Home Truths, a quarterly report on the state of the Berkeley real estate market, is brought to you by Red Oak Realty.
It’s a great time for home sellers in Berkeley. Prices broke another record in the first three months of the year, reaching a median $975,000. They’ve increased 23% year over year.
Even buyers who can afford these homes fail repeatedly in the face of fierce competition. You’ve got to feel sorry for someone writing seven, eight, or more offers and still not getting a house. There is a major emotional cost to the effort, and a likely financial loss because prices continue to rise.
Homes are selling an average of 15.2% over the asking price, and if you’re in a multi-offer situation, they’re selling 20.2% over asking. There are even homes selling 55% over asking like 1417 Grant, and we don’t yet know the price of 2219 Acton that had 38 offers. These properties might be exceptions, but they are certainly not contrary to the trend.
The buyer’s problem is exacerbated by a lack of inventory. In the first quarter of 2015, the number of available homes for sale in Berkeley dropped 20% year over year.
Why wouldn’t sellers want to take advantage of the mother of all sellers’ markets? It’s simple: there’s nowhere to go. Even if a seller is “buying down” to a smaller home, the proceeds of the sale might not be enough.
So how long will the craziness last?
Unfortunately it doesn’t seem to be slowing down any time soon. In fact, the trends seem to be accelerating. It’s the double-edged sword of a strong economy: people are being priced out of more expensive areas of the Bay Area, and because of the strength of the technology, financial and biotech sectors (not to mention Cal’s growth and the future Global Campus at Richmond Bay), more people can afford to live here, too. In “Economy 101” language that’s high demand and low supply, and that leads to higher prices.
All this talk would lead one to think that we are in a housing price bubble, and that once it pops, homeowners are in for years of pain. Yes, there is talk of that happening; some are concerned the technology sector is due for a reset (although others disagree). Our earlier bubble was built into the financing of the sales: loans with incredibly low starting rates and ruinous adjustments. We were headed for some kind of crisis even if the economy did well.
But if one can ride out that storm and take a long-term view of one’s investment in housing, these dips have proven to be temporary. For example, after the crash in 2008 it took just three years for prices to reset in Berkeley. And they have grown steadily since.
Booms, busts, and bubbles are not easy to predict, but if the recent past is any indication of things to come, we’ll have a tight housing market for the foreseeable future.
Data is sourced from the Multiple Listing Service and analyzed by Red Oak Realty.
Home Truths is written and sponsored by Red Oak Realty, one of the largest independent real estate brokers in the East Bay, serving the community since 1976. Read more in this series. If you are interested in learning more about the local real estate market, or are considering buying or selling a home, contact Red Oak at firstname.lastname@example.org, tel: 510-250 8780.