This post first appeared in the May edition of: Cirios Trends: In Search of Real Estate Opportunities.

As the consensus builds that the worst is over for the housing market, it’s a natural extension that proclamations such as, “it’s a great time to buy” will continue to grow louder. As readers of this newsletter know, we at Cirios rail against this notion, believing firmly that such a statement is a misnomer. Without knowing each buyer’s particular situation it’s impossible to make such a catchall generalization. In the following slides, we look at seemingly unrelated markets, connected only loosely by geographic proximity. In each pair, we look at a market that is “desirable” and one that is “not so desirable.” Clearly there is more to the home buying decision than dollars and cents, but from a pure investment standpoint, where would you buy? Or would you at all?

Piedmont is arguably the most desirable city in the East Bay. Minutes from San Francisco with large, secluded homes nestled in hillside communities, Piedmont is the dream locale for many families. As with most high end markets, Piedmont held up longer and has fallen slower than distressed areas like Oakland and Hayward. However, even as these distressed markets are picking back up, high end markets like Piedmont continue to languish. Prices are all the way back to … 2005 levels? Recall that the broader housing market was peaking in 2005, as 2006 was the year when cracks in subprime began to emerge. We would argue that Piedmont, despite all the fundamental factors driving demand, is an area where buyers should tread lightly.

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Roll down the hill into Oakland, south of Lake Merritt and through Chinatown and you run into the urban delight that is the 94606 zip code. The chart above shows prices for single family homes, which have tumbled more than 50% from their 2005-6 peak. Stabilization was found early last year as prices dropped back to levels not seen since 2001. And while 2001 represented the back end of the dot com bubble (witness the spike in prices during 2000), eyeballing a straight line from the trends of 1997-1999, prices almost seem back to where they should be. True, examining these two neighborhoods is the definition of comparing apples to oranges, but we’re not arguing you should raise your kids in south Oakland. Cash flush investors are extremely active in this part of Oakland, as the city slowly, begrudgingly tries to clean itself up. But change is afoot, and change breeds demographic shifts, which move housing prices over the long run.

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A couple hours south of Piedmont and Oakland lies Santa Cruz, part surf haven, part, well, all surf haven. On occasion the fog rolls in and temperatures drop, but as anyone who has spent time in Santa Cruz will tell you (or won’t tell you, to keep the hoards away), the weather is actually quite good. Removed from the Bay Area by the treacherous Highway 17 and thus less appealing to Silicon Valley weekend warriors, Santa Cruz saw prices rise during the boom, but the trend was less than spectacular and driven more by buyers looking for remaining pockets of affordability than by aspirational social climbers trying to get into the next, biggest McMansion. On the way down, Santa Cruz has seen a smooth slide in prices, but one which is yet to display much in the way of stabilization. The waves are still there, as are the quiet cliffs, but we remain cautious, albeit envious of the locale.

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Salinas, formerly known for lettuce, became one of the poster children for the housing market’s boom and bust. The chart above tells the story. But, like Oakland in a previous slide, prices have retreated all the way back to levels not seen for 10 years. The ramp up during the height of the boom was only outdone in severity by the collapse when the bubble burst. But here in North Salinas, perfectly nice and relatively new homes can be had for at or below the cost of renting. This just makes economic sense, despite the fact that there isn’t a point break in sight.