Try telling someone who hasn’t attempted to buy a home in Oakland in the last six months that there are bidding wars and that it’s fairly common for homes to sell for at least $50,000 more than the asking price and you’ll probably be met with shock or disbelief. Don’t get me wrong, there are homes that are selling for less than asking price, and most bank owners are pricing their listings well below the market. However, the number of buyers has increased greatly since last year. To make the situation even tougher for buyers, instead of just releasing homes as soon as they foreclose on them, banks are trickling them onto the market (it seems that they are trying not to saturate the market and cause steep price declines) so buyers are milling around, waiting to pounce when a nice house hits the market. Buyers descend in droves on homes in decent condition that are priced attractively. After a while, buyers learn the ropes, make arrangements to immediately see homes that look nice and will write up an offer on the front steps of the home they like while other prospective buyers, with or without agents, climb over them to tour the house.
My clients usually balk when I tell them that they’re going to have to offer $40,000 or more over asking just to be in the running on certain homes. We look at the prices of recently sold homes in the same neighborhood, and I call the agent to find out if there are other offers in. Often there are at least a few already in that are all over the asking price. At that point, my clients realize that they have two choices (especially if they are using FHA and are less able to make an attractive offer than cash buyers): make the highest, over asking price offer that they are comfortable with financially. Or, if they aren’t able to offer more than asking, pass on the home in favor of one with less competition or in a lower price range.
This all seems to contradict the news that we are hearing about vacant homes sitting on the market, would-be buyers not being able to get loans, increases in foreclosures and the terrible economy. What we have to remember is that this is Oakland. It’s both amazing in its own right and it’s close to San Francisco for a fraction of the price.People buying their first home in Oakland love it because it’s relatively affordable (especially now), diverse and close to San Francisco and Berkeley. Investors love it because, in the less expensive areas, the rents are high in comparison to costs (such as mortgage, taxes and other expenses of owning the home). For these reasons, there is always more buying activity in Oakland than in many other East Bay cities.
I decided to figure out whether the numbers locally would support my experience and contradict the news and generally held assumptions about the market. To do this, I calculated the Month’s Supply of Inventory (MSI) for each of Oakland’s zipcodes. The MSI of an area shows how long it will take for all listed homes to be sold based on the number of houses on the market and the rate that homes have been sold in the past. Generally, an MSI greater than 7 means that the area is a “buyer’s market” and an MSI of less than 5 means it’s a “seller’s market.” MSI between 5 and 7 indicate a balanced market. What I found did not surprise me.
Although none of the zipcodes were seller’s markets, many were “balanced.” One, 94619 (includes the lovely East Oakland neighborhood of Maxwell Park up to Skyline) was just a few percentage points away from being a seller’s market. The other balanced markets were 94602 (includes Glen View), 94603 (the very south east section of Oakland and 94606 (includes San Antonio/New Chinatown). These neighborhoods appeal to a mix of buyer-types - investors who are snapping up homes in the dirt-cheap 94603 zip code, and first time home buyers and families who adore 94619, 94602 and 94606. In my experience, nicer homes listed in these neighborhoods are off the market in a matter of days.
Other zipcodes were moderately buyer’s markets: 94601 (includes Fruitvale and Allendale), 94605 (a very diverse zipcode including everything east of Mills from the North down to around, possibly a bit above E. 14th), 94608 (parts of West Oakland), 94609 (Temescal and North Oakland), and 94621 (Southern East Oakland past Fruitvale before 94605 and 94603). These zip codes have a very steady stream of inventory, a bit more than there are buyers for. Of course, attractive homes at attractive prices in the more desirable neighborhoods (like Oak Knoll in 94605) of these zip codes sell as fast as they do in the more balanced neighborhoods, but there are a lot of fixers in these neighborhoods that tend to sit on the market, either because they are priced more than buyers are willing to pay or buyers are unable to find a lender willing, due to the homes’ condition, to loan them money to purchase them.
A few zipcodes had numbers that suggested that they were ridiculous buyer’s markets – 94612 (downtown Oakland), 94610 (Lake Merritt), 94611 (Piedmont area, Montclair) and 94607 (West Oakland closest to BART). The reasons that the MSI for houses in these neighborhoods are so high varies based on the neighborhood. The more expensive zipcodes are likely to be suffering due to the very high interest rates on jumbo loans and the low number of buyers looking for luxury or high-end homes. West Oakland, Piedmont Ave, Downtown and Lake Merritt are likely to be struggling due to the over-production of condos (some of which are short sales) that are currently just sitting on the market because buyers are unwilling to pay what sellers or developers need or want to sell them for. Buyers may also prefer the two or three bedroom single family homes that they can purchase for less than a junior one bedroom condo. Those single family homes won’t require them to pay HOA fees upwards of $300 per month.
Several other reasons are likely to be dragging down West Oakland’s housing market. The housing stock is so old that many of the houses there need a lot of work, and a good number of them have tenants (making them harder to sell and less attractive to buyers who are unwilling or unable to evict due to Oakland’s strong tenant’s rights laws).
So what does all of this mean? First of all, real estate markets are very local, meaning they are influenced by factors that may cause a different situation than what might be happening in other areas in the state or in the nation. Before starting to make offers, buyers should learn, not just about buying homes and the market generally, but about what is going on with the process of buying and prices in the specific neighborhood they are interested in. It’ll save time and your nerves. Realtors who are assisting buyers in their neighborhood of interest are one of the best resources for this information. While it’s terrible and devastating that people are losing their homes, Oakland’s real estate market isn’t significantly ailing in the way that many markets are.
Click here to see the raw data.
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