Buyers Go Condo Crazy
They're snapping up whatever they can find as housing prices surge.
Eliot Peper and Drea Castillo bought a condo rather than rent.
Eliot Peper, 27, and his fiancée Drea Castillo, 30, moved to the Bay Area from San Diego last year when Castillo accepted a job with an architecture firm in San Francisco. At first, the couple considered renting an apartment but were surprised to find it was cheaper to buy a condo.
"Rents were astronomical; I was absolutely shocked," Peper said. "We realized that the monthly payments, if we bought a condo, would be significantly lower than renting." In January, they closed on an Oakland duplex; Peper estimated the monthly payments were 40 percent less than monthly rent for a comparable structure. "It was enough to make us blink," he said.
The East Bay has become a hot area for condominiums in the past year, with condo prices rising to as much as $406 per square foot in 2014 up from $239 per square foot in 2011. But despite the rise in prices, many buyers like Peper and Castillo still continue to find condos a more attractive option than renting. In the last year, falling interest rates as low as 3.5 percent have made home ownership more viable, while rising rents in San Francisco and Silicon Valley have simultaneously driven many young professionals to look to the East Bay for more affordable housing options.
"Young buyers cannot afford the rents in San Francisco, where you have studio apartments going for as high as $3,000 per month," said Orhan Tolu, President of Century 21 Realty Alliance in the Bay Area. "For that, you can buy a condo in the East Bay for $300,000 and have a lower monthly payment. [Interest rates] have been coming down over the last three years, but it’s only been since 2013 that buyers have really begun to understand that these rates might not be available forever. Beginning in 2013, we saw a lot more buyers and investors jumping into the market."
But while the number of interested buyers is on the rise, construction of new condo developments in the East Bay has not kept up with the demand, increasing the price tag for existing units. Don Cruz Datanagan, East Bay district broker for ZipRealty, noted one 10-year-old condominium in Livermore that sold for $218,000 in 2011 sold again in 2013 for $400,000.
"Many 680 and 880 corridor cities have enacted ordinances to block high-density condo complexes," said Datanagan. "Pleasanton won’t allow it; Danville won’t allow it; Alamo won’t allow it. They don’t want their towns to become high density."
Condo sales in Alameda and Contra Costa counties dipped 9 percent in 2013 from 4,433 in 2012 to just 3,947, but still remained high compared to the nadir of 2008 when just 3,000 units sold. Real estate agents attributed the 2013 dip to a decline in distressed and delinquent sales and a return to a normal real estate market. Even so, the demand for condos in the East Bay remains high, outstripping the supply of available units. Competition for condos is especially fierce in the Oakland/Berkeley market, where Peper and Castillo were at first constantly outbid by first-time homebuyers fleeing San Francisco.
"They want to buy houses that are beautiful, hands-off and ready to move in, and would rather pay more for a fully renovated house with granite counter-tops than hire a contractor to put in the counter-tops themselves," said Peper. "But if you’re looking for something less shiny but with good fundamentals, you can still get a good deal."