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

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 And some questioned whether the 30 percent figure was outdated, saying many people can afford to pay more.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

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!

We get some interesting comments from people who don’t agree with our definition of what the Real Bay Area (RBA) is. Many seem to think that if an area is wealthier than its surrounding community, that, in and of itself, is sufficient for RBAhood.  Nothing could be further from the truth.

The whole point of the RBA is that it is not only expensive, it is that you will pay a crapton of money to live there and the sellers can ask over three million yet treat you with complete and utter disdain. You will also end up with a house that isn’t even worth photographing. Today’s property illustrates this perfectly.

1801 WAVERLEY St
Palo Alto, CA 94301
$3,295,000

5 Beds
3.5 Baths
2,982 Sq. Ft.
$1,105 / Sq. Ft.
Built: 1932
Lot Size: 9,000 Sq. Ft.
On Redfin: 7 days
Property Type: Detached Single Family
Stories: 2
Community: Old Palo Alto
MLS#: 81307920
Style: Colonial
View: Neighborhood
County: Santa Clara

Upcoming Open Houses

Saturday, Mar 23: 1:30-4:30 pm
Sunday, Mar 24: 1:30-4:30 pm

Prime Old Palo Alto!Old world charm meets modern amenities! Lovely 5 bedroom, 3.5 bath home. 2 master suites; one on each floor. Large family room adjacent to spacious kitchen. This home features a huge 9000 +/- sf lot. It is perfect for large gatherings & extended family visits. Updated kitchen and baths with tile counters and newer appliances.

Yes, this is a vintage home (just slipping in under our definition to earn the “old house” tag) in a desirable part of Palo Alto, but it isn’t being marketed as a teardown. It’s just that the agent obviously has better things to do than pull out the iPhone and snap a dozen listing photos.

Good thing there’s Google Streetview!  Isn’t this place just fabulous?

Guess you’ll never know unless you show up at the Open Houses this weekend.  Also, many sections of Streetview around this house have been blurred out. Perhaps this home is owned by a highly-placed Googler.  This view around the corner from Tennyson was the best we could do.

But you’ve seen plenty of properties on Burbed showcasing Palo Alto. (Heck, we’ve visited Waverley Street so often they ought to rename it Burbed Boulevard.)  We were trying to make a point about the difference between RBA and not-so-RBA.  Let’s see what you could get for pretty much the same amount of money over the Bay and through the Caldecott.

6 GREAT OAKS Cir
Orinda, CA 94563
$3,350,000

3 Beds
3.5 Baths
4,350 Sq. Ft.
$770 / Sq. Ft.
Built: 1949
Lot Size: 2.32 Acres
On Redfin: 541 days
Type: Detached
Stories: 1
Community: Glorietta
MLS#: 40544806
Style: Contemporary
View: Other
County: Contra Costa

Original Frank Lloyd Wright designed home built in 1949. The stunning grounds were landscaped by Henry Matsutani who did the Japanese Tea Gardens in Golden Gate Park. Incredible opportunity to own a bit of history/ a work of art. All showings subject to screening process. Call agents for details.

That’s right.  If you’re willing to spend the same amount in Orinda, you can own a house actually designed by Frank Lloyd fucking Wright. Not only that, the landscaping is by the same master gardener behind the Japanese I-shit-you-not Tea Garden.  In Golden goddamned Gate Park. Which we think even Silicon Valley software dweebs have heard of. Plus the Orinda house is on more than two acres.

It’s also been for sale for a year and a half and has had two major price reductions.

But in Old Palo Alto, you get a house on nine thousand feet, and you will like it.  And if you don’t plenty of others will, because this house has only been on the market for a week, and after the Open House you know the sellers will be receiving all seventy-nine offers the following Tuesday, and decide which of the no-contingencies-extra-cash-please-with-homemade-brownies-and-a-Tesla-Model-S begging letters they will accept.

And THAT, my friends, is the Real difference between the Real Bay Area and the Rest.

Thanks to the fun folks at Redfin Forums for inspiring today’s article.

This image has been bouncing around teh Intertubez this week.  Perhaps you’ve seen it:

This tweet from Jarrett Barrios credits someone else, but we can’t find an earlier use of the map.  (Could be this,) It’s a lovely image that clearly sets up Real Bay Area versus Not the Real Bay Area, with the oddball exception of the WalMart in Mountain View.  Other than that, It’s 280 versus 880.

Best comment on this map: Mountain View’s town motto is "Even our poor people are rich."  Don’t know if that’s true, but the Whole Foods and the WalMart are less than a block apart.

