Zip Code Spotlight – East Palo Alto – 94303
This post first appeared in the June edition of: Cirios Trends: Finding Real Estate Opportunities.
This month’s spotlight falls on East Palo Alto, CA, perhaps one of the Bay Area’s most interesting pockets of real estate and an excellent illustration of the effect of housing boom and bust on marginal areas. Surrounded by islands of almost inconceivable wealth, East Palo Alto (or “EPA”), for many years remained a low-price, crime-ridden enclave that more wealthy residents in the area wouldn’t dare set foot in.
Towards the peak of the boom, the forces of real estate pricing began to bring change to EPA. Entire neighborhoods were bought up, torn down and redeveloped into either commercial space or new residential housing. Gentrification began happening at an accelerated pace, during which time prices rose almost 70% in just four years. When the bust hit, the market tumbled even more quickly than it rose. Prices fell 60% in a single 12-month period. On the graph below, witness the massive supply spike that coincided with prices falling off a cliff (note also the scarcity of blue data points during this time, indicating an extremely illiquid market). Since that time prices appear to have stabilized at around year 2000 price levels and supply has returned to more normal levels.
The question, of course, is where will EPA go from here? With crime again on the rise and municipal budgets slashed by plummeting tax revenues, EPA could again be plagued by the troubles it has known for decades. But the fact remains that EPA has by far the most affordable housing on the Peninsula. Investors are finding value on these once dangerous streets, betting the disparity between EPA home prices and everywhere else will narrow in the years to come.
Tags: east palo alto, east palo alto distressed real estate, east palo alto foreclosures, east palo alto home prices, east palo alto price per square foot, east palo alto real estate development