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
414,670
391,030
394,930
-
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
500,000
Jun-13 Dec-13 Jun-14
*Sales are seasonally adjusted and annualized SERIES: Sales of Existing Single Family Homes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Median Price of Existing Detached Homes
$428,620
$465,960
$457,160
$-
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
$450,000
$500,000
Jun-13 Dec-13 Jun-14
SERIES: Median Price of Existing Single Family Homes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
“Underwater” Mortgages Down
0%
5%
10%
15%
20%
25%
30%
35%
40%
Negative Equity Share in CA Negative Equity Share in CA
SERIES: Underwater Mortgages
SOURCE: CoreLogic
Housing Affordability Index
0%
10%
20%
30%
40%
50%
60%
% OF HOUSEHOLDS THAT CAN BUY
SERIES: Housing Affordability Index of Traditional Buyers
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
0%
2%
4%
6%
8%
10%
12%
Delinquency Rate Foreclosure Rate
Mortgage Foreclosure & Delinquency Rates
California: Q1-2014
Delinquencies: Long Run Average: 4.5%
Foreclosure Rate: Long Run Average: 1.3%
SERIES: Mortgage Foreclosure & Delinquency Rates
SOURCE: Mortgage Bankers Association
Unsold Inventory Index By Price Range
California
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.
4.7
3.2
2.7
2.7
2.7
2.7
2.5
4.8
3.9
3.7
3.7
3.5
3.5
3.3
0 1 2 3 4 5 6
$1,000K+
$750-1000K
$500-749K
$400-499K
$300-399K
$200-299K
$0-199K
Jun-13 Jun-14
SERIES: Unsold Inventory Index of Existing Single Family Homes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
SERIES: Inventory of Existing Single Family Homes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Change in Inventory by Price Range
(Year-to-Year)
-6.1%
27.6%
30.4%
35.9%
31.5%
23.7%
12.5%
-10%
0%
10%
20%
30%
40%
Jun-14
INVESTOR MARKET
OVERVIEW
CA Investor Business Declined
39%
32%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
2013 2014
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?
Most REALTORS® Have 5 or Fewer Investor Clients
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
1 2 3 4 5 6+
16%
20%
17%
7%
9%
15%
Number of Investor Clients
Q: How many investor clients do you currently have?
Number of Investor Clients Down
Q: How many investor clients do you currently have?
0
1
2
3
4
5
6
7
2013 2014
7
5.2
Average
Most REALTORS® Had 5 or Fewer Investor Transactions
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
1 2 3 4 5 6-10 11+
19%
17%
17%
11%
8%
14%
9%
Number of Investor Transactions
Q: How many investor transactions did you close in the past 12 months?
Number of Investor Transactions Down
Q: How many investor transactions did you close in the past 12 months?
0
1
2
3
4
5
6
7
2013 2014
6.4
4.9
Average
Average (All) Closed Transactions: 16.4
0%
5%
10%
15%
20%
25%
30%
35%
1-5 6-10 11-20 21-30 31+
19%
23%
33%
13%
12%
Number of Total Transactions
Q: How many total transactions did you close in the past 12 months?
LAST INVESTOR BUYER
TRANSACTION
Buyers Dominate Investment Transactions
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2013 2014
77%
70%
23%
30%
Sellers
Buyers
Q: Who did you represent?
Single Family Homes Dominate Investor Market
73%
14%
1%
12%
80%
13%
1%
6%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Single family
home
Multifamily Bulk sale Other
2014
2013
Q: What type of property did your investor client purchase?
Majority Transactions Not Distressed
Foreclosure
12%
Shortsale
18%
Equity / regular /
traditional
70%
Q: Was the property a(n)?
79% of Sales Were Single Units
0% 2% 4% 6% 8% 10% 12% 14% 16%
2-5
6-10
10+
15%
2.4%
4.2%
N
u
m
b
e
r

o
f

U
n
i
t
s

Q: How many units did the property have in your last investor transaction?
Slightly Fewer Property Units Per Transaction
0.0
1.0
2.0
3.0
4.0
2013 2014
3.8
3.5
Q: How many units did the property have in your last investor transaction?
Majority of Transactions Listed Below $500k
0%
10%
20%
30%
40%
50%
$250k or less $251k-$500k $501k-$1,000k $1,000k+
37%
40%
16%
8%
Listing Price
Q: What was the initial/listing price?
Initial Listing Price Higher
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
2013 2014
$307,500
$322,500
Median List Price
Q: What was the initial listing price?
Majority of Transactions Sold Below $500k
0%
10%
20%
30%
40%
$250 or less $251-500 $501-$1,000 $1,000+
37%
39%
16%
8%
Sale Price (In Thousands)
Q: What was the final sale price?
Final Sale Price Higher
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
2013 2014
$292,000
$320,000
Median Sale Price
Q: What was the final sale price?
Median Listing Price > Sale Price
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
Listing Sale
$322,500
$320,000
Median Price
Transaction Cost: $10k or Less for Nearly ½ Investors
9%
36%
30%
9%
16%
1%
0%
5%
10%
15%
20%
25%
30%
35%
40%
$0-1 $1-10 $10-50 $50-100 $100-1,000 $1,000+
Transaction Cost (In Thousands)
Q: How much did it cost to purchase the property?
Transaction Cost Higher
Q: How much did it cost to purchase the property?
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
2013 2014
$9,000
$12,000
Median Cost
Median Transaction Cost Relative to Sale Price is
Highest in $500k+ Price Range
5.2%
3.4%
5.3%
$0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
$800,000
$900,000
$250 or less $251-500 $500+
Sale Price (In Thousands)
Median Sale Price
Median Transaction Cost
Median Days on Market: 15
0%
10%
20%
30%
40%
50%
60%
70%
0-30
31-60
61-90
91-180
180-365
365+
69%
13%
8.5%
5.0%
3.8%
0.8%
D
a
y
s

