This post first appeared in the July edition of Cirios Trends: Getting to the Bottom of the Housing Market

This month’s spotlight shines on an oft-forgotten portion of the East Bay, San Leandro.

While San Leandro lacks the famous name of an Oakland and the semi-swankitude of a Castro Valley, its central location and amazing affordability make it worth a second look for anyone looking to buy a home for less than $600,000.

Currently listed homes in the zip code range from a small 2 bedroom fixer upper listed at $200,000 to a $1.3 million dollar home with a pool and views of San Francisco. The large majority of homes (77%) are priced $600,000, large lots are common and Chabot Regional Park is a stone’s throw away. Downtown San Leandro is a vibrant commercial area with many common outdoor events.

As can be seen in the graph below, home prices in 94577 have come down significantly since their peak in 2005. Another noteworthy aspect of the sales graph is the enormous spike in supply that occurred in late 2007. As we have explained in the past, these supply spikes always correlate with precipitous declines in prices.

On the flip side, as supply pressures ease, values tend to stabilize. Clearly, the supply trend for this area is returning to more traditional levels. Simultaneously, there seems to be some support at current price levels, meaning that the decline in prices could be leveling out.

The public school system in San Leandro isn’t anything to write home about, but the attractive affordability levels mean private schools could be an option.

And in terms of commuting to San Francisco, the 24 minute ride from the San Leandro BART is identical to the commute from the Downtown Berkeley station.

By AUSTIN NELSON

The National Association of Realtors released figures on existing home sales for December, showing an “unexpected” rise in sales volume for the month. Across the US, data showed a 6.5% increase in volume month over month. The surprise increase was bittersweet however, as median home price declined almost 3% month over month and were down 15.3% for all of 2008.

The Western region led both these trends last month, showing a 13.6% increase in sales volume and an 11.6% decrease in median sale price. Furthermore, in 2008 the West saw a 31.6% increase in sales volume and a whopping 31.5% decrease in median sale price. (Click here for more on median sales price figures compared to average prices.)

While this month’s data could simply be a small bump on the otherwise sharply downward roller coaster ride of residential real estate, in the West region at least it is indicative of a trend. As home prices “bottom” out or at least hit lows not seen in a decade, homes start to actually become affordable for the people who live in the area. Combine that with more favorable lending conditions and voila!, you’ve got an increase in sales volume.

This trend is even more accentuated the more you drill down to individual neighborhoods. We have seen neighborhoods in the San Francisco Bay Area that are seeing two fold increases in sales volume as prices reach affordable levels. Indeed, the further the drop in price, the more likely an increase in sales volume will be seen.

The important thing to keep in mind here is that prices are still continuing to drop even amidst the increasing volume. So even though your neighbor successfully sold his house in time to avoid foreclosure, you will likely end up selling yours for less. This is a result of the continued high levels of short sales and foreclosures that are flooding the market. Even with increases in buying activity and eligible buyers in the market, there are still enough properties for sale that the buyer can afford to be a stickler about price.

With that in mind, perhaps the most important number to watch is the housing inventory, which is simply a value calculated by taking the number of homes currently on the market and dividing it by the rate at which homes are being sold (seasonally adjusted, of course). This gives you the approximate time it would take to sell every home currently on the market (assuming the rate stayed the same and no new homes came on the market). That number was on the rise through the middle of last year but seems to have stabilized.

If this month’s data is an indicator of a future downward trend in inventory it could be the first true sign of improvement on the horizon. The question is, how far away is that horizon? And, given the current state of the US economy and banking system, will that improvement have staying power?

In the short run, savvy investors can take advantage of the increased liquidity in the housing markets by buying at a discounted rate and selling right back into the increasing demand. This will require careful analysis of the sales trends for a particular area as well as precise valuation of any property under consideration.