Real estate

Berkeley house prices show uptick after years of slump

Berkeley houses in the Indian Rock neighborhood. Photo: Peter Alfred Hess

Berkeley houses in the Indian Rock neighborhood. Photo: Peter Alfred Hess

Following the financial crisis of 2008, house prices in Berkeley and throughout the country plummeted. In the last couple of years, Berkeley house prices stabilized, but according to the most recent data it looks as though 2012 marked a real upturn in house prices.

Local realtor Ira Serkes, from Pacific Union International/Christie’s Real Estate, compiled detailed data on all the single family house sales in Berkeley last year. It provides a distinct picture of both the nature of the Berkeley market, and the improving prices for sellers. (All the charts in this article are compiled from Serkes’ data. If you click on the images, you can access interactive versions of the charts on Infogr.am.)

According to the data, the median price for two-bedroom houses rose 6.7% last year, three-bedroom houses rose 10.8%, and four-bedroom house prices were flat. Median prices are still well below the 2007 peak. There were 581 closings on sales of single family houses in Berkeley, compared to 535 in 2011.

Median sales price 2012

“I would characterize the market as having undergone a dramatic change in the second half of the year,” Serkes said.

First half versus second half

The rising trend is confirmed by data from San Diego-based DataQuick, which yesterday reported that “turnaround trends continued apace in the Bay Area housing market last month with the strongest January sales in six years and the tenth straight year-over-year increase in the median sale price.”

Price distribution

The price distribution of Berkeley houses sold by number of bedrooms shows both that the majority of houses sold for less than $1 million and that houses with more than three bedrooms are a rarity in Berkeley: 73% of the sold homes in 2012 were two or three bedrooms, and only 8% had five or more bedrooms. Serkes points out that most of Berkeley was built up by the 1930s, when smaller houses by today’s national standards were the norm.

Serkes also compiled his data on a series of interactive maps, embedded below. They divide the data into sales by price, by number of bedrooms, by area of the house, by year built, and by the sales price as a percentage of the original list price. On each of the maps, click and drag to move around, use +/- to zoom in and out (or touchpad gestures), and click on the pie charts to get increasingly granular information. Data geeks, enjoy:

There’s more data on Serkes’ own page.

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  • Bryan Garcia

    Doesn’t make much difference to me. I’ve started to accept the fact that I’ll probably never be able to afford to buy a home here in Berkeley unless my wife and I both start making six-digit incomes. The market here is simply going from unaffordable back up to absurdly unaffordable.

  • marymae

    Interesting to see the information graphed so nicely. While the median price range is not very big between 2011 and 2012, the back story is huge. 2011 saw buyers still thinking prices would go lower and found them trying to time the market. There were multiple offers, but buyers were mostly hesitant. 2012 saw buyers realize that the market had already bottomed, and they came out in droves trying to get into a house while prices were still relatively low. So, there were many buyers for few houses, and the competition has been fierce. 2013 is shaping up to be more of the same.

  • guest

    If interest rates go up, home prices may fall again. If the treasury stops buying mortgage backed securities, mortgages may return to being unavailable. If the Hayward fault goes boom, the houses may come crashing down. Scary time to buy.

  • bgal4

    Check Homepath foreclosed properties, apparently there is a new requirement that for the first 13 days on the market only owner occupied and first time buyer can make an offer. Realtors please correct/inform us about this opportunity. There are other creative ways to buy a house on a budget.

  • guest

    Starting salary for Berkeley Public School teacher, $38,497, Median 2 bedroom house price from this article >$500,000. That is 13 years of gross income.

  • Tizzielish

    Your comment grossly oversimplified the economics of buying a house. It would not take thirteen years of gross income to come up with a down payment and qualify for a mortgage.

  • PragmaticProgressive

    There is no shame in renting. Or commuting.

