Talking Charts – Who’s Back on Track?
This post first appeared in the June edition of: Cirios Trends: Finding Real Estate Opportunities.
If there is a theme we at Cirios harp on more than any other, it’s that just because a particular city or neighborhood is considered “more desirable” than another, that does not mean by extension it’s also a better place to buy real estate. The following slides compare four different markets, and we challenge readers to put their preconceived notions aside when evaluating the home price trends in each area. Making sound real estate decisions doesn’t just depend on one’s ability to identify where he or she would like to live (that’s pretty easy), but rather where large groups of people are going to want to live. Demographics drive home price trends, and understanding demographics, population movements and macro culture shifts enables savvy investors to position themselves in front of, rather than behind, trend shifts and market movements.
Albany, what’s not to love? Great schools, good weather and even a decent selection of restaurants. BART makes for an easy commute into San Francisco and the city’s quiet suburban streets attract families young and old. But what about home prices? Since the market peaked in 2005, which notably was well before most high end markets peaked in 2007, prices have been in a steady slide. Even over the past 12 months, a time period when many Bay Area housing markets were actually improving, Albany remained sluggish. And while there are many explanations for the continued declines, if the graph above tells you anything, it’s that just because a town has great schools and a strong community, that doesn’t mean its housing market is immune from factors affecting what most would
consider a significantly less desirable area … like, Pittsburg.
———————————————————————————————————————-
Pittsburg (California, not Pennsylvania) lies about 45 minutes east of San Francisco and is a fairly typical working class community. North of Highway 4, neighborhoods can get fairly rough, but south of the Highway you can find quiet streets and generally affordable homes. Pittsburg schools are not going to win any awards and they are certainly not on par with nearby Brentwood, but then again, home prices are lower too. The price trend here is pretty clear … up up up DOWN DOWN DOWN flat flat up. The drop in late 2007/early 2008 was dramatic, to be sure, but since early last year prices appear to have stabilized. And while much of the rebound can be attributed to government intervention into the market to prevent foreclosed homes from being sold, affordability also played a key role in the recovery. Not only is buying at times cheaper than renting, but investors can also earn solid rental yields. These two factors lead to a stronger housing market, government meddling notwithstanding.
———————————————————————————————————————-
94112 is not the sexiest zip code in San Francisco. Encompassing such neighborhoods as the Excelsior and Ingleside, this suburban, gritty section of San Francisco is far from the city’s most coveted spots. Prices are down to be sure, but demographics and affordability bode well for these fringy areas. Single Family homes remain one of San Francisco real estate’s most prized possessions, and this zip code is chalked full of single family homes. As buyers are forced to move further and further from the city center to find affordable housing, this area should benefit from its relatively low prices. As for demographics, these ethnically mixed neighborhoods are home to populations where the middle class is growing, not shrinking. Think of it like comparing the developed world (Pacific Heights) to the developing world (Excelsior). Developed countries grow more slowly while developing countries expand at a sometimes blistering pace. True, less established areas are often more susceptible to economic headwinds, but remember the bit about wanting to be where the people are going, not where they already area.
———————————————————————————————————————-
Pleasant Hill is a quick 35 minute drive from San Francisco through the Caldecott Tunnel or one stop past Walnut Creek on BART. Not quite as nice as Walnut Creek but a touch better than Concord, Pleasant Hill is a, well, “pleasant”, option for homeowners looking for a desirable area, quiet streets and big lots. Home prices were slow to stabilize last year, likely since Pleasant Hill had a fair number of aspirational homebuyers who moved up too far, too quickly during the boom. But since last summer, prices have popped as investors and regular home buyers have found value. Similar to 94112 in San Francisco, Pleasant Hill could be classified as a place where people are going, not necessarily where they already are.
Tags: 94112 home price trends, 94506 home price trends, 94523 home price trends, 94565 home price trends, albany home prices, albany price per square foot, albany real estate market, pittsburg home price trends, pittsburg price per square foot, pleasant hill home price trends, pleasant hill price per square foot, san francisco home price trends, san francisco price per square foot