Bay Area Sweet Digs

May 13, 2008

OMG, How Much Lower Can They Fall?

2452482304 c7f620092d m OMG, How Much Lower Can They Fall?

What is going to mark the bottom in Antioch, one of the Bay Area’s most foreclosure-plagued cities?  Just one example: a two-bedroom, two-bath corner unit condo with fireplace and hardwood floor for $89,000. While this is by no means an apples-to-applies comparison, $100,000 was a not-unusual price for homes in Berkeley in the 1980s. (Of course, Berkeley is a far more desirable city, we all know.) Still, this price has symbolic meaning. How low do you think homes in Antioch will go? Will we see prices fall to $65,000 soon?

Whilst we contemplate this question, here’s a list of recent price drops in Antioch and Pittsburg as the subprime meltdown continues to batter these two East Contra Costa County towns. If you thought you’d never be able to buy a house in the Bay Area, looks like the chance could be here. Just remember to do your homework online, talk to folks who live in the neighborhood and trusted professionals, and make sure this is a purchase that will work for you. (Photo of falls: Miguel Vieira.)

2400 Shadow Lane #108, Antioch: 2 bedrooms/2 baths, 944 sq ft, was $102,900, now $89,900. Needless to say, this is a foreclosure, with no yard and probably an apartment conversion – built in 1979. No beauty, though looks well-maintained in the photos.

2415 Horizon Lane #126, Antioch: 2 bedrooms/2 baths, 944 sq ft, was $119,900, now $109,900. End unit condo with wood-burning fireplace, wall-to-wall carpeting and a patio; not surprisingly, sale is “as is,” and yes, it’s a foreclosure.

233 Rolfe Drive, Pittsburg: 3 bedrooms/2 baths, 1,252 sq ft, was $219,000 and now dropped to $119,000. While the ones above are probably most notable for the low prices, this property looks like it could be a worthwhile acquisition. It’s a single-family detached home with granite counters that shows very well in the photos. Short sale.

1708 Springwood Way, Antioch: 3 bedrooms/1 bath, 1,022 sq ft, was $199,950, now $149,950. Again, this one seems like it could be a good deal. It’s a single-family detached house with a patio, double-car garage, parquet and wall-to-wall carpeting and looks very well-maintained in the photos.

Posted by Janis Mara on May 13, 2008 11:08 AM | del.icio.us | Digg

  • Sure seems worth a look!
  • David
    Well, there are bad 'hoods and then there are bad 'hoods.

    If there are dealers and prostitutes on the streetcorners, then yeah, your "product" is going to be substandard. I don't know the areas where these listings are, but at these prices if I were in the investment market, I'd be checking the 'hoods out.
  • Wow, this is exciting! Sounds like the thing to do is become more familiar with the area and keep pursuing this option. Nice to think that there are some decent opportunities.
  • That never occurred to me, David, thanks! What about the neighborhood, though? I'm thinking that a less-than-desirable neighborhood with few amenities and a fair share of crime would also affect the product, eh? ---> One thing that seems to work for a friend of mine is always running a credit report on prospective tenants. But probably everybody reading this already thought of that.

    Jill, I'll keep poking around and will report in tomorrow with anything I find out. Are you considering Antioch as a possible location for your investment?
  • David
    I don't how to best avoid undesirable tenants. One thing I would do, and recommend for any wannabe landlord is to realize that while they're making an investment, they're also in a product business. If you provide a good product (livable, well-maintained unit/house), you can charge a premium, and attract a more responsible tenant. Provide a substandard product (slumlord) and you're likely to be matched with those kind of tenants.
  • Jill
    Yes...we never thought we would see the potential for cash-flow positive investment properties in the bay area. We are just trying to get smarter about the area, and we can check Craigslist to understand rental market, greatschools.com to understand schools, etc., but it would be easier to just have a good realtor.

    A friend suggested getting the local Sunday paper and seeing which REaltors seem to have a lot of listings...but I am also hoping that there is a website or something which ranks realtors. Realtors are always boasting about how they are #1 Sales in their area, etc. So I would imagine that there is a source for tracking this. If you find out anything would love to hear it. Thanks!
  • *Awesome* question, Jill! I just spoke with Kevin Sweatt, a commercial real estate broker with NAI BT Commerical. He didn't have a Web site to suggest, but confirmed exactly what you said:

    "You have to talk to a residential broker, someone who knows the market who has sold property or maybe even purchased property in the area. You have to factor in the schools and the infrastructure, as well as the crime rate."

