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investment funds in Sacramento

Blackstone’s $196,000,000 shopping spree in Sacramento

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Did you ever dream of winning a shopping spree as a kid? I used to imagine myself having ten minutes to fill up a cart at Toys ‘R Us with whatever I wanted. I would’ve headed straight for the baseball cards, bikes, toy guns and sports equipment. Of course I was never lucky enough to do something like that, but I’m still holding out hope for a Home Depot or Lowes spree one of these days.

$196 Million of Local Real Estate: If you didn’t know, there was a $196 million dollar real estate shopping spree that happened in the Sacramento market over the past year or so. As reported by The Sacramento Business Journal, the private equity fund Blackstone purchased roughly 1,100 homes in the local market since January 2011 (with the bulk of these purchases being after August 2012). In all Blackstone has acquired about 21,000 properties in the United States over the past year. In the Sacramento area they’ve done business as THR California, IH2 Property West and IH3 Property West, and they’re holding their properties in hopes of making more money by creating bonds from rentals. 

housing supply and median sales price by sacramento appraisal blog blackstone

Goodbye Blackstone? Over the past months Blackstone has seemingly begun to pull back on their aggressive purchasing plan. They’re still buying properties, but as of late they’ve been laying low. Some say they are done, but at the same time their system has worked well and they can easily get things moving with IH4 in 2014 if they want. Ultimately their local presence lately has felt nothing like it was last year when they were a definite catalyst in driving up values for the rest of the market. Depending on how you look at it and whether you bought or sold this past year, it’s probably either good or bad to have had one investment fund step in to buy 1,100 properties in such a short time span. Instead of parsing the arguments on both sides though, I’d rather focus on their slowdown and simply say it looks like we are seeing Blackstone’s year of market dominance fade….. for now at least. In the mean time we can expect to continue to see conventional and FHA buyers pick up their slack while Blackstone and other cash buyers are more dormant or pull out of the market. While it’s easy to criticize Blackstone, let’s consider one last thing. If you look at the graph above, you’ll see they came in at just the right time as the real estate market hit bottom after years of decline, and they also look to be slowing down at a good time also. Maybe there is a business lesson here to consider?

Blackstone Invitation Home Signs in Sacramento

UPDATE on 11/21/2013: The Sacramento Bee posted a story that states Blackstone has purchased nearly 1,500 homes in the Sacramento area. RealtyTrac shows closer to 1100 and Tax Records is about half of what RealtyTrac shows. All things considered, it is not easy to track the actual number because different sources say different things.

Questions: Any thoughts on Blackstone as they have been slowing their pace? What store would you like to win a shopping spree at?

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Blackstone, Natomas & Cash in Sacramento

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Wall Street collided with Main Street over the past year in the Sacramento market as institutional investors like Blackstone made mass purchases. Here is an image in the Natomas area of Sacramento to illustrate the homes that Blackstone bought in this neighborhood over a period of twelve months. Keep in mind these are only purchases listed in Tax Records, which is important since Realist data at times has only included about 50% or so of Blackstone’s acquisitions. It’s amazing to see so many new rentals by one investment fund, don’t you think?

THR IH2 Blackstone sales in Sacramento August 2012 through August 28 2013 per Tax Records - by Sacramento Appraisal Blog

While it is striking to see mass cash purchases, it’s also important to consider there has been less cash in the Sacramento real estate market lately – just as the graph below helps illustrate. As housing inventory has been climbing and price increases have begun to slow down, investors have seemed to take their foot of the gas pedal a bit over the past 60+ days. It seems like Blackstone has been slowing down too based on what I’ve been hearing from agents and also observing data-wise over the past few months (less sales over the past 90 days compared to the previous quarter). In my mind it is important what Blackstone does since they have been a huge player in the market. In short, this is worth watching over time.

cash purchases Sacramento County

Any thoughts, questions or stories to share? Feel free to comment below.

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Jaw-dropping real estate stats (even if you don’t like numbers)

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Did you like math class as a kid? Or were you more of a literary buff or science geek? I was the type of kid who had a love-hate relationship with math depending on what we were learning and who my teacher was. Honestly though, I often wondered then how numbers or theories could really be used in the real world.

