April 17th//Commercial

As Prices Rise, California Investors Seek Niche Properties

The real estate landscape in California is always changing.

Years after the foreclosure crisis, there are fewer and fewer distressed homes available for investors. The latest survey of investors from the California Association of Realtors® (C.A.R.) survey found that more investors are seeking out opportunities other than residential single-family homes. Residential home sales are still the bulk of purchases but have been in decline since 2013, 70% of investors purchased single family homes compared to 78% in 2013.  Foreclosures continue to become more rare, the share of equity transactions is now at 87%, up from 70% in 2014.

The survey found that 10% of investors purchased commercial, land, mobile homes, or other types of properties in the past year, up from 7% in 2015 and 6.7%  in 2014. The share of investors who purchased multifamily properties also declined slightly, from 21% in 2015 to 19% in 2016.

Investors seek location first (38%) followed by rate of return (30%), good price (17%), and future development potential (7%).  More than three-fourths of investors remodeled their properties, spending an average of $13,500 this year. A little over one quarter of investors are planning to flip the property while 12% plan to leave the property vacant, use it as a vacation rental, or other use. Investors in 2016 are planning to hold the property for longer–an average of 8.1 years, up from 6.1 years in 2015.

Possibly due to higher prices, fewer investors paid cash in 2016 (55%), compared to last year (66 %). For complete survey results, visit http://www.car.org/marketdata/surveys/investorsurvey/

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