Year-end price spikes in the San Francisco Bay Area doesn't mean the worst is over for one of the nation's most expensive housing markets.

Job losses and household wealth declines have transformed the once hot Bay Area into a buyer's market and a turnaround is at least a year away.

So says "The San Francisco Bay Area Housing Market: A Buyer's Market," by University of California-Berkeley real estate professor Kenneth Rosen and research associate Amanda Bishop at the university's Haas School's Fisher Center for Real Estate & Urban Economics.

"Even with the worst part of the current recession behind us, the effects on the housing market will lag about a year," said Rosen, chairman of the Fisher Center.

"The Bay Area housing market will not bounce back until 2003," he flatly proclaims.

The median price paid for a Bay Area home was $377,000 in December, 2001 up 2.4 percent from $368,000 in November, 2001 and up 1.1 percent from $373,000 in December a year ago, but off the market's recent peak of $386,000 in March 2001, according to La Jolla, CA-based DataQuick Information Systems.

A total of 7,725 new and resale houses and condos were sold in the nine-county region in December, 2001. That was up 16.3 percent from 6,644 for November 2001, and down 9.3 percent from 8,515 in December 2000 a year ago, according to DataQuick.

DataQuick says a decline from November to December is normal for the season, however, the total 77,271 homes sold in the region in all of 2001, was down 17.3 percent from 93,423 during 2000, one of the region's hottest years on record.

"I've heard people talking of the bottom falling out of the Bay Area real estate market, but that's not happening. There certainly was over-exuberance a year-and-a-half ago, but today's market is back to relative normalcy," said Mike Ela, DataQuick's president.

Real estate agents in the field aren't so sure. Depending upon the county and cities within each county, while some markets appear to have already hit bottom, others are still losing steam.

"Though we've been in a seller's market for some years, the trend right now is starting to reverse, and we are seeing fewer multiple offers, and a bit more negotiating on prices. Not a huge difference in pricing yet, but a more normal market is emerging," real estate agent Vikki Landes of Prudential California Realty, reported to RealtyTimes.com's Oakland, CA Market Conditions Report.

Landes rated the Current Market Rating Average in Oakland a 3, indicating a fair market on a scale of 1 to 5 where 1 is a buyer's market and 5 is a seller's market. However, she rated the Price Trend Average a 2 where 1 indicates falling prices and 5 indicates rising prices.

Most agents in the San Francisco Bay Area offered a similar mix of ratings on RealtyTimes.com's Market Conditions Reports.

"Recently, the market has inched towards a seller's market. More buyers with loan approvals are hunting for houses. Sunnyvale has houses in various price ranges. Few houses are on the market and the stock market is behaving relatively better," Tari Qrafeeqi of Realty World, reported to RealtyTimes.com's Sunnyvale, CA Market Conditions Report.

"Who knows if the prices will climb or decline. But my reading is that the prices this summer would be higher than they are now," he added.

The current economic climate has turned the Bay Area housing market into a buyer's market for the first time since the early 1990s. When the cycle has been completed, Rosen and Bishop expect home prices to have fallen 15 percent from their peak and luxury home prices to have fallen 30 percent from their peak. Some communities, including Santa Clara County (Silicon Valley) have already suffered greater price declines. The Bay Area saw explosive economic and job growth in the late 1990s, with employment in the area's six counties expanding by 13.2 percent, or 361,900 jobs, between December 1993 and 2000, the report said. When jobs are abundant, consumers buy homes, pushing prices skyward.

The area's housing market is further influenced by the contraction of household wealth, largely due to the bust in the area's technology-based economy.

When the market crashed, housing prices declined, and many new homeowners, who found themselves with a mortgage they could no longer afford, put their homes on the market.

"It was clear to us, however, that the boom was unsustainable," says Rosen.

Published: February 5, 2002

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Broderick Perkins parlayed a career in old-school journalism into a contemporary digital news service that really hits home. The award-winning consumer journalist, originally from Wilmington, DE, is founder, publisher and executive editor of the bootstrap DeadlineNews Group, a Silicon Valley-based editorial content and consulting service specializing in residential real estate, consumer news and related editorial consulting services. The DeadlineNews Group includes the website, DeadlineNews.com, offering real estate editorial content and consulting services, and its back shop, the Deadline Newsroom, an open house on news that really hits home. Perkins obtained his formal journalism education from University of Delaware and a journalism boot camp, the Institute of Journalism Education at the University of California-Berkeley. He went on to 20 years of service as a daily newspaper journalist at the Wilmington, DE News Journal and San Jose, CA Mercury News. Perkins covered housing on the San Jose Mercury News reporting team which earned a General News Reporting Pulitzer Prize in 1989 for coverage of the Loma Prieta earthquake. He has also produced real estate, consumer and small business content for the Wall Street Journal, Los Angeles Times, RealtyTimes.com, Nolo.com, Better Homes and Gardens, the National Association of Realtors, Homestore/Move and Intuit/Quicken among more than three dozen publications. In addition to managing the DeadlineNews Group, Perkins most recently served as chief editorial consultant for Nolo's Essential Guide To Buying Your First Home, Nolo, and writes real estate television scripts for RealtyTimes.com.