California’s Top Fix-and-Flip Markets

California’s real estate markets have performed impressively in 2016. Home sales in most markets are robust and home selling prices continue to rise.  California’s performance shows the resiliency of its huge economy, which has regained over 2.2 million jobs since 2010, which more than replaces the 1.3 million jobs lost during the Great Recession. Tight housing inventories, strong buyer demand, and appreciating home prices make California an attractive market for fix-and-flip investing. Here is a closer look at California markets that offer outstanding investment opportunities.

Equity Sales Represent 9 of Every 10 Sales

The most recent distressed home sale numbers from the California Association of Realtors (CAR) indicate that equity sales comprised the vast majority of home sales in California. Since December 2015, equity sales have accounted for nearly 94 percent of distressed real estate transactions. Investors looking to put their cash to work can choose from thousands of properties. More than six percent of California home sales are distressed sales, and many of these properties are being sold outright by owners.

As shown in the table below, California’s hottest real estate markets are Mendocino and Siskiyou Counties in Northern California, Tulare County in the Central Valley, and San Bernardino and Riverside Counties in Southern California. Each posted higher home sales and selling prices in 2016. A closer look at each of these top-performing counties follows the table:

CountyChange in Home Sales YOY*Average Selling Prices*
Mendocino County23.30%$370,000
Siskiyou County18.40%$192,000
Solano County-5.80%$389,500
Napa County0.80%$650,000
Kings County-4.20%$197,000
Tulare County8.50%$209,900
San Bernardino County3.60%$254,330
Riverside County11.10%$352,250

*Source: California Association of Realtors. Data as of September 2016

Northern California

Home sales in Northern California’s Mendocino County are up a whopping 23 percent this year, and median selling prices are nearly nine percent above last year. Unsold inventories are modestly higher at seven months, but days that homes are on the market is declining, suggesting that opportunities still exist for fix-and-flip investors. Homes in Mendocino sell in an average of 77 days, down from 80 days last year.

Mendocino County is noteworthy for its Pacific shoreline and Redwood Forests and covers nearly 3,900 square miles in Northern California. Prominent local industries include micro-brewing and wine production. Mendocino also boasts over 75 miles of pristine coastline, making it a popular tourist destination. Median selling prices for Mendocino homes are $370,000, but rising inventories make it likely that fix-and-flip properties can be purchased for less.

Home sales in Siskiyou County, which sits on the Oregon border in the Shasta Cascade Mountains, climbed 18 percent this year and median selling prices rose 10 percent to $192,000. Other factors making Siskiyou County attractive for investors are steep declines in housing inventories and fewer days on the market. Unsold inventories fell nearly 26 percent this year and median selling time dropped by 50 percent to just 39 days. Siskiyou County played a major role in California’s Gold Rush and is still a potential mother lode for fix-and-flip profits.

Bay Area

Located in the eastern portion of the North Bay, Solano County posted double-digit gains in home selling prices this year, but homes sales were lower. Solano County sits midway between San Francisco and Sacramento and is popular with commuters. Average selling prices stand at $389,500 in Solano County and inventories are tight at only three months. Many Solano homes sell in just 43 days.

Napa County is wine country, with many of America’s best-known vineyards. It’s no secret that living in Napa is expensive and strict growth limits, including a virtual moratorium on subdividing land outside of city limits, keep inventories tight and home values high. Median selling prices for Napa homes rose five percent this year to $650,000. Supply constraints and rising home prices make Napa real estate a good long-term bet for investors.

Central Valley

Moving inland to California’s Central Valley, investors can find more budget-friendly fix-and-flip properties. Kings County is located in the agriculturally-rich Joaquin Valley and offers some of California’s most affordable housing. With selling prices currently averaging only $197,000, it’s not surprising that Kings County homes sell in just 25 days. Kings County’s properties should appeal to fix-and-flip investors who want affordability and a quick turn on their investment.

Further inland, Tulare County is a gateway to Sequoia National Park. Tulare County has a huge agricultural industry, the second largest in the US, and is surprisingly affordable for fix-and-flip investors. The average home sells for $209,900. A surge in home sales this year is likely to continue due to tight inventories (3.9 months). Tulare County homes sell on average in 28 days.

Southern California

San Bernardino County is the largest county in the US, and offers a variety of opportunities for fix-and-flip investing. Properties range from desert villas around Death Valley to ski chalets in the popular resort town of Big Bear. For nature lovers, San Bernardino is home to six national parks. Homes are affordable in San Bernardino, with median selling prices at $254,330. Tight inventories (3.9 months) suggest that prices can rise further.

Neighboring Riverside County is SoCal wine country, with many vineyards in Temecula. Visitors also come to Riverside County for its nearby mountains and beaches, hundreds of hiking and bike trails, and numerous world-class resorts. Riverside’s popularity with home buyers is indicated by double-digit gains in home sales this year and a strong rise in selling prices. The median selling price for a Riverside County home is $352,250.

Outlook for California’s Property Markets

California’s economy continues to outperform the rest of the country and CAR believes that housing demand will remain robust in 2017, although growth in selling prices will moderate. CAR looks for a 4.3 percent increase in average selling prices in 2017 following a 6.2 percent gain this year. In addition, CAR predicts that more affordable areas such as the Inland Empire and the Central Valley will outperform coastal cities, where already rich home prices may constrain sales.

Socotra Capital is a leading source of investment capital for fix-and-flip projects. Our equity-based lending allows us to finance projects that banks can’t handle, and to make cash available to real estate investors within days. Our management team has extensive real estate financing experience, and can help you obtain funding for your next fix-and-flip or rental. Contact us today to discuss financing your next fix-and-flip.

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