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The Bay Area’s recovery from the housing crash is proceeding ZIP code by ZIP code, with only a few upscale communities nearing the values they saw before the bubble popped five years ago.
It may take another three to five years for the entire region to return to a healthy housing market, one that sees prices go up every year in most areas, and has far fewer foreclosures.
According to an analysis by this newspaper of home values by ZIP code, with higher priced homes, such as the core of Silicon Valley and parts of San Francisco, have recovered much of the home equity lost in the crash. The data is for all types of homes: single-family, condos and townhouses. But neighborhoods with low-cost homes, especially those in parts of Alameda and Contra Costa counties, are still far below peak values, hurt by the waves of foreclosures that struck those areas.
The analysis of ZIP code data supplied by the online real estate site Zillow used April 2006 as the approximate peak in Bay Area home values, although different communities reached their highest levels a bit before or after that. After that, values gradually declined until crashing in late 2007.
“In the Bay Area, it’s incredibly sensitive to where you are,” said Richard K. Green, director of the Lusk Center for Real Estate at the University of Southern California. “Places like Atherton and Palo Alto are just crazy. San Francisco is not all the way back, but it’s getting there. Oakland
is still dead.”
Of the 204 Bay Area ZIP codes analyzed, the median loss in value from the peak stands at 30 percent. The top 10 best performing ZIP codes were in Silicon Valley. The bottom 10 were in Alameda and Contra Costa counties.
“It comes down to whether these are areas with a lot of unemployment or a lot of jobs,” said Svenja Gudell, senior economist at Zillow. “Is there a lot of negative equity and an oversupply of homes? That will put downward pressure on prices.”
The good news is that real estate agents say those low prices are beginning to attract buyers.
Cheryl and Ken Mensing bought their first house this month after 28 years in a mobile home. There were nine bids on the 4-bedroom, 2-bath foreclosure in the Santa Teresa area of San Jose listed at $429,000. The couple won with a bid of $442,000.
Mensing said she and her husband saw prices edging up and decided that the stars were aligned for “a leap of faith” into the housing market.
“The prices finally came into where we could actually afford them and get into the market,” she said. “The interest rates were so low, so we thought this is the time — now or never. We just closed our eyes and jumped.”
Their agent, Eric Sjoberg of Century 21 in San Jose, said he thinks the South Bay is “past the tipping point. I’m starting to see increasing values incrementally in many, many of our markets.”
But while one neighborhood may be on the road to recovery, others in the same city may still be struggling. The variation between neighborhoods is evident in San Jose, where one ZIP code (95116) bordering the city’s east side had home values in February that were still 52 percent below the Bay Area’s peak in April 2006, while another (95129) in West San Jose was only 11 percent under.
To the north, in the upscale areas from Mountain View to Menlo Park, two Los Altos ZIP codes (94022 and 94024) are 5.6 and 3.7 percent below their highest point. One ZIP (94306) in Palo Alto is back at its peak. Parts of San Francisco are within 15 percent or less of their highest values before the bubble burst.
“There are two things going on,” said Jed Kolko, economist with Trulia, an online real estate company. “There has been stronger job growth in San Francisco and in some of the areas with a lot of high-tech jobs. But more importantly, these are areas that didn’t see the overbuilding during the boom.”
The East Bay is more challenged, especially eastern Contra Costa County. One Antioch ZIP code (94531), for example, is 64 percent below its high point. But Lafayette (94549) has regained all but 23 percent of the value it lost in the housing crash.
Mary Chatton Brown, an agent with Prudential California Realty in Orinda, said she has one client doing a short sale and another facing foreclosure. She recently sold a home that fetched a price below its appraisal.
“I have been in business quite a number of years, and I have been through a lot, but never like this,” she said. “This is very unique. That’s why everybody’s walking around thinking, what’s going to happen? When are we going to get through it?”
Not for a few more years, according to Home Value Forecast, which provides analysis and forecasts of the housing market.
“In general, the Bay Area’s held up better than other hard-hit markets around the country,” said Michael Sklarz, president of Collateral Analytics and contributing author of Home Value Forecast.
“We think the market’s hit bottom and we’re in the midst of a gradual recovery which will start accelerating over the next three to five years,” Sklarz said. “What people don’t understand about real estate markets is they are very long drawn-out cycles.”
Homebuilders are seeing signs of a modest recovery in some parts of the Bay Area, and are launching new single-family and condo developments. The San Jose metro area is back to its typical level of home building, according to Trulia.
“We think the recovery’s going to be ZIP code by ZIP code,” said Michael Maples, co-founder of Trumark Homes in Danville. Trumark is starting one single-family home development in San Jose this summer, and two in Sunnyvale later in the year, for a total of nearly 250 single-family homes and townhouses.
In anticipation of the recovery, Toll Brothers’ Northern California Division has been acquiring single-family lots over the past year — 24 east of Walnut Creek, 71 in Brisbane, and 51 in Sunnyvale.
“We do feel a little bit better about the market,” said Gary Mayo, Northern California group president of the national homebuilder. “There are people sitting on the fence not wanting to make that major investment until they can see some positive signs in the economy. We see those signs all over the Bay Area.”
Also investing in the housing market is San Francisco-based 643 Capital Management, which owns 600 foreclosed houses in the Bay Area and plans to buy more. Gregor Watson, the fund’s co-founder and managing partner, said he expects “modest appreciation for four or five years. There’s light at the end of the tunnel, but that may be a long tunnel,” he said.
At least some builders are counting on tech workers to help spur the housing recovery.
“My hope is the tech boom that’s creating all these jobs will spill over into the rest of the nine-county Bay Area,” said Doug Bauer of TRI Pointe, which plans to open a luxury home development in the San Jose foothills this month. “As prices of homes become too expensive for somebody making $80,000 a year, they’re going to have to head back into Contra Costa County. It’s like we repeat ourselves every 10 years.”
Contact Pete Carey at 408-920-5419.