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.”

Every part of the Bay Area has seen gains in the past year, with Silicon Valley leading the way. But parts of Contra Costa and Alameda counties, where subprime lending was heavy, are still far below their peaks.

The recovery has pulled many homeowners out from underwater — when houses are worth less than the mortgage — and convinced others it may finally be time to sell and move to bigger homes. They’re diving into a fast-moving market in which homes can sell in a day for more than the asking price.

Mike and Lois Lee

sold their Danville home for $780,000 in two days this month, after their real estate agent, Mark Kennedy of Empire Realty, told them their house was again worth more than they paid for it. They made $10,000 on the sale, the result of the past year’s rise in home values.

“I had no idea the market had corrected that much,” Mike Lee said.

Kennedy said the couple tried to sell in 2011 but there were no takers, and it might have resulted in a short sale. “I would say that in a year they went from losing money to making money,” he said.

In one Sunnyvale ZIP code that surpassed its bubble-era peak in December, Greg and Daisy Biggers decided in January it was time to make a move. Their family — four children — was outgrowing the home and the market timing looked right. In fact, it couldn’t have been better.

The Biggers family sold their home in less than a week, with all offers above asking price. Then they bought a home in Orinda, paying above the asking price. The whole process, from the decision to move to the purchase of the Orinda home, took eight weeks. Both homes are in escrow, and agents declined to reveal the sales prices before closing.

“When we started looking at the market, we picked up on this

Daisy Biggers, left, her husband, Greg, and son, Jeffrey, 11, pack some of their belongings that were stored in the garage of the house they recently sold in Sunnyvale on Tuesday, April 23, 2013. They sold their house in less than a week, and bought one in Orinda. The whole process, from the decision to sell, took only eight weeks. Housing values have staged a big comeback and are rapidly accelerating around the Bay Area, with the biggest recovery so far in the Peninsula and Silicon Valley. (Patrick Tehan/Bay Area News Group)
(
Patrick Tehan
)up-trend in prices,” Biggers said. “We quickly decided that if we’re going do it, now is the time. We had much higher demand than we had hoped for, which is great. And things are moving really, really quickly.”

Some pricier parts of Berkeley, Pleasanton, Oakland and Orinda are 10 percent or less below their earlier peaks. Not far behind are San Ramon, Moraga, Alameda, Danville and Fremont.

“Property in Dublin is selling at prices you would more commonly associate with some parts of the Peninsula,” said Lanny Baker, president and chief executive of ZipRealty. Baker said prices should hold even as more homes come on the market.

The market is so hot that sales in a week are not unusual. According to the real estate company Redfin, 24 percent of Alameda County listings in March were pending in a week; the numbers were 32 percent in Contra Costa County, 19 percent in San Mateo County and 26 percent in Santa Clara County.

Ally Yang bought a home in Mountain View in a day after losing another home to a higher offer. Her agent, Mark Wong of Alain Pinel Realty, “sent me the listing. I said let’s go check it out. I walked in, it’s a single family, I know the value, I think it’s a good deal.”

She made an offer of $705,000 that afternoon, and it was accepted. “I think in this kind of market you just have to know what you want and go after it,” she said.

Up the Peninsula in a Burlingame ZIP code that surpassed its bubble-era peak in August, Dianna Herrmann decided it was time to downsize and put her historic, 6,000-square-foot home on the market for $3.98 million.

“I watch the real estate market a lot,” Herrmann said. In February, she called her real estate broker. “I said things are overheated, inventory is low, prices are moving up and rates are low. Is this a good time to sell?”

The answer was yes.

Fifteen days later, the house was sold in an all-cash deal for over the asking price.

“The market is faster than ever,” said Burlingame broker Jennifer Tasto. “When a place sells, there’s one person who gets it and two other people replacing that buyer.”

The recovery is in full bloom in San Francisco. The Mission Bay neighborhood, where new luxury condominiums are about all that’s for sale, edged past its prior peak in January, and other parts of the city are nearing their previous highs.

“San Francisco has recovered incredibly,” said Leslie Bauer, an agent who specializes in the South Beach, Yerba Buena and Mission Bay districts. “I would say we’re recovered beyond when the market fell.”

