Are TIC Sales Dying?
May 22, 2009Well lets just find out, shall we?
We ran some reports to answer this question. It’s an important question as there are many people shopping for homes– around 65% of whom are open to TIC ownership.
First, we calculated the number of sales of single family homes, condos, TICs, lofts, and stock cooperatives that have taken place in San Francisco from January 1 through May 1. We cut off the analysis at May 1st because some agents take a couple weeks to update their sales in the MLS, which would skew this year’s number.
Next, we calculated how many sales during that same time period were attributed to TICs. Then we divided the number of TIC sales by the first calculation (which represents total sales) to arrive at our final number… the percentage of total sales attributed to TICs. Plotting the percentages over the past few years gave us a trend and a source from which we could make some comments:
Percentage of total sales attributed to TICs over time (click to enlarge)
To see commentary and conclusions, continue reading –>
- The popularity of TICs grew dramatically from 2004 to 2005. This was due to two factors… 1) a booming market at the time and 2) the introduction of fractional financing.
- TIC popularity peaked in 2007.
- Since last year, TIC sales have declined ~23% in relation to all sales taking place in the market.
Final Thoughts:
Are TIC sales dying? Our thought is that no, they aren’t dying, but they certainly have slowed. The chart shows a downward trend in the percent of all sales attributed to TICs for two years running, but they still account for ~9% of total sales taking place in 2009. We expect TIC sales to stabilize somewhere around today’s number. Just FYI- the tax assessor’s office says that TICs account for around 4% of San Francisco’s total housing stock.
If fractional lending products for TICs went away, then we would expect TIC sales to come to a screeching halt and return to their 2003/2004 levels. But for now, those products are alive and well. We feel their biggest chance of disappearing was last fall, but they survived.
In sum, if you’re out shopping and TICs are on your menu, we wouldn’t avoid them but we’d suggest not picking up any run-of-the-mill TIC. You’ll want to stick to the most desirable TIC properties, as those will keep you more liquid in the future when you become the seller. The majority of TIC listings we see selling like hot-cakes in this market are the ones in the best locations, offering fractional financing, and have been substantially renovated. And a seller that can buy down points for you is all the better, as TIC loans are more expensive than those for condos or single family homes.
For more buyer tips, click HERE.
