The last time the spread between Bay Area median prices and Sacramento median prices grew so big was a decade ago, just before tens of thousands of Bay Area transplants arrived in Sacramento, turning a healthy housing market into a bona fide boom.

Since then, that wave of transplants has slowed to a drip, with barely more residents relocating from the Bay Area to Sacramento than heading in the other direction.

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That’s what homebuyers now pay for a typical house in the Sacramento region compared to buyers in San Francisco. And if history is any guide, that mounting price gap could have a big impact on Sacramento’s housing market and economy in the not-too-distant future.

The last time the spread between Bay Area median prices and Sacramento median prices grew so big was a decade ago, just before tens of thousands of Bay Area transplants arrived in Sacramento, turning a healthy housing market into a bona fide boom.

Since then, that wave of transplants has slowed to a drip, with barely more residents relocating from the Bay Area to Sacramento than heading in the other direction.

Several local real estate experts and economists said they don’t expect to see another approaching fleet of U-Haul trucks quite yet, with the possible exception of a few being driven by carefree retirees.

“It’s a different market now,” said Suzanne O’Keefe, a Sacramento State economics professor. “Everyone is more cautious. The housing market isn’t going to rebound quickly because people move from the Bay Area.”

O’Keefe and others note that the local job market is stalled; cheap housing is available elsewhere; and many Bay Area residents already cashed out home equity during the boom. Just as key: Bay Area home prices are less expensive than they have been in years. A San Francisco condo worth $1 million in 2005 would sell today for about $840,000.

But even if Bay Area transplants aren’t about to swoop into Sacramento tomorrow on white horses, many expect their numbers to increase, helping to put a floor on falling home prices. To bolster their case, these optimists point to past trends.

The San Francisco and Sacramento housing markets are closely entwined. Growing price differences between the two areas preceded and fed the last two housing booms.

The calculus is simple: Bay Area residents see their modest homes sell for immodest prices, and decide to cash out and buy quasi-mansions in Sacramento.

Right now, the median home price in the Sacramento region is about $185,000, according to data from Wells Fargo and the National Association of Home Builders. In San Francisco-Marin-San Mateo, it’s $630,000. In the San Jose area, it’s $454,000.

David Bicknell, the local franchisee for Intero Real Estate Services, is putting money behind his premonitions of a coming influx. His company recently opened offices in Folsom and El Dorado County and plans more expansion.

“More and more people are able to move to the Sacramento area,” Bicknell said.

Influx of equity-rich retirees seen

Bicknell is encouraged by the local tech sector, which he believes is rebounding.

Intel Corp., one of the local region’s largest private employers, recently hired 368 new workers at its Folsom campus, reversing more than a decade of downsizing.

The new hires increased Intel’s local workforce by about 6 percent to 6,515 workers. Many are recent college graduates who have relocated to the region, the company said.

Tech company Bloo Solar of El Dorado Hills plans to hire another 40 or so workers over the next several years as it expands its solar manufacturing plant.

“We see this as a continuing trend,” Bicknell said. “The homes are nice, the schools are good, and the cost of living is so much lower.”

Retiring Bay Area baby boomers are just as important to Bicknell’s strategy.

The last generation of retirees largely drove the big influx from the Bay Area to Sacramento 10 years ago. The town of Lincoln quadrupled in size during that boom, partly because of senior citizens arriving from places like Santa Clara County.

Assuming they have a pocket full of cashed-out equity, retirees might not worry as much as others about Sacramento’s difficult economy.

“There’s a lot of potential out there for the active adult market,” said Dean Wehrli, a senior manager at John Burns Real Estate Consulting. “That part of the market is increasing, and it’s going to be like that for 20 years.”

Granite Bay Realtor Eve Fenstermaker said she has noticed more interest from prospective Bay Area buyers since last spring. She gave the example of a client who lives in the exclusive Blackhawk area of Contra Costa County. Two years ago, the woman balked at moving because of declining prices in her neighborhood ? and corresponding lost equity. With prices recovering, she is considering Sacramento.

“If you can sell your house in the Bay Area for $900,000 and can buy a comparable house here for $725,000, why wouldn’t you do it?” Fenstermaker said.

Douglas Booher, a 34-year-old Southwest Airlines pilot based in Oakland, recently looked at several homes in Folsom and El Dorado Hills. He likes the schools and the proximity to Lake Tahoe.

“If we can live in Sacramento in a nice home ? maybe not our dream home, but a nice home ? then we will have more money left to play with,” said Booher, who rents in Clayton and spends much of his time on the road. “It’s worth the two-hour drive once a week.”

