From the San Jose Mercury News…
After years of decline, housing prices are expected to stabilize or even increase in some parts of the Bay Area this year, according to a new forecast.
Stabilizing prices are a sign of a healthier market, even though homebuyers still face challenges — tight credit, not many homes for sale and competition from investors paying cash.
In a report to be released Monday, Clear Capital, a real estate valuations company in Truckee, predicts that prices will remain almost flat this year — compared with a 4.7 percent drop in 2011 — in the San Francisco-Oakland-Fremont metropolitan area, including Contra Costa County. Silicon Valley should see a 1.6 percent increase in home prices, compared with a 2.5 percent drop last year, the company said.
“This region overall is doing pretty well,” said Clear Capital research director Alex Villacorta.
In three of the past four years, Bay Area home prices have declined from the previous year, including a dramatic 35 percent drop for the San Francisco metro area in 2008 and a 28 percent drop in Silicon Valley that year. Only in 2010 were there slight increases, followed by last year’s drop.
“We haven’t seen any stretches of normal activity for the last 20 years or so” in the Bay Area, he said, noting that prices had rocketed upward in the years before the decline. “It’s really been a roller coaster, with exception of now, when things are settling and leveling off.”
Nationally, the company sees a 0.2 percent gain in home prices in 2012, compared to a 2.1 percent drop in 2011. The San Jose area’s expected performance was in the top third and San Francisco was in the top half of 50 major metropolitan areas analyzed.
Across the country, housing could help repair the economy, said economist Sung Won Sohn at Cal State Channel Islands. Sohn, who recently released his own economic forecast, is predicting a housing-led recovery for the U.S. this year based partly on low interest rates and renewed multifamily home construction, which usually brings gains in the overall housing market. And prices, he said, are about as low as they can go.
“No one is expecting a dramatic fall in house prices,” Sohn said. “That gets people buying houses.”
The Bay Area, especially Silicon Valley, is already doing better, he said, “because the underlying economy seems to be doing better. I think we will see a somewhat faster recovery in the Bay Area.”
In the past two years, home prices bobbed up and down in response to government programs to encourage sales, as well as fluctuations in the number of foreclosures and short sales, in which homes are sold for less than is owed on them.
But agents say too few homes are on the market, and buyers still face tight credit.
“People are in escrow forever, and they finally give up,” said Richard Calhoun of Creekside Realty. “That is what I see as the biggest hindrance on the market.”
Investors paying cash for lower-priced houses remain a big obstacle for people like Nicole Collison, 25, a San Jose schoolteacher trying to buy her first home.
Motivated by the high rent she’s paying and the market’s current low interest rates and prices, Collison has looked at nearly 50 houses since October and bid on half a dozen of them, only to lose out every time to cash buyers.
“We’re always outbid,” she said. “It has been quite a challenge.”
But she hasn’t given up.
“We’re going to keep at it. We’re hopeful after the beginning of the year more things will come on to the market.”
In the East Bay, about 20 percent of the homes are selling rapidly, said Unhei Kang with Grubb Co. in Berkeley. A nicely presented home in a desirable area will draw multiple bids, she said.
“I don’t know what the future will hold, but to me it seems like it is stable. There are definitely buyers out there. Maybe it has to do with the low interest rates. A lot of buyers are feeling it’s not going to get any better than this,” Kang said.
The housing market is “spotty” in Contra Costa County, with some areas doing well and others not, said Barbara Safran, president of the Contra Costa Association of Realtors. “I think we’ve dropped about as low as it can get, unless some crazy thing happens in the economy and the world.”
The median price for single-family homes dropped about 4 percent last year, Safran said, with condos dropping about 4.6 percent.
“We’re predicting that it’s probably going to stay the way it is for a while. I think we’re going to continue to see a lot of short sales. The foreclosure market is still iffy. It’s a question of how quickly banks are going to put out those foreclosures.”
Bay Area home prices
San Jose metro area
2011- down 2.5%
2012 forecast – up 1.6 %
San Francisco metro area
2011 – down 4.7%
2012 forecast – up 0.1%
source: Clear Capital.