THE IMPACT OF INVESTORS ON
CALIFORNIA’S HOUSING MARKET
Presented by
Carmen Hirciag, MBA
Senior Research Analyst
WHAT’S GOING ON IN THE CA
REAL ESTATE MARKET?
Sales of Existing Detached Homes
500,000
450,000
394,930
414,670
391,030
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
Jun-13
SERIES: Sales of Existing Single Family Homes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Dec-13
Jun-14
*Sales are seasonally adjusted and annualized
Median Price of Existing Detached Homes
$500,000
$450,000
$465,960
$457,160
$428,620
$400,000
$350,000
$300,000
$250,000
$200,000
$150,000
$100,000
$50,000
$Jun-13
SERIES: Median Price of Existing Single Family Homes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Dec-13
Jun-14
“Underwater” Mortgages Down
40%
35%
30%
25%
20%
15%
10%
5%
0%
SERIES: Underwater Mortgages
SOURCE: CoreLogic
Negative Equity
in CA
Negative
EquityShare
Share
in CA
Housing Affordability Index
% OF HOUSEHOLDS THAT CAN BUY
60%
50%
40%
30%
20%
10%
0%
SERIES: Housing Affordability Index of Traditional Buyers
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Mortgage Foreclosure & Delinquency Rates
California: Q1-2014
12%
Delinquency Rate
Foreclosure Rate
10%
8%
Delinquencies: Long Run Average: 4.5%
6%
4%
Foreclosure Rate: Long Run Average: 1.3%
2%
0%
SERIES: Mortgage Foreclosure & Delinquency Rates
SOURCE: Mortgage Bankers Association
Unsold Inventory Index By Price Range
California
Jun-13
Jun-14
4.7
4.8
$1,000K+
3.2
$750-1000K
3.9
2.7
$500-749K
3.7
$400-499K
2.7
$300-399K
2.7
$200-299K
2.7
3.7
3.5
3.5
2.5
$0-199K
0
1
2
3.3
3
4
5
Note: “Unsold Inventory Index” represents the number of months it would take to sell the remaining inventory for the month in question. The
remaining inventory for the month is defined as the number of properties that were “Active”, “Pending”, and “Contingent” (when available) and
divide the sum by the number of “Sold” properties for the month in question.
SERIES: Unsold Inventory Index of Existing Single Family Homes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
6
Change in Inventory by Price Range
(Year-to-Year)
Jun-14
40%
35.9%
27.6%
30%
30.4%
31.5%
23.7%
20%
12.5%
10%
0%
-10%
-6.1%
SERIES: Inventory of Existing Single Family Homes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
INVESTOR MARKET
OVERVIEW
CA Investor Business Declined
45%
40%
39%
35%
32%
30%
25%
20%
15%
10%
5%
0%
2013
Q: How many investor transactions did you close in the past 12 months?
Q: How many total transactions did you close in the past 12 months?
2014
Most REALTORS® Have 5 or Fewer Investor Clients
20%
20%
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
17%
16%
15%
9%
7%
1
2
3
4
Number of Investor Clients
Q: How many investor clients do you currently have?
5
6+
Number of Investor Clients Down
Average
7
7
5.2
6
5
4
3
2
1
0
2013
Q: How many investor clients do you currently have?
2014
Most REALTORS® Had 5 or Fewer Investor Transactions
20%
19%
17%
18%
17%
16%
14%
14%
11%
12%
9%
10%
8%
8%
6%
4%
2%
0%
1
2
3
4
5
Number of Investor Transactions
Q: How many investor transactions did you close in the past 12 months?
6-10
11+
Number of Investor Transactions Down
Average
7
6.4
6
4.9
5
4
3
2
1
0
2013
Q: How many investor transactions did you close in the past 12 months?
2014
Average (All) Closed Transactions: 16.4
33%
35%
30%
23%
25%
20%
19%
13%
15%
12%
10%
5%
0%
1-5
6-10
11-20
21-30
Number of Total Transactions
Q: How many total transactions did you close in the past 12 months?
31+
LAST INVESTOR BUYER
TRANSACTION
Buyers Dominate Investment Transactions
100%
90%
23%
30%
80%
70%
60%
Sellers
50%
Buyers
40%
77%
70%
30%
20%
10%
0%
2013
Q: Who did you represent?
