February 6, 2008

The View From the Ground Is That Buyers Are Calling the Shots

So, according to Forbes, Berkeley is the second most overpriced suburb (ouch that word hurts) in the United States of America.

Why? Because it takes 14.7 years of total earned salary for the median-income ($51,256) Berkeley household to afford the median priced home ($752,500). While the report accepts these figures might be distorted by the UC population, it goes on to say “there’s a larger group of residents responsible for the sharp divide between the million-dollar homes in the hills that look out over the bay and those renting apartments closer to Interstate-580.”

While I wouldn’t dispute these findings per se, I would argue that what sounds alarming news for homebuyers should be tempered with a reality check. For I, your on-the-ground housing hound in Berkeley, feel confident in declaring that, right now, buyers are calling the shots.

All around me I see homes in fine neighborhoods with no takers and diminishing price-tags. Others are going on the market with “realistic” asking prices, and still failing to attract interest. And in the more modest neighborhoods, there are potential bargains, often the result of desperation and/or foreclosures. Take the following:

bonar The View From the Ground Is That Buyers Are Calling the Shots

2210 Bonar Street (at University) (above): 2/1 home with permitted studio on 4,800 sq ft lot reduced from $575,000 to $549,000.

1531 Oregon Street: a 3/2 bungalow with deep yard in need of TLC priced at $399,000 — or $308/ sq ft.

harmon The View From the Ground Is That Buyers Are Calling the Shots

Harmon (at Sacramento) (above): 3/1.5 bank-owned home with dual pane windows, hardwood entry and tile kitchen with new cabinets. Reduced by $50,000 to $469,500.

I’m not saying there aren’t still overpriced homes out there, just that on the whole it’s buyers, not sellers, who are setting the agenda.


  • David, be happy where you are. Live and let live.
  • David
    Chris. Heh. Hate to burst your bubble, but Berkeley's only gotten "whiter" the past decade.

    Berkeley is now estimated to be 61% white (census.gov). In 2000, it was 59% white. That is also an increase from 1990.

    But glad you're happy where you are.

    David
  • David
    Well, yes, of course my mind's made up--I lived there, and don't anymore, even though I could choose to do so.

    When I was living there, I used to think it was pretty much the best place to live out of the options (Albany, El Cerrito, Oakland, Alameda).

    After spending more time in the other locations, it became more clear that, no, I don't find that Berkeley is superior (well, El Cerrito isn't my cup of tea), and again, why pay the "Berkeley premium"?

    The "exceptionalism" isn't really that "poorly defined." You say "Berkeley politics" and pretty much everybody knows what you're talking about and for the most part it's very true. I think that's a pretty good definition.
  • Chris
    I recently purchased a home in west berkeley - near University and San Pablo. At first I was extremely hesitant. It didn't look as visually desireable as rockridge, north berkeley, albany, etc. However, it worked for us; I'll spare you the details.


    After having lived here for 6 months. I love it! I love the diversity, the activity, the location, and nearly everything else for that matter.


    If you are afraid of economic diversity and want blandness, homogeny, and to be surrounded by other (mostly) white people - go live in piedmont, or lamorinda, or albany - and be content living a suburban yuppie lifestyle.


    Me? I'll take
  • Toady
    I don’t know, David. I think Frolic might be on to something here.

    Your original comment wondered why people choose to live in Berkeley. I just stated specifically why I choose to live in Berkeley. I’m a member of the community, so I know other residents and homeowners and thus know why many of them live here. And I think most of Tracey’s posts about her own home search describe her reasons for wanting to live here.

    And still, though you apparently no longer live here, you insist that it’s something else, some sort of ill-defined exceptionalism. It makes it seem as though your mind’s pretty much made up.
  • David
    Oh please, Frolic, do tell me about my "issues."

    The evidence is plain that Berkeley is the outlier, not I. If you can't see that, again, that's part of the culture/politics of the area. It's most amusing that someone who points out that Berkeley (and the entire area) is an outlier, a fact that's as plain as day, is the one "with issues."

    David
  • Frolic
    Yikes, seems like perhaps you're working through some larger issues than the price of real estate, David.
  • David
    See, Bad Advice, that's exactly why I didn't want to point one reason why I don't live in Berkeley (among others).

    It's a beautiful reflex from Bay Area residents in particular when they hear someone has the temerity to point out that the urban policies of the late '60's and '70's were abject failures by any metric. I've seen it time and time again living here on and off for more than a decade.

    It's disturbing to YOUR religion--ca. 1968 liberalism, and so you react just as a religious fundamentalist might--by suggesting I exile myself to the hinterland.

    Who's provincial here? Look, clearly you and others enjoy the attitudes espoused by most of the residents. As I stated, I voted with my feet and don't live there anymore. I didn't state that you should leave Berkeley, so try to close the page on the "the personal is political" trope from that long-ago decade.

