This post first Appeared in the August edition of Cirios Trends: Getting to the Bottom of the Housing Market

This month’s spotlight shines on a centrally located, reasonably priced, and easily overlooked section of the Peninsula, San Bruno.

While San Bruno’s proximity to San Francisco International Airport and temperamental weather are often viewed as major negatives, its central location and relative affordability compared to many nearby higher priced markets make it worth a second look for anyone looking to buy a home on the Peninsula for less than $800,000.

Currently listed homes in the 94066 zip code range from a small 2 bedroom near the train tracks listed at $325,000 to a million dollar plus 6-bedroom mansion. The majority of homes — 78% of all active listings — are priced below $800,000. Bay views are common and easy access to public transportation to San Francisco make this area particularly desirable for those looking to live on the peninsula for well under a million dollars. Downtown San Bruno is a quaint, main street style area with several small shops and restaurants.

As can be seen in the graph below, home prices in 94066 have come down significantly since their peak in 2007. 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 correlate strongly with precipitous declines in prices.

On the flip side, as supply pressures ease, values tend to stabilize. Inventory in this area has come down of late, although it seems to have stabilized at a level slightly higher than the historic norm. Prices are likely to come down further in the near future, so a six-month wait may be in order. Savvy prospective homebuyers should probably hold out until inventory approaches lower levels to step into the market.

The public school system in San Bruno is well above average, and several local schools are standouts. Careful selection of location to assure inclusion in the right district could garner an excellent public education for your children.

In terms of commuting to San Francisco, there are several, easy options for commuting, either by car or by train.

Belmont is about as convenient a city as one can find if you want to split the difference between the South Bay job centers of Mountain View and Sunnyvale, without being too far from San Francisco for the occasional jaunt to the city. Housing prices, to be sure reflect this fact. (Click images for larger photos)

And up in the hills, winding streets and Bay Views can make desirable homes downright expensive. That is, of course, until the housing market collapsed.

Belmont is by no means the cheapest place to live on the
Peninsula, but it is not Burlingame or Palo Alto either. With
good schools, convenient amenities and the aforementioned good location, the area can be a great place to lead the quiet, suburban lifestyle the Bay Area has become known for.

This home is a short sale, meaning the bank holding the current owner’s mortgage is letting them sell the house for less than the amount of the loan. The home appears to be in great condition with a reasonable yard for the hills, but is located on a somewhat busy street. It’s been on the market
since April without a price drop (despite the agent’s
claims to the contrary), so we would be surprised
if a price drop is forthcoming.

The home has some positive features, to be sure, but the
busy street may turn off some buyers: so is it a:
DEAL or NO DEAL?

Address: 1715 Notre Dame Ave., Belmont, CA
(MLS Listing)
Status: ACTIVE
Bedrooms: 2; Bathrooms: 2
Living Space: 1,670 sq ft
Lot Size: 7,250 sq ft
List Date: 4/4/2009
Original List Price: $695,000
Current List Price: $695,000
MLS no.: 80916993

Real Estate Agent Comment: Spectacular Bayviews! Short sale – dramatic price reduction. Amazing kitchen w/granite counters.Family Room. Large Florida Room, Large usable rear yard. A must see – views forever!

DEAL or NO DEAL?
Comment below and tell us what you think!

San Mateo is about as convenient as it gets for Peninsula job centers, 15 minutes north to San Francisco and another 20 minutes south to Mountan View. This home is a perfect example of what happens when you list a property too high.
(click images to the right to enlarge)

First listed 10/31/2008 for $839,000, the asking price has chased the market all the way down to $699,000, where its been since early March. The ultimate question at this point is how much room the seller has to lower the asking price without getting into a short sale situation — the home was bought in February 2005 for $761,900.

DEAL or NO DEAL?

Address: 2605 Garfield Ct. San Mateo, CA 94402 (MLS Listing)
Status: ACTIVE
Bedrooms: 3; Bathrooms: 2
Living Space: 1,110 sq ft
Lot Size: 7,400 sq ft
List Date: 10/31/2008
Original List Price: $839,000
Current List Price: $699,000
MLS number:80842997

Real Estate Agent Comment: WELL SITUATED IN QUIET CUL-DE-SAC. 3 BEDROOM 2 BATH. FRESHLY PAINTED. NEW CARPETS. HARDWOOD FLOORS, FIREPLACE, EAT-IN KITCHEN. FABULOUS YARD. CLOSE TO SCHOOL, SHOPPING AND TRANSPORTATION. ONE LEVEL CUTIE. WASHER/DRYER ARE INCLUDED BUT NOT WARRENTED.

DEAL or NO DEAL?
Comment below and tell us what you think!

By ANDREW JEFFERY

This post first appeared on Minyanville.

Residential real estate is about to get very weird.

In the coming months, housing-market data is likely to show price stabilization in many of the country’s hardest hit areas. Pundits, government officials and real-estate professionals will loudly proclaim the worst of our real estate woes are behind us. Back in reality, however, this data will simply reinforce the axiom that there are lies, damn lies, and statistics.

