Three zip codes, eight-year price look-back
Originally appeared in Bay Area News Group publications on November 1, 2013
If you don’t know history, then you don’t know anything. You are a leaf that doesn’t know it is part of a tree.
– Michael Crichton
2013 has been an excellent year for sellers because low interest rates and insufficient inventory have led to high prices. Buyers, conversely, have found this to be a challenging real estate market.
I hear many opinions about local prices. With so much information online, it is easy to draw conclusions, but are they correct? Some say prices have surpassed highs of our previous seller’s market, others think not.
To answer this question, I chose three popular Oakland zip codes, 94602, 94611 and 94618, and charted Multiple Listing Service (MLS) statistics back to 2005, the peak year for closed sales.
Which stats were used?
For each zip, I reviewed number of solds, sales price (average) and days on market (average). Data for 2013 are through October 25th.
This zip includes Glenview, Dimond and Oakmore. Closed sales crested at 315 in 2006 (308 in 2005). In comparison, 2013 to date is 258, so the totals will probably be close. 2009 was the nadir at 206. Days on market are 20 this year, the lowest in this span. The highest were 40 in 2011 and 39 in 2008. Sales prices were tops in 2005 and 2006 at just above $655,000 and lowest in 2011 at $448,000. Prices in 2012 were $489,000 and rose to almost $641,000 this year. Clearly, timing can be the difference between making or losing a large sum of money.
Montclair and the Piedmont Avenue area are in this zip. Closed sales spiked to 365 in 2005 and dropped to a low of 209 in 2009. Days on market ranged from 18 in 2005 to 47 in 2011.
$963,000 was the pinnacle for prices in 2007 (2006 was close) and they sank to $675,000 in 2011. 2013 prices to date are almost $859,000, $129,000 more than 2012.
This is one of the most sought-after and priciest zips because it is Rockridge. At 142 to date, we are on track this year to approach the 165 solds in 2007. 2009 saw the low of 115. The 18 days on market average of 2013 is half the tally for last year and two below the 20 of 2005.
With a current average sales price of $1,029,000, Rockridge, although on their wish list, is out of range for many buyers. Today’s prices, however, are $87,000 lower than they were in 2007, but $138,000 higher than 2011. Changes like this are difficult even for experts to predict.
Digesting the data
Contrary to what it may feel like, the average sales price for none of the three zips cited above is now higher than its previous peak.
Prices tend to continue rising, sometimes for a number of years, after the market has reached its apex. This becomes clear only when looking back. In all three zips, as has been true in previous seller’s markets, prices kept climbing in years after the 2005 peak.
Figures can vary from zip to zip and neighborhood to neighborhood. Do not assume; get accurate facts. Generalized statistics may not be totally applicable to a specific home, but it cannot hurt to have an overview.
Folks who buy at the top are most in danger of losing money when they sell. There were a plethora of cases in the last seller’s market where buyers paid more than was warranted. This was a major factor, as was too-easy-to-get loans, in the avalanche of distressed properties beginning in 2008.
Each zip has more and less desirable streets and sections which significantly influence prices. It is useful for buyers and sellers to know the average, median, highest and lowest selling prices for their location. Overpricing for a seller can sometimes be as harmful as overpaying for a buyer.
As real estate is a “sales” business, there are licensees who emphasize making the sale rather than educating and protecting their clients. Once the music stops, it is buyers who overpaid that have a big problem, although this may not be apparent for years.
As a buyer or seller, do not make the mistake of thinking you can learn enough on your own by going online. Aside from inaccurate information, which is rampant, Internet sites and even the MLS are often not adequate to keep you out of trouble.
In 2013, some buyers have paid the highest prices ever for a particular neighborhood or part of it. From an investment standpoint, this is very risky. When, not if, the market changes those homes might sell for substantially less. It is likely that these buyers did not ask their agent the top price previously paid for a comparable home in that area.
Sellers need to request their agent to provide this kind of historical perspective in addition to more recent sales. This is an important aspect of pricing.
Similar to what has happened in Brooklyn vis-a-vis Manhattan, Oakland real estate has been benefitting from San Francisco’s unaffordability. For years, many buyers who were priced out of the City have bought in Oakland. They can afford prices that are high here, but unworkable there.
Caution: Do not allow others with much greater financial resources to push you pay a price you may regret in the future. If the numbers do not make sense, keep looking. It may take longer, but you will be glad you did.
Buying or selling an East Bay home involves too much money for guesswork. Do your homework and avoid expensive mistakes.