2014
Single Family Homes Dominate Investor Market
90%
80%
80%
73%
70%
60%
50%
2014
40%
2013
30%
20%
14% 13%
12%
6%
10%
1% 1%
0%
Single family
home
Multifamily
Q: What type of property did your investor client purchase?
Bulk sale
Other
Majority Transactions Not Distressed
Foreclosure
12%
Shortsale
18%
Equity / regular /
traditional
70%
Q: Was the property a(n)?
79% of Sales Were Single Units
4.2%
Number of Units
10+
2.4%
6-10
15%
2-5
0%
2%
4%
6%
8%
10%
Q: How many units did the property have in your last investor transaction?
12%
14%
16%
Slightly Fewer Property Units Per Transaction
3.8
3.5
4.0
3.0
2.0
1.0
0.0
2013
Q: How many units did the property have in your last investor transaction?
2014
Majority of Transactions Listed Below $500k
50%
40%
30%
40%
37%
20%
16%
10%
8%
0%
$250k or less
Q: What was the initial/listing price?
$251k-$500k
$501k-$1,000k
Listing Price
$1,000k+
Initial Listing Price Higher
Median List Price
$350,000
$307,500
$322,500
$300,000
$250,000
$200,000
$150,000
$100,000
$50,000
$0
2013
Q: What was the initial listing price?
2014
Majority of Transactions Sold Below $500k
40%
37%
30%
39%
16%
20%
8%
10%
0%
$250 or less
Q: What was the final sale price?
$251-500
$501-$1,000
Sale Price (In Thousands)
$1,000+
Final Sale Price Higher
Median Sale Price
$350,000
$320,000
$292,000
$300,000
$250,000
$200,000
$150,000
$100,000
$50,000
$0
2013
Q: What was the final sale price?
2014
Median Listing Price > Sale Price
Median Price
$322,500
$320,000
$350,000
$300,000
$250,000
$200,000
$150,000
$100,000
$50,000
$0
Listing
Sale
Transaction Cost: $10k or Less for Nearly ½ Investors
40%
36%
35%
30%
30%
25%
20%
16%
15%
10%
9%
9%
5%
1%
0%
$0-1
$1-10
$10-50
$50-100
$100-1,000
Transaction Cost (In Thousands)
Q: How much did it cost to purchase the property?
$1,000+
Transaction Cost Higher
Median Cost
$12,000
$12,000
$9,000
$10,000
$8,000
$6,000
$4,000
$2,000
$0
2013
Q: How much did it cost to purchase the property?
2014
Median Transaction Cost Relative to Sale Price is
Highest in $500k+ Price Range
$900,000
5.3%
$800,000
$700,000
$600,000
$500,000
3.4%
$400,000
Median Transaction Cost
$300,000
$200,000
Median Sale Price
5.2%
$100,000
$0
$250 or less
$251-500
$500+
Sale Price (In Thousands)
Median Days on Market: 15
0.8%
Days on Market
365+
3.8%
180-365
5.0%
91-180
8.5%
61-90
13%
31-60
0-30
0%
10%
69%
20%
Q: How many days was the property on the market?
30%
40%
50%
60%
70%
Days on Market Unchanged
Median Days on Market
15
15
16
14
12
10
8
6
4
2
0
2013
Q: How many days was the property on the market?
2014
Majority Investors Rented Properties
100%
7%
90%
14%
80%
70%
60%
73%
58%
50%
Rental
40%
Flip
30%
20%
10%
Other
20%
28%
0%
2013
Q: What was the intended use of the property?
2014
Most Investors Made Minor or No Repairs
None
Minor cosmetic
18%
2013
22%
2014
0%
20%
Major cosmetic
51%
22%
39%
40%
Major remodeling
22%
60%
Q: What type of rehabilitation/remodeling was done to the property?
80%
9%
17%
100%
Majority Spent < $30k on Remodeling
20%
15%
10%
5%
0%
13%
6%
16% 16%
11%
5%
12%
4%
7%
3%
1%
Remodeling Cost
Q: How much did your client invest in rehabilitating/remodeling the property?
Median Remodeling Cost Increased
$15,000
$16,000
$14,000
$10,000
$12,000
$10,000
$8,000
$6,000
$4,000
$2,000
$0
2013
2014
Q: How much did your client invest in rehabilitating/remodeling the property?
