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 And some questioned whether the 30 percent figure was outdated, saying many people can afford to pay more.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

Last week Richard Florida found himself defending his research from an amusing little pissing match started by Joel Kotkin. The argument was over whether “creative class” metros drive the economic engines (Florida) or whether suburban sprawl has it all (Kotkin).  Florida himself dubbed this dustup Flo-Ko. So instead of looking at just which areas are the most “economically advantaged” (a PC way of saying loaded with rich bastards), he addressed X’s objection and decided to subtract out the cost of housing from the index.

What’s left is a disposable income advantage index of the 20 metros with the most money left over after paying the housing nut.  And, you guessed it. Silicon Valley, as represented by the MSA called San Jose-Sunnyvale-Santa Clara, is totally first on the list.  Let’s take a gander at the top five.

New York was Lucky #8, Seattle came in at Less Lucky #13 (right behind a couple of Connecticut metros), and Philly brought up the bottom at #20.  This scatter graph shows how the housing costs versus income data looks, and that’s Silicon Valley in the extreme upper right.  You should see datapoints labeled as you hover over them.

What makes a metro have so much disposable income?  There’s a high correlation between number of knowledge worker jobs (that creative class thing again), at 0.73, high incomes (0.60) and number of college grads (0.53).

Inotherwords, Florida 1, Kotkin 0.  x1000.

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.

Sometimes a picture explains what words cannot.

Rising home values push more Bay Area homes above water, Zillow says

By Pete Carey, San Jose Mercury News

Posted: 02/21/2013 06:26:11 AM PST, Updated: 02/21/2013 06:26:39 AM PST

Rising prices pushed thousands of Bay Area homes back above water last year, according to a report released Wednesday, another sign that the region's housing crisis is easing as the economy recovers.

The report, by the housing website Zillow, shows drops across the region in the number of homes that are underwater — worth less than the value of their mortgages.

More than 56,826 homes bobbed back above water across seven counties of the Bay Area in 2012, Zillow reported. That still leaves 205,986 homes with a total negative equity of $31.5 billion.

Now let's see the graphic. See? Fewer homes are underwater! That means more of them are Special, so more are also in the Real Bay Area! They must be making more Real Bay Area land.

Glad we could clear this up.

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.

We’re always interested in ways to measure how Special a place is.  A website called areavibes.com has a Livability Index that has some interesting assumptions.

First, let’s see what it makes of some places most of us agree are Not Particularly Special (by which we mean we wouldn’t live there for free and we also wouldn’t live there unless we were paid Larry Ellison’s stock options).

Here’s areavibes on Detroit.

Detroit, MI is “Somewhat Livable.”  The only “A” grade it received was in cost of living, and that’s because the city will pay you to take one of their excess houses so they don’t have to pay to tear it down.  We can’t imagine what kind of city would merit a “Completely Out of the Question.”  Let’s move another to another Perennial of Pwnage: Stockton.

I can see the new Civic Motto over City Hall (if they have any staff capable of hanging banners): Stockton! Four Points More Livable Than Detroit!  But they are an important four points, as Stockton is considered “Very Livable.”

We now move on toward the Bay Area, but not the Good Part.

When Stockton has finer amenities than you do, and their weather is better too, plus your housing costs are unacceptably high to anyone outside the Bay Area, what’s the point of even entering the race?  Let’s try a better zip code.

Ooooo!  Exceptionally Livable!  And what’s really exceptional is that if we type in an actual zip code, the score went down.

Good luck figuring out why.  Finally, we arrive at the pinnacle of Real Bay Area Living.

We invite you to try to score higher than that, either in the Bay Area, or anywhere else.  And we don’t want you to think these “grades” are completely pulled out of Mitt Romney’s car elevator.  Here, for example, is what the housing grade is based on:

Cupertino scores higher than average in every category.  Why would they be marked down for better numbers?

This is also your Weekend Open Thread, so go crazy.

