Housing Price Trends in the Bay Area, 2005 to 2009

Several years ago, I started looking at housing listings in the Bay Area to get an idea of whether I could afford to purchase a nice place to live.  Housing prices in the Bay Area are insanely high compared to most of the United States, and I figured I might have to watch prices for a while.  So I signed up for one of those online real estate search services where you input your search parameters (price, location, square footage, number of bedrooms and bathrooms, etc.) and every once in a while I would get an email saying that I had listings that matched my search parameters.

Also, this service sent me an email message once a month with a report showing a housing inventory snapshot, with average and median list price, average days on the market, and interest rates for 30-year fixed, 15-year fixed, and 5/1 adjustable rate mortgages.  I have saved some from 2005 and 2006, and most of them since January 2007 and saved the data into this spreadsheet(StarOffice / OpenOffice format) (Excel format here ) so I could graph the changes over time.

Here are some of the trends.

First, the Average List Price for houses under $1,000,000 in San Mateo County (a fairly expensive county in the Bay Area):


Look how much housing prices fell from their peak in May 2006 ($788,274) to the low in January of this year ($609,290).  That's a drop of about 23 percent.  Ouch.  Even worse, look at the next graph that shows how long these houses stayed on the market:


By the May 2006 peak, houses were already taking longer to sell than the months before (38 days) but at the lowest average prices in January 2009, average time on the market was a painful 91 days.  Yes folks, 3 full months on the market to sell a house for 23% less than the peak.

When I would look at my graphs over the past three years, I started to have hope that we could find an affordable house in San Mateo County that we would enjoy.  But the prices were still a bit steep, so I started to look at Alameda County, where the news is worse for sellers, better for buyers.  Check this out:


From a high in May 2006 of $645,401, average housing prices dropped by 37% to $415,561.  That's a spanking, no matter how you look at it.  Let's see how long these houses stayed on the market, on average:



Yeah, not so good.  Same trend as with San Mateo county, and again in January 2009, houses stayed on the market an average of 91 days.

The graphs show some good news, though: in both San Mateo and Alameda counties, average housing prices have risen a fair bit.  In Alameda County, prices have recovered about 13% of their former value (average prices are now at 76% of the May 2006 high vs. 63% of the high); looking at it with a glass-half-full point of view, prices have risen in Alameda County about 21% since January.  San Mateo prices have recovered about 10% of their former high value, rising about 13% since January of this year.

We bought in September 20092008, a few months before the bottom and just before lending really tightened up.  Our timing was fortunate, and we've been delighted in our new house ever since.

One last graph: interest rates for 30-year fixed mortgages over the same time period:

I don't really know what to make of this chart except to say that if you can manage to borrow money right now, it seems like a really good time to do it.

What's going on with housing prices where you live? Have you been tracking prices, too? If so, drop me a line and let me know what you've been seeing. Or, download the spreadsheet and play with the data yourself, make some graphs of your own, and put the links in a comment here.







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Comments

It’s always a dream for me to

It’s always a dream for me to purchase a property in some bay area like San Mateo County. I was searching for suitable and affordable properties for the past 2 years, but they were asking higher price than I expected. Since I didn’t have any idea about the property prices at the bay area to get a, After reading your study result, trends and observing the graphs I realized that the price they asked was not that high, but the market rates. Now I can but without any doubt as I am fully aware about the trends and the property prices in bay area after reading this post.

This is a very good time to

This is a very good time to buy a house, prices haven't been that low in years and you certainly would get a good deal. From the seller point of view though, this is the worst time to sell, so what can you do if you need to sell your house? I think the best thing to do would be to search a competent real estate agent who knows how to. The longer a house remain unsold the lower it's price can get so it's crucial to find a buyer fast.

The guide is very

The guide is very informative.And by the way, I have visited the site on foreclosure, given by Adam, the site is very useful.

The graph is very helpful to

The graph is very helpful to compare the increase and decrease in sales. Many real estates are doing a appreciative job. Foreclosure deals are found increasing in Canada.

Love your charts, man

Awesome stuff, George. I dig your charts and can't get enough of them. Too bad this service did not also provide the data for the number of units sold and the active inventory (unsold units) in those counties. I incessantly track the real estate prices/activity of many zip codes in the Santa Clara and Santa Cruz counties with the (seemingly foolish) hope of one day buying a shack with a bit of earth surrounding it. One thing is for certain is that there is much hot air remaining in the real estate bubble. How and when it escapes remains to be seen as the government's costly patchwork will at some point give way to natural forces. I just hope I will have the required fortitude to acquire a mortgage for an asset that just a few years ago soared to previously unseen heights. On a final note that I find maddening, when did we stop wanting to own a home and start wanting to buy a house? We used to be content with almost anything with four walls and a roof as one just needs to look at all of the Bay Area's ticky tacky subdivisions. Like I said earlier, all I would like is a shack with some dirt.

The problem with "average

The problem with "average sales price" data is that when sales of houses at one of the market dominate the stats, they drag the average in their direction. I think the foreclosures and short sales in the last year skewed the stats too dramatically downward. As a result, as the higher end of the market unfreezes, the upward numbers are going to look overly dramatic as well. Chris's stat of 11x price-to-median is really crazy. Of course, Vancouver is a great city, and most Canadians would call it their favorite. I'm sure it attracts the wealthy retirees and second-home-owning Canadians. But 11x? (3x or maybe 4x is more typical...the Bay Area got up to 6x.) Are the development rules really restrictive?