But the data also reflects the stark contrast between the tech-heavy South Bay and Peninsula, where many areas are surpassing their pre-crash peak values, and the far reaches of the East Bay, where home values in some places are 50 percent or more below peaks that were inflated by subprime lending.

Antioch, Pittsburg, Richmond and a ZIP code in East Oakland have a long climb ahead of them. There, values still hover near their bottoms.

Fifteen ZIP codes in Contra Costa County and three in Alameda County are more than 50 percent below their peak median home value, according to Zillow’s data. In one Antioch ZIP, the median value of a home was $177,700, only 18 percent up from an October 2009 bottom of $149,800 and 62 percent below its peak of $473,400 in January 2006.

“We have a ways to go before we recover,” said Luis Salas, a real estate agent in Antioch. “We’re far from the city and there was so much construction the prices went down a lot in Antioch — in some cases more than 50 percent from the peak. But it’s recovering.”

As prices rise in Antioch, some short sales are drawing offers over asking price and becoming regular equity sales, according to Joy Di Ricco, an Antioch real estate agent who has specialized in short sales since the market crash.

She said one client’s home was $100,000 below the amount of the mortgage six months ago.

“I told them hold off,” Di Ricco said. “Sure enough, I think in another 30 days we may have an equity sale.”

Contact Pete Carey at 408-920-5419 Follow him at Twitter.com/petecarey.

Article source: http://www.mercurynews.com/business/ci_23107869/bay-area-housing-recovery-spreads-from-silicon-valley

Bay Area homes have lost more than a third of a trillion dollars in value since the housing bubble burst about four years ago. And in the process, they have taken a big chunk of the economy with them.

During the boom, homeowners borrowed against that mountain of money, fueling a huge surge in everything from yacht sales in Silicon Valley to home heating upgrades in Antioch. Later, when home prices collapsed, their loss of money and confidence crushed those same businesses.

Adding more strain, while the equity went away, the debt remained, further hobbling those who hung on to their homes.

While the devastation of the housing crisis has been well reported — foreclosures; people stuck in homes they can’t sell; houses sold for a fraction of their value — one issue that has received less attention is the remarkable loss of housing values and its impact on the economy. Home equity loans, for example, are running at about one-tenth the level they hit four years ago.

But it’s probably not overstating the issue to say that the economy’s ultimate recovery depends on restoring stability to the housing market. “Consumer spending won’t fully recover until the housing market stabilizes and people feel that their main assets — their home — will grow in value,” said Jed Kolko, chief economist with the real estate website Trulia. And consumer spending makes up about two-thirds of the American economy.

In a reversal of the “wealth effect”

that had homeowners spending freely during the bubble because their home equity made them feel rich, the loss of equity when the bubble burst “magnified the income and jobs effect in the recession,” he said. “Both of those hold back consumer spending. It especially hurt industries that served a local market — retail, restaurants and local services.”

The loss in home value in five Bay Area counties from 2007 to 2011, calculated by DataQuick for this newspaper based on the average price per square foot paid for housing, was $387 billion, a 33 percent decline. That figure is necessarily an estimate, because it’s based on the value of houses sold, and the types of homes sold in both periods.

Contra Costa County was hit the hardest, followed by Alameda, Santa Clara, San Mateo and San Francisco in that order. There was a wide variation within counties, with some areas hit harder than others.

From 2007 to 2011, homes in Oakland lost an average of $350,000; Concord $289,000; San Jose $267,000 and San Francisco $205,000, according to an analysis by the San Diego real estate information company. That was equity homeowners tapped for kitchen remodels, new boats and trucks, vacations and college tuitions. It also served as

a security blanket for those nearing retirement.

Businesses struggle

The collapse has hit business hard — everyone from remodeling contractors in the wealthy enclaves of Silicon Valley to heating and air conditioning installers in hard-hit Antioch have felt its sting.

“It’s all changed since the equity money died,” said George Sikich, a yacht and ship broker whose Bay Area business dramatically slowed when the housing bubble burst. “There’s no doubt — the business is down.”

