Stockton: The Last Bastion of Housing Affordability in California

106 Replies

After my most recent post on Realtor.com projecting Stockton to be the #4 metro market in the nation in 2018, I've received the same question over and over and over again:

"But WHY Stockton? What's so great about it? Are there great schools? Major employers in the area? I just can't see why people would move there..."

After answering this question a million times, I thought I would write a post about it to explain thoroughly WHY Stockton will be the #4 metro market in the nation for 2018, even if it doesn't have all the cool stuff that bigger and fancier towns do.

Put simply: Stockton is the last bastion of housing affordability in Northern California. Period. 

Let's imagine a hypothetical scenario... (which isn't so hypothetical when you realize it's happening by the thousands).

Let's say you're a millennial in your late twenties living in your parent's basement in the Bay Area... and your girlfriend gets pregnant. 

Think that basement is gonna fly with baby momma? NOPE!

"When Pregnant Women Attack"

So, you want to get a home so you can provide a safe haven for your family... but only 25% of homes in the Bay Area are priced less than $500k and they're in the ghetto... and you only qualify for $250k anyways.

Sooooooooo... Where Do You Move To?

Sacramento? Well, Sacramento's median home price is $350k so you're not getting much there... it's doable, but you'll have limited options. Only 15% of homes in the last three months sold for $250k or less.

You can't go Northwest to Napa and the rest of the wine country, you'll pay the same as Bay Area if not more. 

Can't go up to Yuba City... too damn far and it's a little podunk town anyways. Too much of a change from the big city you're used to. And there are only 20 homes currently on the market at $250 or under... so once again, little selection. Also no jobs.

Modesto? Affordable, but not enough jobs either. No job = no move. While Stockton may make the headlines for bad crime, according to NeighborhoodScout.com 97% of communities within California have a lower crime rate. So Baby Momma ain't too keen on Modesto either.

Fresno? Too damn hot and too damn far. It's a 3 hour drive without traffic, and I'm not joking about the heat. On average in the summer it's 25 degrees hotter than San Francisco. Someone who's lived all their lives in the Bay Area is going to head out there and have a heat stroke.

So Stockton it is. 

It's all driven by housing affordability and millennial migration.

People buying their first home don't give a crap about nice schools and hip neighborhoods if they can't afford to live in them. Plus even if you can buy in the Bay Area great schools aren't guaranteed when you go down to enroll your kid and find out the school is overcrowded and you have to send them somewhere else.

I know they'd much rather stay where they are, but most simply can't afford to. It's just not an option.

"Those with the gold get to choose." And yes, they will choose to remain, or head to Oakland as the last resort. 

But many, can't. Plain and simple.

Happy Wife = Happy Life

And I'm not kidding about new families having a MAJOR impact on housing trends and migration. 

Here's two examples from previous clients to give you an idea of what I'm talking about.

#1) Young couple from San Jose. Late twenties. Engaged. 10 month old daughter. When they're visiting the grandparents in San Jose, they're staying with his parents. When they're visiting the Grandparents in Elk Grove so they can see the baby they're staying with her parents. Now tell me how long you could do that before one of you goes insane.

#2) Well-to-do married couple living in San Francisco. Early 30's. Both work in tech. Happy renting in a one bedroom apartment in the city core for $3,300/mo. But guess what? Bun is in the oven. Suddenly a swanky Bay Area apartment doesn't seem as a appealing when you throw a baby in the mix. Lifestyle change = living situation change. 

And that's happening all over the Bay Area as more and more millennials are finally swiping right on Tinder and matching with their soulmate :-P They shack up, sleep in the same bed, one thing leads to another and presto... you've got children.

When that happens, baby momma wants a home to nest in, and doesn't care about being in the city core close to the hip Thai-Mexican fusion restaurant. She wants a home. She wants a safe neighborhood. And all for her first-born child.

But oh whaddaya know that costs over a million dollars in the Bay Area so good luck finding that when your generation got screwed right outta college with the worst recession in years and you got a late start in life which is why you're still living in your parent's home in the first place.

Lifestyle Change = Living Situation Change

And so... they look for more affordable pastures: 

In the Bay Area (Oakland) if they can afford it, in Sacramento if they can afford it, and in Stockton if it's all that's left.

And for many, that's the case.

So for all you investors, don't assume that the average person making the move is someone with a bunch of options like you. 

ln Alameda and Contra Costa counties, $80k per year for a family of four is considered low income. While that's nearly double the median household income in Stockton. 

If that family can find a job, or find a way to commute, they're moving.

They don't give a crap about Stockton's reputation... they don't give a crap what school district they land in... 

All the Mrs. cares about is finding a nice home in relatively safe neighborhood so she can protect her child.

Or they don't, and Mr. Husband gets to be the bane of holiday dinners and family get-togethers where her old school grandma tells everybody he's a dead-beat loser and that she should find someone better who can provide a home for her newborn child :-)

"Get a job you deadbeat!"

(Last Christmas one of my cousins was playing kissy face in the corner with her high school boyfriend and my grandma rolled over in her wheelchair, smacked her on the leg, and told her to have more respect for herself and stop being such a hussy! LOL you can always count on Grandma to tell it to you straight!)

