Home Prices Down in 90 percent of SF Bay Area ZIP codes

November 9 2008 - Home prices have declined in more than 90 percent of Bay Area ZIP codes over the past year, often by more than double digits, according to a Chronicle analysis. And even the handful of ZIP codes where prices rose barely eked out single-digit increases for the most part.

“Prices are off virtually everywhere,” said Andrew LePage, an analyst with MDA DataQuick, a San Diego research firm, which provided sales information culled from county records.

The analysis compared price per square foot paid for existing single-family homes during the three months ended Oct. 15 to the price paid in the same period last year. This metric was picked rather than median home prices, because the median can be skewed by the number of homes that change hands at the high or low ends of the market.

“The vast majority of Bay Area neighborhoods, even along the coast, have seen prices come down 10 to 20 percent from peak levels, and in many cases from year-ago levels,” LePage said. “There are (a few) pockets of relative strength in higher-end areas, but they are not pockets of immunity. They are not shielded from the forces pushing down home prices across the Bay Area and the state.”

Those forces are well known: the implosion of subprime mortgages that triggered a foreclosure onslaught; the credit freeze that has made getting a mortgage harder and more expensive; the vicious circle that declining home prices trigger more foreclosures and that foreclosures force down prices; and the economic crisis that is causing people to lose jobs and retirement savings.

More than 70 percent of Bay Area ZIPs saw prices fall by more than 10 percent - often by considerably more than that. The mid-range price decline on a per-square-foot basis around the nine counties was 17 percent.

“No ZIP code is an island,” said Christopher Thornberg, a principal with Beacon Economics in Los Angeles. “These markets are linked. Of course the chaos on one end is going to affect somewhere else.”

Randall Kostick, general manager of Zephyr Real Estate, one of the largest brokerages in San Francisco, agreed. “There is no housing market that is immune from economic forces,” he said.

To be sure, because real estate is intensely local, there is significant variation among the levels of depreciation, even within the same city. For instance, Oakland had some of the best- and worst-performing ZIP codes in the Bay Area. Rockridge’s 94618, where the square-foot price rose 7.5 percent (from $531 to $571), was one of only nine ZIP codes in positive territory. But in the city’s flatlands, the story was entirely different. ZIP 94621 was the second worst in the whole Bay Area, down 63.7 percent to $118 a square foot, compared to $325 a year ago.

Not surprisingly, the areas where prices fell the furthest had the most homes that had been repossessed by banks. Price per square foot fell most drastically - by ranges up to 70 percent - in foreclosure-heavy suburbs and exurbs such as Richmond, Antioch, Vallejo, San Pablo, East Palo Alto and parts of Oakland. There’s an obvious reason for the correlation: Banks want to hurry up and sell repossessed homes, so they offer them at fire-sale prices.

Richmond’s 94801 ZIP, which includes the notorious Iron Triangle, had the steepest price plunge, a 68.8 percent drop from $311 per square foot to $97. The median price fell roughly in sync, down 72.2 percent from $403,000 to $112,000. In the first nine months of the year, a stunning 7 percent of all homes in the ZIP were foreclosed upon.

But it is noteworthy that even areas that are relatively immune to foreclosures experienced price drops.

Take the East Bay’s Albany, known for its small-town ambience, good school system and Solano Avenue’s mile-long array of restaurants and shops. Banks repossessed just seven homes in the first nine months of this year, or .014 percent of the housing stock. But prices there were down 9.9 percent from $580 per square foot to $522.

Of 189 ZIPs where at least 20 homes were sold in the time period, only nine, or 4.7 percent, saw prices increase in the period. Even after factoring in ZIPs where fewer homes traded hands doesn’t make a big change. In all 236 ZIPs, just 24, or 10 percent, experienced price appreciation. All the ZIPs where prices rose were in affluent areas. The ones that were excluded for too few sales were in such places as Sea Ranch, Ross and Atherton, where just a handful of homes were sold.

“I think it’s incredibly impressive for any ZIP to be up at all,” LePage said.

One of the few standouts was the 94114 ZIP in San Francisco, home of Noe Valley, where houses go for well over a million dollars, designer strollers clog the sidewalks, posh shops peddle handmade ethnic tchotchkes, and the Google bus regularly cruises the streets.

But even that ZIP didn’t enjoy the double-digit appreciation that became de rigueur during the real estate boom. Instead Noe Valley prices were up 6.8 percent year over year, from $893 a square foot to $954.

Thornberg said the drops are a natural consequence of prices getting grossly overinflated during the real estate bubble.

“Home prices in California have to fall 40 percent to 45 percent just to get back to its historic levels of unaffordability,” he said. “If it’s 45 percent overall, for the upper-price areas, that might mean a 25 percent to 30 percent drop; for the lower-priced areas, 60 percent to 65 percent.”

Home prices down in 90% of Bay Area ZIP codes
by Carolyn Said | San Francisco Chronicle