Piedmont Neighborhood News

What's happening in Piedmont, CA

Housing Trends and Piedmont Finances

Posted by drewbendon on November 1, 2007

A lot has been written about the decline in home sales resulting in decreased transfer tax revenue for the City of Piedmont. Jeff Weiler has mentioned this several times in his Piedmontage pieces in the Piedmont Post, so I won’t belabor this point. I must admit though, that since the housing market has cooled I have been comforted by the thought that our good school district would soften the blow on our community. Now I’m not so certain. I recently received Scott Hill‘s e-newsletter showing 3rd Quarter Home Sales data comparisons between 2007 and 2006 for Piedmont and neighboring communities and was struck by the fact that, for the most part, the neighborhoods with “better” school districts (Piedmont, Orinda and Moraga) did not fare better, and in some cases fared worse than neighboring communities. While this third quarter view is only a snapshot and not necessarily indicative of a larger trend, it bears watching. If Piedmont’s schools don’t buffer us from the effects of the housing slowdown, projections of revenue for the City might actually end up being worse than we thought.

– Drew

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4 Responses to “Housing Trends and Piedmont Finances”

  1. harvitt said

    I really wouldn’t be too worried. We’re one of those few who bought in the 3rd quarter and are very excited to be moving to Piedmont. The schools will indeed soften the blow to Piedmont; they are the reason we are moving there, and the reason other families we know are hoping to. The Oakland schools are not fixing themselves and private schools are not getting cheaper. The number of listings was down as people who have flexibility realized that this probably isn’t the best time to sell, but the demand for Piedmont remains. While there are a few properties that have been sitting on the market for a long time, in each case there is a pretty obvious reason (location/unreasonable asking price/condition or size of house/etc.). In fact, we bought a fixer and there were a surprising number of offers. The decline in sales has much more to do with the decline in number of listings rather than in decline in demand or a decline in price (unlike our house in Oakland which certainly has gone down in value). We have been carefully watching the “cheaper” half of the Piedmont market for a while, and only a few houses have gone for less than we expected. When you are dealing with a small sample size as you are in Piedmont, you have to view the statistics with suspicion. What may suppress turnover and transfer tax revenue is that we are in the midst of the mortgage availability crisis and that perhaps it is not a good time to sell, and that for those that are looking to move out of Piedmont it is perhaps a difficult time to buy (others not looking to sell now/difficulty arranging financing) as well. — dan

  2. drewbendon said

    Thanks for the comment! All of those factors, though do still portend lower tax revenues don’t you think? I think of this in the context of all of the wish list projects that are out there, Coaches Field, Hampton Field, the Civic Center plan with the pool. One of the things that has really bothered me about the Civic Center plan in particular is that it is entirely dependent on City funding. There has been no effort to expand the small commercial area to improve the tax base and provide the amenities the folks want and there has been no discussion of making it possible, for example, for a private developer to develop 801 Magnolia. The process is more like “central planning” than planning in the sense I am used to and/or hoping for.

  3. harvitt said

    Well, thank you for your newsletter/blog! I hope that more people leave comments; I was kind of surprised for example that your recent entry on the pool issue didn’t draw comments, but I’m new to Piedmont, so what do i know? Anyway, I wouldn’t be too sure that the number of sales will stay low. That number depends mainly on the number that want to sell, and when i think of the main reasons people probably sell in Piedmont (for retirement elsewhere, their kids are now done with the Piedmont schools and they can downsize or relocate, a move within Piedmont, job transfer, divorce….), i don’t know that any of them will be too affected. Sure, some will try and hold off for a better time to sell, but others may think that things will not improve for a while so lets sell now. People may hold off selling for a half year, but not forever. Total transfer tax income is based much more on the number of houses sold than whether the sell price was a bit higher or lower. (A $1,000,000 house yields $13,000 in transfer tax, but it goes for $950k, $12,350). So, my uneducated guess is that aside from the current bump in the road, this revenue stream will not change much. Still, from you write, demand for revenue will outpace actual revenue, so something will have to give.

  4. adamray1 said

    Hi Drew,

    Have you looked at the statistics from the mid-90’s? That’s the only time I can think of when the housing prices have retraced in the Bay Area. That might be a good data point to predict the future.

    I guess I’m also relatively hopeful because of the law of supply and demand. Piedmont’s a small community. How does the churn rate (inventory) compare historically to the rest of the East Bay? I’d guess that it’s low–exactly because so many people have kids in school.

    Despite my optimism about housing prices, I’ve been aghast at how cavalier the community is about some of this huge capital projects (schools, city center, etc.) But that’s for another discussion.

    /a

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