Investor home buying in the Bay Area is not at a record high — but it’s rapidly growing in these ZIP codes

“Hollister is really the up-and-coming place,” Macias, an associate with RE/MAX Gold, said of the recent real estate boom. “Ninety-nine percent of the buyers I’ve worked with have come from the Bay Area.”

But it’s not just individual home buyers fueling record home prices all across the San Francisco, Oakland and San Jose metro areas. After years of steadily increasing, the Bay Area’s overall share of investor purchases dipped slightly during 2020 and 2021, but purchases by investors still increased significantly in some areas. Downtown neighborhoods in the region’s biggest cities saw notable upticks, along with outlying communities like Hollister, Pacifica and Bethel Island, according to data analyzed by The Chronicle from real estate listing site Redfin.

Fewer investors are purchasing Bay Area single-family homes, townhouses, condos and two-to-four-unit apartment buildings than in lower-cost cities constructing more homes, like Atlanta and Phoenix. But in a region where bidding wars, risky no-contingency offers and losing out to all-cash offers have already become the norm, analysts say deep-pocketed investors can put more homes out of reach for ordinary Californians and add upward pressure on rents.

“There’s no sugar coating that it’s super hard right now, especially for first-time buyers,” said Redfin senior economist Sheharyar Bokhari. And the challenge is magnified in cities that attracted new residents during the pandemic: “They get competition from wealthier folks who may be coming into their area, and they can outbid them,” he said, “then investors can outbid them in cash.”

When measured by the percentage increase in investor purchases during the pandemic compared to 2018 and 2019, ZIP codes in uptown Oakland, Portola Valley and downtown San Jose were at the top of the list, seeing a 3% to 4% increase in investor activity during 2020 and 2021. Contra Costa County’s Bethel Island, along with parts of Richmond, West Berkeley, San Pablo and San Francisco’s condo-rich financial district also saw 3% upticks.

Suburban and rural areas near Walnut Creek, Hollister and Pacifica were all among the top 20 ZIP codes for increasing investor home buying during the pandemic. In Hollister’s 95023 ZIP code, investors purchased only 17 homes in 2018 and 2019, but that more than doubled to 36 homes in 2020 and 2021, according to Redfin’s analysis of deed ownership information.

The varied geography underscores that investors aren’t all the same. They can be individual people or a small group shopping for a quick flip, a vacation rental or long-term retirement income. Others are international buyers or branches of major financiers with varied short- and long-term investment strategies.

It can be difficult to track investor activity using public records, and to distinguish investors with no intention of living in a home from business entities employed by some wealthy homeowners to minimize taxes, maximize inheritance benefits and shield their privacy. Redfin identified investors by searching deeds for buyers whose names included the keywords LLC, Inc., Corp or Homes. They also included properties where a deed listed an ownership code containing the following terms: association, corporate trustee, company, joint venture or corporate trust.

“You don’t know which of these belong to a Wall Street firm, because they use some obscure name,” Bokhari said. And beyond that, “The data doesn’t tell us whether they’re using it as a rental or flipping it.”

In Hollister and other cities with ample land for new construction, Macias said investors sometimes buy new homes when they’re first planned in subdivisions, rent them out for a short period after construction, then sell at a profit. Cities including Oakland have seen a different trend since the last housing crash of large firms buying up houses in low-income neighborhoods and renting them out. Across California and the nation, home-flipping and income properties have become part of many peoples’ career and retirement plans.

State lawmakers wary of constituents being shut out of homeownership have in recent years signed off on reforms designed to give individual home buyers more opportunity to bid against investors, though all-cash offers and other favorable terms are still hard to compete with. Politicians in Sacramento are currently weighing a measure, AB 1771, that would add a 25% tax on house-flipping profits. Cities including San Francisco and Santa Cruz, meanwhile, are debating vacancy taxes on empty homes.

After the uncertainty of the pandemic and ensuing eviction moratoriums, housing advocates like Maeve Elise Brown say that some property owners are also looking to get out of the rental business, opening another door for bigger investors.

“Small landlords are withdrawing from the rental market,” said Brown, executive director of Oakland nonprofit legal service Housing and Economic Rights Advocates, or HERA. “It’s tough. It’s messy. It’s clear that the pandemic drove some of the sales that are happening.”

The financial stakes are magnified in diverse, gentrifying cities like Oakland and Richmond, which follow a national trend where some historically Black and Latino neighborhoods are “primed for investors,” Bokhari said, thanks to factors like systemic undervaluation and rising rents.

Those dynamics add to Jennifer Duffy’s challenges shepherding first-time home buyers through Alameda County’s AC Boost program, which uses voter-approved bond money to make down payment loans to teachers, first responders and lucky lottery winners.

When the program first opened applications in 2019, nearly 3,000 people pre-applied. After vetting and a lottery, Duffy said 70 people bought homes with the loans. AC Boost is in the middle of its second funding round, which opened last summer and drew 6,000 pre-applications.

The program has made “huge changes” to adjust to a chaotic market, said Duffy, president of AC Boost administrator Hello Housing, including raising the maximum amount participants who make around the area’s median income can borrow, to $210,000. Expanding networks of lenders and real estate agents has been crucial, she said, along with sending sellers letters from prospective first-time buyers.

Some participants had luck with condos after demand for smaller spaces dipped during pandemic lockdowns. Most who have found homes placed winning offers in Oakland, San Leandro or Hayward.

Others haven’t been so lucky.

“Sometimes they run out of time,” Duffy said, “They have 120 days to get out in the market.”

Back in Hollister, Macias is down to more like three offers per house, though homes in the $700,000 range can still incite a frenzy. For those left on the sidelines, it can be hard not to wonder if the opportunity to buy has already passed.

“Unfortunately it has put a strain on our locals here,” Macias said. “It’s very hard for them to compete and get into a house in their own town.”