Have we discussed the price adjustments (up! up! up!) in both buying and renting in San Francisco due to the Facebook IPO?  Not enough!  Let’s see what happens when CNN lets one of its bloggers write a tl;dr post that makes our zip code pieces look like tweets by comparison.

The Facebook effect on San Francisco real estate

By Julian Hebron, contributor @CNNMoney May 17, 2012: 1:27 PM ET

(StockTwits) — The Basis Point is a popular mortgage and housing blog that tracks consumer critical issues and data. It is edited by Julian Hebron, a retail mortgage lender who runs the San Francisco branches of RPM Mortgage.

Three weeks ago, some clients wrote a $1.25 million offer on a 1,400 square foot 3-bed, 1-bath house with original kitchen and bath near San Francisco’s Dolores Park. They weren’t even close. There were 51 offers. It sold for $1.4 million and closed 8 days after offers were due.

That’s the most offers I’ve seen in 10 years. And a different property at that week got 23 offers.

Two weeks ago, another client offered $245,000 over list price on a 3-bed, 2-bath Pacific Heights condo. One of the other 9 offers was the winning bid in this $1.6 million to $1.9 million market segment. That was my client’s fourth rejected offer. He’s looking at two properties in this price range this week, and the listing agents are reporting similar demand: about 10 serious buyers circling.

That’s the norm. It’s what some are calling The Facebook Effect on San Francisco real estate.

That’s the norm: 10 serious buyers circling.  StockTwits goes on at very great length to explain why this is happening, and mentions “The Facebook Effect” as if the term were newly minted.  Here’s what Hebron said in much fewer words.  (The charts are all linked from his article.)

1. Everyone not already working for Facebook is trying to buy before millions of Facebook employees get their license to print unlimited money

You will love this quote from the article:

The San Francisco buyer mindset is that they want to get in before they’re priced out, but they either haven’t reaped their firm’s windfall yet or don’t expect much if any windfall from their firm.

That’s right.  They’re all worried about being Priced Out Forever.  And this has never, never, ever happened before!

2. Ed Lee’s reelection as SF Mayor means tech employers can demand payroll tax adjustments

Twitter threatened to leave SF over the 1.5% payroll tax, what with all the high salaries and the stock option financials on top of that, Lee negotiated an adjustment with a maximum annual tax, and now all the other tech companies will expect similar easements.  Which means they’ll stay in SF, which means high-paid twentysomething technogeeks will continue to buy real estate there, which means you can’t afford anything.

And this is all very interesting, except Facebook is not in SF.  So why isn’t this article called “The Twitter Effect”?

3. Constricted housing supply.  Really, really, really constricted.  Plus rising rents.  Did we mention constricted housing supply?

The key takeaway is that there were only 500-600 annual SF home sales above $1.5 million.  Now, how many people do you think will be wanting one of those better places once the IPO cash hits?

And is it maybe possible that more homeowners would cash out when they start seeing more of these prices? 

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.

Today we have a guest post from Burbed reader Greg Fielding.  Greg has a real estate blog, Bay Area Real Estate Trends, and even though he’s a real estate agent, he is not a Realtard.  If you check out his site, you’ll find it rather free of Now Is The Time To Buy.  For someone who makes a living helping people buy or sell houses, he sure spends a lot of time over on patrick.net.

Greg is based in Contra Costa County, which we haven’t covered enough on this site.  Be sure to let him know if you think his analysis is relevant to the Real Bay Area (if anyone can figure out where it is in 2012).

Anyway, please give Greg a big, warm, RBA welcome to the front page today. 

Tale of Two Markets: Breaking Down Case-Shiller Tiered Indices

Following up on the latest Case-Shiller Home Price Index report for the Bay Area, let’s break down index into top, middle, and lower tiers. The result shows two distinctly different markets since the price lows in the Spring of 2009.

Just as Wall Street has diverged from Main Street, high-end neighborhoods are enjoying a different reality than the rest of us.