Falling prices frighten many buyers

Several economists, though, cautioned that new residents like Booher will likely remain anomalies in the near term.

Many Bay Area homebuyers are scared by Sacramento’s falling home prices, seeing the market as risky. Before the last two booms, the real estate markets in both the Bay Area and Sacramento region were relatively stable. Today, the Bay Area is recovering faster than Sacramento.

Despite that recovery, home prices in San Francisco are still at 2004 levels. (They are at 2000 levels in Sacramento.) So a lot of Bay Area residents aren’t feeling priced out of the market, unlike during much of the housing boom.

Other Bay Area residents bit the poison apple and refinanced during the boom, leaving them underwater on their mortgages and unable to pull out equity for homes here.

“Even if you have plenty of equity left, you might want to wait a bit” until the market stabilizes, said Jeff Michael, an economist at the University of the Pacific.

For those without much cash, a move to Sacramento can be tough, largely because of the tight job market.

Unemployment in the Sacramento region has hovered at 12 percent for more than a year, roughly three percentage points higher than the rate in the San Francisco-Marin-San Mateo area.

Affordable housing doesn’t mean much to working families if it doesn’t come with employment.

Some, like Booher, might choose to live here on the cheap and commute to San Francisco. But home prices are also low in places closer to the bay, like Vacaville and Fairfield. Why commute from Sacramento when a shorter drive is available?

“Some of that underbrush has to clear first” before extreme commuters start coming here, said Wehrli.

Those obstacles are immediate, but likely transitory, said economist Stephen Levy. The Bay Area and Sacramento have danced to this tune before, and they’ll probably one day dance to it again.

During the last boom, Levy noted, people felt priced out of the Bay Area and moved here. Likewise, many Sacramento residents felt priced out here and moved to even-cheaper places like Texas.

The last several years, then, have marked a massive, dramatic, painful correction, said Levy, director of the Center for Continuing Study of the California Economy in Palo Alto.

When the dust settles, if people from the Bay Area ? or anywhere ? think housing costs have gotten too high in their community, there’s a good chance they will look to places like Sacramento.

And that’s a selling point for the region, he said.

“This makes the Sacramento region more competitive,” Levy said. “If I was a leader in Sacramento, I’d be talking to businesses about how their workers can afford to live here.”

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Article source: http://www.sacbee.com/2011/10/16/3983170/hope-in-housing-gap.html

But in the Bay Area, officials are already preparing for global warming by rewriting local building policies in anticipation of rising sea levels.

The San Francisco Bay Conservation and Development Commission, a 27-member state agency that regulates activities that affect the waters and shoreline of San Francisco Bay, is in the process of crafting regulatory guidelines that could restrict new development projects in parts of the Bay Area threatened by rising waters.

While environmentalists see these measures as wise, some developers contend that the BCDC is being overly precautionary and will unnecessarily stifle employment opportunities for contractors and builders.

The BCDC’s proposed guideline suggests “that state agencies should generally not plan, develop, or build any new significant structure in a place where that structure will require significant protection from sea-level rise.” If one prediction — produced by the United Nations — of a 55-inch rise in sea level by 2100 proves true, the BCDC’s advisory could apply to 332 square miles of Bay Area real estate. This 213,000-acre region is home now to 270,000 people, and state officials believe that figure should grow no larger.

“Given what’s coming in the next century, there are some areas where we just shouldn’t be building,” said BCDC Executive Director Will Travis. Though BCDC only holds authority over land within 100 feet of Bay waters, its proposed recommendations could be applied by local governments in areas beyond the agency’s jurisdiction.

David Lewis, executive director for the environmentalist group Save the Bay, is among those encouraging the enforcement of precautionary building restrictions for the future.

“We know from New Orleans and Japan that building in areas at risk of inundation is a bad idea,” he said. “We’ll need to protect some critical areas, like airports, but the state is saying it’s not smart to put new people at risk.”

But critics of the BCDC’s process have argued that the commission is basing policy-making on faulty maps that show ominous future high-tide lines drawn without regard to existing flood protections. These maps, critics argue, could drive down property values and scare away insurers from real estate where the waters may never reach.

Neil Struthers, CEO of the Santa Clara and San Benito Counties Building and Construction Trades Council, said sea walls, levees and other structures can subdue risks of flooding and inundation of low-lying land.

One location whose future is the subject of a fierce debate is Cargill Salt’s former drying pond in Redwood City, a 1,400-acre parcel where the corporation wants to build a bayside community of 12,000 homes for 25,000 people.