    Of course, you already know this, Jill, and I'm going to poke around and see what I can find. One thought is: Sounds like you have a trusted Realtor or two or three - they just aren't in that area. Why not ask them if they know trustworthy professionals who are? Anyway, I'm glad you posted. Sounds like you are thinking about purchasing some investment property, eh?
  • Jill
    Very interesting post/thread. Any suggestions on how to find a "trusted professional" who knows the area to help assess the neighborhoods, etc.? I know how to find a good realtor in our area, ask friends, but what if you don't know anyone who lives out there? Are there any websites that rank top realtors for a specific area?
  • Awesome, that's great, David! I happen to know that at least one person reading this comment thread is looking to buy investment property, so you've done that person a service, not to mention contributing to general knowledge. Just one other question, you don't think it's an inordinate risk to rent in a somewhat depressed area - an inordinate risk of getting less than reliable tenants, I mean?
  • David
    I think price/rent is a more accurate measure than price to income in this area. Due to desirability factors, as much as I hate to admit it, deluded people still want to live here, there will be a higher %% of the average person's income devoted to housing--either buying or renting.

    Therefore, I use price/rent here (in Milwaukee, I would use price/income, by comparison).

    I don't know what happened to Antioch's rents the last time around, but I know that inner East Bay rents dropped 8%, and SF/Peninsula rates dropped 15%. Again, this area was the epicenter of the last bust, with hundreds of thousands of people fleeing. While the outer East Bay was a pretty big housing bubble site, it has NOTHING on San Diego or especially Florida.

    If you could rent that house for $1500/month, assuming 30% down for investment property, you're getting good cash flow. Even with rents down to $1200/month, you should be making money. I'm not as familiar with that market, but I'd say if I were an investor more familiar with it, it's time to go shopping.

    Remember, average SFR rental yields across the entire country from 1965-1995 averaged 5%. So if you buy a house for $100K to rent out and you get more than $5K/year, you're beating a solid 30 year average. Rents may drop, but you're assuredly going to get more than $500/month to rent that house. And then you get the appreciation, pay down of the loan etc.

    So, yes, I think these are clearance prices, even though the area is depressed and will stay so for another 3-5 years.
  • Downward pressure on rents! So maybe we'll emerge from this bloodbath with a Bay Area where it isn't such a struggle to pay for shelter. One can only hope. When I first got to the Bay Area, I ended up living in one big room in a six-story apartment building that was created as a place for maintenance workers to store their ladders, paint cans and so on and use the bathroom. And I was paying quite a bit for it!

    So, Susan - would you consider buying a home in Antioch to rent it out?
  • Colin
    As more of these properties get bought up by "investors" and rented, they will put downward pressure on rents. To some extent this will be balanced by foreclosed owners looking for a place to rent, but a lot of these properties are sitting there unoccupied right now. So my belief is that prices will continue to fall until prices match historic norms versus rents/incomes and owner-occupiers can return to the market as buyers. Even in places like Antioch, Stockton etc I think we have a way to go.
  • Now, that's actually starting to be affordable - both for owners and for landlords.
  • Smile. Well, SB, that's a good point. I just thought it was amazing to see any property in the Bay Area offered for under $100,000.

    Interesting to hear that you think Stockton's prices are mostly corrected! What about Richmond? I know you said the East Bay has further to fall, but Richmond and San Pablo have the lowest property values in the East Bay. Do you think values have corrected there?

    Hey there, David! I swung by Rent.com and found a listing for what is described as "luxury 2bed/2bath apartments ... in a spectacular location," apartment community Hillcrest View, for $1420 to $1520.

    The Village at Park View has $835 to $1435 rents, "just down the road from Somersville Town Center." Riverstone apartment community has rents at $900 to $1077, describing these as "affordable rents."

    What do you think, David? Is your thought that investors would buy the houses in the interests of "buy low, sell high," and rent them out to pay the mortgage until prices begin to rise?
  • Sb
    Comparing a condo in Antioch in 2008 to a SFH in Berkeley in the 80s?? I don't understand your point. How can this provide any meaninful insight?

    As long as housing prices are beyond the median income of the neighborhoods that they're located in, they will continue to fall. Some areas appear to be mostly corrected by now (around Bakersfield, Stockton, east San Diego, etc), while others still have a lot further to fall (Peninsula except near Stanford, East Bay).
  • David
    what are rents out there? I'm thinking investors should start being attracted at these prices and could put a floor in there.
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