The rule of thumb for many potential Bay Area home owners is, ìtry not to think about it too much.î When looking at the average home price in the Bay Area, $560,000, and then looking at what $560,000 affords you (a 2 bedroom home in Stockton or a studio apartment in the Mission District of San Francisco) it is best to make sure you have the down payment and can make mortgage payments, and buy. But even more importantly, don't talk about the price of buying a home, the inflated real estate market, or the size of your potential new abode with anyone outside the area–unless they live in Boston or New York City.

ìLowî and ìHighî are the two words you hear most when talking about real estate prices in the San Francisco Bay Area. Low inventory and low interest rates are driving up home prices, asking prices are high, and bids are even higher. 11,068 new and existing homes were sold in 2004. Prices are rapidly increasing and will soon surpass the drastic prices and sales the area saw in the late 1990's dotcom boom. Even after the dotcom bust of 2000-2001 when everything in the area seemed to be deflating, home prices continued to rise and it hasn't stopped. In addition, in most Bay Area counties, a half million dollar home usually needs some work. It is rare to find a home for $500,000 or under that is ready to move into or livable. With high home prices only getting higher, and low inventory the investments you make in your home, whether with upgrades or more drastic remodeling projects, will only help the resale value.

Often Bay Area residents living in San Francisco and Silicon Valley turn to the East Bay for more affordable home options. However, prices are rapidly increasing in Contra Costa and Alameda counties too. Alameda County's median home price rose 20.3 percent from March of 2004 to March of 2005, and now homes are selling for an average of $527,000. According to the East Bay Business Times: ìThe only Bay Area county with a median home price of under half a million dollars in March was Solano, at $409,000, up 25.1 percent in a year's time. Despite record median prices, indicators of market distress are still largely absent, according to DataQuick. Foreclosure rates are low, down payment sizes are stable and there have been no significant shifts in market mix, the company says.î

Home prices in the Bay Area are high, and thinking about them can get you low, but when you look at the natural beauty of the area, the proximity to the ocean, the mountains, wine country, and numerous cultural outlets it seems are fair price to pay. The Bay Area is one of the fastest growing communities in the country, and has relatively low crime rates, respectable schools, and location, location, location; you can understand the booming real estate market. With home prices in the Bay Area getting higher and higher and the inventory getting smaller and smaller, buying a home in the Bay Area is proving a solid investment regardless of cost.

To read about Bay Area real estate profiles for over 100 cities, visit http://www.bayarearealestateadvisor.com.

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