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THR California LP

Blackstone’s focus in the 2013 real estate market

April 8, 2013 By Ryan Lundquist 10 Comments

Even if you only follow real estate casually, you’ve probably heard of Blackstone, a private equity fund that has garnered wide media attention for pumping billions of dollars into the housing market. Their plan has been to acquire thousands of properties as rentals and then sell them in years to come.

The Local Market: Blackstone has been targeting cities throughout the country, and their presence has definitely been felt in the Sacramento area since they began buying tenaciously last August. Let’s take a look at some stats and areas of focus to help understand what they are doing locally.

Blackstone activity in the Sacramento real estate market - by Sacramento Appraisal Blog

Has Blackstone Been Slowing Down? Blackstone appears to have slowed down a bit over the past few months compared to the previous quarter. Their 96 purchases under $200,000 in Sacramento County on MLS during 2013 represent 4% of all sales under $200,000, which translates to 8% of all cash purchases under $200,000. Previously Blackstone had 324 purchases under $200,000 from August 2012 to December 31, 2012, which was almost 13% of cash sales for the time period. Blackstone has been a big player in the market, though ultimately they are really only one piece of the investor pie since 53% of all sales under $200,000 last quarter were cash deals. However, we must ask of course whether their recent slow down is a result of strategy or a lack of inventory. That is the critical question.

Blackstone Purchases in Sacramento County - Graph by Sacramento Appraisal Blog

Blackstone’s Strategy: As you can see, over 80% of Blackstone’s purchases have been under $200,000. It seems they have been primarily focused on the first-time buyer market, and they’ve purchased traditional sales, flipped properties, foreclosures, short sales, private sales, trustees sales, non-performing loans directly from banks and really whatever they can get their hands on. They are buying as “THR California LP”, and Tax Records indicates they have purchased 548 properties since August 2012. However, some local media outlets state they have picked up over 1000 homes since last year. That could definitely be the case since there may very well be many private sales off the books, but since Tax Records only shows 548, I’ll stick with that and consider it a representative sample.

Blackstone purchases according to Tax Records in Sacramento County in 2013 - data from Tax Records - compiled by Sacramento Appraisal Blog

Sacramento County: THR California LP has purchased a total of 126 properties in Sacramento County so far in 2013 according to Tax Records. 96 of these sales were listed on MLS and priced under $200,000. As you can see, areas like Natomas, Rancho Cordova, Elk Grove, South Sacramento and North Highlands have been on their radar. At the same time Blackstone has seemed to pretty much avoid North Sacramento (Del Paso Heights), Oak Park, and well-established classic neighborhoods with higher property values.

Blackstone purchases according to Tax Records in Placer County in 2013 - data from Tax Records - compiled by Sacramento Appraisal Blog

Placer County: Blackstone has been purchasing in Placer County also, though activity has been substantially lower than Sacramento County as there have only been 26 sales so far in 2013. It seems most of the Placer County action has been in Lincoln, Roseville and Rocklin.

Blackstone purchases according to Tax Records in Yolo County in 2013 - data from Tax Records - compiled by Sacramento Appraisal Blog

Yolo County: Clearly Yolo County has not been much of a target for THR California LP. They’ve had a sprinkling of purchases in West Sacramento and Woodland this year, and one in the City of Davis (a short sale condo at $245,000).

 Implications of so much cash in the market: 

  1. Diversify: If you work in real estate, continue to diversify your business above the $200K price level where the market is less saturated with investors.
  2. Save Money: If you’re trying to buy a home with little money down, it’s time to save more money. You may need it to compete with investors.
  3. Keep Frustration in Context: If you’re frustrated about so many cash investors in the Sacramento area right now, that’s definitely understandable and you’re not alone. However, it’s important to keep frustration with Blackstone in context. By no means am I trying to defend a private equity fund with billions of dollars, but I’m simply highlighting that they’ve purchased 96 of 1,202 cash sales as “THR” under $200,000 on MLS so far in 2013. I know that’s quite a bit for one investment fund, but the truth is there are many other investors in the market besides Blackstone. This means it’s important to let the data inform our conversations and complaints. (by the way, The SacBee posted an interesting article today highlighting some of the critiques of investment funds).

My quote in RealtyTrac Foreclosure Report March 2013RealtyTrac Quote: By the way, here is a partial quote I gave in RealtyTrac‘s March 2013 Foreclosure Report. They did a story on institutional investors, and called me for an interview. I would link to the report here, but unfortunately the report is private and only for subscribers.

UPDATE ON 04/09/2013: I talked with a Sacramento Bee Reporter about their data that shows Blackstone has purchased 1000+ properties since August. The Bee reporter stated that Blackstone confirmed this number and his search of the Sacramento County Recorder also confirms this number (it is very tedious to do this search – I didn’t confirm). All things considered, it looks like only about half of Blackstone’s sales are recording in Tax Records for whatever reason. I am only using Tax Records because that is what I can control best. Nonetheless, despite a difference in numbers in my post, the data in Tax Records still appears representative of the overall trends when comparing the data in this post with The Sac Bee data. The SacBee also reported a huge downtrend in 2013 so far.

Any thoughts?

