homesmillbrae.com

But, in particular, the past year has seen Alameda and Contra Costa come into focus as real estate hot spots: The 10 big cities with the highest percentage growth in home prices from February 2021 to February 2022 were all in those counties.

Union City, Dublin, Pleasanton, San Ramon and Danville were at the top of the list, as prospective buyers entered bidding wars to snap up desirable properties, according to Zillow.

“People like location,” said Ronnie Escalante, a San Francisco-based Realtor. “People also like quality of life. These are nice neighborhoods where … you’re in the middle of everything.”

A typical home price in Union City in February 2021 hovered at $1.05 million, according to Zillow. A year later in February 2022, that was closer to $1.38 million, a 32% increase year-over-year for the Alameda County city — the highest in the metropolitan area.

In San Ramon, the average home sold for $1.43 million in February 2021. In February 2022, that number was $1.83 million, a 27% increase year-over-year and the highest in Contra Costa County.

Typical home prices are calculated by Zillow economists by averaging the median 30% of homes sold.

Buyers are considering a wider range of cities now that remote work is here to stay. Although some workplaces have returned to the office, whether fully in-person or in a hybrid setting, more than 60% of companies nationwide expected to keep their expanded work-from-home changes after the pandemic ends, according to a February report from the Bureau of Labor Statistics.

They’re also evaluating social and cultural life in each city. Before the pandemic, people rented or bought homes in big cities such as San Francisco and Oakland for the access to restaurants, nightlife and museums.

But as availability of those amenities shrank during the pandemic, so did demand to buy in those areas, said Jeff Tucker, a senior economist at Zillow.

Before, the I-680 and I-580 corridors may have felt far from bustling employment and nightlife centers. Now, suburbs with easy access to BART and freeways are appealing to people seeking more space.

“The East Bay is looking attractive as a sweet spot where you’re close enough to participate in urban life, get to offices or hang out with friends but still your money goes further,” Tucker said.

Still, San Francisco homes got more expensive during the pandemic. Typical home prices went up nearly 12%, from $1.41 million in February 2021 to $1.58 million in February 2022, according to Zillow.

Some smaller locales throughout the San Francisco metropolitan area have also seen spikes in price growth. Emerald Lake Hills in San Mateo County and Bolinas in Marin County experienced the largest year-over-year growth in their counties, at 24% and 28% respectively.

The data provided by Zillow looked at 99 cities in Alameda, Contra Costa, Marin, San Francisco and San Mateo counties. Only two communities, La Honda and Pescadero in San Mateo County, saw a decrease in typical home price from February 2021 to February 2022.

Those places are small, with populations of under 1,000 people, according to the U.S. Census Bureau. A few more homes may have been built there during the pandemic, but their low housing stock makes it hard to determine why prices have changed, Tucker said.

So, with interest rates starting to tick upward, will housing prices drop anytime soon in the region? Experts don’t think it’s easy to predict.

“We are seeing so many people throwing down offers, and everyone’s looking for a deal,” Escalante said.

Tucker, the economist, thinks the pandemic accelerated the dreams of many who might otherwise have put off purchasing a house for a few more years. A combination of low interest rates, remote work and restricted access to their social lives has prompted them to re-evaluate their priorities, he said, and snap up homes as fast as they come on the market.

“People don’t mind paying more money than God for a house,” Tucker said.

Gwendolyn Wu (she/her) is a San Francisco Chronicle staff writer. Email: gwendolyn.wu@sfchronicle.com

Introduction to Five Point Holdings

Five Point Holdings (NYSE:FPH) is a land developer which has three major assets across California. Throughout the past decade, the company has steadily developed and sold tracts of land to home builders who now offer hundreds of modern housing units going for over $1 million on average. As such, revenues have been volatile, but trending upwards, thanks to favorable partnerships with developers and high demand. The pandemic was a boon for the housing market, launching prices higher throughout 2021 and into 2022. However, the share price of Five Point has been falling since 2017, leading to a significant undervaluation in my eyes. This article will describe the three major assets of the company and go through recent market data to understand how the next few months are set to play out.

The company composition and payouts to shareholders of different units cause revenues and earnings to be tricky to understand. I would recommend reading the SEC filing for the most recent annual report to get a clearer picture.

