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The incredible soaring Bay Area home prices

Thu, 28 Mar 2013 01:02:22 +0000

Tuesday’s SP/Case-Shiller report underscored the rapid run-up in Bay Area home prices, showing that the San Francisco metro area — Alameda, Contra Costa, Marin, San Francisco and San Mateo counties — saw home prices surge 17.5% in January compared to a year ago. That outpaced the national run-up of 8.1 % and was second only to Phoenix.

For a detailed analysis of the numbers and what they mean for the Bay Area, click here.

Bidding wars and multiple offers are the new norm here.

Here’s a look at a San Jose house listed for $1,075,000 that sold for $1,120,000. Redfin agent Ashley Rabello said she had four offers within the first day of listing. The winning offer had no contingencies, a large percentage down, and was significantly higher than the asking price.

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Heavy action at all price points is new — and another harbinger of recovery.

“During the boom and bust, the lower-priced houses had the biggest percentage price increases and then the biggest percentage collapse,” said David Blitzer, chair of the index committee for SP/Dow Jones. That’s because the most-outrageous lending practices — subprime loans, liar loans, no money down — were more concentrated in the low end.

Case-Shiller tracks homes at three price tiers — low (under $383,942), middle ($383,9422 to $681,776) and high (over $681,776). “Until the boom, the three moved together; during the downturn, they spread apart,” Blitzer said. “Now they’re moving in sync again; it’s a sign the market is coming back to normal, behaving a lot less bizarrely than it did before.”

Carolyn Said is a San Francisco Chronicle staff writer. For insights and news on the real estate market, follow her on Twitter: @csaid

Article source: http://blog.sfgate.com/ontheblock/2013/03/27/the-incredible-soaring-bay-area-home-prices/

Bay Area new-home construction rebounds

Sun, 28 Oct 2012 07:41:42 +0000

Construction of new homes around the Bay Area is on an upswing this year, showing signs of a return to normal following its surge during the housing boom and its dismal retrenchment during the downturn.

The increased activity mirrors what’s happening nationally, as builders ramp up after a long hibernation that saw home starts plunge to record lows.

A Chronicle analysis of Census Bureau data on housing permits – a strong indicator of future construction as 86 percent become housing starts within one month – shows that this year the core Bay Area counties are on track for more-robust home building.

The home construction market is returning to normal as it recovers from the “boom and bust carnage,” said Robert Denk, senior economist at the National Association of Home Builders.

“We definitely see that we’re on our way up off the bottom,” said Gary Mayo, group president for Northern California and Nevada at Toll Brothers, one of the nation’s largest home builders. “The market is improving across the country, with Northern California among the stronger areas. In the Bay Area, sales started to dramatically improve in January. Our sales in the Bay Area on the same (housing developments) as last year are up 100 percent this year.”

Models not even done

Toll has luxury developments in Brisbane and Sunnyvale – each of which has sold more than a dozen homes without even completing a model house.

“We have a sales trailer out in the middle of the raw land where we’re putting in the site improvements. It shows the strength of the market: People are buying off of the blueprints and our reputation,” he said. Another new site in Pleasanton opened a week ago and has taken six deposits. Existing developments around the bay in Hayward, San Ramon, Dublin and elsewhere are suddenly finding a ready coterie of buyers, he said.

Kenny and Rena Tan will pay about $1 million for a five-bedroom home in Toll’s Brisbane development called the Ridge, which will be ready in about a year. For now, they put down a nonrefundable $9,000 deposit, accounting for about half of the structural options they requested, such as converting the downstairs library to a bedroom, putting in a kitchen island and a adding a sink to the laundry room.

They like the location, near San Francisco and the airport, and picked a site with hill views, he said.

At 52, Tan said they were looking ahead to their senior years.

“We wanted a home we can retire in, with a downstairs bedroom so we don’t have to climb stairs as we get older,” he said.

As a real estate lawyer, he’s very familiar with the market, Tan said.

“I know that the worst is over; especially in San Francisco and the Peninsula there is such a strong demand for homes that it is a very resilient market,” he said. “I waited until now; no way would I have jumped in two years ago.”

What caused the turnaround?

Richard Green, director of the USC Lusk Center for Real Estate, said that a growing population’s demand had caught up with the existing supply, making it time for new homes to be built.

“We went a long time, basically five years, with almost no new construction to speak of,” he said. “In the post-World War II era we’ve never seen anything like this before, so it had to turn around.”

