Bay Area Real Estate Prices Predicted to Surge

Almost every corner of the Bay Area is poised for robust home-price appreciation this year in a surge that will outpace projected national growth, according to a forecast from real-estate information site Zillow.com.

Looking at 245 Bay Area ZIP codes, Zillow projects that 244 will see home values ratchet up by significant margins in 2013, with 27 ZIPs seeing double-digit appreciation. Only one of the ZIPs analyzed - 94515 in Calistoga - is forecast to see values recede, by a modest 1.4 percent.
"The forces of supply and demand seem to be exacerbated here right now," said Svenja Gudell, senior economist with Zillow in Seattle. "We're happily surprised by how well (the market) is doing and how much it's picking up steam."

Strikingly, some of the strongest percentage increases are likely to happen in both the cheapest and the priciest areas in the nine-county region, Zillow predicts. Low-end Solano County markets such as Vacaville, Fairfield, Dixon and Suisun City, where values plunged during the real-estate downturn and are still half off their peaks, should see values bump up by more than 14 percent - admittedly easier to do off a low base.

At the same time, Portola Valley, Atherton and Palo Alto - with million-dollar-plus median values that now exceed their boom-time heights - should see appreciation above 12 percent, Zillow said.
Popular San Francisco neighborhoods such as Noe Valley, the Castro, Twin Peaks, the Mission and Bernal Heights are poised for double-digit appreciation, along with Menlo Park, Larkspur, Palo Alto, Alameda and North Berkeley, Zillow predicts.

Regaining value

One major way that the low-cost and high-end markets diverge is in where values are now relative to their peak. Zillow shows 25 ZIP codes where values have regained all the value lost during the downturn and then some. All are in pricey Silicon Valley or San Francisco neighborhoods where the median price is around $1 million. Meanwhile, about 100 ZIP codes are still 30 percent or more below their peaks - all in hard-hit, lower-end communities in Solano, Alameda and Contra Costa counties.

"That is a really great number in the San Francisco metro," Gudell said. "It is rather special compared to the U.S. as a whole."

Zillow's projections take into account both long-term historical trends back to 1997, as well as current data on how markets have behaved in recent months. It also factors in information on employment, income and other economic factors to predict what housing values might do, she said.

Can't meet demand

Every market around the Bay Area - whether low-end, high-end or somewhere in the middle - now has one outstanding characteristic that is driving up prices: too few homes for sale to meet buyer appetite.

"There is no place where we see a steeper decline in listed homes (for sale) than the Bay Area," said Lanny Baker, CEO of ZipRealty in Emeryville, which has agents throughout the Bay Area and the country. "This time last year there were 13,000 homes listed here. Today we see about 5,000 homes - a 60 percent reduction."

Moreover, the mix of homes being sold has changed dramatically, something that particularly affects lower-end markets such as Solano County. Far fewer bargain-priced, bank-owned foreclosures are on the market.

In the low-cost markets, investors waving fistfuls of cash are snapping up properties, usually to keep as rentals, sometimes to flip. In the high-end markets, it's tech millionaires - armed with far bigger wads of cash - who are jostling to live in homes in Silicon Valley or San Francisco.

"As soon as something new hits the market, it's snapped up," said Sandy Rainsbarger, an agent with ZipRealty in Vacaville. That town's 95688 ZIP, where the median value is now $287,900, is projected by Zillow to see values rise 17.1 percent this year - the biggest price appreciation in the Bay Area. "There are multiple offers on every single property."

Buyers pushed aside

Meanwhile, "regular" buyers, especially first-time home buyers who are relying on Federal Housing Administration mortgages, are finding themselves shoved aside time after time in frenzied bidding wars.

"The Bay Area is one of the fastest-moving markets in the country," Baker said. "We see houses sell on average in 26 days here. One statistic we look at is what percentage of homes sell in just seven days; that's like a red alert. If it gets to 15 percent, we know we're in a zany market. In the Bay Area, it's at 13 percent. In Sacramento, 25 percent of homes sell in less than seven days.

"I think throughout this year, we'll see Bay Area markets continue to be very, very strong," Baker said. "On the lower end, the specter of foreclosures and 'Gosh, nobody's ever going to want to live this far out' has washed away, and there is more confidence in values recovering.
"On the high end, we've got Silicon Valley and the tech economy doing really well."

