OAK NOTES from Grace Bishop
Feb 2020

STEPHEN LOEWINSOHN
 
EAST BAY HOME VALUES COULD BE FLAT (OR DECLINE) IN 2020

It is February and the East Bay real estate market is still in its slumber. Although we won't see a high number of sales until spring, Red Oak is closely watching 4 factors that will have a significant impact on home values this year. 
 

Available Inventory

The number of homes for sale in the Inner East Bay, cities west of the Caldecott Tunnel, from Pinole to San Leandro, has a significant influence on the overall activity of the market. If supply declines but demand remains stable, prices will increase. 

The number of available listings is down 37% in the Inner East Bay (1/1-2/3 2020 vs. 2019). This is already affecting the market as buyers are competing for fewer listings, many of which are generating dozens of offers. However, the higher prices rise, the more buyers are priced out of the market. This puts a "ceiling" on home values and may limit appreciation in 2020.

Note that these kinds of trends can shift over the course of the year, so we will watch how inventory fluctuates, especially as we get closer to April and the heart of the spring market.
 

Technology Sector

The health of the Bay Area's economy is highly dependent upon the health of the technology sector. It employs 831,700 people across the region, who subsequently pay for a host of other services that support those workers (e.g. restaurants). Over the past few years, there has been steep growth in the number of tech jobs, which helps drive consumer confidence and the likelihood that buyers will invest in a home. 

But things are changing. Recent IPO performance has been weak (Uber, Lyft, Slack, Casper), valuations for top companies are declining (WeWork), and layoffs are becoming "trendy" as startups pivot from growth to profitability. What's more, an increasing number of people are leaving the region. This type of change is beneficial to the long-term health of the real estate market, but there could be short-term negative implications on sales activity and prices.
 

Rate of Appreciation

The median price of a single-family home in the Inner East Bay has grown every year since 2011. It was $285,000 back then; it was $800,000 in 2019. That is a 181% increase.

But the rate of year-over-year appreciation has been slowing. Between 2018 and 2019, the market grew 6%, the lowest level in the past 6 years. (This number varies by city, with some cities appreciating - like Kensington 10%, Albany 8%, Alameda 7% - and others declining like El Sobrante -4%, El Cerrito -3% and Piedmont -2%.)

We may face a decline in home values in the near future. Between 2018 and 2019, the entire East Bay market rose 3% - higher than any other region in the Bay Area. But appreciation is lower in all regions and San Mateo and Sonoma counties actually depreciated (-4%, -3%). We may be next in line.
 

The Election

No matter what you think of the state of American politics, national elections have an effect on East Bay real estate. Median price increases at a lower rate during years with national elections - 4% during election years, 10% during non-election years (based upon Red Oak analysis of MLS sales 2008-2018).

This means that, in addition to declining appreciation (as noted above), the election will put downward pressure on prices. This is one of the reasons many economists are predicting a nearly flat or down market in 2020. 
 

For sellers who have been considering putting their home on the market, this might be the last chance to time the top of the market (until the next cycle). For buyers who have had to face the difficult task of getting their offer accepted, these changes will hopefully be good news. To see how this affects your specific situation, just reply to this email.
 



RECENT TRANSACTIONS

MARKET UPDATE: JANUARY 2020


 

Only a handful of homes typically sell in January, and 2020 was no exception. Compared to last year, the number of homes available for sale in the East Bay dropped by 49%, but the number of transactions was essentially flat. That means supply was low and demand remained high - and with that came higher prices and the median price increased by 15% to $806,000. What's more, homes also sold further over asking at 4.1% and were on the market for 34 days, essentially flat compared to last year.

Many of the homes that are for sale now are generating a high level of interest from buyers. We will be watching this trend as we head into spring and more homes become available for sale. 

Just respond to this email if you'd like some help figuring out how this affects your efforts to buy or sell in 2020.

 


MORTGAGE UPDATE

Interest rates dipped to the lowest levels in three years as fears of the economic impact of the Coronavirus outbreak in China sent investors fleeing to the safety of the bond market. 30-year fixed rates for optimal scenarios ranged in the 3.25% to 3.5% range for much of the week of February 10th. The Consumer Price Index (CPI), which measures inflation on the consumer level, came at 0.1% in the month of January. This was just beneath expectations of 0.2%, but the year-over-year reading increased from 2.3% to 2.5% year-over-year.  The more important Core rate, which strips out the volatile food and energy prices, remained stable at 2.3% on a year-over-year basis, which is just shy of an 11-year high.  

If you bought a property at some time in last past three years, please contact Faramarz Moeen-Ziai of Commerce Home Mortgage at fmz@commercemtg.com or 415.377.1147. COMMERCE HOME MORTGAGE


 



DONA
 
RESTAURANT SPOTLIGHT: DOÑA

Times are changing and what was once Doña Tomas on Telegraph Avenue has been transformed into the lively Doña on Piedmont Avenue.

The ambiance is rather casual and spacious, spirited but relaxed. Start by ordering at the service counter, then find yourself a seat inside, on the patio or at the bar. (Note: if you're lucky enough to find a seat at the bar, you can bypass the service counter and order food from the bartender). 

The food is crafted from scratch, varied and tasty. There are so many favorites but a few standouts are the ceviche tostaditos, platanos with crema and the ensalada de doña which comes with a big heap of barbacoa (beef braised in smoky chilies, tomatoes and coca cola). For your tacos, burritos and bowls choose from a variety of options such as barbacoa, carnitas, pescado frito, pollo asado, pollo tinga and for vegetarians, calabaza y kale. Of course you must order the chunky, fresh guacamole served with housemade chips. There are also many other appetizers and sides to choose from and a special menu for kids. 

For those who wish to indulge, there are delicious desserts including churros, cajeta caramel pudding and Mexican chocolate cake. Libations include beer, wine, sangria, top-shelf margaritas and other skillfully crafted cocktails. To top it off, enjoy an Oaxacan coffee, latte or cappuccino.

Doña is located at 3770 Piedmont Avenue, Oakland. Order take out via 510.450.0522. Open every day 9:00 am - 9:00 pm.
 



Grace Bishop
Realtor | #01245471
510.872.4512