Living in your parent's basement or sharing a flat with 3 roommates might have been cool when you were single, but it's certainly not cool when you're pregnant.

I know, this all seems like "Baby, baby, baby ohhhhhh" but you should realize that a woman's brain actually undergoes physical changes after having children and those changes last for at least 2 years after giving birth.

The average age women have their first child is 28... and the biggest section of millennials turns 30 in 2020 (over 4.6 million, with over 4 million per year till then)...

Soooo, based on my calculations, we're due for another Bay Area Millennial pregnancy right about... now?

Mr Blackwell 

How is the affordability of rental property around the UOP campus?   Could a three to four bedroom house in this area work well if you rent out the rooms to students?  

Thanks 

Randy Cooper 

@Randy Cooper

Most certainly. I have a client who I just helped do that not too long ago. Bought with 35% down and there's nearly a $1,000 gap between the mortgage and rent, so not too shabby if you ask me ;-)

It helps if you have a hook up with one of the local fraternities or sororities (they did) which makes it easier to keep the property full year-round and you'll always have a replacement tenant if someone graduates.

Not the last bastion but maybe one of the last.  Most of the Central Valley and the Inland Empire are also affordable, at least by comparison.

" but only 25% of homes in the Bay Area are priced less than $500k and they're in the ghetto..."

^^^ Define ghetto?? I hear this word thrown around, yet, authors never specify what that even means, leaving readers prying to find out. But I digress.

In keeping with the topic of home affordability and millennial migration in the unaffordable Bay Area, this article speaks directly to the notion of why you need to "know your neighborhood," rather than basing your info off calculations (think back to stats analysis and data interpretation folks) and cross state speculators. If I knew nothing about Oakland, a welcoming city with glorious one-of-a-kind history that produces some of the most unique and talented people (biased, of course), then based on this article, I would be led to believe that choosing this region (Stockton isn't near Oakland) is a reluctant settle. That is, if you can afford it =)

@Ete-kamba Jeremiah Amaku

I would define a ghetto as a slum area where there is high crime and multiple instances of assault with a deadly weapon, shooting on an occupied dwelling, negligent discharge of a firearm, homicide, etc. For a less statistical approach, it's an area where I take my clients to and they don't feel safe getting out of the car. This is pretty much what the lower 25% of the price range looks like in any major metro area.

For example, take a look at the violent crime map for Sacramento from the past 3 months.  I circled the areas in blue that are higher priced neighborhoods. Notice how incidents of violent crime are generally absent from those areas.

Now look and see how those areas match up with Trulia's Price Heat Map. Also notice that the dark green areas match up with the higher rates of crime.

Now let's take a look at what $400k can get you in the various markets I mentioned:

Here's a 284 sq ft condo in San Francisco. Looks great! But is that going to work for a family? NOPE!

https://www.realtor.com/realestateandhomes-detail/1932-Fell-St-Apt-4_San-Francisco_CA_94117_M29029-08472

Now here's a place in Oakland for roughly the same price. Almost 3 times as large too!

https://www.realtor.com/realestateandhomes-detail/5536-Hilton-St_Oakland_CA_94605_M21724-22539

But notice the iron gate with the pointy spikes on top... the bars on the windows... not a good initial sign. Let's take a look at the street view on google to see if we can get a better picture of the area:

Well, the property is next to several fourplexes, so you've probably got lots of renters in the area, and renters generally take worse care of the neighborhood than owners do. Just notice the huge pile of trash bunched up across the street.

And the end of the block there is a small apartment complex with trash in the street and trash all over the parking lot. The landlord apparently doesn't even care that this is happening and doesn't enforce any rules (if he even has any). So what kind of people do you think are being allowed to live there? Not quality renters if you ask me... just look at how they treat the property.

I don't even need to see a crime map to tell you what's going on in this neighborhood... but let's do it. Notice how there is a case of assault on nearly every corner nearby in the past 3 months:

Now what can less than $400k get you in Stockton? Let's a look...

https://www.realtor.com/realestateandhomes-detail/2337-Canyon-Creek-Dr_Stockton_CA_95207_M13512-32217

A remodeled home more than twice the size of the Oakland property, and in a gated community too. Crime is basically non-existent.

So you tell me... who's settling here? 

San Fran: Too expensive, don't get enough for your money

Oakland: Not safe unless you can afford to live in a nicer area, which most can't

Stockton: Remodeled home in a gated community and no crime. 

These were the first properties I clicked on, it's not like I cherry picked them. I could do it many times over no problem.

I never said Oakland was "bad" -- but let's be honest: 

People would prefer to live in the nicest areas of San Francisco (if they can afford to). 

If they can't, then they would prefer to live in the nicest areas of nearby places like Oakland (if they can afford to). 

But if they can't, and the only options are the three above, which one do you think they're going to choose?

I went through the same process as described by @Wes Blackwell .

400k budget. Can't find anything in the peninsula that isn't paralysing.

Looked at Oakland. Anything within that budget feels unsafe.

Looked at Richmond. Like the gentrification upside but feels unsafe.

Looked at Pittsburgh / Antioch / Brentwood. Feels a lot safer. Suburbia. 

