Warren Buffett made headlines in the real estate world in an interview with CNBC's "Squawk Box" in February by emphatically stating. "If I had a way of buying a couple hundred thousand single-family homes, and had a way of managing… I would load up on them."
In the interview, Buffett called today's single-family homes,"a very attractive asset class".
It seems those in our local market agree with the "Oracle of Omaha."
Carlsbad's single-family market saw buying activity rise more than 30 percent in March from February. Carlsbad's real estate community has noted a sharp increase in property showings and homebuyer inquiries.
The same homes that 90 days ago would receive two or three showings a week are seeing two to three showings a day.
Multiple-offer-negotiations are back. Realtors in North County are sheepishly nodding with each other in recognition of the active real estate environment.
And the main challenge of this year's real estate market is a dwindling supply of property.
In North County San Diego, spring traditionally sees an increase in homebuying activity.
A 30 percent increase during the first 4 months is not uncommon in Carlsbad.
In the past, the increase in buying activity is met with an influx of new homes for-sale. This year, however, there many neighborhoods without new for-sale homes.
The average time to sell a single-family home in Carlsbad has dropped from an average of 75 days to around 55 days. The average supply of homes has moved from around 5-6 months last year to its current levels of around 2.5 months; a notably low number.
If the local real estate market does not see more single family homes come on the market and the current buying activity persists, North County will see higher home prices.
Rising prices occur when home buyers compete with each other for the fewer available homes. They will pay more than the most recent comparatives, because that is often what is required to secure a home. An extreme example played out during a 9-month period in the 2003-2004 Carlsbad real estate market, when record buyer demand was met with record low inventory.
The price of the average Carlsbad home went up $100,000.
The activity is not just your traditional home buyer. Investors are also competing for those fewer available homes.
Local brokers are fielding calls from investment groups with funds in excess of $100 million with the purpose of buying rental property.
A historical anomaly, private money has often avoided large-scale investment in single family real estate. But with rising rents, low home prices and average investment returns of 6 percent to 8 percent and more, real estate has become the more attractive investment vehicles.
But the 'little guy" still rules in North County.
Investment funds are being reminded of the logistical challenges associated with buying $100 million in residential real estate.
At an average price of $250,000, a $100 million fund would need 400 income-producing properties. It means 400 escrows, 800 brokers and more than 40 property managers/staff/contractors, a logistical and contractual nightmare.
Our own firm, The Lund Team, Inc, helped facilitate the purchase of rental properties for several high-net worth clients divesting from single commercial properties.
One client had the task of conforming to the time frames set by a 1031 exchange and finding 13 quality properties within 45 days that also produced an acceptable return on investment.
A challenging task given the restricted inventory in today's marketplace and the reason Warren Buffett will continue to buy companies rather than thousands of single-family homes.
One sub-market of the Carlsbad real estate market, the luxury home market, will benefit in the next 12 to 18 months should the current inventory restriction persist.
Continued supply shortage of homes in the $500k-$900K will push those capable buyers to look at more expensive homes in order to increase their selection.
The low inventory in the entry level and mid-range market will, effectively, create demand in the Carlsbad luxury market.
Lund can be reached at [email protected]
In the interview, Buffett called today's single-family homes,"a very attractive asset class".
It seems those in our local market agree with the "Oracle of Omaha."
Carlsbad's single-family market saw buying activity rise more than 30 percent in March from February. Carlsbad's real estate community has noted a sharp increase in property showings and homebuyer inquiries.
The same homes that 90 days ago would receive two or three showings a week are seeing two to three showings a day.
Multiple-offer-negotiations are back. Realtors in North County are sheepishly nodding with each other in recognition of the active real estate environment.
And the main challenge of this year's real estate market is a dwindling supply of property.
In North County San Diego, spring traditionally sees an increase in homebuying activity.
A 30 percent increase during the first 4 months is not uncommon in Carlsbad.
In the past, the increase in buying activity is met with an influx of new homes for-sale. This year, however, there many neighborhoods without new for-sale homes.
The average time to sell a single-family home in Carlsbad has dropped from an average of 75 days to around 55 days. The average supply of homes has moved from around 5-6 months last year to its current levels of around 2.5 months; a notably low number.
If the local real estate market does not see more single family homes come on the market and the current buying activity persists, North County will see higher home prices.
Rising prices occur when home buyers compete with each other for the fewer available homes. They will pay more than the most recent comparatives, because that is often what is required to secure a home. An extreme example played out during a 9-month period in the 2003-2004 Carlsbad real estate market, when record buyer demand was met with record low inventory.
The price of the average Carlsbad home went up $100,000.
The activity is not just your traditional home buyer. Investors are also competing for those fewer available homes.
Local brokers are fielding calls from investment groups with funds in excess of $100 million with the purpose of buying rental property.
A historical anomaly, private money has often avoided large-scale investment in single family real estate. But with rising rents, low home prices and average investment returns of 6 percent to 8 percent and more, real estate has become the more attractive investment vehicles.
But the 'little guy" still rules in North County.
Investment funds are being reminded of the logistical challenges associated with buying $100 million in residential real estate.
At an average price of $250,000, a $100 million fund would need 400 income-producing properties. It means 400 escrows, 800 brokers and more than 40 property managers/staff/contractors, a logistical and contractual nightmare.
Our own firm, The Lund Team, Inc, helped facilitate the purchase of rental properties for several high-net worth clients divesting from single commercial properties.
One client had the task of conforming to the time frames set by a 1031 exchange and finding 13 quality properties within 45 days that also produced an acceptable return on investment.
A challenging task given the restricted inventory in today's marketplace and the reason Warren Buffett will continue to buy companies rather than thousands of single-family homes.
One sub-market of the Carlsbad real estate market, the luxury home market, will benefit in the next 12 to 18 months should the current inventory restriction persist.
Continued supply shortage of homes in the $500k-$900K will push those capable buyers to look at more expensive homes in order to increase their selection.
The low inventory in the entry level and mid-range market will, effectively, create demand in the Carlsbad luxury market.
Lund can be reached at [email protected]