Bay Area real estate a bargain? In some places, maybe

Despite a record streak of higher real estate prices, some
economists believe homes in certain Bay Area communities should be
considered a bargain. And that’s even with median price tags
easily topping a million bucks.

An analysis of historic and current income and housing trends by
real estate data firm CoreLogic found the pricey markets in San
Mateo, San Francisco and Marin counties are,
by some measures, under-valued.

The analysis, which considered disposable income, home values
and past real estate market experience, also found the San Jose and
Oakland metro areas priced about right by historic standards.

It’s good news for homeowners but sobering for prospective
home buyers looking to purchase in some of the country’s most
expensive counties, including San Mateo (median home sale price in
June, $1.36 million), San Francisco ($1.4 million), Marin ($1.2
million), Santa Clara ($1.13 million), Alameda ($865,000) and
Contra Costa ($660,000).

“It’s expensive here. I wouldn’t really say San Mateo
County is under-valued,” said Jeff LaMont, a Coldwell Banker
broker in San Mateo. Still, he added, Bay Area homes have soared in
value since 2012 and have proved a good, historical investment.

The steady climb of Bay Area sales prices hit a plateau this
year, with home prices slumping in core Silicon Valley cities in
Santa Clara County. Regional home sale prices fell 2.3 percent from
the previous June, according to CoreLogic, to a still-whopping
median of $855,000.

Despite one indicator suggesting part of the region is
undervalued, would-be buyers have been delaying or giving up on the
market. Home sales in June hit their lowest level for the month
since 2008, according to CoreLogic.

The San Jose metro area is one of the least affordable regions
to purchase a home, according to a recent report by Clever Real
Estate.  A buyer needs about 10 years worth of  the region’s
median annual income to afford the typical home, nearly five times
as much as it took in the 1960s.

San Francisco and the East Bay are slightly more affordable,
requiring about 9 times the median income to afford a home,
according to the analysis of census and real estate data. The
median family income in the Bay Area is around $100,000 per
household.

The typical U.S. homeowner spends about 3.5 times their annual
salary on a home.

The CoreLogic market analysis is based on historical, per capita
disposable income and real estate data. The report compares the
price of homes and incomes from 1976 to 2003 with current real
estate and income data. The analysis considers markets over-valued
if they are priced at least 10 percent above long-term levels that
are supported by disposable income and other factors. Markets are
considered under-valued if they are priced at least 10 percent
below historic, sustainable levels.

Although Bay Area home prices are among the highest in the
nation, the region’s median income — fueled by growth and
high-paying tech and professional jobs — has meant San Mateo
County households are spending a smaller percentage of their
disposable income on housing, according to the report.

A company spokeswoman said the analysis, called the market
condition indicators, is a useful tool, but not the whole picture
of a housing market. Other factors, including how expensive it is
to rent versus buying a home, tell a more complete story about an
individual market, she said in an email.

CoreLogic analyzed the country’s top 100 metro areas in June,
and rated 38 as over-valued, 24 as undervalued, and 38 at a normal
value.

Several popular escapes for Bay Area ex-pats — including Las
Vegas, Denver, and the Washington, D.C. metro — are seen as
overvalued. Los Angeles is considered a normal market, with prices
in line with historical spending.

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CoreLogic economists see Bay Area home values staying strong for
the next five years. They forecast the San Jose area to remain at
normal values, while expecting Oakland and the East Bay to be
over-valued. San Francisco and San Mateo counties should dip back
into the normal range, the analysts say. Marin is expected to stay
under-valued.

Penelope Huang, a broker with Golden Gate Sotheby’s in Menlo
Park, said it’s difficult to make a sweeping judgment about a
county as diverse as San Mateo, which includes blue-collar
communities in East Palo Alto and wealthy enclaves in
Hillsborough.

“I’m not buying it,” said Huang, a 30-year veteran of Bay
Area real estate. “It’s such a wide swath of different types of
housing, you can’t make that generalization.”

LaMont said relative bargains can be found in some neighborhoods
of Pacifica, Daly City and Redwood City. First-time buyers can find
condominiums under $1 million — which counts as a deal.
“Nothing is cheap here,” he said.

“Under-valued? No. Over-valued? No,” LaMont added. “I
think it’s spot on.”

Source: FS – All – Real Estate News 1
Bay Area real estate a bargain? In some places, maybe