There are hundreds of foreclosed homes in low-income Oakland neighborhoods going for fire sale prices. In the East Oakland flatlands, you can buy a house for at least $200,000 less than you could before the housing market collapsed.
One might think that the drastically reduced prices would bring homeownership within reach for many families with modest incomes who couldn't previously afford to buy.
But that's often not the case.
Just ask Dorcia White.
She and her husband, Courtney, both have jobs with documented income. She is a manager at Everett & Jones barbecue restaurant -- an Oakland fixture run by her family. He is a carpenter with a union salary and benefits. They have two sons, 3 and 11, and are looking to move out of their rental in West Oakland and buy a fixer-upper. They have been prequalified for a loan.
Yet the White's six-month house search has turned up empty. They have made four offers on foreclosures in East Oakland. Each time, they got beat out by bidders with cash.
Investors are snatching up foreclosures in East and West Oakland in a rapid land grab that has occurred for the most part under the radar. They have been buying up property in the same low-income communities that were hit hardest by predatory lenders. In the process, they are squeezing out low- and middle-income buyers who can't pay cash.
"It reminds me of Monopoly," Dorcia White says. "You already own Park Place and now you
On Thursday, the Urban Strategies Council, an Oakland nonprofit group, released a study, "Who Owns Your Neighborhood: The Role of Investors in Post-Foreclosure Oakland." It focuses on an aspect of the foreclosure crisis that has thus far gotten scant attention.
Who is buying up foreclosures and how does that affect the surrounding community?
If a homeowner is unable to come to an agreement with his lender, a property is either (1) sold at a trustee sale on the steps of the county courthouse to the highest bidder or (2) if it is not sold, it reverts back to a financial institution -- becoming an REO, a lender-owned property -- or government-backed entity.
There were 10,508 foreclosures in Oakland from 2007 to October 2011.
According to the study, investors bought 42 percent of these properties either in trustee sales or directly from a financial institution.
You can't even participate in a trustee sale unless you can prove beforehand that you are able to pay cash. Meanwhile, financial institutions anxious to unload foreclosures overwhelmingly favor cash buyers over working people who actually plan to live in the homes.
This phenomenon has serious implications for low-income communities.
There has been a huge transfer of wealth out of poor neighborhoods into the pockets of investors -- most of them from out of town.
Since 2007, two investors have amassed 500 Oakland properties between them.
According to the study, as of October 2011, Oakland-based Community Fund, operating mostly in East Oakland, had flipped 120 homes at an average gross gain of $70,721 per property. REO Homes, based in San Francisco, had flipped 10 homes with an average gross gain of $186,980.
Oakland has focused on holding banks accountable for maintaining their foreclosures. But no one has paid attention to investors, many of whom also leave their property in a state of disrepair that becomes a crime magnet.
Councilwoman Desley Brooks' district is at the epicenter of the foreclosure crisis. She has introduced an ordinance that would require all property owners who don't live in their newly purchased homes to bring their properties up to code or face fines. The City Council's Community and Economic Development Agency will hold a hearing on her proposal July 10.
Brooks and affordable housing advocates further called for financial institutions to give low- and mid-income buyers more opportunities for financing and to give them preference over investors in foreclosure purchases.
"These investors are buying low and selling high," Brooks said. "If we all continue to allow this to happen, we do a tremendous disservice to our communities."