May 17, 2010

Two Years Later, Who’s in the RBA Now!

And now, a guest post from Madhaus. Pretty thought provoking!

Two Years Later, Who’s in the RBA Now!

Just about two years ago, burbed ran this post, picking up my comment predicting which Special places in the Bay Area were going to become a little less Special.  Home prices in income-challenged regions of the Bay Area had been crashing for more than a year, and foreclosures were starting to mount in far-flung exurbs such as Stockton (and closer ones such as Gilroy).  But most in the Real Bay Area thought they were immune from the oncoming tide of equity retreat.

With my battle cry of “Here’s my prediction of which areas will be removed from the RBA next, in order, with RBA defined as ‘where prices never go down,’” I invite you to Real Bay Area, Then and Now!

And the surprising conclusion?  Only ONE ZIP CODE remains in the RBA.  That’s right.  ONE.  And it’s in Palo Alto!

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Locale 2008 $/sf 2010 $/sf Annual % change
West Redwood City 94062 $576 $499 -6.9%
S. Santa Clara 95051Maywood Park/CUSD $465$796k $348
South Sunnyvale 94087non-CUSD
Central Mountain View 94040 573 550 -2.0%
South Mountain View 94041 644 572 -5.8%
Willow Glen 95125
redfin neighborhood
468 350 -6.4%
West San Jose CUSD 95129 567 485 -7.5%
Los Altos 94022 764 649 -7.8%
Cupertino 95014east of Bubb
west of Bubb
Los Gatos 95032 572 457 -10.6%
Los Gatos 95030 719 603 -8.4%
West Menlo Park 94025
actual Redfin neighborhood
793 724 -4.6%
Palo Alto 94303Midtown 706
Palo Alto 94306 580 724 +11.7% (!)
Saratoga 95070 671 559 -8.7%
Palo Alto 94301 907 801 -6.0%
Los Altos Hills 94024 739 647 -6.4%
Woodside 94062 847
Portola Valley 1,060 648 -21.8%
Palo Alto 94304 1,070 771 -15.1%

Zip code $/sf data from redfin, comparing April 14, 2008 with April 12, 2010 sales prices per square foot.  If a neighborhood is unrepresentative (read: way more Special) of its ZIP code, I picked a house in the neighborhood and compared Zestimates for the beginning of May 2008 and 2010.  Yes, completely unscientific and unrepresentative, but until Redfin lets me pick a neighborhood by school district, or pick a neighborhood that has a name they don’t want to acknowledge, tough.

Wasn’t that a surprise?  The fairest ZIP code of them all is South Palo Alto.   Who knew?  South Palo Alto 94306 – up an incredible 11.7% annualized!  Yes, scraping tiny homes off small lots and replacing them with McMansions pays off!

And let’s have a round of applause for our lovely runners-up, those areas that lost less than five percent annual value in the last two years.  Yes, two years, so you have to more than double those percentages to figure out how much value the average house lost!  Here they are, the lucky ducks!

  • · Central Mountain View 94040 -2.0%
  • · South Sunnyvale 94087 -4.1%
  • · West Menlo Park 94025 -4.6%

Sorry North Mountain View (94043), you’re only down -3.3% a year, but you never were in the RBA in the first place.

Many predictions were made in 2008.  Discuss.

Comments (26) -- Posted by: burbed @ 5:25 am

26 Responses to “Two Years Later, Who’s in the RBA Now!”

  1. nomadic Says:

    Nice research, madhaus!

    I have to laugh at this tidbit from your 2008 post though: “Gilroy will be back in the RBA by the end of 2009! You heard it here first!” As if Gilroy was ever in the RBA to begin with!

  2. Petsmart groomer Says:

    Congratulations to Mayfield (94306). The Real™ Palo Alto (the one before the Mayfield annexation) is doing worse than Mountain View, which only strengthens my argument.

  3. SEA Says:

    madhaus- Is this just another thread about Palo Alto?

    And how many RBA properties are in 94306? You know the list of exclusions, including but not limited to:

    1. Busy streets
    2. Power lines
    3. Railroad tracks
    4. Homes owned by transient guests

  4. madhaus Says:

    SEA, yes only 20% of all properties are acceptable no matter how Special the neighborhood is.

    Did you read the 2008 comment thread, and the one linked from there? Back then there were a few more people in denial that the good areas had peaked and were about to head south, and by south I didn’t mean Mayfield.

    nomadic, I’m sorry if you invested in Gilroy property on my say-so. Can you hold out another three years?

  5. SEA Says:

    We will need some new definitions-

    Something like, when other areas go down 50%, the Real New RBA only goes down 35%, and thus you are 15% better off. We’ll just forget about any price differences.

    Or maybe the Real New RBA will be defined by theaters and soccer fields? The Real New RBA is where all the guests send their kids for theater and soccer.

    Maybe the Real New RBA will be defined solely by the property that Real Estater owns.

    I guess we all know that the RBA is defined by ten-year returns, and not two-year returns, so this whole post is flawed. Since your money is doubled every ten years, it only matters how much you ‘invest,’ and not any specific purchase price. So it will take at least ten years to sort this all out… In the mean time, it’s a great time to buy–just make sure you buy in the RBA.

  6. SR Says:

    Search on google maps for 94306 puts the marker right near the suicide point (rail road crossing: Alma & Meadow)! Is there a correlation here?