In the end I chose Vallejo. Feels a lot safer. Lots of potential upside. Closer to SF than Pittsburgh/ Antioch / Brentwood with multiple commute options - I-80, 24, 37-101 Marin, ferry.

Stockton was too far of a commute. Even if I can work from home it's still too far to exciting places other than Sacramento. But that's just me. Not a stay-at-home kinda person. 

@Wes Blackwell. While I respect your numbers and comparisons to other cities, I do not agree that Stockton is a good market for (most) investors.

The reason for low prices is because Stockton has lots of problems. We can start by saying poor city management and high crime rate (one of America’s 10 most violent cities per capita).

Stockton city council recently passed a program to pay criminals not “to shoot guns”. They don’t care if you rob, rape, sell drugs or commit other violent crime, just no “gun violence”. So for most investors who choose to purchase homes in “good neighborhoods”,

Stockton in general does not cut it. I’m not saying that you cannot make money, but I’ve seen people list duplex’s on the marketplace that are in absolute war zones. So to say Stockton is going to be #4 metro market, I don’t buy that.

@David Fawcett

Here's the thing...

Stockton HAD poor city management... Stockton HAD a high crime rate... but the times are a changin'.

Stockton Crime Rate at 15-year Low

Stockton's Crime Rate Down Despite Recent Homicides

Stockton Police Encouraged by Dropping Violent Crime Rate

New Mayor Michael Tubbs Earns More Than 70% of The Vote

I don't necessarily agree with some of Stockton's programs like the one for paying criminals to avoid gun violence, but hey, at least they're trying something.

And yes, there are still some warzones, and no one said you should invest there. But let's be frank there's warzones in every city. 

SoI wouldn't hedge my bets against Realtor.com's predictions... last year Sacramento was projected to be the #4 metro market in the nation... 

And the appreciation that resulted?

Median home price went up by 8.5% for the region. 

People can poo-poo over old headlines all they want, but the stark reality is that it's the most affordable metro area in Northern California. 

So if you can no longer afford the Bay, or your life situation is changing and you need to buy a home but only qualify for $250k, you can basically either move to Stockton or leave the state.

And people will be moving to Stockton in droves. Last time there was a call for affordable housing applications there were over 700 entries from Oakland alone. 

For those afraid of investing in the wrong area, read my article below. Can't go wrong if you're working with a Stockton native who can steer you in the right direction:

https://www.biggerpockets.com/forums/627/topics/424510-how-to-invest-in-stockton-ca---a-detailed-overview

@ Wes Blackwell here's the thing......anyone that has taken statistics knows that you can argue the numbers any which direction.  So, with that being said, crime is not down in Stockton.  Ask anyone on this site that lives in the Stockton area and they will tell that crime is alive and well in Stockton.  I'm not bashing Stockton and to be honest, I used to live in Stockton myself.  What is happening is less crime is being report and new technology is out.  So the police do not even respond to all crimes, which means people may or may not file a police report over the internet.  

Lets take car crashes accidents as an example.  The police used to respond to all car crashes and take an accident report.  Now the police do not respond unless certain criteria are met.  The police will instead tell you to report this to insurance.  So, if I told you car crashes were down would you believe me?  I hope not, just less of them are being reported.  This is the problem with the police being so short staffed.  

Stockton has some very nice parts in it, but it's not like most cities.  Stockton has been under poor management for many many years.  The only reason Tubbs won by a landslide was due to other candidate being arrested for child molest.  Of course he won.  Tubbs is trying his hardest I'm sure, but you cannot fix Stockton's problems the way he is trying to. 

Stockton's population is not going to grow the way its projected.  It hasn't in 17 years since I've lived in the area.  Stockton has financial issues, which is why it went through bankruptcy.  Stockton needs to lure big businesses for tax base money, then the population will rise.

There are other places to live just outside of Stockton.  A lot of people move to the outskirts of Stockton and get more bang for their buck.  All I'm really trying to tell you is Stockton is not going to be the next big thing!  Can you make money in Stockton, yes.  

Wes knowns his stuff!

@Pavan Sandhu I never questioned Wes'.  To be honest most people on this site have more real estate experience than me.  I'm not a "know it all" person, and I love to learn.  I just would hate to see an out of the area investor get a raw deal.  My purpose behind this was not to attack Wes (hopefully Wes does not feel that way), just be aware that realtor.com and a couple stats that the city releases may not be gospel.  I pay people for their expert advise, and I usually follow it.  If you look at my short bio I might claim to be an expert of this area =)

@David Fawcett

No offense taken at all David! That's what this site is for... to get different people's opinions and experiences and have a conversation that we can all learn from to make better investment decisions. 

I totally understand the skepticism about Stockton... frankly, I think it's good for investors to be skeptical on ALL markets and potential investments. My ultimate goal is always to make sure my client is making the best investment decision possible. So I always want them to feel 110% confident in the decision they're making. 

Plus, I'm a big believer that your agent should talk you OUT of more deals than they talk you into. I know I've saved more than a couple investor's necks on here when they were considering purchasing something I wouldn't touch with a 10 foot pole.

