Ghanapolitics: San Francisco Business Times/Blanca Torres: Ken Rosen: Oakland's housing boom is too much too fast

Monday 2 December 2019

San Francisco Business Times/Blanca Torres: Ken Rosen: Oakland's housing boom is too much too fast

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Ken Rosen chairs the Fisher Center for Real Estate & Urban Economics at UC Berkeley.

By Blanca Torres
Reporter, San Francisco Business Times

Nov 25, 2019, 2:04pm PST

Ken Rosen, one of the Bay Area’s most well-known economists, said Oakland’s housing market is oversupplied with new units.

The influx of new apartments will benefit renters with more competitive prices and a broader selection of homes, Rosen said as he presented his annual forecast on the region’s economy Monday in San Francisco. But landlords could take financial hits if they have to offer discounts to lure tenants or charge lower rents than they originally planned when they started construction.

“There’s going to be some turmoil,” said Rosen, chairman of the Fisher Center for Real Estate & Urban Economics at the Haas School of Business at the University of California, Berkeley. “Too much supply at once is a lot to deal with. That doesn’t mean it won’t be absorbed.”

The city has welcomed a few thousand new homes to the market this year with 9,277 homes under construction and another 10,097 units in the pipeline, according to city data. Oakland is now adding more homes, mostly apartments, to its housing stock than San Francisco.

While Oakland's median monthly rent shot up 44 percent from $2,133 in 2014 to $3,066 in 2018 — rents unheard of in Oakland five years ago — the rate of growth has slowed. The media rent increased by only 1 percent between 2017 and 2018, according real estate information website Zillow.

Oakland’s housing boom comes as the region faces a housing shortage as job growth has far outpaced housing production during the past decade.

The city upzoned several areas in and around its downtown core, including along the former Auto Row, where some 3,000 homes have been built or are under construction.

Rosen said rents have effectively doubled in many parts of the Bay Area and home prices have surpassed their peak from before the Great Recession. But that rate of growth is slowing down.

“More development is a good thing,” he said. “We need more supply, but it means there’s going to be more caution in the next round.”

At the same time, the region’s unaffordability is taking a toll on the labor force as more workers move out of state to cities where housing is less expensive.

Rosen predicted a 40 percent chance of a recession next year and a 60 percent chance in 2021. The key factors that could lead the nation into an economic downturn are geopolitical volatility such as the future of Britain’s exit from the European Union, President Donald Trump’s trade war with China over tariffs as well as a slowdown in the tech sector.

Rosen said some companies that had been growing exponentially are likely overvalued. That includes WeWork, the co-working and office space operator, that is one of San Francisco’s largest office tenants.

“We never want recessions, but there would be less traffic and housing costs would go down,” he said.