Zip Code Spotlight: Berkeley — 94703
Each month we examine a single zip code, identifying micro-trends within the area to try and figure out how close (or far) that market could be from a bottom.
This month we shine the Zip Code Spotlight on 94703, an area smack in the middle of storied Berkeley, CA. The area contains an eclectic mix (it is Berkeley after all) of houses, condos and apartments. For this month’s analysis, we’ll focus on the single family residences within the zip code.
Looking at the zip’s sales history, one can see a trend that sets it apart from many other areas in the East Bay. Since the peak of the market in mid-2006, prices for homes in this zip code have fallen by 15%. Normally, this would seem like a staggering drop, but a 15% decline is mild when you consider the East Bay as a whole has come down more than 40%.
The area’s relative stability is likely a product of several factors (affordability, proximity to San Francisco and UC Berkeley, etc). Perhaps the most important of these is the fact that during the recent housing boom, home prices did not run up as much as many of the surrounding areas.
The average sale price is up 95% since 2000 — which is significant — but a moderate rise compared to the East Bay as a whole, which saw gains of more than 130%.
This is only part of story, however, and doesn’t explain why prices in 94703 have just come down to 2004 levels, while overall East Bay prices have already returned to levels not seen since 2000.
So is 94703 primed for a bigger drop or has it weathered the storm?
Source: Cirios Real Estate, MLS data
Only time will tell, of course, but until then we can watch for a few telling indicators.
First and foremost in our minds is supply, which, as we explain in detail in this month’s By the Numbers, can be an important leading indicator for prices. Spikes in supply often lead to price declines, as buyers can be more patient and sellers become more desperate. The larger the spike, the larger the decline.
As can be seen in the graph below, supply in 94703 is certainly moving higher and sits at the upper bound of its range over the past dozen or so years. We are watching this level carefully, as further increases would likely foretell more severe price drops in the future.
If, on the other hand, buyers step in and pick up lower priced homes, supply may return to more historic norms, supporting prices at their current levels.
Tags: 94703, berkeley, East Bay, home prices, inventory, supply