In the article I wrote detailing How To Invest In Stockton, I pointed out the nice areas of town I'd recommend, and the warzones I would avoid. The main thing that has changed with that is the Downtown Area due to the Open Window Project that is set to transform downtown Stockton over the next 5-10 years.

Investors all the time are asking me if I know any up and coming areas that are set to really develop over the next decade, and downtown Stockton is the only area I know of set to have a $67.5 million first-phase of construction. If you're anywhere near that, you can't help but make money.

Stockton had a huge boom in population from 2000-2005 and gained 38,000 people in less than 5 years (+15%!) and while we may not experience the same kind of growth again, this ALWAYS happens when real estate prices go up. 

Just Google "Stockton Population" and "San Jose Population" and play around with the sliders over time. Here's the cliff notes version of the migration:

Central Valley From 2000 to 2005:

Stockton: +38,000

Sacramento: +39,000

Modesto: +14,000

Lodi: + 4,000

Tracy: +20,000

Now let's take a look at what happened in the Bay Area:

San Jose from 2001 to 2003: -10,000

San Francisco from 2001 to 2004: -11,000

Oakland from 2001 to 2006: -11,500

Sooooo, where did all those people move do? Numbers speak for themselves.

Sure, it's not going to be the wild west like it was last time when strippers and McDonald's employees were out there buying 5 houses without verifying their income, but the migration is happening... just like it did last time prices in the Bay Area went up.

Since 2005, Modesto has gained roughly 8,000 people, Lodi has gained 3,000 and Tracy has gained 10,000...

Stockton? 25,000. More than all three of the major surrounding areas combined.

Further, here are the current average prices per sq ft for areas around Stockton:

Modesto: $184

Lodi: $197

Manteca: $198

Tracy: $227

And Stockton? $183... lower than all of them.

So you don't get more bang for your buck in the surrounding areas... you get less. I can get more house for the same amount of money in Stockton than I can anywhere else in Northern California. 

California JUST eclipsed Mississippi to be the #1 state for poverty in America. Not everybody from the Bay Area runs a startup company, and not everybody from Napa owns a winery (and I should know... I'm from Napa!)

 "In a 2016 Pew Research Center survey, 72% of renters said they would like to buy a house at some point. About two-thirds of renters in the same survey (65%) said they currently rent as a result of circumstances, compared with 32% who said they rent as a matter of choice. When asked about the specific reasons why they rent, a majority of renters, especially nonwhites, cited financial reasons."

So when given the choice, people would rather own in Stockton than rent in Stockton if it were the same financial cost. And it's not a long shot to think that people would rather own in Stockton than rent in the Bay Area. Afterall, that's exactly what brought them running here in the mid-2000's.

I'm not saying that you can anywhere in Stockton and sit on the property 6 months and sell it for a massive profit...

I'm saying that if you pay attention to trends, especially when they already mirror what happened just a decade ago when housing prices went up in the Bay Area and Stockton was the last affordable place to move to, and you buy in the RIGHT area and wait for the growth to happen over the next 3-5 years, it's a solid investment decision. 

@Wes Blackwell you are telling me that Stockton's population is growing?  Once again you are reading into statistics.  For a former resident of Stockton you should know that Stockton's population grows every year for a couple months, because of the farming community.  That population also leaves just as fast as they came.  But, even if you want to believe your statistics that Stockton's population is growing you are forgetting the rest of the rules for investors.  

Stockton is the ONLY city to file for bankruptcy.  Stockton has a suffering fire dept, police dept (waiting for the you to post the article that Stockton has more police than every before, because that's what they tell you)  and is STILL struggling with its finances.  Stockton has zero job growth.  Stockton has businesses leaving town, not coming to town.  Of the two major malls in Stockton, one of them is almost completely empty.  That's right, all the businesses left.  Stockton had an opportunity to lure an Amazon distribution hub, but nope Stockton leadership wanted to tax the heck out of them, so they went to Tracy (who gave them tax breaks for two years).  See Stockton's problems are deeper than your statistics show.  This is the point I'm trying to tell you.

Personally if you are telling people to invest in downtown Stockton, that is the worst advise you can give.  Downtown Stockton is dying.  They keep throwing money into it because every guru tells them a thriving city has a wonderful downtown, but once again Stockton's downtown is not dying, its dead!  Downtown Stockton is one of the most violent places in Stockton.  The city adjusted the reporting districts of "downtown" so it would look like crime is down, just to lure businesses.  It didn't work.  Once the new downtown theater was built, they virtually had cops standing on every corner protecting it, but that didn't work either.  Stockton's problems run deeper than you are telling your clients.  Once again, I'm not saying you cannot make money in Stockton, but it is not going to grow like Sacramento.  

While the term ghetto certainly has its own meaning to different people, the definition you provided fails to yield a viable definition which can subsequently, stand and function as an efficient and effective tool to be utilized by agents, brokers, investors, etc. as a guide for decision making. Yes, it informs about a few categories of the neighborhood, but like @DavidFawcett said, they are just numbers and numbers can be manipulated, and ultimately just ends up being your own opinion anyway.