FivePoint Great Park

Irvine is the major commercial, industrial, and technological hub of Southern California. With a significant amount of local and global headquarters for hundreds of major companies around the world, the area is expensive, growing, and in high demand. Five Point is developing a major plot of land that used to be Marine Corps Air Station El Toro. The location is within five to ten minutes driving time of the major Irvine Spectrum mall, 5 and 405 interstates, and the University of California, Irvine (my alma mater). Major companies headquartered or located in the vicinity include multiple video game studios such as Blizzard Entertainment (ATVI), healthcare leaders such as Edwards Lifesciences (EW) and Allergan (ABBV), semiconductor companies such as Western Digital (WDC) and Broadcom (AVGO), and even an EV developer Rivian (RIVN). As you can see, the region is full of high value, high-growth companies that are both A.) hiring (by looking at company career pages), and B.) providing the necessary income required to purchase Five Point’s expensive properties.

Development partners include Lennar (LEN), Taylor Morrison (TMHC), and Pulte (PHM). Prices range from $900,000 to $1.8 million, and all are townhome style. This contrasts with single-family homes in the area that start above $2 million. Competition is non-existent in my opinion as the house prices are comparable to other homes in the area, including most of Orange County, and why would someone choose to pay $800-$900 thousand for a 60s era house in a worse neighborhood that needs extensive work done. Although, while this Irvine property is one of the largest in the county, there are plenty of other new developments in the area that offer similar prices for new homes. Demand will be driven by the supply and demand data that I discussed above, and Great Park’s location remains superior.

Five Point puts much effort into the creation of trendy and progressive communities, full of public space and social venues. The development also includes recreation parks, trails, and three schools to support a diverse and healthy community. The company seems to be leading in a new sustainable form of urban “new suburbanism”: dense housing but with plenty of sensibility. The area is set to have 10,500 homes, and 3,800 have been sold so far. As such, there is still a few more years of development in store to draw the majority of revenues. Lastly, less than 10% of units are set to be “affordable”, so this both limits profit losses and risk as luxury residents are in high supply. I believe “affordable” units are in the $900s just as a reference.

FivePoint Valencia

The second major development area for FPH is in the outer LA county City of Santa Clarita. Located about an hour away from LA, the community of Valencia is a major master planned community set to over a quarter of a million in population and millions of sq ft in commercial space. While the community was well established already prior to Five Point involvement, the company plans to add 21,500 homes, 7 new schools, and 10,000 acres of open space and trails. Home prices are lower on average than Orange County due to the location, but the homes listed on the Valencia page start at a meager $400- $600,000 (1-3 bedrooms).

Thanks to the favorable location along the 5 corridor and conveniently located next to Six Flags Magic Mountain (SIX), prices are able to remain relatively higher than other cities an hour away from LA. You may have noticed the development during a recent visit to Six Flags when looking towards the west. Partner developers include Lennar, KB Home (KBH), Toll Brothers (TOL), Richmond American (MDC), Tri Pointe (TPH), and more. While the area is growing economically thanks to a shift away from the central LA area and location along the 5 corridor, slightly more risk exists in regards to the safety of the valuation of this project when compared to the affluent Irvine region.

FivePoint San Francisco

Another future development that investors can look forward to is in San Francisco at the location of where the old Candlestick Baseball stadium used to be located. The current wasteland/trailer park offers a large block of land to transform into a new major community in SF. The location to the south of the city center offers some exposure to the Silicon Valley crowd, and may be able to support high prices. While risk exists due to the current high market prices, loss of population in the bay area, and political environment, I do not see SF not being able to maintain its leading status as a world-class city. The development is still in the early stage, but the company has a goal for 10,700 homes and over 6 million sq ft of commercial and entertainment space.

The California Real Estate Market

The housing market has some unstable signs to consider, but in general, I find the state is better off than areas that saw extreme growth during the pandemic. February saw a continuation in the upward trend of house prices in Southern California, although the numbers of sales have fallen. The 12.6% increase in price to $760,000 is a high not seen in any other region in the country, except the bay area. Five Point has begun selling plots of lands and earning home sales fees over the past few years, and so are able to benefit from the upward price trend.

However, after home sales rose significantly in 2021, 2022 has started off with an almost 10% decline. This may also lead to a steep decrease in home value down the line. Although, high-value homes seem to be holding up better than low-value houses. As Five Point’s holdings are in high-value regions, we can look for positive revenue metrics in 2022 and beyond as long as the market is healthy. There is still plenty of demand out there, but the problem is supply. In the last earnings call, the management claimed that there are no homes sitting empty, and that inventory is being sold as soon as construction is complete. As of 2021, the only issue is the lack of supplies and labor developing housing.