  • guest

    Feel free to explain how long an honest worker must work to get a house. Possible answers: 1) until Mom & Dad buy one for them 2) infinity years 3) other (insert calculation here)… And for bonus points, how does the honest work compete with the all cash investor? Keep in mind, the salary must pay living expenses while saving, and perhaps student loans.

  • Shutterbuggery

    More real estate promoter bull. Ask how many of those single family homes were purchased by people intending to live in that home. Whats happening is speculators are buying homes to rent out. This isn’t an upward trend of homeownership, its an upward trend in the rentier appropriation of homeowner assets.

  • guest

    If you’re unhappy with your salary, get a different job.

  • guest123

    Proof? Evidence?

  • L.

    What kind of spending are you people doing who insist that you can’t afford to buy without two incomes of six figures?! My husband and I bought 5 years ago, in our late 20’s, and neither of us make six figures even now! The real reason most people see buying as un-obtainable is because of the very, very common trend in this area of frittering away your 20s exploring your “dreams” (or just hanging out, whatever). We both started full time, professional work straight out of undergrad, lived well but modestly in Berkeley during our 20’s and had no problem saving a downpayment for a lovely starter home. We bought in 2007 (ouch!), but within our means and no fancy financing, and our mortgage + taxes now is just about equal to rental costs for a similar home.

    We won’t ever be able to afford a BIG house without those six figure salaries, but over the last 6 years our incomes have gone up, and we hope to upgrade to something a little larger in the next year or two. All of this, with no help from parents, no six figure incomes, and no crazy shady loans.

    I’m not saying that housing here is “affordable”, or even reasonable, and there are lots of low paying fields (like teachers, as previously pointed out) where it’d be really tough to save up that down payment. But the idea that only the super rich can do it is just not accurate.

  • Stella D.

    My husband and lived in a small apartment and saved saved saved. You only need 20% for down payment. I agree that the prices are too high, but it is possible to do this without help in less than 5 years.

  • bgal4

    my son and his wife, 26 and grad students working on campus, did the same, they are in process of buying a very nice affordable property, low $300,000, in a decent part of Oakland. There are ways to get into a home, we bought a trashed probate, and did the repairs ourselves. You either have money or time, but if you don’t have $ you have to be willing to make sacrifices and plan.

  • Chris J

    We bought in Berkeley back in 1994 for a couple of reasons–it was affordable (mostly) and we didn’t want to live in a condo/townhouse apt or whatever in SF where we then were living. That $210k home we bought is now worth perhaps anywhere from $500-600k depending on which realtor you talk to, so at least when we sell (eventually) we will be ahead of the game once the mortgage is paid off.

    Harder to do that now, but not impossible. Our daughter is 38 and is looking to buy her first home–she has enough for a down payment; just waiting on ‘this and that’…

  • PragmaticProgressive

    You’re both working, and if both salaries are needed to pay the mortgage, that can be a risky proposition. See Elizabeth Warren’s pre-Senate work on this.

    http://m.youtube.com/#/watch?v=8GHg3GAeQ1Y&desktop_uri=%2Fwatch%3Fv%3D8GHg3GAeQ1Y

  • Bill N

    Is the Tenants in Common now possible or impossible in Berkeley? We bought, alas many years ago, with another couple and shared a three bedroom house with three of the four of us chipping in for a down payment of 20%. The house payments for four of us was cheaper than we were paying as rent for three apartments. Things are clearly more expensive now but I would hope that imaginative people can find a way to make it work. Fortunately, after 4 years and one baby, they moved to the east coast and we bought them out!!

  • Hilldah

    The prices are high because there is very little inventory.

  • Get Real, Realtors

    I agree that the market for Bay Area homes has been stronger in the last year. However, the use of *median sales prices* by the real estate industry to portray the state of the market is completely bogus; c.f. “the tenth straight year-over-year increase in the median sale price” mentioned above. Today’s median house in the US has twice the square footage and far more amenities than the median house after WWII. Realtors and their data-PR affiliates pump houses the same way Wall St pumps stocks. Why? They need sales volume to prosper, irrespective of the direction of asset values.