The lower and middle-tiers are generally following the same pattern. When the supply of foreclosures was turned off, interest rates dropped, and buyer incentives kicked in, both market segments rallied. Then, when that temporary stimulus was exhausted, they resumed their declines at a paces of roughly 10 percent per year.

However, the top-tier – homes priced above $579,803 – are only declining at a pace of roughly 3-4 percent per year.

Why?

There are lots of possible reasons. Among them, that higher home prices are more directly tied to the stock market, which has performed remarkably well. In April of 2009, the S&P 500 Index was in the 800′s. Today it is at 1,277 – an increase of roughly 50 percent. Also, higher-paying jobs have survived the recession better than lower paying retail-type jobs that are more directly tied to consumer spending and sentiment. Or, that wealthier homeowners with higher-paying jobs were more likely to be able to refinance their homes to avoid foreclosure. And there are probably a dozen other reasons that all contribute to the divergence.

One other note: high-end home prices are holding relatively stable in spite of the reduction in conforming loan limits. Buyers literally need 100K+ more of cash to buy the same high-end home, and they are still doing it. So far, anyway. Honestly, I am shocked by this.

One thing is clear: this circle will square itself at some point. Either the mid and lower-tiers will rally (or stabilize) and the gap will narrow over time. Or, the pillars holding up the high-end will eventually give way and prices will begin to fall at a pace that matches the other tiers.

Written by Greg Fielding. This article originally appeared on Bay Area Real Estate Trends on January 4th.  Republished with permission, nay, encouragement of the author.

Poor Mr. Zip.  The United States Postal Service put him out to pasture in 1986, when they introduced the ZIP+4 postal codes.  But he was a familiar sight in the 1960s, urging everyone to include the new ZIP (Zone Improvement Plan) postal codes when sending mail.

Mr. Zip might not be around to nag you on addressing envelopes, because he’s in retirement.  Mr. Z writes to say he hopes this series will go on forever, because he can’t play Name That Code all the time.

Today we bring you yet another installment of all the Northern California cities on Forbes’ Most Expensive Zip Code list.  It features data crunched by local favorite Altos Research (and mangled by Forbes; you’d think after I’ve linked to them four different times and noted in each article that their data has a systematic error in every single entry, maybe somebody there would fix it, but NOOOOOOOO).  Anyway, here’s what you may have missed while writing code or hanging out on a sunny sidewalk waiting to collect a faceful of pepper spray.

Previous Entries in the Most Expensive Zip Code Series:

• Top 50 Most Expensive Zip Codes, RBA Edition
• Next 50 Most Expensive Zip Codes, Almost-RBA Edition
• Third Tier Realty: Zips 101-200 or I have a feeling we’re not in the RBA Anymore
• Fourth Tier Cul de Sac: Submillion in Suburbia

Now, we’ll take the Fifth!  Fifth Tier, that is; the Top Half of the Bottom 200!

Let’s see which cities can still scrape together a property median wishing price just under $850K.  Remember, we correct the mistakes as we find them, and we added the comparison to last year’s list.  That’s the kind of original work you’ll only find done by obsessive-compulsive bloggers who think zip codes are fascinating.  Well, Mr. Zip certainly agrees!

#304: San Mateo 94402

• Median Home Price: $849,292
• Median Price Change: NA
• Average Days On Market: 200 114
• Inventory: 114 81
• Rank in 2010: 236 (-68 spots ⇓)
• Most Expensive Home: $13 Million

Now I am beginning to think that the people at Forbes were just making stuff up for that “Most Expensive Home” field.  $13 million.  In San Mateo.  The most expensive place I could find sold for $3.3 mil in June, including the gated entryway.  It’s just like what you get in mid-level condoplexes, including calling itself an ESTATE (complete with the CAPITAL LETTERS).

Ah, but that living room does look spacious enough to hold a very small charity ball.  More goodness from Mr. Zip after the break!

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