Although numbers of units sold are falling, prices remain in their upward trend, further signifying short-term momentum favors FPH. As the company mostly develops townhome style units, it is important to look at the corresponding data. With an average price of $640,00 in Feb 2022, an incredible opportunity exists in the segment. A shift in townhome quality, availability, and demand has allowed townhome prices per square ft values to increase far above single family home values. This is further evidence that builders working with Five Point are well positioned to continue driving sales. In turn, the builders will continue buying homesites from Five Point. This may be a sign that townhomes are leading the advance in new development across Southern California as the need for more housing, without expanding our footprint as fast into natural areas, is at the fore. I believe that FPH has a good balance between environmental stewardship, conservative housing expansion, and high density opportunities.

Lastly, an important metric to follow is the availability of inventory. Prices will continue to rise due to the extremely low supply. Although it seems like this trend may end, no concrete pattern has emerged. Therefore, for the time being, we can say that new construction such as the case with FPH will continue to have an advantage in both pricing and demand as they are essentially the only new entrants to the market. However, due to supply chain issues and inflation, revenue growth has been slower and development is more costly than anticipated. This is one reason for the extremely low valuations for both land holders and home builders. I will discuss the financials and valuation next.

Financials

Since development is shifted to home builders, FPH makes their money through homesite sales and fee-build arrangements. As of the full year of 2021, the Irvine development saw 887 homesites and 16 homes sold, allowing for $419.5 million in revenues. Further, distributions and incentive payments totaled $98.3 million, and builder sales increased 11% YoY. In Valencia, 643 homesite sales brought in $167.3 million. A total of 1,866 homesites have been sold there, while only 346 builder home sales have occurred, allowing for significant growth in fee revenue over the coming years as more homes are sold. The San Francisco development is not earning revenue yet.

While revenues are linked to the state of available development, expenses are linked to development services, marketing, and managing properties, and this has in the past led to volatile net income over the years. Taking a look at the balance sheet, the company has been slowly draining their cash pile over the past five years. However, debt raised from 2017 to 2019 has also been falling. Now, the company has a fairly tolerable net debt level of $440 million. Although, I would look to the company to increase profitability in order to feel safer about this level of debt.

One interesting point to consider as a strong point to the company is the value of their land assets. The company currently has a book value per share of $9.05. This contrasts with revenue per share of $3.33 and earnings per share of $0.09. As such, FPH is trading at a price to book of just 0.66. Real estate names have taken a beating over the past few months to a year, and valuations are incredibly low. For a prospector like Five Point which has failed to exhaust their inventory, I find there is plenty of opportunity that remains.

Conclusion

While the current valuation of the company is very low, there are a few data points to consider for this investment. First is the state of the housing market and recession. While prices remain elevated, sales are already slowing down as mortgage rates go up. In the future, prices may fall as supply and demand rebalance after the pandemic period. Further, the risk for financial difficulties is possible due to inflationary pressures. However, Five Point has the benefit of their assets being in high demand regions with growing and high-income residents. As the company puts a lot of effort into creating sustainable communities and residents enjoy living there, inventory will continue to be sold as soon as it hits the market.

Also, to combat the issue of supply chain and labor shortages, the company has not sold as many lots as they could have to developers to make sure there is no excess inventory and costs. This will likely continue into the future as the company watches supply and demand in the market. I listed multiple home builders that are buying land off FPH in the article, and so I would recommend looking at their performance as well.

Along with studying the real estate market, it will also be important to watch Five Point work into a profitable growth mode. While the three sites are all mostly undeveloped, losses should not be expected long term. However, we cannot tell how profitability will turn out after Irvine and Valencia units get mostly sold. I would like to hear management provide more insight into the commercial, rental, and management service revenues that will be necessary for future growth. Lastly, one positive point to consider is the new CEO in place who seems to be focused on increasing profitability. Time will tell on his success, and so I will wait to see how things play out over the next few months. I will provide a deep dive into the company then, as it is quite complex.

Thanks for reading, feel free to comment on anything below.

