The foreclosure site PropertyRadar reported that home sales across six Bay Area counties plunged to an eight-year low this fall, and it’s evidently the fault of the cheapest properties on the market.
All told, PR records a 10 percent decline in home sales across the Bay Area for the first nine months of 2016, relative to the same period in 2015.
That includes a 13-percent drop in San Francisco, even as prices climbed nine percent year over year.
This mostly corresponds to the chatter and speculation from analysts and realty hubs all year about a general cooling of the market. Where things get weird, though, is when you look at which house aren’t selling.
It’s the most inexpensive homes—those priced at $500,000 or less—which saw the greatest degree of decline, with sales down 26.7 percent over the year.
On the other hand, sales of seven-figure homes actually went up a tiny bit (0.4 percent), the only price bracket to see an improvement compared to 2015 in the PropertyRadar data.
Are there really that many Bay Area homes selling for under half a million dollars to begin with? As it turns out, yes, nearly 11,000 of them so far this year, (compared to over 12,600 homes sold for over $1 million).
The trick is, a lot of these are what are euphemistically called “distressed properties.” In most cases, these are foreclosures, or other emergency sales that suggest very unfortunate circumstances.
Yes, our gangbusters housing market the past few years has rested on a bit of a foreclosure foundation.
While foreclosure sales have been declining for years ever since peaking in (you guessed it) 2009, they’ve taken a particularly big dip this year.
Part of that is just soaring prices and property values.
Back in April, the analytics firm Black Knight estimated that even if home values were to suddenly drop 10 percent, there would only be 350 homes underwater in San Francisco and San Jose combined.
But there’s also the fact that you can only get so much water by squeezing the same sponge year after year. In San Francisco, foreclosures tend to hit one particular neighborhood again and again.
Just today, eleven of the 23 foreclosure sales listed on the MLS aggregate site Redfin are around the Bayview area.
In the San Francisco Chronicle’s foreclosure database, more than one in seven San Francisco foreclosures from 2001-2014 happened in the 94124 ZIP code.
And the realty site RealtyTrac estimates that while the city overall has a foreclosure rate of one in every 4,405, that southeastern ZIP code suffers a rate of one in every 854. That’s nearly four times that of the next hardest hit area.
Interestingly, other high-foreclosure zones include wealthy neighborhoods like South Beach and the Castro. But none of them come even close enough to the rates seen in the Bayview area to be mentioned in the same breath.