Note: Google Maps only creates ten pins per image.  Those little red dots are additional location, location, locations.  So yes there are Whole Foods stores, 3 of them, in Marin.

We’d like to know if you can you come up with other easy-to-map measures for RBA versus Not the RBA.

This is why.

This is Zillow’s map of negative equity by county in Central California.  The more red, the more they bled.  You can look at the map by state, by county, and by zip code.  At the county level, we can see that the only Bay Area regions that aren’t about to terminate from failure to clot are Santa Clara, San Mateo, San Francisco and Marin Counties.  Santa Cruz County is looking a little pink around the neck (it’s 22% underwater) but it’s downright alabaster compared to the abattoir north and east of San Jose.  Here are the county by county numbers for 2012.

And here’s a live version for you to play with, although you can also head over to Zillow and see it in action wherever you want to examine.

We love real estate tools.  Maps are awesome.  Here’s a new one with the cute name Rich Blocks Poor Blocks that Burbed readers wahnny and Divasm both sent in this week when someone posted about it in Redfin Forums.  (No link, Redfin, until you resume trackbacks to our featured homes.  Neener neener.)

It’s a fairly good idea: take ACS income data for each official Census tract and show graphically how much they vary.  As they say on their main page, “See how much money people make in every neighborhood in every city in America.”  In theory you could use it to see how Special each part of the city is.  Here’s what it looks like when it’s working as the authors intended.

Each state uses its own scale, applying the color key to its own income range.  In the case of Illinois, above, the deep red, lowest income is under $23,120 and the deep green, highest income is over $106,503.  There appear to be 20 different segments in the color key, although we think there’s far too much green and not enough in the red, orange, and yellow. 

Since these are Google Map tools, you can zoom in and out to your heart’s delight, but you can only map one state at a time.As you can see in in the case of New Jersey, above, this tool isn’t that useful with metros that span multiple states.  Fortunately, that’s not an issue even in the furthest exurbs of the Bay Area.

No, the Bay area has different issues.  See what happens when we map the core RBA.

Too. Much. Dark. Green.

The California income scale ranges from $28,183.65 to $122,762.90.  We hope you’re beginning to see the problem: the top 5% income for all of California seems to apply to an awful lot of Census tracts in the RBA.  Or even places that are NOT in the RBA. Like this part of Santa Clara with the Oracle campus:

Contrast with an RBA tract we know is loaded: Los Altos Hills.

It’s the exact same shade of green, because the danged scale tops off far too early for the RBA.  According to this map, there is no difference between northeast Santa Clara and Los Altos Hills even though the latter’s median household income is 72% higher.

If a tract in the Triangle of Lost Equity can have median household income above 95% of California, Rich Blocks Poor Blocks in the Real Bay Area might as well be called Five Red Tracts of Suck Amidst A Sea of Deep Green Money.

As regular readers of this site already know, homes in the Real Bay Area don’t need to convince buyers of their value.  No matter how inept the Realtard representing it, even a turkey of a home within RBA limits will go pending quickly.

This isn’t the case for homes far, far away from the RBA. Thanks to Burbed reader Michael Boltonestater for this example of how to sell a house that has the misfortune of not being anywhere near Google or Facebook.

1501 GUTHRIE Dr
INVERNESS, IL 60010
$1,149,000 (Reduced from $1,490,000)

BEDS: 4
BATHS: 5
SQ. FT.: 6,757
$/SQ. FT.: $170
HOA DUES: $17/month
LOT SIZE: 1.03 Acres
PROPERTY TYPE: Detached Single Family, 2 Stories
STYLE: Traditional
EXPOSURE: East, West
YEAR BUILT: 2001
COMMUNITY: Inverness
COUNTY: Cook
MLS#: 08047047
SOURCE: MRED
STATUS: Active
ON REDFIN: 46 days

Wide open floor plan with granite, stainless, and maple kitchen w/ viking range and commercial hood. Hardwood floors throughout much of the home. !st flr. Theater, office, and sun room! Dining room is perfect for large dinner parties. All bedrooms with private baths and walk-in’s. luxurious master suite with sitting room, and high end master bath with vaulted ceilings, cherry cabinets, and marble. Huge deck.

What can you do if you own a ginormous housing tumor in flyover country and no longer wish to have it sap your precious bodily fluids?  You list it for sale and more than 30 days go by, which means, according to Jim the Realtor, that the price is more than 10% too high.  In this case, probably way more than 10%, as you’ve already cut it 23% without any takers.  It could mean that nobody wants your expensive mistake.

