A user on Reddit broke down the cost savings of living in Las Vegas and commuting four days a week to a job in San Francisco. The user estimated he could save $1,124 per month – and that included getting a two-bedroom apartment in Vegas instead of a one-bedroom in San Francisco.
While the Vegas to San Francisco commute is extreme, more and more people are moving farther out in order to find affordable housing. This month, Home Value Forecast will look at the impact of economic displacement in the Bay Area.
What’s the Story in San Francisco, CA?
Over the last five years more than 500,000 jobs were created in San Francisco with limited additions to the housing supply. Following the natural laws of supply and demand, housing prices in San Francisco have sky rocketed, pushing many people farther out to find a home. Here’s how the market looks today:
This isn’t a new problem for San Francisco, just one that has been exacerbated by the real estate crash. New housing starts tanked for three and a half years after 2008, leaving much to room to make up.
Prices have risen, leaving San Francisco real estate out of reach for many. Today, the average home in the metro is $1.2 million, with continued appreciation forecasted.
The Urban Displacement Project publish by UC Berkley researchers states that:
“Gentrification, or the influx of capital and higher-income, higher-educated residents into working-class neighborhoods, has already transformed about 10% of Bay Area neighborhoods. Displacement, which occurs when housing or neighborhood conditions actually force moves, is occurring in 48% of Bay Area neighborhoods, divided almost evenly between low-income and moderate/high-income neighborhoods.”
So with the average home costing over one million dollars, where do working-class people live who work in the San Francisco area go if they want a reasonable priced home? As with most cities, the farther you go outside the metro the more opportunities there are. For some in San Francisco, that means moving to Antioch, CA.
More people moving farther out equals longer commutes and worse traffic. A recent article rated Antioch, CA #2 in the 50 worst commutes in America, only behind New York City. Average commute time in Antioch is 42 minutes, with 28% of commuters having travel times of more than an hour. The morning commute is now starting by 5 a.m., leading to longer, more stressful days.
Antioch’s real estate market is one that has not yet recovered from the housing crisis. What happened?
1. Pre the 2008 housing crisis, Antioch’s real estate market was fueled by the high availability of non-traditional home loan products. Zero-down or low down-payment mortgages were very popular before the housing crisis in Antioch, with loan-to-value averages hitting 97% by Q4 2006.
2. As the real estate crisis picked up steam in Antioch, people lost jobs and foreclosures started to spike. With high loan-to-values, dropping prices, and little to no equity, walking away from an underwater loan in some instances was the best choice.
3. Foreclosed properties sell for less than regular market sales. With so many foreclosures in Antioch, prices dropped across the board. Prices bottomed-out in 2011, and are slowly working their way back.
Antioch’s is a community still in transition. After the foreclosure crisis many homes in the community were bought and rented out as investment properties, leading to more temporary residents.
Today, the number of REO sales has returned to pre-crash levels and prices have begun to rebound. As more families make permanent homes in Antioch, home prices should continue to rise.
CBSA Winners and Losers
Each month, Home Value Forecast uses a number of leading real estate market-based indicators to rank the single-family home markets in the top 200 CBSAs and highlight the strongest and weakest metros.
The ranking system is purely objective and is based on directional trends. Each indicator is given a score based on whether the trend is positive, negative or neutral for that series. For example, a declining trend in active listings would be positive, as will be an increasing trend in average price. A composite score for each CBSA is calculated by summing the directional scores of each of its indicators. From the universe of the top 200 CBSAs, we highlight each month the CBSAs which have the highest and lowest composite scores.
The tables below show the individual market indicators that are being used to rank the CBSAs, along with the most recent values and the percent changes. We have color-coded each of the indicators to help visualize whether it is moving in a positive (green) or negative (red) direction.
Top 10 CBSAs
Top ten this month includes the San Antonio-New Braunfels, TX CBSA. New Braunfels lies on Interstate 35 between Austin and San Antonio, and has been experiencing tremendous growth as the two anchor cities have been attracting new businesses.
The Austin-San Antonio area population is expected to increase more than 34% by 2030, to 5.71 million residents. With growth four times the Texas average, housing prices should continue to increase.
Bottom 10 CBSAs
On the other end of the Texas economy, the real estate market in Midland continues to worsen. A 101% increase in active listings, 140% increase in Months of Remaining Inventory (MRI) and 198% increase in Foreclosure as a % of Sales are numbers not seen at Home Value Forecast in a while. The speed of the change in the market is reminiscent of 2008, but on a localized level. The Midland real estate market will continue to be on shaky ground until oil prices rebound.
About Home Value Forecast
Home Value Forecast (HVF) is brought to you by Pro Teck Valuation Services. HVF provides insight into the current and future state of the U.S. housing market, and delivers 14 market snapshot graphs from the top 30 CBSAs.
HVF is built using numerous housing and economic data sources. The top 750 CBSAs as well as data down to the ZIP code level for approximately 18,000 ZIPs are available with a corporate subscription to the service.
Also, Pro Teck Valuation Services offers reporters the following:
- National, regional or metro level housing data
- Monthly Updates and HVF Insights articles
- By-request data for your story — custom data, heat maps and charts are available
- Expert commentary from Home Value Forecast Editorial Committee:
- Tom O’Grady, Chief Executive Officer, Pro Teck Valuation Services
- Michael Sklarz, PH.D., President, Collateral Analytics
- Jeff Dickstein, Chief Compliance Officer, Pro Teck Valuation Services