Your responses certainly prove that some shift is happening there in Stockton, but I would ask whether the article was written with the investor in mind, or the growing family? Or Both? Either way, I have to agree with David because although those figures are helpful, what is it that your eyes tell you? Which brings me back to the "ghetto" comment. Let's be frank, we know that is code for "people who don't look like me," but I'd caution inexperienced readers and potential buyers who fit in that criteria of $400K budget >>no SF >> no peninsula >> no Richmond, and options are [ghetto] Oakland or...Stockton? This would be a no brainer. The property you posted looked bad -- but fortunate for me, I have the ability to see that property in person, so I did!

Yeah -- I agree it doesn't look very inviting from your pictures or mine, and I can see how your clients may feel unsafe and refuse to exit the car. But like David said, what the pictures and numbers don't show are; the business complexes being built around the corner on Seminary Ave., across from the commercial retail shop construction site, with the new traffic lights being installed presumably for the anticipated increase in traffic?

"So if you can no longer afford the Bay, or your life situation is changing and you need to buy a home but only qualify for $250k, you can basically either move to Stockton or leave the state."

I agree with you here. You do what you gotta do! However if I was advised to move to Stockton, I would run the other way. The 3rd option would be to miss out on an opportunity in a so-called unsafe neighborhood, and continue to bid on the same overpriced walls with the rest of the people who are handcuffed by fear. 

But...I could be wrong =)

As a Realtor based in Stockton, and a resident of Stockton for 28 of my 32 years of living, I can provide some good insight to the whole Stockton situation.  Stockton's housing market is booming! There isn't a ton of inventory of homes in Stockton compared to the number of buyers spilling over from the bay area into the central valley. . As a result homes are selling fast, and selling at or over ask much more often than not.   Roughly 80% of buyers I represented last year came from the bay area, and about the same percentage of buyers of my listings came from the bay as well.  Barring any sudden turn to the countries economic situation, this trend does not look to be slowing down.  

Management of the city itself is still an issue that does not appear to be going away. However, as a long time resident of Stockton, I know where the good areas are, and it's not too difficult to stay clear of violent crime, but it's also easy to find if you're looking for trouble.  With that said, overall crime is still just as large of an issue in Stockton as it was during the significant police layoffs that occurred during Stockton's bankruptcy.  New ideas are being implemented by the current mayor/ city counsel, and only time will tell if the new policies will yield a positive impact.

Back to the efficacy of investing in Stockton.  Stockton has many different investment plays available.  Fix and flip opportunities are just around many corners of Stockton, but of course the best opportunities are found before those fixers hit the market.  So if you are a street sweeping, door knocking, owner tracking hustler, you can really find fantastic off market opportunities, fix and sell quickly in this market with low inventory and plenty of buyers to leverage against each other.  These same hustlers also make great wholesale deals as well as there are plenty of fix and flip investors starving for opportunities to swing their hammers.  Skyrocketing rental rates are also rampant in the central valley, with Stockton being no exception, making for solid rental cash cow opportunities.  Combine this with income properties that have been neglected by both tenants and owners (fairly common in Stockton) and you can find deals with instant equity and solid cash flow.  All of this is much easier to type than actually execute, but it is all possible, and is being done.  

As for the downtown area of Stockton...... I absolutely love much of the architecture of the older buildings there, but..... There are multiple issues to deal with downtown.  Along with crime, the homeless situation is just as prevalent as ever, and is something businesses downtown will have to work with.  Another issue currently being brought to Northern California's attention is an aggressive code enforcement department which is actually a part of the police department in Stockton.  Code enforcement should be an entity present to help ensure the safety of the public, but many investors will attest that the enforcement of this department seems to be highly selective on who receives their attention, and let's be honest, what building erected in the early 1900's isn't going to have some code violations today?  Furthermore, once you do receive their attention, you may just have to get used to their presence for a long long time.  I personally had two nice commercial transactions in prime locations downtown between the movie theater, city hall, the new ballpark and arena killed by the City of Stockton.  These were properties built in the 1920's and hadn't been renovated/ maintained much if at all since their completion (conditions fairly easily found downtown.)  Naturally, these properties had a litany of code violations, and the city was applying great pressure on the owners to sell, going so far as taking the owners to court for maintaining a nuisance, and having the owners enter into a plea agreement to transfer ownership to new owners within 90 days.  After successfully finding a buyer who was offering a fair price for the challenges they would face upon purchasing these properties, the city ultimately killed the transactions by simply refusing to provide the payoff amount for the code violations fines that accrued on the properties to the title company.  Without payoff amounts for these code violations fines, the title company could not close escrow.  Instead the city elected to hire attorneys from Irvine to represent the city in an attempt to seize control of the properties through a legal mechanism called "receivership," or have our buyer enter into an agreement with the city to completely rehab these dilapidated properties, within 30 days, and to lose control of the properties if they fail to complete the total rehab within said 30 day period.  What a joke..... Sadly, this was what happened.

