Home Prices On The Rise

What do you think? Is the housing market on the verge of recovery?

Don't look now, but the housing market might actually be ready to rebound after a seven-year slump.

An article in the Los Angeles Times reports that a leading index showed home prices in the United States' 20 largest cities rose 1.6 percent in July to their highest level in two years.

The rise was the fourth straight monthly increase and the third straight month prices rose in all 20 cities, according to the Case-Shiller Price Index.

That trend is also apparent in the East Bay.

Wayne Gregori of The Gregori Group real estate company said home prices in various parts of the East Bay have shown improvement recently.

"It's happening all across the board," Gregori said.

Gregori said prices in general did show a bump in July, then slid a little in August and are back on the upswing this month.

In San Leandro, for example, the median price for a single-family home is $385,000, up from $350,000 in July.

In Pleasanton, the median price has increased from $960,000 in July to $1.01 million this month.

In Oakland's Rockridge area, the median price has jumped from $705,000 in July to $745,000 today.

There are some exceptions. In Danville, the median price has slipped from $1.05 million to $1.03 million.

In Livermore, it has dropped from $685,000 to $676,000.

Gregori, however, said the seven-day trend is showing an uptick in East Bay home prices.

He said the biggest problem is a lack of homes for sale. Banks are limiting the number of houses they put back on the market.

"We have very little difficulty selling a house. It's a good time to sell," said Gregori. "There just isn't a lot of inventory."

Gregori said there are low interest rates, pent-up demand and still reasonable prices to fuel the market.

He noted he believes the housing market is heading for recovery, but it may take as long as 10 years for the backlog of foreclosures to be cleared.

