In “Bay Area housing recovery spreads from Silicon Valley to East Bay“, Argus reporter Pete Carey describes these housing micro-climates with fascinating data and dramatic anecdotes, starting with the following stark graphic:

(click to enlarge)

The housing micro-climates of the greater San Francisco Bay Area show a dramatic schism between recovery and despair

Source: Bay Area housing recovery spreads from Silicon Valley to East Bay (linked above)

The green areas are localities where housing prices are at or above their pre-crash peaks. In the most favorable areas with good school districts and plentiful jobs, the housing market is back to the good old bad days. Limited inventories, low interest rates, pent-up demand, and buyers flush with cash are scrambling to outbid each other and driving prices ever higher. In some of these areas, prices are already 15-24% ABOVE their pre-crash peak. Far away from the Bay Area’s job centers, housing inventory is plentiful, rampant sub-prime lending has transformed affordability into foreclosures and short sales, and prices are only just now climbing off their post-crash bottoms. The recoveries here may depend upon how fast residents’ tolerances for horrific commutes rebuild relative to the decline in tolerance for sky-high housing prices closer to jobs and good public schools. In between these extremes is a variety of local conditions generating pockets of housing prosperity and despair.

Further to the east is Stockton, now the country’s largest bankrupt city, gateway and ground zero for the state’s housing bubble and crash that rippled hardest throughout the central valley where houses multiplied much faster than jobs. Not shown on this map are the counties northward from San Francisco — Marin, Napa, Sonoma, and Solano. Contrasts exist here as well from the highly sought estates in Marin county, the plush vineyards of Napa, and bucolic surroundings of Sonoma to Vallejo in Solano County that declared bankruptcy at the height of the financial crisis.

This is quite a panorama that highlights the old real estate maxim of location, location, location. Here are some ZIP code related stats from the Argus article:

“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…

…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.”

An extreme example of the recovery comes from Burlingame, a city with some of the most expensive ZIP codes in the Bay Area.

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

The anecdotes I hear from friends and family confirm the heat in the Bay Area housing market. One friend offered $50K above asking price for a Sunnyvale home, only to find out that a buyer with all-cash outbid him by another $50K. He has since given up house hunting after seeing a Sunnyvale home in less-than-desirable surroundings sell for a cool million. Another friend has also slowed down her house hunt after realizing that her desired home close to work in Silicon Valley could not be found for less than $1.1M. Some homes in desirable markets are sold within a week of listing, creating an added sense of urgency with buyers:

“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.”

A classic quote I found in a flyer for a home in Fremont — an important traffic hub/gateway between the East Bay and Silicon Valley — offered a modest 3-bedroom house for about $600K that needed updates. It was marketed as an opportunity to turn this residence into “the home of your dreams!”

So why spend time studying and tracking this madness?

First and foremost, this drama provides the backdrop for the great results homebuilders are reporting in their California-based communities. Homebuilders like Tri Pointe Homes (TPH), KB Home (KBH), and Meritage (MTH) are benefiting from the premium markets in the Bay Area (for more on TPH see “A Concentrated Way To Play Rapid Price Appreciation In The California Housing Market“). Similar stories can be found in Southern California. The homebuilders learned many important lessons from the housing crash. One lesson has trained them to focus their building in areas with strong job growth and growing economies. Places like the Bay Area are providing blueprints for the country’s recovery, and we can find homebuilders converging on these locales.

Secondly and in related fashion, the frenzy going on in the housing market is likely a leading (or confirming) indicator of an improving economy, albeit an unevenly recovering one (after all, California has a poverty rate of 16% using traditional measures. When using the Census Bureau’s new supplemental approach that adjusts for the cost of living, California’s poverty rate goes to tops in the nation at 23%). The notion that deflation is a risk in this economy should be quickly dispelled after understanding what is going on in markets like California. The buying will slowly but surely spread out as it always does to the lower-priced regions of the Bay Area as the economy continues to grow. This will have plenty of cascading and multiplying impacts.

Finally, the California housing micro-climates are a great reminder of why both housing bulls and bears can make convincing arguments. Depending on the lens applied, debaters can conjure up plenty of skewed arguments about the health or weakness of the housing market. The biggest mistake I continue to see is the interpretation of low sales numbers (better yet, lower than expectations) as an indicator of a slowing housing market. When inventories are tight and sellers are anxiously waiting for today’s soaring prices to make them whole on their homes, it is no surprise that sales are constrained. Bulls can also overstate the case if they do not recognize that tight credit conditions continue to lock out many entry-level and first-time buyers. The housing market cannot continue its recovery if the buying remains dominated by well-heeled cash buyers. I am still looking for hard data on how many of these cash buyers are Canadians taking advantage of the enviable combination of a strong currency and relatively low prices for American housing; and/or wealthy Chinese nationals looking for lucrative foreign investments.