Article source: https://seekingalpha.com/article/4501832-five-point-california-real-estate-market-breakdown-company-position

Rising home prices. Growing demand from first-time buyers. A near-record-low number of homes for sale. Bidding wars flying $1 million over asking prices.

Is this the toughest time to buy a Bay Area home?

Affordability has neared all-time lows, with home prices climbing far faster than incomes.

Bay Area buyers without healthy cash reserves, big down payments and quick decision-making are getting left at the starting gate.

In January, real estate analysts saw the fastest rise in U.S. home prices over any 12-month period in 45 years.

But don’t just look at the numbers – ask Pinky Abrenilla and Chip Fernandez. The East Bay couple had an expiring lease in the Berkeley Hills and were determined to move by the end of March.

They spent four months touring almost 100 open houses, lost bids every other week, and collected a novella’s worth of disappointments before finally landing a $788,000 fixer-upper in Concord. Abrenilla doesn’t love the neighborhood or the $60,000 in needed repairs. But it was better than most of their other choices.

“It’s not,” she said, “going to be our forever home.”

• CONCORD, CALIFORNIA – MARCH 17: Chip Fernandez, of Concord, and his wife Pinky Abrenilla, examine the outside of their newly purchased 1,492 square feet home in Concord, Calif., on Thursday, March 17, 2022. Abrenilla and Fernandez have been looking for a new home since November 2021 and had placed over eight bids on previous homes before settling on this $788,000 fixer-upper. (Jose Carlos Fajardo/Bay Area News Group)

• CONCORD, CALIFORNIA – MARCH 17: Pinky Abrenilla, of Concord, tries the stove of their newly purchased 1,492 square feet home in Concord, Calif., on Thursday, March 17, 2022. Abrenilla and her husband Chip Fernandez have been looking for a new home since November 2021 and had placed over eight bids on previous homes before settling on this $788,000 fixer-upper. (Jose Carlos Fajardo/Bay Area News Group)

• CONCORD, CALIFORNIA – MARCH 17: Chip Fernandez, of Concord, and his wife Pinky Abrenilla, stand in the living room of their newly purchased 1,492 square feet home in Concord, Calif., on Thursday, March 17, 2022. Abrenilla and Fernandez have been looking for a new home since November 2021 and had placed over eight bids on previous homes before settling on this $788,000 fixer-upper. (Jose Carlos Fajardo/Bay Area News Group)

• CONCORD, CALIFORNIA – MARCH 17: Pinky Abrenilla, of Concord, exits the bathroom of the master bedroom of their newly purchased 1,492 square feet home in Concord, Calif., on Thursday, March 17, 2022. Abrenilla and her husband Chip Fernandez have been looking for a new home since November 2021 and had placed over eight bids on previous homes before settling on this $788,000 fixer-upper. (Jose Carlos Fajardo/Bay Area News Group)

• CONCORD, CALIFORNIA – MARCH 17: Pinky Abrenilla, of Concord, and her husband Chip Fernandez stand in their master bedroom of their newly purchased 1,492 square feet home in Concord, Calif., on Thursday, March 17, 2022. Abrenilla and Fernandez have been looking for a new home since November 2021 and had placed over eight bids on previous homes before settling on this $788,000 fixer-upper. (Jose Carlos Fajardo/Bay Area News Group)

Show Caption

Expand

In the Bay Area, agents and economists say the decade-long rising market has grown increasingly frustrating for buyers. Data from the California Association of Realtors (CAR) paints a stark picture: The number of Bay Area single-family homes for sale in January dropped by 40% from the same month in 2020.

At the same time, the typical home in the nine-county region sold for nearly 6% over asking price – a higher premium than any January since CAR started tracking the data in 1995. Bay Area houses have typically sold for at or below list prices. The median price of a single-family home was $1.25 million at the end of last year.

And the premiums for single-family homes in the core counties have escalated to recent, record highs, according to the data. San Francisco homes sold, on average, more than 21% over list price in February, while Alameda County prices went 17% higher than list price, followed by Santa Clara (nearly 17%) and San Mateo (13%) and Contra Costa (6%) counties.

The typical home in Santa Clara and San Mateo counties in February sold in 7 days, the fastest time since CAR began tracking days on the market in 1995. Alameda and Contra Costa county homes sold in a near-record 8 days.

“It definitely is the most competitive era we have seen,” said CAR economist Oscar Wei.

