Thydour Coleman shook her head as she spoke about the four mothers evicted from a West Oakland house bought by a real estate investment company planning to flip it.
The McClymonds High School graduate was born and raised in the community, leaving for four decades before returning two years ago. It was unrecognizable, she said.
“The neighborhood has changed completely since I was a little kid,” Coleman said as she walked her dog a block away from the Moms 4 Housing eviction. “I’ve never seen so many homeless people in my life, and they keep building these expensive ... houses. They only care about the rich and the famous.”
On Tuesday morning, Alameda County sheriff’s deputies evicted four mothers from a two-story home on Magnolia Street after they had occupied the house, without the owner’s permission, for nearly two months. The episode turned the spotlight on the Bay Area’s exorbitant housing prices — but also on the practice of home flipping and what role it plays in people being priced out of neighborhoods.
For the past nine years, Wedgewood Properties, the Southern California firm that owns the Magnolia Street house, has been one of Oakland’s most prolific house flippers, rehabbing and selling 160 homes. The company says it has spent an average of $57,000 per home, about $9.1 million in total, using all local labor to do the work. Most of the homes were owned by banks, having gone into foreclosure during and after the financial crisis of 2008. They include homes like 2753 67th Ave., which the company bought at auction for $367,000 and sold six months later for $573,000.
Wedgewood spokeswoman Leslie Moody said the company has paid more than $2 million to Oakland in transfer and property taxes. “We bring employment to the local community, rehabilitate severely damaged homes and revitalize communities,” she said. “That rundown, vacant house is now a like-new home available to first-time home buyers.”
Critics call it real estate speculation that fuels gentrification and displaces longtime working-class Oakland residents, many of them victims of predatory lending. More affluent newcomers take their place.
Housing data show that in the San Francisco-Oakland-Hayward metropolitan region, house flips are not as common as in many cities. In the third quarter of 2019, 380 homes were flipped, about 3.7% of all sales, according to Attom Data Solutions, a company that compiles real estate data. That rate ranked 129th out of 148 metro areas in the country.
The median purchase price of rehabilitated houses in the Oakland region was $604,000 and those properties’ median sales price was $735,000, a 21.7% return on investment, according to Attom. The company estimates that a flipper must spend 20% to 33% of the property’s after-repair value to rehab a house. The margin also ranks near the bottom of metro areas at 133rd.
Maksim Stavinsky, co-founder and chief operating officer of Roc Capitol, said in an Attom report that declining profits have led to an increased interest in renting out investment properties rather than renovating and selling them.
“We have been seeing a decline in projected and realized profits for borrowers on projects, despite the fact that borrower financing costs have been meaningfully coming down,” said Stavinsky. “This has led to much greater interest and activity in our rental programs. We expect these trends to continue.”
Flipping homes is not as easy as popular HGTV home improvement shows make it out to be, according to those who do it. Sean Pan, who has bought and fixed up five homes in Santa Clara County, said that he has not quite broken even financially on his investment. While he made $300,000 on one deal, he lost $400,000 on another. Like most house flippers he borrows money from private lenders, which means 10% interest rates. That gets expensive very quickly.
“With the last house, unfortunately, the market cooled down,” he said. “I took a fat loss. There are a lot of mistakes you can make. It was a hard lesson that you can lose money flipping houses just as quickly as you can make money.”
Single-family homes that are flipped tend to be older — the median year built is 1961 — and at an average of 1,300 square feet they are smaller than the homes being constructed, according to Attom. It takes an average of 181 days from purchase to sale of an investment property.
Almost 15% of the flipped homes last third quarter were bought with cash, while only 6.1% are sold to Federal Housing Administration buyers, often first-time home buyers.
The Moms 4 Homes group squatted inside 2928 Magnolia St., a two-story, three-bedroom, one-bath house built in 1908. Wedgewood bought the house for $500,000 at a foreclosure sale in July and took possession in November, two days after the mothers took residence.
The house sold in 1997 for $50,000, and in 1987 for only $15,000.
Todd David, executive director of the San Francisco Housing Action Coalition, said the occupation of the house was “totally predictable.”
“These moms got to the point where they said, pardon my French, ‘This is totally f—ing ridiculous. We can’t afford a place to live anywhere anymore,’ ” David said. “I don’t think anyone else should be surprised this happened because the frustration has reached a new level.
“This is the very predictable outcome because we’ve under-produced housing,” he said.
In California, there were 5,029 flips in the third quarter, about 5% of all sales, a 3% annual drop, according to Attom. The company used deed data to classify as a flip the sale of a single-family home or condo when the property had previously been sold within the last 12 months.
“That’s how gentrification occurs, because there’s not new units of housing on the market, so they take existing, older affordable housing and upgrade those units,” David said. “We created that flipping incentive by limiting the housing supply.”
Oakland City Council President Rebecca Kaplan has proposed that the city acquire homes destined for foreclosure auctions and use them for affordable housing. Alameda County’s homeless count last year showed a 47% increase in Oakland.
“Numerous people have been subjected to predatory foreclosures and wrongful evictions, leading to displacement and thousands of people living on our streets,” Kaplan said in a statement Thursday. “In order to provide affordable housing and protect and preserve housing for our community, it is important to use all tools available.”
In the San Francisco-Oakland-Hayward region, Attom found that of the 1.2 million residential properties, 4,539 were vacant in the fourth quarter of last year, or 0.38% of the housing stock. Almost 300,000 of those residential units were investment properties, and 3,027 of those, just over 1%, sat vacant, according to Attom. That percentage is ranked 151st out of 158 metro regions.
In the 94608 ZIP code, where the Magnolia Street property sits, there are 9,256 residential units and 18 were vacant in the fourth quarter last year. Almost 44%, or 4,065, of the neighborhood’s housing units were investment properties, and of those, 11 were vacant in the fourth quarter.
As for Coleman, the West Oakland native, she plans to move to Hayward or San Leandro, where it’s more affordable.
“I’ve had enough,” she said.
San Francisco Chronicle staff writer Rachel Swan contributed to this report.
Matthias Gafni and J.K. Dineen are San Francisco Chronicle staff writers. Email: matthias.gafni@sfchronicle.com, jdineen@sfchronicle.com Twitter: @mgafni, @sfjkdineen
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Moms 4 Housing eviction: Just how many flips, vacant homes are there in Bay Area? - San Francisco Chronicle
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