The Real Anon September 26, 2012 at 11:09 PM
CA real estate is a suckers game and everyone who has bought a house in the last 13 years has lost money, with the possible exception being the exclusive high end communities. Point to any house in Livermore sold between say, late 1998 and now, and I will show you a bad investment. It either lost money or has gained no value. Now, if you're just looking for a place to live in, that doesn't matter much, as an investment, its lousy.
Tom September 26, 2012 at 11:50 PM
@reallanon, I think your window is too large. 13 years ago you could but in San Ramon or Danville and today still be in VERY good shape. Shorten the window and then yes, I agree.
David September 26, 2012 at 11:51 PM
Housing to live in is not an investment. It is a consumable capital good. Since you have to live somewhere, your choice is to rent or buy. At current prices, it makes economic sense for most to buy. Of course if you're planning to move in a couple years, or many other circumstances can make it irrational to buy. But overall, if you have the down payment saved and plan to stay in the house for 5 years or more, it makes more sense to buy than rent at the current time.
Tom September 26, 2012 at 11:55 PM
Agree with David, the investment part can be a bonus but at least in a way you are paying yourself by not paying rent. Even if you buy high as long as you did not extend beyond your means in terms of loan you should recover any paper loss in time.
Anand September 27, 2012 at 01:13 AM
I have been looking at the San Ramon (specifically 94582) market and I see a clear rebound - I would even say it is heating up more than it should (elements of a bubble) - multiple offers, cash only offers, selling much more than listed price, comparable homes selling much more then what they sold for as recently as in April 2012, etc. if one looks at the demographics of the people moving into 94582, it is crystal clear. Without meaning any disrespect of any sort, it is all because of Asian (Indians, Chinese, et al). And the bulk of them are moving from Fremont because of good public schools in San ramon (Note that Fremont has one overcrowded good elementary school district - Ardenhood; Middle and High public schools suck). Add to this the relatively new homes in San Ramon compared to your run down home in Fremont/Union City. A typical profile of this Asian is a couple in their 30's with one or two school going kids; they have held their jobs in a high tech company long enough to build confidence to buy their first or second home. Also understand the psychographics - Asians tend to do what their friends do. They are closely knit. if one does something the rest follow ("herd" mentality) PS: All my comments are applicable only to 94582. I am not a Real Estate agent. I am just a lay man observing the world around me.
Anand September 27, 2012 at 01:21 AM
'The Real Anon' - not sure what world you live in - perhaps tracy, stockton, mountain house, etc. My friend, I know tons of people who bought houses in 1999/2000 in the South Bay and Peninsula (Sunnyvale, Cupertino,Mountain View, Foster City - I am not even going to Palo Alto or los Altos or Saratoga), and these have appreciated by 40% at a minimum and as much as 65% in some cases. Don't make sweeping generalizations. Real Estate, like the weather is a micro market. What you say may apply to particular cities, particular areas in cities or even particular streets!
David September 27, 2012 at 02:57 AM
Moving to an area for schools is not a particularly "Asian" thing. Anyone who cares can do the math-- putting two kids through private school can cost $40k/yr in after tax income. That's about $5000/month in pre-tax housing payments, or an $800,000 mortgage. AND you get the money back essentially when you own the house.
Rob Raistlin September 27, 2012 at 03:32 AM
asians tend to do what friends do. what the hell does that mean? demographics? what the hell does race have to do with anything? what are you saying about non-asians? i'm quite sure if i said the same thing about whites it would be ok. right? how about you just come out and say what you mean. this is a good neighborhood because its mostly asian. or maybe its a good neighborhood because its just expensive enough to keep *those kind of people* out? you are an idiot!!
Fred Eiger September 27, 2012 at 03:46 AM
I believe the "shadow argument". There lots of homes in the high price Lafayette, Moraga, Orinda, Alamo area that the banks were sitting on hoping the market would improve. Now, those homes are coming on the market. Raising the "average" of Bay Area Homes. Travel out to Brentwood or Discovery Bay and homes are on the cheap out there.
Anand September 27, 2012 at 05:29 AM
Dear Rob Raistlin - Ask me properly and I will explain to you what i mean. I would like to participate in 'civil' discussions only.
Pleasanton Mom September 27, 2012 at 05:32 AM
@david: Your argument assumes someone could qualify for the additional $5K per month in mortgage payments, which a majority of people cannot. Local private schools don't run $20K per year per student. They run closer to $8K to $10K even on the high end. Don't forget that many people that invested in local markets, including is San Ramon and Pleasanton, not only did not get their money back by owning, they lost hundreds of thousands of dollars when their equity disappeared after putting 20% down on a home. Most buyers in Pleasanton and San Ramon are conventional, and not FHA, where less than 20% down would be required. Finally, a full one third of homes in Alameda County, including Pleasanton, and in Contra Costa County, including San Ramon, were ALL CASH ;last quarter so the mortgage argument is not relevant in 1/3 of all transactions. Not saying it's good or bad, but there has been a surge in the number of Asian and Indian families moving to the tri-valley and most will openly say it's due in large part to the excellent public schools. Look at demographic data over the past decade and you'll see what others have pointed out. I'm not necessarily opposed to this because I think there's been a greater focus on reading and science in the last decade as the community had become more diverse.
Pleasanton Mom September 27, 2012 at 05:41 AM
Most banks have taken the position that they'd rather work with homeowner's and allow them to short sale instead of forcing a foreclosure. A majority of properties on the market are short sales instead of seeing a majority homes being bank owned. I know one major bank/lender in the tri-valley who went from releasing an average of ten homes for sale that were foreclosures each month to now only releasing an average of two per month. And it's not because they are holding on to inventory, they are instead working with homeowner's to short sale by offering favorable terms to them and cash for keys when they depart. Banks come out ahead when they short sale a property instead of foreclosing and it allows the homeowner to recover faster and qualify for a new mortgage sooner (when they short sale instead of having a foreclosure).
Pleasanton Mom September 27, 2012 at 05:45 AM
