Realtors responding to a recent survey
by the California Association of Realtors® (C.A.R.) reported that investors and
investor sales are a shrinking part of their business. Investor transactions made up an average of
32 percent of sales Realtors reported in the survey, conducted in May of this
year, down from 39 percent in the 2013 survey.
Most respondents reported that they have one to three clients who are
investors. Only 20 percent said they
were doing business with six or more.
The average number of investor clients dropped from 7 in the 2013 survey
to 5.2 this year. More than half of
respondents reported they had three or fewer investor sales over the previous
While Realtors reported that the
percentage of sellers they represented in investor transactions grew by 7
percentage points to 30 percent compared to the 2013 survey, buyers still make
up by far the largest share of clients, 70 percent, in investors transactions. Realtors reported that 80 percent of investor
transactions were single family sales compared to 73 percent in the previous
survey and the average number of units per transaction dropped from 3.8 to 3.5.
With the number of distressed homes
on the market diminishing, investors are moving away from the more popular
urban areas and buying homes in more rural areas where better deals can be
found. Forty-five percent said they had
purchased properties in such counties as Sacramento, Fresno, Kern, and Tulare,
up from 27 percent in 2013. Further reflecting
the recovering housing market, the majority of investment properties purchased
(70 percent) were equity sales, while 18 percent were short sales, and 12
percent were foreclosures.
Seventy-seven percent of investor
transactions involved property listed for under $500,000. The median sales price of an investment
property in 2014 was $320,000, up 9.6 percent from $292,000 in 2013, reflecting
increasing home prices and fewer available distressed properties over the past
Almost half of investors spent less
than $10,000 in transactions costs to purchase their investments but the median
transaction cost increased from $9,000 in 2013 to $12,000. The median transaction cost relative to the
cost of the property was significantly higher for properties selling for over
$500,000 than for those under that price.
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. Thus fewer of the investment properties were
rented; that percentage dropped from 73 percent in 2013 to 58 percent in the
recent survey. More than half of
investors (55 percent) intend to keep the property they purchased for less than
six years. More than two-thirds of
owners manage their properties themselves, essentially unchanged between 2013
More than two-thirds (67 percent) of
investors paid cash for the properties and most made either no repairs or minor
ones. The percentage of those who did do major remodeling went from 9 percent
in 2013 to 17 percent and those investors spent more, a median of $15,000
compared to $10,000 in 2013.
Of those who financed their purchases
86 percent did so with a bank loan. The
average down payment was down from 30 to 24 percent and Realtors said that only
a small number of their clients had any difficulty financing.
More than eight out of 10 investors
(83 percent) own other investment properties, with 7 percent owning more than
10 properties, 17 percent owning 6-10 properties, 47 percent owning 2-5 properties,
and 12 percent owning one other property. The average number of properties
owned increased from 6.5 in 2013 to 8.3 this year.
Realtors reported that the majority
of their investor-buyers found a property within eight weeks with an average of
6.8 weeks, more than three weeks more quickly than in the last survey. On average an investor looked at 6.9
properties, down from over 11.
About 75 percent of investors were
individuals, 75 percent were male and 75 percent were married. The average age was up three years from the
previous survey to 51. One-third of
investors were from foreign countries with China, Mexico, Taiwan, and India
being the top countries of origin.
The C.A.R. survey was emailed to a
random sample of REALTORS® throughout California who had worked with investors
within the 12 months prior to May 2014.