Buyers are also having a harder time affording homes than any time since 2008, before the real estate bubble burst, according to real estate data. The CAR affordability index, a measure of home prices, mortgage rates and incomes, estimated that less than one-quarter of Bay Area families had the financial wherewithal to buy a home at the end of last year. Bay Area affordability dropped slightly from the previous year and is half of its peak level in early 2012.

By comparison, half of working families in the U.S. can afford to buy a home.

When will it get better?

Historically, the busiest home-buying season is spring and early summer. Wei expects inventory to pick up, but maybe not enough to satisfy all the buyers in the market.

And the stories from real estate agents around the region point to hard times for buyers. The influx of millennials looking for their first home, the fear of faster-rising mortgage rates and a push to convert volatile stock portfolios into property have super-charged demand. Many sellers have been reluctant to move and face their own daunting home search, pinching supply.

Saratoga agent Mark Wong has seen a half-dozen Silicon Valley homes recently sell for more than $1 million over listing. “There’s a lot of competition for the right house,” he said.

“It’s never been harder everywhere,” veteran Fremont agent Sunil Sethi said in an early March email. Since then, he said, the market loosened up for a week as the Russian invasion of Ukraine played havoc with the economy and spooked buyers.

But, he said, the frenzy has returned. Sethi received offers this month for two homes he hadn’t formally put on the market, both for more than $300,000 over the initial asking price. The sellers waited to hold an open house before accepting a deal.

Sethi believes today’s market is a bit less crazy than the 2007 rush to buy Bay Area homes, but current buyers meet tougher loan standards and have better incomes.

For Abrenilla, a retail manager, and Fernandez, a business analyst, the hunt began in mid-November, when their long-time landlords announced they would be moving back into the home. The landlords offered a $10,000 bonus if the couple would leave by March 31.

The middle-aged couple loved their rental, the neighborhood, and the proximity to Abrenilla’s two sisters. But nearby fixer-uppers were selling for $1.1 million, just outside their budget. They explored the East Bay with agent Matt Rubenstein.

He estimates he looked at more than 30 properties with the couple. “They had to manage their expectations and change strategies a few times,” Rubenstein said.

Abrenilla and Fernandez’s first offer on a Martinez home came in second place, despite their heartfelt thank you note and plea to the owners. Other rejections followed.

They got creative, looking for homes that could produce income with a backyard apartment, and asking family members if they wanted to make a purchase together. They considered buying a waterfront property in Marin County and renting out boat slips.

Fernandez and his brother-in-law visited one home together in Oakland, only to discover a car stripped of its wheels and perched on bricks near the open house. Hard pass.

Another hillside home in Oakland seemed ideal – except for the precarious three flights of stairs that needed to be replaced just to get into the front door.

At one point, Abrenilla spotted a gem, but the open house was on Christmas day. She figured they could tour it a few days later. It sold before they got the chance.

After a few weeks, the couple started a spreadsheet of most of the homes they visited, evaluating each by price, school district, affordability, potential for rental income and estimated renovation costs. They became obsessed. “Literally, every day off since November has been an open house,” Abrenilla said. “Open house, bid. Open house, bid.”

She said she gave up on finding a “forever home” after losing their fifth bid.

The spreadsheet grew to more than 70 homes, and things were getting desperate. The couple considered renting another home.

But they came across a four-bedroom, two-bath house with a pool in Concord, just a few blocks from De La Salle High School. They agreed to buy it as-is, fixing any problems, major or minor, out of their own pocket.

The couple closed last week.

“I love the Bay Area,” said Abrenilla, a San Jose native who has also lived on the East Coast. “But the experience of house buying here is not fun. … At the end of the day, it’s a transaction.”

• Report an error
• Policies and Standards
• Contact Us

Article source: https://www.mercurynews.com/2022/03/20/is-now-the-hardest-time-to-buy-a-bay-area-home

Like many cities in the Bay Area, 2021 was a record year for Emeryville Real Estate. The Sales volume more that doubled year-to-year, the median sales price went up by 2.95% and homes sold 17.65% faster compared to 2020.

Emeryville Rents stabilize after Post-Pandemic Decline

After a post-pandemic “peak” in August 2021, median Emeryville rents saw small declines to finish the year. The price of one bedroom units settled to a median of $2,430, while two bedrooms stand at about $3,000.

