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Despite Rising Rates, Northern California Offers Solid Housing Investments

By Joe Taylor Jr.
Local Lender Columnist
Apr 19, 2006
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With fixed mortgage rates predicted to increase again this year, finding an affordable home in Northern California could become even more challenging.

In a recent study, the California Association of Realtors called the housing market in Northern California one of the most overpriced in the nation. Three metropolitan areas in Northern California ranked among the top fifteen most unaffordable places to live in the United States. Average home prices in these cities ranged between $311,000 and $760,000.

Northern California Prices Keep Rising, Just More Slowly

Economic forecasters suggest that prices will continue to rise in Northern California. Some say the state's barreling housing market will slow down to a more reasonable 5% to 8% increase rather than the recent 20% to 30% surges.

The predicted increase in mortgage rates likely will be coupled with a slowdown in the economy, according to analysts. For Northern California, this will mean less new construction and fewer new houses in a market where demand for homes far exceeds what builders can produce.

Northern California Still Holds Good Deals for Treasure Hunters

If you can afford to buy a house in Northern California, experts say this should be a good year to invest in real estate. While mortgage rates are predicted to increase slightly this year, possibly close to 7% for a 30-year mortgage, the rates remain low by historical standards. The demand for houses in Northern California should remain high, as builders in California say they are running about 40,000 units behind the pace of growth in the state.

While some forecasters warn that the "housing bubble" could burst soon - all indicators show that home prices will continue to increase. Northern California real estate, especially property in wine country, remains an excellent investment for the foreseeable future.

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About the Author
Joe Taylor Jr. has covered business and finance news for Financial Times Television and CNBC. He coaches beginning mortgage brokers to provide better customer service and to understand creative financing opportunities.