Clearly, more drastic marketing measures are needed.  Have a look at them by clicking on through.

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Trulia has a new blog entry on the eternal Buy vs Rent question, and they have lots of meaningless aggregate data to wave around!  Here’s their Winter 2012 Rent vs Buy Index, and and it isn’t restricted to the Real Bay Area. 

Don’t be surprised that Trulia thinks signs point to Buy.  Their being in the listing information and real estate agent referral business shouldn’t have anything to do with their conclusion, right?  After all, Now is Always the Time to Buy!

Remember, the Index is the Price Rent Ratio: sales price divided by annual rent.  So, if a house in the RBA sold for $1.5 million, and rented for $4,500 a month, the rent ratio would be 1500000 / (4500 x 12).  That equation simplifies to 27.8, which sounds about right for the RBA.  Trulia considers 15-20 to be the swing zone between whether buying or renting is a better option; below 15 is buy and above 20 is rent.  We’ve written about the price rent ratio before, and 15 was always the inflection point mentioned in these articles, not 15-20.

Update 10:26 AM: The swing zone was 15-20 from other sources, but the other sites and articles counseled renting over buying unless the home you were considering was an unusually good find.  Trulia considers the rent vs. buy decision as completely balanced when the ratio is between 15-20.  That’s the thumb on the scale.

Trulia is pushing their own agenda with this redefinition of terms by asserting a higher ratio for the buy zone.  The lack of yellow on the map above could indicate homes are more affordable, or it could show that the unlabeled color key breakpoints were chosen incorrectly.  Perhaps they simply wanted the map to match their brand color.

Now for some bad news. The Bay Area appears at #2 and #4 on Trulia’s list of least buy-friendly metro areas. It’s always a disappointment to not first on a list.

At least SF beat NYC this time, but they’re going to gripe that was because New Jersey pulled them into the Hudson like a pair of cement overshoes.  We can counter that SF has the East Bay to contend with, and San Jose has, well, East San Jose. 

Here’s a little bit more breakdown, by county, but this still doesn’t get to the city level, let alone by zip code. 

Look, Pacific Heights is going to have a higher rent ratio than the Outer Sunset.  Palo Alto is going to completely clean Gilroy’s clock.  Foster City will stomp Daly City, Montclair mauls Hayward, and Danville going to defeat Discovery Bay in the “mine’s bigger” sweeps.  Even when outside the RBA, we still have an idea which places would be contenders, and which are permanently assigned to LOLsville.  And it’s the Definitely Not In The RBA places that are going to have the lower ratios.

Here are some other metros that score lower on the Index.

The same rule applies within the Bay Area as well.  The not-so-Special places that are “slow-growing with high vacancy rates and land to spare” will have the best ratios.  These places also have the most foreclosures, which might explain why so many FBs are turning into renters themselves.  Too many foreclosures thus drive home prices down and rents up, resulting in a lower price rent ratio.  But in the RBA, prices are sticky because more owners can afford to wait out the price lulls.

These ratios are much lower than what we’d been seeing before.  Do you agree that prices are down and/or rents are up where you live?  Here’s what Trulia has to say about how the Index has changed recently: San Jose has been stable but San Francisco is dropping. 

Updated 11:14 AM: Added Oakland, Sacramento and Fresno to the table.  Note how the numbers don’t agree with those in the Bay Area table.  Stockton not called out separately.

San Jose Metro also has the second lowest vacancy rate (3.9%) of the 100 regions surveyed. The “winner” is Long Island, NY, by one tenth of a percentage point. It’s also the third highest in growth in the employment rate, at 3%.  In the first two spots are Louisville, KY and Salt Lake City.  The latter is gearing up for a ginormous government data mining operation, so there may be some tech jobs!

Their  full press release on how they came up with these numbers is here.

Foreclosure rattles upscale San Jose neighborhood, and tenants

By Pete Carey, San Jose Mercury News
Posted:   03/14/2012 05:53:36 PM PDT, Updated: 03/15/2012 10:14:37 AM PDT

The two-story home in the East San Jose foothills could belong to any well-to-do family, but step through the door and you’re inside a million-dollar suburban foreclosure quagmire.

More than a dozen adults and their pets have been living in a warren of rented rooms in the foreclosed house, turning a tranquil cul-de-sac into what one upset neighbor called "a nightmare for all of us living on that block."