The Arizona-based developer tapped to do the job — DMB Associates — currently has lobbyists at work against the BCDC’s suggested building restraints, and Save the Bay’s Lewis suspects Cargill’s so-called “Saltworks” project is fueling much of the opposition to the BCDC’s Bay Plan amendments.

Though the BCDC’s proposal contains no specific language that could immediately halt the project, Pete Hillan, a DMB spokesman, said the BCDC is creating an atmosphere generally unaccommodating to development — what he calls a “retreat and surrender policy approach.” Hillan added that, in spite of some opposition, Cargill is committed to carrying out its project, now six years in the planning.

But what Cargill remains most concerned about, Hillan says, is Bay Area property values, which could drop as a result of the BCDC’s warnings of regions that could one day be flooded or lie below sea level. “Their amendments will basically declare people’s property as heading toward losing all value,” said Hillan, who believes the map depicting threatened areas shows lands that saltwater will never reach. “You can’t reduce someone’s property value without good reason.”

Save the Bay’s Lewis, like many environmentalists, feels that Cargill’s property would best be restored to tidal marshlands, which can buffer shorelines against flooding.

But Hillan said the Saltworks project would include a sturdy seawall that would protect much of Redwood City, amounting to community infrastructure built with private money.

Alan Talansky, chair of the policy committee of San Mateo Area Chamber of Commerce, feels that required environmental impact reports and general community involvement already provide sufficient regulation of building activity. “BCDC is proposing a level of oversight that isn’t necessary,” Talansky said. He also feels that predictions of sea level rise are all too speculative.

“To look at the next 100 years and surmise now what might be and then set regulations is the wrong approach,” Talansky said. “No one knows what the real rise will be.”

Many will be made to move away from swelling sea

If projections of rising sea levels are correct, in the coming century thousands of Bay Area residents will be forced to pull up their roots, pack their belongings and abandon their homes for higher ground.

Just as surely, other people’s properties will be protected, their communities buffered with public and private resources against the swelling of the sea by levees, seawalls and other barriers. The question is: Who will be protected and who will be forced to evacuate?

“That’s where we’re going to face some huge environmental justice and social justice issues,” said the San Francisco Bay Conservation and Development Commission’s Will Travis. “We as a society will need to decide which areas we’re going to protect.”

Important commercial centers, such as downtown San Francisco, the Port of Oakland, San Francisco International Airport and Silicon Valley, will certainly receive prioritized safeguarding, Travis said.

Already, plans are being proposed to guard Treasure Island — which will undergo a massive redevelopment in coming years — from the expected sea level rise.

But other threatened areas may never see such protections.

“We may lose Crissy Field, the Aquatic Park, parts of Emeryville, near-shore areas of Mission Bay, and the Eastshore State Park [between Richmond and Oakland],” said Saul Bloom, executive director of Arc Ecology, a development consultant in San Francisco. He points out that ocean-facing land will also be impacted. “At Ocean Beach, the water could come lapping over the Great Highway.”

This, he says, will give us two options: retreat or build seawalls.

“We’ll have to ask, ‘How much do we want to look like the Netherlands?’,” Bloom said.

The cost for protecting Treasure Island — a community that could house, at most, about 19,000 people — could be $190 million, according to a city spokesman. Under such looming figures, entire neighborhoods, in all likelihood, will be vacated.

“So the question is, how do we move people out of threatened areas in an equitable and fair way?” said the Green Party’s Eric Brooks. “We have to plan. Where will people go? They obviously can’t stay there — even in some wealthy neighborhoods. Parts of the Marina we’ll probably have to evacuate.”

Going under

16 inches: Sea level rise possible by the year 2050
55 inches: Sea-level rise projection for 2100
332 square miles: Area surrounding the Bay that could be under water if sea levels rise 55 inches
270,000: People now living in those areas

Source: United Nations Intergovernmental Panel on Climate Change, BCDC

Slipping away

In the coming century as sea levels rise, some places will be saved while others probably won’t. Here are the areas the experts – regulators, environmentalists, urban planners – predict will be protected and those that might be abdandoned.

What will be saved

• Downtown San Francisco
• Downtown Oakland
• Treasure Island
• Silicon Valley
• San Francisco International Airport

What may be abandoned?

• Richmond-Berkeley Shoreline
• Crissy Field
• Alameda
• Highway 37

Article source: http://www.sfexaminer.com/local/2011/07/environmentalists-developers-clash-over-how-deal-rising-tide