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REALTOR®: Investors drive California's housing market recovery

Wednesday, May 29, 2013

Low mortgage rates, attractive home prices, and low yields on alternative assets have fueled demand for investment properties in California. According to a survey by the California Association of REALTORS®, investors have played a key role in the California housing market recovery for the past four years, particularly in markets dominated by distressed homes.

C.A.R. surveyed its members about their interactions with investors in April 2013. Findings show today's investors behave differently than in the past, favoring buy and hold over flipping. Profit potential and good prices are precipitating their property purchases.

Three-fourths or 75 percent of investors own 1-10 other investment properties; 15 percent own just one property; 46 percent own 2-5 properties; and 14 percent own 6-10 properties, according to the California Association of Realtors' "2013 Investor Survey." Among the reasons 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).

Two-thirds (66 percent) of investors indicated they intend to hold on to property they purchased, while about one-quarter (26 percent) of investors flipped the property. Three-fourths of buyers intend to keep the property for less than six years.

Of the properties purchased by investors, 78 percent of transactions involved single-family 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. 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). The median rate of return on investment was 14 percent.

More than two-thirds of buyers (67 percent) paid cash. Foreigners accounted for 27 percent of all investors, with China, India, and Mexico being the top countries of origin.

"Investors understand it makes sense to buy these properties, which are at reasonable prices compared to the past, especially here in California. Silicon Valley property is attractive to foreign buyers because it's the business center and still has wonderful neighborhoods and good schools. We're seeing a global real estate market in our region," said Carolyn Miller, president of the Silicon Valley Association of REALTORS®.

Miller added while she is happy the market is recovering, she is concerned that many times investors have squeezed out traditional home buyers. "We value neighborhoods, where families can settle down for the long-term and contribute to a community. Our children who were born here are having difficulties getting a toe hold in this market. Home ownership is still what many families want to achieve," said Miller.

Other findings of the survey reveal majority of investors (59 percent) found their property on the MLS, and more than two-thirds of the properties are managed by the owners, rather than professionally managed.


The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.

The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.

Variations of this article have appeared in local area newspapers.

For further information, please contact Rose Meily at SILVAR Public Affairs, email , or phone (408) 200-0109.

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