Southern California home prices barely above bubble peak

SD home value increase since 2007 meh

Metro home price comparisons (2007 and 2017) in major U.S. cities
  • Metro home price comparisons (2007 and 2017) in major U.S. cities

San Diego metro home prices are now above their median home values when prices peaked roughly a decade ago — $550,900 today and $543,600 when the bubble burst in 2007 — a gain of 1.3 percent. This is according to a new study by Zillow.

In the Los Angeles metro area (which includes Long Beach and Anaheim) median prices are now $611,100; they were $604,000 at the bubble peak. That's a gain of 1.2 percent.

But look at the Bay Area, center of the tech industry. San Francisco's median is now $859,000; it was $700,300 at its bubble peak. So the gain is a sturdy 22.7 percent.

But look at Silicon Valley, represented by the San Jose metro area. The median today is $1,027,100; at the bubble peak it was $745,300 — a gain of 37.8 percent.

The difference is no doubt the tech industry, big and bulging in both Silicon Valley and San Francisco. So the question now is: is tech a bubble? It was a colossal bubble in much of the 1990s, culminating with a crippling crash that began in 2000.

San Diego and Los Angeles are doing about the same as the nation as a whole. The nation's gain has been 2.1 percent. The median United States home value is now $4100 above the bubble peak, and almost half of individual homes are worth more than they were before the crash brought on by the bubble and Wall Street mischief that was tied to housing prices.

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My experience with Zillow's data is their numbers are typically 20% above real world buying and selling facts. At least that observation is true in the neighborhoods I track regularly in San Diego.

Here's an example: a nearby neighbor initially listed her home for sale at $1.5 million. This was very close to its Zillow listed value of $1,550,000. After sitting on the market for months and a two price reductions it sold for $1,237,000. Roughly 20% less than the so called Zillow "value".

Are values unreasonable high? Depends on who you ask. The family who purchased the home above were "pleased" with the price and plan on remodeling it further before moving in. I am pleased too as it raises the value of my home, which is larger, by a similar percentage. The seller however was not as happy believing the value was the inflated Zillow "value".

But as we have seen over and over, what goes up, comes down.

JustWondering: I am not questioning your observation, but I am not sure why Zillow should give publish values 20% above a realistic price. Real estate salespeople who use Zillow often try to lower a home price artificially so they can get a quick sale and move on, even though their commissions might be lower.

Zillow's estimates are based on comparable sales prices in a region. Zillow comes up with sound stats, in my opinion, but again, I won't gainsay yours. Best, Don Bauder

just as I thought, real estate agents manuliplat things and take advantage of the persons they are hired to represent. ( sounds a lot like how lawyers work)

Murphyjunk: I would suspect that real estate agents are held in public esteem about as high as members of Congress. Best, Don Baude

Either I'm blind, or San Jose wasn't on the part of the listing that shows above. I will take your word for the million-dollar-plus median and nearly 40% run-up. That area, and more specifically the peninsula including Palo Alto and San Mateo, isn't doing much to increase its housing stock. That is unfortunate because in that area the job market is white hot. The valuations are spilling over into San Francisco, pushing up rents and values there. Some of the tech operations on the peninsula, which includes Google and Facebook, are now running stealth buses for employees to and from the city to the worksites to the south. "Stealth" refers to the buses, new and shiny over-the-road coaches with smoked glass windows and no markings at all. Do they escape notice? Hardly, San Franciscans know the score on what they are and why they show up in their 'hoods twice daily.

Is that while hot job market a bubble? Hard to say, but most of the bubbles have had their big runs prior to the pop. And nothing like that ever exists forever.

Visduh: The median home value in the San Jose metro area is now $1,027,100, according to Zillow. That's up 37.8 percent from the 2007-2008 peak. Yes, the Silicon Valley job market is white hot and salaries are very high. Companies give employees tremendous benefits and do run the buses you allude to. (We have two sons in Silicon Valley.)

Is it a bubble? Who knows? Remember, the Federal Reserve did not see the housing bubble of 2007-2008. Best, Don Bauder

In 2003, we purchased a real fixer-upper in Del Mar Heights (Del Mar ZIP Code, but in the city of San Diego) for $679,000. Put a lot of sweat equity and about $100,000 in improvements and sold the house in the summer of 2007 for exactly $1,000,000. After the crash I would look at Zillow and it went down to a “Z-Estimate” of $785,000 in March, 2011. Today the Z-Estimate is $1,130,000.