Overall, the housing market recovery is still just getting started. Markets like the San Francisco Bay Area are leading the way. Pent-up demand is getting released and running into low inventory levels. Homebuilders are scrambling to ramp up to meet some of this demand by buying land and securing scarce construction resources. The cost and price pressures are part of the early growing pains from a decimated industry where supply is not yet recovered enough to handle demand where it is most robust. It is hard to determine when prosperity will be more widely shared, but I am expecting that once unemployment begins a new trajectory downward, scenes like the ones in the Bay Area will spread like wildfire across the country… especially since interest rates are likely to remain extremely low as employment data only slowly improve.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More…)

Article source: http://seekingalpha.com/article/1380051-the-san-francisco-bay-area-s-housing-micro-climates-a-microcosm-of-a-2-speed-recovery?source=google_news

SF’s Clock Tower: home to lofts and those who love them…

Jenny Pisillo’s Eichler reverie brought to mind a living space design that could be considered a new-century modern cousin to the mid-century modern: the loft.  Like the Eichler, a loft space is designed to maximize light and space, showcasing an allegiance to clean, straight lines. Also like Eichelrs, lofts seem to inspire either adoration or derision, fervent emotions either way.

Lofts are decidedly urban in character. An Eichler you could find in the suburbs (cool suburbs, anyway) but a loft would be out of place without bright lights in the window, the buzz of city traffic and culture on the street outside. In some cases, again like Eichlers, lofts have been constructed for a middle-class buyer, generally as a  live/work space. But in the Bay Area, initial middle-class intentions can easily fall to the wayside when confronted by local estate values.

Of course, the Bay Area represents many different real estate micro-climates, so lofts in one part won’t be as pricey as lofts in another. San Francisco and Oakland offer two locations for illuminating comparison.

Though the more expensive of the two, in San Francisco you can (if you look hard) get a better deal than in past years on lofts, with many hitting the MLS at prices hundreds of thousands of dollars less than they were in 2007 and 2008. Here’s an example on Rausch- the unit sold for $800K in 2008, was listed in 2012 at $690K, and is now relisted at $660K. The interiors, exposed metal ceilings and cement, show as sexy and sleek to some, stark and depressingly industrial to others.

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60 Rausch loft for sale in SF

Main room. All photos via Redfin/MLS

Cement wall- love it or hate it?

Office with metal ceiling

Loft bath

Sweet shared roof deck

Going up in price, we find this loft in the Clock Tower on 2nd Street. This unit isn’t as cold as some lofts with its use of warm brick, honey-toned hard woods, and bright pops of color in kitchen and bath tiles. This one is listed at $899K, down from $949K in March of this year.

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461 2nd Street: Clock Tower Loft

Inside the main living area. Photos via Redfin/MLS

Dining area

Creative kitchen

Bed by the bricks

Sexy bath

Upstairs lounge area

Common garden space

Better deals, as per usual, are found in the East Bay. Oakland’s always converting some factory or another into arty looking lofts. This one is in the Pacific Cannery loft complex. We like it for its simple, clean layout that makes it feel much bigger than its 969 square feet.

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1201 Pine St., Oakland loft

Main room in loft

Loft kitchen

Stairs to upper-level

Loft bath

Loft closet, something these kinds of homes generally excel in

In the old Rossi Cigar Company building, here’s an  Oakland example we love, but again, the preponderance of unorganized open space might overwhelm some buyers who prefer a more structured layout. Price is now $299K, down from an original list of $340K.

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1411 Center St., Oakland loft for sale

Exterior (!). Photos via Redfin/MLS

Kitchen

Looking from kitchen to main room

Main room

Bedroom

The loft, unstaged– acres of space!

Clever kitchen, unstaged

So reader, post-tour, weigh in. Lofts:  modern gifts to urban living, or rectangles with delusions of grandeur?

Article source: http://blog.sfgate.com/ontheblock/2012/05/08/love-them-or-hate-them-lofts-still-very-much-a-part-of-the-bay-area-market/