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California’s hottest real estate: Home prices are still rising in these ZIP codes – San Francisco Chronicle

The California housing market continues to cool from the pandemic buying frenzy, with some areas seeing home prices decline for seven months in a row.

Among the factors fueling the decline have been inflation, economic uncertainty and soaring interest rates, experts say. The average monthly mortgage rate was 6.15% for the week ending Jan. 19, up 73% from a year ago.

Even so, home value growth in some California outlier neighborhoods has bucked the trend, continuing to rise even as parts of San Francisco and Los Angeles push further into the red, according to the latest data from real estate listings site Zillow.

While the increases in the hottest ZIP codes over the past six months don’t match the torrid pace of the early pandemic months, experts say they are encouraging signals for the market as a whole.

Largest increases in Southern California

Six Southern California ZIP codes made the top 10 for highest home value growth from June-December 2022. Five of those were in Imperial County, at the southeastern tip of the state.

At No. 1 statewide was the 92250 ZIP code in the Imperial County city of Holtville. The typical home value there was $316,377 in December 2022, up 10.2%, from $287,049 in June 2022, according to Zillow. At No. 2 was 92274 in Thermal in Riverside County with 8.8% growth, followed by three more Imperial County ZIP codes.

The 92251 ZIP code in the city of Imperial was third on the list, with home values jumping 7.5% from $385,318 in June to $414,327 in December. Right behind it at No. 4 was 92231 in Calexico, with a 7.2% bump from $344,659 in June to $369,307 in December. In fifth place was El Centro, where home values rose 6.5% in the six-month period. Also in the top 10 was Brawley in Imperial County, at No. 7, with a 5.4% increase.

Zillow’s estimates for typical home value are based not only on the prices of recently sold homes, but also on the estimated value of all homes within a ZIP code based on the selling price trends of similar homes in the area.

Home values for the six months ending in December 2022 increased 5.4% to 10.2% in six ZIP codes in Imperial County, including in Calexico where this home is located, according to data from Zillow.

Home values for the six months ending in December 2022 increased 5.4% to 10.2% in six ZIP codes in Imperial County, including in Calexico where this home is located, according to data from Zillow.

Courtesy of Carla Ramos

Carla Ramos, a real estate agent in Imperial, said she wasn’t surprised that ZIP codes there were among the hottest in the state for real estate value.

“Right now inventory is low,” she said, and available homes are snapped up quickly. “A lot of investors from San Diego and L.A. come to buy cheaper properties, and lease for a great amount of money.”

She said there are a lot of renters in the area, and available units are hard to come by. While the city of Imperial is seeing housing growth, she added, new construction is rare in the rest of the county, which has further constrained supply.

According to the U.S. census, the median age in Imperial County is 32.8 and the population is 86% Hispanic, with a median household income of $51,809.

Residents of Imperial County, which borders Mexico and is home to two state prisons, typically include corrections officers, teachers, law enforcement — including many who work for U.S. Border Patrol — and health care workers. Farms, meat processing plants, the solar panel industry and construction companies are also major employers, but many of their workers live in Mexico and cross the border daily because it has become too expensive for them to live in Imperial County, Ramos said.

Home buyers include younger people who have stable jobs and are looking for starter homes, as well as families, many living in multigenerational households.

Ramos said she doesn’t see the demand stopping anytime soon, “unless they build 1,000 homes … but nothing is being built” in Imperial County, she said.

Coastal towns see positive growth

Over on California’s coast, ZIP codes in the cities of San Luis Obispo, Santa Cruz and Santa Barbara also landed in the top 15 for home value growth in the past six months.

The ocean remains a perennial draw, including for many who can’t or don’t want to pay tip-top prices, real estate experts said.

“There is demand from people who want a coastal lifestyle and are looking for places relatively less expensive,” said Matt Kreamer, director of brand communications for Zillow. “You wouldn’t necessarily think of Santa Cruz as a bargain, but compared to some of the nearby coastal areas, there are bargains to be found.”