According to attorneys for the tenants, the former owner was renting out rooms — including the laundry room and a living room split in two — in the months after the home was foreclosed by the bank. They claim she never told tenants about the foreclosure. Now the tenants face eviction in a hearing to be held Thursday in Santa Clara County Superior Court.

San Jose police officers have responded 16 times since September to resolve disputes and disturbances at the five bedroom, four bath home on La Castellet Court, where houses are valued at $1 million or more. The city’s code enforcement department says it has an open case on the house.      

Remember the Cubicle House?  This owner simply took that idea one step further now that rentals beat office space.

For all of you who have been criticizing the idea of The Real Bay Area versus The Part That Is Not, this should definitively settle those arguments.  Things like this simply Do Not Happen In The Real Bay Area.  If someone in Los Altos Hills were to notice 15 cars parked along the street in front of the 4,000 square foot housing tumor next door, Code Enforcement would not merely say they have “an open case on the house.”

And in Palo Alto, every one of those vehicles would have collected parking tickets within 2 hours and 10 minutes.

Anyway, our intrepid reporters have tracked down the house in question.

Unfortunately for purposes of journalistic outrage, the Streetview photo does not have the aforementioned excess vehicle collection.

Zillow can show us the neighborhood values.

Homeowners here certainly may have paid over a million for this area, but Zillow has a disturbing lack of faith in their reported valuations.  The expressway-like street against the backyards is Aborn. 

And if you’re wondering why the FB felt the need to fill this home chock-a-block with tenants while hiding from Bank of America, wait until you hear the bubblicious price paid for this place: $1,580,000 on Halloween of 2006. 

Today we have a guest post from Burbed reader A Lewis.  Burbed tends to spend too much time in Silicon Valley, so it’s good we’ve got a frequent contributor to remind us that there’s listings full of Burbed Win all over the Bay Area, not just within three miles of Google.

Please give A a big, warm, Real Bay Area welcome as today’s guest blogger, revisiting his very first Burbed posting.

One of my favorite features on Burbed is follow-up stories from previous listings.

Cast your mind waaaaaaay back to the dim past of March, 2011 (just think how much the Republican primary field has changed since then! And who would have bet the 49ers would have clinched their division?) and this thread:

We actually ended up with a pretty good conversation full of East Bay Love (TM)!

Well, I’m sure you will be as excited as I am that 8190 Terrace was not snapped up by an ordinary buyer who intended to live in it for years…No, it was clearly a flipper who has renovated it and is ready to pass the instant equity on to you at the low low price of $849K $799K! 

Have a look inside to see what they did!

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We’ve had many discussions on what makes a place Real Bay Area (RBA) and more importantly, what makes a place Not.  Good schools, professionals for neighbors, and no uncorrectable deficits such as freeways, airports, and toxic waste dumps is a start.  But what’s a real tip-off that a place is in the RBA?

Not only is it way too expensive for what you’re buying, but the asking price has been increased.  Many thanks to Burbed reader Praveen for today’s featured listing.

 

42261 CAMINO SANTA BARBARA
Fremont, CA 94539
$10,998,000

 

BEDS: 4
BATHS: 2
SQ. FT.: 1,931
$/SQ. FT.: $5,695
LOT SIZE: 7,910 Sq. Ft.
PROPERTY TYPE: Detached Single Family
STORIES: 1
YEAR BUILT: 1964
COMMUNITY: Alameda County
COUNTY: Alameda
MLS#: 81200779
SOURCE: MLSListings
STATUS: Active
ON REDFIN: 1 day NEW LISTING (24 HOURS)

Very exclusive Mission Highlands East section of Chadbourne. One level four bedroom with huge remodeled kitchen and family room. Large master bedroom newly remodeled master bath. Large yard. Wonderful layout. Easy wlk to Mission High, Chadbourne elementary.

This not particularly large home on a not particularly large lot was listed for $1,099,000 on EBRD, the East Bay multiple listing service, last Friday.  But when it appeared on MLS (used by the West Counties) the following Monday, the price had gone up tenfold.  What happened?

Simple. Houses marketed to East Bay buyers aren’t as Special as houses for Peninsula and South Bay buyers.  That’s why there’s one price for the East Bay and a higher, better, more exclusive, lots more Real Price for Silicon Valley lucky duckies.

And boy, some Silicon Valley home-owner-to-be is going to want this place!  Doesn’t that location, location, location suggest rural isolation and quiet evenings at home?

Absolutely!

Get your overbids ready, because photography like you see for this listing doesn’t come cheap!