Investors Losing Interest in Housing, Despite Rise in Distressed Sales Share

Institutional investors appear to bernlosing interest in purchasing foreclosed properties for rentals in the face ofrnrising property prices and interest rates and increased competition fromrnhomebuyers.   According to RealtyTrac’s January 2014 U.S. Residential and Foreclosure SalesrnReport, the share of home sales tied to institutional investors – entitiesrnthat purchase ten or more properties in a calendar year – dropped to 5.2rnpercent in January, down from 7.9 percent in December and 8.2 percent inrnJanuary 2013.  The January number was arn22 month low.</p

Daren Blomquist, a RealtyTrac vicernpresident said, “Many have anticipated that the large institutional investorsrnbacked by private equity would start winding down their purchases of homes tornrent, and the January sales numbers provide early evidence this isrnhappening.  It’s unlikely that thisrnpullback in purchasing is weather-related given that there were increases inrnthe institutional investor share of purchases in colder-weather markets such asrnDenver and Cincinnati, even while many warmer-weather markets in Florida andrnArizona saw substantial decreases in the share of institutional investors fromrna year ago.”</p

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The fall back in institutionalrninvestors occurred in nearly three-quarters of the metropolitan areas tracked byrnthe Irvine California company.  Areas withrnparticularly large declines from a year earlier included Cape Coral-Fort Myers,rnFlorida (-70 percent); Memphis (-64 percent), Tucson (-59 percent), and Tampa (-48rnpercent).  Institutional activityrnincreased in 23 of the 101 areas with Austin, Texas notable for a 162 percentrnrise while Cincinnati was up 83 percent and Dallas 30 percent.</p

Institutional investment remains arnmajor factor in sales in several areas including Jacksonville, Florida at 25.5rnpercent, Atlanta, (25.1 percent), and Austin (18.0). </p

Sales of all U.S. residentialrnproperties including single family homes, condos, and townhomes were at anrnestimated annual rate of 5.126 million units in January, a less than 1 percent</bincrease from December and up 8 percent from a year earlier.  The rate of sales declined in seven statesrnand 17 of the 50 largest metropolitan areas.</p