Home Financial Record Bay Area Investor Home Buying Hasn’t Hit an All-Time High — But It’s Growing Rapidly in These ZIP Codes

Bay Area Investor Home Buying Hasn’t Hit an All-Time High — But It’s Growing Rapidly in These ZIP Codes

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When Kimberly Macias and her parents moved to the farming town of Hollister on the Central Coast in 1991, the big attraction in town was a new Target store.

The San Benito County town of about 42,000 had been transformed into a new frontier for Silicon Valley commuters by the time Macias, a local real estate agent, posted 22 offers on a single home during the pandemic. In addition to its old eves, like producing olive oil, nuts and apricots, Hollister is now home to an Amazon delivery station, a downtown craft beer bar and an ever-growing number of grafts at looking for large homes on spacious lots.

“Hollister is really the booming place,” Macias, an associate of RE/MAX Gold, said of the recent housing boom. “Ninety-nine percent of the buyers I’ve worked with are from the Bay Area.”

But it’s not just single-detached home buyers who are fueling record home prices in the San Francisco, Oakland and San Jose metro areas. After years of steady increases, the Bay Area’s overall share of investor purchases declined slightly in 2020 and 2021, but investor purchases still increased significantly in some regions. Downtown neighborhoods in the region’s largest cities saw notable increases, along with outlying communities like Hollister, Pacifica and Bethel Island, according to data analyzed by real estate listing site Redfin’s The Chronicle.

Fewer investors are buying single-family homes, townhouses, condos and two- to four-unit buildings in the Bay Area than in cheaper cities build more homes, like Atlanta and Phoenix. But in a region where bidding wars, risky no-contingency deals and losing all-cash deals have already become the norm, analysts say deep-pocketed investors can put more homes out of the reach of ordinary Californians. and add upward pressure on rents.

“There’s no sugar coating that it’s super tough right now, especially for first-time buyers,” said Redfin chief economist Sheharyar Bokhari. And the challenge is amplified in cities that have attracted new residents during the pandemic: “They’re competing with wealthier people who might come to their area, and they can outbid them,” he said, ” then investors can outbid them in cash”.

Measured by percentage increase in investor purchases during the pandemic compared to 2018 and 2019, the downtown Oakland, Portola Valley and downtown San Jose zip codes topped the list, with a 3% to 4% increase in investor activity during 2020 and 2021. Contra Costa County’s Bethel Island, as well as parts of Richmond, West Berkeley, San Pablo and the condo-rich Financial District San Francisco also recorded a 3% increase.

Suburban and rural areas near Walnut Creek, Hollister and Pacifica were all among the top 20 ZIP codes for increased home purchases by investors during the pandemic. In Hollister’s 95023 zip code, investors bought just 17 homes in 2018 and 2019, but that more than doubled to 36 homes in 2020 and 2021, according to Redfin’s analysis of deed ownership information. .

The geographical diversity underlines that investors are not all the same. It can be individuals or a small group shopping for a quickie, vacation rental, or long-term retirement income. Others are international buyers or branches of large financiers with varying short- and long-term investment strategies.

It can be difficult to track investor activity using public records and to distinguish investors not intending to live in a home from business entities employed by some wealthy homeowners to minimize taxes, maximize inheritance benefits, and protect their privacy. Redfin identified investors by searching for deeds of buyers whose names included the keywords LLC, Inc., Corp or Homes. They also included property for which a deed mentioned a property code containing the following terms: association, corporate trustee, partnership, joint venture or corporate trust.

“You don’t know which one of them belongs to a Wall Street company because they use an obscure name,” Bokhari said. And beyond that, “the data doesn’t tell us if they’re using it as a rental or if they’re returning it.”

In Hollister and other cities with large lots for new construction, Macias said investors sometimes buy new homes when they’re originally planned in subdivisions, rent them out for a short time after construction, and then rent them out. resell for profit. Cities like Oakland have saw a different trend since the last real estate crash big companies buying houses in working-class neighborhoods and renting them out. Across California and the country, flipped homes and income properties have become part of many people’s career and retirement plans.

The share of homes bought by investors has surged in some outlying Bay Area communities during the pandemic, including Contra Costa County’s Bethel Island.

Paul Kuroda / Special for The Chronicle 2021

State lawmakers wary of homeless voters have in recent years approved the reforms designed to give single-family home buyers more opportunities to bid against investors, although cash offers and other favorable terms are still tough to compete with. Sacramento politicians are currently weighing a measure, AB 1771, this would add a 25% tax on house flip profits. Cities like San Francisco and Santa Cruz, meanwhile, are debating vacancy taxes on empty homes.

After the uncertainty of the pandemic and subsequent moratoria on evictions, housing advocates like Maeve Elise Brown say some landlords are also looking to exit the rental business, opening another door for bigger investors.

“Small landlords are pulling out of the rental market,” said Brown, executive director of the nonprofit Legal Department of Oakland Housing and Economic Rights Advocates, or HERA. “It’s tough. It’s messy. Clearly the pandemic has driven some of the selling that’s happening.”

The financial stakes are heightened in diverse and gentrified cities like Oakland and Richmond, which follow a national trend where some historically black and Latino neighborhoods are “investor-ready,” Bokhari said, thanks to factors like undervaluation. systemic and rising rents.

This dynamic adds to Jennifer Duffy’s challenges guiding first-time home buyers through Alameda County. AC Boost programwhich uses voter-approved bonds to provide down payment loans to teachers, first responders and lucky lottery winners.

When the program first opened applications in 2019, nearly 3,000 people pre-applied. After verification and lottery, Duffy said 70 people had bought homes with the loans. AC Boost is in the middle of its second round of funding, which opened last summer and attracted 6,000 pre-applications.

The program has made “huge changes” to adapt to a chaotic market, said Duffy, president of AC Boost administrator Hello Housing, including increasing the maximum amount that participants who earn around the median income of the region can borrow, at $210,000. Expanding networks of lenders and real estate agents has been crucial, she said, as well as sending letters to sellers from potential first-time buyers.

Some attendees have had luck with condos after demand for smaller spaces plummeted during pandemic closings. Most of those who found homes placed winning bids in Oakland, San Leandro or Hayward.

Others weren’t so lucky.

“Sometimes they run out of time,” Duffy said, “They have 120 days to get out to market.”

Back at Hollister, Macias is down to just three offers per home, though homes around $700,000 may still spark a frenzy. For those on the sidelines, it can be hard not to wonder if the opportunity to buy has already passed.

“Unfortunately it has put a strain on our people here,” Macias said. “It’s very difficult for them to compete and get into a house in their own town.”

Lauren Hepler and Susie Neilson are the editors of the San Francisco Chronicle. Email: [email protected], [email protected] Twitter: @LAHepler, @susieneilson