Kaid Benfield's Blog
Smart locations fare better as home prices plummet, foreclosures rise
April 20, 2008
Posted by Kaid Benfield in Living Sustainably
In previous entries, I’ve pointed to work by serious academics suggesting that, because of the mortgage crisis and other more structural changes in the housing market, sprawl locations are at more risk of decline than closer-in, more accessible locations. The smart-growth locations, the argument goes, will hold their value much better than those on the outer fringe of metro areas.
New data from the San Francisco Bay Area confirms that the market is, in fact, performing as expected. In particular, the San Francisco Chronicle reports that that one-quarter of all homes sold in the nine-county region in the last month were foreclosure sales. But the rate is much lower in more urban places:
“As has consistently been the case, several counties - notably those close to job centers and in affluent areas - were in better shape than hard-hit places such as Contra Costa and Solano counties. In San Francisco, the median resale price inched up 0.4 percent to $826,000 - the only county where the median grew. Not coincidentally, San Francisco also had the lowest percentage of foreclosed homes sold, with only 2.4 percent of homes sold in March having gone through foreclosure.”
By comparison, 29 percent of the homes sold in Sonoma County in March had been in foreclosure at some point in the last year. In Contra Costa County, the number is a shocking 44.7 percent. The map below from Microsoft Virtual Earth shows foreclosure rates across the Bay Area. The areas in red (and especially those in dark red) have the highest rates of foreclosure per household:
A table from a report by real estate analysts DataQuick indicates that, while San Francisco county home prices rose slightly, as noted above, those in the outer counties of Alameda, Contra Costa, Napa, Solano, and Sonoma fell sharply, by 16-27 percent. Prices in the region as a whole fell 16 percent.
Sales volume in March of this year compared to March of 2007 was down everywhere in the region, including San Francisco, where volume was down 20 percent. But that was the smallest drop in sales activity. Sales in the region as a whole dropped 41 percent, with the normally high-volume counties of Alameda, Contra Costa and Santa Clara experiencing declines from 32 to 47 percent.
Many thanks to NRDC’s location-efficiency guru David Goldstein for suggesting this article.
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- Kaid Benfield
- Director, Smart Growth Program
- Washington, DC
- I was raised in the mountains of western North Carolina, surrounded by some of the...
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Comments
Kate — Apr 20 2008 10:05 PM
Kaid, the Microsoft chart you show seems to belie the argument you're making (and since it's a 'private' file, those of us looking at it can't recreate or see the underlying data). Or at least it really begs for more analysis. If you were to overlay mass-transit lines on that map you'ld see there are plenty of places that are very 'location-efficent' in Alameda that still have high foreclosure rates, while places in Marin and on the peninsula that are completely car dependent are doing okay. Even increasing. I think SF has a lot of confounding variables making this kind of analysis difficult; perhaps you could check a few other cities?
Kaid Benfield — Apr 20 2008 10:35 PM
Kate, perhaps you can email me and I can get more of a sense of who you are and we can discuss particulars if you like. My intent was mainly to articulate the point that the Chronicle writer made, which was that counties close to job centers and those, yes, more affluent were the ones suffering the most with regard to housing value drops and foreclosures. Both the DataQuick article and the map tend to support that argument, though at an admittedly crude level of analysis.
My sligtly educated guess is that a more sophisticated analysis might find that both job proximity and median income would be significant factors, with one or the other more significant for various locations, and other factors perhaps significant as well. Certainly a lot of locations in and near Oakland (Alameda County) would be likely to be low income and vulnerable for that reason, regardless of job proximity.
I wasn't arguing that proximity to mass transit would be a factor, since even locations with transit can be relatively less accessible to jobs and other important destinations within a region, depending on distance and type/amount of transit service. Generally speaking, more central locations have lower rates of driving than outer ones with or without transit presence, since more people drive than take transit and more central locations, on average, have shorter driving trips. It conforms to intuition that consumers would prefer these locations and assign higher home-price values to them, and that they would be less susceptible to depreciation if one controls for income.
It will be an interesting issue to follow and learn from as more data and analysis come in. Know anyone who would fund some further research?
kbenfield@nrdc.org