Median Rehab Cost Ratio is Highest in Lower Sale
Price Range
6.3%
$800,000
$700,000
$600,000
$500,000
3.6%
$400,000
$300,000
$200,000
Median Sale Price
Median Rehab Cost
6.5%
$100,000
$0
$250 or less
$251-500
$500+
Sale Price (In Thousands)
Top 5 Reasons for Buying Now
profit potential
58%
good price
43%
location
26%
personal
21%
low interest rates
14%
0%
10%
20%
Q: What motivated your client to buy now? (multiple response)
30%
40%
50%
60%
70%
Most Investors Own Other Properties
2%
# P 100+
r 50-100
o o
21-50
f p
e 11-20
O r
6-10
t t
2-5
h i
1
e e
None
r s
3%
2%
17%
47%
12%
17%
0%
10%
20%
Q: How many other investment properties does your client own?
30%
40%
50%
Investors Own More Other Properties
9.0
Average
8.3
8.0
7.0
6.5
6.0
5.0
4.0
3.0
2.0
1.0
0.0
2013
Q: How many other investment properties does your client own?
2014
Most Properties Were Found on MLS
MLS
62%
21%
My listing
Other
6%
Client found property
4%
Directly from seller
4%
Another agent's private listing
2%
0%
Q: How did you find the property for your client?
20%
40%
60%
80%
Future Price Predictions Positive
100%
6%
90%
80%
70%
20%
1%
16%
8%
3%
60%
Don't know
50%
40%
Flat
Down
73%
74%
In one year
In five years
Up
30%
20%
10%
0%
Q: Do you think real estate prices in the neighborhood where the property is located will go up down or stay
flat?
More than 1/2 Intend to Keep Property < 6 Years
40%
37%
35%
30%
28%
25%
20%
18%
15%
12%
10%
6%
5%
0%
Less than 1
1-5
6-10
Years
Q: How many years does your client intend to keep the property?
11-20
21-30
Intended Length of Ownership Unchanged
6.0
Median Years
5.0
5.0
5.0
4.0
3.0
2.0
1.0
0.0
2013
Q: How many years does your client intend to keep the property?
2014
>2/3 Properties Managed by Owner
100%
8%
11%
27%
22%
90%
80%
70%
60%
Other
50%
Property manager
40%
30%
67%
69%
2013
2014
20%
10%
0%
Q: Who will manage the property?
Owner
FINANCING
More than 2/3 Paid Cash
Obtained
financing
33%
All cash
67%
Q: How did your client pay for the property?
Most Cash Funds from Savings
Personal savings
45%
Proceeds from previous sale
26%
15%
Private investors
0%
10%
20%
Q: What was the source of the cash funds in your last investor transaction?
30%
40%
50%
Majority Financing from Bank
86%
Bank loan
6%
Private investors
1%
1031 exchange
8%
Other
0%
20%
40%
Q: What was the source of the financing in your last investor transaction?
60%
80%
100%
Buyers Overwhelmingly Opted for Fixed Rate Loans
87%
Fixed
86%
9%
Adjustable
2013
6%
Other
2014
1%
0%
20%
Q: What type of loan did your client acquire?
40%
60%
80%
100%
¾ of Buyers Acquired 30-year Loans
100%
90%
80%
70%
60%
76%
50%
76%
15 years
40%
Other
30%
20%
10%
0%
30 years
11%
8%
9%
6%
2013
2014
Q: What is the duration of the loan?
Most Investors Didn’t Have Trouble Obtaining Financing
40%
34%
35%
30%
25%
20%
15%
10%
5%
14%
12%
9%
4%
5%
7%
0%
Q: Please rate how difficult it was for your last investor client to obtain financing.
7%
1%
4%
Difficulty of Obtaining Financing Declined
4.5
4.2
Average
3.8
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
2013
Q: Please rate how difficult it was for your last investor client to obtain financing.
2014
Average Down Payment Declined
30%
25%
20%
30%
15%
24%
10%
5%
0%
2013
2014
Q: How much was the down payment (as a percentage of the sale price) in your last investor transaction?
Average Expected Rate of Return Down
19%
17%
20%
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
2013
Q: What is the expected rate of return on the property investment?
2014
CLIENT – AGENT
RELATIONSHIP
Many REALTORS® Getting Repeat Business
36%
Previous client
Client found me online
14%
Refferal
14%
12%
Friend
Prior dealings with my brokerage
6%
"For Sale" sign
6%
Relative
3%
Client responded to my ad
2%
9%
Other
0%
Q: How did you find your client?
