• Justin Sullivan/Getty Images file photo
• Real estate in San Francisco and around the Bay Area is poised for an upswing, much like the trend before the recession hit.

In the half-decade before California was clobbered by its worst recession since the Great Depression, taxable property values — those of land, homes, apartments and commercial buildings — exploded.

Between 2003 and 2009, values increased by a whopping two-thirds, from $2.7 trillion to $4.5 trillion, much from new construction, and local governments enjoyed a nearly $20 billion increase in annual revenue from the boom.

We all know what happened next: The real estate market went into a tailspin. Local governments that had banked, literally, on ever-increasing revenues felt the pinch. It contributed heavily to two cities’ bankruptcies.

Actually, taxable values didn’t go into the tank.

They just stopped growing and shrank a little, falling to $4.3 trillion in 2011. And as the state’s economy began to improve, so did property values, rising slightly in 2012.

This year, they are poised to register a sharp gain, based on reports from local assessors that are being compiled by the state Board of Equalization.

Gov. Jerry Brown’s 2013-14 budget assumes a 2.8 percent increase, but it’s more likely to be in the 4 to 5 percent range.

Los Angeles County, which has a quarter of the state’s taxable property, is up 4.66 percent, and in some of the counties experiencing economic booms, such as those in the Bay Area, the gains are higher. They’re up 6 percent in San Mateo County, for example, and 5.17 percent in Alameda County.

Each percentage point of property value increase generates about a $500 million in additional revenue statewide, so overall, the increase could be well over $2 billion for local coffers and, indirectly, for the state treasury.

Under the state constitution, schools are guaranteed certain amounts of revenue, with the first increment coming from property taxes and the state providing the remainder. Thus any unanticipated increase in local property values and taxes decreases what the state must pay schools.

It’s not another property bubble, at least not yet, but with the housing construction industry beginning to pick up again, California could see strong growth in property taxes in the years ahead. The state is also seeing a surge in sales and income taxes, $2 billion over estimates already this year.

These revenue jumps, however, create another challenge for state and local politicians, who have overspent previous windfalls, leading to huge budget deficits and, as mentioned earlier, the bankruptcies of two cities.

Those who want more spending, whether it’s for government services or public employees’ salaries, will be pressing politicians hard.

Brown has said he wants to resist that pressure and redirect any windfalls into debt reduction and reserves.

But as the money piles up, the pressure will grow.

Dan Walters covers state politics for the Sacramento Bee.

Article source: http://www.sfexaminer.com/sanfrancisco/california-property-values-poised-to-soar/Content?oid=2535210

What a difference two months (and 1.11%) makes: Higher rates mean this Brisbane condo would now pencil out to $254 more a month (Kiesha Stephens/Redfin)

Mortgage interest rates are on a tear. Last week they registered their sharpest one-week spike in years, hitting 4.46% for a fixed-rate 30-year home loan, according to Freddie Mac. Less than two months earlier, the rate was 3.35%.

Today’s Chronicle looks at the impact on the housing market; click here for the story.

Is a percentage more really that big a deal? Well, just ask all the folks who refinanced to carve that 1% off their mortgage rate.

Those who have not yet refinanced, perhaps because they were either underwater or close to it (lacking that magic 20% equity) are getting worried they may be out of luck. It’s a balancing act to see what will happen faster: Higher home values to increase their equity or higher mortgage rates that will make a refi less attractive.

Some home buyers, as well as those refinancing, may see the rising rates as motivation to get in the game.

“The rate increase spurred a lot of people to pull the trigger,” said Jay Voorhees, owner/broker of JVM Lending in Walnut Creek. “We’ve had an uptick in volume recently with both purchases and refinances.”

In his blog, mortgage broker Julian Hebron of RPM Mortgage in San Francisco discusses the possibility that rates could hit 5% in the near future.

While many experts say the housing market as a whole is likely to shrug off the higher rates, for some individual buyers, especially those on a shoestring budget, the impact will be stronger.

Consider these two homes now on the market, a condo very close to the Bay Area median, and a more high end home. Assuming a standard 20% down payment, look at what the monthly mortgage payments would be under today’s rate, and what it would have been in early May with the 3.35% rate.

This Brisbane two-bedroom condo “steps from the great outdoors,” (at top) is listed at $499,000. At today’s rate of 4.6%, monthly mortgage payments would be $2,017.  Monthly payments at 3.35% would be $1,763, or $254 less.

This San Jose 5-bedroom with an “inviting floor plan” and “lush backyard” in the Cambrian neighborhood (below)  lists at $889,000. The monthly cost at 4.6%: $3,587.  At 3.35%: 3,135. The difference: $452 a month. (Caveat: In reality this jumbo mortgage might mean a higher rate, but the spread between two months ago and now would be consistent.)

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

This 5-bedroom in San Jose’s Cambrian neighborhood lists for $889,000. (Ashley Rabello/Redfin)

Article source: http://blog.sfgate.com/ontheblock/2013/06/30/mortgage-interest-rates-on-upswing-heres-the-pocketbook-impact/

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