According to a poll released by the Bay Area Council, 46 percent of Bay Area residents surveyed want to move out of the area within a few years - 61 percent plan to move out-of-state, and 24 percent plan to move elsewhere in California. Their reasons for moving are not surprising, namely the high cost of housing, high cost of living and traffic. One analyst says there is a lot of housing activity taking place in the San Francisco Bay Area. While there are many people leaving the state, many are still coming and others are staying put.
At a recent meeting of the Silicon Valley Association of Realtors, Jeffrey Traum, managing director and wealth advisor with Morgan Private Wealth Management, shared his take on why Bay Area residents want to leave the area, why others stay, and what buyers and sellers think.
Traum said there is tremendous wealth creation in the Bay Area. Creation of wealth has occurred due to the region's "engine growth in jobs is fantastic." Income funds are coming in. In fact, last year the Bay Area had the largest share ever of wealth creation in the world, followed by the U.S. and China.
People have become millionaires by just selling their Bay Area home. An analysis by PropertySharp ranked San Francisco #1 of top 25 cities where the most millionaires purchased a home for less than $1 million before 2001 and sold it afterwards for $1 million or more. Not surprisingly, the study found in Silicon Valley, where the median home price is more than $1 million in most cities, seven cities added a total of 332 millionaires since 2001, with 119 in San Jose, 48 Redwood City, 40 San Mateo, and 29 San Carlos.
Traum saidpeople who are selling now want to lock in and take advantage of their gain while they still fall in the limits. Others are tired of the high cost of living and traffic, their kids are out of the house and they want to be closer to them and their grandchildren. Others sell because they need the money for their retirement.
On the other side of the spectrum are people not selling because they currently have low property taxes and would get hit with a steep capital gains tax if they move. A new place could mean higher property taxes, taking on a new mortgage and new maintenance costs. Also, they have their friends and family here and good schools if they have children. Some stay because they see future growth and appreciation in their homes.
Traum noted despite high prices many people are buying homes in the region, and some are even buying several houses in a block. They want to avoid the uncertainties of renting, to live closer to work, for the great schools and weather. Wealthy foreigners want to diversify their millions because the countries where they live are unstable or devaluing their currency. They also opportunities for their children. Others buy homes for their children because they want them living nearby.
On the other hand, prospective buyers have pulled away because prices are getting too expensive. Interest rates are no longer super low and they can't afford the down payment. It's not as easy to move upward as it was in the past, and even if they did purchase, property taxes and maintenance would be too high. They are also turned off by the traffic and state and local taxes deduction limitations. It is just too expensive to maintain their lifestyle here, and since many jobs allow their employees to work remotely, they move to more affordable places.
Whatever one chooses to do, Traum said it's important to watch interest rates. Rising interest rates increase housing expenses, could depress demand, and could tip the economy
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
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