You tend to see this alot when inventory is super low as it is now. With 33% of all sales in Alameda and Contra Costa now being all cash, you'll probably see more and more of this because 1/3 of all borrowers don't have to worry about a conservative appraisal by their lender that will limit the amount they can pay for the property unless they are willing to pay the difference in cash, which most people are not or cannot do. In all honesty, this is what is helping the housing market recover here. I'm told by a friend who is a local realtor that on lower priced homes, hers is often one of 8 to 10 offers on any given house. So bad news if you are a buyer, but good news if you are already a homeowner as this will likely help many that have value issues with their homes.
Mark D September 27, 2012 at 05:46 AM
@Pleasanton Mom: The Athenian School and The Quarry Lane School both run at $25-30k per year for a high school student.
David September 27, 2012 at 01:17 PM
Pleasonton mom. 1) of course they'd have to qualify. Of course, if they're looking to spend $40k/year on 2 kids, they would qualify. 2) Private, non-sectarian schools in the Bay Area *start* at $20k and go up from there. Only Catholic schools are as cheap as you describe. 3) I'm not making a mortgage or loan or whatever argument. I'm making the argument that if you have kids and you're looking at private school (assuming you can afford it) or public school, the math often times strongly favors buying a house in a good public school district.
Paisley September 27, 2012 at 06:58 PM
With a massive 13% collapse in durable goods - I would say no. With agents, it's never been a better time to buy. They will never tell you otherwise. Having said that, if you pay rent you are throwing money away also.
David September 27, 2012 at 07:31 PM
There's no correlation between home prices and durable goods. HSBC published a massive review of local housing markets across the country. The clearest correlations are: 1) in "land constrained" areas (here, NYC, Hawaii, Seattle, etc), home prices are correlated to rent. 2) in areas will little barriers to building (Texas, ex-urban areas outside of California, etc), home prices are correlated to income. Curiously, prices are *not* correlated (or as well correlated) to: 1) the larger economy as defined by business cycles 2) interest rates 3) inflation rates 4) outlook for appreciation except, of course, as those factors relate to rent and income trends, depending on the location.
Paisley September 27, 2012 at 07:42 PM
""There's no correlation between home prices and durable goods." Technically a true statement in a normal market. However, if people are pulling back on these items you can have no expectation of increased sales of anything else. Wages are stagnant. GDP was just revised down. There is nothing that indicates prices will rise and even Schiller of Case Schiller predicts a 20% price fall. Now the Tri-Valley area is in a somewhat unique situation with the mall. However, since 600 or so got laid off from comcast, this will put pressure on these good readings. I guess we will see what the employment numbers are tomorrow.
Paisley September 27, 2012 at 07:47 PM
Additionally: Pending home sales slip in August, mortgage rates hit new lows. http://www.usatoday.com/money/business/story/2012/09/27/pending-home-sales-slip-in-august-mortgage-rates-hit-new-lows/57847752/1
David September 27, 2012 at 07:50 PM
yes, a 30 year+ relationship/correlation can change and now home prices could correlate with durable goods. Durable goods numbers are heavily skewed to cars, trains, airplanes, and such. August is always a slow month. Wages don't matter in the Bay Area. Indeed, San Francisco is has the highest percentage of homes owned with no mortgage. What matters is rents. Rents are rising in the Bay Area. Even during the tech crunch, which was worse for wages and employment than the recent crisis, rents dropped 8%, and that was it. Sure, we'll see. I don't see rents collapsing here. And if rents don't collapse, neither will home prices, now that they're at the current levels where it makes more sense to buy than rent.
Paisley September 27, 2012 at 08:07 PM
"And if rents don't collapse, neither will home prices," That is preposterous! In 2008 when the meltdown happened, rents in this area fluctuated around 2% up and down for two years. Rents never collapsed. House prices did. I assumed they would follow home prices to some degree. They never did. Staying pretty much the same the whole time. At the third year they started clipping about a 5% rise. And have done so every year after.
Paisley September 27, 2012 at 08:13 PM
That should read 10%. I tend to average out the 4 year span. Two years were flat.
Rob Raistlin September 27, 2012 at 08:54 PM
when the housing market crashed, it was open season on foreclosures. people were getting evicted left and right. there were thousand who were homeless but still had a little bit of money. people who rented out to these homeless thought they hit the lottery. it just took some time for them to figure how high they could charge for rent and still get suckers to sign up. thats why the rent prices didnt go down, but did go way up.
David September 28, 2012 at 12:44 AM
No, rents didn't collapse. Home price increases, as we all know, far exceeded rent increases, hence the collapse of home prices. To make this even simpler: In the Bay Area home prices are determined by a *RATIO* of price/rent. Get that. A *RATIO* If the numerator (price) goes far higher (as it did from 2002-2007), and rents don't follow, prices will collapse until we hit a "normal" *RATIO*. We're at that "normal" ratio now, more or less. As rents continue to rise (or even stay flat), prices will follow. Got it?
Paisley September 28, 2012 at 01:06 AM
" As rents continue to rise (or even stay flat), prices will follow. Got it?" Oh, I've got it. I just think you are wrong. But I do always enjoy a healthy debate. It lets people make up their own minds. I agree with your principle in normal market. I'd actually love for you to be right. I just don't think you are currently with the current atmosphere. Companies everywhere are starting to warn. And we still have to get through the rest of earnings season. But I guess salaries don't matter. So maybe that doesn't matter either. All I know is when caterpillar warns - you better steady yourself.
David September 28, 2012 at 02:20 AM
Home prices can and do rise during recessions. Again, what matters is price/rent here, or if you're in Texas/Nebraska/Ohio etc, price/income. Or the past 30 years (and likely more) are no guide, and "this time it's different."* By all means make up your own mind. *: The most expensive words in the English language.
Mona Taplin November 12, 2012 at 07:22 AM
libertus, I have relatives who are finding the same situation that you are. They are looking for a home to buy, and many are gone before anyone gets a chance to look at them and were told the same thing as you were. The couple they were able to look at and were interested in turned out to be a bidding war,- prospective buyers offering more than the asking price because there are so few homes on the market,- and they couldn't match their bids.
Mona Taplin March 12, 2013 at 03:46 AM
One way of doing that is to put extra money on that mortgage and pay it off as fast as you can to bring the cost of interest down.
Mona Taplin March 12, 2013 at 03:51 AM
When the housing bubble burst and foreclosures were overwhelming, rentals were hard to come by so of course that bubble didn't burst.
Mona Taplin March 12, 2013 at 03:55 AM
Time was when people bought a home, instead of a house to live in for a few years then flip for a profit. That's what we did.


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