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.
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 And some questioned whether the 30 percent figure was outdated, saying many people can afford to pay more.
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.
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!