Hedge funds have become a noticeably dominant player in the real estate market lately. While investor funds have always been a factor, it’s been easier to spot in recent months since inventory is so tight. As an example, consider Blackstone, a hedge fund that began aggressively buying properties in the Sacramento market over the past few months. Since August 2012 they’ve purchased 158 sales on MLS as THR California LLC. They may have other DBAs, but I’m only aware of this one. Investors friends tell me their plan is to rent out their portfolio, which makes sense since a great number of their purchases were bought at the top of the market and have already been remodeled.
As you can see below, Blackstone has purchased nearly 3% of all sales recently.
When looking at the entire market in Sacramento County under $200,000, it’s astounding to see how much cash is the market, isn’t it? I shared some cash stats from one week ago, yet cash sales increased by 3% from that time until now.
By the way, the Sacramento Business Journal came out with an article today entitled “Some worry that investment funds are distorting housing market“. I have a quote in the article. Unfortunately the article is for their print edition, so only part of it shows up online.
Questions: What are you seeing out there in the market? How do you think so much cash is going to affect the market long-term? I’d love to hear from real estate professionals, investors and prospective home owners.
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Matt Kelly says
My wife and I made offers on 6 different properties at asking price between May and June only to be outbid or not accepted in favor of cash investors. In one case two house in one street were purchased by an LLC with cash and the realtor said the same LLC had purchased seven other house in the Arden Arcade area. We feel fortunate to have inked the deal on a short sale a few weeks ago that we started in back in June.
Ryan Lundquist says
Matt, congratulations on getting that deal closed. Short sales can take patience. I’m really happy for you. Just in time for Thanksgiving too.
I mentioned Blackstone in this article, but it’s worth pointing out there are many other investors out there. For instance, there have been very few Blackstone purchases in Arden-Arcade off MLS, so it might actually be another fund or investment group that bought those properties your agent referred to. I’d be curious to look into it. It’s been remarkable to watch how much cash is out there. I’m just glad you were able to get into contract and close the deal. It’s incredible how many offers it takes to get one accepted these days. It must be such a relief when escrow closes.
For any onlookers, this is a great article in Reuters from last month about one hedge fund actually exiting the market. I don’t know that these guys were purchasing on MLS. It sounded like they might have been buying through the back door form a bank. The one element I wanted to point out was the article lists a handful of active funds in the real estate market. They may not all be buying in Sacramento, but it’s important to point out how much big money is out there. http://www.reuters.com/article/2012/10/17/us-foreclosed-hedgefunds-idUSBRE89G1TE20121017
They’re front running the Fed, which buys $40 billion MBS per month.