“Bubble Watch” digs into trends that may indicate economic and/or housing market troubles ahead.
Buzz: Half of Southern California’s homebuying surge this summer can be tied to a big jump in the purchasing pace by investors.
Source: My trusty spreadsheet reviewed Redfin estimates of investor activity locally and in 40 major metropolitan areas in the third quarter, defined as purchases made by entities with corporate-sounding names or descriptions.
Surging home prices with gains of 30% in two years have clearly been a draw for investors to the four counties covered by the Southern California News Group.
nvestors bought 8,900 residences in the summer or 17.7% of all purchases. These weren’t fixer-uppers, by the way, as the typical sales price for these deals was $898,000.
Compare that with one year earlier, when homebuying was swiftly rebounding from a locked-down spring. Investors bought 6,758 homes in the summer of 2020, or 14.6% of the market. That’s a 32% jump in investor purchases.
Or look at ballooning bets this way: Local investors bought 2,142 more homes this summer vs. 2020’s third quarter — or 51% of the region’s 4,228 overall sales increase.
Let’s start by saying that if this Southern California speculator surge looks bold, it’s tame when viewed using a national yardstick.
This summer, 90,215 of the 495,000 U.S. homes sold in 40 major markets were acquired by investors — up 80% from a year earlier. And that speculator feeding frenzy equaled 72% of the big metro jump in homebuying in the past year.
Perhaps much of this housing speculation is simply U.S. investors catching up to SoCal’s thirst for real estate assets.
This summer, 18.2% of all homes in the 40 metros bought were by investors vs. 11.4% a year earlier. But even after that buying binge, the 40-metro investor’s slice of the market isn’t much higher than the 17.7% share seen locally.
That said, investors were another wrinkle for a Southern California house-hunting market already crowded with residents seeking larger living quarters in the pandemic era.
The biggest speculative growth was seen in Riverside and San Bernardino counties where investors gobbled up 2,756 homes — up 49% in a year. That eye-catching burst ranked as only the No. 22 increase of 40 big metro areas tracked by Redfin. Inland investors represented 15.3% of all deals vs. 10.9% in summer 2020.
Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at [email protected]