Biggest of all, Denk said: stabilization of the overall housing market. “Nobody will buy a house if they expect it to lose value,” he said. “The bottoming out of house prices is a critical factor enabling the turnaround.”

Low interest rates

Overall economic conditions, with growing consumer confidence and record-low interest rates, is another factor.

“I think people are tired of waiting,” Mayo said. “They’ve been sitting on the sidelines for five years wanting a new home but didn’t feel the dynamics were right. Employment didn’t feel solid. Now (they see) low interest rates, a strengthening economy and (more) equity in their existing homes, so they can sell them.”

Consider this: In both 2005 and 2006, builders pulled permits for about 15,000 new homes a year in the San Francisco metropolitan area (the counties of Alameda, Contra Costa, Marin, San Francisco and San Mateo), a little more than half of them being single-family houses and the rest apartments or condos. In 2009, just 3,550 permits were issued. By 2011 it was up to about 5,800.

Soaring past last year

As of August, builders have already taken out about 5,800 permits this year – as many as in all of last year – putting them on track to exceed last year’s total by 50 percent.

The San Jose metro area (the counties of Santa Clara and San Benito) had an even deeper plunge, going from roughly 6,000 new permits a year to only 1,100 in 2009. This year, it is on track for about 5,800 permits – almost back to its boom-time levels.

Home construction is an economic indicator that packs a hefty wallop. Building a house creates the equivalent of three full-time yearlong jobs, according to the National Association of Home Builders. About half of them are construction – the folks who swing the hammers and install the plumbing and electricity – while the other half are everything from real estate agents, mortgage brokers and lawyers to sellers of concrete, brick, masonry, steel, furniture and other goods.

The United States “was hovering at 1.4 million single-family houses being built a year, and that dropped to 400,000,” Denk said. “With 1 million fewer housing starts, that meant 3 million jobs that weren’t there because we weren’t building at a normal pace.”

From 2007 to 2011, more than 2.1 million construction workers lost their jobs, according to the Bureau of Labor Statistics. Since then, only about a quarter of a million have gone back to work in the industry.

“In a normal year, housing construction is 5 percent of GDP,” Green said. The downturn “shaved 3 percent off the GDP. When we get back to normal – and we’re still not there yet – that’s another 3 percent back of GDP, which I think everyone will welcome.”

Exurbia building

Some people predicted that post-downturn new homes would be leaner than the boom-time McMansions, but that doesn’t seem to be holding true.

“There is more building in exurbia, where land is relatively cheap,” Green said. “Developers make bigger margins on bigger houses, so that’s probably what we’re going to see.”

Patrick Duffy, principal at home-building consultant Metro Intelligence Real Estate Advisors, said he predicts that next year will see builders break ground on 800,000 to 1 million new homes nationwide, following this year’s projected 600,000.

“House building has a big multiplier effect” on the economy, he said. “That’s why we’ve been dragging along. Now housing is starting to pick up; that’s a nice annual bump. It’s really hopeful, but there’s still some economic uncertainty out there. “

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

Article source: http://www.sfgate.com/realestate/article/Bay-Area-new-home-construction-rebounds-3986773.php

In San Francisco, High-Rises by the Bay

Sat, 20 Oct 2012 01:16:37 +0000

ROUGHLY two decades ago, during an earlier Internet start-up boom, many entrepreneurs and fast-typing coders and engineers set up shop in a still-gritty area of this city: South of Market Street.

The young tech crowd rented — and sometimes bought — in commercial buildings in this former warehouse area, converting them into “work-live” spaces where they operated their nascent companies and slept (once in awhile).

The boom-and-bust cycles in the tech sector move quickly, and the pace of constant reinvention and innovation is relentless.

The same is true of tastes in real estate. Today a new generation of tech dreamers is back in the South of Market area. But this time they are breathing life into a start-up wave not previously seen in San Francisco: high-rise condo living.

A clutch of new condo buildings and condo-hotels, some with stunning views of the San Francisco-Oakland Bay Bridge and Twin Peaks, have sprung up downtown in the past five years. For what would be considered modest prices in Manhattan, they are offering a full-service lifestyle that locals have traditionally steered away from, preferring the single-family homes traditionally available in the City by the Bay.

In the late 1990s, if someone wanted to live in a high-end condo, the options were almost nonexistent. “There wasn’t any signature building that people said, ‘I gotta have it,’ ” said Max Armour, a real estate agent with TRI Coldwell Banker.

