What Does Fair Mean? A Closer Look at the Laurel
A Map of the Laurel District
In one of my previous blogs I highlighted some of the price cuts happening with many (most?) homes around Alameda County. David, one of our readers, stated that he almost bought one of the properties listed, 3069 California (located in Oakland’s Laurel District) ten years ago for $114,000. Sure enough, its sales history lists this SFR as being sold for $110,000 in 1997. Currently it is on the market for $549,950. In his comment, David brings up the question of price: he argues that since no major home improvements seem to have been done, a price $400k greater than its sale ten years ago seems “unreasonable”. This got me thinking: is it? To be fair, a “sunroom” is listed as being added, and perhaps other amenities as well. But I’m not here to nitpick our reader’s comments. I’m interested in the broader question of “what is fair?” and ”is fair even the question we should be asking?”
I too was looking to buy in the Laurel. However, unlike David, I began my search at the height of the housing boom, in 2006. At the time I worked in the Laurel District and thought it would be a nice place to live: it had many of the necessary amenities such as grocery stores, hardware, video, some eateries and cafes and several banking options down the street on Fruitvale Ave. Additionally, it’s close to 580 and not far from the Warren freeway. Finally, like many parts of Oakland, and East Oakland in particular, it appeared to be racially, culturally and economically diverse, qualities that are important to me. Historically the neighborhood has shifted from white to black to mixed race and has seen alternating periods of boom and bust. For the past 10 years, the neighborhood has been on the upswing economically and has become more racially mixed. For example, the 2000 census lists Laurel’s population as approximately 1/4 Black, 1/3 Asian and 1/3 White with the remainder comprised of Latino, Native American and Pacific Islander populations.
But I didn’t end up buying in the Laurel. Why? Because in 2006, most of the homes started in at 500k, which was out of my price range. As I visited homes for sale, I was dumbstruck and at times outraged by the prices. Before I knew about Redfin, I did my homework on listed homes’ previous sales prices, and just as David states, many of the homes I saw listed in the $500k or the $600k range had sold for $300k a mere 3 years previously, and in the $100k range during the mid-late 1990s. Here’s an example of what I’m talking about: 
This home, 3460 Laguna , sold for $325,000 in 2002; $503,000 in 2004; spiked to $599,000 in 2006 then dropped 100 grand and sold in November 2007 for $499,000.
So in 2006, like David, I thought that the prices were inflated. At the same time, I felt helpless: we live in a free market, so if a buyer is out there that will pay $550k for a home that was half the price several years ago so be it. Apparently, prices will go as high as the market can bear. And what is the market but what we are willing to pay?Today, like almost everywhere, prices are down in the Laurel. Still, listing and sales prices vary according to geography (in addition to the other variables such as square footage, condition of the home, etc.) Generally, homes north of 580 are more expensive than the homes south of the freeway; and the more northern you go towards the hills, the more expensive the homes become.
But getting back to David’s comment: is paying 5x more for a house than its price 10 years ago “reasonable”? Apparently less of us are willing to pay what those paid just a year ago for a house in the Bay Area, and thus “the market” is down. Whether a real estate price can be “fair” or not, I don’t know. What I can do is show you stats for recent sales in the Laurel as well as each home’s prior sales history. You be the judge and then let me know while you’re at it!
Recent sales in October and November 2007
$250,000 3425 Maple Ave. 2bd/1ba 1160 SF; Previous sales: $430,000 in 2004; $70,000 in 1988
$300,000 3008 School St. 2/1 824 SF; Previous sales: $415,000 in 2006; $126,000 in 1998
$355,000 3232 Kansas St. 2bd/1ba 828 SF; Previous sales: $505,000 in 2006.
$377,310 3345 Arkansas 3/1 1064 SF; Previous sales: $508,000 in 2005
$487,000 3240 Delaware 5/2 1804 SF; Previous sales: $330,000 in 2000; $81k in 1998
$499,000 3460 Laguna 2bd/1ba 1160 SF; Previous Sales: $599,000 in 2006; $503,000 in 2004; $325,000 in 2002
$534,500 4069 Maple Ave. 2bd/1ba 972 SF; Previous sales: $157,000 in 1995
$535,500 3059 Frye St. 3bd/1ba 1579 SF; Sold November 2007
$526,000 3027 Kansas St. 2bd/1ba 866 SF; Previous sale: $385,000 in 2004
$589,000 3857 Coolidge 3/2 October 2007; Previous sale: $425,000 in 2003
$645,000 2725 Carmel St. 3/2 1498 SF; Previous sale: $324,500 in 1999
Slappy said:
According to a rate of return calculator I found on cnn:
Return on investment:
Annualized return: 17.04%
Return for the entire period: 382.33%
While it saddens me because I don’t own a house and never will own a house, should we begrudge those who can afford this type of home?
Perhaps instead we should all focus on income disparity and lack of housing stock? Because a simple mortgage calculator shows this to be a $ 3,209.36 a month mortgage payment. If housing costs are supposed to be 1/3 of your income, we’re looking at $115k Net or $160k gross in salary.
That’s approx. double the median annual household income ($62,024 according to wikipedia), so how many people can even afford this price?
January 12, 2008 6:48 PM
Alison said:
Hi Slappy: thanks for your insightful comments. I agree: the point is not about begrudging others who can afford homes in this market and locale. Focusing on income disparity makes sense. For example: what do we as a society value and how do we want to assign worth? Does the fact that I’m a social worker and make under the median annual household income mean that my work is less valuable than say, an investment banker’s? (And not to pick on bankers out there, just using this as an example of a high-income career.)And while housing costs ideally should be 1/3 of folks’ income, that doesn’t hold true for most of us in the Bay Area or other high-cost areas such as New York City, Honolulu, or Seattle. For many people I know, including my partner and I, 50% of income goes to housing.
January 13, 2008 7:26 PM