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Stacey Smith and her husband looked at about three dozen homes in the San Francisco Bay area and lost a bidding war before finally purchasing a four-bedroom house in June for $1.5 million — 40 percent more than the asking price.

Their search wasn’t in Silicon Valley or San Francisco. It was just across the bay in Oakland, which has supplanted its pricier and better-known neighbors to become the region’s most heated real estate market.

“Something we had to wrap our head around really quickly was the fact that we were automatically going to bid at least 30 percent over asking,” said Smith, a 50-year-old strategy consultant who moved from San Francisco in search of more space for her family’s three kids. “It’s the new normal.”

Oakland’s housing market is still soaring even as growth cools in San Francisco, where million-dollar median home prices have left buyers searching for more affordable alternatives. The East Bay city had California’s highest annual appreciation of home values and the biggest rent growth of the 50 largest U.S. cities as of June, according to data compiled by Zillow.

Despite persistently high crime rates and political turmoil, Oakland is attracting residents for its relative affordability, vibrant cultural scene, diverse population and urban environment within commuting distance to San Francisco. Companies such as Uber Technologies Inc. are moving in — helping to fuel a 43 percent jump in office rents in two years — while big investors including Blackstone Group LP and Boston Properties Inc. are putting money into residential projects in the city.

“Oakland is the hottest residential real estate market in the Bay Area,” said Kenneth Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at the University of California, Berkeley. “It’s still expensive, but it’s more affordable” than San Francisco.

Biggest Gains

Oakland home values soared 16 percent in June from a year earlier to a median $616,300, the biggest gain of California’s major cities, according to Zillow. The median monthly rent jumped 15 percent, the most in the U.S., to $2,846 in the same period. That was almost triple the 5.5 percent growth in San Francisco, and more than five times the nationwide increase.

Houses are selling fast — and far above list prices. The average home in Oakland sold for 17 percent more than asking in the second quarter, according to data from Paragon Real Estate Group measuring properties that didn’t go through a price reduction first. That compared with 9 percent for San Francisco and 5 percent in Silicon Valley’s Santa Clara and San Mateo counties. Oakland homes were on the market an average of 20 days, fewer than the 34 days in San Francisco.

“Most markets would be pleased if they averaged asking price, or 1 or 2 percent over asking price,” said Patrick Carlisle, chief market analyst at Paragon. “To see things averaging 9 to 17 percent over asking price is virtually unheard of. It’s the highest I’ve ever seen.”

The median home price in Oakland has soared 178 percent since 2011, almost double the gain in San Francisco, Paragon data show.

Police Scandal

Oakland is still struggling with a reputation for social and political unrest. Its police department is operating without a chief after three departed, one after another, in the span of about a week in June amid a sex scandal involving officers and a teenage prostitute. It’s also an epicenter of social protests, including those connected to the Black Lives Matter and Occupy Wall Street movements.

The troubles aren’t deterring newcomers, city officials say.

“It’s not slowing growth in the way that it used to five or 10 years ago,” said Marisa Raya, an economic analyst in Oakland’s office of economic and workforce development. “But we are certainly seeing a lot of political activism around the super-fast rent growth.”

Oakland voters will consider ballot measures in November to strengthen rent control and issue bonds for affordable housing.

Blackstone Rarity

Blackstone has teamed with CityView, a property company started by former U.S. Housing and Urban Development Secretary Henry Cisneros, to build a 423-unit apartment complex in Oakland. The $175 million project at 3093 Broadway, due to be finished in 2018, is the first development in the city for the world’s largest alternative-asset manager.

Jon Gray, Blackstone’s billionaire head of real estate, said he thinks Oakland may become the next Brooklyn — a comparison that has frequently been evoked in recent years as the city comes into its own as a hot spot after previously being overshadowed by its glitzier neighbor.

“We very rarely do ground-up development, so this project reflects our strong confidence in the transformation under way in Oakland,” Gray said in an e-mail.

Boston Properties, the largest publicly traded U.S. office owner, signed a letter of intent to invest in a 25-story residential development in Oakland’s Temescal neighborhood, Chief Executive Officer Owen Thomas said on a July 27 earnings conference call.

“Given the high cost of multifamily product in the San Francisco market, we believe we can deliver high-quality units that are approximately at a 20 percent discount to San Francisco rents in a location that is a 16-minute transit ride from the Embarcadero BART Station in downtown San Francisco,” he said on the call. Arista Joyner, a spokeswoman for the company, declined to comment further.

