Where is the market and which way is it headed?
Originally appeared in Bay Area News Group publications on July 29, 2016
“Those who have knowledge don’t predict. Those who predict don’t have knowledge.”
– Lao Tzu
Real estate prices are always a subject of interest, especially during periods of skyrocketing home values. People want to know if the market is still hot, and, if so, how long it will continue.
As real estate professionals, we constantly ask our colleagues these questions and receive various opinions. Lately, other agents have been telling me that the Oakland/Berkeley market is still very active in the “affordable” ranges. What is affordable depends on the licensee’s business pattern and perspective. Nonetheless, there seems to be some agent sentiment that listings in the million-dollar-plus range are not selling as quickly or for as much as they might have in the recent past.
This business has taught me that all markets eventually change regardless of how things appear now. The longer a seller’s market persists, the more predisposed it is for a downturn. Is that time today? No one knows for sure.
A reliable way to determine market strength and direction is to study at least the past six months of statistics. What follows are specifics for three popular Oakland neighborhoods. 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. The time periods were January-June 2016, July-December 2015 and January-June 2015.
This area includes Glenview, Dimond, Oakmore, Lincoln Heights, Joaquin Miller and Laurel. For the first half of this year, there were 103 solds (S) at an average sales price (ASP) of $865,034. Twenty-eight of those (27 per cent) sold for $1,000,000 or more. This compares to 167 S at an ASP of $810,462 from July-December 2015, with 34 (20 per cent) selling for $1,000,000 or higher, and 133 S at an ASP of $788,675, with 24 (18 per cent) attaining $1,000,000 or greater the first half of 2015. Days on market were 18 for the first six months of 2016 and the previous six months, and 17 for January-June 2015. This is a reflection of an enduring, seller’s market. The figures above indicate a continuing acceleration in prices and in the proportion of properties selling for at least $1,000,000.
Montclair and Piedmont Avenue are in this ZIP. January-June 2016 recorded 141 S and the ASP was $1,132,187, with 88 (62 per cent) at the $1,000,000 or more figure. Six months earlier, there were 198 S with a $1,078,120 ASP. Of these, 97 (49 per cent) reached or surpassed $1,000,000. January-June 2015 results revealed 146 S with a $1,052,747 ASP and 73 (50 per cent) hitting the seven-figure mark. Eighteen days on market for 2016’s first six months compare to 24 the prior six months and 23 for the January-June 2015 time frame. Again, short days on market and an increasing percentage of million-dollar-plus sales is not evidence of a slowdown.
This incorporates Rockridge, Upper Rockridge and the Country Club area. In January-June 2016, there were 65 S with an ASP of $1,464,726. Fifty-nine of these (91 per cent) were at or over $1,000,000. The July-December 2015 period saw an ASP of $1,358,982 for the 63 S. Fifty-one (81 per cent) were in the minimum $1,000,000 range. 2015’s first six months experienced 61 S that had an ASP of $1,485,118, fifty-two of which (85 per cent) were $1,000,000 or greater. Days on market were short and varied only slightly from 16 to 19 to 17, from most to least recent.
The January-June 2016 ASP was lower (by 1.4 per cent) than that of the same time frame in 2015, although the percentage of $1,000,000 solds increased. Comparing million-dollar-plus prices for the first six months of 2016 to 2015 in ZIPs 02 and 11, ASP was up over four per cent in ZIP 02 and was down 14 per cent in ZIP 11. These data show evidence of some softening in the over $1,000,000 range. They also illustrate why you need to know the exact numbers, because this may or may not be relevant to where you are looking to buy or sell.
A close examination of the past 18 month’s sales for these three ZIPs discloses that our blistering market is still humming along. It is being fueled by high buyer demand accompanied by low inventory and low interest rates. This can change quickly. Unless you have no choice, avoid being the seller who puts his home for sale after the market has entered its downward trajectory. Likewise, best not to be the buyer who sets the neighborhood high-price record just at the wrong time.
As a buyer, even if you are in the fortunate group who has the resources to purchase in this area, be careful to separate the wheat from the chaff. A number of homes on streets in desirable neighborhoods can be considered a solid investment, despite current high prices.
If you are thinking about selling, it is important to understand the trend of the overall market as well as relevant history on your street and those nearby. Statements about what is happening should be backed up with data that are provided to you.
The market may shift at any time, but we can only know by looking backward. That could be too late if you make the wrong assumptions. Be sure to base your buying or selling decisions on facts, not just how some say they “feel” about the market.