Driven by the roaring economic engine of Silicon Valley, home prices in some Bay Area cities have neared or exceeded the record highs reached in last decade’s housing bubble. San Francisco, Palo Alto and other cities flush with cash from Google, Facebook and Apple blew past their prior peaks in recent months and set new records.
Now the price spikes are spreading to outlying areas.
Suburban communities such as Pleasanton and Fremont, with good schools and relatively short commutes to jobs, are seeing bubble-era prices, too. Both are just a few percentage points off their all-time highs set in 2005 and 2006, real estate information service DataQuick reported.
Yet in Sacramento, home prices remain about 40 percent below the heights they reached in the bubble. Even in the region’s most affluent areas, including the suburban foothill communities of Granite Bay and El Dorado Hills, recent housing gains lag far behind the Bay Area’s.
With dated ranch houses in Fremont and Pleasanton going for $800,000 – the same price as large homes in the Sacramento region’s most desirable neighborhoods – Bay Area residents may look inland for better deals, experts said.
“I expect to see it this spring,” said Kevin Carson, Northern California president of the New Home Company, which is building homes in Granite Bay, Roseville and Folsom – areas that in the past have proved popular with Bay Area transplants. The company and other home builders are moving fast to bring more homes online in the next two years.
The Bay Area’s real estate booms and busts have affected Sacramento for decades. In the past three housing booms, starting in the late 1970s, influxes of Bay Area buyers drove up Sacramento prices, often to levels out of whack with local incomes. Almost 150,000 people migrated from the Bay Area to the Sacramento metropolitan region from 2001 to 2005, a torrent of 80 newcomers a day, according to a Bee analysis of federal IRS data. More people came here from the nine Bay Area counties during that time than from all other counties in the state combined.
Carson said those buyers spurred economic growth in the region by launching startup businesses, while Bay Area companies relocated to take advantage of better housing and employment conditions.
“If the cycle continues, you get businesses saying they can get better quality of life or a cheaper workforce here,” he said. “Then you start getting job growth, which fuels a seven-year cycle.”
Rick Turley, president of Coldwell Banker in San Francisco, said the Bay Area housing market, like Sacramento’s, has been constrained this year by a scarcity of homes for sale despite rising demand. That’s pushed prices into the stratosphere. He expects a wave of homeowners to list their houses starting in February to take advantage of the sky-high prices.
“It’s settling in that this is a good time to make a move,” Turley said.
Some will cash out and move to the Central Valley, as many did in the housing boom of the mid-2000s. Back then, Bay Area homeowners realized they had unprecedented amounts of equity in their house.
“People were going up to Roseville and Lincoln,” Turley said. “They could put half a million in the bank and get a nice place for cash.”
In the boom years of the late 1980s, when Turley was selling real estate in Sacramento, Bay Area buyers would migrate to upscale neighborhoods such as Sacramento’s Fabulous 40s or Sierra Oaks, he said. Today, they gravitate toward Granite Bay, in the Placer County foothills, or to the university town of Davis, both areas with excellent schools and high quality of life.
Visiting houses in the same price range in the Bay Area and Sacramento reveals a stark contrast. In the Bay Area suburbs of Fremont and Pleasanton, 1970s ranch houses – some on busy streets – command prices of $700,000 to $900,000.
In Fremont, for example, a tan stucco five-bedroom ranch house on busy Mission Boulevard, with two lanes of speeding traffic in each direction, has new cabinets and granite counters in the kitchen but old carpet and a gas heater in the garage, as if someone had been living there. The home is priced just shy of $700,000.
A plain-looking 1,200-square-foot ranch house, built in 1961, was listed recently for $735,000 on a treeless stretch of Mardis Street, a few miles from Mission San Jose. It also has new cabinets, appliances and granite counters, but it backs up to a busy road and has tiny bedrooms and a patio of cracked concrete.
