`. Then you would be like how is it possible to be both. It should be either this or that. Well it is because that is what makes them feel happy. They make money if people sell houses and they make money if people buy houses.

So what is my biased opinion? I think house prices are gonna go down in 2018. Well that is what makes me feel happy since I do not have a house and houses are crazy expensive right now. Do I have any justifications for my prediction? Yes, I have a few:

• The new tax rules are going to affect the house market. Especially the expensive houses. And guess what, every house in the bay area is expensive. People are going to get less federal tax breaks when they buy a 2M$ house. Less state tax return also. Some buyers or investors will start thinking twice before buying an expensive house.
• I work for Google, I make a pretty good salary and my wife is a dentist. We can afford to buy a 2M$ house. But isn't it crazy that with 2M$ we wouldn't find a house that looks descent in the bay area? This doesn't make sense. If we cannot buy a house with spending this much money, who could?
• Stock prices are up. Everyone feels rich right now. FANG stocks went up by around 50% in one year. It is doubtful that things are going to stay like this for too long. 
• Dollar value has gone down. In 2017, Dollar value went down 15% in comparison to Euro value and some other strong currencies. This means a house that was worth 1M$ now is worth 1.15M$. When dollar becomes strong again, I predict the house prices will adjust as well.
• Interest rates are going up, yet another reason why house prices will go down.
• Already my agent told me that this year there are much more inventory in comparison to the previous year. More people selling already which means more houses in the market and less competition for buyers.
• Another factor that has caused the house market bubble I think is apps such as Redfin, Zillow, etc. They make estimations about the value of the house, then buyers would add few tens of dollars to those estimation when putting down offers, causing house prices to continuously go up. Now these apps are starting to get established and buyers are starting to better understand them. I also predict gradually apps such as Redfin will replace a large portion of the work that is done by real estate agents, causing the house prices go down by few percent.
• There is a cryptocurrency bubble that can burst at any point. Yet another reason that some people who could afford expensive house could get out of the game.
• Any natural incident such as flooding, fire, earthquake, etc. could strongly hit the house market bubble in the bay area.

I am happy to hear your thoughts, comments, corrections and suggestions.