With fewer available distressed homes on the market, more investors are veering away from single-family homes and turning their attention to investing in multifamily properties, according to a survey conducted by the California Association of REALTORS® (C.A.R.).
C.A.R.'s 2015 investor survey, conducted in February and March 2015, asked members about their interactions with investors in an effort to learn more about the role of investors in the California housing market. The survey that sampled random California REALTORS®. who had worked with investors within the 12 months prior to March 2015, found 21 percent of investors purchased multifamily properties in the past year, up from 19 percent in 2014 and 14 percent in 2013.
Eighty percent of the transactions were non-distressed, up from 70 percent in 2014, a reflection of the recovering housing market. Consistent with investors purchasing more equity and multifamily properties, the median sales price increased to $375,000 in 2015, up from $320,000 in 2014 and $292,000 in 2013.
Given a lack of inventory of lower-priced properties, investors turned to higher-priced properties. Twenty-three percent of investment properties purchased ranged between $501,000 to $1 million, up from 16 percent in 2014, and 9 percent were above $1 million, up from 8 percent in 2014.
Among the reasons investors cited for buying now include good price (39 percent), followed closely by good location (38 percent), future development potential (9 percent), and size (7 percent).
"Even if prices are higher than they were a couple of years ago, investors know with land scarce and inventory of single-family homes tight, especially in the Bay Area, it pays to invest in multifamily property. Big companies like Apple, Google and Facebook and other companies are continuing to hire workers. There soon will be thousands of workers seeking places to live," said Chris Isaacson, president of the Silicon Valley Association of REALTORS®.
More investors (65 percent) rented their properties rather than flip them (26 percent), up from 58 percent in 2014 but down from 73 percent in 2013. Investors intend to charge a median monthly rent of $1,850 and plan to increase that by $50 (2.7 percent) next year.
In a sign of optimism, the vast majority (70 percent) of investors believed their property would increase in value in one year, and three-fourths said the property would increase in value in five years. Investors expect the property to appreciate an average of 27 percent during their ownership period.
Investors held properties for a short period of time at an average of 6.1 years in 2015, down from 8 years in 2014, and 7.9 years in 2013. They also owned fewer properties on average in 2015 (6.4), down from 8.3 in 2014 and 6.5 in 2013.
Two-thirds (66 percent) of investors paid cash in 2015, essentially unchanged from 67 percent in 2014 and 2013. They cited proceeds from a previous investment as the primary source of cash funds (49 percent), followed by personal savings (42 percent), and private investors (20 percent).
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.