“The school district is what drives the prices,” said Coldwell Banker real estate agent Romar De Claro. Families who want a detached home and a backyard within commuting distance of high-tech jobs in San Jose were willing to pay the price for Fremont, he said. Similar homes in San Jose, with less of a commute, might cost $100,000 more, he said.
Pleasanton homes for sale generally are vintage 1970s and 1980s and many lack major upgrades. But the city’s high prices reflect its tree-lined streets, walkable downtown shopping district and top-tier schools, De Claro said.
He had just listed a one-bedroom condominium for $450,000.
On quiet, curving Concord Street, a sprawling home built in 1973 was listed at $860,000. The 2,500-square-foot house had an awkward layout, a pool that needed maintenance and a backyard garden that needed tending.
“The value is really in the land here,” De Claro said. “This is a very desirable neighborhood.”
Some Bay Area buyers are growing weary of the high prices, less-than-thrilling homes and stiff competition, the agent said. “Buyers end up getting tired and taking breaks,” he said.
The sense of being priced out of the market will eventually push some buyers to the Central Valley.
Take Claire Walters, who bought a high-water bungalow in Sacramento’s leafy Curtis Park neighborhood four months ago for $340,000. The previous owners had completely restored the home, built in 1906, in period style, she said.
Walters, who works in social services, decided to move from her hometown of Palo Alto after realizing she could never afford a home anywhere near Stanford University, where she worked at the time. The median home price in Palo Alto reached a new record of nearly $2.2 million in the first three months of this year. Prices in the surrounding cities of the nation’s high-tech heartland, including Los Altos and Sunnyvale, also soared.
Walters said she was tired of paying $2,200 a month in rent for a two-bedroom condominium in Palo Alto and wanted to be near her parents and brothers, all of whom had relocated to the Sacramento area.
She was stunned at what she was able to afford here, even with home prices going up this spring and summer. Her agent, Brian Perry of Coldwell Banker in Granite Bay, found her exactly the home she was looking for, she said.
“To me it was ridiculously cheap coming from the Bay Area,” she said. “It would not have been feasible for me to live anywhere I wanted for that price.”
Another of Perry’s clients, Frank Noey, said he and his wife raised three children in a 1950s home they owned in Fremont for 30 years. They sold the 2,350-square-foot house in 2011 for $649,000 and paid $629,000 for a recently built custom home near Auburn that was nearly double the size on a half-acre lot.
“We got a lot more for the money, and we got a better living environment,” Noey said.
Perry said he, too, migrated from the Bay Area. In 1997, he bought a 960-square-foot condo in Fremont for $125,000. He sold it three years later for $280,000 and bought a 1,900-square-foot house in Rocklin for $260,000. He and his wife have raised their three children there in a safe neighborhood with high-performing schools.
The agent said he’s been working with several buyers from the Bay Area, some of whom want to move for quality of life, others to be near children and grandchildren. They’re often struck at what they can afford, he said.
“I can’t even count how many people I’ve moved from the Bay Area over the years,” he said.
Today, the scene is set for the migration to resume in earnest. For the same prices as lackluster homes in Fremont and Pleasanton, buyers in the Sacramento region can take their pick of exclusive real estate. Recent listings include a Tudor mini-mansion in Granite Bay. On a quiet cul-de-sac within walking distance of Folsom Lake, it has a pool and tennis court on a 5-acre lot. The asking price: $799,950.
Or for about $850,000, there’s a storybook home in a prime location in Sacramento’s Fabulous 40s neighborhood. The house, on a quiet block of 40th Street, is about 2,000 square feet with three bedrooms and three baths and has a private entrance to the Sutter Lawn Swim and Tennis Club, a small private club in east Sacramento.
Of course, many homes in areas such as Roseville or Folsom are half those prices, and Perry said he thinks many Bay Area buyers will turn in that direction this time around.
“What I’m seeing is a different trend now than in 2004 to 2007,” he said. “Then, people were coming here and buying the biggest home they could get with their money. Now, people are coming here and purchasing more conservatively. They want to travel sometimes, and they don’t want huge tax burdens.”