homesmillbrae.com » Booms

Builders Can’t Keep Pace With Demand As Bay Area Housing Booms Again

Tue, 11 Jun 2013 13:10:21 +0000

SUNNYVALE (KCBS)— New townhome projects continue at a rapid pace in Sunnyvale, where home construction can barely keep up with demand. The 14 currently under construction probably won’t be empty for long. Home values increased nearly 11-percent nationwide over the last year, but homes in the Bay Area are getting even greater gains.

The Standard Poor’s/Case-Shiller home price index released Tuesday showed that all 20 cities measured by the report posted year-over-year gains for the third straight month.

And prices rose in 15 cities in March from February. That’s up from only 11 in the previous month. The monthly figures aren’t seasonally adjusted and may reflect the beginning of the spring buying season.

Prices rose in Phoenix by 22.5 percent over the past 12 months, the biggest gain among cities. It was followed by the Bay Area (22.2 percent) and Las Vegas (20.6 percent).

Niccole Beckerman said her family has been priced out of the Silicon Valley.

“It’s really expensive. My parents were trying to buy a house and it’s really expensive just because the schools are really good,” Beckerman said.

The story is the same throughout much of the Bay Area. According to the San Francisco Association Of Realtors, the median Bay Area price for a single-family home has crossed above the $1 million mark for the first time since 2007.

The Inventory of available homes remains extremely low according to San Jose realtor David Martz. He said there are only about 1,000 homes for sale in a population of nearly two-million people in the greater San Jose area.

“Combined with the fact that we currently have interest rates at an all-time low, it’s possible to get an interest rate close to three percent, which is driving demand, so the buyers are out there in force,” said Martz.

Martz said four out of every five homes that come on the market here receive multiple offers, with prices, in some cases, going up hundreds of thousands of dollars over asking.

Despite the gains, a limited number of homeowners are putting their houses on the market. That’s helped lift home prices. And it’s made builders more willing to ramp up construction. Applications for building permits rose in April to the highest level in nearly five years.

The supply of available homes jumped in April, but was still 14 percent below its level a year earlier.

Stan Humphries, chief economist at Zillow, a real estate data provider, said that the increase in the Case-Shiller index has been skewed higher by cities such as Phoenix and San Francisco. Fewer homes are available in those areas because many homeowners still owe more on their mortgages than their homes are worth. That makes it difficult to sell.

Still, even excluding those markets, home prices are rising steadily nationwide, Humphries said. The increases are “certainly confirmation that the housing market is experiencing a brisk recovery,” he added.

The housing recovery is creating more construction jobs and bolstering the economy in other ways. Higher home prices make homeowners feel wealthier and encourages them to spend more.

Rising prices also encourage more would-be buyers to purchase homes, before prices rise further. They also enable more homeowners to sell homes, by reducing the number of people who owe more on their mortgages than the homes are worth.

Prices have been increasing steadily since last summer. Still, they are about 29 percent below the peak reached in July 2006.

Banks have raised their credit standards since the housing bubble burst and are demanding larger down payments. That’s made it particularly hard for potential first-time buyers to get a mortgage.

Article source: http://sanfrancisco.cbslocal.com/2013/05/28/builders-cant-keep-pace-with-demand-as-bay-area-housing-booms-again/

Hope in housing gap

Mon, 17 Oct 2011 00:16:59 +0000

Twenty-nine cents on the dollar.

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.”

Call The Bee’s Phillip Reese, (916) 321-1137.

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