Thursday, June 19, 2008

How Much is A Lot?

The Sac Bee posted their DataQuick county stats today. There is a little tidbit in the write up that I focused on.

Wasserman notes that "Absentee owners, typically investors seeking rental properties, accounted for an estimated 19 percent of all sales. At one point near the peak of the boom, investor share reached almost 27 percent."

Wow, that's still one out of every five purchases! It's only down 8% from the hey day. Most stable neighborhoods that I know of don't have nearly that level of renters. Once again I wonder, what the heck are they doing with all these homes?

I have no idea what a healthy level of investment activity is. Even lacking historical context for this number, 19% still seems really high. I would think around 10% is "normal".

This leads me to believe that while it may appear that life has returned to the Sacramento housing market, it is largely artificial. Thus the market is likely to remain on life support for quite some time to come until true home buyer demand strengthens.

7 comments:

Paul said...

I think when the investors are almost the only ones buying homes, we have a ways to go before we see capitulation in the real estate market.

The latest numbers in Cameron Park: median remains about $480k, with 125 or so above, and 125 or so below. Amazing to me is that 10% of the "above" are pending, including some +$1 million homes. Recently, most of the pendings above the median, have fallen out of escrow before they closed.

Buying Time said...

I should probably be more grateful to all these investors, as they are providing us with comps.

Sippn said...

Homeownership rate is historically in the 60-66% range, so this is about right as there will be upside down owners who will keep and rent for 10 years. (not everybody walks)

You're living in a neighborhood that is likely higher in ownership rate due to price.

G Spot1 said...

I asked myself the same question when I read that article. Reminds me of my ex-realtor who tried to tell me that 95% of people were still current on their mortgages....

I'd really be interested to know what the price/rent ratio is and whether these investors are making money month to month, or just speculating that we are at bottom and planning to flip. I think the investor activity could be really helpful to clear inventory and rehab foreclosed units - but only if the p/e ratio makes sense for these investments. Otherwise, we are just looking at a plateau until these new speculators go into default because their investment is under water...

Buying Time said...

Nice try Sippn

But the number of "households" that actually live in SFHs is far smaller.

I would imagine at least 20-30% of those folks live in apartments or multifamily homes. Think of all the 20 somethings, as well as big city dwellers.

PeonInChief said...

Sippn--

Do you know the percentage of tenants in multifamily housing? And tenants make up 40% of the population in Sacramento County.

BT--

A far larger percentage of tenants live in apartment complexes--greater than 50%, I would estimate, but I've asked Sippn if he knows.

What's likely to happen is what happened to San Bernardino after the early 1990s crash. Much of the housing was purchased by investors and the majority of the population there is tenants.

Buying Time said...

An example..... one home near us has been on the market as a flip (young couple whose aunt was a realtor) since we moved here. It finally sold as a short sale early last month, 150k less than what they were asking when we moved into town. Immediately went onto the rental market for the same rent we pay.....one month later, no tenant. Unless they put a lot of money down, I don't know how they will cover taxes and HOA even if they get what they are asking in rent.