Faster Foreclosures Help Bump Home Prices

Many states with faster foreclosure processes are seeing sharper increases in home prices.
There are exceptions. And other factors, such as job growth, are likely stronger drivers of home price trends, economists say.
But home price data generally show stronger price increases in states where courts don’t have to approve foreclosures than in states where they do. Foreclosures are completed faster where court approval isn’t necessary.
Last year, home values tracked by Zillow, a Web-based real estate tracker, rose an average 5.4 percent in the 24 states where foreclosures don’t go through the courts, according to Zillow. Where they do, the average increase was 3.2 percent.

Asking prices follow trend

Asking prices, a leading indicator of price trends, show a similar pattern.
In January, asking prices in non-judicial states were up an average of 7.3 percent year-over-year versus 3.1 percent for judicial foreclosure states, show data from real estate website Trulia.
Nonjudicial foreclosure states have tended to clear out distressed home inventory quicker, which is helping prices, said John Burns, CEO of John Burns Real Estate Consulting. The 10 major metropolitan areas that have seen the most rapid appreciation in home prices in the past year are in non-judicial foreclosure states, the firm says.
Job growth and how far prices dropped during the housing bust are probably stronger drivers of home price trends, said Trulia economist Jed Kolko. But foreclosure speeds are a contributor, he and others say.

Court states vs. noncourt states

In Florida, New York and New Jersey — all judicial foreclosure states — the average loan in foreclosure was past due for more than 31 months before the process was completed, according to December data from Lender Processing Services.
In California, Arizona and Nevada — all nonjudicial foreclosure states — that average was fewer than 22 months, LPS data show.
Those three states were among the top seven in terms of home value gains last year, Zillow’s data show.
Homes lingering in foreclosure “creates real uncertainty,” which hurts prices, and inhibits investor buyers, says Stan Humphries, Zillow’s chief economist.

A few exceptions

Exceptions to the trends in price gains between judicial and non-judicial foreclosure states underscore that many factors influence home values, Kolko says.
For instance, Zillow’s data show strong price gains last year in Indiana, a judicial state. Rhode Island had the greatest price depreciation last year, the data show, and it’s a nonjudicial state.

Bay Area Real Estate: Strongest January Sales in 6 Years

Turnaround trends continued apace in the Bay Area housing market last month with the strongest January sales in six years and the tenth straight year-over-year increase in the median sale price, a real estate information service reported.

A total of 5,501 new and resale houses and condos were sold in the nine-county Bay Area last month. That was down 28.4 percent from 7,688 in December, and up 3.2 percent from 5,330 for January a year ago, according to San Diego-based DataQuick.

Sales always drop from December to January. While still below the long-term January average of 6,094, last month’s sales count was the strongest since 6,168 homes were sold in 2007. The strongest January in DataQuick’s records, which go back to 1988, was in 2005 when 8,298 homes sold. The slowest sales were in 2008, when 3,586 sold.

“When we look carefully at underlying trends, it’s obvious that the market is still far from normal. The mortgage market is still dysfunctional. Relative sales rates between categories are lopsided. That said, the market imbalances are moving toward normalcy, with baby steps,” said John Walsh, DataQuick president.

The median price paid for a home in the nine-county Bay Area was $415,000 in January. That was down 6.3 percent from $442,750 in December, and up 27.3 percent from $326,000 in January a year ago.

A drop in the median sale price from December to January is normal for the season. At least half of the year-over-year increase in the January median is the result of changes in market mix, with sales shifting away from low-cost distress homes toward more mid-market and move-up homes.

The median reached a high of $665,000 in June/July 2007 and then fell to a low of $290,000 in March 2009. On a year-over-year basis, the median dropped more than 30 percent each month from August 2008 through May 2009. At the median’s current rate of increase, it will recover about half of its peak-to-trough loss sometime this spring.

The number of homes sold for less than $500,000 last month fell 17.9 percent year-over-year, while the number sold for more than $500,000 increased 45.4 percent, DataQuick reported.
Last month distressed property sales – the combination of foreclosure resales and “short sales” – made up 37.7 percent of the resale market. That was up from 35.3 percent in December and down from 55.6 percent a year ago.

