Monday, September 04, 2006

Pot House Neighborhoods: Why Here?

Over the past few weeks, several houses in Elk Grove and the Natomas neighborhood of Sacramento were found to be part of a large marijuana growing operation. Notable was the fact that most of these houses were in newly built housing developments and sold for an average of $500,000.

After our hastily prepared analysis of the Elk Grove pot house neighborhoods last week, we received several requests for a better work-up. While much anecdotal evidence exists that the newer developments where most of the pot houses were found are also hotbeds of flipper activity, a detailed examination was needed to say for certain.

Mostly out of curiosity, we began looking at property records and neighborhood sales data on these houses. (Agent Bubble's analysis of property records proved to be an excellent predictor of future pot house busts.) We also noticed what seemed to be a large number of house sales on these streets within the last three years, and speculated that it would be easier for criminals to infiltrate a neighborhood with high housing turnover, since the neighbors would not be around enough to notice anything suspicious.

Our speculation notwithstanding, further analysis shows us that these neighborhoods are far above the county average for turnover rate and current sales listings:

Sacramento County has had a turnover rate of 23.4% over the last three years. 15 of the pot house neighborhoods were above that number, some by three or four times. One street (Catherwood Way) has completely turned over within the last three years. 17 of the pot house neighborhoods had for-sale rates higher that the county average, with 14 more than double. While the motivations of the marijuana-growers can only be speculated upon, the neighborhoods where they chose to operate were clearly in flux.

We would like to thank the Sacramento Bee for respecting our privacy wishes while giving credit to the blog.

Pot raids hit six more homes
Sacramento County Assessor’s Office
Home 'for sale' signs soar
Recent home sales


Anonymous said...

Nice update on the stats. Raw data can be misleading. Catherwood Way and Castro Valley are 3-4 year old homes, the original sale contributing to the 100% turnover rate within 3 years.

Max said...

I can't stress this enough:

New house sales are not included in these data!!!

All the data reported here are for resale activity. The reporting mechanisms are much different for new vs. resale activity.

Anonymous said...

Max - how do you get your data? check your programming. Catherwood way has 33 homes, only 10 homes have ever been resold not including sale from US home or John Moier Const. Look at recorders data.

Thats 30% turnover in a 3 year old subdivision, approx 10% a year. I suspect I would see tha same at the Castro Valley subdivision.

You might be seeing a lot of refi activity.

My email is

Max said...

Correction: These are houses that sold through the MLS, not as *new* houses directly through a builder.

Either the builder listed the house in the MLS using an in-house broker, or sold the properties en masse to another company who then listed them. You're making an assumption either way.

Unfortunately, my data processing skills can’t tell when a seller using the MLS is *really* a builder in disguise. If you see a bunch of houses that were all previously owned by the same person/group, then it’s probably a safe assumption. But not always.

30% turnover is still 33% higher than the county average.