    Some time in the future, I recommend to you as I do to everyone in the area, especially those, like you, who it seems have no idea what life is like elsewhere--take 2 weeks (at least) and drive across the country. You'll learn several things:

    1) This country is huge.
    2) People in, say, Peterson Kentucky, or better yet, Milwaukee, Des Moines, Birmingham, Tulsa, etc. lead very normal lives.
    3) These very normal people are much more "tolerant" and "open-minded" than 95% of the people in the Bay Area who can't even conceive of thinking outside the 1968-1972 prism.
    4) They lack the exceedingly annoying and unjustifiable civic narcissism that pervades this area.
    5)$40,000/year buys you the same lifestyle that you lead here for over $100,000/year, yet wages often are only 10% less for comparable, non-specialized (i.e. tech/biotech) jobs.

    So you can convince yourself life really is that much better here, but really, you just sound like a close-minded, pretentious "SF liberal" stereotype.
  • Bad Advice
    Sheesh, if you don't like the politics, move to Petersburg, Kentucky. The land is cheap and you can go frolick at the Creationism Museum.

    Beware of what you think is backwards, there's worse out there (well, maybe you believe in that kind of stuff so whatever floats your boat).
  • David
    I'm not counting exit exams. I'm looking at the percentages of students scoring "proficient" or above at different grade levels. Exit exams are gamed, by obviously not including dropouts.

    And again, you're gaming the expense. If I threw in West Oakland into my comp, housing would be cheaper in Oakland than Berkeley, obviously. You cannot tell me that West Berkeley or South Berkeley remotely resemble Rockridge in desirability. The correct comp is North Berkeley (and maybe central) to Rockridge etc. And there you see similar to high home prices in Berkeley vs Rockridge/Piedmont ave/Redwood Heights/Montclair.

    If you don't understand my comment on people in Berkeley living in a "dream palace built in 1968," have you lived anywhere else besides the Bay Area? The town is run by hippy boomers who see everything through that prism. Like I said, if you like that, great, but I don't know which Berkeley you're living in if you don't have a clue as to just how frozen the politics and attitudes are there.
  • sc
    I cannot for the life of me figure out why anyone would want to live in Berkeley unless they like dirty college towns with old hippies, violence, and crazies everywhere.

    The real estate is high in Berkeley, but no where near as high as Lamorinda, Alamo, or Danville where the average home price is well over 1MM. All of these neighborhoods have better schools and no ghettos.

    I went to Berkeley in the 90's and hated the neighborhood due to the rampant violence that occured while I lived there. I would never ever live there again. Blech. That city lives in the past, is hypocritical, and disgusting.
  • Toady
    First, if you look at the data in a comprehensive way, there is no "premium" for buying a home in Berkeley. If you pick and choose which listings you're going to compare, then I suppose you can make any case that you'd like. The fact is that real estate in Berkeley is less expensive than in its neighboring communities.

    These affordability indexes are nonsense. I just don’t understand how it’s at all meaningful to simply divide median home price by median income when there are a whole host of other factors at play; i.e. high percentage of no-income earners, intergenerational working-class homeowners, etc. Are we supposed to conclude that Berkeley is less affordable than, say, Menlo Park, or San Rafael, or San Francisco?

    I would propose an entirely different metric for affordability. For instance, Antioch and Berkeley each have a little over 100K in population. There are currently over 500 REOs listed for sale in Antioch. Berkeley has 6. So which city’s homeowners appear more able to afford their mortgage payments?

    As for why buyers are attracted to Berkeley, I suppose we could argue all day, because these decisions are often based on unquantifiables; for instance, the “dream palace of 1968-1972.” I have no idea what that is, but maybe somewhere there are people who really want to live in Berkeley because of something that happened 40 years ago.

    My family lives in Berkeley because it’s centrally located, it’s a diverse and dynamic community (unlike lily-white Albany), it’s affordable relative to neighboring communities (Piedmont is $539/sf, BTW), and the public schools are fantastic. Berkeley High’s test scores aren’t as high as Albany’s or Piedmont’s or Miramonte’s, but you are paying a premium to live in those districts. And BHS’s 2006 CAHSEE scores were in the top quintile in the state; I don’t know how you can call that “not good.” And the curriculum changes that Principal Slemp has brought about are exciting and innovative.

    Sorry for the book. I just don’t get all the slag that gets thrown at Berkeley. If you don’t like it, great, don’t move here. It’ll keep housing prices affordable.
  • David
    I think Berkeley attracts those who "believe in the dream" for all that means (1960's-70's hippie ideals), and repels those who don't believe in those past policies, which can even include "liberals."

    I would post more what I think of those ideals, but it's not appropriate. Obviously I voted with my feet, although I understand why people do reside there, having lived in near downtown Berkeley for 6 years.

    As to the average price/sq ft. I was listing the range, not the average, indicating the range of house prices/sq ft is quite comparable. As I'm sure you know, the "average" is not indicative of much, ESPECIALLY when you average in the Berkeley "flats." A more proper comp would be north Berkeley/Solano/Marin area compared to Rockridge. There you'll find that prices are comparable to higher than Rockridge.

