Gentrification is either a dirty word or something wonderful depending on who you ask. One of the best examples of gentrification locally is the Oak Park area of Sacramento. Let’s take a deeper look at this neighborhood that is in the process of change. I’d love to hear your take in the comments below.
Seriously, $428,000? When telling a few locals on Twitter last week that a property on 34th Street recently sold for $428,000, the responses were mostly, “What the heck? Really? Wow!!” I know that doesn’t sound like much for certain areas of the country, but it gives pause for Oak Park because it seems symbolic of what is happening in the neighborhood as well as indicative of values that have risen dramatically in recent years.
What is gentrification? According to Merriam Webster, it is the process of renewal and rebuilding accompanying the influx of middle-class or affluent people into deteriorating areas that often displaces poorer residents.
1) Neighborhoods Have Life Cycles:
Growth: A period during which there are gains in public favor and acceptance. Demand increases.
Stability: A period of equilibrium without marked gains or losses. No real obvious change.
Decline: A period of diminishing demand and acceptance.
Renewal: A period of rejuvenation and rebirth of market demand.
2) The Good & Bad: Blight needs to be cleaned up, so it’s a good thing when that begins to happen in neighborhoods. However, it’s a bad thing when native residents are displaced because they can no longer afford the neighborhood.
An Example of Gentrification: The Oak Park area of Sacramento has been gentrifying for more than a decade. In some portions of the neighborhood there are signs of revitalization as residential properties are rehabbed, chain link fences are removed, and commercial businesses along Broadway are starting to attract outsiders (which is something that rarely happened in previous years). Overall a shift in attitude is taking place, and that is being reflected with greater demand and higher home prices. There are “gentrification pockets” so to speak in various areas of Oak Park, but not all areas.
Here are all Oak Park sales over the past 6+ years. This graph shows all portions of Oak Park including North Oak Park (not Med Center). These are residential sales from MLS (no private sales). The highest sale in Oak Park recently closed at $428,000. On one hand this sale is higher than anything else, and that gives us pause, but on the other hand it is larger in size and new homes tend to command a value premium.
Med Center Thoughts: North Oak Park has been a very hot market, and some would say the line between Med Center and North Oak Park has been blurred in recent years, meaning higher values of the Med Center area have trickled throughout North Oak Park. If you are a buyer, would you pay a premium for Med Center or do you not care? As an appraiser I like to graph Med Center separately because some properties in Med Center can still command a premium. However, the graph does show the highest prices in Oak Park are more readily competing with Med Center prices.
SNL’s Gentrification Skit: By the way, if you haven’t seen Saturday Night Live’s skit on gentrification, they nailed it. Watch below (or here). There is some language, so be careful about kids being present.
Questions: Any thoughts, stories, or points to share? I’d love to hear your take. How has your perception of Oak Park changed over the past decade? Do you think there is a price difference between Med Center and North Oak Park? What are the strengths and weaknesses of gentrification?
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Love it Ryan. I’ve been saying this for the past couple of years. I sold two huge fixers several months ago here both under 100K. The largest looks exactly like the home you featured in your picture. It’s still being renovated but we all estimated it could sell for about $400K. The other was a 2 bed 1 bath sold for $60K. It recently re-sold for $131,500 after being updated. Wha? Right! Time to buy and stay in Oak Park.
Thanks Keisha. It’s wild to see higher prices. Congrats on the two sales too. There have been some very stylish flips in the neighborhood in recent time, and these flips seem to be commanding premiums because they combine a sense of era charm with everything that is fresh on Pinterest and Houzz. 🙂
Hey Ryan:
Let’s see, this house is 200 yards from the freeway and wedged between apartments and the cyclone fence enclosed charter school. Doesn’t add up.
Ricardo
Thanks Ricardo. I hear you. Yet North Oak Park has huge demand right now. Location, location, and location… 🙂
Seems about right, beautiful house with that many bathrooms and that much square footage near downtown. If it was just north of the freeway it would be selling for $900,000.