    The rate of change in home values needs to be measured by aggregating purchase and sale data for the same individual houses, adjusted as necessary for improvements. Years ago, there was an obscure publication out of San Luis Obispo that did this for subscribers such as the major mortgage lenders in California. At the Federal level, OFHEO publishes such data.

  • Hyper_lexic

    Assuming you have 20% down, your monthly payments are ~$1800/mo (at 3.5% rate, which is conservative these days). Factor in taxes ($725/mo), Insurance ($100/mo), maintenance ($250/mo), and the offsetting savings in income tax (call it $500/mo), and you end up with effective $2375/mo, of which $500/mo is going to principle (in the first year) – so call it net $1875/mo of ‘money thrown away’. Meanwhile on craigslist rents in Berkeley for a 2br mostly see between $2000 and $2400.

    I realize that saving up 20% can be challenging, but there are other options (FHA loans with 3.5% down, etc) that can help with that.

    Net result I think buying makes a lot of sense IF you’re fairly convinced you’ll be in a place for a longer period (>7-10 years). Shorter than that and that the transaction costs are problematic.

    And, no, I’m not a real estate professional.

  • Hyper_lexic

    By the way – median salary for a Berkeley (non-pre-K) school teacher is ~$60k: http://www.teachersalaryinfo.com/california/teacher-salary-in-berkeley-unified-school-district/

  • Hyper_lexic

    Agreed – the better indices use this – e.g., Case/Shiller, Zillow, etc. Zillow tends to be very ‘noisy’ when dealing with short time frames, but good over the long term.

    But Case/Shiller is showing significant gains in the last 2 years for the San Francisco area:
    http://ycharts.com/indicators/case_shiller_home_price_index_san_francisco

    And Zillow is showing a dramatic increase in the last year:
    http://www.zillow.com/local-info/CA-Berkeley-home-value/r_16992/

  • Che Joubert

    What started the boom was low mort rates. Like now – they start at 3.6 % or so. Let’s say you buy a house in Albany for $529,000 (real price for a house on the market today.) At these low rates you’re going to pay aprox $2000 per month – or $3000 when you include taxes. But let’s say you want to sell in the typical 5-7 years, and the rates are back up to around 8% or much higher, say 12% like they were in ’90. At 8% your payment + taxes will be aprox $4100 and at 12% it will be $5300.

    Who’s going to be able to afford to buy your house? Maybe if you sell it for exactly what you paid someone will buy it – don’t look for a profit. But you’ll still lose money since for the first several years you’re paying mostly interest, so you’ve already lost a lot of money.

    All that’s going on now is another boom that will lead to tragedy. Low rates allow houses to be sold at higher prices. But when those rates go up no one can afford your house at that high price you paid. People forget how low Berkeley house prices really were before the boom. I bought my 6/4 on Allston Way in ’90 for $245,000. I bought my Craftsman on Spaulding in ’98 also for $245,000. These prices now are astronomical, and the rates are only going to go up – you do the math.

  • Che Joubert

    Are you going to sell that house in 7 years at the same interest rate? Likely not, and likely it will be closer to 8% or higher. Your payment will no longer be $2375 but $3375. And that’s if it’s only 8%, and not more like 12% which it was in ’90. Then your payment would be $4500. And that’s if you sell it for exactly the same price as you bought it.

  • Charles_Siegel

    From your numbers, I conclude that it makes sense to buy now, because prices are still at a relatively low post-crash level, and interest rates are very low. Now the payments are an amount that you can afford.

    When you sell it 8 years from now, interest rates will be higher. Presumably, housing prices will also be higher. So you won’t be able to afford the house you are selling, and someone wealthier will buy the house from you.

