01 Mar Ups & Downs in SF Bay Area Real Estate Markets
The spring market has been hotter than anticipated! The Krishnan Team has been extremely busy writing contracts and trying to get our buyers into homes in very, very competitive situations. It looks to me like we are in the middle of an appreciation increase in most segments. This could be driven by interest rates going up, by people wanting to get in before they go up further, and by continued optimism about the stock market.
We recently had one of our listings in contract after only three days on the market. We are very pleased that these particular sellers hired us to sell this home for the second time in the last five years. See the property here: www.QueenAnneSf.com
In other exciting news, we did a new team video! Let me know what you think?
Since we have a team, we always have the capacity to take on more clients while still delivering the best service in the business. Please do keep us in mind for anyone you know who may be getting married, divorced, having a baby or working at a company on the verge of going public. These are all signs that someone will be interested in buying or selling real estate very soon. It is never too soon for us to meet a new client.
& The Krishnan Team
Affordability, and Selected Demographic Angles, by CountyFebruary 2017 Survey
We have updated our median home price maps for the entire Bay Area by city, for San Francisco by neighborhood, and then specifically for the Marin, Lamorinda & Diablo Valley, and Wine Country markets. To access them, click on the map image below.
Bay Area Median Price Changes
From Top of Bubble to Crash & Recovery
These next two charts illustrate BAY AREA median house prices and price trends since the market peaked in each county prior to the 2008 crash, to the bottom of the market during the 2009-2011 recession, to 2016, after 5 years of recovery. We also threw in a separate section for San Francisco condos, since they are such a large part of the city market.
Based on the charts above, this next table is a bit complicated, but for those interested, it lays out the different percentage ups and downs from pre-crash peak, to post-crash bottom, and then back up to the present. It also breaks out the recent appreciation rate from 2015 to 2016.
If all these percentages up and down are too mind boggling, jump to the charts further below in the report, with additional county market comparisons and some interesting angles on demographics.
- BUBBLE: Generally speaking, the lower price ranges and the less affluent areas saw much bigger, crazier bubbles than other segments, inflated in the years prior to 2006 by predatory lending, subprime loans and the utter abandonment of underwriting standards.
- CRASH: In 2008-2011 distressed-property sales devastated the lower price segments and the areas where they predominated, and they suffered the biggest declines in home prices. When the recovery started in 2012, they began from unnaturally low points, which had little to do with fair market values. Other market segments were certainly dramatically affected as well, but to much lesser degrees.
- PROXIMITY to the high-tech boom: SF and Silicon Valley have been the white-hot hearts of economic expansion. Oakland and the rest of Alameda County were the closest, significantly-more-affordable housing options. Then, as one moves further away, the effect on home prices gradually lessened.
- AFFORDABILITY: The more affluent areas led the recovery in 2012-2014, but then the highest pressure of demand started shifting to less expensive neighborhoods, cities and counties. Amid the feverish appreciation in prices, buyers desperately searched for affordable housing options. Now, some of the most expensive markets are beginning to cool, while less expensive ones remain very competitive.
OAKLAND had a gigantic subprime bubble, a huge 60% crash, and then a sensational recovery highly pressurized by being just across the bridge from SF (and much more affordable). The Oakland median house price is up a staggering 182% since 2011, partly because it crashed so low. However, because its subprime bubble was so big, it is only 12% above its inflated 2007 price. Alameda County as a whole has experienced much the same market. Other comparatively lower-priced Bay Area markets, such as northern Contra Costa, Solano, Napa and Sonoma, more distant from the high-tech boom, saw similar dynamics, but are still somewhat below their 2007 peaks despite substantial recoveries.
SAN FRANCISCO, more expensive and affluent, had a much smaller bubble and much smaller crash with far fewer distressed property sales. The high-tech boom then supercharged its recovery: Its median house price is up 90% from the bottom hit in 2011 (much less than Oakland), but is 48% higher than its 2007 peak, the biggest increase over the 10 years of any of the markets measured. Silicon Valley has similar statistics, and other high-price markets like Marin and the Lamorinda/Diablo Valley area of Contra Costa County, saw comparable, if somewhat less dramatic, dynamics.
Additional Bay Area Market Comparisons
Bay Area Housing Affordability Index
The Bay Area is among the least affordable places in the country, but it is still somewhat more affordable than during the historic low in 2007. Interest rates play a big role in that comparison.
Interest rates changes, which have a large impact on affordability,
continue to confound predictions as to sustained direction.
Selected Demographic Snapshots
A few angles on how the Bay Area is different from other places, and how Bay Area counties differ from one another.
Some local context to the current political issue of immigration.
The Bay Area would be a totally different place without it.
All Bay Area counties have been rapidly growing in population. San Francisco
in particular is very densely populated and getting more so.
Along with Washington DC and Seattle, the Bay Area ranks among
the best educated metro areas in the country.
Case-Shiller Home-Price Index Trends
By Price Segment, since 1988
This chart above based on the S&P Case-Shiller Home Price Index illustrates the enormous differences between the bubbles and crashes of different price segments in the Bay Area market (as alluded to earlier in this report): Notice the insane size of the bubble for the low-price tier (the light blue line) – it went up 174% from 2000 to 2006, about twice as much as the high-price tier (green line) – which then led to its staggering crash. It is interesting to note that the overall appreciation of all three price segments are now relatively similar when compared to 2000, with the low-price tier taking a small recent lead.
Note: Case-Shiller analyzes the Bay Area market by low, mid and high-price tiers, each tier equaling one third of sales. For any Bay Area home, whatever its price in January 2000, Case-Shiller assigns it a value of 100. All other values on the chart below refer to percentages above or below the January 2000 price, i.e. 150 equals 50% price appreciation since that date. Case-Shiller does not use median sales price data, but instead uses its own proprietary algorithm to reach its conclusions.
Bay Area Rents
Some rents have begun to drop in the Bay Area, especially in San Francisco
due to the current boom in apartment building construction.
However, the city still has the highest rents in the land.
These analyses were made in good faith with data from sources deemed reliable, but may contain errors and are subject to revision. It is not our intent to convince you of a particular position, but to attempt to provide straightforward data and analysis, so you can make your own informed decisions. Median and average statistics are enormous generalities: There are hundreds of different markets in the Bay Area, each with its own unique dynamics. Median prices can be and often are affected by other factors besides changes in fair market value, and longer term trends are much more meaningful than short-term. It is impossible to know how median prices apply to any particular home without a specific comparative market analysis.
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