Smart locations fare better as home prices plummet, foreclosures rise

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.