May 19, 2013

Real American Area: No Bubble. Real Bay Area? Otherwise.

Here’s part 1643 of Proof there is indeed a Bay Area Bubble 4.0.

Housing Bubble Unlikely, Home Price Appreciation Should Slow – CoreLogic

BY JANN SWANSON, Mortgage News Daily
May 16 2013, 11:10AM

CoreLogic said today that home prices are projected to increase 3.9 percent on an annualized basis between the fourth quarter of 2012 and the same quarter in 2017.  However, a new housing bubble is not likely as market dynamics shift for both supply and demand.  Prices rose 7.3 percent in 2012.

The CoreLogic Case-Shiller Index report notes that the increase in 2012 was the strongest rate of appreciation in nearly seven years and projected that prices will continue to improve in 2013 and beyond in the more than 380 U.S. markets it tracks.  The company’s current analysis says that, "Cities at epicenter of housing bubble/crash are clocking highest rate of appreciation, largely driven by investor demand."

130518-homeprices-map

This map comes to us thanks to Burbed reader PKamp3 over at DQYDJ.net, who linked us to the story in Business Insider. However they got the story from Jim the Realtor’s BubbleInfo blog, who in turn got it from Mortgage News Daily.  And it’s a good thing we traced the map (and story) all the way back to the original article, because it has some seriously amusing conclusions to anyone who lives Where It’s Special.  And that’s without making fun of the name of the Chief Economist for CoreLogic/Case-Shiller.  Nah, we’ll just make fun of his opinions of whether there’s a housing bubble:

Dr. Stiff tamped down concerns of another housing bubble. "Even if double-digit price appreciation were to continue in the former bubble metro areas, there is no reason to believe that new home price bubbles are forming. That’s because single-family homes in these markets are still very affordable, even after last year’s large price gains. Consider Phoenix, where home prices rose 27 percent since the market hit bottom in 2011, making it the strongest residential real estate market in the U.S. Yet, home prices there are still 45 percent below their 2006 peak," Stiff continued.

Yes, if you would consider living in a hellhole like Phoenix with summer daytime temperatures routinely above 110 degrees Fahrenheit, of course you’d note that these markets are still very affordable. But nobody uses the words “Real Bay Area home prices” and “affordable” unless they are separated by some sort of negating construction.

Lest you think we are making this up, the San Francisco-San Mateo-Redwood City metro is the least affordable in the entire country, with only 28.9 percent of homes affordable by a median income household. That’s right, we’re Number One again, beating out 221 other metros for the crown!  Santa Cruz-Watsonville is #4 (37.1%), while San Jose-Sunnyvale-Santa Clara isn’t far behind at #6 (43.3%) and Salinas (44.4%) at #7.

130518-homeprices-paragonWhere’s Phoenix, the brick oven that’s still 45 percent below their 2006 peak? They’re at number 57 in unaffordability.

Let us remind everyone that San Francisco and San Mateo Counties never dropped 45 percent below peak. The reason the San Francisco Case-Shiller numbers dropped as much as they did is because they’re completely weighed down by Alameda and Contra Costa Counties.

It’s the East Bay that dropped like a rock after 2006, not the Real Bay Area.  And like a pair of cement overshoes, the East Bay took the whole SF Case-Shiller index down with it. Even the upper tier (the top third of home prices) is affected by this home distribution.

130518-homeprices-paloaltoAnd let’s check those East Bay numbers.  Oakland-Fremont-Hayward turns in a respectable #24 in the You Can’t Touch This index, showing it’s no Phoenix, either.

So we have some words for that Stiff Doctor: There is too a Bay Area Bubble 4.0. We see it every single day even outside the Real Bay Area. We see peak pricing. We see bidding wars. We hear from readers reporting lines to enter Open Houses, or appraisals coming in higher in just a few weeks, or as-is cash overbids on homes where the would-be buyers didn’t even bother going inside.

Inotherwords, Dr. Stiff, maybe you need to get over your Phoenix fixation and check out the parts of the country where the housing bubble is very much back.

Comments (4) -- Posted by: madhaus @ 5:04 am

4 Responses to “Real American Area: No Bubble. Real Bay Area? Otherwise.”

  1. Jb Says:

    I think the investors are going a bit crazy out in the not real bay area near Lafayette – 30 offers on a basic house (sold for a modest $775) with a spec house nearby listed a few points over a million. And then one investors won’t touch (foundation/gasp/issues) got 4 measly offers. Maybe those problems are not so bad….pesky investors. Can’t we blame them for the crash too? Maybe they are worse than agents…..nah, probly not. May go poke around some open houses today if I can stomach the crowds. And investors. And agents.

  2. waiting_for_the_fall Says:

    It feels like we’re almost near the top of the bubble.
    Something is going to shock the market. Maybe Japan defaulting on their debt, or the breakup of the Euro, or another large Cyprus-type bank run, or a combination of many things going wrong all at once. Some financial panic is going to hit the market and cause everything to crash; stock markets, housing markets, job markets. The world economy is hanging by a thread that is unravaling before our eyes.
    Does anyone really want to buy an overpriced house in this environment?

  3. nomadic Says:

    It’s clear why you picked your handle. ;-)

    Last week I received marketing materials for my house from a realtard who added notes in the margins with a semi-literate scrawl. What a waste of postage. Then there was a letter from an individual in the school district hoping to buy a larger house for his growing family. That was a first for me. Then again, the cynic in me figures he’s actually a realtard too.

  4. PK Says:

    #3 Maybe he’s a genius realtor instead? Remember Fermat wrote his Last Theorem in the margin of another publication!


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.)