    Maybe you are thinking that housing prices will crash when interest rates go up, because no one will be able to afford the higher payments. In reality:
    1) the economy will be healthier then, so people will be able to afford to pay more

    2) the Fed will not raise interest rates so high that they will make housing prices crash,

    (This assumes the economy remains stable. If there is another bubble, interest rates may temporarily go to unrealistically high levels before they crash again, and the economy may not be healthy when you want to sell.)

  • guest

    There are lots and lots of older houses in Berkeley that require ongoing maintenance to the building and the garden to be comfortable and to hold their market value. This costs money (sometimes lots of it – upwards of $20,000 for a new roof on a medium sized home) that is above and beyond the mortgage and property tax expenses mentioned elsewhere.

    That said, if you plan to live here long term and can possibly afford it, buy a home, live in it, and keep it up.

  • guest

    “Get a different job”
    Have you been living under a rock for the past 4 years?

  • EBGuy

    I enjoy an anti-REIC (real estate industrial complex) rant as much as the next guy, but please this is Ira we are talking about. The man has written a NOLO press book for cryin’ out loud. One of the main problems with medians is the mix issue. He does a lot to ameliorate this issue by breaking out the homes by number of bedrooms. This allows you to, roughly, track like to like sales. I’m a big fan of Case/Shiller, or even OFHEO, but these indices aggregate data over too large of an area to be relevant for the micro-markets — in this case Berkeley. Ira, nice job on the breakdown.

  • Hyper_lexic

    Che –

    You’re right it’s important to think about investment risk and reward. I was just speaking to whether buying is still affordable compared to rent, but definitely everyone should think about this.
    I’m not as convinced as you seem to be that interest rates will spike and housing will crash, but I won’t argue the point. I will say though that renting carries it’s own risk – namely that rents might go up significantly. To be sure we have rent control in Berkeley, so the risk is limited as long as you don’t move; but on the other hand, you don’t have any asset risk with buying as long as you never want to move!
    Personally I think the most likely scenario for the next 20 years is: interest rates stay low for an extended period (5 years at least); the Bay Area continues to be the tech center of the world; and land-use policies continue to be extremely tight in the Bay Area. Based on that I expect housing prices to raise over a 20 year timeline.
    But, that said, I definitely agree I could be wrong; and furthermore there might be stalls and reversals in shorter timeframes (people who bought in 2007 still haven’t recovered). I had said you should plan on staying 7 years would be good based on transaction costs, but in light of price risk people may need to be ready for longer timeframes.

  • EBGuy

    Yikes, I’m not sure I’d recommend a SFH TIC to anyone, but I do endorse duplexes and multi-units as affordable housing for those who think outside the box. Thankfully, the City Council cannot ban TICs; however, city condo conversion fees for duplexes are 4% of sale price and 8% for multi-units. A 25% discount applies for those who pay the fee at the time of conversion.

  • EBGuy

    Sell? This is California. You pass your Prop 13 tax basis on to your children; it’s their birthright.

  • just sayin’

    Better cross your fingers that neither of you finds yourselves unemployed, if you rely on two salaries to pay the mortgage.

  • guest

    What parts of Oakland are nice, but still affordable? I have finally come to grips with the fact that I just can’t afford Berkeley but don’t know enough about Oakland to know where to look. Friends suggested Rockridge but it seems almost as expensive as Berkeley…

  • Name

    “This allows you to, roughly, track like to like sales.”

    Bruce, Love? Is that you?

  • bgal4

    The kids will be out on the edge of Oakland, Sheffield Village. My son rides to UCB, so his commute will be long, an hour each way. Sheffield Village is adjacent Lake Chabot open space, so their three dogs will enjoy the open space on weekend hikes. Once again trade offs, I bought in south Berkeley back during the crack wars, so we suffered horrible incidents of violent crime, but had an easy bike commute to UC and access to Berkeley’s arts and music events.

    North Oakland has good areas, you might look around for a home where the elders are transitioning to senior living and the house has not been updated. West and east Oakland are more challenging, but there are blocks where the community stands against crime effectively.