Today let’s look at some stats that are bound to leave an impression – even if you don’t like numbers. Let’s check out the amount of cash in the Sacramento real estate market under $200,000.

Graph of cash sales in Sacramento Placer and Yolo County under 200K - by Sacramento Appraisal Blog

Did you know that 50% of all sales in Sacramento County under $200,000 have been cash purchases for about eight months now? How does that strike you? If you’re like most people when hearing numbers like this, it’s astounding. This is only for detached units too. When we include condos and attached units in this figure, we see the percentage increase to 53.12%.  Sacramento County has a much stronger cash presence than Placer and Yolo County. For reference, there were thousands of sales under $200,000 in Sacramento County over the past 60 days, but only 80 in Placer County (so take Placer County stats over these past two months with a grain of salt).

cash fha conventional stats in 2013 Sacramento real estate market - by Sacramento Appraisal Blog

The turning point in terms of cash purchases really began in early 2012 as news of the bottom of the market hit and foreclosures began to dry up. But then it went to a whole different level when investors like the private equity fund Blackstone made a very strong entrance in August 2012 by purchasing over 1100 properties in eight months in Sacramento County.

Why does the $200,000 price level matter? This is important because the median sales price is barely above $200,000 in Sacramento County. Remember, the median price is the one in the middle, which essentially means half the sales in the county are above $200,000 while the other half of sales are below that level. Since cash purchases are basically driving the market under $200,000, it tends to have an impact on the entire market by boosting overall numbers. Additionally, one of the byproducts of enormous cash percentages is a decline in FHA loans, which makes it more challenging for many would-be owner occupants.

Question: Did you like math as a kid? How do these numbers strike you? Share them with someone today to see what type of response you get.

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“Two Truths and a Lie” & Cash in Sacramento

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I taught my kids how to play the game “Two Truths and a Lie” recently and we’ve been having fun with it. Here’s how the game works. One player shares two things that are true and one that is a lie, while other players try to guess which statement is the lie. Since I know virtually everything about my boys, this game is a breeze for me. But since there is so much they don’t know about me, I can usually win by pulling out two things that shouldn’t be true (usually things I did as a teenager) and then one equally obscure lie to match.

Let’s play the real estate version of “Two Truths and a Lie” (cash style):

  1. Image purchased at 123rf dot com and used with permission - 14688774_s - smallerCash sales have represented about 50% of all sales under $200K for the past eight months in Sacramento County.
  2. The past two months are the first time in four years where REO sales have been less than 10% of all sales in the market.
  3. Cash sales have begun to see a steep decline since Blackstone has been purchasing less.

Check out the charts below and read a few sentences to see which two statements are true and which one is the lie.

cash sales in sacramento placer yolo county - by Sacramento Appraisal Blog

Cash is still very strong in the Sacramento real estate market. When we parse numbers, 34.75% of all single family DETACHED sales have been cash in 2013. When including condos and other attached units, the number jumps to 37.46% (which tells us there is a greater percentage of cash in the condo market). Yes, there has been a very slight decline in county-wide cash sales during these past two months, but let’s finish out the month of June to complete an entire quarter to getter a better feel of any real decline. Some in the real estate community have said Blackstone is purchasing less lately, so cash sales have declined, but the numbers don’t tell that story – especially since Blackstone has been primarily focused under the $200,000 price level. Keep in mind it’s been eight months steady where roughly 50% of all sales under $200,000 have been cash purchases in Sacramento County. If anything, the market under $200,000 for cash has not flinched at all because it’s been very strong.

chart of cash sales by month in sacramento county - by Sacramento Appraisal Blog

We’ll take a deeper look at the cash market under $200K and distressed properties in the next few days, but for now it’s worth noting that foreclosures and short sales have seen blatant declines in 2013. In fact, April and May 2013 were the first two months in over four years where foreclosure sales represented less than 10% of all sales in the market. How does that strike you?

ANSWER: In case you missed it in the paragraphs above, #3 is the lie.

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