Investors are moving their focus into California's less expensive, more rural areas, according to a California Association of Realtors survey.
In 2014 45% of investors — up 27% compared to 2013 — said they purchased properties in such counties, including Sacramento, San Joaquin, Fresno, Kern, Merced and Tulare, instead of purchasing properties in the most popular, urban areas.
The state's weaker distressed home market appears to be the main driver of the investor strategy change, according to CAR's 2014 Investor Survey. It found that only 15% of investors purchased properties in Northern California in 2014, down from 27% in 2013. Similarly, 40% invested in Southern California in 2014, down from 50% a year earlier. "Reflecting the recovering housing market," according to CAR, only 12% of properties purchased were foreclosures, at 70% the majority of investor purchases were equity sales.
The median sales price of an investment property in 2014 was $320,000, up 9.6% from $292,000 in 2013, reflecting increasing home prices and fewer available distressed properties over the past year.
As home prices continue to increase, this year 28% of the investors participating in the survey also are flipping properties (buying and selling them for a profit) instead of renting them, up from 20% in 2013. Only 58% rented their properties in 2014, down from 73% the previous year. More than half of investors, 55%, said they intend to keep the property less than six years.
Up to 67% of investors paid cash reflecting another persistent trend of the recent past. One-third of investors were foreign investors, mainly from China, Mexico, Taiwan and India.
The survey was conducted in May 2014.