Average

Yeah Eric, good point about "average" being a potentially misleading stat. That may be why the spreadsheet also included median values; I just didn't bother making graphs for both median and mean. To verify what you're saying, you might be interested in downloading the spreadsheet and graphing the median values; it's all there.

Also, I don't know if you noticed from the spreadsheet, but the data comes in four categories per county:
  1. Single Family Under $1M
  2. Single Family Over $1M
  3. Condo / Townhome Under $600K
  4. Condo / Townhome over $600K
which tends to ameliorate the issue you're talking about.

In short, the data in the spreadsheet has much more than just average housing prices, so the problem you mention is minimized.

You said that you think foreclosures and short sales skewed the data. Do you have data to support that claim? Please post what you have so we can all see; that would be phenomenal.

Let's see if Chris has anything to say about why he thinks or is reading Vancouver housing prices are so high.

Why is Vancouver Real Estate So Expensive?

There's been a lot of speculation about why it's so expensive here. I've never been convinced by any one explanation. Some possibilities:

  1. Speculation. A report a year or two ago by BC Hydro, the main source of electricity here, suggested that there were thousands of units using only enough power to keep a fridge running. Seems to have been discounted since, but there has been a lot of flippping.
  2. Quality of Life. It is true that various polls and studies have consistently rated Vancouver one of the best places in the world to live. But they never seem to take into account the cost of real estate.
  3. Foreign Buyers. Strikes me as a bit xenophobic. I've seen some suggestions that our rate of immigration has been relatively low through all of this.
  4. Drugs. Some have said that drugs are a bigger industry in BC than forestry--and that's saying a lot. There may be thousands of undiscovered grow-ops, as well.
  5. Real Estate Religion. This is mostly my idea: it's basically psychology. I have never lived anywhere that has had as much talk and press about real estate. It's become an obsession.
  6. Low Interest Rates. This seems to have revived or extended the boom.
  7. Mom and Dad. Inherited money, property passed on.
  8. There are more, I am sure. Maybe it all adds up.

    For some more information, see the 5th Annual Demographia International Housing Affordability Survey. It suggests that Vancouver was at an 8.4 multiplier. I've heard higher values.

Vancouver Real Estate

This is great, George. I've been tracking Vancouver real estate obsessively for a few years. We really miscalculated when we moved back here in late 1999; it was in retrospect an amazing buying opportunity--I thought that with the downturn (dot com bubble etc.) we were going to go in the opposite direction.

But now, Vancouver is astronomically expensive. The multiplier of median income to median home price is somewhere around 11, which is several percentage points higher than New York City! Totally insane. I've been following several real estate blogs here, for example The Greatest Real Estate Anywhere!, by a local realtor, and Greater Fool, by a former Member of Parliament. The consensus among real estate "bears" was, until recently, that we'd be about two years behind the U.S. downturn. And in fact, last year prices started to fall. But this year, there seems to have been a turnaround, spurred mostly by extremely low interest rates--we're currently pre-approved at 3.7%, and could do better--and though all the data is still not in, it seems that there has been a rebound after a correction of about 10-12%, depending on area.

So now the question is whether we'll actually have a crash. Garth Turner (Greater Fool blog, above), is still adamant that we will. But right now we really can't afford anything decent: we're essentially priced out even with a household income that's about double the Vancouver median. People are spending north of 70% of their income on housing here, which we're just not willing to do: if (no, when) interest rates go up a couple of percentage points, there are going to be a lot of people hurting at mortgage renegotiation time.

For Canada, a good source of information that's roughly equivalent to the U.S. Case-Shiller index is Teranet.

Curious to know where you bought, and how much you paid, including price per square foot. (BTW, I suspect you meant to write that you bought in September 2008, not 2009.)

(I feel really guilty using so many parentheses, after you've told me I scolded you years ago for doing so (at least I don't have double sets (oh dang.).).)

Vancouver Real Estate

Wow, Chris: 70% of income spent on housing in Vancouver, BC? That's truly scary.

Thanks for the blog links, too; I'll have to check those out.

Do you know why Vancouver real estate prices have risen so drastically? I mean, I can understand why anybody would want to live in that gorgeous city, but I'm assuming the prices have risen faster in Vancouver than in other Canadian cities?

Thanks for the correction, by the way: yes, we bought in September 2008, not 2009. I'll send sales price info privately, but I can tell you that we purchased in the East Bay, in the city of Hayward, which got hit particularly hard. Also, in our situation, we happened to find a house where the seller was the person who had built the house (yes, our house is brand-new), and the builder ran into financial distress. So, we got the house in a short sale deal. We got what we believe to be a phenomenal value, but I tell you it also came with a fair amount of stress. We were hours away from pulling out of the deal. Our neighbors actually did pull out of the deal, but that's another story.

We're in the Hayward hills, near Cal State East Bay. It's a nice neighborhood. I believe we paid $241 per square foot. How does that sound? When we were looking, lots of places were selling for $300 / sq ft and above, if I recall correctly.

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