Red Oak Realty: Berkeley, California Quarterly Market Report

Learn the latest real estate news from Leverage Partner Red Oak Realty, who was recently featured in Berkeleyside with Home Truths, a quarterly report on the state of the Berkeley, California real estate market.

Read the full article: Home Truths: Why Berkeley has become one of the Bay Area’s hottest real-estate spots

Those of us who live in Berkeley have many reasons to love it: it's urban yet suburban, offers great schools, and has relatively easy access to water, hills and (if it ever gets cold again) snow.

But these factors only partially explain why real-estate prices in Berkeley have skyrocketed. 2014 was a record-breaker, with median price reaching an all-time high of $884,500. That's up 9% in one year, 51% in 10. And homes sold an average of 14% over their asking price, the second highest difference in the Bay Area (after Albany).

So why has Berkeley become one of the hottest spots in the Bay Area? There are three factors to consider:

Simply supply and demand

Over the past two years, new listing inventory in Berkeley has plummeted. It is down 10 percent in the past year alone. Why? With prices so high, homeowners are staying put - there's nowhere to go.

No city is an island

When trying to understand Berkeley's appeal, it's important to look at the Bay Area as a whole. Berkeley does not exist in a vacuum. For example, 47% of the Bay Area's 1.3 million employed residents cross over at least one county line to get to work.

Strong economic factors, but...

The Bay Area offers a unique confluence of forces: a technology and biotech hub, a large creative class, a gateway for Chinese investment, world-class academic institutions, and, last but not least, a stellar climate. This has created rising wages and near-record levels of employment, attracting people from across the U.S. and the globe.

Much of the Bay Area's growth, especially in the real-estate markets, is driven by venture-capital investment. In fact, investments in San Francisco more than doubled between 2013 and 2014. As San Francisco's real-estate market continues to tighten, more technology companies are looking to move to the East Bay, which means an increasing focus on the Berkeley residential market.