Since the housing recovery has left fewer distressed homes on the market, investors are changing their strategy and focusing on properties in more rural areas of the state, where better deals can be found, according to the California Association of REALTORS® (C.A.R.).
The "2014 Investor Survey" conducted by C.A.R. reveals in 2014, 15 percent of investors purchased properties in Northern California in 2014, down from 27 percent in 2013. Forty percent of investors purchased properties in Southern California in 2014, down from 50 percent last year. Nearly half (45 percent) of investors said they purchased properties in such counties as Sacramento, San Joaquin, Fresno, Kern, Merced, and Tulare, up from 27 percent in 2013.
Additionally, with home prices on the rise, more investors are flipping properties instead of renting them. In 2014, 28 percent of investors flipped the property, up from 20 percent last year.
Fifty-eight percent of investors rented their properties in 2014, down from 73 percent in 2013. More than half of investors (55 percent) intend to keep the property less than six years.
Among the reasons investors cited for buying now include profit potential (cited by 58 percent), good price (43 percent), location (26 percent), personal (21 percent), and low interest rates (14 percent).
Prices and types of properties purchased by investors reflect the recovering housing market. The survey found the median sales price of an investment property in 2014 was $320,000, up 9.6 percent from $292,000 in 2013. Seventy percent of investment properties purchased were equity sales, while 18 percent were short sales, and 12 percent were foreclosures.
More than two-thirds (67 percent) of investors paid cash. One-third of investors were foreign investors, with China, Mexico, Taiwan, and India being the top countries of origin.
The Q2 2014 U.S. Institutional Investor & Cash Sales Report released during the week by RealtyTrac has similar findings nationwide. The report noted in the second quarter of 2014, purchases by institutional investors - entities that purchase at least 10 properties in a calendar year - were just 4.7 percent of all sales of single-family homes and condos, the lowest since first-quarter 2012. These purchases were down from 5.3 percent in the previous quarter and down from 5.8 percent.
All-cash sales accounted for 37.9 percent of all sales of single-family homes and condos nationwide in the second quarter, down from a three-year high of 42 percent in the previous quarter, but still up from 35.7 percent in a year ago.
"For the past two years, purchases by investors and all-cash buyers cornered the market and now they have stepped back. As inventory improves and home prices stabilize, more opportunities may open for non-cash buyers and first-time home buyers, who have been shut out of our market due to stiff competition from investors, many of whom paid all cash," said David Tonna, president of the Silicon Valley Association of REALTORS® (SILVAR).
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 email or call the SILVAR office at (408) 200-0100.