Oakland is a great place to live, work and play…. but perhaps not to invest in real estate.
Historic architecture, a diverse population, a mild climate that encourages year-round outdoor activity… these are just a few of the many lifestyle attractions offered by Oakland, California.
The list continues with world-class attractions, a colorful arts community, and tasteful restaurants. Parks and pro sports teams punctuate the area, while a bustling waterfront adds a vibrant backdrop.
From all appearances, this major West Coast port city has it all. But, when it comes to the Oakland real estate market investing, is its beauty only skin deep?
Oakland is the largest city in the East Bay region of the Bay Area, with a population just topping 400,000 people. A close proximately to San Francisco—about a 12-mile drive from door to door—has made it a mecca for people unable to afford to live in San Francisco.
In the recent year, this dynamic has dramatically driven up Oakland home prices.
According to online real estate resource Trulia, “Oakland market trends indicate an increase of $57,500 or 11% in median home sales over the past year. The average price per square foot for this same period rose to $476.”
The impact on rental pricing has paralleled this increase. In fact, Oakland real estate market ranks among the most expensive rental markets in the nation. As Alison Vekshin of Bloomberg notes, “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.”
What does Oakland’s Combustive Real Estate Market Growth Mean to Investors?
The bottom line is that when home prices surge, rental returns diminish. According to HomeUnion’s 2016 Single Family Rental Research Report, “Owner-occupied home prices (in Oakland) are at the highest levels in the past ten years, while investment-home prices are still catching up to the previous peak.” The report continues, “Transaction velocity has dipped in recent quarters as prices have climbed beyond the threshold desired by many investors.” While several Oakland real estate markets, such as East Alameda, offer lower prices and attractive returns, new apartment construction projects could eventually soften renter demand.
Investors need to take stock of their personal investment goals to determine if investing in Oakland makes sense. For example, investors with longer time horizons should consider properties with access to future transit stations, which will eventually bolster valuations. Those seeking higher profits sooner should move onto other locations.
Is Oakland Real Estate Investing Right for You?
After reflecting on your financial goals and investment amount, is Oakland a smart investment location for you? When you need an expert perspective, HomeUnion is there to help
Our Solutions Managers are available to lend you insight and information every step of the way. We put big data at your fingertips, along with local real estate experts, and the key research you need to invest in line with your individual goals.
Is the Oakland iron hot for the striking? Or do greener pastures beckon? Find out now, by scheduling a consultation with a HomeUnion Solution Manager.