Today there are at least two, both a few blocks south of Market Street. In terms of quality, amenities and V.I.P. neighbors, the 60-story Millennium Tower is San Francisco’s version of 15 Central Park West, or perhaps the yet-to-be-completed One57.

At Millennium, tech millionaires from Google, Twitter, Zynga and Salesforce mingle with celebrity residents like the 49ers legend Joe Montana and the chef Michael Mina, who runs RN74, the restaurant in the building. Thomas Perkins, the venture capitalist, lives in a 4,500-square-foot penthouse he bought in 2009 for $9.35 million.

Just up Mission Street from the Millennium, and nearer the financial district, is the St. Regis, a more low-key building, though also lauded for its refinement. Last December a 17,100-square-foot penthouse there sold to a Hong Kong family for $28 million, said Gregg Lynn, the broker at Sotheby’s International Realty who represented the sellers.

Other buildings south of Market have been selling swiftly, including Madrone, or have sold out, like Infinity. Developers have taken advantage of zoning regulations in the newer neighborhoods of South Beach, Mission Bay and Rincon Hill to erect taller towers than would be allowed in better-established residential pockets of the city. Millennium Tower, at 645 feet, is San Francisco’s tallest residential building.

“There is a whole new generation of wealth that has found its way into San Francisco,” said Richard G. Baumert, a partner with the New York-based Millennium Partners, which developed Millennium Tower. “Whether through stock options or whatever, there has been this influx of buying from the tech sector that has had a positive impact on the whole market.”

Some of the wealthiest tech buyers have ranged beyond South of Market and bought trophy properties throughout the city.

In February Jack Dorsey, a founder of Twitter and Square, bought a two-bedroom house perched on a cliff overlooking the Pacific for $9.99 million. A few months later Mark Pincus, a founder of Zynga, paid $16 million for a seven-bedroom 11,500-square-foot house in the Pacific Heights neighborhood. Jonathan Ive, the Apple executive responsible for the design of the iPhone and iPad, bought an English-style manor on “Billionaire’s Row” in Pacific Heights for $17 million.

The recent fall in stock prices for companies like Facebook and Zynga hasn’t done a whole lot to slow the buying, brokers say. “If that hadn’t happened our inventory probably would be at zero now,” Mr. Lynn said.

The inventory in the San Francisco area, which includes the East Bay, dropped by 42.2 percent over the past year, the biggest drop after Sacramento among the country’s 30 largest metro areas, according to Zillow, the real estate Web site.

As for the young tech professionals, the catalyst for their condo purchases — often in developments South of Market — is San Francisco’s exceedingly tight rental market. What the buildings lack in proximity to supermarkets and night life they make up for with an easier commute to tech companies in Silicon Valley, which can take up to 90 minutes during rush hour. A train station for lines running south to the valley is in Mission Bay, as are on-ramps for the expressway.

“It’s like living in TriBeCa and working in New Jersey,” said Alan Mark, president of the Mark Company, a real estate marketing and sales firm.

Follow Alexei Barrionuevo on Twitter: @alexeinyt.

Article source: http://www.nytimes.com/2012/10/21/realestate/in-san-francisco-glass-and-steel-condos-rising-by-the-bay.html?pagewanted=all

US Real Estate News: California

Fri, 12 Oct 2012 12:54:42 +0000

California leading US out of housing bust

KHB

California, the state that led the US into the housing “Boom and Bust” with some of the most reckless subprime mortgage lending, is now leading the way out.
A fall in new defaults in California helped push US foreclosure filings to the lowest level in almost 5 yrs, according to RealtyTrac Inc., a seller of home-loan data.

Across the country, 531,576 properties received notices of default, auction or repossession in Q-3, down 13% from a year earlier and the lowest since Y 2007, 1 in every 248 households got a filing, RealyTrac said today.

California, the home of subprime mortgage lending, saw a burst of foreclosures thanks to such industry innovations as “no-doc” loans that required no proof of income.

The state’s recovery is mirrored by US home values that rose 1.2% in July from a year earlier, according to the SP/Case Shiller index of property prices in 20 major cities. It was the 2nd straight 12-month advance and the biggest jump for the real estate gauge since August 2010.
.
The gains are moving in tandem with foreclosure declines as lenders control the flow of bank-owned homes that come to market, crimping inventory and pushing up prices, said Daren Blomquist of Irvine, California-based RealtyTrac.

