FAQ: How is inflation affecting the Bay Area real estate market?

A: Inflation has ushered in a markedly different landscape in the Bay Area real estate market compared to what we witnessed between 2020 and 2022. In the last year and a half, the market dynamics have shifted significantly, driven by the pervasive effects of rising prices across various sectors of the economy.

As inflation continues to drive up the costs of everyday essentials such as gas, food and clothing, potential homebuyers find themselves with more limited budgets for purchasing homes. The combination of rising inflation and higher mortgage interest rates has created a less affordable environment for homebuyers. Consequently, sellers are now facing the need to adjust their expectations and lower their asking prices to attract buyers in this more challenging market.

For sellers, the current situation still presents an opportunity to secure a substantial return on their real estate investment, given the remarkable appreciation of home prices in the last two years. On the other hand, for buyers whose circumstances and budgets allow for flexibility, this period may offer a promising window of opportunity with reduced competition.

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Original article published in the San Francisco Chronicle on October 1, 2023.