Overall, U.S. home prices registered their biggest annual climb since summer 2006, rising 8.1 percent compared with last year, according to the SP/Case-Shiller composite index. Every one of the 20 major metropolitan areas Case-Shiller tracks posted year-over-year gains. The annual gains accelerated in 19 of the markets, with Detroit the only exception.

“The number that jumps off the page is San Francisco’s 17.5 percent increase in the past 12 months,” David Blitzer, chairman of the index committee for SP Dow Jones Indices, said. “That’s pretty big. Only one city, Phoenix (with a 23.2 percent increase), did better. Compared to the low points, you’re way up there, about 25 percent over the low. It’s a strong comeback.”

Resale homes

Case-Shiller defines the San Francisco metro area as Alameda, Contra Costa, Marin, San Francisco and San Mateo counties. The index tracks sales of the same single-family houses over time, comparing changes with a base value of 100, which represents values as of January 2000.

The San Francisco index is now 147.45, meaning that prices are 47.45 percent above their January 2000 level. The region’s index peaked at 218.37 in May 2006 and hit a low of 117.74 in March 2009 – so prices are still 32.5 percent below their peak, according to the index.

Several forces propel the upward trend, notably an improving economy, low interest rates, tight inventory and fewer foreclosures.

The San Francisco area “is the second-leading place in the country in job creation (after Houston), and doesn’t build a lot of houses, so supply is very tight,” said Ken Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at UC Berkeley. “We added 210,000 jobs to the Bay Area in the past 2 1/2 years – that’s a lot of people.”

Similar forces are driving the rental market, which is also experiencing big price run-ups. Exacerbating that situation, the tight for-sale inventory “is forcing a lot of people who want to be buyers to remain as renters,” Rosen said.

Rosen and others said Case-Shiller actually understates the turnaround – prices have risen even more than the index can capture. In part, that’s because it has a long lag time, measuring prices in January. Real estate service DataQuick, for instance, reported that February median sales prices in the nine-county Bay Area were up 24.6 percent compared with the same time in 2012.

“I would say Case-Shiller under-represents,” said Charmaine Frank, Redfin real estate’s area manager for San Francisco, San Mateo, Santa Clara and Marin counties. “The market has taken a pretty dramatic turn since January.”

Cash is the fuel

Like agents throughout the Bay Area, she said there are “enormous bidding wars going on. We see upwards of 40 to 60 offers on some properties; typically the top five to eight will be all-cash buyers.”

The numerous cash sales help fuel price appreciation, she said, because buyers skip getting an appraisal since they don’t have a mortgage. Appraisals, which rely on recent comparable sales, would moderate the rapid run-up.

“There’s a huge shortage of homes on the market right now,” said Cindi Hagley, a broker with the Hagley Group at Prudential California Realty in San Ramon. “For example, there are only 12 single-family homes for sale in Dublin right now. Ordinarily there should be 100 to 150 homes for sale there.”

Patrick Newport, U.S. economist with market analyst Global Insight, said that the rising home prices should help boost the economy further. “They stimulate new construction, and they also help consumer spending because they raise the value of people’s homes,” he said.

With multiple bids and properties selling well above asking price, could another real estate bubble be forming?

“Not yet,” said Rosen. “If they keep (interest) rates this low for two more years, the answer is yes.”

“This time, rapidly rising prices are a good thing,” Newport said. “A lot of homeowners are underwater; this helps them come out of that.”

Carolyn Said is a San Francisco Chronicle staff writer. E-mail: csaid@sfchronicle.com Twitter: @csaid

Article source: http://www.sfgate.com/business/article/Home-prices-in-Bay-Area-up-17-5-in-January-4386974.php

“California’s economy is actually healthier than popular or pundit opinion would suggest,” says Christopher Thornberg, president of Beacon Economics. Despite the unacceptably high 11.7 percent unemployment rate – 2 million Californians still out of work – the economic trend line is up. “Considering that employment is a lagging indicator of overall health, it is clear that California is solidly in a new growth phase,” Thornburgh says in his firm’s latest employment analysis.

Stephen Levy, director of the Center for Continuing Study of the California Economy, notes that California has added close to 250,000 jobs in the past year, a bigger percentage gain – albeit a paltry 1.7 percent – than the nation as a whole.

“The industry pattern is positive for the future with gains in professional, technical, scientific and information services, and a rebound in manufacturing activity and continuing export gains,” says Levy.

Nationally, chimes in Ken Rosen, chairman of the Fisher Center for Real Estate Urban Economics at UC Berkeley‘s Haas School of Business, “employment growth will be stronger than thought.” In his annual Economic and Real Estate Outlook presented last week, Rosen forecasts a net gain of 1.6 million jobs in 2012.

