Long after recovery, the housing wealth gap in Richmond is worse than ever
on December 19, 2014
As the country continues to recover from the economic crisis, and housing prices in the Bay Area have quickly resumed their ascent, Richmond is stuck in the biggest wealth gap in housing it’s ever known.
While historically rich neighborhoods of Richmond are climbing up the curve of a slow but sure recovery, houses of the poorer neighborhoods, such as South Richmond, are lagging behind in restoring the value they held at the peak of the market in 2006. It is a reality that Michael Seguin, Senior Technology Manager of the Contra Costa Association of Realtors, referred to as “the tale of two recoveries.”
Click on the blue line to see the 6-month averages of median sales prices in Point Richmond between 2005 and 2014.
Point Richmond, considered by many the wealthiest area of the city, lost more than half of its housing prices value during the recession. However, it has recovered quite well since the second half of 2011.
“Prices are up and they’re going to continue to go up,” said Margi Celucci of Bay View Realty, a real estate agency in Point Richmond.
But on the other side of the tracks, in an area commonly referred to as the Iron Triangle, the crisis that hit in 2007 has had a lasting effect on the housing market.
Click on the blue line to see the 6-month averages of median sales prices in South Richmond between 2005 and 2014.
“Prices plummeted and they haven’t risen back,” said Seguin.
A quick look at both charts shows that the mortgage crisis hit the poorest neighborhoods of Richmond the hardest.
When the low-income area of South Richmond was hit in 2006, houses lost over 75% of their value, falling from $404,575 a housing unit on average to a record low of $70,500.
Homeowners, who were not kicked out by no-longer-affordable mortgages, saw the value of their houses – and much of their personal wealth — shrink to a historical low.
The gap created by such a crash is still in play today, when a $120,000 difference separates the rich neighborhoods (in gold on the map) from the poor neighborhoods (in blue on the map).
Click on the yellow and blue areas to see how much a house costs on average. The rich neighborhoods (in yellow) sell houses at over $500,000, still below the market price of the region. The poorer neighborhoods (in blue) had average prices in Oct 2014 below $380,000, a dramatic low.
Before the crisis, a house in Point Richmond could buy you two houses in the Iron Triangle. Today, it can buy you three.
Data from the Contra Costa Association of Realtors shows that a house in South Richmond at the market peak was worth on average $408,575, half the price of a house in Point Richmond. A house in South Richmond is now worth $218,000 on average, a third of what a Point Richmond house is worth.
“Foreclosures are still a problem in Richmond,” said Vice Mayor Jovanka Beckles.
Beckles adds that Richmond Cares, a city-run program which looks at renegotiating the principal on a mortgage with banks, and uses eminent domain to lower the principal as a last resort, is something the City Council will take a fresh look at in 2015.
Another factor in the impoverishment of the inner city is what Jim Becker, the CEO of the Richmond Community Foundation, a local non-profit, refers to as “zombie houses.”
Houses left vacant by the owner and not foreclosed on by the bank in the neighborhoods of Santa Fe, Coronado, and the Iron Triangle attract squatters and contribute to a wider and deeper loss in property value.
According to Becker, zombie houses in those areas could be responsible for as much as an 8 percent drop in property value.
Beckles, on the other hand, blames the Chevron fire of 2012 for the slow recovery of the housing market.
“That fire, which is perceived as a source of danger, keeps our property values from elevating,” she said.
Zanna Knight, a realtor from Coldwell Banker, an agency based in Berkeley, says that the fire, in her experience, is not a main concern for people looking to buy.
“People come here because of the cheap prices and the beautiful view, “she said.
But “the hard part is always the Iron Triangle, because of the crime,” she said. “A colleague of mine only sold 5 homes there last year” and they were all below market price.
In her opinion, prices in the Iron Triangle are not likely to rise much, permanently suffering from its bad reputation.
Notes on the data:
The data was collected by the Contra Costa Association of REALTORS®, a professionals association based in Walnut Creek. The map and charts were built using the Association’s monthly aggregate transaction statistics for 9 different MLS (multiple listing service) areas in Richmond. The data is of single family existing houses with closed sales. Were left out townhouses, condos, new constructions and,houses with pending or active sales status.
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