  7. mtv-renter Says:

    I rent a house in 94040, and I’m surprised that home prices only lost 2% here. Every weekend, there is an increasing number of realtor signs on street corners pointing to homes for sale. Supply is clearly going up, so prices must at some point come down if the sellers are serious about selling.

    While cycling on Sunday past the Cuesta Dr / El Monte intersection in Los Altos, I saw something that made me wish I had a camera with me. There were eight realtor signs at that intersection in this RBA neighborhood where nobody supposedly ever sells their house.

  8. sonarrat Says:

    I’ll be going through that intersection today. Will take a picture with my cell phone if I spot it.

  9. mtv-renter Says:

    I expect the signs to be gone, they come out on the weekends when realtors hold open houses. I’ll take a pic next week, maybe there will be more signs.

  10. DreamT Says:

    Maywood Park/CUSD has never been around $700/sqf. It hovers in the high 400 – low 500 range.
    Also a calculation based on April/May 2008 is as biased as can be: this was the absolute peak in my and many other neighborhoods. In my immediate neighborhood, exactly one house sold at that peak, followed by zero the following six months 🙂
    This being said, the percentages look accurate to me. Of course it would be interesting to see a 4y and 6y columns, if only to show that whatever conclusion one may draw from this would be entirely false.

  11. SEA Says:

    “I rent a house in 94040, and I’m surprised that home prices only lost 2% here.”

    A few observations:

    1. It’s 2% per year, not “only 2%.”
    2. It’s per square foot, not “prices.”

    What could be happening is the size of homes sold may be changing. For example, people may be willing to spend a little more per square foot on smaller, lower-priced homes, even if the overall psf is falling. This would slow the per square foot price reductions. The various government programs have helped push selling prices higher too, especially on the lower end.

  12. CB Says:

    907/sq ft for a 3br/2ba in a suburb. PA is ridiculous.

  13. madEstater Says:

    907/sq ft for a 3br/2ba in a suburb. PA is ridiculous.

    Oh come on, CB. That was the 2008 price! Now downtown Palo Alto is only $801 a square foot. So much more affordable! Now is the right time to buy! Now is always the right time to buy!

  14. CB Says:

    At $801, I would still require 2004 lending standards.

    Every once in a while the thought that I may be paying too much creeps into my mind. Then I think about what I have: ~900 API elementary, a lively town square and main st two blocks away, trails, parks, lakes all within walking distance – and all for ~350/sq ft. Then I’m reminded of how many who buy in PA are complete retards. It feels good to not be retarded.

  15. Insecure Techie Says:

    At $801, I would still require 2004 lending standards.

    Alternately, a few Worried Moms.

  16. CB Says:

    Regardless of price, I’m not a Stanford professor, and I don’t anticipate my kids attending opera or symphony.

  17. DreamT Says:

    Strangely, page 39 (Lexington) of this week’s The Economist states “[In Boise, ID] $150,000 buys you a spacious house with a garden. In the nice parts of Palo Alto, it buys you a poky flat.”

    There are 1-level apartments for sale at $150k in the nice parts of Palo Alto?!?

  18. DreamT Says: for the non-subscribers

  19. SEA Says:

    “At $801, I would still require 2004 lending standards.”

    I am always a bit amused when people complain that they don’t qualify to buy. I suggest that people run, not walk, away.

    Same thing when a professional appraiser appraises a property below the offer–run away!

  20. zanon Says:

    great job madhaus

    RBA is like Chuck Norris.

    The RBA doesn’t just appreciate. It makes the rest of the planet DEPRECIATE

  21. madhaus Says:

    Hey zanon, you better read the article I wrote yesterday. The RBA has not appreciated, it is abbreviated! LOL

  22. madhaus Says:

    Whoops, this is the article from yesterday. My bad, as usual. Carry on.

  23. PA Homeowner Says:

    On behalf of all my fellow 94306 homeowners (meaning people who acutally own their homes or have modest mortgages well below the value of their homes), I am graciously accepting our title as the RBA. I would like to thank all the Asian money and overstressed overachieving kids in the schools that has made this title possible.


  24. A. Lewis Says:

    great post madhaus.

    #11 SEAs comment on size mix affecting the $/sqft issue is important. Though $/sqft is a hell of a lot better than median sales price, we all know it still suffers.

    In my MRBA neighborhood, the high end larger homes mostly went off the market post-bust, the smaller ones in equally awesome locations sold a few houses for more per sqft, but less overall, of course, and this is exactly what SEA suggests: masking an even deeper drop in prices.

    When the larger homes start to sell more frequently, look for even larger drops in $/sqft (but a rise in median – even as same-house prices are dropping.)

  25. Sio2 Says:

    $/sq ft has a problem around here where land is a big piece of the price. Let’s pick Los Altos – a 1500 sq ft place may go for $1.2m ($800/sq ft) while a 2500 sq ft place may go for $1.6m ($640/sq ft). But a normal lot with no house at all may go for $1m, how do you value that in $/sq ft? The formula needs to be some some factor of house sq ft and lot sq ft.

    Check out 13179 Shadow Mountain Drive in Saratoga. Only asked $918k. Unfortunately it was a fire total loss. Nonetheless it sold, we’ll see for what it was soon.

  26. Single Family House for Price of a Condo… in the RBA. Really. | Says:

    […] week, this site reported the startling news that only one ZIP code remained in the RBA (Real Bay Area).  That ZIP was South Palo Alto, 94306.  So here is an affordable house in […]

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