San Francisco, Oakland Rents and Home Prices Still Climbing

Apartment hunters are well aware that prices in the city are at budget-busting levels. In San Francisco rents in July were up 8 percent over last year, according to a report out from real estate website Trulia.

Things aren’t much better in Oakland, which has seen a 5.6 percent hike.

That puts both cities in the top 10 hottest markets nationwide.

The news isn’t all bad for renters in the Bay Area. There is hope that a construction boom could give soaring prices some relief.

“As new multifamily buildings come onto the market and add to the rental supply, we might see rents cool down because renters will have more units to choose from,” said Jed Kolko, the chief economist at Trulia.

Avoiding another bubble?

In the for-sale market, home prices have left some concerned that we’re headed into another housing bubble. Home prices have jumped 31 percent in Oakland and 17.2 percent in San Francisco since July 2012.

But the latest data show that things may be cooling. Though asking prices were still increasing in the second quarter, they’ve slowed since earlier this year, said Kolko.

“That means prices aren’t yet going into reverse, but we’re taking the foot off the gas,” he said. “That’s good news if you were worried that we would be going into the next bubble.”

A number of factors may be contributing to the home price slowdown.

• Rising mortgage rates. Rates are up more than 1 percentage point in the last two months, making it more expensive to buy. Though still low, they aren’t as low as they have been.
• Increased inventory. Increasing home prices are encouraging more homeowners to sell. When buyers have more to choose from, they are less likely to get caught up in a bidding war.
• Less demand from investors. Home prices are higher than they were a year ago, so investing in real estate is less of a bargain than it was this time last year.