So that would be a 13% increase. JustWondering has a good point because I think the current Z-Estimate is rather high. The craziest thing was when we sold it in 2007, it worked out to $709 a sq. ft. whereas when we bought it four years earlier it was $481,000 a sq. ft. I’m a believer that the cost per sq. ft. is a more important consideration when comparing values in a neighborhood and the average sq. ft. cost compared to other communities. Just like the cap-rate is the most significant metric for purchasing rental investments.

The subject property is a 1400 sq. ft. single family home (rambler style, one-story) on a 7,300 sq. ft. lot. Oh it has a nice view of Carmel Valley, and a large pool, and one-mile to the beach...but 3BR 2BA 1400 sq. ft. for one million dollars or more?

Ponz, At this time, such a home would be worth far more than that in many areas around SF bay. Location, location, location. And what's wrong with Del Mar Heights? That may not be the highest "rent district" in the county, but it's close.

Visduh, nothing is wrong with Del Mar Heights. But I hated the ZIP Code because every bid on got on anything was higher than if I said I was in, say, Sierra Mesa.

"Oh, you live in 92014? That'll be 50% more because we think you have the money."

I live in Lemon Grove part time to help with my 92 year-old mother and the rest of my time in Coronado. Coronado is so fantastically more friendly and refreshing than Del Mar.

Ponzi: Yes, but Coronado's median home values are among the high ones in San Diego County. I understand the Navy is building some affordable condos there for troops and their families. That could bring the median down. Best, Don Bauder

Visduh: Oh yes, that home would be worth much more in the Bay Area, where prices are the highest in the nation. Best, Don Bauder

Ponzi: I can see that house being above $1 million. It has an excellent location. My guess is that the homes that changed hands in the neighborhood went for high prices, and that explains the estimate's altitude. Of course, I don't know the house, and you do. Best, Don Bauder

Grey Jackson: Yes, millennials get the short end of the stick. As you point out, that is why so many are still living at home. Don't be so sure that when Baby Boomers start dying off that home values will drop sharply, if at all. There are other factors, such as interest rates, that affect home values. Coastal California homes may stay extremely high (although global warming may make it uncomfortable to live in Southern California at the time Baby Boomers die off.) Best, Don Bauder

Yeah, beach front property in La Mesa, and Kearny Mesa! And California will drop off the continent too as CalExit is enacted. What a future and can hardly wait.

JustWondering: Check the seismologists and the climatologists. La Mesa may be on the beach in a number of decades. Best, Don Bauder

Then there is hope for my Arizona beach front property.

AlexClarke: The salesman who sold you the Arizona beach front property should not be sent to jail. His timing was just a few centuries off. Hold on. Your family may be able to sell it in 2200. Best, Don Bauder

Well, I am ahead of the game as I have a lot of sand which must be the precursor to an ocean arriving.

AlexClarke: The Great Sand Dunes National Park, which has the tallest dunes in North America, is in Colorado. Does that mean that Coloradans can expect to live on ocean front property in a few thousand years? Best, Don Bauder

don bauder, The Los Angeles-Long Beach-Anaheim Metro area includes ALL of Orange County. According to Zillo, the current median median home value in Orange County is $687,000, which is a 3.9% rise since last year. As best as I can recall, at he bubble peak it was in the neighborhood of $645K, give or take, which is about a 6.5% increase over peak. So is it fair to say that it is more expense to live in Orange County than in San Diego? Perhaps I should tell my daughter that if she wants to keep living in the SC house, she has to buy it from me. Hahaha.

danfogel: Yes, the L.A. metro area contains all of Orange County. The federal government defines metro areas by citing three major locations within the city: Chicago-Joliet-Naperville is the Chicago metropolitan area, for example. I know you know that. The median value of Orange County homes is higher than San Diego homes. Best, Don Bauder

I read in this AP story Seattle, another hi-tech community, is leading the nation not only in higher minimum wages, but housing too. I'm just wondering if there is a correlation?

Seattle Home Price Surge

JustWondering: I have read that the high minimum wage in Seattle has not been economically harmful. But there is another side, too, and economists I respect, such as San Diego's Kelly Cunningham, warn that a higher minimum wage will kill jobs. More data are needed on this point. As to the correlation with housing prices, off the top of my head I would doubt it. I would guess that Seattle's high housing prices are driven by high salaries, often in tech. A higher minimum wage might permit some low-income families to buy low-priced homes, but would that drive up the median value of homes significantly? I would doubt it. Best, Don Bauder

'Scuse my ignorance, but are these calculations adjusted with the CPI?

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