Who owns Stockton? Investors make up 46% of home sales over past six months

In recent months, Central Valley housing prices have rapidly improved. In particular, Stockton has posted double-digit percentage increases in home prices over last year, better than the national average. However, new research I have done with SCL shows that Stockton’s housing market appears to be heavily driven by investors, the majority of which reside outside of the city.

Over the last six months, 46% of homes sold in Stockton were purchased by investors, while 54% were purchased by owner-occupants. Of investor purchases, 59% list tax addresses in a city other than Stockton. This analysis was conducted by assessing nearly 2,000 residential, one-house lot sales in Stockton between October 2012 and the first week of April, 2013 using data from Metrolist.

Source: SCL analysis of Metrolist data

Source: SCL analysis of Metrolist data

The percentage of Stockton homes being acquired by investors is much higher than other cities. In the Bay Area, about a quarter of all homes are purchased by investors, according to the San Francisco Chronicle. In Phoenix, investor purchases have fluctuated between 28% and 36%, according to the USA Today.  Nationwide, the average is about 20%. Stockton clearly is an outlier in this regard.

Source: SCL analysis of Metrolist data

Source: SCL analysis of Metrolist data

As you can see in the charts provided, the percentage of homes sold to investors has steadily increased since October, rising from 39% to 53% over the last six months. Also, my analysis found that the share of investor purchases falls as home prices increase.

These findings are important because communities with higher percentages of owner-occupants are more stable. Research has shown that homeowners generally take better care of their property, while a higher proportion of renters often translates into poorly maintained houses and lower values for surrounding homes. This issue is particularly salient in Stockton as Councilman Paul Canepa  recently commented on the need for Stockton to crack down on absentee landlords. Unfortunately, it looks as if an increasing number of homes are falling into the hands of investors who see our city as little more than a parking lot for their retirement funds.

SCL investor charts-2

Source: SCL analysis of Metrolist data

Over half of these investors reside outside of Stockton, with the majority located in the Bay Area. While some purchases were made from addresses as nearby as Lodi, Lathrop or Tracy, there were several purchases made from all across the country, and even a couple from other countries altogether (see graphic below). Many of these investors include trusts and LLCs purchasing multiple properties.

It is important to note that this data is not exhaustive as not all home sales are listed on Metrolist. For example, homes bought at auction are not included (though these almost certainly would push the investor numbers much higher). Moreover, the data may include an address more than once, as an investor may purchase a property and subsequently flip it to an owner-occupant. Both of these types of transactions are captured in the data. It also should be noted that not all investors have bad intentions. Many investors take great care with the properties they acquire and can contribute to the stabilization of a neighborhood, especially if they are from the area.

While housing prices in Stockton have gone up, it appears that the market may be artificially driven by investor demand. Some experts fear that increased investor activity is leading to another real estate bubble. Locally, several realtors and home buyers I have spoken with over the past few months felt that the market was being driven mostly by investors making cash offers, pushing those with traditional mortgages out of the market. Unfortunately, the data I have looked at seems to confirm this suspicion. Admittedly, this analysis is not a comprehensive search of all available housing data (I would need to dive into tax records to do that). However, the data presented by Mertolist is fairly extensive, and the sample size is big enough for us to confirm that Stockton has an investor problem.

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Categories: Community Commentary, SCL Exclusives

Author:David A. Garcia

David A. Garcia founded SCL in March of 2012. He holds degrees from UCLA as well as Johns Hopkins University and currently works as the Chief Operating Officer at Ten Space in Downtown Stockton, and previously worked as a researcher/analyst for a congressional agency in Washington DC. The views expressed here are solely of the author.

5 Comments on “Who owns Stockton? Investors make up 46% of home sales over past six months”

  1. July 16, 2013 at 9:50 am #

    The investor market in housing is a real problem. We bought a foreclosed home in 2009 near March Lane and Holman. It was not my ideal walkable neighborhood as we had lived in for years, but we decided that 11 fruit trees and raised vegetable garden boxes, solar power, and good water conservation techniques were a good start toward urban homesteading. Our new neighborhood had about a 80% foreclosure rate. Many homes have been bought by investors and have been rented back to families who lost their homes elsewhere. The vast majority of our neighbors are perfectly sweet people, but houses are not being maintained as well as in most California neighborhoods. Lawns are neglected; garbage spilled is not picked up; shopping carts are left around. The investors who own the homes do not pay for gardening services as they should. The few homes that were bought by families like our family are actually taken care of quite well. It’s sad; these houses are only seven years old, with good interior design for large families, but the neighborhood looks shabby. I don’t get it. When I rented a home, I cared for it as if it were my house. I like to be proud of where I live. I think the investor/owners should be held accountable. Meanwhile, the only way to get the City to enforce codes is to file reports on-line. I do not have time to do this constantly, and I resent that the City, which knows that there are problems in the area, does not simply come out for a monthly code enforcement visit.

  2. babsbp
    July 16, 2013 at 10:06 am #

    We bought a foreclosed home the March Lane/Holman area in 2009. It was not the normal type of walkable neighborhood we had lived in for years, but we figured that 11 fruit trees, raised garden boxes, solar power, and good water conservation measures would make our home into an urban homestead. Also, as a family that has always worked in the nonprofit sector, it was a chance for us to acquire an affordable home. The neighborhood was at an 80% foreclosure rate, and most of the homes have been bought by investors out of the area. They have rented back to families that lost their homes to foreclosure throughout the region. Our new neighbors are mostly sweet people, but their rental homes are not maintained. Lawns are not cared for, spilled garbage is left after trash day, and shopping carts can be found in random locations. The investor/owners do no pay for lawn services as they should, and do not monitor these homes. It’s sad; these home have great floor plans for large families and are only seven years old, but the neighborhood looks shabby. I am angry that the City only monitors the neighborhood, when they know that there are problems, if I file reports on-line. The City should simply do a monthly drive through for code enforcement. I don’t understand the lack of care by City officials, owners, and renters. When I rented a home, I maintained it as I wanted my home to be pleasant. And I pushed my landlord to hold up his responsibilities. Our house is terrific, but the neighborhood is depressing. The answer for Stockton isn’t simply about changing up how we build in the future. It’s also about how we maintain and maximize what we have presently. How do we get people to operate with care in the present?

Trackbacks/Pingbacks

  1. Thursday notes: SPD nationally ranked, Stockton’s population keeps growing, the Asparagus Festival and more | Stockton City Limits - May 2, 2013

    […] before. Why? Because investors are crowding out owner occupants. SCL reported a few weeks ago that investors accounted for 46% of Stockton home purchases over the last six months, indicating that home prices are being artificially inflated by trust funds and LLCs. This is a […]

  2. Prominent economist warns of Central Valley housing bubble | Stockton City Limits - June 12, 2013

    […] is driven in large part by hedge funds scooping up properties in bulk. As SCL uncovered in April, the housing market in Stockton is dominated by investors. These cash buyers, usually from out of town, present problems for regular home buyers who may be […]

  3. Stockton is not Detroit, for better or worse | Stockton City Limits - August 6, 2013

    […] to foreclosure, most homes were picked up by investors and are at least occupied by renters. While investor-dominated neighborhoods are by no means a good thing, Stockton does not have Detroit’s problem with abandoned housing, at least not on the same […]

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