In 2021, rents for 1 bedroom units are up about 5% and 2-bedroom’s are basically flat.

Emeryville is ranked as the 5th most expensive city to rent in the Bay Area following SF, Palo Alto, Sunnyvale Mountain View.

Read the full report on Zumper.com. Browse all current Emeryville rental listings here.

Single Family 3 Bedroom see Largest Median Increases

• The median sales prices of all homes in Emeryville increased by 2.95% in 2021 to $550,000
• The median sales price of studios increased by 3.39% from $346,500 to 358,250
• One bedroom homes also increased from$473,000 to $502,500 by 6.23%
• Two bedroom median sales price decreased by 4.65% from $760,000 to $725,000
• Three bedroom median sales price increased by 36.68% from $730,000 to $997,912
• Single Family median sales price increased by 17.5% from $800,000 to $940,000

2021 Sales by Property Type

Studios

Median List: $349,500
Median Sales Price: $358,250
Median Day on Market: 41

1 Bedroom Condo

Median List: $482,000
Median Sales Price: $502,500
Median Day on Market: 45

2 Bedroom Condo

Median List: $699,000
Median Sales Price: $725,000
Median Day on Market: 37

3 Bedroom Condo

Median List: $998,000
Median Sales Price: $1,145,625
Median Day on Market: 32

Single Family Homes

Number of homes Sold: 9
Median List: $788,000
Median Sales Price: $940,000
Median Day on Market: 36

2020 vs 2021

• 62.3% increase in Total Sales Volume
• 58.2% increase in total Number of Homes Sold
• 2.95% increase in median Sales Price
• 17.65% decrease increase in average days on market

This density map shows the various sales clusters within Emeryville.

Sales By Condominium Complex

The graphics below show the average sales price and total units sold for the various condominium complexes within Emeryville.

2021 Sales Spotlight

BMR sells for $174K, Stanford Ave SFH “Flipped” for $1.4M

Emeryville’s lowest sales price in 2021 was Andante Condominiums unit #1305. The sale was a Below Market Rate unit originally purchased in 2005 for $109K. It received 25 offers and sold after 24 Days on the Market for $174,600.

If you are not familiar with Emeryville’s Below Market Rate Program, find more details on the city’s website.

Emeryville’s highest sales price in 2021 went to a single family home located at 1241 Stanford. The property that we spotlighted in March was purchased by an investor for $580,000 and completely overhauled. The corner lot was expanded from its original 884 sq. ft. to 3 Bedrooms and 2.5 Baths.

It went pending within 15 days and sold $215,000 over asking for a final sales price of $1,400,000.

A complete listing of available Emeryville properties can be viewed here.

This report is prepared by longtime Emeryville resident and Coldwell Banker Realtor Nicole Gruen. Curious about buying or selling in Emeryville? Support your resident realtor.

**All data deemed accurate, but not guaranteed.

Is Local News “Essential” to you?

If so, consider a one-time or recurring contribution to help support our local journalists.

Article source: https://evilleeye.com/in-the-neighborhood/2021-emeryville-rents-real-estate-review/

Rent vs. buy: No simple answer

The primary consideration is an individual’s personal and financial situation. There are many factors and variables to consider, including current income and debt, personal assets, credit score, down-payment funds, mortgage interest rate, purchase price and the location and type of property.

Home ownership is the way to go for long-term investment and equity, if an individual has the wherewithal to get into the market. But for those looking to make a head-to-head financial comparison between renting and buying in the nearer term, there are tools available to try this out.

By plugging in common variables to rent-vs.-buy calculators from NerdWallet, SmartAsset and Realtor.com, The Chronicle identified some key trends for people considering becoming homeowners (or considering exiting homeownership). The exercise found that it takes longer to realize investment in home ownership in the Bay Area’s biggest cities than in the nation at large.

For the three largest Bay Area cities (San Jose, San Francisco and Oakland), these data points were factored in:

• Median household income from the U.S. Census.

• Typical two-bedroom home value from real estate listings site Zillow from February, 2022.

• Estimate of two-bedroom apartment rent from Apartment List from February 2022. Apartment List uses Census Bureau and Department of Housing and Urban Development statistics.

We entered these values into a rent vs. buy calculator, adjusted home appreciation to 5%, set mortgage interest rate to 5.1%, which was the national average as of Sunday, and assumed a 20% down payment on a house.

