An abundance of new homes, many of which were financed with subprime mortgages, resulted in many East Bay communities experiencing disproportionately high rates of foreclosure and remarkable declines in median home values. A virtual standstill in home sales, a significant decrease in individual wealth, and the subsequent decline in consumer confidence helped transform a housing recession into a general recession. These factors slowed business growth and jeopardized shelter for many.
HOME VALUES
At the start of 2009, the East Bay’s real estate market continued to reflect the trends seen throughout California and the nation, with prices falling dramatically until spring, when pent-up demand and sales activity in the region’s more expensive markets began to drive prices up again. In July 2009, median home values in Alameda and Contra Costa Counties were $340,000 and $261,000, respectively — up from the lows of $280,000 in Alameda County and $216,000 in Contra Costa County, seen in early 2009. Despite these recent increases, home values are still significantly lower than the peaks seen in 2007 ($619,000 in Alameda County and $600,000 in Contra Costa County). Increased activity and rising values indicate a possible “bottom” for residential real estate and a turnaround in the market. Although home values throughout the Bay Area have increased on a month-over-month basis since May 2009, the losses incurred since 2007 will take many years to recover.
HOME SALES
The slowdown in Bay Area home sales began in September 2007, when sales declined nearly 42 percent in Alameda County and nearly 46 percent in Contra Costa County1. After dismal sales activity throughout 2008, most Bay Area counties saw an uptick in sales in spring 2009. By July 2009, annual sales in Alameda and Contra Costa Counties had increased 24.6 percent and 9.1 percent, respectively, from the extreme lows of the previous year – both counties reaching sales volumes close to those seen in 2006 and early 2007.
FIRST-TIME HOMEBUYER AFFORDABILITY
First-time homebuyer affordability in the East Bay and Bay Area real estate markets reached its lowest levels in the latter part of 2007, when affordability in Alameda and Contra Costa Counties fell as low as 23 percent and 16 percent, respectively. As a result of the severe downturn in values, affordability has reached highs not seen in over a decade. As of the first quarter of 2009, affordability was 62 percent in Alameda County and 50 percent in Contra Costa County.
BAY AREA RESIDENTIAL RENTS
According to data published by the United States Department of Housing and Urban Development (HUD), rental prices in the East Bay track fairly closely with those of other regions in the Bay Area, with San Francisco prices being the highest. A one-bedroom apartment in the East Bay can be rented for $1,093 while a similarly sized apartment in San Francisco will cost $1,325 per month and in San Jose, $1,113 per month.
NOTICES OF DEFAULT
Notices of Default are an early indicator of foreclosures. Lenders send default notices to homeowners who are 4-6 months behind on their mortgage payments, beginning the foreclosure process. In late 2008 the dramatic rise in foreclosures and notices of default that occurred over the previous two years slowed. More notices of default were recorded in Contra Costa and Alameda Counties than in other Bay Area regions, due in part to the East Bay’s large housing stock.
1 DataQuick Monthly Home Sales Report for Bay Area region, 2000-2009, www.dqnews.com.