Bay Area – Land Prices Have Gone Through the Roof!

Since the 2011 trough in land prices, the worst markets in the Bay Area have seen a significant increase in lot prices – an average of about 44%. As the available land in the core markets has dwindled, builders have turned to the tertiary markets that were once off the radar. This trend will likely continue in areas such as the Central Valley and Monterey and Sonoma Counties. Although they may be considered unbuildable zones today, they will see a similar lot appreciation over the next few years as builders move farther out of the core to build.

Lot Price Appreciation for a 5,000 SF lot

Oakley 53.33%
Antioch 53.13%
Pittsburg 51.52%
Martinez 51.11%
Brentwood 48.57%
Livermore 46.67%
Mountain View 46.67%
Sunnyvale 46.43%
Hayward 46.15%
San Jose 45.45%
Fremont 40.00%
Hercules 37.14%
Concord 33.93%
Gilroy 33.33%
Dublin 30.00%

Source: Steve Reilly, Marketing Consultant, (925) 368-3128

Bay Area Tertiary Markets Recovering? Maybe…

In the depths of the downturn (say, March 2008), the City of Antioch had over 800 active listings of single family homes on the market.  According to the MLS, only 105 homes sold that month, which translated into an 8-month supply of inventory.  Needless to say those were also the months where we saw double digit price declines year-over-year.

Fast forward to today: In the first two and a half months of 2012, 247 homes sold in Antioch, or approximately 98 sales per month.  The current active inventory according the Contra Costa MLS is 103, meaning a 1.1-month supply of inventory!  While this may not mean that prices are going to rocket up anytime soon in East Contra Costa County, it is definitely a great sign that the market has found a “natural” bottom and might have even overcorrected on the way down.

This same story is being repeated in Brentwood, Oakley, Pittsburg and other tertiary Bay Area markets, which were first to fall off the “cliff” a few years ago.

This work-off of resale inventory is starting to show its affect on new home absorptions.  In 2011 builders in East Contra Costa County were struggling to get to 1 to 2 sales per month on average. In the first few months of 2012, absorptions have been running between 3 and 4 sales per month. If this trend continues we expect more builders to begin venturing back out to the tertiary markets to look for new residential land deals.

Source: Steve Reilly, Senior Marketing Consultant, (925) 368-3128

The American Dream… Renting in the Central Valley?

As the Central Valley land and homebuilding market continues to slog through foreclosures, short sales, and tepid new home sales, many potential homebuyers are waiting out the current real estate cycle until real signs of economic growth emerge.  

  • According to Affiliated Appraisers, the median sale price of a single family home in Kern County rose 0.8% to $132,000 from September to October this year, but decreased by 2.2% year over year.
  • The number of foreclosures dropped 9.9% from September to October of this year, and is down 36.1% since October 2010.
  • October saw 522 closed homes sales (new and resale) throughout the County, down 11.4% for the month and off 7.1% for the year.
  • Properties owned by lenders account for 40.5% of all sales compared with a national average of 30.1%.

Due to the lack of confidence in the economy and homebuilding market, many would-be homebuyers are now turning to renting instead of buying.  According to RealFacts, many potential buyers with good credit who can afford to purchase a home now are electing to wait on the sidelines, and rent an apartment or townhome for a while instead.

Indicative of demand, average monthly rent in Kern County rose 2.8% in the third quarter 2011. The County had the 16th highest rent of 24 metropolitan statistical areas in California.  Its 98% occupancy rate earned it the State’s No. 4 spot on occupancy.  Over the last 3 quarters, rent for two-bedroom townhomes in Kern County increased by 10.7% compared to the previous three quarters.

Kern County is following a pattern typical of inland communities and other tertiary markets… They tend to be the first to collapse and the last to recover.

Source: Jason Hepp, Senior Marketing Consultant, (661) 702-9080 x14