Four years ago, Sikich’s customers were only thinking about buying a bigger boat than the one they had. “They were using their home equity, buying boats a lot. They had an ATM in their home,” he said.

Since 2008, boat prices have plunged along with sales, he said. “I have a little market niche and I expect to muddle along and be OK,” he said. “I don’t see things changing a lot until we see the money flowing again. I don’t see things turning around for a year to two.”

The steady slide in home value has also slowed real estate sales. The Santa Clara County Association of Realtors dropped from 9,370 members in 2007 to 6,200 today, the association reported.

“People have lost confidence,” said Ken Rosen, chairman at the Fisher Center for Real Estate and Urban Economics at UC Berkeley. “No one thinks prices go up any more.” But housing prices already are beginning to stabilize in some parts of the Bay Area, he said.

That can’t happen soon enough for Jeff Scalier, who owns Blue Star Heating Air Conditioning in Antioch. Scalier said he’s doing mostly repairs to furnaces that should be thrown out, and installing few new furnaces.

“In the old days, one or two people a week would drop their credit card down on the table and buy a new air and heating system for their families. Now it’s more ‘How much to fix it?’ And when you give them prices to fix it, they always cringe. No one asks to replace it. No one upgrades anymore. People only buy what they need to buy and very little else.”

Scalier says the company he worked for five years ago is out of business, as is one of his competitors.

His business “went from having work every day, day in and day out, to the point where you don’t have work every day, you don’t know if you have work for the rest of the week. And if you have work, there’s generally less profit.”

Wary consumers

Taxable sales, an indicator of business health and consumer spending power, were down 17 percent in Alameda County and 14 percent in Contra Costa County between the third quarters of 2007 and 2010, the latest period for which the Board of Equalization has data. There has been a recovery since a low in 2009, but consumer spending has undergone a permanent change, according to some economists.

“Consumer spending is going to be lower going forward for two reasons,” said Jon Havemen, chief economist with the Bay Area Council’s Economic Institute. “Consumers have waked up to the fact that ‘Wow, I need to save for retirement, and not only do I need to save, but I don’t have all this money in my house.’ “

Fewer lines of credit

New home equity lines of credit originated by banks have plunged in Santa Clara, San Mateo, Alameda, Contra Costa and San Francisco counties by nearly 90 percent, from $6.1 billion issued in the second quarter of 2007 to $674 million in the third quarter of this year, according to DataQuick. That has starved remodeling businesses — among others — for customers. The East Bay has seen a 37 percent drop in the number of specialty contractors since 2007; the Silicon Valley has seen a 28 percent drop.

Antonio Perez, 43, of San Jose, had a flourishing custom cabinet business until work dried up early in 2008. His business is shuttered and he’s back in school, taking courses in San Jose State University’s business department.

“A lot of people I know in the industry are forced to do things they’ve never done before, and take jobs they had never done before. My brother, one of the greatest finish carpenters I know of, is reduced to building fences,” Perez said.

“It’s rough to watch — such fine talent that used to work for me reduced to lot of menial tasks. Someone who spent his whole life in a trade, refining his skills, and there’s no demand for it. You can have the greatest skills, but it’s all supply and demand.”

The struggling small-business man is sometimes also a struggling homeowner wondering when the spiral of equity loss, debt, business hardship and job loss will end.

Jerry Albert borrowed on his Redwood City home to buy a printing business. “We had a couple of good years and were rolling right along, and then ‘Bang!’ The bottom fell out.”

Albert has been negotiating with Bank of America for a loan modification since 2009. “I built my house and I was making money. I could pay my bills, and I was putting money away in a savings account,” he said. “I hate being pigeonholed as irresponsible. I’m a victim of the economy. My business has tanked. I have had clients file bankruptcy owing me money, and I can’t collect it.”

If there’s anything positive to say about the state of the housing market, it’s that if you have the money, it’s a great time to buy.

“We’re going to see prices stabilize,” said Rosen of UC Berkeley’s Fisher Center. “It’s already happening in pockets like Silicon Valley and San Francisco. If you want to buy a house, it’s probably the best time in California in 30 years.”

Contact Pete Carey at 408-920-5419.

Article source: http://www.mercurynews.com/top-stories/ci_19656382