Job Growth

Oakland’s job growth also is showing signs of outpacing its neighbor, with listings up 16 percent since April, compared with a 1 percent decline in San Francisco, according to LinkUp, a job-search engine based in Minneapolis. Among the companies setting up shop is San Francisco-based Uber, which last year bought the old Sears building in the Oakland’s urban core and is renovating it, with plans to open in late 2017.

The city is home to consumer-products maker Clorox Co.; Kaiser Permanente, a nonprofit health insurer and hospital chain; and internet-radio service Pandora Media Inc.

The rate for top-quality office space in the city has grown 43 percent in the second quarter compared with two years earlier, while San Francisco’s rent is up 20 percent in that time, according to data from real estate brokerage CBRE Group Inc.

The influx of companies is helping to prop up housing prices. Even as the technology industry slows, there are still “many, many buyers” in Oakland, said Carla Buffington, a real estate broker at Pacific Union in the city.

“We’re seeing a majority of properties selling with multiple offers,” Buffington said. “Almost weekly, I am shocked by the price that a certain property will get.”

Article source: http://www.bloomberg.com/news/articles/2016-08-23/san-francisco-housing-frenzy-shifts-across-the-bay-to-oakland

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Stacey Smith and her husband looked at about three dozen homes in the San Francisco Bay area and lost a bidding war before finally purchasing a four-bedroom house in June for $1.5 million — 40 percent more than the asking price.

Their search wasn’t in Silicon Valley or San Francisco. It was just across the bay in Oakland, which has supplanted its pricier and better-known neighbors to become the region’s most heated real estate market.

“Something we had to wrap our head around really quickly was the fact that we were automatically going to bid at least 30 percent over asking,” said Smith, a 50-year-old strategy consultant who moved from San Francisco in search of more space for her family’s three kids. “It’s the new normal.”

Oakland’s housing market is still soaring even as growth cools in San Francisco, where million-dollar median home prices have left buyers searching for more affordable alternatives. The East Bay city had California’s highest annual appreciation of home values and the biggest rent growth of the 50 largest U.S. cities as of June, according to data compiled by Zillow.

Despite persistently high crime rates and political turmoil, Oakland is attracting residents for its relative affordability, vibrant cultural scene, diverse population and urban environment within commuting distance to San Francisco. Companies such as Uber Technologies Inc. are moving in — helping to fuel a 43 percent jump in office rents in two years — while big investors including Blackstone Group LP and Boston Properties Inc. are putting money into residential projects in the city.

“Oakland is the hottest residential real estate market in the Bay Area,” said Kenneth Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at the University of California, Berkeley. “It’s still expensive, but it’s more affordable” than San Francisco.

Biggest Gains

Oakland home values soared 16 percent in June from a year earlier to a median $616,300, the biggest gain of California’s major cities, according to Zillow. The median monthly rent jumped 15 percent, the most in the U.S., to $2,846 in the same period. That was almost triple the 5.5 percent growth in San Francisco, and more than five times the nationwide increase.

Houses are selling fast — and far above list prices. The average home in Oakland sold for 17 percent more than asking in the second quarter, according to data from Paragon Real Estate Group measuring properties that didn’t go through a price reduction first. That compared with 9 percent for San Francisco and 5 percent in Silicon Valley’s Santa Clara and San Mateo counties. Oakland homes were on the market an average of 20 days, fewer than the 34 days in San Francisco.

“Most markets would be pleased if they averaged asking price, or 1 or 2 percent over asking price,” said Patrick Carlisle, chief market analyst at Paragon. “To see things averaging 9 to 17 percent over asking price is virtually unheard of. It’s the highest I’ve ever seen.”

The median home price in Oakland has soared 178 percent since 2011, almost double the gain in San Francisco, Paragon data show.

Police Scandal

Oakland is still struggling with a reputation for social and political unrest. Its police department is operating without a chief after three departed, one after another, in the span of about a week in June amid a sex scandal involving officers and a teenage prostitute. It’s also an epicenter of social protests, including those connected to the Black Lives Matter and Occupy Wall Street movements.

The troubles aren’t deterring newcomers, city officials say.

“It’s not slowing growth in the way that it used to five or 10 years ago,” said Marisa Raya, an economic analyst in Oakland’s office of economic and workforce development. “But we are certainly seeing a lot of political activism around the super-fast rent growth.”

Oakland voters will consider ballot measures in November to strengthen rent control and issue bonds for affordable housing.

Blackstone Rarity

Blackstone has teamed with CityView, a property company started by former U.S. Housing and Urban Development Secretary Henry Cisneros, to build a 423-unit apartment complex in Oakland. The $175 million project at 3093 Broadway, due to be finished in 2018, is the first development in the city for the world’s largest alternative-asset manager.

