Home Truths, a quarterly report on the state of the Berkeley real estate market, is brought to you by Red Oak Realty.
Tech workers make up an increasing portion of the East Bay’s population and wealth. The Oakland Chamber of Commerce recently found that the number of tech employees in that city increased 23% between 2010 and 2014. During the same period, the median home price in Oakland increased 73%. This is not to say one caused the other, but the relationship is well-established and worth further exploration. (Even The Onion thinks so.) And if it’s happening in Oakland, it’s a fair bet it’s happening next door in Berkeley.
With so many of our Berkeley neighbors working in the high-paid high-tech sector – and most of them with a mortgage — does this mean that Berkeley real estate is more exposed to a downturn if the tech sector slows?
The question takes on particular weight in the wake of recent news about the overvaluation of unicorns, from write-downs for Snapchat to low IPO prices for Square. There have been layoffs, like those at Twitter and HotelTonight. And some believe the Bay Area as a whole is poised for a correction.
Unfortunately, history may not be able to give us direction. If you look at Berkeley prices after the dot-com bust of 2000-2002, they only increased.
This may be because the Berkeley market was not as closely linked to VC investments as it is now.
While there may be concerns of a future slowdown, the market is still white hot: the Twitter layoffs generated a hiring field day, as did Trulia when it was purchased by Zillow. Bay Area unemployment stands at 3.8%, its lowest level in 15 years. In fact, the venture capitalist Marc Andreessen thinks tech is undervalued. In other words, only time will tell.
So what does this mean to Berkeley buyers and sellers?
Prices should remain high, and, even though Berkeley reached an all-time high in Q2 2015, they should continue to rise — albeit more slowly than before. This will not only be driven by high-tech salaries; it will also be driven by the steady decline of available homes for purchase, and even higher prices in other parts of the Bay Area.
If a downturn occurs, staying put will allow homeowners to ride out the storm. Real estate is best used as a long-term investment. For those thinking of selling, it’s nearly impossible to time the market, so sell while prices are high. If you think waiting will bring an even higher return, weigh the risks of a potential downturn and play your odds.
For buyers, waiting longer most likely means paying more. We are often seeing buyers placing seven or eight offers before landing a home. You can shortcut that process by offering more than you think it should sell for, and, above all, listen to your Realtor.
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.