$1,050,000. That was the median price of a home in Berkeley in the second quarter of 2015. It was also the highest median price on record and the first time it sat above the million-dollar mark.
With homes selling an average of 19.9% over asking (all time high) in an average of 16 days (all time low), buyers hoping to break into the Berkeley market just can’t catch a break.
Or can they? If we look at activity by neighborhood, we might be able to find opportunities that don’t present themselves when analyzing numbers on a city-wide basis.
Take for example South Berkeley. It offered the lowest median price in the city at $750,000, with homes appreciating 15% year over year. Or consider San Pablo Park where the median price is $775,000 with an annual appreciation of 26%. At the other end of the spectrum, the most expensive homes were sold in the Claremont ($1,825,000) and the Elmwood neighborhood ($1,612,500). Either way, these prices may very well be out of reach for many people throughout the Bay Area as only 18% of Alameda County residents can afford to purchase a median priced home in the region.
Like the rest of the East Bay, Berkeley‘s real-estate inventory is insufficient to meet buyer demand. This dynamic (as well as aggressive pricing strategies) is driving up the difference between list over sale price. For example, Cragmont homes sold closest to asking at an average 13.6% over list price; homes in Live Oak were highly competitive, selling 30.3% over list, the highest in the city (possibly because of the neighborhood’s close proximity to the amenities of the Gourmet Ghetto).
We can draw a better understanding of these neighborhoods by looking at the distribution of sales in each neighborhood by quartile. For instance, only a few Berkeley Hills homes sold above $2,000,000 (like 107 Southampton). The majority of properties were sold between $725,000 and $1,988,000. And, while the median price of a home in the Elmwood was $1,613,000, it was still possible to purchase a property as low as $687,000.
Despite this highly competitive environment, a portion of homes sold below list price (like 640 Creston and 1709 La Loma). To find these rare properties, look where the crowd isn’t looking: keep your eyes on listings that have been sitting on the market and don’t walk away from a “diamond in the rough.” Just know that quite often the property will need work – from an outdated kitchen to a complete tear-down – and if you’re not prepared to put in the time and effort, you may want to take a pass.
Will the trends continue? Critical metrics like low unemployment and tech and biotech sector growth point to continued market strength. What’s more, East Bay prices are still relatively low when compared to the rest of the Bay Area: you’ll pay 122% more for a home in Palo Alto ($2,345,000 median), 35% more in San Francisco ($1,425,000) and 28% more in Mill Valley ($1,350,000).
However, the recent declines in the stock market could limit cash available to potential buyers, creating a dampening effect on the market. Some argue that this has already begun, but we will get a clear gauge in late September when the fall market is in full swing.
As you search for homes in Berkeley, know that even within this relatively small town, real estate is “hyperlocal,” and the unique character of each neighborhood means the market needs to be assessed on a block-by-block basis.
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 email@example.com, tel: 510-250 8780.