Jon Gray, Blackstone’s billionaire head of real estate, said he thinks Oakland may become the next Brooklyn — a comparison that has frequently been evoked in recent years as the city comes into its own as a hot spot after previously being overshadowed by its glitzier neighbor.

“We very rarely do ground-up development, so this project reflects our strong confidence in the transformation under way in Oakland,” Gray said in an e-mail.

Boston Properties, the largest publicly traded U.S. office owner, signed a letter of intent to invest in a 25-story residential development in Oakland’s Temescal neighborhood, Chief Executive Officer Owen Thomas said on a July 27 earnings conference call.

“Given the high cost of multifamily product in the San Francisco market, we believe we can deliver high-quality units that are approximately at a 20 percent discount to San Francisco rents in a location that is a 16-minute transit ride from the Embarcadero BART Station in downtown San Francisco,” he said on the call. Arista Joyner, a spokeswoman for the company, declined to comment further.

Job Growth

Oakland’s job growth also is showing signs of outpacing its neighbor, with listings up 16 percent since April, compared with a 1 percent decline in San Francisco, according to LinkUp, a job-search engine based in Minneapolis. Among the companies setting up shop is San Francisco-based Uber, which last year bought the old Sears building in the Oakland’s urban core and is renovating it, with plans to open in late 2017.

The city is home to consumer-products maker Clorox Co.; Kaiser Permanente, a nonprofit health insurer and hospital chain; and internet-radio service Pandora Media Inc.

The rate for top-quality office space in the city has grown 43 percent in the second quarter compared with two years earlier, while San Francisco’s rent is up 20 percent in that time, according to data from real estate brokerage CBRE Group Inc.

The influx of companies is helping to prop up housing prices. Even as the technology industry slows, there are still “many, many buyers” in Oakland, said Carla Buffington, a real estate broker at Pacific Union in the city.

“We’re seeing a majority of properties selling with multiple offers,” Buffington said. “Almost weekly, I am shocked by the price that a certain property will get.”

Article source: http://www.bloomberg.com/news/articles/2016-08-23/san-francisco-housing-frenzy-shifts-across-the-bay-to-oakland

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Article source: http://www.nytimes.com/2016/08/22/business/economy/bay-area-start-ups-find-low-cost-outposts-in-arizona.html

To its neighbors in the San Francisco Bay Area, the city of Vallejo, CA, has long been known for several things. There was the notorious bankruptcy in 2008. There was the ignominious honor of ranking No. 9 on the Forbes list of Most Miserable Cities and No. 2 on Newsweek’s of Dying Cities in the same year (2011). There was the abandoned Mare Island Naval Shipyard, the violent crime, the squalor, the shuttered homes, the hopelessness.

One thing Vallejo was not known as: the next trendy place for Northern Californians to buy a house and raise a family.

But, remarkably enough, all that has changed. For the past two months, the metropolis has topped realtor.com®‘s rankings of the nation’s hottest real estate markets. As in No. 1.

Call it the latest beneficiary of the Bay Area’s brutal (and brutally expensive) supply-and-demand housing market. As more and more buyers and renters are priced out of San Francisco and the surrounding towns, they’ve become increasingly open to new frontiers. It’s led to a resurgence and gentrification in long-downtrodden Oakland. And now it’s hitting Vallejo big-time.

Buyers are overlooking the high crime rates and poor public schools and snapping up stately Victorians and other residences in the former naval town, where the median listing price is just $345,000, according to realtor.com.

The price is still considerably higher than the national median price of $247,700 for existing homes and $306,700 for newly constructed abodes, according to June data from the National Association of Realtors® and the U.S. Commerce Department. But it’s dirt-cheap compared with San Francisco, with a median listing price of $1.1 million, or Silicon Valley’s Palo Alto, CA—where techies are shelling out a mind-boggling median $2 million on their treasured homes.

Vallejo’s even a bargain compared with Oakland, San Francisco’s still somewhat grittier eastern neighbor, with median list prices hitting $525,000.

“It still remains one of the few arguably affordable places in Northern California,” says Javier Vivas, realtor.com’s manager of economic research. “That makes owning a viable option in Vallejo, driving up demand.”

Vallejo’s woes

But despite having twice served as the capital of California (briefly, in 1852 and 1853), the city wasn’t always so in demand. Its established middle- and working-class community took a big hit in 1996 when the area’s major employer, the naval shipyard, closed, and thousands of workers were suddenly out of a job.

