Bay Area counties and market segments experienced housing bubbles and crashes of significantly different magnitudes. Though their current recoveries are similar in trend lines, the scale of recovery varies and current home values in relation to previous peak prices vary widely. This report explains some of the reasons why. Bay Area Home Values since 2000 by Price Tier
Way Up, Way Down, Sharply Up Again
The Case-Shiller Index for the 5-county SF Metro Area divides the market into three equal sets of unit sales by price-range tiers: low, middle and high. This chart compares their trend lines side by side, by June Index readings since the year 2000: the numbers relate to a January 2000 value of 100, thus an Index reading of 202 signifies an increase in value of 102% since that date.
The chart above illustrates the market bubbles in all three tiers, but particularly how the subprime lending fiasco supercharged the lowest price tier of Bay Area homes to an insane 176% appreciation – i.e. an almost tripling in price – in less than 7 years.
The foreclosure and distressed-property crisis then hit this segment the hardest, inflicting a crushing 62% drop in values. Those neighborhoods, communities and counties with mostly higher-priced
homes were much less affected by the subprime effect: they appreciated less in the bubble, depreciated less in the crash, began their recoveries earlier, and are now much closer to previous peak values. (In fact, many of San Francisco’s neighborhoods have now re-attained or surpassed previous peak prices.)
Of course, there are other important economic and social factors at play in the markets of different communities, but as a general overlay, the price-tier analysis is surprisingly relevant to what has happened in our different real estate markets. Because subprime lending inflated such large bubbles in some counties, it may be unrealistic to expect their low-price-tier homes to re-attain previous peak values anytime soon, even with the dramatic recoveries underway.
Note that the Case-Shiller SF Metro Area does not include Napa and Sonoma, but their market trends generally played out in the same way. Also as pertaining to percentages of appreciation and depreciation: if a home has a 100% increase in values, then a 50% decrease
, the value is back to where it began.
Long-Term Appreciation Trends
Looking at total home-price appreciation since 2000, the end results – after bubble, crash and rebound to date – are similar for all price tiers: middle and high tiers show 76% - 77% appreciation over the 12.5 years, while the low tier is a step behind at 58%. Once the anomaly of the distressed property phenomenon is washed out of the market – as is rapidly occurring – it may be that all 3 tiers line up in their long-term appreciation rates.
Median Home Sales Prices by County
County median sales prices are generalities that, as will be seen later in this report, mask enormous disparities in the prices of underlying sales, but they do convey an idea of comparative home costs in different areas. In the chart below, the overall median prices are for both house and condo sales, comparing the approximate bottom of the market, the third quarter of 2011, with today. Note that condo sales now outnumber house sales in San Francisco (a recent occurrence), yet constitute relatively small percentages of sales in the other counties.
Median prices often fluctuate for other reasons than changes in market values, such as variations in the distressed and luxury home segments, inventory available to purchase and available financing – which is why Case-Shiller Index trend lines do not correlate exactly with changes in median price.
If you’d like to drill down to median sales prices by SF neighborhood or Bay Area city, they have been mapped out here for second quarter sales: Mapped Bay Area Home Values
County Home Sales by Price Range
In the 3 following charts, the San Francisco residential market is compared to those in the North Bay, East Bay and San Mateo by quantity of sales in defined price ranges. The SF, San Mateo and Marin markets are similar in that their home prices skew higher – these counties contain some of the most expensive real estate markets in the country. Though all the counties shown have home sales across the spectrum of prices, including very high-end homes, Napa, Sonoma, Alameda and Contra Costa have the greater percentage of their sales in lower price segments.
Note that property types vary by county: for example, San Francisco doesn’t have many ranch, mobile home and houseboat sales (to say the least), while other counties sell few if any tenancy-in-common units (TICs). As mentioned before, San Francisco also has a much larger condo market. Some of these charts measure slightly different 90-day periods, so the number of sales listed for San Francisco varies.
San Francisco & North Bay Counties
San Francisco & East Bay Counties
San Francisco & San Mateo County
Unit Sales by County (90 days)
This chart is for a 90-day period over the summer. The Alameda and Contra Costa home markets dwarf the other counties in quantity of sales. San Mateo, San Francisco and Sonoma constitute the second tier, with Marin and Napa being distinctly smaller markets in unit sales.
Distressed-Home Sales by County (2nd Quarter 2013)
As discussed in the Case-Shiller chart that began this report, generally speaking, the lower the home prices in a county, the greater the subprime bubble and the greater the quantity of distressed property sales as a percentage of total home sales. The distressed market is rapidly dwindling everywhere; in San Francisco, it has virtually disappeared and no longer has any impact on non-distressed home values. While some of the lower-price-tier counties still have significant percentages of distressed sales, the percentages have declined from highs of 50% - 60% a few years back. As the distressed home segment disappears with the market recovery, its malign influence on homeownership and home values is also disappearing.