Foreclosure resales – homes that had been foreclosed on in the prior 12 months – accounted for 14.4 percent of resales in January, up from a revised 12.1 percent in December, and down from 27.2 percent a year ago. Foreclosure resales peaked at 52.0 percent in February 2009. The monthly average for foreclosure resales over the past 17 years is about 10 percent.

Short sales – transactions where the sale price fell short of what was owed on the property – made up an estimated 23.3 percent of Bay Area resales last month. That was up from an estimated 23.2 percent in December and down from 28.1 percent a year earlier.

Jumbo loans, mortgages above the old conforming limit of $417,000, accounted for 38.0 percent of last month’s purchase lending, down from a revised 40.3 percent in December, and up from 23.6 percent a year ago. Jumbo usage dropped to a low of 17.1 percent in January 2009. Before the credit crunch struck in August 2007, jumbos accounted for nearly 60 percent of the Bay Area purchase loan market.

Adjustable-rate mortgages (ARMs), an important indicator of mortgage availability, accounted for 11.4 percent of the Bay Area’s home purchase loans. That was up from 11.1 percent in December, and down from 11.7 percent in January last year. Since 2000, ARMs have accounted for 48.6 percent of all purchase loans. ARMs hit a low of 3.0 percent of loans in January 2009.

Government-insured FHA home purchase loans, a popular choice among first-time buyers, accounted for 15.5 percent of all Bay Area purchase mortgages in January, down from 18.9 percent in December and down from 23.6 percent a year earlier. In recent months the FHA level has the been the lowest since summer 2008, reflecting both tougher qualifying standards and the difficulties first-time buyers have competing with investors and other cash buyers.

The most active lenders to Bay Area home buyers last month were Wells Fargo with 13.4 percent of the market, Stearns Lending with 3.9 percent, and RPM Mortgage with 3.6 percent. Bank of America, which had 2.9 percent of the Bay Area market last month, recently announced that it was gearing up for a “new run” at the mortgage market. The bank had around 10 percent of the Bay Area market two years ago.

Last month absentee buyers – mostly investors – purchased 26.7 percent of all Bay Area homes, an all-time high (absentee statistics go back to January 2000). Last month’s absentee level was up from a revised 26.0 percent in December, and up from 25.2 percent a year ago. Absentee buyers paid a median $300,000 in January, up 33.3 percent from $225,000 a year earlier.
Buyers who appear to have paid all cash – meaning no sign of a corresponding purchase loan was found in the public record – accounted for 28.5 percent of sales in January. That was down from 29.8 percent in both December and January 2012. The monthly average going back to 1988 is 12.9 percent. Cash buyers paid a median $300,000 in January, up 33.3 percent from $225,000 a year earlier.

San Diego-based DataQuick monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts. Because of late data availability, sales were estimated in Alameda, San Mateo and San Francisco counties. Statistics for those three counties have been revised for 2011 and 2012.
The typical monthly mortgage payment that Bay Area buyers committed themselves to paying last month was $1,474. That was down from $1,561 in December, and up from $1,233 a year ago. Adjusted for inflation, last month’s payment was 47.4 percent below the typical payment in spring 1989, the peak of the prior real estate cycle. It was 61.1 percent below the current cycle’s peak in July 2007.

Indicators of market distress continue to decline. Foreclosure activity has been trending lower and remains well below peak levels reached several years ago. Financing with multiple mortgages is low, while down payment sizes are stable, DataQuick reported.

All Homes #Sold #Sold Pct. $Median Median Pct.
Jan-12 Jan-13 Chng Jan-12 Jan-13 Chng

Alameda 1,097 1,196 9.0% $295,000 $385,000 30.5%
Contra Costa 1,115 1,165 4.5% $235,000 $301,500 28.3%
Marin 191 181 -5.2% $523,000 $640,000 22.4%
Napa 93 108 16.1% $332,500 $380,000 14.3%
Santa Clara 1,183 1,115 -5.7% $418,000 $550,000 31.6%
San Francisco 308 394 27.9% $602,500 $699,000 16.0%
San Mateo 412 421 2.2% $465,000 $600,500 29.1%
Solano 508 523 3.0% $179,750 $219,000 21.8%
Sonoma 423 398 -5.9% $285,000 $340,000 19.3%
Bay Area 5,330 5,501 3.2% $326,000 $415,000 27.3%

