Investors fuel housing market recovery

June 1, 2013


Isn’t it refreshing to hear the words “housing” and “recovery” in the same sentence? Our area is definitely recovering, with investors playing a key role in the California housing market revival. Low mortgage rates, attractive home prices, and low yields on alternative assets have fueled demand for investment properties, particularly where distressed homes have dominated in many markets. In an effort to learn more about the investor sector, California Association of Realtors (CAR) surveyed its members about their interactions with investors. A few of its findings might surprise you.

In keeping with common wisdom that today’s real estate market is ideal for a long-term investment strategy, two-thirds (66 percent) of investors indicated they are following just that approach, while about one-quarter (26 percent) of investors flipped the property, according to a (CAR) investor survey. Investors are favoring buying and holding instead of flipping.

Additionally, three-fourths of investors are of the small mom-and-pop type, owning one to 10 other investment properties, with 15 percent owning just one property, 46 percent owning two to five properties, and 14 percent owning six to10 properties, CAR’s “2013 Investor Survey” found. Of the properties purchased by investors, single-family homes were the preferred property type, with 78 percent of transactions involving singlefamily homes. Multifamily properties comprised 14 percent, 7 percent were other property types, and bulk sales made up only 1 percent.

The median sales price of an investment property was $272,500 according to statewide data. More than eight out of every 10 investors made repairs to their investment properties, spending a median of $10,000 – or 4 percent of the median sales price. Investors spent a greater percentage (4.2 percent) of the sales price rehabilitating properties costing $250,000 or less than they did on properties costing $500,000 or more (3.4 percent).Among the reasons investors cited for buying or selling now include profit potential (cited by 34 percent), good price (26 percent), low interest rates (10 percent), personal (6 percent), and location (4 percent).

housing chartAdditional findings from CAR’s “2013 Investor Survey” include:

• More than two-thirds (67 percent) of buyers paid cash.

• Twenty-seven percent of investors were foreign investors, with China, India, and Mexico being the top countries of origin.

• The majority of investors (59 percent) found their property on the MLS.

• Three-fourths of buyers intend to keep the property for less than six years.

• More than two-thirds of the properties are managed by the owners, rather than professionally managed.

• The median rate of return on investment was 14 percent.

CAR’s “2013 California Investor Survey” was conducted in April 2013 in an effort to learn more about the role of investors in the California housing market. While our area supports a lower median sales price, it’s invaluable to have an understanding of what’s typical for most investors on a larger scale. If you have been Investors fuel housing market recovery considering becoming a real estate investor contact your local Realtor who can get you started on the right track. Education on current market conditions, what’s a typical rent, negotiating strategies and what to expect with the purchase is what we love to do. As the market continues to shift, adjust, and move finding a local expert is tantamount to finding an awesome deal.

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