In all three cities, it’s less costly to rent in the shorter term — no surprise, given the upfront costs necessary for homeownership. But the break-even point occurs at a different moment for the three cities, and later than the national average, especially in San Francisco.

Calculating the break-even point

NerdWallet’s calculator shows that in Oakland, the point at which buying is financially superior to renting comes at the 11-year mark. (This assumes a household income of $80,143, a two-bedroom home priced at $820,376, and a two-bedroom rent estimate of $1,939.)

Raise the monthly rent input by 10%, and it decreases to nine years. A 20% monthly rental increase allows the buyer to break even in seven years.

Conversely, if the home price goes up 10%, buying is again never cheaper than renting unless your rent is much higher.

In San Francisco, using the average numbers for household income ($119,136), two-bedroom home price ($1.48 million) and rental price ($2,713), you break even in 26 years, according to the calculator.

If the rent is increased 10%, the break-even point is 22 years, and a rental increase of 20% puts that milestone at 18 years. But raise the home price by 10% and you won’t break even for 30 years.

In San Jose, inputting the median household income of $117,324, a two-bedroom home price of $893,119 and rent estimate of $2,331, you break even in nine years.

Raise the monthly rent by 10% and the homeownership break-even mark comes at seven years, while increasing rent 20% makes it six years. But again, increase the San Jose home price by 10% and you’re better off renting.

Buying a home becomes the better financial bet much sooner when all the numbers are based on national averages. With a median household income of $64,994, a home priced at the typical two-bedroom home value of $245,552, a two-bedroom rent estimate of $1,295 and 3% home appreciation rate, the break-even point is just four years. Raise the rent 10% and the break-even point is reached in three years, and the same with a 20% increase in rent.

These calculators are limited in their scope, and experts say it all really depends on your end goal. Results depend on estimating and assuming many variables that can vary widely from region to region, person to person, and scenario to scenario.

“If you are in a rent control apartment and have been renting for a long time, then renting will always be cheaper,” said Jeannie Gant, a San Francisco real estate broker and president of the San Francisco Association of Realtors. “But you will not have the many advantages of owning a home and building equity. If you are renting at today’s rental market price, then you will start to see the curve bend towards buying as a better option.”

Other factors to consider

Gant said the primary reason for homeownership is to “build equity and provide housing stability.”

Rob Warnock, senior research associate for Apartment List, pointed to the attractiveness of “passive investment” as one reason for buying a home, even if renting is cheaper.

“A lot of household wealth creation is based on mortgage payments that convert into equity, which can be used to access more capital,” he wrote in an email.

In order for a renter to achieve these gains, “they would need to calculate their monthly savings compared to homeownership, invest those savings, and achieve a return that matches or exceeds home price appreciation.”

“While certainly not impossible, wealth-creation in this way is far more demanding as a renter,” he said. “This is a drawback to these (rent-versus-buy) calculators I think, which focus on how much you spend rather than how much wealth you generate.”

Still, there are benefits to renting including overall lower monthly costs, the flexibility to pick up and move wherever you want, not having to deal with surprise housing expenses, and being able to live in more urban areas that typically have more units for rent, Warnock said.

“But despite these benefits, our research suggests that most renters rent because they can’t afford not to, and specifically it’s the up-front costs that makes homeownership unaffordable,” he said.

The pandemic has made the home buying market especially tough in the Bay Area, which was already notorious for high prices and low inventory.

“The pandemic increased the demand for single family homes as buyers moved away from bigger condo complexes and preferred outdoor space and single dwellings,” Gant said. “Therefore the appreciation rate for single family homes went up over 10% from 2021 to 2022.”

Especially fierce competition in some parts of the Bay Area has led to “bidding wars, all-cash offers, institutional investors, waived inspection contingencies,” Warnock noted.

“Unfortunately I think the competitiveness of today’s Bay Area home market is making obsolete a lot of conventional wisdom about what it takes to buy a home,” he said. “It’s one thing for the market to be expensive … but historically low inventory and a rush to capitalize on low interest rates has created a competitiveness that poses new challenges to potential home buyers.”

He added that the pandemic “has increased demand for owned homes while also interrupting new home construction.”

That said, Gant said prospective buyers can still find homes if “they are willing to forego some amenities”: In San Francisco, for instance, “you can pay about $100,000 less for a home without parking.”