With that said, there are plenty of opportunities to make money on real estate in Stockton.  Fix and flip, wholesale, buy and hold, and cash flow can all be found in Stockton. There are nice areas of Stockton to even move to and live in.  Simply find someone who can help show you around.  I absolutely love the wide variety of cultural restaurants we have, and am currently enjoying dance lessons with incredibly fun people who were complete strangers just a couple months ago.  Our downtown movie theater is up to date, and there are lots of fun community events throughout the year, that can be found on social media platforms.  Some gems of Lincoln Center, Miracle Mile, UOP, boat access marinas to the delta, golf courses, country clubs, and more. Stockton has a lot to offer, and it is too bad that all anyone hears about it is negative.

@David Fawcett

I use statistics and other sources of authority because without them all we have are opinions.

The real estate "crystal ball" really only goes out about a year or two... beyond that it gets a little foggy and there's way too much that can happen between now and then.

So maybe nobody knows the real truth, or the full answer, and certainly no one knows the future. But using statistics coupled with trends and advice from local experts (like Tristan and myself) Is the best anyone from BiggerPockets is going to get. If anyone knows of a fortune teller who specializes in real estate values let me know!

So once again, as for the claims on zero job growth, here are the stats straight from the United States Labor Department - Bureau of Labor Statistics to show that's not the case:

https://www.bls.gov/eag/eag.ca_stockton_msa.htm

Plus here's a couple articles from some news sources:

Report: Stockton To Lead Region's Job Growth

Stockton is #24 on Forbes List of Places for Job Growth

So I just can't agree. Everything I see is telling me the opposite.

@Ete-kamba Jeremiah Amaku

Dude... that is SO AWESOME that you were able to drive by and take live pics of the property! You have no idea how helpful that was to everyone reading this post. Definitely helps us all get a clearer picture of the reality.

Like you said, the quality of a neighborhood ultimately comes down the investor's personal opinion. The investor from Beverly Hills and the investor from the Bronx are going to have two different opinions about the exact same neighborhood. 

I've had two clients look at the same property and one says "OMG! What a dump! How could anyone live here! This is crazy!" and another says "OMG! What a deal! How come no one has bought this yet? This is crazy!"

Most people from BiggerPockets are just getting started. They have a small nest egg to invest and are scared like hell to spend it because it's all they've got. Everyone always contacts me asking for an up-and-coming B class area... even though they know they could make a better ROI in a C class neighborhood like that one in Oakland.

So in general, I wouldn't advise that area to most investors... but for those are comfortable with the idea of investing in that neighborhood (such as yourself) then I'd gladly show the property and help them see the potential :-)

@Tristan Escove

So great to hear another Realtor echoing everything I've been saying. This is EXACTLY what was happening (and is still happening) in Sacramento last year when it was projected to be the #4 metro market by Realtor.com. Low inventory, every hot property sells in less than a week, with multiple offers well above the asking price, and all the agents calling in had a 925, 510 or 408 area code. Thanks for sharing!

My wife and I were in the exact situation two years ago. We lived in downtown SF and had a kid on the way. We had to move out of the city for space and to someplace more kid friendly. We moved to Walnut Creek. Stockton never was on our radar and quite frankly never would be. If you move from SF to Stockton, you are essentially agreeing to move out of the bay area b/c of the distance, and the whole reason we chose to live in the area is to experience the things that come with living close to the city. The distance to Stockton is too far. The commute is too long to still work in the city, and if you do choose to brave it, the commuting costs and time spent commuting eat up all the potential savings anyways.  I have a lot of friends in the same situation, and they all chose places like Walnut Creek, Pleasant Hill, Vallejo, Emeryville, Pleasanton, or San Rafael. I am not saying that Stockton won't be a great place to invest over the next decade, but don't expect to move there and still work in San Francisco. Unless you telecommute, but then you could really live anywhere you wanted and why limit yourself to CA.

Originally posted by @Ete-kamba Jeremiah Amaku :

While the term ghetto certainly has its own meaning to different people, the definition you provided fails to yield a viable definition which can subsequently, stand and function as an efficient and effective tool to be utilized by agents, brokers, investors, etc. as a guide for decision making. Yes, it informs about a few categories of the neighborhood, but like @DavidFawcett said, they are just numbers and numbers can be manipulated, and ultimately just ends up being your own opinion anyway.

Your responses certainly prove that some shift is happening there in Stockton, but I would ask whether the article was written with the investor in mind, or the growing family? Or Both? Either way, I have to agree with David because although those figures are helpful, what is it that your eyes tell you? Which brings me back to the "ghetto" comment. Let's be frank, we know that is code for "people who don't look like me," but I'd caution inexperienced readers and potential buyers who fit in that criteria of $400K budget >>no SF >> no peninsula >> no Richmond, and options are [ghetto] Oakland or...Stockton? This would be a no brainer. The property you posted looked bad -- but fortunate for me, I have the ability to see that property in person, so I did!

Yeah -- I agree it doesn't look very inviting from your pictures or mine, and I can see how your clients may feel unsafe and refuse to exit the car. But like David said, what the pictures and numbers don't show are; the business complexes being built around the corner on Seminary Ave., across from the commercial retail shop construction site, with the new traffic lights being installed presumably for the anticipated increase in traffic?

"So if you can no longer afford the Bay, or your life situation is changing and you need to buy a home but only qualify for $250k, you can basically either move to Stockton or leave the state."