If you have any questions or Sacramento home appraisal or property tax appeal needs, let’s connect by phone 916-595-3735, email, Twitter, subscribe to posts by email (or RSS) or “like” my page on Facebook

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Filed Under: Market Trends, Resources Tagged With: Blackstone, cash investors in Sacramento, hedge fund purchases, Home Appraiser, House Appraiser, investment funds, Placer County, private equity fund, real estate trends in Sacramento, Sacramento home appraisers, THR California LP, wall street money in housing market, Yolo County

The crazy market, bubble talk & crunching numbers

February 20, 2013 By Ryan Lundquist 6 Comments

The real estate market has been screaming forward at an incredible pace. It’s been going fast. Maybe too fast. In fact, The Sacramento Bee reported median prices saw a 22% increase over the past year in Sacramento County, and the Sacramento Association of Realtors reported the median sales price is now back up to $200,000 after over four years of being below that point (see PDF report).

A Housing Bubble? (Image purchased from 123rf dot com and used with permission)The market has certainly felt “on fire” lately, which has caused many to remember the “glory days'” of real estate a decade ago. I know when I’m making upward adjustments in my appraisal reports due to an increasing market, I can’t help but remember the “boom” years of 2003 and 2004. Yet at the same time we are starting to hear more talk about a real estate “bubble” forming. After all, there are definitely some elements helping to prop up the market.

Market Tidbits & Trends:

  1. Jobs: It’s interesting to note during the “boom” years a decade ago the unemployment rate in Sacramento County was closer to 5% compared to 9.9% right now. This begs the question whether such rapid appreciation is sustainable since the job market still needs strengthening. In other words, if value continues to increase quickly, when will buyers (non-investors) no longer be able to afford higher prices? Equally important, will renters be able to afford higher rents on the plethora of available rentals?
  2. External Forces: The market is being driven in large part by external forces (investors, low inventory and interest rates) rather than the local economy. Unemployment in Sacramento County has decreased from a high of 13.2% in July 2010, but 9.9% is still high, isn’t it?
  3. Blackstone: Since August 2012 the private equity fund Blackstone has purchased 461 sales on MLS according to Tax Records. This represents 4.28% of all MLS sales during that time period. Other sources report they have purchased 1000 properties since August, but I’m going with what Tax Records says for the time being.
  4. Crazy Pricing: It’s understandable to see price increases on listings, but it’s important to still look at other competitive sales in the neighborhood rather than simply apply a regional or county-wide metric to a specific property. After all, larger pools of data may not be indicative of trends in every neighborhood or every type of property either. Ultimately when we read that values have increased by 22% over the course of the year, we need to consider that ample investor flips at the top and a decline of foreclosure inventory at the bottom have surely helped boost up median price figures. Yes, the market has increased this year, but we cannot simply apply a 22% figure to each neighborhood without considering the aforementioned market dynamics that have given median price numbers a boost (this is especially true under $200,000).

Should this property be listed at $200,000? I recently came across a flipped house in Rancho Cordova that sold in August 2012 around $160,000 and is now pending at $200,000. It’s a sign of the times to see an investor wanting to flip an already flipped property in such a short period of time, yet when looking at the numbers, the market has not increased by nearly 20% since August. While I wouldn’t be surprised to see the property close well above $160,000, a $40,000 increase is still steep when considering the data.

Let me share some graphs with you as an example when considering price increases in Rancho Cordova (north of Highway 50).

All sales in Rancho Cordova - north of Highway 50 - by Sacramento Appraisal Blog

This graph shows an increase in the market, but can you also see how less sales at the bottom can make overall price numbers look stronger than they are?

Price for REO SS and Normal - north of Highway 50 in Rancho Cordova - by Sacramento Appraisal Blog

Prices in the neighborhood have increased over the year. That’s very clear when looking at data in the entire neighborhood. However, what do you make of listings being priced so much higher than the most recent sales? Is there justification for such an increase? Could the increase in list price be a result of legitimate market appreciation? Could some of the increase be due to fewer available listings as well as more listings in pristine condition? Might some listings simply be overpriced? There are so many factors to consider.

All listings in neighborhood market - by Sacramento Appraisal Blog

For further reference, here are all competitive listings to the property that previously sold at $160,000 (this property is slightly over 1200 square feet).

Rancho Cordova Sales - 1100-1400 GLA - North of Highway 50 - by Sacramento Apprasial Blog

The property that sold in August for $160,000 is slightly over 1200 square feet, so let’s take a look at all competitively-sized sales in the neighborhood. There is one recent sale at $200,000, but this sale is actually newer in age and not competitive to the subject property. Does it look like values have increased from $160K to $200K since August?

All Sales north of Highway 50 in Rancho Cordova - 1200-1400 GLA - Graph by Sacramento Appraisal Blog

This last graph helps illustrate a trend for a segment of properties over time. This is one of the ways I prefer to look at a neighborhood market because it helps give a picture for competitive properties instead of data from an entire county, city or zip code – which may or may not reflect trends for the property being appraised or listed.

What are you seeing out there? Anything you’d like to add?

If you have any questions or Sacramento home appraisal or property tax appeal needs, let’s connect by phone 916-595-3735, email, Twitter, subscribe to posts by email (or RSS) or “like” my page on Facebook

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Filed Under: Market Trends Tagged With: appraiser blogs, Blackstone, boom or bubble, externral forces in real estate, Home Appraiser, House Appraiser, investment funds, job market in Sacramento, low inventory, prices too high in Sacramento County, real estate bubble, real estate data, sacramento appraisers, THR California LP

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