Deniz Kahramaner is the Founder & CEO of the data driven Real Estate Brokerage Atlasa. His mission is to help home buyers understand the tradeoffs of different home options using big data and analytics. You can reach Deniz at deniz@atlasa.com or 650-770-3100.

I consistently hear the following question from my clients:

Shouldn’t higher interest rates hurt home prices in the Bay Area?

Yet, we still see relentless appreciation on good condos, single family homes, and investment properties.

When we look at the big picture, the reason becomes a little more obvious:

Interest Rates Are Still Lower Than They’ve Been In Decades

Back in the 80s, we saw interest rates as high as 16.6%.

When looking at the significant dearth of housing supply in the Bay Area, it becomes fairly obvious how interest rates’ effect on prices is overshadowed by demand consistently surpassing supply.

Furthermore:

Since January 2016, interest rates have gone up about 1 full percentage point, from 3.9% to 4.9%

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For a $1M property, this translates to approximately $10,000 of additional interest payments per year. This is not a lot of money in the grand scheme of things, especially in a place like Silicon Valley where the average household that purchases a property makes over $200K a year.

However, we do see that a wider national recession would affect Bay Area home prices.

If the recession does not hit us in 2019, we still do expect to see quite a bit of appreciation, given the lack of supply in residential neighborhoods in San Francisco and South Bay. More on that topic next week!

Authors

Deniz Kahramaner is the Founder and CEO of Atlasa and a Realtor. He was formerly the Head of Data at Accompany Inc. He holds a BS in Electrical Engineering and an MS in Computer Science at Stanford University.

Jeremie Young is a Data Engineer and Operations Manager at Atlasa. He was formerly a marketer at Compass and Pacific Union.