In the early stages of a building boom? Information available now points to a resounding YES!
According to Zillow, the real estate website, which forecasts home values all the way down to ZIP code by looking at macroeconomic factors such as unemployment, mortgage rates, construction costs and land availability, then looks at what prices are likely to do based on what they are doing today.
Zillow predicts that home values will be higher in June 2016 than they were this June in all nine Bay Area counties, with increases ranging from 1.5 percent in Sonoma to 6.8 percent in San Mateo.
Jerry Nickelsburg, an economics professor at UCLA Anderson School of Management, predicts that Bay Area prices will be going up for a simple reason. “Home demand depends on household formation,” which includes people moving to the Bay Area, kids moving out of their parents’ house, and roommates moving into their own homes. “You have had very rapid job and income growth. That fueled demand for housing, but you have not had much increase in the stock of housing. That gives you better home prices.”
Ken Rosen, chairman of the Fisher Center for Real Estate at UC Berkeley, said he thinks real estate prices may “slow substantially” in 2016, but will still be positive. In June, prices in Bay Area counties were up 10 to 20 percent over the previous years. “The three things that are causing this – the huge increase in jobs, the supply shortage, and very low interest rates” will all begin to change in 2016. He sees mortgage rates going up half a percent, job growth slowing, and inventory growing. A year from now, he predicts prices will be 7 percent higher in the East Bay and 9 percent higher in San Francisco.
The boom in building permits in most Bay Area counties is one factor that will slow price increases by bringing more inventory onto the market.
Both agents and buyers report strong demand for homes in Sonoma County this year. One main reason is that Sonoma county still lacks a meaningful supply of newly built homes. Local governments issued just 251 permits for new single-family homes in the county in 2014, the lowest level in at least 45 years-which is about a seventh of the historical em and for the average of the two decades preceding the economic downturn.
The “wet utility” work at the corner of Rohnert Park Expressway and Petaluma Hill Road is in preparation for a housing subdivision and the first single-family homes to be built in Sonoma County’s third-largest city in at least 15 years. In Rohnert Park, developers are taking advantage of a more favorable economy and an enviable amount of undeveloped land within the city’s urban growth boundary to kick-start new construction.
“The city of Rohnert Park is where the action is,” said Keith Woods, executive director of the North Bay Builders Exchange.
All told, 4,350 housing units ranging from single-family homes to apartments have cleared at least the first stage of the city’s approval process.
Were every housing unit to be built, the city’s population of 43,000 could swell by 25 percent, or nearly 11,000 people. Already, the transient population has ballooned due to an influx of construction workers from around the region.
Meanwhile, San Francisco supervisor London Breed says, ‘There’s a lot of building happening, and we certainly need to make sure we have all the resources in place to ensure they’re safe.’
Part of that uptick stems from the increased number of big multimillion-dollar projects in the city, including massive residential and office towers downtown. There were nearly 60 major projects in the city several years ago, city officials say, and more than 250 today.
Readers can find Zillow’s forecast by going to www.zillow.com/research/data. Under Additional Data Products, click on Data next to the line labeled Zillow Home Value Forecast an you will get a spreadsheet with Zillow’s price forecast for every metro area, city, and ZIP code.
Buyers and sellers can track local trends on Redfin, a real estate website and brokerage, at http://redf.in/1II95EO.
Kathleen Pender; San Francisco Chronicle; August 4, 2015
Robert Digitale; The Press Democrat; April 11, 2015
Ted Goldberg; KQED News; January 12, 2015