And which urban areas lead the pack, employment-wise? San Francisco and San Jose (Silicon Valley). Despite an 8.1 percent unemployment rate, “San Francisco is No. 1 in the country for job growth,” thanks largely to the latest tech boom.

But, the recovery remains “slow and choppy,” said Rosen, and can be derailed by, for example, Europe’s debt crisis.

And it’s not working for those who aren’t in the professions Levy mentions above, or for the millions caught in the jaws of the mortgage meltdown. (More than a quarter of the subprime loans out there are 30 days or more delinquent, according to Rosen’s report.)

“This has become a bifurcated economy,” and we need people in Washington who will honestly step up and help fix it,” he said.

Yes, the flip side of this year’s Thanksgiving.

Help needed: Natural Resources, the well-known and much appreciated pregnancy and early parenting resource center on San Francisco’s Valencia Street, is in trouble.

Voted this year’s “Best Shop for Parents To Be” by Bay Guardian readers, the 25-year-old center is on the verge of going out of business. Tough economic times have taken their toll and attempts to get new financial partners or even sell the business have failed. So the owners have turned elsewhere for help in getting $45,000 by 11:59 p.m. Monday to keep the doors open.

As of Wednesday afternoon, a community fundraising drive had raised $33,246. If the goal is not reached by the deadline, I’m told Natural Resources will return all the donations received ( www.naturalresources-sf.com).

Merit badges: Every year since 2000, the Consumer Electronics Association has inducted inventors and industry leaders into its Hall of Fame. Thomas Edison and Alexander Graham Bell were among the first, along with Bay Area alums, including the late Philo T. Farnsworth, Atari founder Nolan Bushnell and Ray Dolby of San Francisco’s Dolby Systems.

Steve Jobs made it into the hall in 2009, five years after Apple co-founder Steve Wozniak.

Joining that illustrious company this year are two more from the Bay Area – retired SanDisk CEO Eli Harari and Sam Runco, a pioneer of large-screen video projectors, whose company, Runco International, trademarked the name “home theater.”

“His namesake company became the most innovative and highly respected projection television makers in the world,” said the association.

Harari, co-founder of SanDisk, a multinational company headquartered in Milpitas, came up with a precursor to flash memory and “helped launch the flash memory revolution to become the global leader in flash memory cards,” the organization said.

One other inductee with Bay Area connections is Robert Metcalfe, who, with fellow computer scientist David Boggs, invented the Ethernet while working at Xerox PARC in Palo Alto in 1973. Metcalfe later went on to found 3Com.

Blogging: www.sfgate.com/columns/bottomline. Facebook page: sfg.ly/doACKM. Tweeting: @andrewsross. E-mail: bottomline@sfchronicle.com.

This article appeared on page D – 1 of the San Francisco Chronicle

Article source: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2011/11/26/BUR61M3K5M.DTL

“Are we out of the woods? No, not at all,” said Alexander Villacorta, director of research at Clear Capital, a real estate information firm.

His firm predicts a slight rise in Bay Area home prices over the next two years. But prices likely will drop further in Los Angeles and Riverside counties.

Despite historically low interest rates and a plunge in home prices, many consumers today aren’t purchasing single-family homes, the experts said. Some have difficulty qualifying for loans under today’s tougher credit standards. Others are hesitating due to uncertainty concerning the direction of home prices and the amount of distressed properties that still must come to market.

“We’ve got what I call analysis paralysis,” RealtyTrac CEO James Saccacio said of consumers. “They’re not buying. They’re waiting.”

Both men were speakers at UC Berkeley’s 34th annual real estate and economics symposium at the Westin St. Francis Hotel.

Saccacio said both the nation and California still have large amounts of distressed properties, including homeowners in default and those who owe banks far more than their homes are now worth. At current absorption rates, he said, it could take the state 28 to 33 months to work through that supply.

Speakers also suggested that global worries would weigh down the housing market.

Kenneth Rosen, chairman of the Fisher Center of Real Estate and Urban Economics, said the United States is headed for a “choppy recovery” over the next year, and Europe’s sovereign debt crisis “could spin out of control.”

“I think there is some chance that we could get a double dip,” said Rosen. He placed the chances at only 30 percent, “but it scares me.”

Nonetheless, Rosen and others insisted that at today’s prices and interest rates, the rental housing sector offers investors a chance for significant returns. Rental properties will benefit from strong demand by renters and from coming inflation, which he suggested seems inevitable given the nation’s debt problems.

“Real estate is better than gold, and not as volatile,” he said.

Article source: http://www.pressdemocrat.com/article/20111121/BUSINESS/111129945/1339/business?Title=Analyst-Bay-Area-home-prices-will-rise