“The housing market really did bottom out at that time, because a lot of people were taking jobs elsewhere and leaving the community,” says Jim Kern, executive director at the Vallejo Naval and Historical Museum. “The city has always been defined by the presence of the Navy. [But] for 20 years, we’ve had to carve out a new identity.”

A little more than a decade later, the world economy tanked, the U.S. housing market cratered, and a wave of foreclosures swept through Vallejo. Without those property taxes to pay for the city’s public worker pension costs, the city declared bankruptcy.

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At the height of the foreclosure crisis, homes were selling for about $100,000, says Vallejo real estate agent Debbie Raynor of Re/Max Gold. She used to list foreclosed properties for the banks that repossessed them.

“Still, nobody wanted to be in Vallejo,” says Raynor, adding that some of those empty homes became drug dens and havens for squatters. “It was blighted. There was a ton of crime.”

Violent crime is still a problem in the city, where it is more than double the national average. There were 18 murders, 63 rapes, 363 robberies, and 1,040 auto thefts in 2014, according to the most recent information available from city-data.com.

The city’s public school district is also struggling—receiving just a 4 out of 10 rating on GreatSchools.org.

So with high crime and lousy schools, how did Vallejo, with a population of about 121,000, become the nation’s hottest market? Sorry to trade in clichés, but as the real estate pros like to say (and say again), it’s all about one thing: location, location, location.

Vallejo’s comeback

Across the board, things in Vallejo are definitely looking up.

The city is just over 30 miles from San Francisco and about 60 miles from Sacramento along the Interstate 80 corridor. And when the workweek is over, it’s home to Six Flags Discovery Kingdom and a mere 16 miles from Napa and its surrounding wine country. In recent years, a “vibrant” artist community has moved into the city’s downtown, heralding the opening of several small galleries, says Rich Curtola, CEO of the Vallejo Chamber of Commerce.

Perhaps most important, Vallejo offers ferry service directly to San Francisco so commuters can get to work in the Golden City within an hour.

“People are saying, ‘Jeez, I can’t afford to live in San Francisco, and I can’t even afford to live in Oakland,’” Curtola says. “What people are finding is there are affordable properties here that are absolutely beautiful.”

The turnaround seems sudden, but it’s actually years in the making.

Investors realized this early on and swooped in in 2009 and 2010 and began rehabbing foreclosures that had seen better days and flipping them, local real estate agent Raynor says.

But the days of finding real estate bargains are long over, she says. Now she’s getting multiple offers and bids well over asking price, despite the continuing dearth of popular amenities such as trendy restaurants.

“It’s still one of the last remaining underdeveloped areas with waterfront,” says Raynor, who lives in the city.

And prices are only expected to continue shooting up. There are plans for hundreds of waterfront condominiums, some high-end rentals, and retail development along the Napa River, says Andrea Ouse, community and economic development director for the city of Vallejo. There are also schemes to put up hotels, a sports field, and a 3,000-seat amphitheater on the site of the Solano County Fairgrounds. There is no set date for construction yet.

“Land values are going to increase particularly over the next three to five years due to the level of investment that we are seeing now and the level of interest in potential development,” Ouse says.

Mare Island’s resurgence

Mare Island, the former home of Vallejo’s long-deserted shipyard, is also experiencing a resurgence. The island now has about 250 homes and more than 100 businesses, says Edward Moser, a spokesman for Lennar Mare Island, the developer for a portion of the island.

The ship construction and repair firm Mare Island Dry Dock opened in late 2013 and now employs about 150 people. Touro University California moved to a 44-acre site on the island in 1999 and opened a nursing school there in 2014. Faraday Future, an electric car company, is in negotiations to open a factory and test-drive facility on a large property parcel. 

And there are plans to put up a new ferry terminal, whiskey distillery, and 1,400 single-family houses, townhouses, condos, and rentals on the island as well, Moser says.

The Mare Island Brewing Co., which opened in 2013, is doing so well that it plans to break ground on a larger facility on the island this fall.

“Our taproom is so busy that we can’t keep up,” says Kent Fortner, the microbrewery’s founder/owner and a proud Vallejo resident. He’s seeing an influx of refugees from other, pricier Silicon Valley hubs.

“It’s headed upward. You can feel it,” says Fortner. “Everybody I know is relandscaping their lawns, doing a small remodel … or they’re actually thinking of buying a second home on the island as an investment to rent out.”

The biggest challenge to the burgeoning community remains the substandard public schools, a warship-size obstacle for many professionals with children. His own two kids attend a charter school in Napa.

However, he remains optimistic about the future of Vallejo.

“It’s a renaissance that has no limits,” Fortner says.

Article source: http://www.realtor.com/news/trends/vallejo/