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2012-04-02 12:07:16
NAR Reports Investor Sales Jumped 65%

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NAR Report: Dramatic 65% Increase In Home Sales To Investors.

Sales of homes to investors in fact jumped 65 percent in 2011 from 2010, according to the National Association of Realtors, as bargain-basement bank-owned properties and rising rents fueled demand. More than a third of the investors surveyed said they wanted to diversify their investments, and nearly half said they would buy another property within two years.

There is still plenty of distressed supply, with 5.8 million properties owned by people either delinquent on their loans or in the foreclosure process, according to Lender Processing Services.

Investors Swarm Housing, Raising Concerns

The number of homes sold to investors more than doubled last year, as rising rents and low-priced distressed properties fueled demand. Investors, half of them using no mortgage, bought 1.23 million homes in 2011, a 65 percent jump from 2010, according to the National Association of Realtors. Half of the homes purchased were distressed properties, that is, foreclosures or short sales (when the bank allows the home to be sold for less than the value of the mortgage).

 

fotog | Getty Images
Half of all investment home purchases in 2011 were distressed homes, as were 39 percent of vacation homes, according to the NAR.

“Rising rental income easily beat cash sitting in banks as an added inducement,” says NAR’s chief economist Lawrence Yun. “In addition, 41 percent of investment buyers purchased more than one property.”

Half of investment buyers said they purchased primarily to generate rental income, according to the Realtors’ report. 34 percent wanted to diversify their investments, as 2011 saw a volatile stock market due to the debt crisis at home and overseas.

While nearly half of investment buyers said they were likely to purchase another property within two years, housing and mortgage analyst Mark Hanson calls them a “thin cohort” and worries that they add ever more volatility to the current housing recovery.

“They are fickle and volatile. They will go away on the slightest of conditions changes. They also won't chase prices higher or buy new homes from builders. Lastly, without the heavy flow of distressed supply, there is no U.S. housing market recovery. Distressed sales ARE the market,” says Hanson.

 

'Investment-home buyers in 2011 had a median age of 50, earned $86,100 and bought a home that was relatively close to their primary residence – a median distance of 25 miles, although 30 percent were more than 100 miles away.”

National Association of Realtors
2012 Investment and Vacation Home Buyers Survey

Foreclosure supply is still running high, with 65,000 completed foreclosures in February of this year, according to a just-released report from CoreLogic. 862,000 foreclosures were completed in the twelve months ending in February. While there are still 1.4 million homes in the foreclosures process, all of these numbers are coming down, albeit very slowly, and sales of bank-owned properties (REO) are speeding up.

Even the Realtors are concerned, like Hanson, that new programs by the government and banks to sell foreclosed properties in bulk discounts to large-scale investors, will cut off a robust individual sales market for smaller investors.

“Small-time investors are helping the market heal, since REO inventory is not lingering for an extended period,” says Yun, clearly looking out for his Realtor constituents. “Any government program to sell REO inventory in bulk to large institutional companies should be limited to small geographic areas.”

 

 

Published: Thursday, 29 Mar 2012 | 11:11 AM ET
By: Diana Olick
CNBC Real Estate Reporter
 
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