High-end California real estate sales are climbing at an alarming rate. What do these new numbers reveal? What happened to the foreclosure crises that was sweeping the nation? More importantly, what real estate investing strategies should investors be deploying?
New statistics from real estate data compiler DataQuick show the Golden State’s housing market moving up rapidly. The sales of homes worth more than $1 million are reportedly up 45% year over year. Other notable statistics for 2013 include:
- The volume of $2 million plus sales in CA hit a new record in 2013
- 4,500 properties sold for between $2 million and $3 million
- $4 million plus sales rose 31%
- $5 million plus sales were up 29% over 2012
- The Most expensive sale was $74.5 million
- The largest home sold was 25,447 square feet
The New Norm – $1Million Price Tag
After reviewing the numbers, it may appear as if the average price for a California home sits around $1 million. The most $1 million dollar-plus sales in the South were recorded in La Jolla and Manhattan Beach. According to Bloomberg, “Almost all homes sold in Santa Monica and Rancho Santa Fe in Southern California…went for prices higher than $1 million.” Perhaps even more notable is the fact that almost 11,000 homes in this price range were paid for with cash, while the median down payment for financed properties stood at a substantial 30 percent.
What about Distressed Sales?
RealtyTrac reported that bank repossessions were down 60% year over year in 2013 compared to 2012, although one out of every 100 properties in California had received at least one foreclosure notice in the last 12 months. This may be due to short sales and the careful throttling of actual foreclosure auctions and sales by lenders.
There is no question that the Southern California housing market is rebounding well, but there are still foreclosures in the works and distressed sales coming to market for other reasons. DataQuick says statewide residential transactions were actually down 0.6 percent, showing a disparity between the high-end and low-end.
There are deals there, it’s just a matter of knowing where to find them.
The Stretch
By some measurements, some could say that California’s housing market is the best it has been in 6 years. However, based upon historical cycles, home prices and mortgage interest rates have a long way to go.
Some areas are even evolving into their own asset class and are moving up independently of normal factors like job creation, unemployment and in-migration. This is a trend that is likely to continue and the separation will continue to widen with increased global investment, out of area investment and liquidity injections from financial markets.
Not all will see their personal wealth explode, but the road ahead could well be paved with gold for some. Fortune definitely favors the bold in the first quarter of 2014 – those that act fast to beat interest rates and lock in the best cash flow spreads and equity positions.
For many, this is the opportunity of their lives to stretch and take advantage of leverage to grow portfolios and operations. The key is smart leverage, which actually pays a dividend.
