photo © 2009 Revol Web | more info (via: Wylio)Real estate values are off 33% from their 2006 value peak, nationally speaking. According to the Case-Shiller home price index, we’ve just crested the hump of a small bounce, and are in the early stage of ‘double-dipping‘.
But national trends don’t tell you everything you need to know about your local Bay Area real estate market. Real estate value trends depend on the broader national picture, but also on a scale of region, city, even neighborhood. Local forces are at work in local markets.
As an example, a San Francisco client of mine who bought a condo for 1.2MM in November 2009 just had it appraised at 1.6MM in April 2011. 33% gain in 1.5 years – you’re not getting a read on that micro-market when you look at the Case-Shiller index, or even the San Francisco-specific data for Case-Shiller, which suggests a decline over the same period.
Watch Jobs Data To Predict Real Estate Values
With a title like “Foreclosures In Silicon Valley Remain Stubbornly Low“, you might think the San Jose Mercury News would follow with a story about the relatively strong employment market in the area. Unemployment is still high, like everywhere, but it’s lower than the general California rate. And, there’s that whole booming dotcom round two going on with Facebook growing like a weed, LinkedIn set for IPO tomorrow, and of course bellwethers like ‘the’ Google.
Unemployment correlates to real estate values. It’s pretty tough to pay the mortgage when you don’t have income. Tech firms are in growth mode, and with that sector abuzz, jobs are available. It stands to reason that fewer properties in the area would be falling into foreclosure, because the people who live there, more so than greater California, are still drawing income.
So why does the Mercury News draw a different interpretation? They suggest that the decline in foreclosures represents a concern because it must imply there is a building back-up of soon-to-be foreclosures. Maybe, but jeepers, talk about a glass half-empty attitude!
Maybe the news media has to paint the situation with a black brush to stir up drama. Maybe they just don’t get it. Or maybe they are on to something… But even if there is a mechanical problem with the foreclosures being purged from the marketplace, and you have improving employment trends, some of those would-be foreclosures are going to be cured, prevented, avoided, etc. So in the end, I don’t share the sentiment expressed in this article.
The robo-signing issue cited in this piece is a national phenomenon. To make local extrapolations like this is awkward – it would affect other areas in the same way, and I believe this robo-signing is a state-by-state issue if not just a national one.
This isn’t the first time the newspapers misrepresented the story of the mortgage marketplace. But I’d rather they applauded the local industry and somewhat stronger jobs marketplace.