In what seems like just a few months, Oakland’s reputation has transformed from a city plagued by violence into a indie darling. The New York Times rated the city #5 on a list of top cities to visit. Movoto named Oakland the #1 most exciting city in America. The Huffington Post recently published a list of 10 reasons why Oakland has never been better. Now one of the positive attributes Mayor Jean Quan mentioned in her speech at Love Our Lake Day, the city’s affordability, may be in danger.
Driven partly by changing perceptions and partly by a tech boom that is pushing people out of San Francisco, Oakland’s real estate market is turning red hot. Real estate website Trulia.com reports that Oakland’s home sales are up 31% from a year ago. Local realtors America Foy and Remy Weinstein of Highland Partners report seeing “an average of 10 -15 offers on every home that’s priced decently.” Martha Hill of Pacific Union noted that homes regularly sell for 12-15% over the asking price.
Hill attributes the real estate scramble to Oakland’s recent positive press, combined with a more stable Bay Area job market. “I haven’t talked to anybody in over a year who’s worried about their job or their husband’s job or their partner’s job,” she said.
“It has to do with consumer confidence,” agreed Weinstein. “The media is telling people that it’s not a horrible thing to do anymore. All the people who have been holding off are jumping back in the game.”
It helps that credit is not only cheap, but finally more available to buyers with small down payments or less-than-stellar credit. “For a long time, it was a buyer’s market, meaning that, if you had some money, you could state your price. Cash was really king during that time,” said Foy. “A couple years ago, nobody could borrow money and there was a glut of foreclosed houses on the market.” Foy feels that Oakland’s real estate market is “getting pushed up from the bottom.” He explained that investors, who dominated the market during the foreclosure crisis, now vie with individual homebuyers armed with bank financing. “It’s driving the prices up exponentially because there’s so much competition for so few houses,” said Foy.
Pricing investors out of the market could have a positive impact on Oakland. According to a June 2012 report by the Urban Strategies Council, investors bought 42% of the homes foreclosed in Oakland between 2007 and 2011. Foy noted that, “It used to be common to have a $100,000 flip,” meaning an investor could make a profit of $100,000, often in a few months, by fixing up a house and reselling it.
Fewer homes for sale is another factor driving prices up. RealtyTrac counts 2,141 Oakland properties somewhere in the foreclosure process. Still, there were 70% fewer foreclosure sales in May of 2013 than there were a year ago, and both the sales price (up 13%) and the list price (up 23%) are higher than they were last year. Even the price to buy a foreclosed home has risen 5%.
Hill, Foy and Weinstein agreed on the hottest neighborhoods: Rockridge (where values had remained high), Temescal, Montclair, and North Oakland. “The other area that’s been really hot is Uptown,” added Hill. “All the new [condo] inventory has sold out.”
Foy and Weinstein related the story of a modest 2-bedroom house in Montclair that was placed on the market at $575,000 and sold for $925,000. “It hasn’t been like this for 10 years,” said Foy.
Prices are also going up in neighborhoods where buyers of more modest means retreat after getting priced out of places like North Oakland. “You know that North Oakland is going to be like Temescal in 10 years. West Oakland might take 20 years,” said Hill. “The last frontier in Oakland is Maxwell Park, maybe the Allendale neighborhood. Deep East Oakland is not a part of [the boom].”
Asked whether she thinks Oakland real estate is experiencing another bubble, Hill said, “I so wish I knew.” She added, “The wounds are so fresh from what we just came from. Some of it really does worry me.”
• Can Oakland get more expensive without losing its heart and soul?
• Is the current boom another bubble that will leave Oaklanders flat and foreclosed, once again?
Read Oakland Local’s past coverage on gentrification and let us know what you think.