I agree with you here. You do what you gotta do! However if I was advised to move to Stockton, I would run the other way. The 3rd option would be to miss out on an opportunity in a so-called unsafe neighborhood, and continue to bid on the same overpriced walls with the rest of the people who are handcuffed by fear. 

But...I could be wrong =)

I invest in lower income areas and I personally believe there is money to be made there, but I sure as hell don't want to live there. That looks like a D class area. This is not the kind of place where young families choose to buy. This is the kind of place where the majority of single family homes are tenant occupied and the renters live there because they can't afford anything better.

I'm sure that you must take offense at the notion that your neighborhood or city is seen as the "ghetto". It certainly is not a nice neighborhood. It certainly is not desirable to the grand majority of home buyers.

Don't let your emotions cloud your vision. I used to do the same thing with concern to my home town. Real estate is a business and trying to convince investors that investing in a D class area is a good idea won't work unless they specialize in those kinds of areas and properties.

@Ryan B.

The reason Stockton was never on your radar and never would be was because you ended up purchasing in an area where the median home price is three times Stockton's (Walnut Creek = $877k, Stockton = $270k).

The median household income for the state of California is $61,320. Mortgages can't be for more than 35% of your income. So for the average California household the monthly mortgage payment is maxed out at roughly $1,788.50/mo. To buy that $877k home with a 4.5% interest rate, they'd need a whopping $789k down (LOL!). That's because property taxes ($913/mo) would make up more than half of their allowable monthly mortgage payment.

Let's look at some industries that match this median household income:

The average salary for a high school teacher in San Jose is $54,762 per year.

The average salary for a janitor in San Francisco is $35,000 per year.

The average salary for a line cook in San Francisco is $32,579 per year.

You think any one of those people is going to be buying in a $800-900k neighborhood? Think again.

If you work in Bio-Tech, expect to have a real hard time replacing your job in the Bay Area with one in Stockton. But if you cook omelettes and hash browns for a living, we've got about a million openings for you.

A challenge I see for a lot of investors is being able to realize that not everybody is like them. Not everyone is financially secure. Not everyone has enough extra income to live comfortably AND invest. Sure, most of your friends area... but a lot of people who probably aren't your friends are barely making ends meet, especially in California where we are now the #1 leader for poverty in the nation.

So to the average person, $270k in Stockton sounds like a helluva deal rather paying through the nose for rent in the Bay Area. And wouldn't it to you if you only made $50k per year?

And why do they limit themselves to California? 1) It's familiar, and 2) Family. 

How many people do you think are going to move to Park Forest, Illinois where you can buy a home for under $80k when they're entire family is still in California? You'd never see them again. Why? Because at that income level those people aren't necessarily racking up the frequent flyer miles and dropping money on plane tickets all the time. 

Or what if Grandma is sick and needs you nearby, but can't bare the thought of leaving her local congregation where she's attended church every Sunday for the last 30 years. You certainly ain't moving out of state then.

Take a look at this graph here representing labor in San Francisco:

The Green Line is for Tier 1 jobs making $118k per year. In 2017 there were 167,000 of them.

The Blue Line is for Tier 2 jobs making $54k per year. In 2017 there were 224,000 of them.

The Red Line is for Tier 3 jobs making $27k per year. In 2017 there were 234,000 of them.

So, 75% of San Francisco makes less than $54k per year. And 37% makes less than $27k per year. 

So they won't be buying in Walnut Creek or any of the areas you mentioned anytime soon. They'll be buying in places like Stockton. Not because they think it's better than those places you mentioned, but because it's the only place in California they can afford that's close to their family.

I can understand your reasoning and generally makes sense. There are some other non norcal options near metros or in metros like Palmdale - Lancaster, Bakersfield. There are also many very affordable options in northern Nor Cal in the much smaller population cities. Some are even yards from the ocean. Keep in mind Stockton I think is considered central Cal but I get your point on the larger metros. 

I do know some dudes that had some apts in Stockton sprinkled in with mostly prime SoCal stuff. After about 2 years they wanted out as the management was a killer when compared. Cheaper is not always better is what they learned. 

All this crazy talk about moving to Stockton and commuting, yea right. I could pick up a second job in the time I'd spend commuting all the way to Stockton..... and live somewhere closer.

I say this as someone who just spent nearly an hour this AM to get to work about 18 miles door to door and 2hrs isn't unheard of on the evening commute.

Even this would be better option

https://www.redfin.com/CA/Fairfield/2418-Bay-Hill-...

then either amtrak into Oakland or Ferry into SF. I randomly picked a new house off redfin, simply because it was cheap new.

or cheap

https://www.redfin.com/CA/Fairfield/1729-San-Jose-St-94533/home/2177706

Originally posted by @Wes Blackwell :

@Ryan B.

The reason Stockton was never on your radar and never would be was because you ended up purchasing in an area where the median home price is three times Stockton's (Walnut Creek = $877k, Stockton = $270k).

The median household income for the state of California is $61,320. Mortgages can't be for more than 35% of your income. So for the average California household the monthly mortgage payment is maxed out at roughly $1,788.50/mo. To buy that $877k home with a 4.5% interest rate, they'd need a whopping $789k down (LOL!). That's because property taxes ($913/mo) would make up more than half of their allowable monthly mortgage payment.

