Where We're Buying

San Jose Mercury News (CA)
January 19, 2007

WHERE WE'RE BUYING
BAY AREA INVESTORS SEEK HOME BARGAINS ELSEWHERE
SUE MCALLISTER, Mercury News

The real estate market may be slower, but Bay Area investors are still buying a sizable amount of property -- elsewhere.

Bay Area residents bought more than 16,500 vacation or investment properties outside the region from January to November 2006 -- 39 percent fewer than during the same period in 2005, according to DataQuick Information Systems. Even so, 2006 will rank as the third-most-active year this decade in terms of how many properties Bay Area residents bought outside the area -- only 2004 and 2005 posted higher numbers.

Just as in 2005, the Top 3 places that Bay Area residents put their real estate investment dollars in 2006 were Las Vegas, Sacramento and Phoenix, according to DataQuick. In fourth place last year was Truckee, with 244 buyers -- most of them probably seeking vacation retreats rather than rental properties.

DataQuick compiled the data from public records, counting properties for which the tax bill is sent to a Bay Area address but the property address is elsewhere in the United States.
One of those purchases was made by Gary and Shawna Kovacs of Oakland, who spent more than two years looking at properties -- from Arizona and Nevada to Monterey and Lake Tahoe.
''We were getting stuck in this conundrum of 'where is going to be the next hot investment area?' '' said Gary Kovacs. By last summer, they'd made up their minds on Truckee, and the market there ''had sort of settled,'' he said. ''There just didn't seem to be as much frenzy chasing the homes.''

Even so, there was one other bidder for the three-bedroom house they bought in the Tahoe Donner development for about $750,000. Kovacs said he, his wife and their 4-year-old daughter have been driving up to their new place almost every two weeks since they bought it. ''We thought the investment value would come based on the usability,'' he said, adding that he hopes to own the home or another in the same area ''a long time.''
'Value-priced'

Sean and Tiffany Carroll, San Francisco residents, also bought property last year in the Truckee area . Lots there ranged in price from $325,000 to $450,000, Carroll said, which he considered ''very value-priced because of the softer market.''

They'd been sporadically looking for a vacation home for three years, but accelerated their purchase plans to take advantage of the deal. They're now assembling architectural plans and hiring a contractor to build a four-bedroom house on their lot.
''We thought last year presented some values,'' Carroll said.

Both economics and demographics affected the investment pattern of 2006, experts said.
''The Bay Area housing market didn't generate as much equity in 2006 as it did in 2005, so there weren't as many dollars to play with as there were in 2005,'' which is part of what suppressed the number of purchases, said DataQuick's John Karevoll.

Not to mention the fact that even those with enormous equity may have decided to wait and watch the market cool before deciding whether and where to make a purchase. Expert opinion seemed divided between two dour camps last year -- one believing that home prices would fall, and the other thinking they'd stagnate. Those views largely persist into 2007.

But demographics probably helped boost the investment numbers. The baby boomer generation, the oldest of them just entering their 60s, has a greater responsibility for funding their future retirement plans than past generations have, said Allen Cymrot, a real estate investment expert and author who runs a blog called NetGainRealEstate.com.

''We're getting a more educated, investment-wise public,'' he said. Without fail-safe company pensions or Social Security to rely on, more middle-aged people are investing individually to prepare for retirement, he said.

In the greater Las Vegas area -- a favorite of Bay Area investors, including some looking toward retirement -- there were more than 23,000 resale single-family houses for sale last fall, including in suburbs like Henderson and Boulder City. That was a radical change from two years earlier, when sales were fast and furious and Nevada had the highest home price appreciation in the country.

But inventory dropped to about 17,800 houses by year's end, said Devin Reiss, president of the Greater Las Vegas Association of Realtors, and sales picked up a bit in December. Prices for resale houses were down about 2 percent in December 2006 from a year earlier, Reiss said, to a median sales price of $306,000.
'Dump' situation

Terry O'Donnell, sales manager with Coldwell Banker Premier Realty in Las Vegas, said one reason prices for most resale homes aren't likely to increase much this year is that about 42 percent of the homes currently for sale in the area are vacant. Many were purchased in recent years by speculators who had no plans to hold their properties but instead hoped to sell at a profit soon after they purchased.

''When the tap turned off, they didn't know what to do,'' O'Donnell said. Many of these homes are still on the market, he said, and ''if almost half the market is in a so-called 'dump' situation, it's not going to help us increase property values.''

But both men agreed that they still see plenty of Bay Area customers interested in owning Las Vegas real estate.
'
'The climate difference from what they're used to makes Las Vegas very appealing,'' Reiss said. ''Especially for retirees or people who are into golf; it's just an ideal place.''

TOP 3 LOCATIONS REMAIN THE SAME

Las Vegas, Sacramento and Phoenix led the list of places where Bay Area residents bought investment or vacation homes in 2006, as in 2005. The top 10 sites accounted for about a fifth of the more than 16,500 such homes bought from January to November of last year.LAS VEGAS TOWERS ABOVE THE RESTThe city's popularity was fueled by its booming condo market and desirability as a retirement and vacation spot. The median price paid by Bay Area residents buying there from January to November 2006 was $292,000, lower than last month's Las Vegas median for resale houses, $306,000


Chart MAP: DOUG GRISWOLD -- MERCURY NEWS
[California, Nevada, Arizona] CHART: MERCURY NEWS

Las Vegas 1,103 properties
Median price: $292,000S

Sacramento 377 properties
Median price: $309,000

Phoenix 343 properties
Median price: $223,000

Truckee 244 properties
Median price: $642,500

North Las Vegas 217 properties
Median price: $309,010

Henderson 215 properties
Median price: $359,990

Reno 212 properties
Median price: $300,000

South Lake Tahoe 210 properties
Median price: $482,500

Fresno 191 properties
Median price: $273,000

Tucson 189 properties
Median price: $256,000