California Real Estate: The Return Of The Equity Sale

What has been reported nationally about the resurgent single-family housing market and the reasons for its recent growth spurt undoubtedly applies to California. Low inventory, rising median sales prices and a swarm of cash investors are just a few of the explanations, but it’s important to remember that the local market is unique inits own right. From low-income homes to vacation homes, Long Beach in many ways reflects the range of economic and social dynamics at play in the real estate market today.

Housing, in general, is creeping back to pre-recession form. “The market is just booming right now,” said Geoff McIntosh, owner of Main Street Realtors in Long Beach. The median sales price in California increased for the 10th consecutive month in December, settling at about $367,000. An inventory of less than two months accounts for last year’s surge in prices, flipping what had for years been a buyers market into a seller’s advantage. McIntosh said that most listings receive multiple offers these days, adding that the median amount of days a home is on the market before selling has fallen to about 35. Moreover, when considering low interest rates, nearly half of all Californians can afford the median priced home in the state, McIntosh said.

Meanwhile, foreclosures continue to decline, helping to clear out the detritus of properties responsible for the collapse of the housing market. A few years ago, distressed properties – REOs, foreclosures, short sales – accounted for nearly two-thirds of home sales. Now, that figure is more like one-third, or less, McIntosh said. The return of equity sales bodes well for the market, as Americans have long made housing a prime asset of their wealth.

So what’s the bad news? Actually, the caveats are many.

For example, the 27 percent increase in median sales prices in the state last year is not likely to be repeated in 2013. Appraised values can be tenuous to begin with, and the fact that cash investors are flooding the market means asking prices are not only being met, but in many cases exceeded. This has the effect of pushing out first-time homebuyers and homeowners looking to move up, said Kirk Mulhearn, owner of Prudential California Realty – The Mulhearn Group in Bixby Knolls. “It’s very frustrating as a residential broker right now,” he added. The median sales price for Prudential properties in Bixby Knolls last year was $350,000, lower than it was statewide and elsewhere in Long Beach. Mulhearn described residents in Bixby Knolls as more blue-collar, which makes the influx of cash investors and equity purchases unsustainable.

The rise in median sales prices – both Mulhearn and McIntosh said they expect the market to see about a 10 percent increase in prices this year – has some agents readying for a sort of micro-bubble, particularly if inventory remains as tight as it is now. Mulhearn said he is seeing equity investors offer $20,000 and $30,000 above asking price.

Compounding this potential price inflation could be the long-rumored shadow inventory of distressed properties that banks are continuing to hold. But McIntosh doesn’t think it will come to fruition like some have forecasted, if only because the banks are watching the market closely and don’t want to risk sending sales prices south by unloading a bulk of risky properties on the market. “I’m here to tell you it’s not there,” he added.

Whether Washington’s appetite for new tax revenue has been satiated with the recent fiscal cliff tax deal remains to be seen. For example, talk of establishing new caps on the mortgage interest deduction, or eliminating it altogether, would disproportionately impact Golden State homeowners because median prices are higher here than in most other states, McIntosh said.

If there is one trend that highlights the fluctuation in the single-family market in recent years, perhaps it is this: The luxury market is on fire right now, but lower-end properties are short on supply. If inventory picks up and sales price increases remain slow and steady, the market might achieve a better balance by year’s end.

2012 Home Prices: Largest Gain Since 2006

Irvine, CA-based CoreLogic (NYSE: CLGX), a leading residential property information, analytics and services provider, on Tuesday, Feb. 5, 2013 released its December CoreLogic HPI® report which showed that home prices nationwide, including distressed sales, increased on a year-over-year basis by 8.3 percent in December 2012 compared to December 2011.

This change represents the biggest increase since May 2006 and the 10th consecutive monthly increase in home prices nationally. On a month-over-month basis, including distressed sales, home prices increased by 0.4 percent in December 2012 compared to November 2012*. The HPI analysis shows that all but four states are experiencing year-over-year price gains.

