Bay Area real estate still a good buy

San Jose, S.F. ranked among top 20 metro areas for growth and potential

“It’s becoming a buyer’s market. This is the time for investors.” — Dan Ramas, a Keller Williams agent in Santa Clara

Despite high prices and tight inventory, the Bay Area remains a strong market for real estate investors.

The Urban Land Institute ranked San Jose and San Francisco among the top 20 metros for real estate prospecting, citing a growing local economy, young workforce and a long-term sustainable market.

The Bay Area scored better this year than in previous years, in part because home prices have leveled off from record highs, said Urban Land Institute Senior Vice President Anita Kramer.

Now, she added, Bay Area properties “are worth it.”

The annual report, conducted by the institute and consulting firm PwC, surveyed more than 1,000 real estate professionals, investors, developers and bankers. Those surveyed considered a wide range of community features, including local economies, property prices, demographics and expectations for growth or stagnation.

Austin, Texas; Raleigh/Durham and Charlotte, N.C.; Nashville, Tenn.; and Boston grab the top spots for future growth and potential, according to the report. The cities share some common threads with San Jose and San Francisco — strong, growing economies,

young workforces and renowned universities.

Experts believe the Bay Area economy will stay strong.

San Francisco (ranked 12), San Jose (13) and Oakland and the East Bay (30) were viewed as strong markets among the top 80 metros ranked.

Nationally, Kramer said, real estate remains a desirable

option if the U.S. economy slows or stalls next year.

“Even though we are late in the expansion cycle, volatility in global financial markets, coupled with global geopolitical instability, continues to drive investors towards U.S. real estate,” the report says. “The asset class remains desirable as investors seek predictable cash flows from tangible investments.”

The Bay Area housing market has leveled off after a record run from 2012

to early 2019. The median price for an existing Bay Area home hit a record of $928,000 in May 2018 and has dropped to $875,000 in July, according to real estate data firm CoreLogic.

Bay Area building permits have stalled, dropping 16% in the past year. And new home sales this year hit monthly lows not seen for at least two decades.

But signs of construction — fenced-off building sites, closed roads and high-rise cranes across city skylines — abound throughout the

region.

San Jose is expected to more than triple the number of new apartments from last year, as investors open about 6,000 units in 2019, according to Rent Cafe. The real estate firm estimates that this year Oakland will add 1,850 units, Milpitas nearly 1,700 units and San Francisco 1,200 apartments.

Gustavo Gonzalez, an investor and president of the Santa Clara County Association of Realtors, said the added tech jobs and

Google’s ambitious expansion plans in San Jose make the city an attractive spot.

But he cautioned that rent control and other regulations in San Jose can make it difficult for existing owners, as well as investors looking to develop new housing.

“We could be way better,” Gonzalez said, adding, “If I take a step back and look at the big picture, there’s a lot of opportunity.”

Dan Ramas, a Keller Williams agent in Santa Clara,

said many small investors in rental properties find better returns in outlying suburbs.

For example, a $400,000 house in Tracy might yield a similar rent as a $1 million property in San Jose, he said.

The market has cooled from last year, he said, and interest rates have dropped.

“It’s becoming a buyer’s market,” Ramas said. “This is the time for investors.”