Is the Starbucks Effect Real? No. Not Really.

In the past few weeks, there has been a story floating around the internet regarding the “Starbucks Effect” which was made famous in Spencer Rascoff's new book Zillow Talk. While it’s fun to consider, it is not entirely accurate when you look at the entire context around the concept.

When was the last time you were driving in the country and stopped at a Starbucks? My guess is never because Starbucks only puts their stores in urban locations.

The majority of Starbucks are in urban or suburban areas.  Appreciation and home values are higher in these areas than in rural areas.  This has little to do with Starbucks or any coffee maker and more to do with urban and suburban vs. rural.

Homes appreciate more in areas near Starbucks than Dunkin' but let’s simply take a Look at market demographics.  Dunkin' has a strong hold in small communities and also in more economically depressed areas such as parts of the Rust Belt that have not recovered in home prices yet due to major economic factors less than Dunkin' or Starbucks.  Also Starbucks has a higher profit per store and their ideal customer is a business executive or housewife buying a latte.  Dunkin' serves more of a blue collar crowd buying their entire lunch or breakfast.

This isn’t a matter of which franchise coffee store is best for real estate. It’s a matter of urban areas obviously having higher value than rural areas and a case of simple market demographics.

So can a Starbucks location be a good indicator of future real estate prices? Yes, it can. But you certainly shouldn't base a real estate investment on that alone. 

10 Facts to Know about San Diego Real Estate in 2015

San Diego is amongst the most playful cities in the United States. It is a warm, feel-good place that will make you fall in love with its beaches, food and people. In fact, almost everybody wants to live there. No wonder San Diego is every realtor’s dream destination.

2015 is set to bring in happy days for the real estate market here. The San Diego real estate market had become very conservative during the previous years and as a result of that, the number of homes sales in the city decreased by over 15% in year 2013. However, things have started looking up from 2014 onwards, as house prices have seen much appreciation.

Median housing prices are expected to be higher in 2015 than the current levels, as San Diego would always remain a desirable real estate destination. The reviving economic conditions have helped create new jobs, and thus demand for new properties is increasing.

It is difficult to predict actual rise in prices. However, home prices will definitely continue to rise. Government policy may put additional burden on buyers purchasing power, as announcements like  easing policy of purchasing mortgage securities and changing qualified mortgage rules will increase interest rates. Buyers are definitely not going to get many “Bargain homes” this year.

Researchers estimate that it could take almost four more years until the real estate market in San Diego reaches its pre-recession rates.

Five Reasons why Chinese Investors are Buying US Real Estate

West Realty Advisors, like many other firms are continuing to receive an increasing amount of inquiries from Chinese investors interested in investing in US real estate.

The increased interest by the Chinese in US real estate would have been a surprise in 2007 but no more now. According to the NAR, Chinese buyers now account for over 27% of foreign investments into the US real estate compared to under 5% in 2007 and trail only the Canadians. So why are the Chinese tycoons buying up properties in the US compared to their favourite destinations like Hong Kong, Singapore and Japan earlier? We will explain here the key to understanding Chinese real estate investments in the US.

  1. Investments in US real estate considered safe and profitable: According to the survey by NAR foreign buyers see US real estate investments not only as safe bets but also as extremely profitable. We must remember that post the 2008 housing bubble burst US home prices have fallen drastically and even in 2014 have not recovered anywhere near 2008 levels. The foreclosure rates on housing mortgages had risen since then triggering firesales. Chinese investors have made good of the buying opportunity picking up real estate mostly in California and usually in near densely populated urban centers unlike the Canadians or the Mexicans.

  2. Higher disposable income and increased credit availability: Nearly two decades of high economic growth in China have created multimillionaires. These investors now have significant surplus cash to invest. Further China has also relaxed credit  norms which has increased credit availability significantly. According to Bloomberg China’s ratio of household credit to GDP has risen from 105% in 2000 to 187% in 2012 and in a survey of 19 analysts it is predicted that credit loosening is unlikely to stop anytime before 2019 so we maybe looking at a sustained or even a growing rate of Chinese investments in US real estate.

  3. Benefits of the stronger Yuan: Chinese Yuan (RMB) now trades at close to 6.2 against 6.8 in 2009. This appreciation of the Yuan unlike other emerging currencies like the BRL, INR or RUB has made the dollar cheaper and this combined with lower USD denominated property prices have caused the US assets to appear “very cheap” in RMB terms.

  4. Chinese domestic real estate market seems highly “overbought”:  Prices in HK and Shanghai have gone through the roof in recent times and there are worries that there could be a potential “housing bubble” in the making. Already there are some indicators that the bubble has started cooling with property prices falling lately. Further the Government in China has increased regulatory oversight on real estate purchases which now makes the domestic market less attractive compared to the US.

  5. Layering and money-laundering: There are strict laws in China on capital flowing out abroad. However there are certain sections of the noveau rich which wants to protect their wealth amid a stinging crackdown in China. According to leading investment banks people are getting over the USD50,000 limit imposed by China by laundering money through Macau casinos and cooking the books of import-export companies. Sometimes these purchases are for investment purposes to overcome the recently bearish outlook on the Chinese economy.

Chinese investments in US real estate are picking up and are here to stay. Moreover unlike Japan in the 1980’s when such a story played out, Chinese investors have significant savings which will allow the economy to run at higher household credit to its GDP compared to similar Emerging Market economies.

 

West Realty Advisors: 1,000 Homes in 5 Years

 

I am excited to announce that last week we hit a milestone that five years ago would have seemed impossible: our 1,000th piece of real estate.

Since 2009 we’ve bought residential housing in 26 different states with a strong focus recently on the midwest and northeast markets. We've created hundreds of jobs across the country and through this process we've established a name for ourselves in the industry for quality, integrity and value. 

The real estate industry can be volatile but with the help of our dedicated and passionate staff we’ve always prevailed. Now that we’ve reached the first 1,000, we are ready to raise the bar and have set a goal to acquire, renovate and sell 1,000 new properties in the next 24 months.

I would like to personally say thank you to our incredibly talented staff, contractors, service providers and most importantly our investors who’ve been there for us from the start. We are excited for what 2015 will bring and look forward to providing the same exceptional results to our investors that they’ve grown to expect in the past five years.  

 

West Realty Advisors Participated in Habitat For Humanity

West Realty Advisors is proud to have been able to participate in helping build a home for Habitat for Humanity two years in a row. Habitat for Humanity brings people together to build homes, communities, and hope for lots of families. They offer a hand-up, not a hand-out. Hard working families will pay for their home through sweat equity and a zero-percent interest mortgage. When these families can call a home their own, they help build better communities.