Excluding distressed sales, home prices increased on a year-over-year basis by 7.5 percent in December 2012 compared to December 2011. On a month-over-month basis, excluding distressed sales, home prices increased 0.9 percent in December 2012 compared to November 2012. Distressed sales include short sales and real estate owned (REO) transactions.

“December marked 10 consecutive months of year-over-year home price improvements, and the strongest growth since the height of the last housing boom more than six years ago,” said Mark Fleming, chief economist for CoreLogic. “We expect price growth to continue in January as our Pending HPI shows strong year-over-year appreciation.”

“We are heading into 2013 with home prices on the rebound,” said Anand Nallathambi, president and CEO of CoreLogic. “The upward trend in home prices in 2012 was broad based with 46 of 50 states registering gains for the year. All signals point to a continued improvement in the fundamentals underpinning the U.S. housing market recovery.”

Highlights as of December 2012:

> Including distressed sales, the five states with the highest home price appreciation were: Arizona (+20.2 percent), Nevada (+15.3 percent), Idaho (+14.6 percent), California (+12.6 percent) and Hawaii (+12.5 percent).
> Including distressed sales, this month only four states posted home price depreciation: Delaware (-3.4 percent), Illinois (-2.7 percent), New Jersey (-0.9 percent) and Pennsylvania (-0.5 percent).
> Excluding distressed sales, the five states with the highest home price appreciation were: Arizona (+16.4 percent), Nevada (+14.7 percent), California (+12.8 percent), Hawaii (+11.7 percent) and North Dakota (+10.8 percent).
> Excluding distressed sales, this month only three states posted home price depreciation: Delaware (-1.9 percent), Alabama (-1.0 percent) and New Jersey (-0.5 percent).
> Including distressed transactions, the peak-to-current change in the national HPI (from April 2006 to December 2012) was -26.9 percent. Excluding distressed transactions, the peak-to-current change in the HPI for the same period was -20.8 percent.
> The five states with the largest peak-to-current declines, including distressed transactions, were Nevada (-52.4 percent), Florida (-43.5 percent), Arizona (-39.8 percent), Michigan (-36.5 percent) and California (-35.4 percent).
Of the top 100 Core Based Statistical Areas (CBSAs) measured by population, only 16 are showing year-over-year declines in December, two fewer than in November.

California Foreclosures Fall To Lowest Levels Since 2006

If California is a setter of future real estate trends -- as it has been in the past -- a report that foreclosures in the Golden State fell to the lowest level since 2006 is good news for the entire nation. According to San Diego-based DataQuick, the number of California homeowners pushed into the foreclosure process fell last quarter to the lowest level in six years, the result of rising home values, an improving economy and a shift toward short sales.

During fourth-quarter 2012 lenders recorded a total of 38,212 Notices of Default (NoDs) on California houses and condos. That was down 22.1 percent from 49,026 during the prior three months, and down 37.9 percent from 61,517 in fourth-quarter 2011, according to DataQuick.
Last quarter's number was the lowest since 37,994 NoDs were recorded in fourth-quarter 2006. New foreclosure filings (NoDs) peaked in first-quarter 2009 at 135,431. DataQuick's NoD statistics go back to 1992.

"Home values increased through most of 2012, and the rate of increase picked up toward the end of the year. That means fewer and fewer homeowners are underwater, where they owe more than their homes are worth. That in turn means they can sell and pay off the mortgage, or perhaps refinance at today's low interest rates. This trend alone suggests we'll see a continued decline in foreclosure rates this year. Another factor is the foreclosure-avoidance goals of various settlements between lenders and the government," said John Walsh, DataQuick president.

The median price paid for a home last quarter was $300,000 in California, up 22.4 percent from a year ago and 32.2 percent off the median's $227,000 bottom in first-quarter 2009, DataQuick reported.

Foreclosure resales accounted for 16.6 percent of all California resale activity last quarter, down from 20.0 percent the prior quarter and 33.6 percent a year ago. It peaked at 57.8 percent in the first quarter of 2009. Foreclosure resales -- properties foreclosed on in the prior 12 months -- varied significantly by county last quarter, from 5.0 percent in San Francisco County to 31.4 percent in Sutter County.

