FREMONT – This week’s movement by the Federal Reserve to rein in skyrocketing inflation with an interest rate hike could hit many prospective Bay Area home buyers especially hard.
Daniel Chan, a Bay Area native who now lives in Fremont, said he was considering leaving California for a more affordable state offering a larger house for a cheaper price.
“We could comfortably retire in Florida or Texas,” Chan said. “We still have to keep working here in the Bay Area and it feels like a rat race.”
Chan is self-employed as a magician booking jobs in person as well as performing virtually from a home studio. He has looked at buying a home for years and regrets not buying in 2008 during the last economic slowdown.
His children are almost finished with high school so he doesn’t want to impact their education and wonders if leaving California may be his best bet.
“I felt that I was doing very well in the stock market and it was gaining faster than appreciation of the houses,” he told KPIX 5 on Thursday. “I feel there is a lot of pressure to buy a home a before everything goes up.”
Chan estimates that the cost of a mortgage around $800,000 would set him back an extra $500 a month after the Federal Reserve raised interest rates by half a point on Wednesday. The move comes as demand remains high in the Bay Area and supply is still low.
Home prices went up in April, according to local realtors who say buyers will need to pay more for even less home in the current market.
“We think this interest rate hike is only going to exacerbate the home ownership disparities, certainly that exist right now between Whites, Asians, Blacks, and Hispanics,” said Brett Caviness, the president of the Silicon Valley Association of Realtors. “If real estate is a long-term strategy for you, then I would say it is always a good time to get into the market when you are able.”
Caviness told KPIX 5 that buyers may see less offers for homes but still plenty of people competing for any property up for sale. He points out that with rising rent rates, many people will still want to try to own a home and get locked into a mortgage rate before another increase.
“There’s always someone that’s richer,” Chan worries as he contemplates what his family will do in the months ahead. “Putting more down in a different state and moving out of California is definitely something on my mind.”