5% 10% 15% 20% 25% 30% 35% 40%
Majority Found Property in < 8 Weeks
50%
41%
40%
30%
21%
20%
20%
10%
7%
0%
1-2
3-4
5-8
Weeks
Q: How many weeks did you spend looking for a property with your client?
9-12
12%
12+
Investors Finding Properties Faster
Average
12
# of Weeks
10
9.9
8
6.8
6
4
2
0
2013
Q: How many weeks did you spend looking for a property with your client?
2014
Majority Viewed < 6 Properties
59%
60%
50%
40%
30%
24%
20%
17%
10%
0%
1-5
6-10
11+
Number of Properties
Q: How many properties did you view with your client prior to the client making a purchase?
Investors Viewed Fewer Properties
Average
12.0
11.1
# of Properties
10.0
8.0
6.9
6.0
4.0
2.0
0.0
2013
2014
Q: How many properties did you view with your client prior to the client making a purchase?
Nearly 2/3 Investors Made Offers on Other Properties
40%
37%
35%
30%
25%
19%
20%
13%
15%
11%
10%
7%
5%
8%
5%
0%
None
1
2
3
Number of Offers
Q: How many offers did your client make on other properties?
4
5
6+
Fewer Multiple Offers in 2014
Average Offers
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
4.2
2.7
2013
2014
Q: How many offers did your client make on other properties?
Investment Properties Received 3.3 Offers on Average
25%
23%
21%
20%
18%
15%
16%
10%
8%
5%
6%
0%
1
2
3
4
5
6+
Number of Offers
Q: How many offers did the property purchased by your last investor client receive, including that of your
buyer?
INVESTOR DEMOGRAPHICS
Most Investors are Individuals
3%
1% 2%
19%
Individual
LLC
LLP
Corp
Other
75%
Q: Was your client a(n)?
Majority of Individual Investors are Male
80%
75%
70%
60%
50%
40%
30%
25%
20%
10%
0%
Male
Q: What was the client’s gender?
Female
Average Individual Investor is 51 Years Old
40.0%
30.2%
27.2%
30.0%
24.7%
20.0%
10.0%
1.2%
7.4%
9.3%
0.0%
25 or under
26-35
36-45
46-55
Age
Q: What was the client’s age at the time the transaction closed?
56-65
66+
Average Individual Investor Age Rises
60
50
Average Age
48
51
40
30
20
10
0
2013
Q: What was the client’s age at the time the transaction closed?
2014
¾ of Individual Investors are Married
4%
23%
Married
Single
73%
Q: What was the client’s marital status at the time the transaction closed?
Other
Most Individual Investors have Higher Education
30%
25%
20%
15%
10%
5%
0%
29%
23%
1%
2%
4%
8%
6%
Q: What was the highest level of education your client had completed at the time the transaction closed?
Fewer Minority Investors in 2014
100%
90%
80%
70%
44%
56%
60%
Caucasian/White
Asian
50%
Hispanic/Latino
40%
30%
Other
26%
20%
10%
0%
African American/Black
16%
13%
10%
7%
9%
1%
2013
Q: How would you describe your client’s ethnic background?
2014
2%
Majority Earn > $200k Annually
30%
30%
25%
20%
15%
20%
16%
12%
14%
10%
5%
8%
0%
Annual Income/Revenue (In Thousands)
Q: What is your client’s annual income/revenue?
Median Annual Income/Revenue Higher
Median Income/Revenue
$200,000
$200,000
$160,000
$150,000
$100,000
$50,000
$0
2013
2014
Q: What is your client’s annual income/revenue?
Fewer Foreign Investors in 2014
Foreigners
37%
34%
40%
35%
30%
25%
20%
15%
10%
5%
0%
2013
Q: What is your client’s country of origin?
2014
> 1/3 Investors are Foreigners
China
7%
Unsure
6%
Mexico
4%
Taiwan
2%
India
2%
1%
Germany
1%
Japan
0%
Q: What is your client’s country of origin?
2%
4%
6%
8%
KEY CONCLUSIONS &
OPPORTUNITIES
Investor is Ideal Client
Pay cash
Not
emotional
about
properties
Less time
searching
for
properties
More affluent
Need
property
managers
Own other
properties
Well
educated
How to Access Investor Info.
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