Home prices in the San Francisco Bay Area surged in April as a booming tech industry helped the region avoid much of the slowdown seen in California and elsewhere across the country.
The price gains mirror those during the region's tech bubble and come as some industry observers question whether those days of irrational exuberance have returned.
"Things are just going as crazy as ever," said Leslie Appleton-Young, chief economist for the California Assn. of Realtors.
April's median sales price in the nine-county region climbed 5.4% from March to $610,000, the highest since fall 2007, research firm DataQuick said Wednesday. The impressive price gains, following a 7.2% rise in March, pushed the region's median price to just 8% below its housing bubble peak of $665,000.
And sales are on the upswing. A total of 7,555 new and resale houses and condos changed hands in April, nearly 20% more than in March — a gain far above average. Sales were essentially flat compared with last year, after falling sharply for six straight months.
In Southern California, April sales fell 6.6% from last year — the seventh straight month of declines. The national slowdown spurred Federal Reserve Chairwoman Janet L. Yellen to recently label the housing market a potential risk to the larger economic recovery.
But the booming tech economy, which underpins the Bay Area housing market, has some asking whether Silicon Valley is in a bubble, similar to the one that popped in 2001 and led to a national economic downturn.
Observers are raising concerns that if the window for Internet initial public offerings closes and venture capital dries up again, the region could feel another economic pinch.
But at the same time, major employers such as Apple, Google, Facebook and LinkedIn have either begun construction or announced plans for new campuses that will be filled by tens of thousands of new employees. With only modest amounts of new housing being built in the Bay Area, the housing market could remain tight for years to come, observers say.
"We are adding more housing, but it's still not enough to keep up with demand," said Jed Kolko, chief economist for real estate website Trulia. "We will see home prices continue to rise in the Bay Area."
That's troubling for middle-class families. Indeed, no market is further out of reach for the typical family than the San Francisco region, according to a report released this week. A household earning the region's median income — $84,129 annually — can afford only 14% of the homes for sale in San Francisco, Marin and San Mateo counties, real estate website Trulia reported. In Los Angeles County, Orange County and the New York area, a middle-class household can afford roughly 25% of the homes on the market.
The region's rising rents and home prices have spurred a backlash against the tech industry. Many local residents worry the technology boom is transforming the region — and especially San Francisco — into a rich enclave with no place for the middle class. In San Francisco, the median sales price is nearing $1 million, and has climbed 13.2% in the past year to $922,500.
If the latest boom is unsustainable, the housing market will take a hit when the frenzy stops, economists said. But if the dot-com bubble is any guide, the pain wouldn't last long.
After the bubble burst, the region's housing market cooled and prices fell slightly year-over-year in October and November of 2001, according to DataQuick. But they then climbed steadily upward, until the larger housing bubble eventually popped.
There are some signs of cooling in the Bay Area. In April, prices climbed 19.6% from a year earlier, compared with 33.3% in February. And sales only stopped their year-over-year plunge in April. But the Bay Area remains one of the hottest markets in the country.
The recent housing slowdown in the Bay Area has been far less pronounced than elsewhere, Kolko said. In Los Angeles and Orange counties, homes are taking longer to sell now than they did last spring. But the pace has only quickened in the Bay Area, according to Trulia data.
"The recent price increases in the Bay Area — especially San Francisco and San Jose — are based more on job and income growth," Kolko said, whereas in Southern California, investors have played a large role.
Appleton-Young said the Bay Area housing market is, in large part, riding on the continued growth of tech companies.
"I think it's going to slow down," she said of the region's tech and housing boom. "Nothing lasts forever."