East Oakland and gentrification?

Question

Hey BP,

Just wanted to throw out a speculative question to pose to all of us familiar with the Oakland area.

What's everyone's opinion on the time it's going to take for the majority of East Oakland to see the gentrification that we're seeing around West Oakland, Lake Merritt, etc...? What's your rationale behind your timeline?

Chris Mason · Answer

Hi @Maxwell Chen,

If "median borrower DTI" is any indicator of probability of future distressed sales, which in turn might be a predictor of short term future appreciation (or lack thereof), then I'm going to go ahead and suggest that the Flatlands might be an area of our market where you should emphasize cashflow a little more, and appreciation speculation a little less.

If you're going to own for 10+ years, great, go for it. Prop 13 still applies, which will always make California a great place to build a Dynasty. And it's still the Best Coast. In addition, the folks buying in East Oakland tend to be high on the "I <3 this area and want to improve it!" scale. But if there is a substantial amount of appreciation speculation going on in your head to make the numbers to work for you.... ehhhhh maybe East Oakland isn't where you should necessarily be looking. Fruitvale being a bit of an exception (close transit access).

If you want to make a bet that's heavier on appreciation and not as heavy on cashflow today... you nailed it with Lake Merritt. And West Oakland. Anything within a half mile of BART. Berkeley.

It's always a dial that you can turn one way for cashflow today, the other way for appreciation tomorrow. Or you can be 'smarter' than the dial, and know something no one else knows, ergo you know something that isn't built into that dial.

DG A. · Answer

I live in Fruitvale, I just bought a duplex here. And I'm starting to see the signs of gentrification.

Pardon my bluntness... But, I'm seeing white people, where I wouldn't have expected to see them 10 years ago, riding fixies up and down international at night. Right on past the sex-workers and pimps.

Ale Industries a micro-brewery opened up a bar 2 blocks from Fruitvale Bart. There's hella hipsters in there drinking beer on the weekend (I'm there too playing pool, does that make me hipster!?) Half Orange has been there for a while serving really good finger food and micro-brewed beer. The point being here that this is the kind of stuff millennials with money tend to like. This is not so much the kind of stuff members of the community with less resources partake in.

I know a lot of folks that work at Tech companies in SOMA in SF, and commute there from Fruitvale.

I wouldn't put Fruitvale 10 years out. At least not Fruitvale between Foothill and 580.

I think West Oakland and East Lake Merrit are gentrifying NOW. Like we're 50% of the way ther in East Lake. And 65% of the way there in West Oakland.

I'd place my bet on Fruitvale being more like East Lake within 5 years.

The cool thing about Fruitvale is, there's plenty of properties that can cashflow here, and as long as you're not shopping for a SFH, you can pick them up at a decent price without much competition specifically if you intend to owner occupy.

Leslie Bandy · Answer

I held an open house of 75th and Weld last week and the turnout was extremely diverse.  I live in Eastmont Hills and have watched the influx of younger people not only in my neighborhood but in Eastmont, Havenscourt, Arroyo Viejo, and Durant Manor - anywhere where there are homes selling for under $500K - and sometimes as little as $275K for something that is livable.  These are the last areas where you can find affordable homes somewhat close to a BART station.

The Oak Knoll project breaks ground this year and the first phase will bring not only sorely needed housing (albeit with prices starting in the $900K range) but also a small shopping district with some amenities that are otherwise lacking in this area.  Rumor has it that one of the large warehouses near San Leandro and Hegenberger is being converted into lofts.

See this: http://www.mercurynews.com/2016/06/03/sizzling-hou...

Brian Garlington · Answer

@Maxwell Chen  @Adekunle Betts @Daniel Gonzalez

Nothing scientific here as far as an analysis,....but common sense says that things are rolling slowly but surely toward East Oakland,.....which is where I bought my duplex last year.

There is talk heating back up as well about a new housing development being build where Oaknoll Naval Hospital used to be off of the 98th Avenue exit and when that happens......get ready.....

The blocks all around me have been african americans and hispanics living there and visiting there for the time I've been there......until two months ago when some women moved into the house at the corner. This is simply an observation....not saying anything good or bad about it.

Robert Marston · Answer

East Oakland is the last place for residence in all of Oakland to go to find "affordable" housing. Outside of East Oakland if you wanna be in deep East Bay proper the next closest "affordable" neighborhood is Richmond, but you can't wear your "I Hella <3 Oakland" hoodie in Richmond and look sharp.

Gentrification is happening, I remember when West Oakland was one of the least desirable neighborhoods, now I'm listing run down Victoria homes over there for $600,000 and selling them in the $700's a few days later. This money almost positively will pour further and further into East Oakland as time goes on HOWEVER I am inclined to believe that it will not happen as fast as it did in West Oakland. In three years that whole area did an 180, with that there is now a larger concentration of lower income families in Fruitvale, 98th and near the Colosseum. Rent Control is getting stricter in the short term, no way to tell what will happen going forward with the controls in place but the signs right now suggest appreciation in East Oakland will be a longer play than other parts of the region.

Alameda County, but specifically Oakland is on a code enforcement march. When touring homes in East Oakland I notice there is a higher concentration of defects on the property than some of the neighboring areas(Tampering with electricity is the most common I see)- If Oakland comes in and makes owners bring these homes up to code before owners are able to make $ off of them then one could expect this to impact home values and rental rates! (Rents would probably go up via the Capital Improvement clause in rent control, only speculating here)

DG A. · Answer

422,000. And i rolled the closing costs into my loan.

Don Souza · Answer

I predict much of East Oakland will be see real estate change in 2017.

DG A. · Answer

Hey Robert, I agree. The capital expenditure based rent increases make a lot of sense. And, funny you should mention it, but my house probably needs some attention when it comes to electrical.

I think everything ...say... south of High street is going to take much longer to gentrify. Except really close to the 580.

It seems that gentrification in the flatlands is starting in the East Lake neighborhood and moving South from there.

Susan O. · Answer

What do you all think of the entitlement and rent control programs being pushed?

http://homesforall.org/updates/rentersdayofaction-photoset/

Beda Yang · Answer

sorry for this plug, but wanted to point you to my post today to see if i can get your opinion on my situation in oak/east oak: https://www.biggerpockets.com/forums/623/topics/49...

thanks!!

East Oakland and gentrification?

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