The lion share of home price declines have, thus far, been focused in low-end markets -areas where property values became the most detached from housing-market fundamentals. Even though the high end is now declining, sales activity is still heavily concentrated in the country’s most distressed markets.

Taking a look at the data below compiled by my firm, Cirios Real Estate — which depict sales transactions for the part of the San Francisco Bay Area between San Francisco and San Jose known as the Peninsula — one can see how rising home prices from 2003 to 2007 shifted sales transactions towards more expensive properties. This makes intuitive sense, and should naturally push up both average and median home prices.

Click to enlarge

Since the market peaked, however, notice how the percentage of sales of homes under $400,000 shot up to more than 50% of sales in the first quarter of this year, from as low as 9% in 2007.

Conversely, sales over $1,000,000 that accounted for almost a quarter of transactions in 2007 now make up less than 9% of total sales so far in 2009.

This heavy concentration of sales in low-end markets is skewing home price data to the downside, exaggerating the impact of depressed markets on broad measures of prices.

As the foreclosure epidemic spreads outwards to more well-to-do areas, and job losses force previously stable homeowners to sell into a weak high-end market, more expensive homes will begin to make up a greater percentage of total transactions. This dynamic — not an overall rise in property values — is likely to push up average and median home price measures.

In other words, high-end markets will be falling as price discovery rears its ugly head, while low-end markets are flat at best, as price declines reach exhaustion levels and investors step in to buy. High levels of supply and looming shadow inventory of foreclosures will prevent meaningful appreciation in these distressed areas for the foreseeable future.

Meanwhile, data will show a housing market on the rebound.

No doubt, banks like Wells Fargo (WFC), Citigroup (C) and Bank of America (BAC) will cheer the end of the real-estate slump. Real estate professionals will pound the table that now’s the time to buy (just like they said back in 2007). Government officials will proudly assert their mortgage-relief efforts were a success.

Nothing, however, could be further from the truth.

The month of March brought a degree of chaos to the financial markets, and indeed to the country as a whole, not seen in, well, months.

The stock market culminated another wave of selling with multi-decade lows, only to rebound in the strongest counter-trend rally since the bear market began last year. The AIG bonus scandal whipped the media, the public and Congress into a frenzy. General Motors lost its CEO at the hand of the President and we learned about Washington’s (latest) last ditch effort to save the financial system.

Meanwhile, the housing market gave investors and homeowners alike a ray of hope: A pop in February’s new and existing home sales. Optimistic pundits declared the housing market’s bottom just months away, while prices stubbornly maintained their distinctly southward trend.

Most economists use these broad trends to “predict” how far home prices will fall and when we’ll ultimately bottom. Data on the national level, however, just isn’t useful to most people. After all, whether you’re buying your first home or plunking down your savings on an investment property, the most important house is the one you’re buying, not some statistical collection of millions of unique properties.

This month’s Chart of the Month illustrates how thoughtful analysis can be used to identify trends the widely quoted data overlook. Prices for smaller homes on the Peninsula peaked first in late 2006 and have slid steadily ever since. Bigger houses, on the other hand, held up better but have fallen almost as far in half the time. This mirrors the trend that Prime mortgages are now souring faster than subprime.

In the coming months, we’ll be watching closely to see if any of these groupings bucks the prevailing trend — will the first group to crack be the first to bottom? Or will the high end’s fall be short and sweet?

Unlike Santa Ana, where last week we learned there is strong demand for attractively priced properties, Sunnyvale has seen sales volume decrease over the past 3 months. This is concerning, particularly as other, distressed areas experience pops in sales activity and the broader economy continues to weaken. Sunnyvale is in the heart of Silicon Valley which has been relatively immune to the downturn in the economy…so far. However, we see properties like this one experiencing significant value drops over the past few months.

Since the property did not sell in the last week, we are providing you with our value. Thanks to Lisa Friedrichs who is the only one who guessed (and got darn close by the way!!). The envelope please …

Address: 809 Muender Ave. Sunnyvale, CA 94086
List Date: 11/13/09
List Price: $509,900
Cirios Value: $390,000
List Price v. Cirios Value: 23.5% over-listed

The housing crisis has affected the entire country but certain markets have fallen faster earlier while others are only now seeing declines. The Sunnyvale market (and the Silicon Valley in general) has only experienced slight declines compared to some of the more distressed markets, which has a lot to do with the strong job market through the 3Q of 2008. As the job market has slowed down, the values of homes have begun to feel the pressure. The first homes to see declines are the ones that have a high level of negative obsolescence.

We believe a former “Old Fashioned Doll House” that is bank owned and backs up to a auto body shop is a prime example of a property that is going to see a significant decrease in value. This home sold for $605,000 in 2005 and to think it has only decreased in value by $95,100 or 16% since that time seems optimistic to us.

Beyond this property, we feel very strongly that properties like this one in formerly strong markets have severe downside risks associated with them. If you only take one thing away from this HOTW, it should be that “entry” level homes on the San Francisco Peninsula should not be viewed as properties that have very little risk.

As always, if you are looking for a property on the Peninsula and want to know what is the real value of the property, please do not hesitate to contact us.

Cirios Real Estate: Educating home buyers since 2008.