Mixed outlook for local housing / Solano County’s forecast weakest, Economy.com says
There’s a good chance that housing prices across the United States will drop next year for the first time since the Great Depression, but West Bay homeowners may be spared by the area’s tight housing supply.

Prices in San Francisco, Marin and San Mateo counties will rise about 3.6 percent a year for the next two years even as home values in the East Bay slip, according to a Moody’s Economy.com report.

Solano County will probably be hit hardest, with prices dropping 12.1 percent through 2008 from their peak at the end of 2005. Home values in Alameda and Contra Costa counties will slide by 6.4 percent, the report predicts.

“There doesn’t appear to be much excess supply in the San Francisco market,” said Gus Faucher, director of macroeconomics at Economy.com. “A lot of the growth has been occurring in the outlying metro areas. It’s the case in San Francisco that supply has not really gotten ahead of demand.

[snip]

San Francisco is also protected by the fact that there are fewer speculators, according to Faucher. Only 9.2 percent of homes in the city and in neighboring Marin and San Mateo counties are occupied by people other than their owners. Nationally, that number is 16 percent, he said.

That, coupled with the fact that home prices in the three-county region aren’t out of line with historical values, suggests that market isn’t in for a major crash, Faucher said.

“San Francisco is perpetually unaffordable,” said Faucher, who noted that an analysis showed that prices in the three counties were just 7.5 percent higher than Economy.com predicted they should be based on historical comparisons. “We think the metro area should be able to sustain that.”

Congrats to San Francisco on being so special!