    Yes, I know Lamorinda is more expensive, but as I wrote, you fork it out for the public schools or you fork it out for the private schools. If you don't have kids, then it doesn't matter. Berkeley public schools past elementary levels are not "good" by any testing measure. So again, I don't understand living in Berkeley, paying a premium for public schools that are inferior to Albany. If you accept that public high schools in both Berkeley and Oakland are poor, then paying a premium for Berkeley public high school is odd.

    Then again, if you believe the Berkeley premium is due to other factors, that's understandable, but I entirely disagree its premium is due to schooling. I also do not agree it's due to commuting convenience (unless you work at the University), nor restaurant quality or quantity (as equivalent restaurants exist in Oakland). Nor is it green space or shopping (again comparable spaces and shopping exist in Oakland).

    Rather, I believe the premium is almost entirely due to those who perceive that Berkeley is a "special place" for the reason listed above--it's a dream palace of 1968-1972. People who are still living that dream love it; those of us who aren't, don't.
  • Curious: I agree with you that it is difficult to consider Berkeley independently of its neighbors. However I think there is a segment of the homebuyer market for which it's Berkeley or nothing. Just as there are some (David for example) for whom it's "anywhere but Berkeley"!
  • curious
    If one of the criteria for selecting homes in Oakland, Berkeley, Albany or other bayside communities is schools, then Piedmont has to be thrown in the mix. Not sure what the pricing is like in Piedmont currently, but historically prices have reflected a premium for the schools (and other community services). None of Oakland, Berkeley, nor Albany can approach the quality of the schools in Piedmont or, as noted by Toady, Orinda.

    The Forbes article raises very interesting issues: what drives the real estate prices in the inner bay area? Without question, Berkeley is not affordable. However, is Walnut Creek, Alamo, Danville substantially more affordable? Can Berkeley be considered alone, without considering Oakland, Albany, El Cerrito, Richmond, and other nearby communities? Seems to me that Berkeley can only be considered in the context of the surrounding communities and the broader bay area.
  • Well, what more can I possibly add? David and Toady have pretty much covered all the bases when it comes to Berkeley living versus the rest. But I think I will return to this subject as it is fascinating. Why is such a tiny city both so attractive to some and repellent to others?
  • Toady
    Average list price per square foot according to current listings on Redfin:

    Berkeley: $459
    Rockridge: $493
    Albany: $548

    I grew up in Lamorinda. My mom's 1,300 sf house was appraised last year for a refi at $1.1 mil. Berkeley is nowhere even close to that.
  • David
    PS. I say that as someone who lived in Berkeley for 6 years.
  • David
    Peralta's not bad, neither is Hillcrest or Chabot (in Rockridge), or Montclair or Thornhill or Redwood Heights (in the hills). I'm not so sure that nice parts of Oakland are more $/sq ft than Berkeley. In Rockridge, I see a range from $450 to $600; other parts in the hills are often in the $400-$500 range. Berkeley, outside of the San Pablo area (not nice) is pretty much in the same range or higher ($450-$700 from what I see). Albany is also $450-$700, but school is fine through high school.

    Berkeley's high school is inferior to Albany, and not great by any measure. Barely 50% were proficient or above in English, and there's no other word for the math scores but atrocious.

    If you're counting on good public high schools, you should be in Albany (same cost as Berkeley) or Lamorinda. Or be ready to fork out the $$ for private schools.

    But if you like Berkeley, fine. I don't understand the attraction or the price premium.
  • Toady
    Rockridge and Albany real estate are both far more expensive, in terms of average $/square foot, than Berkeley. And Rockridge is still in Oakland Unified School District, which is an almost unmitigated disaster. Maybe your kid gets into Peralta, which is a decent school. But then what? Oakland Tech? I didn't think so. So you need to add private school tuition to your mortgage payments.

    Forbes methodology is absurd. Berkeley's population is just under 103K. Cal's enrollment, undergrad and postgrad, is almost 35K. So if somewhere around a third of your population is virtually income-free, that's going to have a pretty significant effect on calculating median income.

    Berkeley is certainly pricey. But for those of us who choose to live here, it's a great community with a well-funded and responsive local government and an outstanding K-12 school system. Plus, Shakespeare and Co., Cody's, Moe's, Comic Relief, Black Oak, Half-Price, Other Change of Hobbit, etc.

    That's why.
  • David
    I still don't understand why anyone not affiliated with the university would pay a premium to live in Berkeley. Restaurants? You can live in Rockridge/Piedmont Ave and the Grand Lake area in Oakland and get just as good restaurants. Or Albany and Solano Ave. And you'd get Albany schools, or if living near Rockridge, get those schools, if you have kids.

    I mean, Berkeley can't even support a bookstore anymore. It's pathetic.
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