o
n

M
a
r
k
e
t

Q: How many days was the property on the market?
Days on Market Unchanged
Q: How many days was the property on the market?
0
2
4
6
8
10
12
14
16
2013 2014
15 15
Median Days on Market
Majority Investors Rented Properties
20%
28%
73%
58%
7%
14%
2013 2014
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Other
Rental
Flip
Q: What was the intended use of the property?
Most Investors Made Minor or No Repairs
0%
20%
40%
60%
80%
100%
2014
2013
22%
18%
39%
51%
22%
22%
17%
9%
None Minor cosmetic Major cosmetic Major remodeling
Q: What type of rehabilitation/remodeling was done to the property?
Majority Spent < $30k on Remodeling
0%
5%
10%
15%
20%
6%
13%
11%
16%
16%
5%
4%
7%
3%
12%
1%
Remodeling Cost
Q: How much did your client invest in rehabilitating/remodeling the property?
Median Remodeling Cost Increased
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
2013 2014
$10,000
$15,000
Q: How much did your client invest in rehabilitating/remodeling the property?
Median Rehab Cost Ratio is Highest in Lower Sale
Price Range
$0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
$800,000
$250 or less $251-500 $500+
6.5%
3.6%
6.3%
Sale Price (In Thousands)
Median Sale Price
Median Rehab Cost
Top 5 Reasons for Buying Now
14%
21%
26%
43%
58%
0% 10% 20% 30% 40% 50% 60% 70%
low interest rates
personal
location
good price
profit potential
Q: What motivated your client to buy now? (multiple response)
Most Investors Own Other Properties
0%
10%
20%
30%
40%
50%
None
1
2-5
6-10
11-20
21-50
50-100
100+
17%
12% 47%
17%
2%
3%
2%
#

o
f

O
t
h
e
r

P
r
o
p
e
r
t
i
e
s

Q: How many other investment properties does your client own?
Investors Own More Other Properties
6.5
8.3
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
2013 2014
Average
Q: How many other investment properties does your client own?
Most Properties Were Found on MLS
Another agent's private listing
Directly from seller
Client found property
Other
My listing
MLS
0%
20%
40%
60%
80%
2%
4%
4%
6%
21%
62%
Q: How did you find the property for your client?
Future Price Predictions Positive
73% 74%
1%
3%
20%
8%
6%
16%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
In one year In five years
Don't know
Flat
Down
Up
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
18%
37%
28%
12%
6%
0%
5%
10%
15%
20%
25%
30%
35%
40%
Less than 1 1-5 6-10 11-20 21-30
Years
Q: How many years does your client intend to keep the property?
Intended Length of Ownership Unchanged
5.0
5.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
2013 2014
Median Years
Q: How many years does your client intend to keep the property?
>2/3 Properties Managed by Owner
67%
69%
27%
22%
8%
11%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2013 2014
Other
Property manager
Owner
Q: Who will manage the property?
FINANCING
More than 2/3 Paid Cash
All cash
67%
Obtained
financing
33%
Q: How did your client pay for the property?
Most Cash Funds from Savings
Q: What was the source of the cash funds in your last investor transaction?
Private investors
Proceeds from previous sale
Personal savings
0%
10%
20%
30%
40%
50%
15%
26%
45%
Majority Financing from Bank
Q: What was the source of the financing in your last investor transaction?
0% 20% 40% 60% 80% 100%
Other
1031 exchange
Private investors
Bank loan
8%
1%
6%
86%
Buyers Overwhelmingly Opted for Fixed Rate Loans
0% 20% 40% 60% 80% 100%
Other
Adjustable
Fixed
1%
6%
86%
9%
87%
2013
2014
Q: What type of loan did your client acquire?
¾ of Buyers Acquired 30-year Loans
8%
6%
11%
9%
76%
76%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2013 2014
30 years
15 years
Other
Q: What is the duration of the loan?
Most Investors Didn’t Have Trouble Obtaining Financing
34%
14%
12%
4%
9%
5%
7% 7%
1%
4%
0%
5%
10%
15%
20%
25%
30%
35%
40%
Q: Please rate how difficult it was for your last investor client to obtain financing.
Difficulty of Obtaining Financing Declined
4.2
3.8
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
2013 2014
Average
Q: Please rate how difficult it was for your last investor client to obtain financing.
Average Down Payment Declined
Q: How much was the down payment (as a percentage of the sale price) in your last investor transaction?
0%
5%
10%
15%
20%
25%
30%
2013 2014
30%
24%
Average Expected Rate of Return Down
Q: What is the expected rate of return on the property investment?
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
2013 2014
19%
17%
CLIENT – AGENT
RELATIONSHIP
Many REALTORS® Getting Repeat Business
0% 5% 10% 15% 20% 25% 30% 35% 40%
Other
Client responded to my ad
Relative
"For Sale" sign
Prior dealings with my brokerage
Friend
Refferal
Client found me online
Previous client
9%
2%
3%
6%
6%
12%
14%
14%
36%
Q: How did you find your client?
Majority Found Property in < 8 Weeks
0%
10%
20%
30%
40%
50%
1-2
3-4
5-8
9-12
12+
41%
21% 20%
7%
12%
Weeks
Q: How many weeks did you spend looking for a property with your client?
Investors Finding Properties Faster
Q: How many weeks did you spend looking for a property with your client?
9.9
6.8
0
2
4
6
8
10
12
2013 2014
#

