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Can I Afford to Buy a House in the Bay Area in 2021?

We’re fast approaching the last month of 2020, and the Bay Area housing market has shown surprising strength over the past eight months. Home prices have climbed steadily, despite COVID-19 and an economic recession.

This has a lot of would-be home buyers wondering the same thing: “Can I afford to buy a house in the Bay Area, in 2021?”

Here’s an update on local house prices, mortgage rates, and other factors that can help you answer this important question.

Related: Income needed to buy a house

Bay Area Home Prices Continue to Climb

According to the latest forecasts and predictions from housing analysts, home prices in most Bay Area cities are expected to continue rising through the end of this year and into 2021. That’s not surprising. As we’ve seen over the last eight months or so, the coronavirus pandemic and recession have not had much impact on Bay Area home values.

According to an October 2020 report from the California Association of Realtors (C.A.R.):

“At the regional level, all major regions posted double-digit price increases from last year. The Central Coast had the highest increase in median price, rising 20.6 percent from last year, followed by the San Francisco Bay Area (20.5%)…”

So, can you afford to buy a house in the Bay Area in 2021? Let’s start by taking a look at where home values are right now, as of fall 2020.

The C.A.R. report mentioned above showed the median sale price for existing single-family homes in the nine counties that make up the San Francisco Bay Area. As you can see from the figures below, housing market affordability varies quite a bit from one region to the next.

Median sale prices as of September 2020, by county:

  • Alameda: $1,050,000
  • Contra Costa: $783,000
  • Marin: $1,550,000
  • Napa: $900,000
  • San Francisco: $1,665,000
  • San Mateo: $1,772,500
  • Santa Clara: $1,402,500
  • Solano: $499,950
  • Sonoma: $715,000

Looking forward, home prices are expected to continue climbing into 2021.

Recent forecasts from the housing analysts and economists at Zillow predicted that prices will continue moving north in most (if not all) Bay Area cities over the coming months.

For example, they predicted that home prices within Contra Costa County would rise by around 8.2% over the next 12 months. In Alameda County, they expect to see a gain of 7.5% over the next year. Similar forecasts were issued for all nine counties within the Bay Area.

So, whether or not you can afford to buy a house in the Bay Area will partly depend on where you want to make a purchase. The median selling price currently ranges from a low of around $500,000 in Solano County, to a high of $1.7 million in San Mateo County.

Terminology note: In this context, the “median” refers to the midpoint or mid-level sales price for a particular housing market. Half of all homes are sold for less than the median, while the other half sell for more. So don’t be too discouraged when looking at median home values in the area where you want to buy. There are plenty of properties available that fall below the median.

Mortgage Rates Hover at Historically Low Levels

Mortgage rates are another key consideration, at least for most home buyers. They play a role in determining whether or not you can afford to buy a house in the Bay Area. And lately, there has been nothing but good news for borrowers on this front.

Bay Area housing market affordability is getting a boost from historically low mortgage rates. According to the weekly survey conducted by Freddie Mac, the average rate for a 30-year fixed mortgage loan fell to an astoundingly low 2.78% during the week of November 5. That was the lowest average (to date) in 50 years of their survey!

That’s where we are right now. But what about the future? Will low mortgage rates help you afford a Bay Area home purchase in 2021?

As we wrote in a recent blog post, mortgage rates are expected to hover somewhere around 3% through the first half of 2021. That would be a slight increase from where we are right now, and it could therefore reduce affordability for Bay Area home buyers next year.

But that’s just a forecast based on current trends. It’s the equivalent of an educated guess.

The point is, mortgage rates are incredibly low right now, and that has helped some people afford to buy a house in the Bay Area.

Flexible Financing Strategies for Home Buyers

When budgeting for a home purchase, it’s important to consider the different financing options that are available to you. And that includes the down payment.

When it comes to affording a home in the Bay Area, the down payment can be an obstacle for many buyers. Down-payment requirements are typically expressed as a percentage of the home price. So in an expensive real estate market, the down payment can swell to sizable proportions.

Some home buyers in the Bay Area find that they cannot afford to make a 20% down payment when buying a house. The good news is, you probably don’t have to put that much down.

These days, there are mortgage loan options that allow for a down payment as low as 3% of the purchase price. That’s for a conventional mortgage loan. FHA requires at least 3.5% down. Military home buyers who qualify for the VA loan program can buy a house in the Bay Area with no down payment whatsoever.

Here’s something else to consider. Your down payment funds can come from an approved third-party donor. That means another person or organization can contribute money to your upfront investment, as long as they don’t expect repayment. This strategy could help you afford to buy a house in the Bay Area, even if you don’t have a lot saved in advance.

We’ve written about down payment gifts elsewhere on this blog. So be sure to check out that article, if it’s relevant to your situation. And don’t hesitate to send us your mortgage-related questions.

How Much Can You Afford to Buy?

Buying a home in the Bay Area is not a one-size-fits-all situation. How much you can afford to buy will depend on your current income, your recurring debts, your long-term financial goals, and other factors. And that’s where we come in.

The mortgage experts at Bridgepoint Funding can review your current financial situation to answer that all-important question: Can I afford to buy a home in the Bay Area? As a mortgage broker, we have access to a wide variety of lenders and loan products, some with flexible requirements.

Please call or email us at your convenience, so we can help you determine the best path forward!

Mike Trejo

Mike Trejo

Mike Trejo is a Bay Area mortgage broker with 20+ years of knowledge and experience.

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