Bay Area Real Estate - A Risky Business

For years, real estate has been one of the best investments in the Bay Area, but some experts are saying it's now becoming a risky business.

A study released Thursday says homeownership in California is at its highest level since the 1960s -- but in large part because people are taking more and more risks to get there. The Public Policy Institute of California says families are taking on enormous debt, skipping down payments, choosing interest-only or adjustable-rate mortgages, and signing up for 40-year loans. Many couldn't afford to buy without such measures.

According to the report, over half of people who bought a home in California in the past two years are ignoring federal guidelines and sinking more than 30% of their income into mortgages. Twenty percent are spending more than half their income.

The gamble has paid off for many. In just the past three years, local home prices have shot up 47%, which helps explain why buyers are willing to pay over the asking price. We saw a modest two-bedroom home in San Mateo Thursday that sold for $100,000 over the price is was listed for.

Broker Bill Mott has been in the business for 30 years. He says the risks could backfire if prices go down, but they don't have to."

As long as they don't sell, they'll be fine," he said. "If they keep the property, then it's their home and it'll be fine. Because eventually even if it stops or slows down or stops appreciating it'll be only a cycle again. It'll start appreciating again. It has to.

"The median prices for a Bay Area home stands at $501,000.

Source -CBS5

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