The 93110 ZIP code on the west side of Santa Barbara saw home values increase 2.6%, from $1.88 million to $1.93 million, from June to December 2022.

According to the U.S. census, the ZIP code has a median age of 43.4, a median household income of $99,261 and a population that is 63% white and 27% Hispanic.

Home values in the 93110 ZIP code in Santa Barbara increased 2.6% in the six-month period ending in December 2022, according to Zillow.

Home values in the 93110 ZIP code in Santa Barbara increased 2.6% in the six-month period ending in December 2022, according to Zillow.

Randy Solakian Estates Group

The ZIP code includes the high-end oceanfront community of Hope Ranch. Randy Solakian of Randy Solakian Estates Group, who has current listings in the community, called it “a little bit of utopia” because it is safe and private, while still offering activities, good schools and cultural amenities.

“Many families with school-aged kids are very determined to buy a home in Hope Ranch,” he said. “A lot of people come in without families too, mature adults with grown kids and grandkids who want a place for family gatherings and holidays.”

Properties in Hope Ranch range from a minimum of 1 to 2½ acres, all the way up to 50 acres, Solakian said. He added that it’s not a gated community, but it has private roads and beach access, and also offers equestrian trails dating back to the community’s founding in the 1920s.

No highways or railroads run through the community, and oceanfront views are unimpeded, making it especially unique and desirable, he added.

Hope Ranch also encompasses a private school, golf club and country club, and while those amenities aren’t free, many join as members, Solakian said.

The community was also untouched by the devastating 2017 Thomas Fire — the eighth-largest wildfire in state history — making it more attractive to home buyers, he said.

While buyer demand has cooled slightly “coast to coast” in the past six months, Solakian said Hope Ranch in 93110 is among the exceptions. He cited low inventory as a contributing factor.

“There’s not a lot of sellers,” he said, “so if somebody qualified comes in and wants a property, there’s very few options, which helps maintain price stability.”

Bay Area, L.A. see big declines

San Francisco and Los Angeles counties dominated the list of California ZIP codes with the biggest home value declines in the past six months.

The biggest drop from June to December, 15%, was in the 91108 ZIP code encompassing San Marino, a wealthy enclave near Pasadena.

Neighboring 91030, which includes South Pasadena, saw the second-biggest home value decline of 12.1% in the past six months.

The third-biggest decline was the 94116 ZIP code on the west side of San Francisco, encompassing the Sunset, Inner Parkside and Forest Hill neighborhoods, as well as part of West Portal. Home values there declined 10.2%.

Home values in the San Francisco metro area — which includes Alameda, Contra Costa, San Francisco, San Mateo and Marin counties — have taken the biggest hit among all large U.S. metros since mid-2022, declining 6% since the start of May, according to Zillow data.

However, despite the declines, already-pricey Bay Area real estate soared into the stratosphere during the first half of the pandemic — and as a result, it remains among the most expensive in the country, and home values are still elevated compared with a year ago in many ZIP codes.

While some people living in these areas may worry about their overall home values and what that means for their investments, Kreamer said he sees no cause for concern.

“Even in the three ZIPs that have seen the sharpest downturn, home values are still up between nearly 5% and more than 16% since 2019,” he said. “It wasn’t possible for home values to continue to skyrocket 15-20% like they did in late 2020 through 2021, and this correction is putting the market back toward something more normal and balanced.”

He added that those looking to buy in the areas with the most significant declines are at an advantage, as they “have more time to shop and make decisions, and are less likely to face a bidding war.”

Over the next few months, Kreamer said he expects “more of the same, as the market continues to rebalance from the pandemic surge.”

“The places that are the most expensive — and the ones where prices grew the most during the pandemic — will continue to cool the fastest,” he said, “and the less expensive markets will continue to stay the hottest, relatively.”

Kellie Hwang is a San Francisco Chronicle staff writer. Email: kellie.hwang@sfchronicle.com Twitter: @KellieHwang

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