ANAHEIM, Calif. — Real estate investors are gobbling up homes in Southern California, compounding the problems for first-time buyers and other buyers in this booming real estate market.
According to Redfin, investors bought about 1 in 5 homes in Los Angeles, Anaheim and Riverside last quarter, a 25% increase over the previous year. Three out of four real estate investors paid the investment house in cash.
“There have always been investors in the housing market, but that was when there was a lot of supply,” Sheharyar Bokhari, senior economist at Redfin, told Spectrum News. “More than two-thirds of investors are buying all-cash and single-family homes. When they come to market, we already know that a cash bid is likely to win. That makes it difficult for repeat buyers.”
The new Redfin report on the housing market released on Wednesday confirmed what many already knew: it has become much more difficult to buy a house.
As first-time buyers and repeat buyers weather a housing slump, rising home prices and rising mortgage rates amid the coronavirus pandemic, they also face stiff, well-heeled competition. Redfin analyzed county property records and searched for keywords such as LLC, Inc, Trust, Corp, Homes and Trusts.
The report comes as the Southern California real estate market remains hot despite the pandemic and rising 30-year mortgage rates, which rose from 3.6% in mid-January to 4.03% on Wednesday. The lack of homes for sale on the market has driven up demand and sent prices soaring.
Orange County started the year with 954 homes for sale. In February, there are now just over 1,400 homes, which is still historically very low for the market.
According to Reports on Housing, Orange County had an average of more than 4,800 homes for sale in the month of February in the three years before the pandemic.
Simply, there aren’t enough homes on the market to stifle demand or prices, which are up double digits year-over-year, said Steven Thomas, chief economist at Reports On Housing. This data site tracks the Southern California real estate market.
“When demand exceeds supply, it indicates that this is an insane, outrageous, hot housing market where buyers clash and Darwinism ensues, survival of the fittest,” said Thomas in his monthly newsletter. “In today’s market, generally, the most qualified buyer with a great job, a big bank account, a strong credit rating, willing to eliminate the contingencies and bend to a seller’s every whim is the winner. .”
Thomas said 60% of all foreclosed home sales in Orange County last month sold above asking price.
In the face of such high demand and record double-digit price growth, not just in Southern California, but across the country, more and more people are becoming real estate investors and jumping into the housing market. , in the hope of making a quick buck.
Home sellers choose to sell their homes to investors because they tend to pay everything in cash and remove some contingencies, making it a faster and more transparent transaction.
“They are in a better negotiating position,” said Bokhari, Redfin’s economist.
Bokhari said investors have more options these days: they can fix it and flip the house, rent it long-term or list it as a short-term rental.
According to Corelogic, single-family home rent growth in Los Angeles had a record year in 2021 with low vacancy rates and rents rising 8% year-over-year.
“It’s a profitable business,” Bokhari said.
According to Redfin, in Los Angeles, 1 in 5 homes purchased last quarter were from real estate investors. The median sale price – or midpoint – of all homes investors bought was $1.02 million.
In Anaheim, Redfin also found that one in five homes purchased last quarter was an investor. The median selling price was $1.07 million.
In Riverside, 16% of homes were purchased by investors with a median price of $522,000.
Nationally, investors bought 80,000 homes, worth a total of $50 billion, or 18.4% of all homes purchased in the fourth quarter of last year.
Bokhari said that as long as there is a shortage of supply and house prices continue to appreciate, expect more investors to keep buying.
“If price growth eventually slows, then maybe they will pull back,” he said.