April 28, 2013

Bay Area Bubble 4.0: The Real Bay Area is Real, too

We told you there was a Bay Area real estate bubble. This mercurynews.com (motto: we were once a newspaper, really!) article caught our attention. Not only does it lend support to everything we said about peak housing prices in northwest Silicon Valley and other prime real estate markets, there’s another interesting reveal as well.

Bay Area housing recovery spreads from Silicon Valley to East Bay

130427-svpeak-mapBy Pete Carey, San Jose Mercury News
Posted:   04/26/2013 06:54:33 AM PDT, Updated:   04/26/2013 06:54:55 AM PDT

The Bay Area’s overheated housing market is restoring thousands of homes to their pre-crash peak values in a ZIP-code-by-ZIP-code recovery that is rapidly spreading from Silicon Valley to the East Bay.

Thirty-four of 185 ZIP codes in five counties have regained or surpassed their bubble-era peak home value or are less than 1 percent from it, according to this newspaper’s analysis of February median values for all homes from online real estate site Zillow.

Another 49 ZIPs are within 15 percent of their previous highs, including 18 in the East Bay. A year ago, only part of leafy Palo Alto had regained the value it lost after Bay Area home values crested in 2006-07.

"Seven or eight years ago, there was really a bubble," said Richard Green, director of the Lusk Center for Real Estate at the University of Southern California. "Now it’s just good real estate where values are returning to near past peaks."

Yes, This Time It’s Different 4.0.  This is “good real estate” as opposed to Bay Area Bubble 3.0 which was also considered “good real estate,” as we can see by looking at some of the stories they ran in 2006.  Here’s one:

MercuryNews.com | 10/03/2006 | ‘Burdened’: Area owners pay a big chunk of their income for housing
Lenders and other home buying experts said they’re not surprised by the numbers, which they said reflect a long-running trend in the Bay Area. And some questioned whether the 30 percent figure was outdated, saying many people can afford to pay more.

[snip]

Lenders and real estate experts said home buyers in the Bay Area are used to paying more for housing than home buyers elsewhere, and that many, like Singer, use their homes as a savings plan. Most have figured out how to manage the extra debt, they said. In some cases, borrowers are making smaller down payments than previous generations of home buyers.

“(They) are going to make the lifestyle change necessary to own a home, which may mean that 50 percent of their income goes to their mortgage. . . . (They) don’t go out to dinner, they don’t go shopping anymore. It’s about changing their lifestyle,” said Andrea Lanier, a mortgage broker with the San Mateo office of Bankers Preferred Real Estate Loans.

But what we’d also like you to pay attention to is the map pictured above.  Green represents home values above the 2005-08 bubble previous peak, and red means the current value is below the pre-crash peak.  And by “values” they mean those Zestimate numbers that Zillow not only made up, they keep changing the historical data retroactively. Hope that’s science-y enough for you because we’re sure convinced! 

The first thing we noticed was that there’s green where we expect to find it: along the 280 spine.  Where’s the red? Why the East Bay, of course.  Now, let’s look at this map next to a few others we’ve featured in the past.  As always, you can click on any map to see a larger version.

First, here’s the map above next to a recent Zillow map of negative equity.  Difficult to have high home values when the homes are worth less than the “owners” owe on them.

130427-svpeak-map

Next, the infamous “Whole Foods vs Walmart” location maps.

And finally, the some of the “Real Bay Area” maps we’ve provided in the past.  2010 is on the left, 2008 on the right.

And here’s the granddaddy.

Hate to say we told you so, but we told you so — about ten kajillion times.  Eventually Bay Area Bubble 4.0 will raise East Bay home prices above the last peak, by which point The Real Bay Area (which most certainly does not include the East Bay) will be so expensive that even dual-income Google couples will be Priced. Out. For-EVEH!

Until Bay Area Bubble 4.0 goes all Bubblepopcalypse on us and we start preparing for Bay Area Bubble 5.0. As you load up on gold bars and dried beans, let us know what Open Houses you were checking out, because this is also your Weekend Open Thread!

Comments (13) -- Posted by: madhaus @ 5:08 am

13 Responses to “Bay Area Bubble 4.0: The Real Bay Area is Real, too”

  1. SEA Says:

    Is Apple in the RBA?

  2. Real Estater Says:

    “People can’t go to the bathroom or Costco because they are afraid they might miss a flash sale”

  3. Concerned Reader Says:

    Check your moderation queue Ms!

  4. sprezzatura Says:

    Everything old is new again….. just like the last time.

  5. PK Says:

    But this time it’s different!

    (I’m going to ATM my house so hard because… what can go wrong?)

  6. Real Estater Says:

    To be honest, if you are a hopeful buyer now you can’t be helped. For the past 3 years I repeated multiple times the “now is the best time to buy” message, and provided the rationale to do. Yet there were plenty of nay sayers who chose to ignore it, and worse yet, to make light of it. For those people, the only saving grace right now is the fact that you haven’t fully missed the rally. When the market surges so strongly, it’s usually an indicator that there is a lot more of the same to come.

  7. SEA Says:

    #2- “Houses are cheap as compared to the price of Facebook, Groupon, or Zynga…”

    So houses are less overpriced than Facebook, Groupon, or Zynga? That’s a great reason to buy!

  8. nomadic Says:

    So does an IPO buyer feel as as shitty about their investment as a 2008 buyer in Antioch?

    Probably not.

  9. Jb Says:

    Sub prime lending is back! In a neighborhood (not RBA) we are looking some idiot offered 850k for a house that the other offers came in more around 775k (775 about 100,000 over asking). The highest offer put 5% down and secured not one but two loans. God knows what appraiser magic happened as the 2 most recent similar sales were $100k below asking…..about $300k below sale price. Huh?? And now (in our current non-bubble bubble) appraises are independent from banks? Um, yeah. Magic, right?

  10. SEA Says:

    Was Antioch ever in the RBA?

  11. nomadic Says:

    I believe the RBA stretched all the way to Seattle during the 2007 peak. But I don’t think the Redfin dude was necessarily only talking about RBA, was he?

  12. SEA Says:

    #11- Is lousy IPO better than buying during 2008 in Antioch? At least I can own that IPO and still live in the RBA.

  13. CB Says:

    It’s definitely loony out there. Homes sold or listed in my Fremont neighborhood have made moving up too tempting. I was trying to time the magic in leveraging a sale in Fremont to a purchase in Livermore just right. But Sunday I looked at a house on a south Livermore street where a similar model sold in Dec for 150 less than the current listing.

    This bubble is an infestation. I think I’m just going stay where I’m at and cash out a few hundred thousand to buy something stupid like boat or a 15K play set for my kids, like they did in the old days.


Leave a Reply

Please be nice. No name calling, no personal attacks, no racist stuff, no baiting, etc. Let's be nice to each other in the true Bay Area spirit! (Comments may be edited/removed without notice.)