Let's look at some industries that match this median household income:

The average salary for a high school teacher in San Jose is $54,762 per year.

The average salary for a janitor in San Francisco is $35,000 per year.

The average salary for a line cook in San Francisco is $32,579 per year.

You think any one of those people is going to be buying in a $800-900k neighborhood? Think again.

If you work in Bio-Tech, expect to have a real hard time replacing your job in the Bay Area with one in Stockton. But if you cook omelettes and hash browns for a living, we've got about a million openings for you.

A challenge I see for a lot of investors is being able to realize that not everybody is like them. Not everyone is financially secure. Not everyone has enough extra income to live comfortably AND invest. Sure, most of your friends area... but a lot of people who probably aren't your friends are barely making ends meet, especially in California where we are now the #1 leader for poverty in the nation.

So to the average person, $270k in Stockton sounds like a helluva deal rather paying through the nose for rent in the Bay Area. And wouldn't it to you if you only made $50k per year?

And why do they limit themselves to California? 1) It's familiar, and 2) Family. 

How many people do you think are going to move to Park Forest, Illinois where you can buy a home for under $80k when they're entire family is still in California? You'd never see them again. Why? Because at that income level those people aren't necessarily racking up the frequent flyer miles and dropping money on plane tickets all the time. 

Or what if Grandma is sick and needs you nearby, but can't bare the thought of leaving her local congregation where she's attended church every Sunday for the last 30 years. You certainly ain't moving out of state then.

Take a look at this graph here representing labor in San Francisco:

The Green Line is for Tier 1 jobs making $118k per year. In 2017 there were 167,000 of them.

The Blue Line is for Tier 2 jobs making $54k per year. In 2017 there were 224,000 of them.

The Red Line is for Tier 3 jobs making $27k per year. In 2017 there were 234,000 of them.

So, 75% of San Francisco makes less than $54k per year. And 37% makes less than $27k per year. 

So they won't be buying in Walnut Creek or any of the areas you mentioned anytime soon. They'll be buying in places like Stockton. Not because they think it's better than those places you mentioned, but because it's the only place in California they can afford that's close to their family.

 One can buy in Richmond for same price points as Stockton and same basic environment safety wise.

Also can go up to Winters or Capay valley  Dixon etc bout the same distances.

but to me Richmond is a gold mine that over the next 20 years is going to make a lot of people a lot of money.

just like East palo alto and East Menlo.. WAR zones in the 60 70s 80s  now look at them.. as Richmond transforms the bad element gets pushed out.

@Matt K.

There are currently six single family properties in Fairfield priced $340k or less. There are 200 available at that price in Stockton. And whole lot more than six people will be moving. So that example really doesn't prove anything.

If you read all my posts from above, the migration trend to Stockton is NOT for people who:

- Can afford a $500k house

- Need to commute to maintain the job to afford that $500k house

37% of San Francisco makes $27k per year... even if they pick up a second job and double their income they STILL aren't affording a half a million dollar property.

Further, 5% down on a $500k property is $25k... how many people making $27-54k per year have that much money saved in the bank? Not happening. 

The average millennial income for a millennial in California is only $21,900. They also make up 29% of the state's population (more than any other generation). THAT'S who's moving to Stockton. Not the guy who has a master's degree in finance and currently works for LinkedIn. 

If you're proud to tell a potential suitor what you do for a living, you probably don't need to worry about moving to Stockton. But if you tell a girl what you do and she stops texting you... then Stockton is probably right for you.

@Matt R.

People from big cities don't like moving to little podunk towns they've never heard of... especially millennials. They want the big city feel without the big city price. And cities where the tallest building in town is three stories isn't going to cut it.

In layman's terms, if you don't have a craft brewery or a night club, there's no way in hell they're moving there.

Anecdotes about some guys who had apartments who knows when in who knows what part of town with who knows what sort of manager can't speak for ALL of Stockton... 

When outsiders think of Stockton, they think of all the terrible headlines and assume that's what the entire city is like. The don't realize the owner of the Chargers lives here and hands out king size candy bars on Halloween, have never been to a house party in Brookside with all the well-to-do kids going to private school, and haven't met any of the wealthy business owners situated on the Miracle Mile. They think we're all just a bunch of gangbangers.

I just had one of my local investor buddies who does EXTREMELY well in Stockton email me cracking up about all the Stockton hate lol. He hopes it'll remain a profitable secret for him because everyone else is too afraid to invest here.

Sorry, I misunderstood and thought the point was low wage earners from around the bay area were moving to Stockton and commuting to their low wage jobs from there, rather you're saying they'll start over in Stockton? Curious how you interpret this article

http://www.capradio.org/articles/2018/01/19/califo...

I get how expensive the bay area is, I get the "wanting to buy a house", but I also realize that it's more realistic that I'll rent. If I'm a low wage earner in the city it's probably realistic that I live at home w/ family or in shared space w/ room mates. That seems much more realistic than moving to Stockton to start over so one could buy a house.

My comment simply put is that commuting to Bay Area from Stockton is exhausting and not a long term solution for anyone, and it's only going to get worse.

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