Some closely watched statistics show that the City by the Bay's housing market is sizzling, but some observers say it's merely simmering — and could cool off in 2011.

According to the latest S&P/Case-Shiller Home Price Index, the San Francisco-Oakland-Fremont, Calif., MSA leaped 18.0% year over year in April, the largest annual increase among the 20 cities covered by the index during the month.

The median price for existing, single-family detached homes shows an even stronger gain, shooting up 28.9% year over year to $592,930 in May for the San Francisco Bay region, according to the California Association of Realtors. Sales increased 17.6% over the same time.

Across the Bay Area, months of supply — measured by how long it would take to sell homes at the most-recent month's sales pace — have been shrinking. Generally, housing economists and analysts consider roughly six months of supply a stable market. Anything less than three months suggests a tight market that favors sellers' ability to raise prices.

In San Francisco, there were just 3.1 months of inventory for existing, single-family homes in June, according to CAR. In Berkeley, the metric stood at 2.5 months of supply in the second quarter for all residential, according to Clarus MarketMetrics. In Oakland, the figure was 2.3 months for detached homes as of June, according to the Oakland Association of Realtors. In Alameda County's Livermore, the figure for detached homes stood at a piping-hot 1.9 months in June, according to the Bay East Association of Realtors.

Meanwhile, supply of rental units is tight, too. According to Reis Inc., vacancy rates in the San Francisco metro area are at 5.0%, compared to the national average of 7.8%.

But some local observers are skeptical that the market is quite that hot.

Kenneth Rosen, chair of the Fisher Center for Real Estate and Urban Economics at the University of California, Berkeley, told SNL that he has trouble believing prices have shot up 18% on average, as Case-Shiller reports. Rosen said that by including foreclosure resales, which were heavier a year ago, the Case-Shiller index was artificially low a year ago. With fewer foreclosure resales in 2010, the index appears to have rocketed more than the actual price movement, in Rosen's opinion.

Maureen Maitland, vice president of index services at Standard & Poor's, agreed that there were more foreclosures a year ago but said the index should look at all sales and reflect the price of all single-family homes sold in that month.

Some analysts question whether those piping-hot months-of-supply numbers will hold. Mark Hanson, president of Mark Hanson Advisers, a real estate consultancy firm in Menlo Park, Calif., told SNL that he is concerned about both "trumped-up demand because of the tax credit and supply that's been artificially held down" by servicers slow to foreclose.

A cautious outlook

Although the market, by whatever measure, is positive now, some local observers are not sure whether the good times will last. Instead, they are concerned about the impact of nagging foreclosures, persistently high unemployment and scarce affordability.

Sudip Chattopadhyay, chairman of the economics department at San Francisco State University, says the tax credit glossed over chronic problems in the housing market driven by a fundamentally weak economy. He told SNL that he was "not very optimistic" that the recent price gains could be sustained.

High unemployment rates could affect the market, too. The Bureau of Labor Statistics shows the nonseasonally adjusted unemployment rate hit 10.1% in May for the San Francisco MSA — with higher rates in the more affordable suburbs than in the expensive core city — compared to 9.3% nationally. If the rate remains high, sales and price gains may slow as potential buyers exit the market — although they could swell the ranks of renters and tighten vacancy rates even more.

Hanson, the local real estate consultant, warns that foreclosures are just now hitting the upper end of the market, which will precipitate a fall in prices that have been relatively resilient so far.

Zillow.com chief economist Stan Humphries also points to foreclosures as a reason that the worst may not be over. Like Phoenix and Los Angeles, other markets that have had big price swings, San Francisco's market still has "quite a bit of negative equity," he told SNL. That's likely to throw off more foreclosures, he predicted.

Although home prices have risen recently, some question how high they can go in an area where affordability has always been a problem. Patrick Killelea, a Bay Area blogger who runs patrick.net andsells a service that helps landlords identify rental investments, told SNL that recent price gains are "unsustainable," predicting that prices in expensive areas will fall gradually over time to match up with average incomes.

He noted that incomes among San Francisco communities do not vary as much as home prices. "The price of housing can vary by almost a factor of 10. It's just crazy; you can pay $200,000 on one side of the bay and $2 million on the other."

But Rosen, the Berkeley economist, notes that although buyers must stretch to buy a house, "we have basically the best affordability in two decades in California." He predicts demand will remain strong, and home prices will keep on an upward pace, rising between 3% and 4% in 2011 and 5% to 6% in 2012.

Some analysts might not be forecasting a decline in prices but hoard plenty of concerns about housing market's trajectory. David Stark, public affairs director for Bay East Association of Realtors, points out that not all markets in the San Francisco MSA have seen prices rise. Stark's group covers Alameda County, which has a few communities with declining year-over-year median home prices, such as San Lorenzo, Castro Valley and the city of Alameda.

Jobs are scarce in the region since an auto parts manufacturing factory left, and local and state governments are too strapped to do much hiring.

"I can't just look at these numbers and say, 'Golly, things are swell,'" Stark said. "Because I'm looking at my crystal ball [that] says, 'There's no guarantee that there's going to be a happy ending to this story.'"