There’s a new market mover in town: The Hoarders. This is a different type of hoarder – it’s not the person with lots of stuff, stacked floor to ceiling. It’s the “property hoarders”. Let’s look at two different types: the Gen X’ers and the Investors.
The Gen X’ers are 40-55 year olds: successful, in the core years of their career, making good money. A lot of them want to buy a bigger, better home. Here’s the difference: they don’t have to sell their first home, opting instead to keep it as a hedge against inflation and the option of valuable rental income. After all, Air B&Bs are the most popular for this age group, seeking out a vacation rental home wherever they travel.
The second group of hoarders are the investors. Not flippers. This group of hoarders are the ‘buy and hold’ crowd. They have been around longer and have flipped properties in the past. Now, they are bemoaning the fact that they sold too quickly: the old “if only I still had that property, it would be worth $XX now!” They really don’t care what they buy as long as they think it’s in an up-and-coming area. They have cash in the bank from selling other properties and are true cash buyers. They buy up the properties and keep them – taking them off the market, effectively reducing inventory.
Sure, there are still flippers out there. And here’s their game-plan: buy the property, do a quick remodel (think lipstick on a pig), then sell it to young buyers who are in the market for their first home. Today’s flippers focus on a new kitchen (add a huge island wherever possible), updating bathrooms, flooring, and windows. Don’t forget painting interior white and a quick landscaping of the yard. These things can be done expediently and, many times, they don’t pull permits. Flippers can be in/out in a couple months. They use OPM, getting investors lined up once they’ve won the bidding war. But, they prefer to buy off market. Their pitch to investors centers around the rising prices and the fast turn. A pivotal change in laws has sweetened the deal – single family zoning is a thing of the past.
Net, net – Hoarders are keeping the housing inventory low.
A recent listing of mine (now in escrow) at 2002 El Sereno Ave, Pasadena CA, exemplifies the above trends in spades. Huge lot, fixer, high level of rentals in the area, and zoned 0-2 units per lot. Investor buyer will likely remodel, build another unit on the lot, and rent the properties.
Photo Credit: Altaf Shah from Pexels