o
f

W
e
e
k
s

Average
Majority Viewed < 6 Properties
0%
10%
20%
30%
40%
50%
60%
1-5
6-10
11+
59%
24%
17%
Number of Properties
Q: How many properties did you view with your client prior to the client making a purchase?
Investors Viewed Fewer Properties
11.1
6.9
0.0
2.0
4.0
6.0
8.0
10.0
12.0
2013 2014
#

o
f

P
r
o
p
e
r
t
i
e
s

Average
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
37%
19%
13%
11%
7%
5%
8%
0%
5%
10%
15%
20%
25%
30%
35%
40%
None 1 2 3 4 5 6+
Number of Offers
Q: How many offers did your client make on other properties?
Fewer Multiple Offers in 2014
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
2013
2014
4.2
2.7
Average Offers
Q: How many offers did your client make on other properties?
Investment Properties Received 3.3 Offers on Average
0%
5%
10%
15%
20%
25%
1
2
3
4
5
6+
23%
21%
18%
8%
6%
16%
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
75%
19%
3%
1% 2%
Individual
LLC
LLP
Corp
Other
Q: Was your client a(n)?
Majority of Individual Investors are Male
75%
25%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Male Female
Q: What was the client’s gender?
Average Individual Investor is 51 Years Old
0.0%
10.0%
20.0%
30.0%
40.0%
25 or under
26-35
36-45
46-55
56-65
66+
1.2%
7.4%
27.2%
30.2%
24.7%
9.3%
Age
Q: What was the client’s age at the time the transaction closed?
Average Individual Investor Age Rises
48
51
0
10
20
30
40
50
60
2013 2014
Average Age
Q: What was the client’s age at the time the transaction closed?
¾ of Individual Investors are Married
73%
23%
4%
Married
Single
Other
Q: What was the client’s marital status at the time the transaction closed?
Most Individual Investors have Higher Education
0%
5%
10%
15%
20%
25%
30%
1%
2%
4%
8%
6%
29%
23%
Q: What was the highest level of education your client had completed at the time the transaction closed?
Fewer Minority Investors in 2014
1% 2%
7%
9%
13%
10%
26%
16%
44%
56%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2013 2014
Caucasian/White
Asian
Hispanic/Latino
Other
African American/Black
Q: How would you describe your client’s ethnic background?
Majority Earn > $200k Annually
0%
5%
10%
15%
20%
25%
30%
12%
30%
20%
16%
14%
8%
Annual Income/Revenue (In Thousands)
Q: What is your client’s annual income/revenue?
Median Annual Income/Revenue Higher
$0
$50,000
$100,000
$150,000
$200,000
2013
2014
$160,000
$200,000
Median Income/Revenue
Q: What is your client’s annual income/revenue?
Fewer Foreign Investors in 2014
Q: What is your client’s country of origin?
0%
5%
10%
15%
20%
25%
30%
35%
40%
2013 2014
37%
34%
Foreigners
> 1/3 Investors are Foreigners
Japan
Germany
India
Taiwan
Mexico
Unsure
China
0%
2%
4%
6%
8%
1%
1%
2%
2%
4%
6%
7%
Q: What is your client’s country of origin?
KEY CONCLUSIONS &
OPPORTUNITIES
Investor is Ideal Client
More affluent
Pay cash
Less time
searching
for
properties
Own other
properties
Well
educated
Need
property
managers
Not
emotional
about
properties
How to Access Investor Info.
California Real Estate
Market Update

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