Let’s face it. The statistic or number that matters more than any other to buyers, sellers, and anyone who wants to be one or the other is price. While national, state or even local statistics may not matter to you personally when you are negotiating that sale or purchase of a home, the final price of your own home will likely be heavily influenced by the overall direction that prices are going in your community.
Kiplinger magazine published an article last month that analyzed numbers from CoreLogic, an often-quoted real estate information company. The report listed the top ten U.S. metropolitan markets in terms of the highest gain in median price for the previous year ending June 30, 2014. Nationally, prices increased by 7.5%, while the top ten metropolitan areas (out of 401) saw increases of between 11.4% and 20.5%. And guess where the biggest increase in the country was? Yep, the San Francisco metro area that, for the purposes of this survey, included certain outlying cities like Oakland and Vallejo. The median price in the SF Metro area for the 12-month period ending in June was as high as $925,000 ($987,000 in the City).
The relationship between a region’s economy and its real estate values is tightly bound. There are several interdependent factors, such as employment, which affect all of the other numbers as well. Job growth in the SF Metro area, for example, increased up to 3.2%, and unemployment fell to as low as 4.3%, two full points below the national number (non-adjusted for seasonal change). Add job growth, mostly due to tech in SF, to the limited supply and growing demand, and there’s the recipe for upward pressure on home prices. While the rate of increase may be slowing somewhat, there do not appear to be any signs that affordability will improve or that prices will actually fall, even as the world appears to be destabilizing in so many other areas.
Widening our lens a bit, it’s interesting that five out of those ten metro areas with the sharpest gains are in California. Our state seems to be recovering, at least in terms of real estate, faster than any other. The reasons for that, I believe, are varied. The #2 metro area in the nation where prices jumped the most was the Central Valley. Yet job growth has been slower there, as low as a half percentage point. Perhaps prices had fallen so low that there was only one way for them to move—up.
Settling into the nation’s #6 position was the Santa Rosa metro area. This one seems to make sense for many of the right reasons. Prices fell as much as 30% there during the darkest days of the recession. Now, however, with job growth up by 3.7% and unemployment a full percentage below the national average, Santa Rosa and its environs are enjoying a considerable bounce, although the rate of increase may be slowing slightly. With the wine and tourism business flourishing again, and significant growth in other areas as well, Sonoma County, with its current median home price of $497,000 (per data from the California Association of REALTORs®) might be a bargain for some time to come, which is great news for anyone desiring a home in the wine country.
A Bay Area native, Mark Penn has been a REALTOR® with Coldwell Banker since 2004. He is also active in animal welfare, and is a former educator, facilitator, and air traffic controller. Mark can be reached at mark@MyHomeInSonoma.com.
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