Thanks Nathan. Context is everything. You pose an important issue. What are new builds selling for in East Sac, Elmhurst, Curtis Park Village, Land Park, etc…? Values will vary substantially based on location, so where does this one in Oak Park fit in to the immediate neighborhood market as well as the wider picture? Yet there is still some undeniable shock for this sale. Almost everyone I have mentioned it to says, “Wow!!” 🙂
From an appraisal standpoint I can see where it would be a challenge to appraise in areas experiencing gentrification. Locating comparable sales within the area you are working in like this might not truly reflect current values. Do you have other areas that are going through similar changes that you can pull from?
Hey Tom. Good point. There are mostly always some sales and/or some pendings / listings to help give clues into the market. It’s not like there is this all of the sudden huge increase in value because this area has been on the path of gentrification for many years. It seems in recent years though with redevelopment along Broadway, there is a more visible representation of some of the changes taking place. There are some surrounding areas that can be used for comps, but one has to be very careful about location adjustments here as markets can be very different once you cross a major street.
Hey Ryan! I moved to Sacto. from Baltimore in 2000 and have been hearing about Oak Park’s revitalization since then. My wife and I have found a great new little spot for local brew and good eats in Oak Park and I giggle every time I’m there. It has taken over a decade, but sounds like it is slowly becoming reality! I haven’t had any recent clients looking in that area, so I can’t really comment on what I’m seeing in that neighborhood. And thanks for sharing that video! Hilarious! I might have to re-share!!!
Thanks Maddy. I assume you’re talking about Oak Park Brewery. I love that place. The Old Soul coffee shop is definitely one of the better spots in Sacramento too (in my humble opinion as a coffee addict). Change certainly happens slowly. I’d love to hear stories of Baltimore sometime.
Hi Ryan;
Thanks for the post! I actually sold this home to a really great couple and they are so happy. This was a brand new construction home on a lot that has been vacant for 15+ years. It is so hard to find a home north of 1,200 sq ft in any part of downtown sac, let along brand new construction that still fits the local charm. The builder put so much love and care building this home, the attention to detail was impeccable. We had multiple offers on this one and it was a tough choice for the seller. The neighbors are glad that they can see a home on it now instead of looking at an empty outgrown lot. I totally agree with what Nathan said about location!
I work with lots of local builders/investors in the area that have a passion for restoration and “gentrification” as you stated.
Shanna Jane
Realty One Group
916.741.2001
Thanks Shanna. I love hearing the inside scoop, and I appreciate it. Congratulations on your sale too. It is wonderful to see one less vacant lot. I bet neighbors are elated to say the least. Congratulations to the new owner also (your house is bound to get some publicity because it is the highest sale). 🙂
Read this article. Interesting conclusion.
http://www.slate.com/articles/news_and_politics/politics/2015/01/the_gentrification_myth_it_s_rare_and_not_as_bad_for_the_poor_as_people.html
Thanks Micah. I’ve seen that article, and I appreciate you sharing it here too. I would welcome any civil discussion on gentrification in this thread too. I always like to hear different perspectives and ideas for how to best improve a neighborhood as well as promote home ownership for long-time community members who have never had a stake in real estate.
Oak Park has gone through some great revitalization in the past 10 years. I went to school at Sac High in the 90’s and wouldn’t have imagined what the Broadway Triangle looks like today.
As downtown and midtown prices get unaffordable you also have a subsection of folks (hipsters, etc.) moving into the now trendy Oak Park.
It’s a great neighborhood with a great history that I’m glad to see going through positive change.
Thanks Matt. It’s good to hear your take. I really appreciate it. You are so right about prices in Oak Park being influenced by the outside market too. There is certainly a “hip” vibe in the community too. It seems the homes commanding the highest prices have very hip upgrades like they are straight from the latest design magazines.
