To Dajo,dimitrig said:dajo9 said:wifeisafurd said:I think you are saying different things about residential real estate capital that are not consistent. Capital is exuberant to California, no like a dividend paying stock, no wait a minute maybe good for appreciation (it's a growth stock?).concordtom said:Or, maybe there is simply an excess of Capital in California. "Irrational exuberance" bidding up properties beyond the national mean.wifeisafurd said:
THE ONLY EXCEPTION TO THIS IS single family residence (SFR) investors are facing with the lowest cap rates in the nation, and is doesn't even vary that much by city or location. In the major metro areas, the SFR cap rate varies from 2.7 San Jose to 3.2 in San Diego, which is very little considering how different the markets in these area vary AND EXCEEDING LOW. SFR cap rates are so low here, partly due to the expectation that home values will increase quickly enough for investors to make a big profit. Investors have gotten recklessly complacent about accepting lower cap rates with annual yield is barely enough to make up for even minor property improvements since they are looking forward to the profit on the sale. Multi-family rates are artificially high reign now due to COVID moratoriums on evictions, but sill are low relative to the rest of the nation. Everyone in real estate see's a correction coming in residential housing in California. And everyone has been saying that for what, about 7 to 10 years now? This is why I giggle every time I hear about the great California exodus. Capital is voting on even more people needing housing here while the idiots in the media are taking about everyone leaving. Who would you think is more likely to be right?
Maybe that California capital doesn't want to invest in Boise so much as down the street. Could be laziness or home region arrogance just the same.
Or, maybe you are saying that an RE investment is like investing in a dividend paying stock: the rent you collect is your dividend. The upward price appreciation of the RE is the price of the stock going up. Expectations are that CA RE will see both increased dividends (rents) and increased buy-in pricing as well.
Hmmmm.
By the way, thanks: https://www.coachcarson.com/cap-rate/#:~:text=What%20Is%20a%20Cap%20Rate,Income%20(NOI)%20%C3%B7%20Purchase%20Price
I'm at a buy/sell decision point for my old SFR in Concord.
I would stay away from anyone who thinks investing in real estate is even remotely comparable to stocks. Real estate and stocks have different risks and opportunities. Real estate is not even close to as liquid as stocks and tends to require more money and time. Real estate can be leveraged, but that also ups the risk. For the same amount of money you can become much more diversified in stocks. It is an apples-to-oranges comparisonthe factors that affect prices, values, risk and returns are very different.
Capital is leaving California precipitously in real estate, other than in the residential sector, where it coming in from elsewhere, or at least so I am told. Increases in cap rates on commercial California real estate relative to its neighbors and nationally on commercial and decreases in residential reflect that. And the comment about investing down the street makes no sense to me in the real estate investment context. Almost all the largest domestic commercial and residential investors are not based in California. This is not VC world. That said, there is plenty of money in California, and some of it probably on the sidelines, but some clearly is leaving in the commercial segment to neighboring states: California Commercial Real Estate News 2020 | Radius ...www.radiusgroup.com california-commercial-real-est...This seems at odds with regionalism - at least in the commercial context.
Conversely, I think you will find that most experts are now predicting a 5 to 10% increase (Zillow predicted 11%) in California home prices in 2021 led by suburban housing. Many companies will likely have a higher percentage of remote workers than in-office and the State is basically stagnant in housing starts, meaning more upward pressure on home prices. SFR cap rates are expected to continue to decrease overall as well - don't expect people to sell in mass. If California were a country, it would have the fifth highest GDP in the world. People are not leaving in mass despite all the complaining. Again, it real easy to see what is hot and what is not in real estate by people who are in the business of investing in residential real estate- look at the cap rates. Here is one well known group's analysis.
California Housing Market Forecast 2021 | Real Estate ...managecasa.com articles california-housing-market-...
Now there are no guaranties. Residential real estate is impacted by a ton of things beyond the investors' control: macroeconomic factors and micro things like what is happening with the specific house and neighborhood. But right now buying that old house of yours in the burbs probably gets a green light in the short term - all things being equal - due to expected appreciation and locking in low interest rates if you are financing. Just don't look at it like a stock investment you can go in and out of. My two cents (and it may be worth less than that in a week).
Thanks for the link. It says Bay Area homes are up 50% in one year? What the hell? L.A. is up a paltry 30%? These numbers are wild. Also seems to be skewed by high sales in luxury homes relatively, but still. What the hell.
Must be all the people leaving and accepting fire sale prices to get out ASAP!
First thing you want to look at is price on a dollars per square foot basis. Otherwise the numbers are hard to compare.
Some explanation of SF which is a very segmented hosing market reflecting wealth disparities, and also what was insanely cyclical in 2020. But to a certain degree luxury houses moved the market.
San Francisco Real Estate as 2021 Begins - Compasswww.bayareamarketreports.com trend san-francisco...
SoCal vs another region is a little to big to be a meaningful comparison. Real estate is very local. Compare say LA City with say Newport Bear for example, which doesn't compare. A better comparison might be LA or downtown San Diego with SF, where you have more similar urban housing.
The thing about residential numbers, besides investors skewing the market, is how little inventory is being up for sale and being sold, where a small number of sales make the numbers jump. The numbers right now in Laguna Beach (where I live much of the time) for example, show prices going up, from about $1,200 per sq/foot to $1,450 over sq ft in just the 4th quarter of 2020, which is insane, and from everything brokers tell me, related to COVID. refugees from high density areas. BTW for those worried about out-migration that means "in migration" from places like New York City.
