Apartment bubble in San Francisco pushing more people to seek homeownership

A bubble in the apartment market in San Francisco is making homes for sale in the Bay Area more attractive than ever. Rising rental rates, coupled with the influx of young post-graduates to the metro area, have formed an abscess that is sucking money out of the local housing market. The price increase began outside of the city in metros like Sacramento, but just like a virus, has spread to the surrounding communities.

"Think of the housing bubble like a wave," said local real estate expert Eli Davidson, according to the Huffington Post. "Depressing home prices in Stockton and Modesto coming through the East Bay finally [make their] way into San Francisco. As it recedes, it's going to see increases in San Francisco first and then the East Bay and finally make its way back into the Central Valley."

If you are considering relocating to the Bay Area, it might be prudent to evaluate property listings that are listed for sale rather than for rent. While an initial down payment may seem like a significant investment, the long-term benefits far outweigh the immediate cost.

For example, the average monthly rental rate in San Francisco was $1,888 during the first quarter of 2012, according to The Wall Street Journal. This was an increase of 5.9 percent from just a year earlier, making the metro the single most expensive place to rent in the entire United States.

Therefore, if you were to purchase a house listed for $400,000 (the median home price for the Bay Area in May 2012), you'd probably need a 10 to 20 percent down payment - approximately $40,000 to $80,000. Rounding down to $40,000, as those with good credit should be able to secure such a low upfront cost, will make an average mortgage payment might be much less than $1,888 a month under typical financing conditions.

In addition to this low number, the Bay Area housing market is heating up as the national economy recovers.

"It's not exactly a stampede, but people are starting to move off the housing-market sidelines in numbers we haven't seen in quite a while," real estate expert John Walsh told Bloomberg. "Foreclosures are a significantly smaller portion of what's selling, and the higher-cost coastal markets are seeing more activity."