Friday, Aug. 01, 2008

Expert: Foreclosures forcing commuters from San Joaquin Valley back to Bay Area

Could real estate woes persuade residents to abandon the Northern San Joaquin Valley?

Bay Area transplants -- nicknamed BATs -- swooped into the valley en masse during the 2000-to-2005 building boom. They came in search of less expensive housing and filled new-home neighborhoods throughout Stanislaus, San Joaquin and Merced counties.

But the region has become the foreclosure capital of the United States as lenders have repossessed 17,000 homes during the past year. Many of those houses now sit empty.

Where did their residents go?

At least one industry analyst suspects the valley's foreclosed families are headed back to the Bay Area, especially those who had been commuters.

"We believe that there is going to be a tremendous shift back to urban areas, led by those who bought homes in the outlying areas who lose their homes to foreclosure. They will choose to rent near work to save money," wrote John Burns, a national real estate consultant in his July building market analysis.

"The high price of gas is playing a very important part in home buyer decisions. The phrase 'drive until you qualify' has less meaning these days as each mile becomes more expensive," Burns said.

Traditionally, the farther from the Bay Area a home was located, the lower it was priced.

During the 2005 peak of the building boom, for instance, homes sold for a median $660,000 in Mountain House, west of Tracy. But if home buyers drove 40 miles farther to northeast Modesto, the median home price was $444,000.

That was a savings of $5,400 for every extra mile they drove from the Bay Area.

So driving more was economically worthwhile, especially since gas cost an average $2.29 per gallon in December 2005, according to the AAA gas price survey.

But gas prices have nearly doubled since, to $4.56 per gallon on average in early July. That makes long commutes much less affordable.

Because of that, Burns is advising his developer clients to "Put your money near the job centers."

Steve Dutra, vice president for John Burns Real Estate Consulting based in Sacramento, said his company's population "shift back" prediction applies to Stanislaus, San Joaquin and Merced counties, along with other parts of the country.

"We saw similar (population shifts) happen in the 1990s, but nothing close to this level," Dutra said. He noted how Northern San Joaquin Valley new home building permits have plummeted while foreclosures have soared. And the region's housing problems aren't over, he cautioned, because more mortgages are scheduled to reset to higher interest rates.

Valley population declines have not been detected yet by U.S. Census Bureau surveys or annual estimates made by the state Department of Finance. Such tallies aren't released until many months after statistics are gathered.

"The data won't show it yet, but we know (the population is shifting) from our clients' reports," Dutra said. He noted that his clients are builders who monitor where people who are shopping for housing are coming from.

Another indicator of population movement is public school enrollment.

This is summer vacation for most schools, but some Stanislaus County districts already are noticing shrinking enrollments.

"For the first time in six years, we had declining enrollment last year," said Rick Hennes, assistant superintendent for the Newman-Crows Landing Unified School District. He said the district had just over 2,500 students, which was about 80 fewer than the previous year.

"It would be hard not to think there was a connection (to all the foreclosures)," Hennes said. "And if you factor in gas prices, I think more people are moving back to the Bay Area."