Short sales -- transactions where the sale price fell short of what was owed on the property -- made up an estimated 26.0 percent of statewide resale activity last quarter. That was down from an estimated 26.4 percent the prior quarter and up from 25.7 percent of all resales a year earlier. The estimated number (rather than percentage) of short sales last quarter rose 4.2 percent from a year earlier.

NoD filings fell in all home price categories last quarter. But mortgage defaults remained far more concentrated in California's most affordable neighborhoods. Zip codes with fourth-quarter 2012 median sale prices below $200,000 collectively saw 5.5 NoDs filed for every 1,000 homes in those zip codes. The ratio was 3.5 NoDs filed per 1,000 homes for zip codes with $200,000 to $800,000 medians, while there were 1.3 NoDs filed per 1,000 homes for the group of zips with medians above $800,000.

Most of the loans going into default are still from the 2005-2007 period: The median origination quarter for defaulted loans is still third-quarter 2006. That has been the case for three years, indicating that weak underwriting standards peaked then.

The most active "beneficiaries" in the formal foreclosure process last quarter were Wells Fargo (6,611), JP Morgan Chase (4,275) and Bank of America (2,005).

The trustees who pursued the highest number of defaults last quarter were NDex West (mostly for Wells Fargo), Cal-Western Reconveyance (also Wells Fargo) and Quality Loan Service Corp (Bank of America).

On primary mortgages, California homeowners were a median eight months behind on their payments when the lender filed the Notice of Default. The borrowers owed a median $14,364 on a median $308,885 mortgage.
On home equity loans and lines of credit in default, borrowers owed a median $4,693 on a median $77,187 credit line. The amount of the credit line that was actually in use cannot be determined from public records.

San Diego-based DataQuick monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts. Notices of Default are recorded at county recorders offices and mark the first step of the formal foreclosure process.

Although 38,212 default notices were filed last quarter, they involved 37,343 homes because some borrowers were in default on multiple loans (e.g. a primary mortgage and a line of credit).
Of the state's larger counties, mortgages were least likely to go into default in San Mateo, Santa Clara and Marin counties. The probability was highest in Yuba, Madera and Tulare counties.

At formal foreclosure auctions held statewide last quarter, an estimated 42.0 percent of the foreclosed properties were bought by investors or others who don't appear to be lender or government entities. That was up from an estimated 39.2 percent the previous quarter and up from 31.2 percent a year earlier, DataQuick reported.

Sale of Existing Homes Falls 1% In December: Inventory Remains Low

Sales of existing homes slipped 1 percent in the month of December as strict mortgage lending standards and scant inventory restricted sales, according to data on the latest real estate market trends released today by the National Association of Realtors.

Total existing homes, including single-family homes, townhomes, condominiums and co-ops declined to a seasonally adjusted annual rate of 4.94 million, according to the association, but the pace 12.8 percent higher than that for December 2011.

Total existing home sales were 4.65 million in 2012, a year-over-year increase of 9.2 percent, according to the association, which tracks overall positive real estate market trends. Total sales volume for 2012 was the highest since 2007, when sales reached 5.03 million. The annual rate of increase is the strongest since 2004.

“Record low mortgage interest rates clearly are helping many home buyers, but tight inventory and restrictive mortgage underwriting standards are limiting sales,” Lawrence Yun, chief economist for the association, said in a statement. Yun predicts sidelined buyers will continue to reenter the housing market as their financial situations stabilize and their confidence grows. Among positive real estate market trends for 2013, Yun said, “both sales and prices will be again high in 2013.”

The inventory of unsold homes is at the lowest level since January 2001 and 21.6 percent lower than a year ago, the association reported, while the median existing home price rose 11.5 percent year-over-year for the 10^th consecutive month of annual gains.

In other real estate market trends, the National Association of Home Builders yesterday reported that sentiment among members of the home remodeling industry has moved into positive territory. The associations Remodeling Market Index rose to 5 points to 55 in the fourth quarter. A reading above 50 indicates more remodelers perceive an increase rather than a decrease in remodeling activity.
The real estate market trends are driven by increased consumer confidence, David Crowe, the association’s chief economist, said in a statement.