Initial filings in September fell in 31 states, led by California which dropped to a 69-month low. Defaults dropped 45% from a year earlier, 34% in Arizona, 22% in Michigan and 21% in Georgia, RealtyTrac said.
Home sales in California’s biggest population centers rose in August to the highest level since Y 2006, according to real estate research firm DataQuick.

Median house and condominium prices in 6 Southern California counties rose 11% from a year earlier to $309,000, while values in 9 counties in the San Francisco Bay Area gained 11% to $410,000, the San Diego-based company said.

“Much of the pickup reflects a continuation of trends we have seen for months, like the unleashing of pent-up demand in move-up markets and high levels of cash and investor buying,” DataQuick President John Walsh said in a 13 September statement about the Southern California sales surge.

KB Home (NYSE:KBH) is seeing “dramatic improvement” in California, where strength in the coastal markets, including the Bay Area and Orange County, is spreading inland, Chairman and Chief Executive Officer Jeffrey Mezger said on a conference call with analysts last month. The West Coast is KB Home’s largest market.

“It’s simply a different market than it was 6 months ago in the Inland areas as inventories have declined significantly and prices are now rising,” Mr. Mezger said.

The Los Angeles-based homebuilder’s shares fell 1.4% today trimming its gain this year to 118%. That compares with the 75% advance for the 11-member Standard Poor’s 1500 Homebuilding index.

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Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster’s Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.

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Article source: http://www.livetradingnews.com/us-real-estate-news-california-89457.htm

US Real Estate News: California

Fri, 12 Oct 2012 12:54:41 +0000

California leading US out of housing bust

KHB

California, the home of subprime mortgage lending, saw a burst of foreclosures thanks to such industry innovations as “no-doc” loans that required no proof of income.

“It’s simply a different market than it was 6 months ago in the Inland areas as inventories have declined significantly and prices are now rising,” Mr. Mezger said.

The Los Angeles-based homebuilder’s shares fell 1.4% today trimming its gain this year to 118%. That compares with the 75% advance for the 11-member Standard Poor’s 1500 Homebuilding index.

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Knightsbridge Law is a boutique law firm in Thailand. The lawyers of our firm have provided legal advice on a variety of areas of the legal practice, including:

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Paul A. Ebeling, Jnr.

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Article source: http://www.livetradingnews.com/us-real-estate-news-california-89457.htm

The Coming Digital Real Estate Bust

Mon, 01 Aug 2011 16:38:20 +0000

^{A version of this article originally appeared on our US site, Fool.com.}

Real estate. They’re not making any more of it. Demand is only increasing. Those arguments helped fuel an epic real estate boom and bust over the past decade — except when it comes to Internet data centres, which have continued to boom on explosive growth in cloud computing. They haven’t been able make those fast enough. But that may be changing, too.

A warning shot over the bow

On its recent earnings call, Akamai (NASDAQ: AKAM.US) was asked about co-location price trends in Internet data centres. Here’s what the company had to say:

… it’s like a real estate market. There are some places where our prices are holding. There are other places where there are very aggressive price declines, and we try to take advantage of that gain in terms of how we deploy our network assets. … The other lever we have on co-location costs, of course, is to make our servers more efficient and get effectively more throughput for our footprint in the co-lo facility.

Based on Akamai’s comments, co-location supply is still constrained in some markets. In others, it’s starting to meet demand. That brings to mind a classic real estate maxim: location, location, location.

Economics 101 teaches us that supply and demand affect pricing. When supply is constrained, prices rise. Internet data centres have been benefiting from that situation. But high prices attract more supply, and eventually supply will catch up with demand. When that happens, prices — and profits — are destined to fall. And that’s starting to happen. What’s more, increasingly efficient IT equipment can offset much of the growing demand for more processing, bandwidth, and storage. What’s good for Akamai can be the opposite for co-location and hosting companies.

Growing up

One factor affecting demand is companies that are shifting from the consumer equivalent of renting to buying their own home. Much like a young adult moving out of Mom and Dad’s place for the first time, companies moving onto the cloud often rent a temporary meets-my-needs-for-now space with no intention of a long-term commitment. As the companies mature, gain a better understanding of their needs, and gather cloud assets, they often began building their own data centres.

Generally, it’s the largest, most attractive tenants that make that shift. Recent examples include Apple (NASDAQ: AAPL.US) and Facebook. They’re following the example of Google (NASDAQ: GOOG.US), which has built its own data centres for some time. As the horde of young companies pursuing cloud strategies gain scale and mature, many more are likely to follow in Google’s, Apple’s and Facebook’s footsteps.