For the sake of onlookers, I wanted to offer an expanded take here. In the many conversations I’ve had over the past day or so about Oak Park, this is an important point to grasp. I already mentioned in the post that the highest sale a few weeks ago was indicative in part due to higher values in the surrounding market (as well as increased demand and the property being larger and new), but it is worth unpacking that more for the sake of clarity. With the increase of values since January 2012 when the market bottomed out, it’s frankly becoming more and more difficult to find an “affordable” home in the region under $200,000. Why? Inventory is tight in this price range, which creates more competition (and thus ramps up prices). However, there are actually many properties priced far below $200,000 throughout portions of Oak Park, so when we discuss affordability in Sacramento, Oak Park is still far more affordable than much of the surrounding market. Granted, the higher side of the neighborhood market is probably what gleans the most attention as it is clearly $300-400K-ish right now. This brings pause and shock to some, though as shown in the graphs above, this has become a much more reasonable range that has made sense to buyers in the neighborhood – especially when considering what values are doing in surrounding areas like Midtown, Curtis Park, and East Sac. This brings us back to the topic of gentrification. The “G” word understandably evokes an emotionally loaded conversation, but throughout the discussion we must see neighborhood sales in gentrifying areas in the context of the overall market. That will help guide any discussion on affordability.
For anyone interested in stats, there are currently 12 actives and pendings under $100,000 in Oak Park, 41 actives / pendings between $100-150K, 36 actives / pendings between 150-200K, 17 actives / pendings from $200-300K, and 4 actives / pendings above $300,000. In terms of sales, there have been 118 sales over the past 6 months under $200,000. 31 of these sales were under $100,000 and 38 were between $100-150K. For further context, there are 996 listings / pendings in Sacramento County right now under $200,000, which means Oak Park has roughly 9% of all actives / listings under $200,000 in the entire county.
Some more stats to help us see the context of Oak Park’s market and redevelopment in context:
Right now Oak Park has about 2% of all listings / pendings in Sacramento County, yet it has nearly 9% of all listings / pendings in the county under $200,000. Thus Oak Park is still one of the most affordable neighborhoods in Sacramento in terms of price level. For reference, there are only 4 listings / pendings above $300,000 in Oak Park at the moment.
Isn’t it a bit misleading to group all of Oak Park together considering the disparity of gentrification in the area? The neighborhood really breaks down into 4 tiers:
North Oak Park (Everything north of 5th Ave/Broadway):
Highly gentrified in large areas, with pockets of poverty remaining
West Central Oak Park (Between 12th and 5th Avenues, West of MLK):
Increasingly gentrified but without the visible affluence of new condos and retail
East Central Oak Park (Between Broadway and 14th Ave, East of MLK, West of Stockton Blvd):
Only early stage gentrification with homes starting to sell more consistently in the 200k range
South Oak Park (South of 12th/14th Ave)
Not yet gentrifying
I’m guessing most of those homes selling in the sub 150k range are South or East Central Oak Park.
Hi Doug. Thank you for the comment. I appreciate your knowledge of the market too. The word “misleading” is strong, though I think I know what you are getting at. As you said, and as I mentioned above, there are “gentrification pockets” so to speak in various areas of Oak Park. We know rebirth is not happening throughout the entire neighborhood, but I still don’t have a problem with saying something like “Oak Park is experiencing a rebirth”. I find it fascinating to group all of Oak Park on a graph above. It would be interesting to dissect a few portions on the graph as a follow-up some day. CBS actually reached out to me to do a story on Oak Park (with a few real estate agents too), and the story should air this week. On one hand the neighborhood has some higher sales in choice pockets, and we can say there is a renewed vibe there, but on the other hand we clearly see some of the lowest-priced homes in Sacramento.
I bought a duplex on 2nd ave in 95817, Curtis park zip code in 2011 for $185k, I rented both units for $1,000 a month for a $24k gross income per year.
I refinanced it with an appraised value of $305k. just recently.
You bought at a great time since the market hit bottom around January 2012 (but it had very little declines in 2011 as the market was nearing a turning point). Congratulations on the increase. I appreciate hearing your story.