2015 Oakland selling prices – a paradigm shift?
Originally appeared in Bay Area News Group publications on January 23, 2016
Paradigm: “Cognitive framework shared by members of a group.”
Paradigm shift: “A significant change in (underlying assumptions of) the paradigm”
For my entire real estate career, I have maintained a basic assumption, a paradigm, of how the market operates. 2015 was the year I began to seriously question whether San Francisco Bay Area real estate has fundamentally and irrevocably changed.
Just as Manhattan prices have pushed those in Brooklyn to astonishing heights, San Francisco, Marin, Orinda/Moraga and Peninsula prices have had the same effect on Oakland. I look at prices on both coasts and simply shake my head.
As in recent years, I used Multiple Listing Service data to review the number of sold single family homes, sales price (average) and days on market (average) for each ZIP below.
This area includes Glenview, Dimond, Oakmore, Lincoln Heights, Joaquin Miller and Laurel. 2015 average sales price was $801,600, 17.3 per cent more than 2014 ($683,500) and 26.5 per cent higher than 2013 ($633,800). The 298 closed sales figure in 2015 was 12 more than the previous year. During our last seller’s market, the peak average sales price was $655,000 in 2005/06, 22.4 per cent lower than now. Days on market have been between 17 and 21 for the past three years. 58 sold for $1,000,000 or more, a 152 per cent increase over 2014 (23).
Montclair and the Piedmont Avenue area are in this ZIP. 344 solds in 2015 were an increase of 36 (11.6 per cent) over the 308 of 2014. At $1,067,400, the 2015 average sales price eclipsed 2014 ($989,700) by 7.9 per cent and 2013 ($847,400) by 26 per cent. 2015’s high is 10.8 per cent more than the 2007 previous zenith of $963,300. The 23 days on market were one fewer than 2014. In 2014, 101 homes sold for $1,000,000 or greater, compared to 170 in 2015, a 68 per cent surge.
This incorporates Rockridge, Upper Rockridge and the Country Club area. As a testament to the popularity and desirability of this ZIP, 102 closed sales in 2015 equaled or surpassed a million dollars. Only 21 of the 123 solds were under $1,000,000. This 102 number compares to 87 sales of $1,000,000 or more last year (a 17.2 per cent increase). Note the 59.3 per cent jump from a 2013 figure of 64. Average sales price in 2015 was $1,417,300 vs. $1,251,500, a 13.2 per cent rise from 2014. The 2015 price outpaced the 2007 record high ($1,116,500) by 26.9 per cent. Although days on market were almost the same (18 in 2015 and 19 in 2014), there were eight fewer closings in 2015 (123) than in 2014 (131).
The above prices make clear the seismic shift, i.e., unprecedented increase, in Oakland home prices in this seller’s market. Can the genie ever be put back in the bottle? I am struggling to see how.
In the absence of another Great Recession, and with continued highly attractive interest rates, prices are likely to continue their inexorable climb in the near term. Given that the market will soften at some point, how low will local prices fall before advancing again? These are questions I ask myself.
If this is the new normal, what does it mean? Obviously, at this point, only folks with substantial incomes and/or cash windfalls have the necessary funds to buy in the Oakland/Berkeley/Alameda corridor. How is this changing the fabric and personality of our East Bay neighborhoods?
Innumerable folks have told me they could never qualify to buy the home they have owned for ten, twenty, thirty years or more. And these are people with good educations, responsible jobs and significant savings.
Already, some people I know are unhappy about this transformation and plan to permanently leave the Bay Area. Fortunately for some of them, they already own a home and will benefit financially. Others are leaving out of despair due to prices of both homes and rentals that are unattainable for them.
Those on the bottom
As Realtors, we tend to analyze real estate trends from the perspective of buyers and sellers and how they will be impacted. There is, nonetheless, a large demographic we rarely discuss because they do not create sales for us — the homeless, and I am a supporter of a local homeless shelter.
This outlandish real estate market is impacting individuals and families who literally have nothing and it came into focus for me during a recent conversation about the shelter’s difficulty in finding affordable housing for its clients. A shelter is a temporary transition from the streets to a home. That necessitates having affordable rentals for those down on their luck. Sadly, however, the “San Francisco effect’ has hugely raised rental prices, even in the toughest neighborhoods.
Older tenants who have been in the same house or building for 20 to 40 years are suddenly out on the street after the landlord died and heirs took advantage of the hot market by selling. It is so bad that owners of properties in the most objectionable neighborhoods are asking the kinds of rent people are paying for better homes in better areas. This is one of the shelter’s biggest struggles.
We are losing perspective. There is a growing chasm between haves and have nots. Some who are outpriced have the means to move elsewhere. Others are having great difficulty, even with the assistance of a shelter, keeping themselves out of the street. We must not forget them.