Other tenants are likely to go bust. From a co-location landlord’s perspective, that’s the corporate equivalent of having a tenant lose his or her job and move back in with Mom and Dad. Too much of that, and rental rates take a hit.

Build it and they will come?

Many data-centre developers are doing the equivalent of building on speculation that there will be a tenant. To wit, the CEO of Equinix, a large data-centre operator, has acknowledged that overbuilding is a “main concern.”

Equinix invests heavily in the IT infrastructure used to serve its clients. Given the rapid depreciation on IT equipment, pricing pressure could make Equinix’s capital expenditures less profitable than anticipated. Pricing pressure is potentially a huge risk for the company.

Say when

When might co-location and hosting supply catch up with demand? Tier1 Research estimates that data-centre utilization in key markets is currently running between 81% (Northern Virginia) and 88% (Silicon Valley). That’s less than I’d expect in an exceptionally tight market.

And it’s a fast-moving market. In the San Francisco Bay area, which includes the Silicon Valley, rental rates for large tenants have reportedly declined 20% over the past 18 months thanks to new supply that’s coming online. A fresh surge of supply is expected in the area before year’s end. In the coming two quarters, data-centre landlord CoreSite Realty predicts that the new supply will outpace demand by as much as 50%.

A recipe for getting burned

With the sector viewed as a cloud play, valuations are sky-high. P/E ratios typically exceed EPS growth rates — that is, when EPS is positive. Over the last four quarters, CoreSite’s EPS was -$0.31 while Internap’s was -$0.10.

The trouble is, supply will catch up with demand sooner or later… and it looks like it might be sooner. When that happens, prices, profits, and P/E ratios are likely to plummet. A UBS analyst stated last December that data-centre developers were grappling with slowing growth, rising competition, and pricing pressure that made their valuations “unsustainably high.”

Foolish takeaway

When prices sneeze, revenues catch a cold and profits catch pneumonia. Akamai’s comment about pricing trends in co-location centres signals that it may be time for investors to break out the handkerchiefs.

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The Motley Fool owns shares in Google.

Article source: http://www.fool.co.uk/news/investing/2011/08/01/the-coming-digital-real-estate-bust.aspx

Predicting Home Prices Is Now Impossible

Thu, 16 Jun 2011 09:58:25 +0000

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When Robert Shiller, co-creator of the SP/Case-Shiller Home Price Indices , speaks, he tends to make headlines, and yesterday was no different.

Claiming that he wasn’t making any predictions, he predicted that home prices could fall another 25 percent.

“That wouldn’t surprise me at all,” he hedged. And there was the headline, tragic as it is.

I happened to be at the conference yesterday where he said that. In fact, I was a speaker/panelist at the Standard and Poors “Housing Summit 2011: Boom, Bust and Beyond.” And, no offense, but that wasn’t the headline. What really struck me was what he said right before that.

“Statisticians deal with things that repeat themselves. This housing boom and bust is so historic and unprecedented, you can’t forecast the future because you have no comparison.”

That was not only the headline, but the theme of the conference, as I sat on a panel with economists from SP, Experian and Columbia Business School. Chip Case was there as well, disagreeing with Shiller on several points.

Audience members, largely from the finance industry, kept asking the same question in different ways, ‘When is this all going to get better??’

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Article source: http://www.cnbc.com/id/43354956?__source=RSS*blog*&par=RSS

Predicting Home Prices is Now Impossible

Fri, 10 Jun 2011 23:31:04 +0000

Page 1 of 3 | Next Page
Show Entire Article

When Robert Shiller, co-creator of the SP/Case-Shiller Home Price Indices , speaks, he tends to make headlines, and yesterday was no different.

Claiming that he wasn’t making any predictions, he predicted that home prices could fall another 25 percent.

“That wouldn’t surprise me at all,” he hedged. And there was the headline, tragic as it is.

“Statisticians deal with things that repeat themselves. This housing boom and bust is so historic and unprecedented, you can’t forecast the future because you have no comparison.”

Audience members, largely from the finance industry, kept asking the same question in different ways, ‘When is this all going to get better??’

Page 1 of 3 | Next Page
Show Entire Article

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Article source: http://www.cnbc.com/id/43354956?__source=RSS*blog*&par=RSS