Bay Area Real Estate Market By County: Bubbles, Crashes and Recoveries

September 18, 2013


The Bay Area’s various counties and market segments are not immune to unique housing bubbles and crashes. And while current recoveries are demonstrating similar trend lines, the scale of recovery and state of home values vary. Here’s a look at what’s contributing to these variations on an otherwise relatively common theme:

Bay Area Home Values since 2000 by Price Tier: Way Up, Way Down, Sharply Up Again
The Case-Shiller Index for the 5-county SF Metro Area* divides the market into three equal sets of unit sales by price-range tiers: low, middle and high.

Case-Shiller_3-Tiers_TrendsThe market bubble, crash, recover cycle is easy to identify across all three tiers, as is the subprime lending fiasco that supercharged the lowest price tier of Bay Area homes to mind-boggling 176% appreciation in less than 7 years. The foreclosure and distressed-property crisis then hit this segment the hardest, inflicting a crushing 62% drop in values. Neighborhoods, communities, and counties with mostly higher-priced homes were much less impacted by the subprime effect: they appreciated less in the bubble, depreciated less in the crash, began their recoveries earlier, and are now much closer to previous peak values, if not already beyond.

There are other economic and social factors at play in the individual markets, but overall the price-tier analysis is surprisingly relevant to what has happened across the board. Because subprime lending inflated such large bubbles in some counties, it could prove unrealistic to expect those low-price-tier homes to return to previous peak values any time soon – even with the dramatic recoveries currently underway.

*The Case-Shiller SF Metro Area does not include Napa and Sonoma, but their market trends generally played out in the same way. Also as pertaining to percentages of appreciation and depreciation: if a home has a 100% increase in values, then a 50% decrease, the value is back to where it began.

Median-Sales-Price-by-CountyMedian Home Sales Prices by County
Median prices often fluctuate for other reasons than changes in market values, such as variations in the distressed and luxury home segments, inventory available to purchase and available financing – which is why Case-Shiller Index trend lines do not correlate exactly with changes in median price.

County median sales prices are generalities that mask enormous disparities in the prices of underlying sales, but they do convey an idea of comparative home costs in different areas.

County Home Sales by Price Range
Comparing the San Francisco residential market with other Bay Area counties in regards to quantity of sales in defined price ranges, the San Francisco, San Mateo and Marin markets are similar in that their home prices trend to the higher end of the range. In fact, these counties contain some of the most expensive real estate markets in the country. Though all the counties shown have home sales across the spectrum of prices, including very high-end homes, Napa, Sonoma, Alameda and Contra Costa have the greater percentage of their sales in lower price segments.

Property types vary by county. San Francisco doesn’t have many ranch, mobile home, and houseboat sales for example, while other counties sell few if any tenancy-in-common units (TICs). San Francisco also represents a much larger condo market.

Unit Sales by County (90 days)
During the summer months this year, the Alameda and Contra Costa home markets dwarf the other counties in quantity of sales. San Mateo, San Francisco and Sonoma constitute the second tier, with Marin and Napa being distinctly smaller markets in unit sales.